Why Omeros Corporation Shares Crashed

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Omeros Corporation (NASDAQ: OMER  ) are trading 9% lower today after briefly dipping into a double-digit loss shortly after lunchtime. The market is fleeing what it views as a disappointing quarter, despite the fact that Omeros has yet to get any drugs to market.

So what: Omeros reported first-quarter revenue of just $100,000, and it naturally spent far more on R&D, leading to a $0.54 GAAP loss. When adjusting for non-cash expenses, Omeros' loss was $0.45 per share. Analysts had expected revenue of $450,000 and a loss of $0.45, but estimating quarterly financial results for a development-stage biotech company is a bit silly when that company hasn't commercialized anything yet. However, Omeros' revenue is 91% lower now than it was a year ago, and its losses are $0.05 per share greater than they were a year ago, so that could be making investors nervous.

Now what: As I already mentioned, panicking over the quarterly financial results of a development-stage biotech company is silly. Keep your focus on what Omeros is actually doing with its R&D and where its trials are leading, and ignore this financial data, as it has little bearing on Omeros' future.

The company began Phase 2 trials for OMS824 for Huntington's disease and made progress on the same drug in Phase 2a trials for treating schizophrenia patients during the first quarter, and also anticipates launching Omidira -- a drug for use in lens-replacement surgery -- during the second quarter. Cataract surgeries, which are one of the most common lens-replacement surgeries, are performed 2.7 million times a year in the United States, so there is certainly a large enough market for Omidira to bring in far more cash flow during the latter half of the year, if Omeros can get surgeons to adopt it.

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  • Report this Comment On May 17, 2014, at 1:11 PM, HowardMD wrote:

    Being from Seattle, I know a lot about Omeros.

    Their pipleline is outstanding and the peptides they have developed are not appreciated at all by the analyists.

    This company has the potential to be a double bagger in a year with much more to come!

    I gladly bought more shares on this correction.

    Dr. Freedman

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