Omeros Corporation (NASDAQ:OMER) stock has been getting battered since its only marketed product stopped getting special treatment from an important government payer. Omidria's imminent decline is troubling, but perhaps the market has been a little too severe. 

After all, the company sports a new drug candidate with blockbuster potential that's getting close to the finish line. Let's look at this unusual drugmaker in light of recent developments to see if there's anything of interest here for us bargain shoppers.

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Good while it lasted

Omidria is a branded combination of two ingredients found in a variety of over-the-counter medications. At the beginning of 2018, it lost pass-through reimbursement status from the Centers for Medicare and Medicaid Services (CMS) that allowed eye surgeons to charge $492.90 for Omidria on top of the standard reimbursement rate for cataract surgeries.

Without pass-through status, eye surgeons need to absorb Omidria's cost within the allowed reimbursement rate of $992.11 for a cataract surgery. it looks as if ophthalmologists across the country have already gone back to mixing readily available ingredients into their eyeball irrigating solutions themselves.

Omidria's pass-through expired on Jan. 1, and sales are already in freefall. Unable to record revenue for vials still in wholesalers' inventories, the company found fourth-quarter sales were 36.5% lower than during the previous quarter.

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Warning: Dilution ahead

Roughly half of Americans over age 75 have cataracts, so eventual success for Omidria as a high-volume product with low margin isn't impossible. That said, Omeros doesn't have any time to test new business models. A complex loan agreement requires the company to record at least $65 million in sales this year and $75 million the next, or raise enough capital to cover any shortfall. It would take a miracle to boost sales above the $64.8 million reported for 2017, so we can reasonably expect some value diluting share offerings this year, and perhaps again in 2019.

Right now's an especially bad time to be short of capital. The company's lead clinical-stage asset, OMS721, is in late-stage testing across three rare-disease indications. Running all those trials will drive up R&D costs, especially an ongoing placebo-controlled study expected to enroll at least 240 immunoglobulin A (IgA) nephropathy patients.

Omeros finished 2017 with $83.7 million in cash and short-term investments. If Omidria sales plummet, the company could easily burn through every cent before 2018 is finished. Last year, combined operating and interest expenses reached $120 million, and running multiple pivotal studies should drive those expenses much higher this year.

Management hasn't thrown in the towel on Omidria or made significant cuts to its sales and marketing team. Raising enough equity to cover expenses is going to raise the number of outstanding so high that your slice of profits from eventual sales of OMS721 could get cut in half.

What can still go right

The company's lead candidate, OMS721, could still become the first available treatment for an underserved group of patients suffering from complement-mediated thrombotic microangiopathies (TMAs). Soliris from Alexion Pharmaceuticals (NASDAQ:ALXN) treats some TMAs, but none on the scale of IgA nephropathy. Soliris sales passed $3.1 billion last year, and OMS721 keeps producing results that suggest it could be even more popular among TMA patients.

At recent prices, Omeros Corporation's entire market cap is just $442 million. Biotech stocks like to trade at mid-single-digit multiples of their total annual revenue, giving this stock market-beating potential despite dilutive stock offerings on the horizon.

Although enormous possible upside makes me want to call Omeros a buy on the dip, it's just too risky at the moment. I'd look for placebo-controlled data for OMS721, expected in the middle of the year, to shore up the drug's case. That will also give us another quarter or two to evaluate how bad the Omidria fallout could get.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.