OMER US Equity☆

ITEM7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the audited annual consolidated financial statements and the related notes thereto included elsewhere in this Annual Report on Form10-K. This discussion contains forward-looking statements reflecting our current expectations that involve risks and uncertainties. Actual results may differ materially from those discussed in these forward-looking statements due to a number of factors, including those set forth in the section entitled “Risk Factors” and elsewhere in this Annual Report on Form10-K. For further information regarding forward-looking statements, please refer to the special note regarding forward-looking statements at the beginning of this Annual Report on Form10-K. Throughout this discussion, unless the context specifies or implies otherwise, the terms “Company,”“we,”“us” and “our” refer to Omeros Corporation and our wholly owned subsidiaries.

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Overview

We are a clinical-stage biopharmaceutical company committed to discovering, developing and commercializing first-in-class small-molecule and protein therapeutics for large-market as well as orphan indications targeting immunologic diseases, including complement-mediated diseases and cancers related to dysfunction of the immune system, as well as addictive and compulsive disorders.

Complement Inhibitor Programs

The complement system plays a role in the body’s inflammatory response and becomes activated as a result of tissue damage or trauma or microbial pathogen invasion. Inappropriate or uncontrolled activation of the complement system can cause diseases characterized by serious tissue injury. Three main pathways can activate the complement system: classical, lectin, and alternative. We are focused on development of therapeutics to treat diseases associated with the lectin and/or alternative pathways of complement. We are developing antibodies as well as small-molecule inhibitors of key enzymes known to be centrally involved in the in activation of the targeted pathway of complement.

Lectin Pathway / MASP 2

MASP-2 is a novel pro-inflammatory protein target that is the effector enzyme of the lectin pathway and is required for the function of this pathway. We are developing antibodies and small-molecule inhibitors of MASP-2 as potential therapeutics for diseases in which the lectin pathway has been shown to contribute to significant tissue injury and pathology. When not treated, these diseases are typically characterized by significant end-organ damage, such as kidney or central nervous system injury. Importantly, inhibition of MASP-2 has been demonstrated not to interfere with the antibody-dependent classical complement activation pathway, a critical component of the acquired immune response to infection.

The lead product candidate in our pipeline of complement-targeted therapeutics is narsoplimab (OMS721), a proprietary, patented human monoclonal antibody targeting MASP-2, the key activator of the lectin pathway of complement. Clinical development of narsoplimab is currently focused primarily on TA-TMA and development efforts are also directed to COVID-19, ARDS and PASC. We are also developing OMS1029, our long-acting antibody targeting MASP-2 which we expect will be well-suited to indications requiring long-term, chronic administration. In addition, we are advancing our orally administered small-molecule MASP-2 inhibitor through IND-enabling studies. For more information, see Part I, Item 1 in this Annual Report on Form 10-K under the heading “Complement Inhibitor Programs: MASP-2 Program – Lectin Pathway Disorders”.

Alternative Pathway / MASP-3

Our pipeline of clinical-stage complement-targeted therapeutic candidates also includes zaltenibart (OMS906), a proprietary, patented monoclonal antibody targeting MASP-3, the key activator of the alternative pathway of complement. We believe zaltenibart has the potential to treat a wide range of alternative pathway-related diseases and that its attributes favorably differentiate zaltenibart from other marketed and in-development alternative pathway inhibitors.

Clinical development of zaltenibart is currently focused on PNH and C3G. We have initiated our Phase 3 clinical development program for zaltenibart in PNH and have an ongoing Phase 2 clinical trial evaluating zaltenibart in C3G. For more information, see Part I, Item 1 in this Annual Report on Form 10-K under the heading “Complement Inhibitor Programs: MASP-3 Program – Alternative Pathway Disorders”.

PDE7 Inhibitor Programs

Our PDE7 inhibitor program, which we refer to as OMS527, comprises multiple PDE7 inhibitor compounds and is based on our discoveries of previously unknown links between PDE7 and any addiction or compulsive disorder, and between PDE7 and any movement disorders. In April 2023, we were awarded a grant from the National Institute on Drug Abuse, part of the National Institutes of Health, to develop our lead orally administered PDE7 inhibitor compound, for which we have successfully completed a Phase 1 study, for the treatment of cocaine use disorder (“CUD”). With NIDA funding, we successfully completed preclinical cocaine interaction/toxicology studies to assess safety of the OMS527 compound when co-administered with cocaine. Based on the successful outcome of the preclinical studies, we have initiated, and NIDA has confirmed availability of grant funding for, an in-patient, placebo-controlled clinical study evaluating the safety and effectiveness of OMS527 in adults with CUD who receive concurrent intravenous cocaine. For more information, see Part I, Item 1 in this Annual Report on Form 10-K under the heading “Other Clinical Programs: PDE7 Inhibitor Programs – OMS527”.

Preclinical Programs - Oncology Platform

We are developing a portfolio of signaling-driven immunomodulators, oncotoxins, and an adoptive T-cell technology combined with an immunostimulator that, unlike other cellular therapy approaches requires no cellular engineering, may reduce manufacturing costs and timelines, and may maintain an enhanced anti-cancer immune response through subsequent repetitive and simple therapeutic administrations.

Our oncology development program is operating in stealth mode as we continue to confirm our results and to generate new data which we expect will contribute to our intellectual property position. For more information, see Part I, Item 1 in this Annual Report on Form 10-K under the heading “Preclinical Programs and Platforms: Oncology Platform”.

OMIDRIA Sale and Royalty Monetization Transactions

We previously developed and commercialized OMIDRIA® (phenylephrine and ketorolac intraocular solutions) 1%/0.3%, which is approved by FDA for use during cataract surgery or intraocular lens replacement to maintain pupil size by preventing intraoperative miosis (pupil constriction) and to reduce postoperative ocular pain. We marketed OMIDRIA in the U.S. from the time of its commercial launch in 2015 until December 2021.

On December 23, 2021, we sold our commercial product, OMIDRIA, to Rayner. Rayner paid us $126.0 million at the closing and we retained all outstanding accounts receivable, accounts payable and accrued expenses as of the closing date.

As contemplated by the Asset Purchase Agreement, in December 2022, we earned a $200.0 million Milestone Payment upon the establishment of separate payment for OMIDRIA for a continuous period of at least four years when furnished in the ASC setting. We received $200.0 million in February 2023. Upon achieving the Milestone Event, the royalty rate applicable to U.S. net sales of OMIDRIA was reduced from 50% to 30%. The 30% royalty rate continues until the expiration or termination of the last issued and unexpired U.S. patent, which we expect to occur no earlier than 2035.

Upon the occurrence of certain events described in the Asset Purchase Agreement, including during any specific period in which OMIDRIA is no longer eligible for separate payment (i.e., becomes included in the packaged payment rate for the surgical procedure) under Medicare Part B, or in certain circumstances involving entry of generic competition for OMIDRIA, the U.S. base royalty rate would be further reduced to 10%. Pursuant to legislation enacted in late 2022, we expect separate payment for OMIDRIA under Medicare Part B to extend until at least January 1, 2028.

As a result of the OMIDRIA divestiture, we recorded an OMIDRIA contract royalty asset on our balance sheet. The results of OMIDRIA activities are classified as discontinued operations in our consolidated statements of operations and comprehensive income (loss) and excluded from continuing operations for all periods presented. See Part II, Item 8, “Note 7 — Discontinued Operations – Sale of OMIDRIA” to our Consolidated Financial Statements in this Annual Report on Form 10-K.

On September 30, 2022, we sold to DRI an interest in a portion of our future OMIDRIA royalty receipts for $125.0 million which we recorded as an OMIDRIA royalty obligation on our consolidated balance sheet. DRI was entitled under that arrangement to receive royalties on OMIDRIA net sales between September 1, 2022 and December 31, 2030, subject to certain annual caps.

On February 1, 2024, we sold an expanded interest in our future OMIDRIA royalties to DRI and received $115.5 million in cash consideration, which we recorded as an addition to the OMIDRIA royalty obligation. The amended and restated royalty purchase agreement with DRI (the “Amendment”) eliminated the previously existing annual caps on royalty payments after January 1, 2024, and provides that DRI receives all royalties on U.S. net sales of OMIDRIA payable between January 1, 2024 and December 31, 2031. In addition to the cash consideration received at closing, the Amendment also entitles us to receive two milestone payments of up to $27.5 million each, payable in January 2026 and January 2028, respectively, based on achievement of certain thresholds for U.S. net sales of OMIDRIA. All royalties earned on OMIDRIA sales within the U.S. through December 31, 2031 are remitted by Rayner to an escrow account established by Omeros, from which payments are made to DRI. We retain the rights to receive all royalties payable by Rayner on any net sales of OMIDRIA outside the U.S. as well as royalties on global net sales of OMIDRIA payable from and after December 31, 2031, including royalties on U.S. OMIDRIA net sales. To date, international royalties have not been significant. DRI has no recourse to our assets other than its interest in OMIDRIA royalties. Interest expense on the OMIDRIA royalty obligation is recorded as a component of continuing operations. See Part II, Item 8, “Note 8 – OMIDRIA Royalty Obligation” to our Consolidated Financial Statements in this Annual Report on Form 10-K for additional information.

Payment on Maturity of 2023 Notes

On November 15, 2023, we extinguished $95.0 million of our 6.25% convertible senior notes (the “2023 Notes”) at par upon maturity.

2024 Term Loan and Repurchase of 2026 Notes

In December 2023, we repurchased $9.1 million par value of our 2026 Notes on the open market at approximately 55% of par value, realizing a $4.1 million non-cash gain on extinguishment.

On June 3, 2024 (the “Closing Date”), we, with certain subsidiaries, as guarantors, entered into the Credit Agreement with Athyrium and Highbridge as lenders (together with additional lenders from time to time, the “Lenders”) and Wilmington Savings Fund Society, FSB, as administrative agent and collateral agent. The Credit Agreement provides for a senior secured term loan facility initially of up to $92.1 million consisting of (i) the Initial Term Loan of $67.1 million, which was fully funded on the Closing Date, and (ii) a $25.0 million Delayed Draw Term Loan, which may be drawn once in full upon notice delivered on or prior to June 3, 2025, conditioned on receipt of FDA approval of narsoplimab in TA-TMA within 30 days of the notice. We do not expect that FDA approval of narsoplimab will be obtained within a timeframe that would permit the Delayed Draw Term Loan to be drawn absent an amendment to, or waiver of, this condition. Proceeds of the Delayed Draw Term Loan, if borrowed, must be used to fund the commercialization of narsoplimab and to pay transaction costs associated with the Delayed Draw Term Loan. The Initial Term Loan has no original issue discount, while the Delayed Draw Term Loan, if drawn, would be issued with an original issue discount of 3.00%.

In 2024, we used the $67.1 million Initial Term Loan, along with $21.7 million of cash on hand to repurchase from the Lenders $118.1 million aggregate principal amount of the 2026 Notes (the “2026 Note Repurchase Transaction”). The principal amount retired in the 2026 Note Repurchase Transaction represented a 55% reduction of the outstanding principal balance of the 2026 Notes at a purchase price of approximately 75% of par value.

We are permitted under the Credit Agreement to repurchase additional outstanding 2026 Notes for cash in open market or privately negotiated transactions, subject to certain limitations described below. Additionally, until the earlier of November 1, 2025 and the date the we elect to draw under the Delayed Draw Term Loan, we, at our sole discretion, may exchange up to $14.9 million aggregate principal amount of outstanding 2026 Notes for cash and additional term loan amounts, with the holders of such notes becoming Lenders under the Credit Agreement (any such additional term loans, together with the Initial Term Loan and the Delayed Draw Term Loan, the “Loans”). We also retain all potential future value of the capped call purchased in connection with the issuance of the 2026 Notes covering all shares underlying the original 2026 Notes.

