# OMEROS CORP (OMER) FY 2025 MD&A

Verbatim Item 7 Management's Discussion and Analysis from OMEROS CORP's 10-K for fiscal year 2025.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1285819/000143774926010636/omer20251231_10k.htm
Accession: 0001437749-26-010636
Filing date: 2026-03-31
Report date: 2025-12-31
Extracted from Item 7 to the first post-MD&A boundary after HTML sanitization. Published MD&A gate trimmed front/tail over-capture.
Confidence: high

Company profile: /company/OMER/
All MD&A years: /company/OMER/mda/
Previous year: /company/OMER/mda/fy2024/ (FY 2024)

ITEM 7.       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 Form 10-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 Form 10-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 Form 10-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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Table of Contents

Overview

We are an innovative, commercial-stage biotechnology company that discovers and develops first-in-class protein and small-molecule therapeutics for large-market and orphan indications, with particular emphasis on complement-mediated diseases, cancers, and addictive or 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 and 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. Our lead lectin pathway inhibitor YARTEMLEA® (narsoplimab-wuug) is FDA-approved and commercially available in the U.S. for the treatment of TA-TMA in adult and pediatric patients aged two years and older. An MAA for YARTEMLEA in TA-TMA is currently under review by the EMA. Clinical development of narsoplimab is anticipated to continue to expand the approved label in TA-TMA and to develop the drug in additional indications. Clinical development efforts have previously been directed to ARDS, including severe acute COVID-19, which can result in 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 have directed efforts towards the development of small-molecule inhibitors of MASP-2, designed for oral administration. 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”.

Commercial Product – YARTEMLEA

Our commercial product, YARTEMLEA, is the first and only approved inhibitor of the lectin pathway of complement. On December 23, 2025, FDA approved YARTEMLEA for the treatment of TA-TMA in adults and in children ages two years and older. TA-TMA is a severe and often-fatal complication of hematopoietic stem cell transplantation in adults and children, driven by systemic endothelial injury triggered by conditioning regimens, immunosuppressants, infection, graft-versus-host disease, and other transplant-related factors. Activation of the lectin pathway of complement plays a central role in disease pathogenesis. YARTEMLEA selectively inhibits MASP-2, blocking pathway activation while preserving classical and alternative complement functions important for host defense. In TA-TMA, MASP-2 inhibition prevents lectin pathway-mediated cellular injury, including endothelial damage in small blood vessels, and thrombus formation.

Commercial distribution and sales of YARTEMLEA commenced in January 2026.

For more information, see Part I, Item 1 in this Annual Report on Form 10-K under the heading “Overview: Our Commercial Product – YARTEMLEA”.

Sale of Zaltenibart / MASP-3

On November 25, 2025, we completed the Transaction pursuant to our APLA with Novo Nordisk for our candidate drug zaltenibart (formerly OMS906). Zaltenibart is a first-in-class, late-stage clinical humanized monoclonal antibody targeting MASP-3, the most upstream and key activator of the alternative pathway of the complement system. Zaltenibart has shown multiple potential advantages over other alternative pathway inhibitors in development and on the market.

At the closing of the Transaction, we received an upfront cash payment of $240.0 million. In addition, we are eligible to receive (i) up to $510.0 million in one-time milestone payments upon the first achievement by Novo Nordisk or its affiliates or sublicensees of each of the development and approval milestone events as set forth in the APLA and (ii) up to $1.3 billion in one-time milestone payments upon the first achievement by Novo Nordisk or its affiliates or sublicensees of certain sales-based milestone events as set forth in the APLA. We are also eligible under the APLA to receive tiered royalties on annual net sales of products at percentage rates ranging from high single digit to high teens, subject to reduction in certain circumstances, as set forth in the APLA. In total, we are eligible to receive up to an additional $1.8 billion in potential development and commercial milestones, plus tiered royalties on net sales.

