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Omeros Corp  (NASDAQ:OMER)
Q4 2018 Earnings Conference Call
March 01, 2019, 8:30 a.m. ET

Contents:

Prepared Remarks:

Operator

Good morning, and welcome to today's conference call for Omeros Corporation. At this time, all participants are in listen-only mode. After the Company's remarks, we will conduct a question-and-answer session. Please be advised that this call is being recorded at the Company's request and replay will be available on the Company's website for one week from today.

I'll turn the call over to Jennifer Williams Investor relations for Omeros.

Jennifer Cook Williams -- Investor and Media Relations

Good morning, and thank you for joining the call today. I'd like to remind you that some of the statements that will be made on the call today will be forward-looking. These statements are based on management's beliefs and expectations as of today only and are subject to change. All forward-looking statements involve risks and uncertainties that could cause the Company's actual results to differ materially.

Please refer to the Risk Factors section of the Company's Annual Report on Form 10-K which was filed today with the SEC for a discussion of these risks and uncertainties. Dr. Greg Demopulos, Chairman and CEO of Omeros will take you through a corporate update and then Mike Jacobsen, our Chief Accounting Officer, will provide an overview of our fourth quarter financial results.

We have some time reserved for questions after the financial overview.

Now I would like to turn the call over to Dr. Demopulos.

Gregory A. Demopulos -- Chairman and Chief Executive Officer

Thank you, Jennifer, and good morning everyone. We appreciate you taking the time to join us today. I'd like to start the call by discussing OMIDRIA, our FDA approved ophthalmic product. Total revenues from OMIDRIA sales reported in the fourth quarter were $22 million, our highest quarterly revenue mark-to-date. This represents a 59% increase year-over-year compared to fourth quarter 2017, the last quarter before losing our pass-through status on January 1st 2018.

2018 included three quarters without pass-through separate payment for OMIDRIA and full-year revenues totaled $29.9 million, a decrease of 54% from full year 2017.

Our net loss for the fourth quarter of 2018 was $23.5 million or $0.48 per share. As of December 31, 2018, we had $60.5 million available for general operations. We have also received initial approval for an accounts receivable based line of credit, which would allow us to borrow up to $50 million based on our available accounts receivable borrowing base.

Of course, we're pleased that the fourth quarter of 2018, the first quarter of restored separate payment for OMIDRIA was our highest revenue quarter ever. But to look behind these numbers is even more encouraging.

In the fourth quarter of 2018, sell-through, the number of units sold by wholesalers to ASCs, and the hospitals during the quarter was also the highest for any quarter of OMIDRIA sales to date. This record sell-through was not the result of increased OMIDRIA inventories.

Inventories on hand at wholesalers as of December 31 2018 were consistent with historical norms. Sales velocity continue to accelerate through the period and our annualized run rate of weekly net sales in December 2018 was approximately $100 million. So what's behind these numbers and what can be inferred from them.

First and foremost, surgeons and facility administrators know that OMIDRIA significantly improved patient outcomes. It decreases complications, reduces the use of pupil expansion devices, prevents intraoperative floppy iris syndrome or IFIS and makes cataract surgery faster and safer.

It also reduces both postoperative pain and use of pain medications, including opioids. And expanding body of peer-reviewed publications underscores these and other benefits that OMIDRIA provides to both surgeons and patients.

Data from one such important recent study were presented earlier this year at International Ophthalmic Surgery Conference. The study consisted of approximately 2,300 cataract procedures and compared OMIDRIA plus postoperative NSAID drops alone versus no OMIDRIA and what is considered the standard treatment following cataract surgery, specifically postoperative topical NSAIDs plus topical corticosteroids.

The data showed that the use of OMIDRIA precluded the need for postoperative corticosteroids. The incidence of potentially devastating Cystoid Macular Edema or CME was markedly lower in the OMIDRIA group than in either the standard topical postoperative regimen or in historically reported levels of CME for cataract surgery.

Use of OMIDRIA also greatly reduced the incidence of rebound iritis as well as photophobia and pain when compared to the standard regimen of postoperative drops. A manuscript is currently in preparation.

A second study by a different investigator this time in about 500 patients also shows that use of OMIDRIA eliminates the need for postoperative steroids following cataract surgery. The data have been accepted for podium presentation at the Annual Meeting of the American Society of Cataract and Refractive Surgery after which a manuscript will be submitted for publication.

The second thing that is clear from our fourth quarter record sales is that they are the direct result of surgeon and facility driven demand and not due to the distribution channel being overfilled. The high rate of sell-through drove replenishment orders and increased progressively throughout the quarter.

As previously noted, wholesaler inventories kept pace with this growth and at year-end remained consistent with historical levels.

Third, a large majority of our previous customers have returned and are ordering OMIDRIA, and we continue to add a growing number of ASCs and HOPDs nationally as new customers. As an example of this expansion to new users, seven of the top 11 ophthalmic hospitals nationally now have OMIDRIA on formulary including Bascom Palmer Eye Institute in Miami, the number one ranked ophthalmic hospital in the country.

Fourth, in addition to growth of OMIDRIA sales in Medicare Part B patients, we saw increasing sales across Veterans Health, Medicare Advantage and commercial plans. To date, our payer team at Omeros has achieved coverage for OMIDRIA from payers representing at least 80% to 85% of each of Med Advantage and commercial beneficiaries nationally.

Now let's briefly address at a high level what we have seen so far with respect to OMIDRIA sales in the first quarter of 2019. To date in the first quarter, there has been low double-digit growth and sell-through over the corresponding weeks in the fourth quarter. This time period in January and February historically represents the lowest annual volume of cataract surgery procedures, due to multiple concurrent ophthalmic surgery conferences and the resetting of insurance deductibles at January 1.