All indebtedness outstanding under the Credit Agreement is guaranteed by certain of our direct and indirect subsidiaries, other than certain foreign subsidiaries that are not material (we and the guarantors, collectively, the “Credit Parties”). Pursuant to a Pledge and Security Agreement, dated June 3, 2024, the indebtedness under the Credit Agreement is secured by a first-priority security interest in and lien on substantially all tangible and intangible property of the Credit Parties, subject to customary exceptions, and excluding royalty interests in OMIDRIA and certain related rights.

The Credit Agreement contains certain customary default provisions, representations and warranties and affirmative and negative covenants, including a covenant for the Credit Parties to maintain at all times unrestricted cash, cash equivalents and short-term investments of at least $25.0 million in accounts subject to control agreements, and a covenant limiting the use of cash for open market or privately negotiated repurchases of any outstanding 2026 Notes to: (i) an initial amount not exceeding $25.0 million, which may be increased by up to an additional $10.0 million subject to the satisfaction of certain conditions; (ii) an unlimited amount, if the amount of Loans outstanding at the time of repurchase does not exceed $38.5 million; and (iii) an additional amount not to exceed 50% of the net cash proceeds from an equity offering, provided that we offer to prepay an equal amount of Loans with the net cash proceeds of such offering.

The Loans accrue interest at an adjusted term secured overnight financing rate, (“adjusted term SOFR”) (with a 3.00% floor) plus 8.75% per annum, payable quarterly. We may choose to pay up to 50% of any quarterly interest payment in kind by adding the portion of such interest payment to the outstanding principal amount of Loans using a quarterly interest rate of adjusted term SOFR (with a 3.00% floor) plus 10.25% per annum. A default interest rate of an additional 3.00% per annum would apply on all outstanding obligations after the occurrence and during the continuance of certain specified events of default.

The Credit Agreement with a four-year term has a scheduled maturity date of June 3, 2028 (unless all Loans become due and payable at an earlier date, whether by acceleration or otherwise). If on November 1, 2025, (i) the aggregate principal amount of the 2026 Notes outstanding that is not held by the Lenders is equal to or greater than $38.5 million and (ii) we have not made nor delivered notice that we expect to make certain voluntary or mandatory prepayments under the Credit Agreement of at least $20.0 million in the aggregate, then we would be required to prepay the Loans in the amount necessary to achieve the $20.0 million prepayment requirement. We expect to prepay the $20.0 million in November 2025 along with a $1.0 million prepayment penalty and have reflected this consideration in our consolidated balance sheet. All mandatory prepayments are subject to the prepayment premiums as described below.

We may elect to prepay Loans, in whole or in part, in cash, subject to (i) during the first year of such Loans, a make-whole premium plus 5.00% of the aggregate principal amount of Loans subject to prepayment (unless the prepayment is made in contemplation of a change of control, in which case only the make-whole premium would be payable); (ii) during the second year, a 5.00% prepayment premium; and (iii) during the third year, a 3.00% prepayment premium. The Credit Agreement requires mandatory prepayments of Loans in an amount equal to 60% of the net cash proceeds (excluding research and development and certain other milestone payments) received by the Credit Parties from asset sales and licenses, provided that if an asset sale or license involving narsoplimab occurs while any Delayed Draw Term Loans are outstanding, mandatory prepayments must be in an amount equal to 100% of the net cash proceeds from such sale. Mandatory prepayments are also required: (i) from insurance recoveries on loss of property that are not otherwise reinvested in other assets of the Credit Parties; (ii) from indebtedness incurred by any of the Credit Parties other than as permitted by the Credit Agreement; (iii) in the event of a change of control and (iv) in respect of 25% of the amount of any Milestone Payment received from DRI its affiliates on the basis of net sales of OMIDRIA.

Financial Summary

As of December 31, 2024, we had cash, cash equivalents and short-term investments of $90.1 million available to fund operations and to service debt.

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Results of Operations

Research and Development Expenses

Our research and development expenses can be divided into three categories: direct external expenses, which include clinical research and development and preclinical research and development activities; internal overhead and other expenses; and stock-based compensation expense. Direct external expenses consist primarily of expenses incurred pursuant to agreements with third-party manufacturing organizations prior to receiving regulatory approval for a product candidate, CROs, clinical trial sites, collaborators, licensors and consultants. Preclinical research and development includes costs prior to beginning Phase 1 studies in human subjects. Internal overhead and other expenses primarily consist of costs for personnel, overhead, rent, utilities and depreciation. Our accounting policy is to expense all manufacturing costs related to product candidates until regulatory approval is reasonably assured in either the U.S. or European Union.

The following table illustrates our expenses associated with these activities:

Year Ended

Year Ended December 31,

(In thousands)

Research and development expenses:

Direct external expenses:

Clinical research and development:

Clinical research and development expenses increased $0.5 million between 2024 and 2023. The change primarily relates to $16.1 million of TA-TMA drug manufacturing costs in anticipation of our BLA and $2.1 million in zaltenibart clinical trials expense and associated costs to manufacture drug supply. These costs are partially offset by a $15.5 million reduction in IgA nephropathy expenses with the closing out of the program and a $2.2 million reduction in OMS1029 expenses primarily due to the completion of one of our single ascending dose studies.

Clinical research and development expenses increased $4.8 million between 2023 and 2022. The $16.5 million increase in OMS906 development costs was due to an increase in manufacturing and Phase 2 clinical trial costs and a $5.0 million development milestone paid in 2023 under a technology license agreement. The $3.6 million increase in OMS1029 expense was primarily due to costs associated with initiation of human trials and other clinical development costs in the transition from preclinical to clinical development status in the third quarter of 2022. These increases were offset by decreased narsoplimab manufacturing costs during 2023.

Preclinical research and development expenses increased $1.3 million in 2024 compared to 2023, primarily due to increased preclinical oncology research and cocaine addiction work during 2024. The cocaine addiction work is being funded by a grant from NIDA, with associated grant revenue included in other income. The $2.1 million decrease in 2023 over 2022 in preclinical research and development expenses was primarily due to the migration of OMS1029 from preclinical to clinical research and development status during the third quarter of 2022, offset by an increase in preclinical oncology work during 2023.

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Internal overhead and other expenses increased $3.5 million for the year ended December 31, 2024 primarily due to additional employee related costs and having received an employee retention tax credit in the prior year that was recorded as an offset to expense.

The changes in stock-based compensation expense between the three covered years were due to the valuation and timing of the vesting of employee stock options.

We expect our overall research and development costs in 2025 to be slightly higher than in 2024, driven by increases in zaltenibart clinical trial costs associated with Phase 3 trials in PNH and C3G, a milestone payment under an existing licensing agreement, and drug manufacturing costs, which we expect to be partially offset by decreases in narsoplimab drug manufacturing and clinical trial costs. Our accounting policy is to expense all manufacturing costs related to product candidates until regulatory approval is reasonably assured in either the U.S. or Europe.

At this time, we are unable to estimate with certainty the longer-term costs we will incur in the continued development of our product candidates due to the inherently unpredictable nature of our preclinical and clinical development activities. Clinical development timelines, the probability of success and development costs can differ materially as new data become available and as expectations change. Our future research and development expenses will depend, in part, on the preclinical or clinical success of each product candidate as well as ongoing assessments of each program’s commercial potential. In addition, we cannot forecast with precision which product candidates, if any, may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.

We are required to expend substantial resources in the development of our product candidates due to the lengthy process of completing clinical trials and seeking regulatory approval. Any failure or delay in completing clinical trials, or in obtaining regulatory approvals, could delay our generation of product revenue and increase our research and development expenses.

Selling, General and Administrative Expenses

Our selling, general and administrative expenses are comprised primarily of salaries, benefits and stock-based compensation costs for marketing and administrative personnel who are not directly engaged in research and development. Costs also include marketing expenses, professional and legal services, general corporate costs and an allocation of our occupancy costs.

Year Ended December 31,

(In thousands)

Selling, general and administrative expenses:

Total selling, general and administrative expenses $ 49,735 $ 49,660 $ 50,668

The changes in stock-based compensation expense between the three covered years were due to the valuation and timing of vesting related to employee stock options.

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Our selling, general and administrative expenses are expected to be higher than in 2024. The magnitude of the anticipated increase in selling, general and administrative expenses for 2025 will be highly dependent on whether narsoplimab receives U.S. regulatory approval for treatment of TA-TMA. If narsoplimab is approved in 2025, we expect to hire a field sales force and initiate commercial launch activities which will increase our selling, general and administrative expenses.

Interest Expense

Interest expense is comprised of contractual cash and accrued interest on our 2026 Notes, 2023 Notes and Initial Term Loan. In addition, we record pass through interest on the OMIDRIA royalty obligation, non-cash interest comprised of remeasurement adjustments taken on our OMIDRIA royalty obligation and amortization of debt discount or premiums on our notes and term debt.

Interest expense, net of premiums, discounts, issuance costs and remeasurement adjustments is shown below:

Year Ended December 31,

(In thousands)

Contractual interest expense $ — $ 5,195 $ 5,938

Amortization of debt discount and issuance costs — 619 662

Amortization of debt discount and issuance costs 859 1,234 1,167

OMIDRIA royalty obligation

Pass through interest remitted to administrative agent 20,634 11,848 1,253

Non-cash remeasurement adjustment (5,614 ) — 1,695

2024 Initial Term Loan

Contractual interest expense 5,525 — —

Amortization of debt premium and issuance costs (4,681 ) — —

Interest expense on 2024 Initial Term Loan 844 — —

Interest expense decreased $6.2 million in 2024 compared to 2023 primarily due to extinguishing $95.0 million in par value of our 2023 Notes at maturity in November 2023 and partially repurchasing $127.2 million in collective par value of our 2026 Notes in December 2023 and June 2024 reducing interest expense on our 2026 Notes by $4.4 million. This decrease was partially offset by increased interest expense of $3.2 million related to our OMIDRIA royalty obligation as we added $115.5 million of principal upon sale in February 2024 to DRI of our remaining OMIDRIA U.S. royalty earnings through 2031. In addition, with the execution of the Credit Agreement, we incurred $0.8 million in effective interest on our Initial Term Loan with Highbridge and Athyrium.

Interest expense increased $8.1 million in 2023 compared to 2022 primarily due to interest incurred from our OMIDRIA royalty obligation.

Contractual interest expense is comprised of cash interest paid during the year and the net change in accrued interest. Interest on our OMIDRIA royalty obligation is calculated under the effective interest method and represents a portion of the royalties remitted by Rayner to our administrative agent, Wilmington Savings Fund Society, FSB, along with principal. Pass through interest paid to DRI is offset by non-cash remeasurement adjustments taken to properly reflect the OMIDRIA royalty obligation for changes in probable cash flows on our future expected Rayner royalties. Debt discounts on the 2026 Notes and 2023 Notes are accretive whereas the unrealized gain on the 2026 Note Repurchase Transaction is treated as a premium on the Initial Term Loan and deducted from contractual interest expense.

For further information see Part II, Item 8, “Note 6 – Debt” and “Note 8 – OMIDRIA Royalty Obligation” to our Consolidated Financial Statements in this Annual Report on Form 10-K.

