Oramed Pharmaceuticals Inc. — Form 10-Q Summary
Reporting period: Three and six months ended June 30, 2022; unaudited. The company changed its fiscal year to the calendar year in 2022. Financial amounts below are in U.S. dollars; figures are shown in millions unless stated otherwise.
Business context
Oramed is a development-stage pharmaceutical company focused on oral delivery of insulin and other biologics. Its lead candidate, ORMD-0801, is in two Phase 3 trials for type 2 diabetes. The company also has a 63%-owned oral vaccine joint venture, Oravax. It has not generated significant operating revenue; reported revenue principally reflects recognition over time of consideration under its HTIT license agreement.
Financial results and liquidity
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $0.674 | $0.674 | $1.340 | $1.340 |
| Research and development | $9.179 | $3.198 | $15.015 | $9.366 |
| Sales and marketing | $0.380 | $0 | $0.970 | $0 |
| General and administrative | $2.532 | $1.926 | $8.024 | $3.028 |
| Operating loss | $11.417 | $4.450 | $22.669 | $11.054 |
| Net loss | $11.067 | $3.909 | $21.775 | $9.972 |
| Loss per share, basic and diluted | $0.27 | $0.12 | $0.54 | $0.32 |
There was no cost of revenue in the periods presented. Revenue was unchanged year over year, while operating and net losses increased substantially, principally as Phase 3 trial costs rose. Six-month financial income, net, declined to $0.894 million from $1.082 million, partly due to revaluation losses on equity investments. The filing does not provide a meaningful commercial gross margin.
At June 30, 2022, cash and cash equivalents were $29.892 million, short- and long-term deposits totaled $122.604 million, and marketable securities totaled $7.309 million. Current assets were $134.870 million, current liabilities $6.418 million, and working capital $128.452 million. Total assets were $162.291 million. The filing reports no conventional borrowings; liabilities include deferred revenue, lease obligations and other operating liabilities. Operating lease liabilities totaled $0.977 million.
For the six months, operating activities used $17.615 million of cash; investing activities provided $17.722 million, mainly reflecting deposit and securities movements; and financing activities provided $2.291 million, primarily from share issuance, net of tax withholdings. Cash and cash equivalents increased $2.436 million to $29.892 million. The company reported $153.037 million in total equity.
Material changes and notable items
- Six-month R&D expense increased 60% year over year; Q2 R&D expense increased 187%, mainly due to Phase 3 trials.
- Six-month G&A expense rose 165%, reflecting higher stock-based compensation, legal costs, and public and investor relations expenses. The first quarter included an $850,000 attorneys’ fee payment under a court-approved settlement.
- Sales and marketing expense began in 2022, primarily associated with commercial staffing and related compensation.
- Weighted-average shares rose to 38.7 million for the first half from 29.3 million a year earlier, mainly due to prior equity offerings. The company issued 277,000 shares under its controlled equity offering during the first half, with $2.968 million net proceeds reported from common-stock issuance.
- Stock-based compensation was $5.911 million for the first half, versus $1.616 million a year earlier.
Outlook, risks and contingencies
- Management expected to fund its planned activities and expenditure level for at least 12 months from existing resources, but warned that unexpected expense increases could require financing sooner. The company expects R&D to remain its major operating expense and may seek additional equity financing.
- ORA-D-013-1 completed enrollment in May 2022 with 710 patients; topline efficacy data was expected in January 2023. ORA-D-013-2 was approximately 50% enrolled as of July 2022. Management anticipated filing a BLA in 2024, subject to trial results and regulatory requirements.
- Oramed reported approximately six months of clinical-trial recruitment delays associated with COVID-19, while stating it did not then expect a material impact on development timelines or liquidity. Further delays remained possible.
- HTIT disputes $6 million of pending payment obligations; $2 million received is included in deferred revenue. Oramed disputes HTIT’s claims and was discussing resolution. The HTIT agreement’s expected product submission date for revenue recognition is June 2023.
- Oravax’s Phase 1 oral COVID-19 vaccine trial had completed Cohort A enrollment and dosing without reported safety issues at the filing date; Cohort A topline data was expected in Q3 2022 and Cohort B data in Q4 2022. Enrollment had been slower than anticipated. These were expectations, not reported outcomes.
- Management noted that product approval, adequate future revenue, and successful development are uncertain. The company depends on regulatory approvals, trial execution, and potentially licensing or additional financing. It also disclosed an Israel Innovation Authority royalty liability of $169,000.
Important facts for investors to verify
- Whether ORA-D-013-1 results and the expected 2023 topline timing were achieved, and the status and enrollment of ORA-D-013-2.
- Whether the company’s cash, deposits, and securities remain sufficient for its stated development plans, considering operating cash burn and potential financing needs.
- Any resolution or further developments in the HTIT payment dispute and the timing or collectability of contingent license payments.
- Actual Oravax trial progress and results, and whether the vaccine purchase agreement or other commercial arrangements advance.
- Subsequent share issuance, stock-based compensation, and dilution; the filing reported 38,827,081 common shares outstanding as of August 10, 2022.