Here's Why Omeros Corporation Is Bouncing Back Today

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What happened

Shares of Omeros Corporation (NASDAQ: OMER), a commercial-stage biotech, are bouncing back after a getting beaten down earlier this month. It looks like the company's cataract surgery drug will regain the pass-through status most assumed it had lost for good. The stock is up 41% as of 11:30 a.m. EDT on Thursday.

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So what

Omeros Corporation's only marketed product, Omidria, lost pass-through reimbursement status from the Centers for Medicare and Medicaid Services (CMS) on Jan. 1. That means eye surgeons performing cataract surgery for Medicare patients can't charge the government program $492.90 on top of the allowed reimbursement rate of $991.11 per cataract surgery.

In the fourth quarter, Omidria sales fell 36.5% from the previous quarter, in part because the company couldn't record revenue from vials in wholesaler inventories. Those inventories will probably collect dust for a few more months, but the Omidria train should start climbing again soon. The $1.3 trillion spending package Congress is expected to pass to keep the entire government funded includes a passage that should allow Omidria's meteoric ascent to continue.

Now what

The bill doesn't mention Omeros or Omidria by name. But it extends pass-through status on drugs that are packaged into covered outpatient services and lost their pass-through status on Dec. 31, 2017. Omidria, and any other drugs that meet the criteria, will be reimbursed at previous prices for a two-year period beginning on Oct. 1, 2018.

If the passage remains in the spending bill, and the bill passes, Omidria sales will probably start ratcheting up again toward the end of the year. Omidria sales rose 56.4% in 2017 to $64.8 million, and I wouldn't be surprised if they achieve a $100 million annual run rate once the ball starts rolling again.

Expect Omeros to funnel Omidria revenue into the development of OMS721, a novel new drug candidate in pivotal trials right now. Although it would be best to wait for more data before buying Omeros, successful results could send the stock rocketing much higher.

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Cory Renauer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.