Interest and Other Income

Year Ended December 31,

(In thousands)

Interest and other income principally includes $8.4 million of interest earned on our investments, $1.6 million earned on sublease rental income and $1.3 million of NIDA grant income. The $5.0 million decrease in interest and other income between 2024 and 2023 was primarily due to holding lower average cash and investment balances than in the prior year. The $12.3 million increase in interest and other income between 2023 and 2022 was a result of receiving the $200.0 million Milestone Payment from Rayner in February 2023 and investing those funds.

We expect interest and other income in 2025 to be less than 2024 primarily due to lower average cash and investment balances during 2025.

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Gain on Early Extinguishment of Convertible Senior Notes

Year Ended December 31,

(In thousands)

Gain on early extinguishment of convertible senior notes $ — $ 4,112 $ —

In December 2023, we repurchased $9.1 million par value of our 2026 Notes at a discount, realizing a $4.1 million non-cash gain on extinguishment.

Net Income from Discontinued Operations, Net of Tax

On December 23, 2021, we sold our commercial drug, OMIDRIA, to Rayner. As a result of the OMIDRIA divestiture, the results of OMIDRIA operations have been classified as discontinued operations for all periods presented.

Net income from OMIDRIA discontinued operations, net of tax is shown below:

Year Ended December 31,

(In thousands)

(1) For further discussion of income tax expense, please refer to Part II, Item 8, “Note 13 – Income Taxes” to our Consolidated Financial Statements in this Annual Report on Form 10-K.

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Interest on OMIDRIA contract royalty asset

During the years ended December 31, 2024, 2023 and 2022, we recorded $16.9 million, $15.3 million and $18.6 million, respectively, of income in discontinued operations representing interest income on the outstanding OMIDRIA contract royalty asset at an implied effective interest rate of 11.0%.

Remeasurement Adjustments

During the years ended December 31, 2024, 2023 and 2022, we recorded remeasurement adjustments of $8.0 million, $41.2 million and $14.5 million, respectively. Periodically, but at least annually, we remeasure the OMIDRIA contract royalty asset when there is a greater probability of achieving materially higher or lower royalty earnings than previously expected. To measure the OMIDRIA contract royalty asset, we use the expected value approach, which is the sum of the discounted probability-weighted royalty payments we would receive using a range of potential outcomes, to the extent that it is probable that a significant reversal in the amount of cumulative income recognized will not occur. Remeasurement is impacted by any changes to the probability-weighting applied to the range of potential outcomes that could occur. For further discussion of discontinued operations, please refer to Part II, Item 8, “Note 7 – Discontinued Operations – Sale of OMIDRIA” to our Consolidated Financial Statements in this Annual Report on Form 10-K.

Milestone Income

The Milestone Event occurred in December 2022, entitling us to receive a Milestone Payment of $200.0 million from Rayner. We received the Milestone Payment together with accrued interest in February 2023.

Income Tax Expense

For the years ended December 31, 2024, 2023 and 2022, we recorded state income tax expense of $0.3 million, $0.5 million and $4.0 million, respectively, in discontinued operations.

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Financial Condition- Liquidity and Capital Resources

As of December 31, 2024, we had cash, cash equivalents and short-term investments of $90.1 million. Our cash used in operations for the year ended December 31, 2024 was $148.8 million and included a net loss for the year of $156.8 million. Pursuant to a covenant in the Credit Agreement, we must maintain $25.0 million of unrestricted cash, cash equivalents and short-term investments at all times.

In recent years, we have incurred net losses from continuing operations and negative cash flows from operations. The recurring losses, in combination with our cash and investment balances as of December 31, 2024, expected repayment of a portion of the borrowings under our secured credit facility on or prior to November 1, 2025 and maturity of our 2026 Notes on February 15, 2026, raise substantial doubt about our ability to continue as a going concern through one year from the issuance of the Company's consolidated financial statements. As we currently do not have an ongoing source of revenue sufficient to cover our operating costs, we will need to raise additional capital to accomplish our business plan. We have a sales agreement to sell shares of our common stock, from time to time, in an “at the market” equity offering facility through which we may offer and sell shares of our common stock equaling an amount up to $150.0 million. Our Delayed Draw Term Loan of $25.0 million may be drawn once in full upon notice delivered on or prior to June 3, 2025, conditioned on receipt of FDA approval of narsoplimab in TA-TMA within 30 days of the notice; however, we do not expect that FDA approval of narsoplimab will be obtained within the timeframe that would permit us to draw the Delayed Draw Term Loan absent an amendment to, or a waiver of, this condition. Proceeds of the Delayed Draw Term Loan, if available, may only be used towards any related transaction costs and for commercialization of narsoplimab efforts of TA-TMA.

We have had preliminary discussions with certain holders of the 2026 Notes regarding a potential refinancing of the 2026 Notes and we may pursue additional debt financings to retire the 2026 Notes that remain outstanding and to raise additional capital to fund operations. Should it be necessary or determined to be strategically advantageous, we also could pursue public and private offerings of our equity securities, additional debt transactions or restructurings, future royalty sales, or other strategic transactions, which may include licensing or selling a portion or all of one or more of our existing technologies. However, pursuing debt financings, certain equity offerings or other strategic transactions may result in mandatory prepayments of the Initial Term Loan. See Part II, Item 8, “Note 6 – Debt” to our Consolidated Financial Statements in this Annual Report on Form 10-K for additional information.

If these capital resources, for any reason, are needed but inaccessible, it would have a significant negative impact on our financial condition. For purposes of determining available capital resources, potential future royalty and/or milestone receipts are excluded. Should it be necessary, we plan to manage our operating expenses and reduce our projected cash requirements by delaying clinical trials, reducing selected research and development efforts, or implementing other restructuring activities.

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Cash Flow Data

Year Ended December 31,

(In thousands)

Selected cash flow data

Cash provided by (used in):

Operating Activities. Net cash used in operating activities for the year ended December 31, 2024 decreased by $223.5 million compared to the same period in 2023. This decrease was primarily due to collecting the $200.0 million Milestone Payment from Rayner in the prior year and a $15.5 million decrease in accounts payable and accrued expenses in the current year.

Net cash provided by operating activities for the year ended December 31, 2023 increased by $161.2 million compared to the same period in 2022. This increase was primarily due to collecting the $200.0 million Milestone Payment from Rayner in February 2023 and a $15.3 million increase in accounts payable and accrued expenses in 2023. This increase was partially offset by a $26.7 million change in the remeasurement of the OMIDRIA contract royalty asset, $8.7 million related to the accretion of interest on U.S. government treasury bills and a $4.1 million gain on the early extinguishment of a portion of our 2026 Notes.

Investing Activities. Net cash provided by investing activities for the year ended December 31, 2024 increased $54.8 million as compared to the same period in 2023. Significant initial investment purchases during the periods were the investment of the $200.0 million Milestone Payment we received from Rayner in February 2023 and the $115.5 million we received from DRI in February 2024 related to the sale of future OMIDRIA royalties.

Net cash provided by investing activities increased $155.0 million during 2023 compared to 2022 driven by collection of the $200.0 million Milestone Payment from Rayner we received in February 2023.

Financing Activities. Net cash provided by financing activities increased $169.0 million during 2024 compared to the prior year. The increase was primarily due to receiving $115.5 million in cash from DRI related to the sale of future OMIDRIA royalties and extinguishing $95.0 million of par value on our 2023 Notes in the prior year. This was partially offset by increased payments to DRI of $17.6 million in 2024 related to the OMIDRIA royalty obligation, an additional $16.9 million paid to repurchase our 2026 Notes and increased common stock repurchases of $7.2 million.

Net cash used in financing activities decreased $230.3 million during 2023 compared to the prior year. The decrease was primarily due to receiving $125.0 million in 2022 in connection with selling a portion of our OMIDRIA royalties to DRI and extinguishing $95.0 million of our 2023 Notes. In addition, we paid $4.9 million to retire $9.1 million par value of our 2026 Notes and repurchased $4.7 million of our common stock through a stock repurchase program in 2023.

Contractual Obligations and Commitments

Operating and Finance Leases

We have operating leases related to our office and laboratory space. The initial term of the leases is through November 2027 and we have two options to extend the lease term, each by five years. As of December 31, 2024, the remaining aggregate non-cancelable rent payable under the initial term of the lease, excluding common area maintenance and related operating expenses, was $20.2 million.

We have finance leases for certain laboratory and office equipment that have lease terms expiring through October 2029. As of December 31, 2024, the remaining aggregate non-cancellable finance lease payable was $2.2 million.

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Debt

For more information regarding the convertible senior notes extinguished in mid-November 2023, convertible senior notes due in February 2026 and our Credit Agreement, see Part II, Item 8, “Note 6 - Debt”.

OMIDRIA Royalty Obligation

For more information regarding the OMIDRIA Royalty Obligation, see Part II, Item 8, “Note 8 - OMIDRIA Royalty Obligation”.

Goods& Services

We have certain non-cancellable obligations under other agreements for the acquisitions of goods and services associated with the manufacturing of our product candidates, which contain firm commitments. As of December 31, 2024, our aggregate firm commitments were $4.7 million.

We may be required, in connection with in-licensing or asset acquisition agreements, to make certain royalty and milestone payments and we cannot, at this time, determine when or if the related milestones will be achieved or whether the events triggering the commencement of payment obligations will occur. Therefore, such payments are not included in the table above. For information regarding agreements that include these royalty and milestone payment obligations, see Part II, Item 8, “Note 10 - Commitments and Contingencies” to our Consolidated Financial Statements in this Annual Report on Form 10-K.

Critical Accounting Policies and Significant Judgments and Estimates

The preparation of our consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances; however, actual results could differ from those estimates. An accounting policy is considered critical if it is important to a company’s financial condition and results of operations and if it requires the exercise of significant judgment and the use of estimates on the part of management in its application. Although we believe that our judgments and estimates are appropriate, actual results may differ materially from our estimates. For a summary of our critical accounting policies, see Part II, Item 8, “Note 2 - Significant Accounting Policies” to our Consolidated Financial Statements in this Annual Report on Form 10-K.

We believe the following to be our critical accounting policies because they are both important to the portrayal of our financial condition and results of operations and they require critical judgment by management and estimates about matters that are uncertain:

● OMIDRIA royalties and contract asset accounting;

● OMIDRIA royalty obligation accounting; and

● accounting for debt issuances, primarily related to fair valuing debt and issuance costs.

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If actual results or events differ materially from those contemplated by us in making these estimates, our reported financial condition and results of operations for future periods could be materially affected.

OMIDRIA Royalties, Milestones and Contract Royalty Assets

We have rights to receive future royalties from Rayner on OMIDRIA net sales at royalty rates that vary based on geography and certain regulatory contingencies. Therefore, future OMIDRIA royalties are treated as variable consideration. To measure the OMIDRIA contract royalty asset, we used the expected value approach which is the discounted sum of probability-weighted royalty payments we would receive using a range of potential outcomes, to the extent that it is probable that a significant reversal in the amount of cumulative income recognized will not occur. Our calculations take the net present value of the sum to arrive at the OMIDRIA contract royalty asset stated on the balance sheet. We revalued the contract royalty asset to reduce the applicable royalty percentage from 50% to 30%, as required under the Asset Purchase Agreement following the occurrence of the Milestone Event triggering the $200.0 million Milestone Payment in 2022. Royalties earned will be recorded as a reduction to the OMIDRIA contract royalty asset. The amount recorded in discontinued operations in future periods will reflect interest earned on the outstanding OMIDRIA contract royalty asset and any amounts received different from the expected royalties recorded at closing. The OMIDRIA contract royalty asset is subject to changes in net sales of OMIDRIA. All else being equal, a 10% decrease or increase in net sales results in a $15.3 million change in value of the OMIDRIA contract royalty asset, resulting in a potential OMIDRIA contract royalty asset valued within the range of $138.0 million to $168.7 million. Changes in net sales could occur due to various risks such as competitors entering the market, changes in the standard of care for cataract patients and loss of separate payment status for OMIDRIA. In determining the value of the OMIDRIA contract royalty asset, we have considered all of these factors. The OMIDRIA contract royalty asset will be re-measured periodically using the expected value approach based on actual results and future expectations. Any required adjustment to the OMIDRIA contract royalty asset will be recorded in discontinued operations.