The first quarter is historically the weakest of the year for OMIDRIA sales. So, we're pleased with the growth that we're seeing and we expect that the net sales in 2019, will be substantially increased over our annualized run rate of $100 million at year-end 2018.

Our long-term strategy for OMIDRIA remains the same. Secure continued separate payment from CMS for the drug beyond the expiration of its current pass-through status in October 2020. We remain keenly focused on both our ongoing administrative and legislative efforts, and we are optimistic that OMIDRIA will be appropriately reimbursed by CMS after October 2020. So that Medicare beneficiaries undergoing cataract surgery can continue to access the drugs proven efficacy and safety benefits.

It's clearly the right thing for patients, as evidenced by the overwhelming OMIDRIA clinical data, and following review and assessment of those data, the rapidly expanding list of leading centers and healthcare systems, including the Veterans Administration that have added OMIDRIA to their formulary.

The return of strong OMIDRIA sales is particularly timely, given the rapid progression with our lead MASP-2 inhibitor in our supplement, which is the recently assigned non-proprietary name for OMS721. We're advancing 3 Phase 3 programs for narsoplimab in hematopoietic stem cell transplant-associated thrombotic microangiopathy or stem cell TMA, Immunoglobulin A or IgA nephropathy, and atypical hemolytic uremic syndrome or aHUS.

For stem cell TMA, narsoplimab holds both breakthrough therapy and orphan drug designations from FDA. As we recently announced our plan(ph)to submission of a Biologics License Application or BLA for narsoplimab in stem cell TMA has been streamlined significantly as a result of a recent meeting with FDA.

The important highlights of that meeting are as follows : we agreed with FDA, that a response-based analysis for narsoplimab in stem cell TMA, is the most appropriate and expeditious assessment for approval. Eliminating the need to conduct a chart review-based historical control. This means that patient data from our existing Phase 2 single-arm stem cell TMA trial will form the clinical basis for the BLA. We are only required to continue collecting clinical data on patients already in the trial for purposes of the BLA. As a result, substantially less work, expense and time will be required to complete the clinical portion of our submission.

We currently are refining the criteria for the response-based endpoint, which we will confirm with FDA, prior to conducting the final data analysis. FDA will consider not only accelerated approval, but also full approval for narsoplimab in stem cell TMA with the determination to be made based on the submitted data.

FDA confirmed that a rolling BLA submission is appropriate in this indication. As planned, the non-clinical portions of the BLA were written late last year and will be the first BLA sections submitted.

The ability to conduct a rolling submission is expected to compress our timeline for any approval. Although, there are no guarantees, we expect that the clinical data to be included in our BLA will demonstrate that narsoplimab has a profound beneficial effect and will support an approval for our drug in stem cell TMA.

We expect that we will report publicly when we have confirmed the criteria with FDA and shortly after the data analysis has been completed.

Given the progress made and our discussions with FDA, we plan to harmonize the requirements for the European Marketing Authorization Application or MAA with those of the US BLA. We previously have met with regulators from three different European countries to discuss our data and submission of an MAA for narsoplimab in this indication. These meetings were uniformly positive.

The European Medicines Agency or EMA has confirmed that the centralized procedure is appropriate, which allows submission of a single MAA that covers all European member states and we are finalizing with the MAA's Pediatric Development Committee, a pediatric investigational plan for narsoplimab. The EMA has granted orphan designation for narsoplimab in stem cell TMA.

TMA occurs in and about 40% of allogeneic stem cell transplants, about 80% of those TMAs have high risk characteristics. In severe TMA following stem cell transplant, the mortality rate is high often cited as greater than 90% and death is usually rapid.

There currently is no approved treatment for stem cell TMA, and we expect that narsoplimab will meet that need. Our commercial team has been actively developing the narsoplimab launch plan for both the US and European stem cell TMA markets.

To date, the TMAs had productive meetings with over 30 of the top US transplant opinion leaders, representing key leadership at over 60% of the top US transplant centers.

Our team will also be meeting with European opinion leaders at this month's Annual Meeting of the European Society for Blood and Marrow Transplantation or EBMT in Frankfurt.

The feedback received from key opinion leaders has been strongly positive. There is a recognition that stem cell TMA represents a substantial unmet need. And there is a significant interest in earlier identification and treatment of TMA patients. The opinion leaders are aligned and highly supportive of our disease education initiative to be launched later this month at EBMT.

Opinion leaders have expressed confidence in the value that narsoplimab will bring to patients and we are collaborating with them to ensure that assuming approval, our drug is included on payer and provider formularies. To align with these efforts, we are developing a value and pricing strategy including a publication plan that recognizes the benefits to patients and the cost savings to providers.

As part of this strategy, we will be engaging with regional coverage authorities throughout Europe to ensure patient access to narsoplimab. It's important to understand that the drug represents not only hope to patients who currently do not have options, but also a way to reduce the economic burden, that providers and payers currently have in managing TMA.

Well, our focus today is stem cell associated TMA. We expect that our focus will expand. Here's why?Narsoplimab inhibits MASP-2 effector enzyme of the lectin pathway. Endothelial damage is known to be a strong activator of the lectin pathway. The cause of TMA is thought to be an endothelial injury resulting from the conditioning regimen required before the transplant, from transplant-related complications and from the immunosuppressants needed after transplant. Yet, TMA is not the only disorder caused by endothelial damage, rather TMA is part of a broader endothelial injury syndrome, which encompasses a good number of other devastating disorders. These include graft-versus-host disease, veno-occlusive disease and diffuse alveolar hemorrhage.