Pursuant to the APLA, we sold and transferred, and Novo Nordisk purchased zaltenibart and certain related assets, and the parties agreed to grant and receive certain intellectual property licenses to facilitate the continued development and commercialization activities of both companies. We retain rights to our MASP-3 small-molecule program unrelated to zaltenibart, including the ability to develop and commercialize small-molecule MASP-3 inhibitors, across a range of therapeutic areas, including, but not limited to, ophthalmology, neurology, gastrointestinal disorders, dermatology, musculoskeletal diseases, and oncology. We also retain rights to our “grandfathered” MASP-3 antibodies, with temporal and indication restrictions on commercialization and for use in advancing our small-molecule therapeutics.

In accordance with the APLA, at the closing of the Transaction, Omeros and Novo Nordisk entered into the Transition Services Agreement pursuant to which we are providing certain transition services to Novo Nordisk to facilitate the transfer of the acquired assets and liabilities under the APLA and to provide for the continued operation of relevant studies and program activities during the applicable term. Subject to certain exceptions and limitations, Novo Nordisk reimburses us for costs and expenses we incur under the Transition Services Agreement, including third-party costs and expenses, costs associated with delivery of transition services by Omeros personnel on an hourly basis at rates specified in the Transition Services Agreement, and for our inventories of zaltenibart drug substance and product.

Other Development Programs

PDE7 Inhibitor Program

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 NIDA, 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. With NIDA funding, we successfully completed preclinical cocaine interaction/toxicology studies to assess safety of the OMS527 compound when co-administered with cocaine. FDA subsequently requested additional preclinical information prior to initiating the clinical in-patient study in cocaine users. Together with our collaborators at NIDA, we are scheduled to meet with FDA to discuss that request. For more information, see Part I, Item 1 in this Annual Report on Form 10-K under the heading “Other Development Programs: PDE7 Inhibitor Programs – OMS527”.

Preclinical Programs - OncotoX-AML

We continue to progress preclinical studies within our novel oncology program, which is focused on developing novel, proprietary large molecule therapeutics designed to selectively target and kill dividing cancer cells. We have completed selection of a drug development candidate, and IND-enabling studies are underway for this program, which we refer to as OncotoX-AML. AML, an aggressive and highly fatal bone marrow and blood cancer, is the lead indication for development. The effectiveness of current AML treatments, such as chemotherapeutics and antibody-drug conjugates, is limited by a number of factors, including high relapse rates and substantial side effects. 

OncotoX-AML is an engineered biologic designed to selectively kill both AML blasts (abnormal myeloid cells) and relapse-related leukemia stem cells. Its unique mechanism of action is independent of myeloid cell genetic mutations, including TP53, NPM1, KMT2A, and FLT3, which are collectively found in approximately 90% of AML patients and are historically difficult to treat. For more information, see Part I, Item 1 in this Annual Report on Form 10-K under the heading “Other Development Programs: OncotoX-AML”.

Preclinical Programs - T-CAT

We are also advancing our T-CAT platform: a new class of recombinant antibodies intended for broad action against bacteria, fungi, viruses, and parasites. T-CAT is designed to harness complement activation to kill pathogens directly, which represents a novel approach to infectious disease treatment.

As preclinical animal data continue to accumulate across multiple pathogen classes and species, we believe that T-CAT demonstrates potential against MDROs. Effective MDRO therapies remain one of the most urgent and unmet needs in medicine, and we believe that T-CAT has the potential to address this need without contributing to drug resistance. For more information, see Part I, Item 1 in this Annual Report on Form 10-K under the heading “Other Development Programs: T-CAT - Infectious Disease”.

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 (“IOL”) 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 OMIDRIA to Rayner pursuant to an Asset Purchase Agreement, dated December 1, 2021 (the “Asset Purchase Agreement”).  In February 2023, we received a $200.0 million milestone payment from Rayner (the “Milestone Payment”), plus accrued interest, upon an event (the “Milestone Event”) that established separate payment for OMIDRIA for a continuous period of at least four years when furnished in an ambulatory surgery center (“ASC”) setting.  The Asset Purchase Agreement also provides for the payment of royalties by Rayner based on Rayner's net sales of OMIDRIA for a term that extends for the life of the patents covering OMIDRIA in the relevant jurisdiction, the longest of which in the United States is currently into 2035. The applicable royalty rates are currently 30% in the United States and 15% outside the United States (“ex-U.S.”), subject to reduction upon certain events described in the Asset Purchase Agreement.

