Why Omeros Corporation Shares Crashed

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Omeros Corporation are trading 9% lower today after briefly dipping into a double-digit loss shortly after lunchtime. The market is fleeing what it views as a disappointing quarter, despite the fact that Omeros has yet to get any drugs to market.

So what: Omeros reported first-quarter revenue of just $100,000, and it naturally spent far more on R&D, leading to a $0.54 GAAP loss. When adjusting for non-cash expenses, Omeros' loss was $0.45 per share. Analysts had expected revenue of $450,000 and a loss of $0.45, but estimating quarterly financial results for a development-stage biotech company is a bit silly when that company hasn't commercialized anything yet. However, Omeros' revenue is 91% lower now than it was a year ago, and its losses are $0.05 per share greater than they were a year ago, so that could be making investors nervous.

Now what: As I already mentioned, panicking over the quarterly financial results of a development-stage biotech company is silly. Keep your focus on what Omeros is actually doing with its R&D and where its trials are leading, and ignore this financial data, as it has little bearing on Omeros' future.

The company began Phase 2 trials for OMS824 for Huntington's disease and made progress on the same drug in Phase 2a trials for treating schizophrenia patients during the first quarter, and also anticipates launching Omidira -- a drug for use in lens-replacement surgery -- during the second quarter. Cataract surgeries, which are one of the most common lens-replacement surgeries, are performed 2.7 million times a year in the United States, so there is certainly a large enough market for Omidira to bring in far more cash flow during the latter half of the year, if Omeros can get surgeons to adopt it.

Invest in the next wave of health care innovation
The Economist compares this disruptive invention to the steam engine and the printing press. Business Insider says it's "the next trillion dollar industry." And the technology behind is poised to set off one of the most remarkable health care revolutions in decades. The Motley Fool's exclusive research presentation dives into this technology's true potential, and its ability to make life-changing medical solutions never thought possible. To learn how you can invest in this unbelievable new technology, click here now to see our free report.

The article Why Omeros Corporation Shares Crashed originally appeared on Fool.com.

Alex Planes has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story