We've already seen narsoplimab successfully treat stem cell transplant patients with TMAs complicated by some of these other disorders. Based on the clinical data and the pathophysiological evidence, we expect that narsoplimab will prove to be an effective treatment broadly for endothelial injury syndrome.

Let's now turn to our narsoplimab program for treatment of IgA nephropathy, which like our stem cell TMA program has been awarded breakthrough therapy and orphan drug designations from the FDA. Earlier in this quarter, we reported additional positive data from patients in the second cohort of the Phase 2 IgA nephropathy trial who entered the extended follow up. All of whom received narsoplimab during this period. The eight patients in this extended follow-up had long-standing IgA nephropathy, substantial concomitant diseases, significantly impaired renal function and highly elevated, in fact most with nephrotic range, baseline proteinuria levels. The data demonstrate that eGFR measurements remain stable, consistent with preservation of renal function and that reductions in proteinuria were consistent in magnitude to those seen in the first cohort of the Phase 2 trial, with improvement seen of 50% to 70%.

The effects of narsoplimab seen in this trial are consistent and have been characterized by international experts and IgA nephropathy as unprecedented in magnitude even in very sick high risk patients with long-standing disease. The effect seen with narsoplimab across the cohorts are evidence of a substantial drug effect and are not consistent with the natural history of the disease.

We also announced this quarter that we had finalized with FDA our clinical plan for submission and approval of narsoplimab in IgA nephropathy based on our ongoing Phase 3 trial referred to as ARTEMIS-IGAN. At the meeting, it was agreed that the Phase 3 trial's primary endpoint of assessment of proteinuria would be extended from 24 to 36 weeks to allow for additional narsoplimab dosing if needed. This change was requested by Omeros.

It was also agreed at the request of investigators, who did not want their study patients in the placebo group to be deprived of access to narsoplimab for an extended period of time, that the Phase 3 trial would allow open label treatment with the drug for patients whose proteinuria remained elevated after at least one year in the trial. These changes are beneficial to our Phase 3 program, are endorsed by our academic leadership committee, and are being incorporated into the ongoing Phase 3 ARTEMIS-IGAN trial without any impact on study patients already enrolled.

The ARTEMIS-IGAN trial continues to enroll, narsoplimab has clear path to accelerated and full approvals in both the entire patient population, which includes patient with baseline proteinuria greater than 1 gram per day, and in the high-risk sub-population, which includes those patients with baseline proteinuria of at least 2 grams per day. To the best of our knowledge, narsoplimab remains the only drug in development that can obtain full FDA approval based on proteinuria data alone.

We expect that the Phase 3 ARTEMIS-IGAN trial, if positive, will also result in European approval for the drug in IgA nephropathy. In Europe as in the US, the drug holds orphan drug designation for IgA nephropathy. In addition to the ongoing Phase 3 ARTEMIS-IGAN trial and IgA Phase 2 second cohort, we also have an IgA Phase 2 third cohort at investigator sites in Hong Kong.

Like the first and second IgA cohorts, this is a small study slated to enroll approximately 10 patients. Given what looks to be good activity with subcutaneous dosing, the study has been redesigned to focus on subcutaneous dosing and associated biomarkers. We will continue to determine the pharmacokinetics and pharmacodynamics of the drug in IgA nephropathy patients when administered subcutaneously over a 12-week period.

Data from this cohort will support the ongoing Phase 3 program in IgA nephropathy and planned lifecycle management for narsoplimab and possibly one or more of our other MASP-2 inhibitors in this disease. We've initiated a publication plan for in narsoplimab in IgA nephropathy. The first manuscript directed to the findings in our Phase 2 first and second cohorts is currently in preparation.

The third Phase 3 program for narsoplimab is evaluating the drug for the treatment of aHUS. Narsoplimab for aHUS is Fast Track Designation from the FDA. The Phase 3 single-arm open label clinical trial in aHUS continues to enroll. In this trial, dosing is subcutaneous with an intravenous loading regimen. Across all clinical trials ongoing and completed, narsoplimab continues to be well tolerated and no safety concerns have been identified.

Across all of its Phase 3 indications, narsoplimab is targeting unmet needs and for stem cell TMA and IgA nephropathy, there are no approved treatments and the drug has breakthrough therapy designation. We look forward to making the drug available as soon as possible to those patients, who need it.

The promising data coming out of our narsoplimab programs have also added to the excitement around our rapidly advancing development of small molecule MASP-2 inhibitors. We have synthesized and screened the large number of compounds and are optimizing our lead compounds for potency, oral bioavailability and target selection. We expect to select the development candidate in the first half of 2019, and -- and anticipate entering clinical trials with an orally administered MASP-2 inhibitor next year.

The potential advantages of small molecules over antibodies are obvious, and the absence of any marketed small molecule therapeutics in the complement space represents a clear opportunity for our small molecule MASP-2 inhibitors.

The other half of our complement franchise is our MASP-3 inhibitor, OMS906. MASP-3 is thought to be the key activator of the complement systems' alternative pathway and is responsible for the conversion of pro-factor to factor D. Systemic administration of our MASP-3 antibody, OMS906 achieves long lasting inhibition of the alternative pathway. There are at least two significant advantages of a MASP-3 inhibitor like OMS906 over other complement inhibitors on the market or in development.

First, OMS906 inhibits the alternative pathway without affecting the functioning of the classical or lectin pathways. Therefore, we don't anticipate that OMS906 will carry the infection risk associated with inhibiting all three pathways as has seen with C3 or C5 inhibition.

