After the strong period of shares being oversold and their price reaching the initial IPO levels, Omeros Corp. (NASDAQ:OMER
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) stock made a considerable step backwards on Friday. It revealed a lot of investor uncertainty, but the excitement still holds on.
Omeros stock dropped down by 6.19% on Friday and closed at $8.18 on relatively low trading activity. With no corporate updates published recently, the strong investor attention the stock has received over the last month probably reflected the excitement about the clinical results for Omeros lead product candidate to be released.
But now, it seems that the market got too excited, as the current market price still suggest willingness to pay an exorbitant premium for the stock relative to the sales that Omeros has, which in turns means that a lot of growth potential is expected.
Though, this potential will take time to be realized, and this will not happen this year. Currently, Omeros' has four clinical development programs for product candidates derived from their proprietary PharmacoSurgery platform and one from their Addiction program. The most advanced program is in Phase 3 clinical trials and the latest results are already expected to be released. However, the management does not expect to have a marketable product this year and by now revenues come solely from grants by two different organizations.
To cover the lengthy and costly clinical trials, the company relies, apart from the sale of common stock, on its funding agreements. From the National Institutes of Health a total of $3.7 million have been received by the end of March and $892,000 of funding remain under these grants. Further, Omeros has a funding agreement with The Stanley Medical Research Institute for a product candidate for the treatment of schizophrenia. As of March, $5.7 million have been received under that agreement and another $3.3 are outstanding.
The cash available currently is enough to cover the expenses over the next year, but still Omeros has limited financial resources, which imposes even more risks than the usual ones related to the development of medical products. One of the crucial issues for the company is to choose the correct product candidates to develop, meaning the ones with the highest chances to get approved and be profitable. The next clinical results will give more insights if Omeros is on the right track.