Oramed Pharmaceuticals Inc. — Form 10-Q Summary
Reporting period: Fiscal quarter and nine months ended May 31, 2013. The filing was signed July 17, 2013. Oramed is a development-stage biotechnology company focused on oral delivery of insulin and other peptides; it had generated no operating revenue.
Financial performance and position
| Metric | Three months ended May 31, 2013 | Nine months ended May 31, 2013 | Comparable 2012 period |
|---|---|---|---|
| Revenue | $0; no revenue generated | $0 | |
| Research and development expense | $835,636 | $1,977,258 | $249,752 quarterly; $1,144,415 nine-month |
| General and administrative expense | $499,034 | $1,349,081 | $290,668 quarterly; $802,273 nine-month |
| Net loss | $1,256,341 | $3,440,968 | $550,365 quarterly; $2,014,259 nine-month |
| Operating cash used | Not provided for the quarter | $3,115,165 | $1,959,262 nine-month |
- Nine-month R&D expense rose about 73% and G&A expense about 68% year over year. Management attributed the R&D increase to clinical-trial preparation and higher stock-based compensation; G&A growth reflected stock compensation, legal fees and consulting costs.
- Net loss increased about 71% for the nine months and about 128% for the quarter. Nine-month basic and diluted loss per share was $0.49, compared with $0.34 in 2012; share data reflect a one-for-twelve reverse split.
- At May 31, cash and cash equivalents were $1.105 million, short-term deposits $2.324 million and marketable securities $803,372. Current assets totaled $4.824 million; current liabilities were $446,024. Total assets were $4.846 million and stockholders’ equity $4.159 million.
- Cash and cash equivalents fell $3.326 million from August 31, 2012. Investing activities used $1.644 million, principally for short-term deposits; financing provided $1.451 million from stock and warrant sales. The filing reports no conventional borrowings outstanding; the $228,272 uncertain-tax-position provision and other listed liabilities remain.
- Marketable securities are D.N.A Biomedical shares, including restricted shares, and their value and liquidity may fluctuate. The company reported $131,924 of other comprehensive income associated with available-for-sale securities for the nine months.
Business developments, outlook and risks
- The FDA requested a sub-study before the company could proceed with its planned Phase 2b oral-insulin trial. The company temporarily halted Medpace’s work under a roughly $3.5 million services agreement; $540,579 had been paid, and $219,867 was recorded as receivable for excess funds to be returned. The FDA cleared the Phase 2a sub-study IND in May; the 30-person inpatient study began in July 2013 and was expected to finish in the third quarter of 2013. Management expected Phase 2b to begin in the second quarter of 2014.
- An oral exenatide clinical trial began in January 2013, with results expected in the third quarter of 2013. A first human study of the oral insulin/exenatide combination began in February. South African and Japanese patents covering aspects of the oral peptide-delivery technology were issued in December 2012 and March 2013, respectively.
- Management estimated approximately $5.22 million in expenditures for the 12 months beginning June 1, 2013: $3.592 million for R&D, net of grants, and $1.628 million for G&A. It said existing resources and financing would support planned activity for at least 12 months, but noted potential need for additional funding and no assurance of success in raising it.
- After quarter-end, the company completed a registered direct offering of 658,144 shares at $7.00 per share, receiving approximately $4.2 million net. This added liquidity but diluted existing shareholders. As of July 17, 2013, 7,900,829 shares were outstanding.
- Key risks include clinical and regulatory uncertainty, the possibility of further trial delays or failure, ongoing operating losses, dependence on external financing and grants, and market/liquidity risk in the D.N.A investment. Government and Bio-Jerusalem grants may require royalties on future product sales; no such royalty liability had accrued because there were no sales. The filing identifies no material off-balance-sheet arrangements.
Most important facts for investors to verify
- Whether the FDA-requested sub-study completed on schedule and what its results mean for the Phase 2b timetable.
- Whether the $219,867 Medpace refund was received and what costs or obligations remain under the paused contract.
- Actual cash use and runway against the $5.22 million planned expenditure estimate, including the use of July offering proceeds and any further financing needs.
- The current fair value, trading restrictions and practical saleability of the D.N.A shares.
- Clinical results for oral exenatide and the combination study, and any subsequent regulatory or patent developments.