Second, given that active factor D enters compartments within the body such as the eye through the bloodstream, we expect significant -- systemic administration of OMS906 to shut down the alternative pathway in parts of the body that are often thought to be inaccessible to systemically delivered antibody therapeutics targeting for example C3 or C5. So OMS906 is expected to have the ability to treat local inflammatory diseases by systemic rather than local administration. Clinical trials are slated to begin in the first part of 2020.

Like in our MASP-2 program, we're also developing selective small molecule MASP-3 inhibitors to block only the alternative pathway as well as potent bispecific MASP-2, MASP-3 inhibitors to shut down both the lectin and alternative pathways.

Let's next turn to OMS527, our phosphodiesterase 7 or PDE7 inhibitor program for addiction and compulsive disorders. PDE7 inhibitors appear to avoid a major drawback of all currently marketed anti-addiction drugs. Depression of the reward system, meaning the pleasure derived from other activities such as social interaction, sex or sports is greatly reduced. PDE7 inhibitors do not appear to alter the reward system. Also PDE7 inhibitors do not appear to be addictive.

Omeros discovered and exclusively controls the link between PDE7 inhibition and any form of addiction or compulsive disorder. A Phase 1 single-ascending and multiple-ascending dose clinical trial is under way to assess safety and pharmacokinetics of the drug in healthy subjects. We have already completed dosing all six cohorts in the single-ascending dose portion of the trial, including a cohort to assess whether pharmacokinetics is affected by food.

We've also finished dosing the first two cohorts in the multiple-ascending dose portion of the trial. The drug has been well-tolerated and pharmacokinetic data are consistent with once daily dosing with or without food.

Completion of the Phase 1 trial is expected in the second or third quarter of this year. Assuming successful completion of Phase 1, we plan to conduct a Phase 2a study targeting nicotine addiction.

The progress with our OMS527 program is particularly exciting given the substantial unmet need for effective treatments and addiction. Substance abuse has an estimated societal cost of nearly $1 trillion annually in the US alone. OMS527 has been shown to be effective in multiple animal models of addiction and compulsion, including nicotine, alcohol, cocaine and opioid addiction as well as in binge eating. Collectively, the effect of PDE7 inhibitors in these models is highly predictive of efficacy in humans.

FDA is committed to advancing effective treatments for addiction to opioids and other substances of abuse, and here again, we look forward to working closely with FDA to advance the development of our PDE7 inhibitors.

We'll close out our program discussion with our G-protein coupled receptors GPCR platform. Omeros believes that it exclusively controls 54 GPCRs, with broad ranging indications. One of the receptors on which we are particularly focused is GPR174, a unique target for immuno-oncology. Our GPR174 program is advancing rapidly, given this program's promise, we plan to commit substantial medicinal chemistry resources to optimize small molecule antagonist of GPR174 with the objective of entering the clinic as quickly as possible.

Before moving on to our financial discussion, I'd like to recognize the recent and welcome addition of Dr. Tom Bumol to our Board of Directors. Tom is the Executive Director of the Allen Institute for Immunology, having assumed that position after a long and distinguished career at Lilly, where he was Senior Vice President of Biotechnology and Immunology and the Site Head of Lilly's Biotechnology Center in San Diego. With decades of experience in immunology and biotechnology development, Tom has a long track record as a successful drug developer of both large and small molecule drugs, and we expect that he'll be a valuable contributor to our Company's success across the full range of our portfolio.

With that, I'll turn the call over to Mike for a summary of our fourth quarter financial results.

Michael A. Jacobsen -- CAO, VP of Finance & Treasurer

Thanks, Greg. As Greg noted, OMIDRIA and total revenues for the fourth quarter were $22 million and our net loss was $23.5 million or $0.48 per share. This includes non-cash expenses of $4.9 million or $0.10 per share.

As of December 31, 2018, we had $60.5 million of cash, cash equivalents and short-term investments available for general operations.

Here are some specifics regarding the fourth quarter results. Our reported revenue for the fourth quarter increased from $4.6 million in the third quarter of 2018 to $22 million in the fourth quarter. As Greg mentioned earlier, the primary driver for the increase was the reinstatement of OMIDRIA pass-through, effective October 1, 2018 and the associated strong demand from ASCs and hospitals. In fact, as we previously announced, our Q4 revenue or sell-in and our sell-through or vials sold to our customers were both all time highs.

As of December 31, 2018, our overall inventory at the wholesalers when measured based on OMIDRIA sell-through volume remained consistent with those we experienced during 2017, when OMIDRIA had pass-through status.

GAAP reported costs and expenses including non-cash expenses for the quarter were $40.5 million, a $400,000 increase from the third quarter of this year. The primary drivers of our research and development expenses continue to be clinical and manufacturing expenses related to our stem cell TMA, IgA nephropathy and aHUS for registration programs.

In addition, our Phase 1 OMS527 trial contributed to our overall R&D costs. The primary drivers of our SG&A costs continue to be the OMIDRIA sales and marking efforts and general corporate expenses.

Pre-commercialization activities for narsoplimab in stem cell TMA are also contributing to SG&A cost. Interest expense was $5.2 million for the quarter, reflecting the increase in our outstanding debt.

In November, we issued $210 million of unsecured convertible senior notes with a 6.25% coupon due on November 15, 2023. We also purchased a capped(ph)call that effectively eliminates any dilution risk, related to the convertible notes until OMIDRIA stock is trading at or above $28.85 per share. Even at this point, we have the option of avoiding conversion to common stock by redeeming the notes using cash generated to for example, product sales, licensing revenues or replacing the current convertible instrument.

