Shares of Omeros Corporation (OMER 17.42%), a rising star in the biotech industry, are losing altitude after the company reported first-quarter earnings today. The stock was down 16% earlier this morning, but just 11.4% lower than the previous day's closing price as of 11:40 a.m. EDT on Thursday.
At the moment, Omeros' lead drug, Omidria, generates practically all its revenue. Sales of the first and only solution for preventing pupil constriction during cataract and lens replacement surgeries have soared in recent quarters, but might be tapering off. Although first-quarter Omidria revenue of $12.3 million was 69.2% higher than in the same period last year, it was $600,000 less than what was reported in the fourth quarter of 2016.
In response, an analyst at Cantor Fitzgerald downgraded the stock to neutral. The downgrade carries a bit of extra weight as it comes from the same institution that underwrote a secondary offering of Omeros stock last summer.
Omeros blames wholesaler shipment schedules for softer-than-expected sales during the three-month period ended in March. According to management, wholesalers replenished their inventories with a $2.1 million Omidria purchase during the first week of April. Adding this figure to first-quarter Omidria sales would have turned the 5% sequential contraction into an 11% gain.
The analyst downgrade based on tapering Omidria sales looks like an overreaction, and it looks like bargain shoppers are responsible for the stock's partial recovery so far today. I thought the stock was one of the best biotech stocks to buy on sale a few weeks ago, and I'd say it's even deeper in value territory after today's slide.
Beyond Omidria, the company's lead new drug candidate, OMS721, is a potential first-in-class treatment for diseases that affect kidneys, including atypical hemolytic uremic syndrome. Patients with aHUS have just one treatment option at the moment, Soliris, a drug that generated $2.8 billion in sales for Alexion Pharmaceuticals last year.
If data from a late-stage clinical trial with OMS721 in aHUS fall in line with previous observations, you can be sure Omeros' recent market cap of about $626 million will dilate like a pupil in the dark.