Omeros Corporation (OMER) announced positive results from a phase IIa study on OMS824, being evaluated for the treatment of schizophrenia. OMS824 is Omeros’ lead candidate in its phosphodiesterase 10 (PDE10) program.

The randomized, double-blind, placebo-controlled study evaluated OMS824 at two dose levels for two weeks. The study demonstrated comparable systemic pharmacokinetics when evaluated alone and concurrently with approved antipsychotic agents in schizophrenic patients. The data revealed that OMS824 was well tolerated, with mild or moderate adverse events that were self-limiting and were resolved during the treatment period. In the high-dose arm, plasma concentration levels were similar to those experienced in a phase I positron emission tomography (:PET) trial.

The positive data suggests that dose adjustment will not be necessary when OMS824 is administered in combination with standard antipsychotic medications.

We note that Omeros will begin enrolment in a phase II study on OMS824 for the treatment of Huntington's disease in the current quarter. OMS824 enjoys Orphan Drug status in the U.S. for this indication. A Fast Track application is also under review in the U.S. for OMS824 for the treatment of Huntington's disease and schizophrenia.

We find the positive data from the schizophrenia study to be encouraging. PDE10 has the potential to treat the positive and negative symptoms of schizophrenia along with cognitive impairment.

On the back of encouraging data, Omeros is likely to evaluate additional higher dose levels of OMS824 in schizophrenic patients. OMS824 will now be developed as monotherapy or in conjunction with other antipsychotics for schizophrenia and a wide range of other psychiatric and neurologic disorders in phase II and phase III of its schizophrenia program.

On the whole, we are encouraged by the pipeline progress at Omeros. We note that Omidria (OMS302) is another interesting candidate in Omeros’ pipeline. The company is looking to get Omidria approved in the U.S. and EU for the treatment of patients undergoing intraocular lens replacement surgery. Omeros expects to market Omidria in the second half 2014. Omidria is Omeros’ proprietary pharmacosurgery product and its most advanced candidate.

Omeros currently carries a Zacks Rank #3 (Hold). Some better-ranked players in the pharma industry include Actelion Ltd. (ALIOF), Endocyte Inc. (ECYT) and Forest Laboratories Inc. (FRX). All the three stocks carry a Zacks Rank #1 (Strong Buy).

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