We used $146 million of the net proceeds to pay off our previously existing notes payable to CRG and $33.2 million for the capped call. Upon payment to CRG, we recorded loss on extinguishment of debt of $13 million and an income tax benefit of $13 million related to the purchase of the capped call. In addition, we have received initial approval for an accounts receivable baseline of credit, which will allow us to borrow up to $50 million, based on our available accounts receivable borrowing base.

Now, let's take a look ahead. As Greg referenced, we've seen low double-digit growth and sell-through in the first quarter over the corresponding weeks in the fourth quarter. The first quarter is historically the weakest of the year for OMIDRIA sales and January and February historically represent the lowest volume of cataract surgery procedures.

We're encouraged by the growth in sell-through and we're seeing and we expect that net sales will grow substantially in 2019. During 2019, the majority of our research and development expenses are expected to be related to narsoplimab with OMS527, OMS906 and our GPCR program contributing lesser amounts. We expect research and development costs will increase in 2019, given our ongoing narsoplimab manufacturing scale-up activities and our Phase 3 clinical programs.

Timing of these expenses on a quarter-by-quarter basis can be inconsistent due to the timing of raw material purchases and the physical manufacturing of drug batches.

Selling, general and administrative expenses for 2019 will also increase over the previous year, primarily due to pre-commercialization activities for narsoplimab. We will begin to incur some of these costs in the first quarter and they are expected to increase as the year progresses.

Interest expense for the first quarter should be approximately $5.7 million, of which, $2.2 million will be non-cash interest. The non-cash component is related to the amortization of the conversion feature and debt issuance costs of our convertible debt.

With that, I'd like to turn the call back over to Greg. Greg?

Gregory A. Demopulos -- Chairman and Chief Executive Officer

Thanks, Mike. Let's open the call to questions.

Questions and Answers:

Operator

Thank you. (Operator Instructions)

And our first question comes from Jason McCarthy with Maxim Group. Your line is now open.

Jason McCarthy -- Maxim Group -- Analyst

Hey, guys. Congratulations on the quarter. It's nice to see OMIDRIA returned to growth. So my first question, I'm going to do related to narsoplimab and IgA nephropathy, specifically with the primary endpoint expansion. So, since the previously enrolled patients are not going to be impacted, I'd like to see if you could discuss how you're going to carry out this analysis, and whether you're going to stratify the patients enrolled after the changes from the ones before? And then also, do you expect this having any impact on powering the study or is that not going to be particularly significant?

Gregory A. Demopulos -- Chairman and Chief Executive Officer

Yes, good morning, Jason, and thanks. In answer to your first question, we don't intend to stratify. We also don't see any effect on powering. We expect that we are appropriately, if not more than appropriately powered for the trial. So I think we're in good shape there.

Jason McCarthy -- Maxim Group -- Analyst

All right perfect. Thank you. And then..

Gregory A. Demopulos -- Chairman and Chief Executive Officer

The expansion -- I'm sorry, just to be clear, the expansion of that primary endpoint from 24 to 36 weeks as you know, allows for repeat dosing of narsoplimab, and we think that's beneficial to the overall program and to patients.

Jason McCarthy -- Maxim Group -- Analyst

All right. Thank you. And then the next one is just related to the development strategy on OMS527. I knew you guys are planning to initially target nicotine addiction. But are there any plans to expand to other forms of addiction in parallel, are you going to wait till after the nicotine addiction trials ,complete especially as the anti-addiction space has become particularly relevant with the opioid crisis and opioid overdose related deaths overpassing car accidents?

Gregory A. Demopulos -- Chairman and Chief Executive Officer

Yeah, that's a very good point and it's a good question. We're focused initially on nicotine, because there is a clear path there. Chantix has set the pathway. So we have something that's very clear to follow. Your point though about other indications, is a good one, and as you would expect, one, that we are continuing to consider seriously, opioid addiction, as you just pointed out, the number of opioid deaths has exceeded deaths from automobile accidents in the US. And obviously, the administration and FDA are focused on opioid addiction and potential new treatments for opioid addiction.

We believe that OMS527 and PDE7 inhibitors in general could meet that need. So we are -- again, as you would expect seriously looking at those indications.

Jason McCarthy -- Maxim Group -- Analyst

Alright. And then just last quick one related to payer coverage on OMIDRIA. Could you talk about the total population of patients that are covered for OMIDRIA right now?

Gregory A. Demopulos -- Chairman and Chief Executive Officer

Sure. I mean, 100% of Med Part B patients are covered. So that's roughly 45% to 50% of all cataract surgery patients. Then, we've got about 80% to 85% of each Med advantage, which represents 25% to 30% and 80% to 85% of commercial, which represents the remainder, which if I'm doing my math correctly, would be about again 20% to 25%.

So when you put all of that together, you're well north of 85% to 90% of patients, who are currently covered.

Jason McCarthy -- Maxim Group -- Analyst

All right. Thank you very much for taking my questions.

Gregory A. Demopulos -- Chairman and Chief Executive Officer

Thanks, Jason.

Operator

Thank you. And our following question comes from Steve Brozak with WBB. Your line is open.

Steve Brozak -- WBB -- Analyst

Hey, congratulations, and of course, thank you for taking the questions. Let me go back here and start on the OMIDRIA questions that you've just been asked and answered on. Clinicians obviously have gotten it and patients obviously are the beneficiaries for it. What can we expect into the future as not so much in terms of sales guidance but in terms of how you would expect different things as OMIDRIA continues to grow in sales, in visibility, and what do you, -- what guidance can you give us on that? And again, I'm not looking for sales guidance, because obviously, with any product launch or in this case relaunch, it's difficult to do anything but give you real-time information?

