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Omeros Corporation (OMER - Snapshot Report) recently reported mixed results from its first pivotal phase III study that was being conducted with OMS103HP in patients undergoing arthroscopic partial meniscectomy surgery.

The candidate failed to meet its primary endpoint (Symptoms Subscale of the Knee Injury and Osteoarthritis Outcome Score [KOOS]) in the study. However, Omeros said that OMS103HP achieved statistical significance in the secondary endpoint - pain measured in the early postoperative period. 
An improvement was observed in other pain-related assessments like postoperative narcotic usage, the occurrence of inflammatory adverse events, use of tourniquets and crutches and time to discontinuation of crutches and return to work.
Despite not meeting the primary endpoint, Omeros intends to go ahead with the second phase III trial which is scheduled to commence in the first half of 2013. 
Arthroscopy is a large market – according to the company, more than 8 million arthroscopic procedures were carried out across the world in 2012 with the US accounting for more than half these procedures. The successful development of OMS103HP would open up significant commercial opportunity for the company.
Meanwhile, we note that Omeros has another late-stage candidate in its pipeline. The company is looking to submit a new drug application for its ophthalmic surgery candidate OMS302 early this year. The candidate could be launched as early as 2014.
Another promising candidate is OMS824, the lead compound in Omeros' phosphodiesterase 10 (PDE10) program. In early December 2012, Omeros reported promising data from the single-ascending-dose (SAD) study portion of a phase I study evaluating OMS824.  
The positive data has led Omeros to advance OMS824 into the next stage of the phase I clinical trial - the evaluation of multiple-dose administration of the compound. Omeros expects to report additional data from its phase I program for candidate OMS824 in the first quarter of 2013.  
We currently have a Neutral recommendation on Omeros, which carries a Zacks #3 Rank (Hold). Right now, Tranzyme, Inc looks attractive with a Zacks #1 Rank (Strong Buy). 

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