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 consolidated balance sheet. The results of OMIDRIA activities are classified as discontinued operations in our consolidated statements of operations and comprehensive loss and excluded from continuing operations for all periods presented. See Part II, Item 8, “Note 8 — Discontinued Operations – Sale of OMIDRIA” to our Consolidated Financial Statements in this Annual Report on Form 10-K.

On September 30, 2022, we entered into a Royalty Purchase Agreement (the “Original Agreement”) with DRI Healthcare Acquisitions LP (“DRI”) under which we received $125.0 million in exchange for a portion of the royalties to which we were entitled from Rayner under the Asset Purchase Agreement on global net sales of OMIDRIA between September 1, 2022 and December 31, 2030, subject to certain annual caps on the royalty amounts payable to DRI.  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 under an Amended and Restated Royalty Purchase Agreement (the “Amendment”) for which we received $115.5 million in cash consideration.  We record the amounts payable to DRI as an OMIDRIA royalty obligation on our consolidated balance sheet. 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. 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. 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 9 – OMIDRIA Royalty Obligation” to our Consolidated Financial Statements in this Annual Report on Form 10-K for additional information.

Debt Financing Transactions

Repayment at 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.

Repurchase of 2026 Notes for Cash

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.

Exchange of 2026 Notes for Term Loan and Cash

On June 3, 2024, we, with certain subsidiaries, as guarantors, entered into a Credit and Guaranty Agreement (the “Credit Agreement”) with certain funds managed by Athyrium Capital Management, LP and certain funds managed by Highbridge Capital Management, LLC, as lenders (together with additional lenders from time to time, the “Lenders”) and Wilmington Savings Fund Society, FSB, as administrative agent and collateral agent. Along with borrowings of $67.1 million under the Credit Agreement (the “Term Loan”) and $21.7 million of cash on hand (for a total aggregate purchase price of $88.8 million), we repurchased from the lenders $118.1 million aggregate principal amount of our 2026 Notes. 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 Term Loan on the Company’s consolidated balance sheet instead of being recognized as a gain on early extinguishment of debt as this was accounted for as a troubled debt restructuring.

Exchange of 2026 Notes for 2029 Notes and Equitization Transaction

On May 14, 2025, we completed the exchange (the “Convertible Note Exchange”) of $70.8 million of our 2026 Notes on a one-for-one basis for newly-issued 2029 Notes. The Convertible Note Exchange was conducted with a limited number of holders of the 2026 Notes pursuant to exchange agreements dated as of May 12, 2025. The 2029 Notes are convertible at the option of the holders into shares of common stock, cash or a combination thereof, as elected by the Company, at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date. Holders who convert their 2029 Notes after November 13, 2025 and prior to June 1, 2029 (except for any conversion in connection with a make-whole fundamental change) are entitled to an interest make-whole payment equal to the sum of the remaining scheduled payments of interest  that would have been made had the 2029 Notes remained outstanding from their conversion date through the earlier of (i) the date that is 18 months following their conversion date, and (ii) June 15, 2029, the maturity date. The initial conversion rate for the 2029 Notes is equivalent to an initial conversion price of approximately $6.18 per share of our common stock. The conversion rate is subject to adjustment in certain circumstances.

The 2029 Notes include both a derivative for the interest make-whole feature and a derivative for the conversion feature available to holders allowing them to convert their notes to common stock, cash or a combination thereof.  At each reporting date, we remeasure the embedded derivative instruments to fair market value. Increases or decreases in our stock price may materially affect the fair value of the derivative. The remeasurement of the derivative is presented in our consolidated statement of operations and comprehensive loss. At contract inception, we recorded a net $23.0 million embedded derivative as a component of our 2029 Notes. However, with the sale of OMS906 to Novo Nordisk and the announcement of FDA approval of TA-TMA, our stock price significantly increased.  At December 31, 2025, the fair market value of our embedded derivative was $157.2 million.  We marked-to-market the initial $23.0 million embedded derivative on the 2029 Notes and recorded a $134.2 million non-cash loss on remeasurement to our consolidated statement of operations and comprehensive loss.  