We receive monthly royalty reports of Rayner’s OMIDRIA product sales in accordance with the Asset Purchase Agreement. Upon the closing of the Asset Purchase Agreement, we determined the expected minimum net present value of future OMIDRIA royalty receipts and recognized the amount as a gain on the sale of OMIDRIA in discontinued operations on our income statement and as an OMIDRIA contract royalty asset on our balance sheet. To determine the OMIDRIA contract royalty asset, we used the expected value approach which is based on the sum of probability-weighted payments we would receive using a range of potential outcomes at an implied effective interest rate of 11%. The contract royalty asset excludes any revenue which potentially may be reversed in the event of an over estimation.

OMIDRIA Royalty Obligations

The sale of any portion of our OMIDRIA royalty receipts is treated as a liability on our consolidated balance sheet, as this does not result in the transfer of a participating interest. We amortize royalty obligation liabilities over the term of the arrangement using the effective interest method and classify interest expense as a component of continuing operations.

To the extent our estimates of future royalties are less than previous estimates, we will adjust the carrying amount of the royalty obligation to the present value of the revised estimated cash flows, discounted at the original effective interest rate utilizing the cumulative catch-up method. The adjustment would be recognized as a component of net income (loss) from continuing operations. Our estimate of cash flows from future royalties is derived from the contract royalty asset accounting described above.

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Debt Issuances

Transactions involving contemporaneous exchanges of cash between the same debtor and creditor in connection with the issuance of a new debt obligation and satisfaction of an existing debt obligation by the debtor are first evaluated as to whether they qualify as a troubled debt restructuring (“TDR”) under ASC Topic 470-60, Debt - Troubled Debt Restructuring by Debtors (“ASC 470-60”). ASC 470-60 requires debt modifications to be evaluated if (1) the borrower is experiencing financial difficulty, and (2) the lender grants the borrower a concession. If both conditions are met under TDR accounting, we would record as the carrying value of the new debt any repurchased old debt less any cash paid. No gain on restructuring is recognized unless the carrying value of the new debt exceeds the undiscounted cash flows of the new debt. Any cancellation of debt income is amortized over the term of the new debt. We determined that the Initial Term Loan qualified as a TDR. Therefore, we amortized as debt premium the cancellation of debt income from the partial repurchase of the 2026 Notes against the Initial Term Loan. If a TDR is determined to not have occurred, we evaluate the modification in accordance with ASC Topic 470-50-40, Debt - Modifications and Extinguishments, which requires modification of debt instruments to be evaluated to assess whether the modifications are considered “substantial”. In instances where our future cash flows change more than 10%, we record our debt at fair value based on factors available to us for similar borrowings and use the extinguishment accounting method. We extinguished the 2023 Notes at maturity. The partial repurchase of the 2026 Notes in 2023 was deemed to be a modification whereby we were able to recognize a $4.1 million gain on debt extinguishment.

Recent Accounting Pronouncements

Please refer to Part II, Item 8, “Note 2 - Significant Accounting Policies” to our Consolidated Financial Statements in this Annual Report on Form 10-K for information regarding recent accounting pronouncements.

ITEM7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our exposure to market risk is primarily confined to our investment securities. The primary objective of our investment activities is to preserve our capital to fund operations, and we do not enter into financial instruments for trading or speculative purposes. We also seek to maximize income from our investments without assuming significant risk. To achieve our objectives, we maintain a portfolio of investments in high-credit-quality securities. As of December 31, 2024, we had cash, cash equivalents and short-term investments of $90.1 million. In accordance with our investment policy, we invest funds in highly liquid, investment-grade securities. The money market funds in our investment portfolio are not leveraged and are classified as available-for-sale. We currently do not hedge interest rate exposure. Because of the short-term maturities of our investments, we do not believe that an increase in market rates would have a material negative effect on the realized value of our investment portfolio. We actively monitor changes in interest rates and, with our current portfolio of short-term investments, we are not exposed to significant loss due to changes in interest rates.

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ITEM8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Consolidated Financial Statements

Page

Report of Independent Registered Public Accounting Firm (PCAOB ID: 42) 55

Consolidated Balance Sheets 57

Consolidated Statements of Operations and Comprehensive Income (Loss) 58

Consolidated Statement of Shareholders’ Equity (Deficit) 59

Consolidated Statements of Cash Flows 60

Notes to Consolidated Financial Statements 61

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Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Omeros Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Omeros Corporation (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations and comprehensive income (loss), shareholders' equity (deficit) and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles.

The Company's Ability to Continue as a Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and has stated that substantial doubt exists about the Company’s ability to continue as a going concern. Management's evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

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OMIDRIA Contract Royalty Asset

/s/Ernst & Young LLP

We have served as the Company’s auditor since 1998.

Seattle, Washington

March 31, 2025

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OMEROS CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

December 31, December 31,

Assets

Current assets:

Cash and cash equivalents $ 3,400 $ 7,105

Prepaid expense and other assets 7,166 8,581

Liabilities and shareholders’ equity (deficit)

Current liabilities:

Term debt, non-current 69,405 —

Other accrued liabilities, non-current 4,501 2,088

Commitments and contingencies (Note 10)

Shareholders’ equity (deficit):

Total shareholders’ equity (deficit) (182,609 ) (24,983 )

Total liabilities and shareholders’ equity (deficit) $ 277,079 $ 378,269

See accompanying Notes to Consolidated Financial Statements

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OMEROS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(In thousands, except share and per share data)

Year Ended December 31,

Costs and expenses:

Gain on early extinguishment of convertible senior notes — 4,112 —

Basic and diluted net income (loss) per share:

Net loss from continuing operations $ (3.14 ) $ (2.79 ) $ (2.90 )

Net income from discontinued operations 0.44 0.91 3.66

See accompanying Notes to Consolidated Financial Statements

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OMEROS CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)

(In thousands, except share data)

Additional Total

Common Stock Paid-in Accumulated Shareholders’

Shares Amount Capital Deficit Equity/(Deficit)

Issuance of common stock upon exercise of stock options 101,160 1 414 — 415

Issuance of common stock upon exercise of stock options 36,726 — 150 — 150

Issuance of common stock upon exercise of stock options 111,109 1 546 — 547

See accompanying Notes to Consolidated Financial Statements

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OMEROS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Year Ended December 31,

Operating activities:

Amortization of discount and issuance costs on convertible notes 859 1,853 1,830

Amortization of non-cash interest and issuance costs on term debt 844 — —

Remeasurement on OMIDRIA contract royalty asset (7,969 ) (41,167 ) (14,457 )

Accretion on U.S. government treasury bills, net (4,371 ) (8,714 ) —

Gain on early extinguishment of convertible senior notes — (4,112 ) —

Changes in operating assets and liabilities:

Investing activities:

Purchases of property and equipment (165 ) (426 ) (113 )

Financing activities:

Proceeds upon exercise of stock options 547 150 415

Payment on maturity of 2023 convertible senior notes — (95,000 ) —

Principal payments on OMIDRIA royalty obligation (18,780 ) (1,152 ) (417 )

Repurchases of common stock (11,851 ) (4,654 ) —

Payments on finance lease obligations (829 ) (555 ) (750 )

Net decrease in cash and cash equivalents (3,705 ) (3,904 ) (89,799 )

Cash and cash equivalents at end of period $ 3,400 $ 7,105 $ 11,009

Supplemental cash flow information

Equipment acquired under finance lease $ 1,523 $ 952 $ 40

Cash paid for income taxes, net $ 165 $ 3,292 $ 80

See accompanying Notes to Consolidated Financial Statements

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OMEROS CORPORATION

NOTESTO CONSOLIDATED FINANCIAL STATEMENTS

Note1—Organization and Basis of Presentation

General

Omeros Corporation (“Omeros,” the “Company” or “we”) is a clinical-stage biopharmaceutical company committed to discovering, developing and commercializing small-molecule and protein therapeutics for large-market as well as orphan indications targeting immunologic diseases, including complement-mediated diseases and cancers related to dysfunction of the immune system, as well as addictive and compulsive disorders.

Our clinical-stage development programs include: narsoplimab, our antibody targeting mannan-binding lectin-associated serine protease 2 (“MASP-2”), the effector enzyme of the lectin pathway of complement; OMS1029, our long-acting antibody targeting MASP-2; zaltenibart, also known as OMS906, our antibody targeting mannan-binding lectin-associated serine protease-3 (“MASP-3”), the key activator of the alternative pathway of complement; and OMS527, our phosphodiesterase 7 (“PDE7”) inhibitor program.

Clinical development of narsoplimab is currently focused primarily on hematopoietic stem cell transplant-associated thrombotic microangiopathy (“TA-TMA”). We successfully completed a pivotal clinical trial for narsoplimab in TA-TMA and previously submitted toFDA a biologics license application (“BLA”) seeking marketing approval for narsoplimab in this indication. In October 2021, FDA issued a complete response letter (“CRL”) with respect to the original BLA and indicated that additional information would be needed to support regulatory approval. We appealed FDA’s decision to issue the CRL through a formal dispute resolution process that concluded in late 2022. Although our appeal was denied, the decision identified potential paths for resubmission of the BLA, including paths based on comparison of survival data from the completed pivotal trial versus a historical control group. Based on the recommendations included in the appeal decision and on subsequent interactions with FDA’s review division, we developed a statistical analysis plan to assess data from our pivotal clinical trial, existing data from a historical control population available from an external source and data from the narsoplimab expanded access program.

In March 2025, we resubmitted to FDA a BLA seeking regulatory approval for narsoplimab in TA-TMA. FDA has 30 days to decide whether the application is sufficiently complete to permit a review of the BLA. Assuming FDA agrees to review the BLA, we expect the resubmission to be classified as Type B, meaning that the target date for FDA action on the BLA under the Prescription Drug User Fee Act (“PDUFA”) is expected to be in September 2025. As with any BLA or new drug application, there can be no guarantee that, even if FDA agrees to review the BLA, that FDA will complete its review within a given timeframe, or that our BLA will ultimately be approved.

Our lectin pathway program also includes OMS1029, our long-acting antibody targeting MASP-2. We have completed Phase 1 clinical trials evaluating both single-ascending and multiple ascending doses of OMS1029. Results of these studies support once-quarterly dosing administered either intravenously or subcutaneously. OMS1029 has been well tolerated to date with no safety concerns identified. We are evaluating several potential indications for Phase 2 clinical development of OMS1029.

Our pipeline of clinical-stage complement-targeted therapeutic candidates also includes zaltenibart, a proprietary, patented monoclonal antibody targeting MASP-3, the key and most proximal activator of the alternative pathway of complement. We have substantially completed two Phase 2 clinical trials evaluating zaltenibart in paroxysmal nocturnal hemoglobinuria (“PNH”) and have an ongoing open label extension study to assess the long-term efficacy and safety of zaltenibart in PNH patients who have completed either of the two Phase 2 clinical trials. We have initiated our Phase 3 clinical development program for zaltenibart in this indication. We also have an ongoing program evaluating zaltenibart in C3G, a rare and debilitating renal disease driven by complement dysregulation.

