Why This Overlooked Seattle Drugmaker Could be the Best Biotech Buy Right Now

Omeros Corporation is getting a lot of love from investors and analysts these days. The company’s focus is developing and commercializing small-molecule and protein therapeutics for inflammation, complement-mediated diseases and central nervous system disorders. It has three platform programs, PharmacoSurgery, antibody and G protein-coupled receptors.

The company has a drug, Omidria (phenylephrine and ketorolac injection), for use during cataract surgery or intraocular lens replacement. It is part of its PharmacoSurgery platform. It also had a number of preclinical programs.

Cory Renauer, writing for The Motley Fool, says, “With one commercial stage drug heading toward the $1 billion in annual sales threshold and another potential blockbuster in late-stage clinical trials, you might be surprised to learn this company’s market cap is a sprightly $875 million at recent prices.”

But he expects it could double or triple in the next few years. OMS721, its most-advanced drug candidate, is under development for patients with complement-mediated thrombotic microangiopathies (TMAs). Renauer notes that Alexion Pharmaceutical’s Soliris for TMAs brings in about $3 billion in annual sales, but he thinks OMS721 could bring in even more. There’s some overlap in the products, but Soliris isn’t approved for patients with immunoglobulin A (IgA) nephropathy, which affects about 130,000 people in the U.S. That could be OMS721’s entry point into the market.

Renauer writes, “The company intends to begin two pivotal trials for OMS721 before the end of the year, one trial for the big IgA nephropathy indication and another for patients with stem-cell transplantation issues. With one pivotal trial for the relatively small atypical hemolytic uremic syndrome population underway, the company could have data for three applications in 2018.”

Also, the company is on track for $86.6 million in yearly sales, an increase of 92 percent over last year. This is based on sales of Omidria, which is used by eye surgeons conducting millions of procedures each year. Renauer thinks annual sales could top $1 billion.

There are some concerns, though. Currently, one of the ways that the Centers for Medicare & Medicaid Services (CMS) reimburses for Omidria is expected to end on Jan. 1, 2018. At the recent third-quarter earnings call, the company’s chief executive officer and chairman, Gregory Demopulos, said in the conference call, “As many of you know, Omidria currently has pass-through status, which allows CMS to reimburse for the drug separately. In other words, outside of the package procedural payment for Medicare patients undergoing cataract surgery. Pass-through for Omidria is slated to end on January 1, 2018. If these were to happen and there were no avenue remaining to restore separate payment for Omidria in Medicare patients, our pricing for Omidria would likely eventually decrease.”

However, the pass-through may be extended and there’s still a two or three-year window before the exception might be eliminated. Demopulos said, “While we are confident that we could generate significant Omidria revneues under such a package scenario, we continue to pursue ongoing separate payment for Omidria, both through CMS and legislative routes.”

Renauer isn’t the only analyst who thinks Omeros stock is incredibly undervalued. Robert Laughlin, writing for Seeking Alpha, is focusing a series of articles on the company.

He writes, “We also believe that, as a result of the market’s inability to recognize the true value of Omeros, at present values, it is quite possibly one of the greatest investment opportunities of our time.”