On May 12, 2025, we entered into the note conversion agreements (each, a “Note Conversion Agreement”) with two holders of the 2026 Notes to convert $10.0 million aggregate principal amount of 2026 Notes into shares of our common stock in three tranches. We completed the conversion of the final tranche in September 2025, resulting in the issuance of an aggregate of 2,819,866 shares of our common stock to the two holders in exchange for the $10.0 million aggregate principal amount of 2026 Notes. We did not receive new cash proceeds in these transactions. We performed an assessment of the Convertible Note Exchange and Equitization Transaction and determined that these transactions were not a troubled debt restructuring and were a partial extinguishment of our 2026 Notes. 

These transactions resulted in a net $3.0 million non-cash loss on extinguishment of the 2026 Notes due to (1) expensing of the unamortized debt issuance costs of the extinguished 2026 Notes, (2) recording the 2029 Notes to fair market value (i.e., at a discount) which we recorded both to our statement of operations and comprehensive loss and as debt on our balance sheet and (3) recording the fair market value of the share-settled liability upon settlement. 

Repayment of Term Loan

On November 25, 2025, concurrent with the closing of the sale and licensing of zaltenibart (OMS906) to Novo Nordisk under the APLA, we were required under the terms of the Credit Agreement to repay in full the $67.1 million principal outstanding under the Term Loan along with a 5% prepayment premium.  We recognized a net non-cash gain on extinguishment in the amount of $17.0 million which represents the de-recognition of $17.9 million in unamortized premium and debt issuance costs, derecognition of $2.6 million of embedded derivatives, partially offset by $3.5 million of prepayment premium and related transaction expenses. 

Repayment of our obligations under the Credit Agreement resulted in the release in full of all liens and covenants thereunder including the covenant requiring us to maintain a minimum of $25.0 million in unrestricted cash, cash equivalents and short-term investments at all times.

Repayment at Maturity of Remaining 2026 Notes

On February 17, 2026, we repaid the remaining $17.1 million aggregate principal amount of outstanding 2026 Notes in full upon maturity. 

See Part II, Item 8, “Note 7 – Debt” and “Note 12 – Shareholders Equity (Deficit)” to our Consolidated Financial Statements in this Annual Report on Form 10-K for additional information on any of these refinancing transactions.

Equity Financing Transactions

At the Market Sales Agreement

We have a sales agreement to sell shares of our common stock from time to time, through an “at the market” (“ATM”) equity offering program. During the year ended December 31, 2025, we sold 4.4 million shares of common stock pursuant to our ATM program, generating $19.0 million in net proceeds at an average price per share of $4.51. On November 14, 2025, the Company filed a shelf registration statement and prospectus supplement renewing the ATM program for an aggregate offering price up to $150.0 million, and as of the date of this annual report, we have $150.0 million in shares of our common stock available to sell under our ATM program.

Registered Direct Offering

On July 28, 2025, we issued and sold 5,365,853 shares of our common stock in a registered direct offering to entities managed by Polar Asset Management Partners at a price of $4.10 per share, representing a 14% premium to the closing price of our common stock on the date of the definitive agreement for the purchase of shares. We received $20.3 million in cash proceeds net of offering expenses.

Share Repurchase Programs

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 prohibited 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 the execution of the Credit Agreement in May 2024. Repayment of our obligations under the Credit Agreement resulted in the release in full of all liens and covenants thereunder including the covenant prohibiting the Company from repurchasing its shares.

On November 29, 2025, the Board of Directors approved a new share repurchase program under which we are permitted to repurchase from time to time up to $100.0 million of our common stock in the open market or through privately negotiated transactions.

See Part II, Item 8, “Note 12 – Shareholders Equity (Deficit)” to our Consolidated Financial Statements in this Annual Report on Form 10-K for additional information on any of these refinancing transactions.