Our phosphodiesterase 7 (“PDE7”) inhibitor program, which we refer to as OMS527, comprises multiple PDE7 inhibitor compounds and is based on our discoveries of previously unknown links between PDE7 and any addiction or compulsive disorder, and between PDE7 and any movement disorders. In April 2023, we were awarded a grant from the National Institute on Drug Abuse (“NIDA”), part of the National Institutes of Health, to develop, at NIDA’s request, our lead orally administered PDE7 inhibitor compound for the treatment of cocaine use disorder (“CUD”). NIDA awarded the grant to us for a total of $6.24 million over three years, of which we have claimed and received $1.1 million of funding to date and recognized $1.3 million into Other Income in our consolidated statement of operations and comprehensive income (loss). The grant is intended to support preclinical cocaine interaction/toxicology studies to assess safety of the therapeutic candidate in the presence of concomitant cocaine administration, as well as an in-patient, placebo-controlled clinical study evaluating the safety and effectiveness of OMS527 in adults with CUD who receive concurrent intravenous cocaine. The preclinical study has been completed successfully and provides the drug-interaction safety data necessary to support the human study of OMS527 in CUD. We expect enrollment in the study evaluating OMS527 in adult patients with CUD to begin in 2025, also fully funded by NIDA.

We also have various programs in preclinical research and development.

OMIDRIA Sale and Royalty Monetization Transactions

On December 23, 2021, we closed on an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Rayner Surgical Inc. (“Rayner”) for the sale of our commercial product OMIDRIA, which we recorded as an OMIDRIA contract asset on our consolidated balance sheet. As a result of this divesture, the results of OMIDRIA activities are classified as discontinued operations in our consolidated statements of operations and comprehensive income (loss) and excluded from continuing operations for all periods presented (See “Note 7 – Discontinued Operations – Sale of OMIDRIA”).

On September 30, 2022, we sold an interest in a portion of our future OMIDRIA royalties to DRI Healthcare Acquisitions LP (“DRI”) and received $125.0 million in cash consideration, which we recorded as an OMIDRIA royalty obligation on our consolidated balance sheet. Interest expense on the royalty obligation is recorded as a component of continuing operations.

On February 1, 2024, we sold an expanded interest in OMIDRIA royalties to DRI and received $115.5 million in cash consideration, which we recorded as an addition to the OMIDRIA royalty obligation. The amended and restated royalty purchase agreement with DRI (the “Amendment”) eliminates the previously existing annual caps on royalty payments after January 1, 2024, and provides that DRI receives all royalties on U.S. net sales of OMIDRIA payable between January 1, 2024 and December 31, 2031. All royalties earned on OMIDRIA sales within the U.S. through December 31, 2031 are remitted by Rayner to an escrow account established by Omeros, from which payments are made to DRI. After December 31, 2031, we will retain any U.S. OMIDRIA royalties. We are entitled to retain all royalties on net sales of OMIDRIA outside of the United States. (See “Note 8 – OMIDRIA Royalty Obligation”).

Term Loan and Repurchase of 2026 Notes

On June 3, 2024, we, with certain subsidiaries, as guarantors, entered into a Credit and Guaranty Agreement (the “Credit Agreement”) with funds managed by Athyrium Capital Management (collectively “Athyrium”) and funds managed by Highbridge Capital Management (collectively “Highbridge”) as Lenders (the “Lenders”). The Credit Agreement provides for a senior secured term loan facility of up to $92.1 million, consisting of an initial term loan of $67.1 million (the “Initial Term Loan”) and a $25.0 million delayed draw term loan (the “Delayed Draw Term Loan”), which may be drawn once in full upon notice delivered on or prior to June 3, 2025, conditioned on receipt of FDA approval of narsoplimab in TA-TMA within 30 days of the notice.

Also, we used the Initial Term Loan along with $21.7 million in cash on hand, to repurchase from the Lenders $118.1 million aggregate principal amount of our existing 5.25% convertible senior notes due on February 15, 2026 (the “2026 Notes” and such repurchase, the “2026 Note Repurchase Transaction”), which resulted in a $51.0 million reduction in our outstanding debt. (See “Note 6 – Debt” for a description of the Credit Agreement provision).

Basis of Presentation

Our consolidated financial statements include the financial position and results of operations of Omeros and our wholly owned subsidiaries. All inter-company transactions have been eliminated. The accompanying consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments and non-recurring adjustments, considered necessary for the fair presentation of such information. Our financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”).

Liquidity and Capital Resources

As of December 31, 2024, we had cash, cash equivalents and short-term investments of $90.1 million. Our cash used in operations for the year ended December 31, 2024 was $148.8 million and included a net loss for the year of $156.8 million. Pursuant to a covenant in the Credit Agreement entered on June 3, 2024, we must maintain $25.0 million of unrestricted cash, cash equivalents and short-term investments at all times (see “Note 6 - Debt”).

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In recent years, Omeros has incurred net losses from continuing operations and negative cash flows from operations. The recurring losses, in combination with our cash and investment balances as of December 31, 2024, and an expected repayment of a portion of the borrowings under our secured credit facility on or prior to November 1, 2025, along with the maturity of the 2026 Notes on February 15, 2026, raises substantial doubt about our ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from uncertainty related to our ability to continue as a going concern.

As we currently do not have an ongoing source of revenue sufficient to cover our operating costs, we will need to raise additional capital to accomplish our business plan. We have a sales agreement to sell shares of our common stock, from time to time, in an “at the market” equity offering facility through which we may offer and sell shares of our common stock equaling an aggregate amount of up to $150.0 million. In addition, our Delayed Draw Term Loan of $25.0 million may be drawn once in full upon notice delivered on or prior to June 3, 2025, conditioned on receipt of FDA approval of narsoplimab in TA-TMA within 30 days of the notice; however, we do not expect that FDA approval of narsoplimab will be obtained within a timeframe that would permit the Delayed Draw Term Loan to be drawn absent an amendment to, or waiver of, this condition. Proceeds of the Delayed Draw Term Loan, if available, may only be used towards any related transaction costs and for commercialization of narsoplimab efforts of TA-TMA.

We may pursue additional debt financings to retire the 2026 Notes that remain outstanding and to fund operations. Should it be necessary or determined to be strategically advantageous, we also could pursue public and private offerings of our equity securities, additional debt transactions or restructurings, future royalty sales, or other strategic transactions, which may include licensing or selling a portion or all of one or more of our existing technologies. However, pursuing debt financings, certain equity offerings or other strategic transactions may result in mandatory prepayments of the Initial Term Loan to the Credit Agreement. (see “Note 6 — Debt” for further details).

If these capital resources, for any reason, are needed but inaccessible, it would have a significant negative impact on our financial condition. For purposes of determining available capital resources, future royalty and/or milestone receipts are excluded. Should it be necessary, we plan to manage our operating expenses and reduce our projected cash requirements by delaying clinical trials, reducing selected research and development efforts, or implementing other restructuring activities.

The conditions described above, when evaluated in accordance with the relevant accounting literature, raise substantial doubt with respect to our ability to meet our obligations through one year from the issuance of the Company's consolidated financial statements.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant items subject to such estimates include the OMIDRIA contract royalty asset valuation and the OMIDRIA royalty obligation valuation. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances; however, actual results could differ from these estimates.

Note2—Significant Accounting Policies

Segment Reporting

We operate in one business segment focusing on the research, discovery, development and commercialization of small-molecule and protein therapeutics targeting immunologic diseases, including complement-mediated diseases and cancers related to dysfunction of the immune system, as well as addictive and compulsive disorders. The Company defines its operating segment based on internally reported financial information that is regularly used by the Chief Operating Decision Maker (“CODM”) to analyze performance, make decisions and allocate resources. The Company's CODM is our Chief Executive Officer. For the year ended December 31, 2024, the Company has identified one operating and reportable segment. The CODM reviews net loss and expenses reported on the consolidated statement of operations and comprehensive income (loss). The measurement of segment assets is reported on the balance sheet as total consolidated assets. All long-lived assets are held in the U.S. Our segment net income (loss) aligns with our consolidated statement of operations and comprehensive income (loss).

Discontinued Operations

We review the presentation of planned or completed business dispositions in the consolidated financial statements based on the available information and events that have occurred. The review consists of evaluating whether the business meets the definition of a component for which the operations and cash flows are clearly distinguishable from the other components of the business and, if so, whether it is anticipated that after the disposal the cash flows of the component would be eliminated from continuing operations and whether the disposition represents a strategic shift that has a major effect on operations and financial results.

Planned or completed business dispositions are presented as discontinued operations when all the criteria described above are met. For those divestitures that qualify as discontinued operations, all comparative periods presented are reclassified in the consolidated balance sheets. Additionally, the results of operations of a discontinued operation are reclassified to income from discontinued operations, net of tax, for all periods presented in the consolidated statements of operations and comprehensive income (loss). Results of discontinued operations include all revenues and expenses directly derived from such businesses. General corporate overhead is not allocated to discontinued operations. The OMIDRIA asset sale to Rayner qualifies as a discontinued operation and has been presented as such for all reporting periods presented. The Company included information regarding cash flows from discontinued operations (see “Note 7 – Discontinued Operations – Sale of OMIDRIA”).

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OMIDRIA Royalties, Milestones and Contract Royalty Assets

We have rights to receive future royalties from Rayner on OMIDRIA net sales at royalty rates that vary based on geography and certain regulatory contingencies. Therefore, future OMIDRIA royalties are treated as variable consideration. The sale of OMIDRIA qualified as an asset sale under GAAP. To measure the OMIDRIA contract royalty asset, we use the expected value approach which is the sum of the discounted probability-weighted royalty payments we would receive using a range of potential outcomes, to the extent that it is probable that a significant reversal in the amount of cumulative income recognized will not occur.

As contemplated by the Asset Purchase Agreement, in December 2022, we earned a $200.0 million milestone payment (the “Milestone Payment”) upon the establishment of separate payment for OMIDRIA for a continuous period of at least four years when furnished in the ambulatory surgery center (“ASC”) setting (the “Milestone Event”). We received $200.0 million in February 2023. Upon achieving the Milestone Event, the royalty rate applicable to U.S. net sales of OMIDRIA was reduced from 50% to 30%. The 30% royalty rate continues until the expiration or termination of the last issued and unexpired U.S. patent, which we expect to occur no earlier than 2035. Consequently, in December 2022, we revalued the OMIDRIA contract royalty asset using the 30% royalty rate on U.S. net sales and adjusted the probability weighted outcomes to reflect the occurrence of the Milestone Event.

Royalties earned are recorded as a reduction to the OMIDRIA contract royalty asset. The amount recorded in discontinued operations in future periods will reflect interest earned on the outstanding OMIDRIA contract royalty asset at 11.0% and any amounts we receive that are different from the expected royalties. The OMIDRIA contract royalty asset is re-measured periodically using the expected value approach based on actual results and future expectations. Any required adjustment to the OMIDRIA contract royalty asset is recorded in discontinued operations.

OMIDRIA Royalty Obligation

On September 30, 2022, we sold to DRI a portion of our future OMIDRIA royalty receipts for a purchase price of $125.0 million and recorded an OMIDRIA Royalty Obligation for the same amount. On February 1, 2024, DRI purchased our remaining U.S. OMIDRIA royalty receipts through December 31, 2031 for $115.5 million in cash, which increased the OMIDRIA royalty obligation by the same amount. The OMIDRIA royalty obligation is valued based on our estimates of future OMIDRIA royalties and is amortized through December 31, 2031 using the implied effective interest rate of 10.27%. Interest expense is recorded as a component within continuing operations.

