What happened

Shares of Omeros Corporation (NASDAQ:OMER), a commercial-stage biopharmaceutical company, are on the move following the company's first-quarter earnings report. Although revenue fell off a cliff, investors liked what they heard about this biotech's lead candidate enough to drive the stock 23.4% higher as of 12:48 p.m. EDT on Friday.

So what 

Omeros Corporation's first-quarter haul was decimated by the temporary loss of Omidria's favorable reimbursement status with the Centers for Medicare and Medicaid Services. Sales fell to just $1.6 million from $12.3 million during the same period last year. Despite the revenue dip, news concerning the company's lead candidate encouraged investors to push up the stock.

Woman holding briefcase walking through a giant upward pointing arrow.

Image source: Getty Images.

Earlier this year, it reported impressive results from a study with its lead candidate OMS721 as a treatment for a rare but dangerous condition that affects patients who undergo stem cell transplants. Transplant-associated thrombotic microangiopathy is so lethal that historical data projects a dismal 10% survival rate at 100 days for high-risk patients similar to those Omeros enrolled into a single-arm study with its candidate.

The company doesn't have any comparison data for OMS721 yet, but a 53% survival rate at 100 days looked impressive. Investors are feeling enthusiastic today because management dropped hints that the Food and Drug Administration might be willing to grant the experimental therapy an accelerated approval based on single-arm data. Omeros would need to run a post-approval confirmatory study, but speeding the therapy to a commercial launch could send the stock screaming higher.

Now what

Omeros has started enrolling immunoglobulin A nephropathy patients in a phase 3 trial and another late-stage study with atypical hemolytic uremic syndrome patients is forging ahead as well. Before getting too excited, investors need to remember a couple things about this biotech stock. First, communications with the FDA aren't subject to full disclosure. The FDA could have discouraged the company from submitting an application without running expensive comparison studies and Omeros really isn't required to tell us.

I'm more concerned about the fact that we only have OMS721 data from a small number of single-arm studies. Using historical data to argue for efficacy has misled plenty of research efforts in the past. That said, the magnitude of the difference is hard to ignore. A majority of 19 patients treated with the experimental drug survived 347 days versus expectations of just 21 days based on past observations of patients with the lethal condition. 

Cory Renauer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.