Financial Summary

As of December 31, 2025, we had cash, cash equivalents and short-term investments of $171.8 million. We had $87.9 million in aggregate principal amount of debt at December 31, 2025, reflecting a decrease of $77.1 million or 46.7% compared to our $164.9 million in aggregate principal amount of debt at December 31, 2024.

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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 EU.

The following table illustrates our expenses associated with these activities:

[[GREPCENT_TABLE]]
[["","","Year Ended"],["","","Year Ended December 31,"],["","","2025","","","2024","","","2023"],["","","(In thousands)"],["Research and development expenses:"],["Direct external expenses:"],["Clinical research and development:"],["MASP-3 program - OMS906 (zaltenibart)","","$","16,109","","","$","24,997","","","$","22,853"],["MASP-2 program - OMS721 (narsoplimab)","","","14,126","","","","35,913","","","","35,352"],["MASP-2 program - OMS1029 and other","","","579","","","","4,059","","","","6,249"],["PDE7 program - (NIDA)","","","744","","","","115","","","","153"],["Total clinical research and development","","","31,558","","","","65,084","","","","64,607"],["Preclinical research and development","","","4,071","","","","6,465","","","","5,172"],["Total direct external expenses","","","35,629","","","","71,549","","","","69,779"],["Internal, overhead and other expenses","","","42,137","","","","43,841","","","","40,337"],["Stock-based compensation expenses","","","3,530","","","","4,133","","","","4,754"],["Total research and development expenses","","$","81,296","","","$","119,523","","","$","114,870"]]
[[/GREPCENT_TABLE]]

Clinical research and development expenses decreased $33.5 million between 2025 and 2024.  This change was primarily due to releasing $17.5 million in narsoplimab and $4.4 million of zaltenibart drug substance batches in the prior year.  We experienced further reduction in spend of $5.5 million during the year related to the further close out of our IgA nephropathy program.  In addition, we have also been in the process of closing out and winding down various studies as they relate to Phase 1 of OMS1029 and early Phase 2 studies of OMS906. 

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, mentioned above, 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.

Preclinical research and development expenses decreased $2.4 million in 2025 compared to 2024 primarily due to the completion of certain animal studies under our NIDA grant. In 2025, we also engaged in general cost cutting measures to conserve cash in anticipation of BLA approval of YARTEMLEA.

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 related to our NIDA grant during 2024. 

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Internal overhead and other expenses decreased $1.7 million for the year ended December 31, 2025 primarily due to reduced employee compensation costs and reduced overhead.  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 2026 to be lower than in 2025. This anticipated decrease is primarily attributable to reduced clinical trial costs for zaltenibart as these program costs will be incurred by Novo Nordisk in connection with the APLA and the Transition Services Agreement, the absence of development milestone payments under our existing licensing agreement related to zaltenibart, and reduced spend on overall drug manufacturing. 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.

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2025","","","2024","","","2023"],["","","(In thousands)"],["Selling, general and administrative expenses:"],["Selling, general and administrative expenses, excluding stock-based compensation expense (1)","","$","36,838","","","$","41,070","","","$","42,520"],["Stock-based compensation expense","","","4,662","","","","6,360","","","","7,140"],["Total selling, general and administrative expenses","","$","41,500","","","$","47,430","","","$","49,660"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["(1)","Prior year general and administrative expenses included $2.3 million of income tax expense which we now separately disclose as income tax expense for comparability purposes below."]]
[[/GREPCENT_TABLE]]

Selling, general and administrative expense, excluding stock-based compensation expense, decreased $4.2 million between 2025 and 2024 primarily due to reduced spend on third-party consultants and legal fees.  In addition, we enacted cost containment measures in 2025 to conserve cash in anticipation of the launch of YARTEMLEA.  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. 

We expect selling, general and administrative expenses in 2026 to increase compared to 2025, primarily reflecting costs associated with building our commercial infrastructure, including the hiring of a field sales force, marketing expenditures, and other commercial launch activities for YARTEMLEA.