Gregory A. Demopulos -- Chairman and Chief Executive Officer

Good morning, Steve. I am -- I understand the question, I believe. I think that the answer to the question is, look, what we saw in the fourth quarter was a very quick return to historical levels, and frankly, levels beyond what we had seen historically.

In the early part of Q1, we've seen continued growth, again, we all expected Q1 is going to be overall the weakest quarter of the year for OMIDRIA. What we do expect is continued growth throughout 2019, and I think as we've pretty clearly stated, we expect that net sales in 2019 will substantially exceed the $100 million in the annualized run rate that we had at the end of 2018.

In terms of road marks or -- a map to kind of what that growth could be, I think we're looking at ASCs and we're looking at hospitals. As you know, we now have a dedicated hospital sales force of six individuals at Omeros, whose full time -- full focus is on sales within hospital systems. And we're seeing that pay off, as we spoke, during the prepared comments, we've seen most recently Bascom Palmer and other large academic centers.

We're also seeing great success with our payer team, which is a relatively new addition or a new addition in 2018, and that group has also done really a phenomenal job of ensuring that Med advantage and commercial payers are appropriately paying for OMIDRIA.

And the results of that you see in the coverage that we now have around the drug. So I think all of those things continue to play into the growth that we expect to see, the publications that we have already out, those that will be coming. I think will further strengthen it. I think any question now about the clinical utility of the drug and the clinical need for the drug, I think those questions have been answered and answered resoundingly in the positive.

So I think this is really now a question of continuing to penetrate facilities, expanding the number of facilities, but not only expanding, increasing our sales within given facilities. So the depth of our sales, within a given facility. But I think that's -- that pretty much sums up the majority of what we're watching.

Steve Brozak -- WBB -- Analyst

No. And again, thank you for that kind of real world explanation. Now obviously, everyone's looking now at narsoplimab and the unusual part of when you look at drug development is typically you've got one drug that's being developed for one indication and that's fairly straightforward in terms of everything regulatory clinical development and then eventually approval.

You've got the proverbial three bites at the apple here, which obviously doesn't explain itself well in a lot of what Wall Street and pharma look at in drug development. How long, -- how would you describe it in terms of what you prosecuted, what the regulatory bodies have bought back to you? How would you go out there and explain it, if we were looking at simplifying the model for investors? How would you do that? And I've got one follow-up after that on that?

Gregory A. Demopulos -- Chairman and Chief Executive Officer

Well, as you pointed out, Steve, we have three bites at the apple. So this is not a rifle shot with narsoplimab. We have multiple shots on goal. From our perspective, really any indication that brings an approval for narsoplimab is great with us. Our current primary objective is to get narsoplimab across the finish line in stem cell TMA. We think that will be the first indication that will carry an approval for the drug.

We believe that IgA will follow, and we believe that aHUS will come across the finish line after IgA. So I think that you've summed it up nicely with really there are multiple shots on goal here for the drug. But we see the drug not being limited to just these three indications. Ultimately, we see MASP-2 inhibitors, narsoplimab being one of them, are small molecule drugs being others that will have really broad applications within the complement system and within the immune system broadly. I think that's clear when you look at ischemia-reperfusion injuries, when you look at a host of other disorders that are increasingly being linked to the lectin pathway. Excuse me, I'm still recovering here a bit, so I apologize for my voice. But I think that is how we view the franchise of MASP-2 inhibition.

Steve Brozak -- WBB -- Analyst

Okay. And thank you. And the last follow-up on that is, obviously, you've been in touch and you do have plans, as far as dealing with the payers, and again, it's an unusual circumstance here. What have the payers given you back considering in terms of feedback? What have they given you, given the fact that you are looking at an unusual -- unusual situation and you do have the proverbial unmet needs here? So how would you give us any kind of clarity or color on what the payer feedback has been? And then I'll hop back in the queue. Thank you.

Gregory A. Demopulos -- Chairman and Chief Executive Officer

Yes. Thanks, Steve. I think it's premature to talk about our discussions with payers around narsoplimab, other than to underscore that clearly, stem cell TMA is an ultra-orphan indication, it is an indication or let's refer to the disorder now, which is stem cell transplant associated TMA, that disorder in severe cases carries a high mortality rate. And the cost to manage TMA, I'm not saying treat TMA, I'm saying the cost to currently manage, because there is no approved treatment. That cost to manage those patients is extremely high.

And the management is intensive. So I think, let me -- let me stop there. As we move further along, we'll have more to say about pricing. But I think for now, anything else would really be premature.

Steve Brozak -- WBB -- Analyst

Great. Again feel better obviously, and thank you for answering these questions and congrats on obviously all the progress.

Gregory A. Demopulos -- Chairman and Chief Executive Officer

Thanks, Steve.

Operator

Thank you. And our next question comes from Liana Moussatos with Wedbush Securities. Your line is open.

Liana Moussatos -- Wedbush Securities -- Analyst

And congratulations on your OMIDRIA sales. When -- can you talk about the activities going on now that could lead to permanent pass-through reimbursement for OMIDRIA? And then do you think you can submit a BLA for stem cell TMAs in 2019, or is that more of a 2020 activity? Thanks.

Gregory A. Demopulos -- Chairman and Chief Executive Officer

Hi, Liana. Good to hear from you. First question, around the efforts for permanent or long term separate payment for OMIDRIA, we continue the efforts that we've had under way for quite a while, which have really two arms to that effort. One is administrative, meaning CMS and the associated groups, and also legislative. We had really unprecedented success with the achieving extension of pass-through in April of last year with the inclusion of the provision addressing pass-through in the omnibus bill at that time.

