- FourWorld Capital shorts Omeros after Medicare policy changes
- Price target suggests more than 70 percent downside risk
Omeros Corp. is the latest short target for FourWorld Capital Management LLC, as the investment adviser issues a new report on the drugmaker with a price target of $4.00, suggesting a more than 70 percent decline from Tuesday’s closing price of $13.65. Omeros shares fell as much as 19 percent at 10:14 a.m. in New York trading.
FourWorld, founded by John Addis, who ran Bank of America Corp.’s Delta One Americas trading unit before leaving the firm in 2015, says Omeros offers “far less than meets the eye,” according to a report viewed by Bloomberg News. The firm expects an 80 percent decline in the drugmaker’s revenue after key legislation for its only marketed product, Omidria, failed to extend Medicare reimbursement for the drug, which is used to treat eye pain after surgery.
“Cracks from Medicare loss showing. Financial deterioration imminent?” the report said. FourWorld highlights Symphony Health data showing a 26 percent drop in institutional sales volume from the end of November to the end of December. That decline, along with an Omeros letter to customers in December offering to buy back inventory, points to “a pending revenue collapse.”
An outside spokeswoman for Omeros didn’t immediately respond to an email or phone call seeking comment.
Short sellers are nothing new to this biotech, which has promised legal action against other short sellers in the past. Short interest in Omeros has climbed in the past month, reaching 19 percent, taking about 11 days to cover the outstanding short position, according to financial analytics firm S3 Partners.
FourWorld’s public track record is limited, but its call on the fracking chemical provider Flotek Industries Inc. precipitated a 55 percent decline in the shares. FourWorld took a short position and issued a report on Flotek in December 2016 questioning the use of one of its key products, a fracking additive known as CnF.
Flotek’s downward trend persisted even after the Securities and Exchange Commission ended an inquiry into the chemical company and the efficacy of CnF in August. The firm’s short position was closed sometime last year, Addis says.
Addis says FourWorld manages about $110 million across funds and managed accounts. Omeros is the firm’s largest and highest conviction short.