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Gain on Sale of zaltenibart

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2025","","","2024","","","2023"],["","","(In thousands)"],["Gain on sale of zaltenibart","","$","237,594","","","$","\u2014","","","$","\u2014"]]
[[/GREPCENT_TABLE]]

On November 25, 2025, we closed the Transaction under the APLA with Novo Nordisk, pursuant to which Novo Nordisk received exclusive global rights in all indications to develop and commercialize zaltenibart and certain related compounds and products. Upon closing, we received net proceeds of $237.6 million comprising $240.0 million in upfront cash less $2.4 million in transaction fees. 

Gain on Early Extinguishment of Term Debt, Net

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2025","","","2024","","","2023"],["","","(In thousands)"],["Gain on early extinguishment of term debt, net","","$","17,035","","","$","\u2014","","","$","\u2014"]]
[[/GREPCENT_TABLE]]

In November 2025, concurrent with the closing of the sale of zaltenibart to Novo Nordisk, the Company repaid in full the $67.1 million principal outstanding under the Term Loan. As a result, we recognized a net non-cash gain on extinguishment in the amount of $17.0 million which represents the de-recognition of $17.9 million in unamortized premium and debt issuance costs, derecognition of $2.6 million of embedded derivatives, offset by $3.5 million of prepayment premium and related transaction expenses.

Gain (Loss) on Early Extinguishment of 2026 Notes

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2025","","","2024","","","2023"],["","","(In thousands)"],["Gain (loss) on early extinguishment of 2026 Notes","","$","(2,968",")","","$","\u2014","","","$","4,112"]]
[[/GREPCENT_TABLE]]

In May 2025, we completed the Convertible Note Exchange and entered into the Equitization Transaction whereby we exchanged $70.8 million of aggregate principal amount of our 2026 Notes for the same aggregate principal amount of our new 2029 Notes and $10.0 million of aggregate principal amount of 2026 Notes for shares of our common stock. Our obligation to deliver these shares in three tranches was initially accounted for as a share-settled liability measured at fair value. We completed the conversion of the final tranche in September 2025, resulting in the issuance of an aggregate of 2,819,866 shares of our common stock to the two holders in exchange for the $10.0 million of aggregate principal amount of 2026 Notes.  These transactions resulted in a net $3.0 million non-cash loss on extinguishment of our 2026 Notes due to (i) expensing of the unamortized debt issuance costs of the extinguished 2026 Notes, (ii) recording the 2029 Notes to fair market value (i.e., at a discount) which we recorded both to our consolidated statement of operations and comprehensive loss and as debt on our consolidated balance sheet and (iii) recording the fair market value of the share-settled liability upon settlement.

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.

Interest and Other Income

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2025","","","2024","","","2023"],["","","(In thousands)"],["Interest and other income","","$","4,096","","","$","11,285","","","$","16,342"]]
[[/GREPCENT_TABLE]]

Interest and other income principally includes interest earned on our investments, and to a lesser extent, sublease income and grant income from NIDA.  The decreases over both years are primarily due to holding lower average cash and investment balances than in the preceding year. 

We expect interest and other income in 2026 to be higher than 2025 primarily due to higher average cash and investment balances during 2026.

Interest Expense

Interest expense is comprised of contractual cash and accrued interest on our 2029 Notes, 2026 Notes, 2023 Notes and 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:

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2025","","","2024","","","2023"],["","","(In thousands)"],["OMIDRIA royalty obligation"],["Pass through interest remitted to administrative agent","","$","19,166","","","$","20,634","","","$","11,848"],["Non-cash remeasurement adjustment","","","(33,435",")","","","(5,614",")","","","\u2014"],["Interest expense, net of remeasurement on OMIDRIA royalty obligation","","","(14,269",")","","","15,020","","","","11,848"],["2026 Notes"],["Contractual interest expense","","","2,547","","","","7,772","","","","11,774"],["Amortization of debt discount and issuance costs","","","287","","","","859","","","","1,234"],["Interest expense on 2026 Notes","","","2,834","","","","8,631","","","","13,008"],["Term Loan"],["Contractual interest expense","","","8,021","","","","5,525","","","","\u2014"],["Amortization of debt premium and issuance costs","","","(5,578",")","","","(4,681",")","","","\u2014"],["Interest expense on Term Loan","","","2,443","","","","844","","","","\u2014"],["2029 Notes"],["Contractual interest expense","","","4,220","","","","\u2014","","","","\u2014"],["Amortization of debt discount and issuance costs","","","3,658","","","","\u2014","","","","\u2014"],["Interest expense on 2029 Notes","","","7,878","","","","\u2014","","","","\u2014"],["2023 Notes"],["Contractual interest expense","","","\u2014","","","","\u2014","","","","5,195"],["Amortization of debt discount and issuance costs","","","\u2014","","","","\u2014","","","","619"],["Interest expense on 2023 Notes","","","\u2014","","","","\u2014","","","","5,814"],["Finance leases and other","","","154","","","","180","","","","174"],["Total interest expense, net of remeasurement adjustments and other","","$","(960",")","","$","24,675","","","$","30,844"]]
[[/GREPCENT_TABLE]]