We believe that the 2019 OPPS final rule, really, again, here provided two paths to permanent separate payment for OMIDRIA. The first is the non-opioid provision. And by that, I know -- you know what I mean. But just so that others understand it, that is the provision by which CMS will pay separately for otherwise package non-opioid pain medications used during surgery. Clearly OMIDRIA fits that definition. OMIDRIA is a non-opioid and it has an FDA approved indication for postoperative pain reduction.

The other approach or avenue that was potentially laid out by the 2019 OPPS final rule, was the statement by CMS that they would consider the separate payment for ophthalmic drugs that have a postoperative benefit, again here, OMIDRIA clearly meets that definition.

We're not standing still waiting for CMS to make good either of the avenues that they laid out in the 2019 OPPS final rule. We continue discussions with CMS. We continue discussions with members and staffers on the hill. We think that clearly if you look at the benefits of OMIDRIA, there's no question, the drug should be separately paid. And I'd say that in good part, because the benefits are clear. The reduction in costs are clear. But also there is no FDA approved alternative, the only alternative, and it's a poor alternative in measure of efficacy.

But the only potential alternative is really compounded products. And I think the risks associated with those are very clear. One needs only look at the 68 patients, who were blinded in Dallas through the use of compounded drugs in cataract surgery to understand that risk. So I think -- I think CMS understands these issues. I think clearly Congress understands these issues. Congress and a clear message, which was drugs like OMIDRIA need to be separately paid. I expect that CMS and would hope that CMS has heard that message and will respond accordingly.

Liana Moussatos -- Wedbush Securities -- Analyst

Thank you. And then will you be able to file the stem cell TMA BLA in 2019 or more like 2020?

Gregory A. Demopulos -- Chairman and Chief Executive Officer

Yeah. I understand that question very clearly as well. I think, look, our objective is to get it filed as quickly as possible. And clearly, the entire team is focused on that. The elimination of the need for an historical control not only really reduces the risk. We were ready to do an historical control. And we were quite confident how that would end up, but there is always risk with the unknown, that unknown risk has now been eliminated. Not only does it eliminate the risk, it compresses the timeline. Saves time saves cost.

So all of that I think bodes well for an earlier submission of our BLA. Let us get through the confirmation of the endpoint with FDA, which we hope to have soon and follow thereafter with our analysis of the data. And I think over the coming months, we'll be making it very clear as to our timeline. I'll just end that Liana with the answer that, clearly, we're pushing to get it across the finish line fast. And I think as things have played out, the stars are aligning for that -- for that submission to be accelerated.

Liana Moussatos -- Wedbush Securities -- Analyst

And do you think it's possible, it would be after 2020?

Gregory A. Demopulos -- Chairman and Chief Executive Officer

Let me be clear about that. No, I don't.

Liana Moussatos -- Wedbush Securities -- Analyst

Okay.

Gregory A. Demopulos -- Chairman and Chief Executive Officer

I think, again, I'm not trying to sidestep the question. I just want to make sure that I'm not jumping the gun. Let us have the discussion with FDA and confirm the endpoint. Let us come back to you. Our objective is to have that filed rapidly. Okay? ? And so let me hold -- let me just stop there.

Liana Moussatos -- Wedbush Securities -- Analyst

Okay.

Operator

Thank you. And our following question comes from Ram Selvaraju with H.C. Wainwright. Your line is open.

Raghuram Selvaraju -- H.C. Wainwright -- Analyst

Hi, Greg. Thanks very much for taking my questions and congratulations once more on an excellent quarter.

With respect to OMIDRIA and the overall ophthalmology space as it pertains to Omeros. Two questions. Firstly I wanted to know whether you could comment at this time on what your updated expectations are for European sales, European commercialization or ex-US commercialization in general of OMIDRIA?

And secondly, if you have any perspective strategically on whether at this time it might be advisable for Omeros to entertain the possibility of adding further ophthalmology focused products to the bag of the sales reps that you currently have? And then secondly, with respect to OMS906, I just wanted to make sure that I understood correctly that you don't anticipate this agent entering the clinic until 2020. And if that's the case, maybe you could describe what the gating items are to getting to that point that are likely to occur over the course of 2019?

And finally with regard to the GPR174 program, if you could maybe provide us with some color at this point regarding what you anticipate could be potential lead indications within the context of immune-oncology for that arena of development? Thank you.

Gregory A. Demopulos -- Chairman and Chief Executive Officer

Okay, I will try to remember all those and answer them in the order in which they were asked, Ram. Thanks. First with respect to OMIDRIA in Europe, our objective there remains unchanged. We want to develop strongly the US market and then follow with the European launch of the product. Pricing in Europe is always going to be a challenge if we create a stronger -- continue to create that stronger demand in the US that's only going to help us in Europe with respect to adoption than with respect to pricing. So our focus today and for the near term remains on building the US market and the US utilization of OMIDRIA.

With respect to additional ophthalmic products, certainly, it makes sense to have more than one product in the bag of our sales force. So we continue to assess the opportunities for other ophthalmic products. Ideally those that would use the same call pattern, but we are looking even more broadly at ophthalmic products to add to our ophthalmic franchise and allow our sales force, which we really believe is now at certainly one of the premier, if not the premier sales force for HOPDs and ASCs in the ophthalmic space. I mean, what they have done with OMIDRIA and what they had to build with respect to a product that is very different than what -- than anything that had been there before I think has been quite remarkable. So it makes a lot of sense to add another product to the bag, we continue to look for that.