To the extent our estimates of future royalties differ materially from the previous estimates, we will adjust for future OMIDRIA royalties to the present value of the revised estimated cash flows, discounted at the implied effective interest rate of 10.27% utilizing the cumulative catch-up method. The offset to the adjustment would be recognized as non-cash interest expense, a component of net income (loss) from continuing operations (see “Note 8 - OMIDRIA Royalty Obligation”).

Cash and Cash Equivalents, Short-Term Investments and Restricted Investments

Cash and cash equivalents include highly liquid instruments with a maturity of three months or less on the date of purchase which can be easily converted into cash without a significant impact to their value. Short-term investment securities are classified as held-to-maturity, except for money market funds which are classified as available-for-sale. Investments classified as available-for-sale are measured at fair value. Investments classified as held-to-maturity are carried at cost. Amortization, accretion, interest, and dividends, realized gains and losses and declines in value judged to be other-than-temporary are included within other income.

The cost of securities sold is based on the specific-identification method. Investments with maturities of less than one year, or those for which management intends to use the investments to fund current operations, are included in current assets. We evaluate whether an investment is other-than-temporarily impaired based on the specific facts and circumstances. Factors that are considered in determining whether an other-than-temporary decline in value has occurred include: the market value of the security in relation to its cost basis; the financial condition of the investee; and the intent and ability to retain the investment for a sufficient period of time to allow for recovery in the market value of the investment. Restricted investments held in money-market funds include security deposits on our office lease.

Investment income, which is included as a component of other income, consists primarily of interest earned.

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Inventory

We expense inventory costs related to product candidates as research and development expenses until regulatory approval is reasonably assured in the U.S. or the European Union (“EU”). Once approval is reasonably assured, costs, including amounts related to third-party manufacturing, transportation and internal labor and overhead, will be capitalized.

Receivables

Receivables primarily consist of royalties receivable from Rayner. Considering the nature of our receivables, we concluded an allowance for doubtful accounts was not necessary as of December 31, 2024 and 2023, respectively.

Property and Equipment, Net

Property and equipment are stated at cost, and depreciation is calculated using the straight-line method over the estimated useful life of the assets, which is generally between three to 10 years. Expenditures for repairs and maintenance are expensed as incurred.

Right-of-Use Assets and Related Lease Liabilities

We record operating leases as right-of-use assets and recognize the related lease liabilities equal to the fair value of the lease payments using our incremental borrowing rate when the implicit rate in the lease agreement is not readily available. We recognize variable lease payments when incurred. Costs associated with operating lease assets are recognized on a straight-line basis within operating expenses over the term of the lease.

We record finance lease obligations as a component of property and equipment and amortize these assets within operating expenses on a straight-line basis to their residual values over the shorter of the term of the underlying lease or the estimated useful life of the equipment. The interest component of finance lease obligations is included in interest expense and recognized using the effective interest method over the lease term.

We account for leases with initial terms of 12 months or less as an operating expense.

Impairment of Long-Lived Assets

We assess the impairment of long-lived assets, whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability of these assets is measured by comparing the carrying value to future undiscounted cash flows that the asset is expected to generate. If the asset is impaired, the amount of any impairment will be reflected in the results of operations in the period of impairment. We have not recognized any impairment losses for the years ended December 31, 2024, 2023 and 2022.

Payment on Maturity of the 2023 Notes

Transactions involving contemporaneous exchanges of cash between the same debtor and creditor in connection with the issuance of a new debt obligation and satisfaction of an existing debt obligation are evaluated as a modification or an extinguishment depending on whether the exchange is determined to have substantially different terms. On November 15, 2023, we extinguished our 6.25% convertible senior notes (the “2023 Notes”) at par upon maturity.

Repurchase of 2026 Notes

In December 2023, we repurchased $9.1 million par value of our 2026 Notes at a discount, realizing a $4.1 million non-cash gain on extinguishment.

In June 2024, we performed an assessment of the Credit Agreement which was entered into with Highbridge and Athyrium and determined that it met the criteria to be accounted for as a troubled debt restructuring. As a result, the $29.3 million difference between the $118.1 million aggregate principal amount of the 2026 Notes exchanged and the $88.8 million aggregate repurchase price (consisting of the $67.1 million Initial Term Loan and $21.7 million cash on hand) was recorded as a premium (i.e. an increase) to the term debt recorded on the Company's consolidated balance sheet instead of being recognized as a gain on early extinguishment of debt. The premium will be amortized as both a reduction of term debt in the consolidated balance sheet and interest expense in the consolidated statement of operations and comprehensive income (loss) over the duration of the term loan.

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Research and Development

Research and development expenses are comprised primarily of contracted research, clinical trial study and manufacturing costs prior to approval; consulting services; contract milestones; materials and supplies; costs for personnel, including salaries, benefits and stock compensation; depreciation; an allocation of our occupancy costs; and other expenses incurred to sustain our overall research and development programs. Advance payments for goods or services that will be used for future research and development activities are deferred and then recognized as an expense as the related goods are delivered or the services are performed. All other research and development costs are expensed as incurred.

Selling, General and Administrative

Selling, general and administrative expenses are comprised primarily of marketing expenses; professional and legal services; patent costs; and salaries, benefits, and stock-compensation costs for marketing and other personnel not directly engaged in research and development. Additionally, selling, general and administrative expenses include depreciation; an allocation of our occupancy costs; and other general corporate expenses. Advertising costs are expensed as incurred. We had no advertising costs during the years ended December 31, 2024, 2023 and 2022.

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their tax bases. Deferred tax assets and liabilities are measured using enacted tax rates applied to taxable income in the years in which those temporary differences are expected to be recovered or settled. We recognize the effect of income tax positions only if those positions are more likely than not of being sustained upon an examination by the relevant taxing authority. A valuation allowance is established when it is more likely than not that the deferred tax assets will not be realized.

Stock-Based Compensation

Stock-based compensation expense is recognized for all share-based payments, including grants of stock option awards and restricted stock units based on estimated fair values. The fair value of our stock is calculated using the Black-Scholes option-pricing model, which requires assumptions around volatility, forfeiture rates, risk-free interest rate and expected term. Compensation expense is recognized over the requisite service periods, which is generally the vesting period, using the straight-line method. Forfeiture expense is estimated at the time of grant and revised in subsequent periods if actual forfeitures differ from those estimates.

Common Stock Repurchases

We have repurchased shares of our common stock from time to time under authorization made by our Board of Directors. Under applicable Washington State law, repurchased shares are retired and not presented separately as treasury stock in the consolidated financial statements. The terms of the Credit Agreement dated June 3, 2024 prohibit us from repurchasing our common stock, unless agreed to by the Lenders. Consequently, the Board of Directors terminated the active share repurchase program effective upon the execution of the Credit Agreement.

Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) is comprised of net income (loss) and certain changes in equity that are excluded from net income (loss). There were no differences between comprehensive income (loss) and net income (loss) for the years ended December 31, 2024, 2023 and 2022.

Financial Instruments and Concentrations of Credit Risk

Cash and cash equivalents, receivables, accounts payable and accrued liabilities, which are recorded at invoiced amount or cost, approximate fair value based on the short-term nature of these financial instruments. The fair value of short-term investments is based on quoted market prices. Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents, short-term investments and receivables. Cash and cash equivalents are held by financial institutions and are federally insured up to certain limits. At times, our cash and cash equivalents balance held at a financial institution may exceeds the federally insured limits. To limit the credit risk, we invest our excess cash in high-quality securities such as money market mutual funds, certificates of deposit and U.S. treasury bills.

Recent Accounting Pronouncements

In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09, Income Taxes - Improvements to Income Tax Disclosure (Topic 740), to enhance the transparency of income tax disclosures. ASU 2023-09 provides enhancements to the income tax disclosures related to the rate reconciliation and income taxes paid information. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024 and applied prospectively. The Company is evaluating the impact of this pronouncement on its consolidated financial statements.

In November 2024, the FASB issued 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expense, requiring public entities to disclose additional information about specific expense categories in the notes to the financial statements on an interim and annual basis. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and for interim periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact on its financial statement disclosures.

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Note3—Net Income (Loss) Per Share

Basic net income (loss) per share (“Basic EPS”) is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share (“Diluted EPS”) is computed by dividing net income (loss) by the weighted average number of common shares and potentially dilutive common shares outstanding during the period. Our potentially dilutive securities include common shares related to our stock options, RSUs and convertible senior notes calculated using the treasury stock method. In periods where we have a net loss from continuing operations but overall net income, we do not compute Diluted EPS because the effect would be antidilutive. Potentially dilutive securities excluded from Diluted EPS are as follows:

Year Ended December 31,

Outstanding restricted stock units (4) — — 98,750

(1) The 2026 Notes are subject to a capped call arrangement that potentially reduces the dilutive effect as described in “Note 6 - Debt”. Any potential impact of the capped call arrangement is excluded from this table.

(2) In December 2023 and on June 3, 2024, we repurchased $9.1 million and $118.1 million of our 2026 Notes, respectively, reducing an effect of dilution related to those notes. For further details refer to “Note 6 - Debt.”

(3) The 2023 Notes were fully extinguished upon maturity on November 15, 2023.

(4) The outstanding restricted stock units were vested and converted to shares of common stock on December 1, 2023.

Note4—Investments and Fair-Value Measurements

All of our investments are short-term and held in our name. Money market funds are classified as available-for-sale and treasury bills are classified as held-to-maturity on the accompanying consolidated balance sheets. Interest income is included as a component of interest and other income on our consolidated statement of operations and comprehensive income (loss). Interest and other income for the years ended December 31, 2024, December 31, 2023 and December 31, 2022 consists primarily of interest earned from investments of $8.4 million, $14.7 million and $2.2 million, respectively.

The following tables summarize our investments:

​ Gross Unrealized

Amortized Cost Gains/(Losses) Estimated Fair Value

​ (In thousands)

​ ​ ​ ​

Money-market funds classified as short-term investments $ 86,732 $ — $ 86,732

​ Gross Unrealized

Amortized Cost Gains/(Losses) Estimated Fair Value

​ (In thousands)

​ ​ ​ ​

Money-market funds classified as short-term investments 62,643 — 62,643

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability, an exit price, in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The accounting standard establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs, where available. The following summarizes the three levels of inputs required:

Level 1—Observable inputs for identical assets or liabilities, such as quoted prices in active markets;

Level 2—Inputs other than quoted prices in active markets that are either directly or indirectly observable; and

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Level 3—Unobservable inputs in which little or no market data exists, therefore they are developed using estimates and assumptions developed by us, which reflect those that a market participant would use.

Our fair-value hierarchy for our financial assets are as follows:

Level 1 Level 2 Level 3 Total

(In thousands)

Assets:

Level 1 Level 2 Level 3 Total

(In thousands)

Assets:

Money-market funds classified as short-term investments 62,643 — — 62,643

Unrealized gains and losses on our short-term investments were not material for either period presented. Cash held in demand deposit accounts of $3.4 million and $7.1 million is excluded from our fair-value hierarchy disclosure as of December 31, 2024 and 2023, respectively. The carrying amounts for receivables, accounts payable and accrued liabilities, and other current monetary assets and liabilities, including lease financing obligations, approximate fair value.