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. 

Contractual interest expense is comprised of cash interest paid during the year and the net change in accrued interest. Amortization of debt discounts, premiums and issuance costs are reflected as non-cash interest expense. Debt discounts on the 2026 Notes and 2029 Notes are accretive whereas the premium on the Term Loan is deducted from contractual interest expense. 

Interest expense decreased $25.6 million in 2025 compared to 2024.  The decrease primarily relates to a $27.8 million change in non-cash remeasurement costs on the OMIDRIA royalty obligation to reflect a change in forecasted OMIDRIA cash flows from Rayner.  Excluding any non-cash remeasurement adjustments of the DRI royalty obligation and any non-cash amortization of debt discount, premium, or issuance costs, contractual interest expense remains relatively unchanged from the prior year.

Interest expense decreased $6.2 million in 2024 compared to 2023 primarily due to the extinguishment of $95.0 million in aggregate principal amount of our 2023 Notes at maturity in November 2023 and partially repurchasing $127.2 million in aggregate principal amount of our 2026 Notes in December 2023 and June 2024 for a collective reduction in interest expense of $10.2 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 Term Loan. 

For further information see Part II, Item 8, “Note 7 – Debt” and “Note 9 – OMIDRIA Royalty Obligation” to our Consolidated Financial Statements in this Annual Report on Form 10-K.

40

Table of Contents

Gain (Loss) on Change in Fair Value of Financial Instruments, Net

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2025","","","2024","","","2023"],["","","(In thousands)"],["Gain (loss) on change in fair value of financial instruments, net","","$","(136,717",")","","$","19","","","$","\u2014"]]
[[/GREPCENT_TABLE]]

Our embedded derivative comprises an interest make-whole and conversion option related to our 2029 Notes.  As of December 31, 2025, the $136.7 million net loss on the embedded derivatives reflects marking to market the option of the 2029 Note holders to convert their notes into shares of common stock, cash or a combination thereof. 

Swings in our stock price could significantly affect the valuation of the 2029 Note conversion derivative. In addition, a decrease in interest rates could increase the valuation of the derivative.

Income Tax Expense

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2025","","","2024","","","2023"],["","","(In thousands)"],["Income tax expense","","$","(2,012",")","","$","(2,305",")","","$","\u2014"]]
[[/GREPCENT_TABLE]]

Income tax expense represents taxes payable to various state jurisdictions.

For further information see Part II, Item 8, “Note 14 – Income Taxes” to our Consolidated Financial Statements in this Annual Report on Form 10-K.

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: 

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2025","","","2024","","","2023"],["","","(In thousands)"],["Interest on OMIDRIA contract royalty asset","","$","14,717","","","$","16,922","","","$","15,315"],["Remeasurement adjustments","","","(12,657",")","","","7,969","","","","41,167"],["Other income (expense), net","","","(58",")","","","1,211","","","","1,087"],["Ex-US royalties","","","12","","","","\u2014","","","","\u2014"],["Income before income tax","","","2,014","","","","26,102","","","","57,569"],["Income tax expense (1)","","","(556",")","","","(288",")","","","(462",")"],["Net income from discontinued operations, net of tax","","$","1,458","","","$","25,814","","","$","57,107"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]