Oramed Pharmaceuticals Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended August 31, 2021; this is an annual report, not a standalone fourth-quarter filing. Unless stated otherwise, financial amounts are in U.S. dollars.
Business context
Oramed is a clinical-stage pharmaceutical company developing oral delivery technologies, led by ORMD-0801, an oral insulin candidate for type 2 diabetes. It has no marketed products and relies primarily on licensing revenue and equity financing. Other programs include oral GLP-1, oral leptin, NASH studies, and an oral vaccine developed through its 63%-owned Oravax joint venture.
Financial performance and liquidity
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | $2.703 million | $2.710 million |
| Research and development expense | $20.989 million | $10.235 million |
| General and administrative expense | $5.937 million | $4.232 million |
| Operating loss | $24.223 million | $11.757 million |
| Net loss | $22.989 million | $11.511 million |
| Basic and diluted loss per share | $0.78 | $0.56 |
| Cash used in operating activities | $21.181 million | $12.440 million |
Revenue consisted of amounts recognized over time under the HTIT license agreement; there was no product revenue and no cost of revenues. Gross margin is therefore not a meaningful indicator of product economics. The net loss attributable to Oramed shareholders was $22.238 million; $0.751 million was attributable to non-controlling interests.
At August 31, 2021, cash and cash equivalents were $77.245 million, short-term deposits $11.044 million, long-term deposits $25.016 million, and marketable securities $12.543 million. Working capital was $88.658 million, versus $35.975 million a year earlier. Total assets were $127.999 million and total liabilities were approximately $11.482 million. The balance sheet lists no borrowings; liabilities include deferred revenue and operating leases.
Financing activities provided $102.892 million in FY2021, principally from stock issuance and warrant and option exercises. Shares issued and outstanding were 35.294 million at year-end and 38.086 million as of November 24, 2021. Management said existing resources and commitments were expected to support planned activity for at least 12 months, while warning that additional funding could be needed.
Material changes versus FY2020
- Revenue was essentially flat, declining by $7,000.
- R&D expense rose 105%, primarily from Phase III trial activity and Oravax in-process research and development; G&A expense rose 40%.
- Net loss nearly doubled, and operating cash use increased by $8.741 million.
- Cash and working capital increased substantially, mainly due to equity financing. Common shares outstanding also increased materially.
- Oramed acquired a 63% interest in Oravax and consolidated it; the transaction included $1.040 million of in-process R&D expense.
Outlook, commentary, and risks
- ORMD-0801: Two pivotal Phase III trials were underway. As reported after year-end, 75% of the 675-patient U.S. study had been enrolled and randomized by November 2021; more than 25% of the 450-patient international study had been enrolled and randomized by August 2021. Topline results were expected in 2022, with a BLA filing anticipated in 2023. These are forward-looking expectations, not assured outcomes.
- Other pipeline: The company reported NASH and GLP-1 clinical activity. Oravax received South African authorization to initiate a Phase I oral COVID-19 vaccine trial in October 2021; this was after the fiscal year-end.
- Spending commitments: Management expected R&D to remain the largest operating expense and disclosed approximately $31 million of clinical research obligations over the following three years.
- HTIT dispute: HTIT disputed $6 million of payment obligations. Oramed contests the claims; it disclosed potential repayment of up to $2 million already received and deferred, and the possibility of not receiving a further $4 million.
- Funding and dilution: The company has a history of losses and expects continued losses and substantial financing needs. Subsequent to year-end, a November 2021 registered direct offering generated approximately $46.375 million net; a separate Cantor equity distribution agreement generated $12.298 million net through November 24, 2021. These proceeds are subsequent events, not included in August 31 cash.
- Execution risks: Clinical efficacy and safety, enrollment and trial timing, regulatory approval, manufacturing and supplier dependence, competition, intellectual-property protection, currency exposure, and the ability to secure commercial partners are significant uncertainties. COVID-19 could disrupt trials or supply chains. The company reported no material legal proceedings.
- Reporting and controls: The auditor issued an unqualified opinion and reported no critical audit matters. Management concluded disclosure controls and internal control over financial reporting were effective; the auditor did not express an opinion on internal controls.
Key facts for investors to verify
- Phase III enrollment, completion, safety monitoring, topline results, and any changes to the expected BLA timeline.
- Current cash, investment liquidity, operating burn, committed clinical spending, and the effect of subsequent equity issuance on dilution and runway.
- Resolution and accounting consequences of the HTIT dispute, including the deferred-revenue exposure and unpaid milestones.
- Oravax’s funding needs, clinical progress, governance and ownership terms, and the extent of any future Oramed investment or shareholder distribution.
- Whether licensing revenue, trial milestones, or commercial partnerships can develop into durable revenues; FY2021 revenue was licensing-related, not product sales.