See “Note 6 - Debt” and “Note 8 – OMIDRIA Royalty Obligation” for the carrying amount and estimated fair value of our outstanding term loan, 2026 Notes and the OMIDRIA royalty obligation.

Note5—Certain Balance Sheet Accounts

Receivables

Receivables consists of the following:

December 31, December 31,

(In thousands)

OMIDRIA royalty receivables $ 6,940 $ 6,724

Property and Equipment, Net

Property and equipment, net consists of the following:

December 31, December 31,

(In thousands)

Equipment under finance leases $ 8,323 $ 6,929

Office equipment and furniture 624 624

Less accumulated depreciation and amortization (11,072 ) (10,241 )

Total property and equipment, net $ 2,678 $ 1,950

For the years ended December 31, 2024, 2023 and 2022, depreciation and amortization expenses were $1.0 million, $0.9 million and $1.0 million, respectively.

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Accrued Expenses

Accrued expenses consist of the following:

December 31, December 31,

(In thousands)

Contract research and development 4,334 6,223

Consulting and professional fees 2,602 3,539

Note6—Debt

Secured Term Debt

On June 3, 2024, we entered into a Credit Agreement, which provides for a term loan credit facility of up to $92.1 million, in aggregate, consisting of an Initial Term Loan of $67.1 million and a Delayed Draw Term Loan of $25.0 million. The Delayed Draw Term Loan may be drawn once in full upon notice delivered on or prior to June 3, 2025, conditioned on receipt of FDA approval of narsoplimab in TA-TMA within 30 days of the notice; however, we do not expect that FDA approval of narsoplimab will be obtained within a timeframe that would permit the Delayed Draw Term Loan to be drawn absent an amendment to, or waiver of, this condition. The Delayed Draw Term Loan would be issued with an original issue discount of 3.0% and the proceeds may be used only for commercialization of narsoplimab in TA-TMA and transaction costs associated with the Delayed Draw Term Loan. Until the earlier of November 1, 2025 and the date we elect to utilize the Delayed Draw Term Loan, the Company, at its sole discretion, may exchange up to $14.9 million aggregate principal amount of outstanding 2026 Notes for cash and/or additional term loan amounts, with the holders of such notes becoming Lenders under the Credit Agreement (any such additional term loans, together with the Initial Term Loan and the Delayed Draw Term Loan, the “Loans”). As of December 31, 2024, no such additional exchanges have occurred. All indebtedness under the Credit Agreement is secured by a first-priority security interest in and lien on substantially all our tangible and intangible property, subject to customary exceptions, and excluding royalty interests in OMIDRIA and certain related rights.

In connection with our entry into the Credit Agreement, we used the Initial Term Loan of $67.1 million along with $21.7 million of cash on hand to repurchase $118.1 million aggregate principal amount of the 2026 Notes held by the Lenders. The total aggregate purchase price of $88.8 million represented a purchase price equal to approximately 75% of the par value of the 2026 Notes retired in the transaction. The reduction in the aggregate outstanding principal balance of our 2026 Notes and incurrence of a new Initial Term Loan resulted in a $51.0 million reduction of our outstanding debt. The $29.3 million difference between the $118.1 million aggregate principal amount of the 2026 Notes and the $88.8 million aggregate repurchase price was recorded as a premium (i.e., an increase) to the long-term debt on the Company’s consolidated balance sheet instead of being recognized as a gain on early extinguishment of debt. The premium is being amortized as both a non-cash reduction of long-term debt in the consolidated balance sheets and interest expense in the consolidated statement of operations and comprehensive income (loss) over the duration of the term loan.

The amount outstanding on the Initial Term Loan is as follows:

December 31,

(In thousands)

Unamortized debt premium, net of issuance costs and other 23,328

Total term debt, net 90,405

The Loans have a stated maturity date of June 3, 2028 and bear interest at an adjusted secured overnight financing rate (“adjusted SOFR”), subject to a 3.0% floor, plus 8.75% per annum, payable quarterly from the closing date. As of December 31, 2024, the contractual interest rate on the Loans was 13.32%. We have the option to pay all of the interest in cash or to pay 50% in cash and pay-in-kind (“PIK”), the remaining interest. When this provision is elected, interest for the quarter, including both the cash interest and PIK interest, is calculated based on adjusted SOFR plus a 10.25% PIK margin (instead of the customary 8.75% margin). The PIK interest is then added to the outstanding principal balance and interest is computed using the original adjusted SOFR plus 8.75% margin rate. Due to the premium amortization on the Initial Term Loan, interest expense is currently being recognized at an implied effective interest rate of 1.50%.

The following table sets forth interest expense recognized related to the Initial Term Loan:

Twelve Months Ended

(In thousands)

Contractual interest expense $ 5,525

Amortization of premium and debt issuance costs (4,681 )

Total interest expense $ 844

We may elect to prepay the Loans, in whole or in part, in cash, plus an applicable prepayment and/or make-whole premium. Under certain circumstances, we are required to prepay all or a portion of the outstanding Loans, plus an applicable prepayment and/or make-whole premium, as described below.

(1) If, on November 1, 2025, (i) the aggregate outstanding principal amount of the outstanding 2026 Notes that is not held by the Lenders equals or exceeds $38.5 million and (ii) we have not made or delivered notice that we expect to make certain voluntary or mandatory prepayments under the Credit Agreement of at least $20.0 million in the aggregate, then we would be required, on or prior to November 15, 2025, to make a $20.0 million mandatory prepayment, together with a $1.0 million prepayment premium.

(2) Upon the occurrence of a change in control, we must prepay the entire outstanding amount of the Loans, plus the applicable make-whole or prepayment premium.

(3) We must prepay the Loans in an amount equal to: (i) 25.0% of any milestone payments received from DRI or its affiliates on the basis of net sales of OMIDRIA; (ii) 60.0% of the net cash proceeds (excluding transaction expenses and certain milestone payments) received by Omeros from the sale or license of our assets (or in the case of an asset sale or license involving narsoplimab that occurs while any Delayed Draw Term Loan is outstanding, an amount equal to 100% of the net cash proceeds from such transaction); (iii) 100.0% of net cash proceeds of indebtedness incurred by the Company other than as permitted by the Credit Agreement; and (iv) 100% of the net cash proceeds of insurance recoveries on loss of property, except to the extent utilized to repair or replace the relevant assets within a specified time.

Voluntary and mandatory prepayments of the Loans are subject to payment of the following premiums: (i) during the first year of such Loans, a make-whole premium plus 5.0% of the applicable prepayment amount (unless the prepayment is made in contemplation of a change of control, in which case only the make-whole premium would be payable); (ii) during the second year, a prepayment premium equal to 5.0% of the applicable prepayment amount; and (iii) during the third year, a prepayment premium equal to 3.0% of the applicable prepayment amount.

The Credit Agreement contains certain customary default provisions, representations and warranties and affirmative and negative covenants. These include a covenant requiring us to maintain at all times unrestricted cash, cash equivalents and short-term investments of at least $25.0 million in accounts subject to control agreements and a covenant limiting the use of cash for open market or privately negotiated repurchases of any outstanding 2026 Notes to: (i) an initial amount not exceeding $25.0 million, which may be increased by up to an additional $10.0 million subject to the satisfaction of certain conditions; (ii) an unlimited amount, if the amount of the Loans outstanding at the time of repurchase does not exceed $38.5 million; and (iii) an additional amount not to exceed 50% of the net cash proceeds from an equity offering, provided that the Company offers to prepay an equal amount of the Loans with the net cash proceeds of such offering. As of December 31, 2024, the Company was in compliance with the covenants under the Credit Agreement. After review of the customary default provisions, affirmative and negative covenants, and voluntary and mandatory prepayment options, we determined that the net derivative asset was not significant as of December 31, 2024. A default under the Credit Agreement that results in the outstanding debt thereunder being declared due and payable prior to the stated maturity would constitute a cross-default under the indenture governing the 2026 Notes. In such an event, the principal and all accrued and unpaid interest on the 2026 Notes may be declared immediately due and payable either by the trustee under the indenture, or by the holders of at least 25% of the aggregate principal amount of the 2026 Notes outstanding.

The fair value of the Loans is classified as a Level 3 liability. As of December 31, 2024, the approximate fair value of our Loan obligations was $69.5 million. We determined the fair market value by discounting the future cash flows based on adjusted SOFR at each measurement date.

2023 Unsecured Convertible Senior Notes

We extinguished the $95.0 million outstanding on our 2023 Notes at par upon maturity on November 15, 2023. The following table sets forth interest expense recognized related to the 2023 Notes.

Year Ended December 31,

(In thousands)

Contractual interest expense $ — $ 5,195 $ 5,938

Amortization of debt issuance costs — 619 663

Total interest expense $ — $ 5,814 $ 6,601

2026 Unsecured Convertible Senior Notes

We have outstanding unsecured convertible senior notes which accrue interest at an annual rate of 5.25% per annum, payable semi-annually in arrears on February 15 and August 15 of each year. The 2026 Notes mature on February 15, 2026, unless earlier purchased, redeemed or converted in accordance with their terms.

In 2024, we repurchased $118.1 million of principal amount outstanding on our 2026 Notes for a total aggregate repurchase price of $88.8 million (approximately 75% of par value), using proceeds from the Initial Term Loan of $67.1 million and paying $21.7 million of cash on hand.

Amounts outstanding on our 2026 Notes are as follows:

December 31, December 31,

(In thousands)

Unamortized debt issuance costs (684 ) (2,769 )

Fair value of outstanding convertible senior notes (1) $ 93,752 $ 131,444

(1) The fair value is classified as Level 2 liability due to the limited trading activity for the unsecured convertible senior notes. The fair value of the 2026 Notes is determined based on quoted prices in an over-the counter market using the most recent trading information available at the end of the reporting period. The value of the conversion feature of the 2026 Notes is not deemed to be significant as the current market price of our common stock is below the initial conversion price of $18.49 per share of common stock.

The unamortized debt issuance costs of $0.7 million as of December 31, 2024 will be amortized to interest expense at an effective interest rate of 5.89% over the remaining term.

The following table sets forth interest expense recognized related to the 2026 Notes:

Year Ended December 31,

(In thousands)

The conversion rate is 54.0906 shares of our common stock per $1,000 of note principal (equivalent to an initial conversion price of approximately $18.4875 per share of common stock), which equals approximately 5.3 million shares issuable upon conversion, subject to adjustment in certain circumstances.

The 2026 Notes are convertible at the option of the holders on or after November 15, 2025 at any time prior to the close of business on February 12, 2026, the second scheduled trading day immediately before the stated maturity date of February 15, 2026. Additionally, holders may convert their 2026 Notes at their option at specified times prior to the maturity date only if:

(1) during any calendar quarter, the last reported sale price per share of our common stock exceeds 130% of the conversion price of the 2026 Notes for each of at least 20 trading days in the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter;

(2) during the five consecutive business days immediately after any five-consecutive-trading-day period (such five-consecutive-trading-day period, the “measurement period”) in which the trading price per $1,000 principal amount of 2026 Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price per share of our common stock on such trading day and the conversion rate on such trading day;

(3) there is an occurrence of one or more certain corporate events or distributions of our common stock; or

(4) we call the 2026 Notes for redemption.

We will settle any conversions by paying or delivering, as applicable, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election, based on the applicable conversion rate(s).

Subject to the satisfaction of certain conditions, we may redeem in whole or in part the 2026 Notes at our option beginning August 15, 2023 through the 50th scheduled trading day immediately before the maturity date at a cash redemption price equal to the principal amount of the 2026 Notes to be redeemed plus any accrued and unpaid interest. The 2026 Notes are subject to redemption only if certain requirements are satisfied, including that the last reported sale price per share of our common stock exceeds 130% of the conversion price on (i) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the trading day immediately before the date we send the related redemption notice and (ii) the trading day immediately before the date we send such notice.