With respect to 906, the expectation is first part of 2020. The milestones there are really quite clear. It's the completion of the scale up of the antibody. It's the pre-IND studies. It's the submission of the IND or the CTA and then in the clinical trials. We do expect that the safety profile will be good. Again, there is no guarantee of that until we run the studies.

But from all scientific evidence that we have, the inhibition of MASP-3 should leave the classical pathway wholly intact just as MASP-2 inhibition does and also as we talked about should be able to get the compartments of the body that other alternative pathway inhibitors cannot and inhibit MASP-3 systemically.

So I think we're in good shape there and we're very excited to get that product into the clinic. I can tell you that our scientists are at least as excited about 906 and MASP-3 inhibition as they are around MASP-2 inhibition and narsoplimab that may be just that the novelty of MASP-2 inhibition is wearing off and MASP-3 is more novel. But there's a lot of excitement around that program and we're looking forward very much to getting that into the clinic quickly.

With respect to 174, and additional color there and potential indications, there is a lot of work going on here on 174. The data that we are amassing are -- I will just characterize it as impressive. Impressive not only internally but impressive to external experts, who are reviewing those data.

What we're seeing, what we believe we're seeing is a target that really controls a key or critical access in the cancer pathway and cancer broadly. So when you talk about indication it's really not a specific indication as breast cancer or pancreatic cancer or lung cancer. Our initial read and I want to characterize that as initial but shared by external experts is that, that initial read is we're really looking at potentially a treatment broadly for tumors, certainly solid tumors and potentially also liquid. So I think the applications here, if what we're seeing in animals and in ex-vivo human studies hold, and I frankly believe they will hold, what we're going to see is something that is broadly applicable across cancers. And again something that will modulate one of those key axis in cancer.

I think something frankly in that case unprecedented, but we will see. Let's just see how that plays out. But right now that's our belief, in fact, I probably make it a little stronger, that's our guarded expectation.

Raghuram Selvaraju -- H.C. Wainwright -- Analyst

Thank you very much for that color. Just two other quick housekeeping items, maybe these are for both you and for Mike. Wanted to just clarify that we are not likely to see any further recurrence of the expense item entitled loss on early extinguishment of debt beyond the roughly $13 million that you recorded for the fourth quarter?

And then also I just wanted some additional clarification on the accounts receivable related additional credit facility. If you could maybe give us an idea of how much is available to you as of right now given where receivables currently stand? And relative to the timeline to potential profitability on acceleration of sales of OMIDRIA, whether you can comment on the current sufficiency of cash resources to reach and extend beyond that point? Thank you.

Gregory A. Demopulos -- Chairman and Chief Executive Officer

Sure, with respect to your first question around the 13 million that's one-time. So we have accounted for it, and that's correct and we are not going to see that recur. You're second question, Ram remind me, I'm drawing blank on -- your first was, go ahead...

Raghuram Selvaraju -- H.C. Wainwright -- Analyst

Yeah, it was just related to what you currently would have available to you under accounts receivable...

Gregory A. Demopulos -- Chairman and Chief Executive Officer

Oh sure, the AR line. Yeah. Assuming we put that in place, and as I said we've already been initially approved for that. And certainly one would think we'd qualify for that. It's a $50 million loan, we think the initial qualification at this point based on our sales let's just use our fourth quarter sales, but that would be probably an additional $20 million that we could access. Your other question was I believe timeline to profitability, and look, I don't want to guide specifically to that. Clearly, we think OMIDRIA sales are going to continue to grow. I can tell you our objective is to become at least cash flow neutral and ultimately profitable off of OMIDRIA, and we're looking at a relatively tight timeline to make that happen.

So I think all of that distills down to what was your last question, which is gee, how are we standing with respect to cash and run room? Look I think when you look at what we've got, when you look at the sales of OMIDRIA, and again, this is going to be in large part dependent on the growth in the sales of OMIDRIA, but you look at our ability to access the AR line. I think that we're in good shape and our objective here would be able to run through 2019 without a need for additional capital, and then you see what happens with OMIDRIA.

But remember too that we have other options. And we still have an additional $40 million that we had thought of first tying in with our convertible debt. There is always the ability to add to that, the bonds are trading well and we'll see how that goes. Not sure we want to do it. Not sure we're going to need it. But certainly we have options.

Raghuram Selvaraju -- H.C. Wainwright -- Analyst

Thank you very much. Very helpful. Congratulations once again.

Gregory A. Demopulos -- Chairman and Chief Executive Officer

All right, Ram. Thanks.

Operator

Thank you. I am showing no further questions at this time. I would now like to turn the call back to Dr. Demopulos for closing remarks.

Gregory A. Demopulos -- Chairman and Chief Executive Officer

Alright. Well, now that wraps up the call for today. Thanks everyone for joining us. Thanks for listening in. As you can see, we see things coming together very nicely for OMIDRIA, for narsoplimab and for the rest of our pipeline. As always we will keep you posted periodically on our progress. And with that, we wish all of you a good day.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone, have a great day.

Duration: 71 minutes

Call participants:

Jennifer Cook Williams -- Investor and Media Relations

Gregory A. Demopulos -- Chairman and Chief Executive Officer

Michael A. Jacobsen -- CAO, VP of Finance & Treasurer

Jason McCarthy -- Maxim Group -- Analyst

Steve Brozak -- WBB -- Analyst

Liana Moussatos -- Wedbush Securities -- Analyst

Raghuram Selvaraju -- H.C. Wainwright -- Analyst

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