In order to reduce the dilutive impact or potential cash expenditure associated with the conversion of the 2026 Notes, we entered into capped call transactions in connection with the issuances of the 2026 Notes (the "2026 Capped Call"). The 2026 Capped Call will cover, subject to anti-dilution adjustments substantially similar to those applicable to the 2026 Notes, the number of shares of common stock underlying the 2026 Notes when our common stock is trading within the range of $18.49 and $26.10. However, should the market price of our common stock exceed the $26.10 cap, then the conversion of the 2026 Notes would have an additional dilutive impact or may require a cash expenditure to the extent the market price exceeds the cap price. The 2026 Capped Call will expire on various dates over the 50-trading-day period ranging from December 2, 2025 to February 12, 2026, if not exercised earlier. The 2026 Capped Call is a separate transaction and not part of the terms of the 2026 Notes and was executed separately from the issuance of the 2026 Notes. The amount paid for the 2026 Capped Call was recorded as a reduction to additional paid-in capital in the consolidated balance sheet. As of December 31, 2024, approximately 12.2 million shares remained outstanding under the 2026 Capped Call. We also retain all potential future value of the capped call purchased in connection with the issuance of the 2026 Notes covering all shares underlying the original 2026 Notes.

Further, we concluded the 2026 Capped Call qualifies for a derivative scope exception for instruments that are both indexed to an entity’s own stock and classified in stockholders’ equity in its balance sheet. Consequently, the fair value of the 2026 Capped Call of $23.2 million is classified as equity, not accounted for as derivatives, and will not be subsequently remeasured.

Minimum Commitments

As of December 31, 2024, the most probable principal payments on our 2026 Notes and Term Loan are as follows:

2026 Notes Term Loan Total

(In thousands)

2029 and thereafter — — —

(1) Under the Term Loan, we expect to pay a $1.0 million prepayment penalty in November 2025 which is included in the current portion of term debt in the consolidated balance sheet. As this is not a principal payment it is included as a component of other costs herein.

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Note 7—Discontinued Operations - Sale of OMIDRIA

On December 23, 2021, we sold the rights to OMIDRIA and related assets to Rayner, which is reported as discontinued operations in our consolidated statements of operations and comprehensive income (loss) and excluded from continuing operations for all periods presented.

In December 2022, we earned a $200.0 million Milestone Payment upon the occurrence of an event specified in the Asset Purchase Agreement with Rayner. The Milestone Payment was received in February 2023. The Milestone Event also resulted in a reduction in the U.S. royalty rate from 50% to 30% on OMIDRIA net sales.

The results of operations for OMIDRIA are recorded as income from discontinued operations for all periods presented in the consolidated statements of operations and comprehensive income (loss) are as follows:

Year Ended December 31,

(In thousands)

(1) For further discussion of income tax expense refer to “Note 13 – Income Taxes”.

The following schedule is a rollforward of the OMIDRIA contract royalty asset (in thousands):

Royalties earned (40,595 )

Interest on OMIDRIA contract royalty asset 15,315

Remeasurement adjustments 41,167

Royalties earned (39,651 )

Interest on OMIDRIA contract royalty asset 16,922

Remeasurement adjustments 7,969

Cash flow from discontinued operations is as follows:

Year Ended December 31,

(In thousands)

Net cash provided by discontinued operations primarily represents royalties received and the $200.0 million milestone payment that we collected from Rayner in February 2023. All royalties earned on OMIDRIA sales within the U.S. through December 31, 2031 are remitted by Rayner to an escrow account established by Omeros, from which payments are made to DRI.

Note 8—OMIDRIA Royalty Obligation

In September 2022, we sold to DRI an interest in our future OMIDRIA royalty receipts and received $125.0 million in cash consideration which was recorded as an OMIDRIA royalty obligation on our consolidated balance sheet. DRI was entitled to receive royalties on OMIDRIA net sales between September 1, 2022 and December 31, 2030 up to certain annual cap limits.

In February 2024, Omeros and DRI expanded their royalty purchase agreement under the Amendment, resulting in the elimination of previously existing annual caps on royalty payments and Omeros receiving an additional $115.5 million in cash consideration which we accounted for as a modification of our existing debt from DRI. All royalties earned on OMIDRIA sales within the U.S. through December 31, 2031 are remitted by Rayner to an escrow account established by Omeros, from which payments are made to DRI.

We retain the right to receive all royalties payable by Rayner on any U.S. net sales of OMIDRIA after December 31, 2031 and all royalties on global net sales of OMIDRIA from and after December 31, 2031. To date, international royalties have not been significant. DRI has no recourse to our assets other than in its interest in OMIDRIA royalties.

We are also entitled to receive a milestone payment ranging between $10.0 million and $27.5 million if U.S. net sales of OMIDRIA reach applicable thresholds ranging between a total of $156.0 million and $160.0 million for any period of four consecutive quarters prior to January 1, 2026. In addition, we are entitled to receive a separate milestone payment ranging between $8.0 million and $27.5 million if U.S. net sales of OMIDRIA reach applicable thresholds ranging between a total of $181.0 million and $185.0 million for any period of four consecutive quarters prior to January 1, 2028.

The changes in the OMIDRIA royalty obligation during the year ended December 31, 2024 are as follows (in thousands):

Principal payments (1,152 )

Principal payments (18,780 )

Non-cash interest (5,614 )

The OMIDRIA royalty obligation is classified as a Level 3 liability as its valuation requires substantial judgment and estimation of factors that are not currently observable in the market. The fair value of the OMIDRIA royalty obligation is determined by calculating the net present value of our estimated future OMIDRIA cash flows using the interest rate at inception of our royalty purchase agreement with DRI, adjusted for the change in the prime rate through the remeasurement date. As of December 31, 2024, the approximate fair value of our obligation was $209.7 million.

For the years ended December 31, 2024, 2023 and 2022, we incurred interest expense of $15.0 million, $11.8 million and $2.9 million, respectively, on the OMIDRIA royalty obligation.

As of December 31, 2024, the expected scheduled principal and interest payments (based on an implied effective interest rate of 10.27%) are as follows:

Principal Interest Total

(In thousands)

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Note9—Lease Liabilities

We have operating leases related to our office and laboratory space. The initial term of the leases is through November 2027 and we have two options to extend the lease term, each by five years. We have finance leases for certain laboratory and office equipment that have lease terms expiring through October 2029.

Lease-related assets and liabilities recorded on our consolidated balance sheet are as follows:

December 31, December 31,

(In thousands)

Assets

Liabilities

Current:

Non-current:

Weighted-average remaining lease term

Operating leases (years) 2.9 3.8

Finance leases (years) 3.5 2.3

Weighted-average discount rate

The components of total lease costs are as follows:

Year Ended

December 31,

(In thousands)

Lease cost

Finance lease cost:

The supplemental cash flow information related to leases is as follows:

Year Ended

December 31,

(In thousands)

Cash paid for amounts included in the measurement of lease liabilities

Cash payments for operating leases $ 7,003 $ 7,144

Cash payments for financing leases 944 655

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The future maturities of our lease liabilities as of December 31, 2024 are as follows:

Operating Finance

Leases Leases Total

(In thousands)

Note10—Commitments and Contingencies

Contracts

We have various agreements with third parties that collectively require payment of termination fees totaling $4.7 million as of December 31, 2024 if we cancel the work within specific time frames, either prior to commencing or during performance of the contracted services.

Development Milestones and Product Royalties

We have entered a variety of development, collaboration, licensing or similar agreements with third parties under which we have accessed technology or services in connection with our development assets and programs. Some of these agreements require milestone payments based on achievements of development, regulatory or sales milestones, and/or low-single to low-double digit royalties on net income or net sales of the relevant product. For the year ended December 31, 2024, we did not pay any development milestones. For the years ended December 31, 2023 and 2022, we paid $5.0 million and $0.3 million, respectively in development milestones.

Note11—Shareholders’ Equity (Deficit)

Common Stock

As of December 31, 2024, we had reserved shares of common stock under our equity plans as follows:

At the Market Sales Agreement – We have a sales agreement to sell shares of our common stock having an aggregate offering price of up to $150.0 million, from time to time, through an “at the market” equity offering program.

Amendment of 2017 Omnibus Incentive Compensation Plan - At our June 23, 2023 annual meeting, our shareholders approved a 5,000,000 share increase in the number of shares of common stock available for grant under the 2017 Omnibus Incentive Compensation Plan, as amended and restated.

Share Repurchase Program - On November 9, 2023, the Board of Directors approved a share repurchase program under which we were permitted to repurchase from time to time up to $50.0 million of our common stock in the open market or through privately negotiated transactions. For the year ended December 31, 2023, we repurchased and retired 1.8 million shares of common stock at an average price of $2.54 per share for an aggregate purchase price of $4.7 million. During the first quarter of 2024, we repurchased and retired 3.2 million shares of common stock at an average of $3.71 per share for an aggregate purchase price of $11.9 million. The terms of the Credit Agreement prohibit us from repurchasing our common stock unless expressly agreed to by the Lenders. Consequently, the Board of Directors terminated the share repurchase program effective upon execution the Credit Agreement in June 2024.

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Note12—Stock-Based Compensation

Our equity plans provide for the grant of incentive and non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock units, performance units, performance shares and other stock and cash awards to employees and consultants. Stock options are granted with an exercise price not less than the fair market value of Omeros’ common stock on the date of the grant. Any unexercised options expire 10 years from grant date, and any unvested stock options granted which are subsequently canceled become available for future reissuance.

Vesting schedules for our equity plans generally are as follows:

Grant Type Vesting Schedule

Employee recurring options grants 1/48 monthly

Non-employee consultant options grants 1/12 or 1/48 monthly

Employee RSUs 50% after one year, 50% after two years

Stock-based compensation expense is as follows:

Year Ended December 31,

(In thousands)

Continuing operations:

Total stock-based compensation in continuing operations 10,493 11,894 14,165

Discontinued operations — (244 ) (93 )

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The following assumptions were applied to stock option grants during the periods ended:

Year Ended December 31,

Estimated weighted-average fair value $ 2.68 $ 2.44 $ 2.94

Weighted-average assumptions:

Expected volatility 95 % 93 % 90 %

Expected life, in years 7.2 7.2 6.0

Expected dividend yield — % — % — %

Expected volatility is based on the historical volatility of our stock price weighted by grant issuances over the reporting period. We estimated the expected life of the stock options granted using the historical exercise behavior of option holders. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. Forfeiture expense is estimated at the time of grant and revised in subsequent periods if actual forfeitures differ from those estimates.

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Stock option activity for all stock option plans is as follows:

Of the 16.7 million common stock options outstanding as of December 31, 2024, 8.2 million have an exercise price above the $9.88 closing price of our stock on the Nasdaq exchange on December 31, 2024. The total intrinsic value of stock options exercised during the years ended December 31, 2024, 2023 and 2022 was $0.5 million, $0.1 million and $0.2 million, respectively.

At December 31, 2024 and December 31, 2023, there were 5.4 million and 4.7 million unvested stock options outstanding, respectively, that vest over a weighted-average period of 2.4 years and 2.1 years, respectively. The remaining estimated compensation expense to be recognized in connection with these unvested stock options is $12.5 million and $14.5 million for the years ended December 31, 2024 and December 31, 2023, respectively.

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Note13—Income Taxes