Oramed Pharmaceuticals Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Financial statement amounts below are in U.S. dollars in thousands unless noted otherwise. Oramed is a development-stage pharmaceutical company focused on oral delivery of insulin and other therapeutic proteins; it reported no significant operating revenue.
Financial performance
| Metric | Q1 2024 | Q1 2023 |
|---|---|---|
| Revenue | $0 | $666 |
| Research and development expense | $1,179 | $4,427 |
| Sales and marketing expense | $0 | $184 |
| General and administrative expense | $1,783 | $1,263 |
| Operating loss | $2,962 | $5,208 |
| Interest expense | $592 | $0 |
| Net financial income | $5,088 | $1,597 |
| Net income (loss) | $1,534 | $(3,611) |
| Basic and diluted earnings (loss) per share | $0.04 | $(0.08) |
Profitability in Q1 2024 was driven by financial income, including a $3,552 gain from remeasurement of the Scilex transaction and interest from bank deposits—not operating revenue. With no revenue in the quarter, operating margins are not meaningful.
Financial position and cash flow
- At March 31, 2024, cash and cash equivalents were $18,576; short-term deposits were $80,285; and current investments at fair value were $77,733. Total current assets were $177,095, against current liabilities of $33,556, yielding working capital of $143,539.
- Total assets were $203,652 and total equity was $165,721. Short-term borrowings were $32,034 at quarter-end, down from $51,013 at December 31, 2023; the loans bear interest of 6.66%–7.38% and are secured by bank deposits. The filing reports $30,550 of remaining annual principal payments through maturity.
- Operating activities used $1,476 of cash, versus $5,549 in Q1 2023. Investing activities provided $29,998, while financing activities used $19,000, primarily for repayment of short-term borrowings. Cash and cash equivalents ended the quarter at $18,576, up from $9,055 at year-end.
- The Scilex Note’s reported fair value was $77,733 at March 31, 2024; it is an investment asset, not cash. The Note and certain warrants are valued using Level 2 or Level 3 inputs, including significant assumptions about Scilex credit risk and repayment scenarios.
Material changes and business developments
- Revenue fell to zero after recognition of HTIT license revenue ended with the expected product submission date in June 2023. R&D expense fell 73%, mainly because the company terminated its two Phase 3 oral-insulin trials; G&A expense rose 41%, primarily due to higher stock-based compensation.
- The ORA-D-013-1 Phase 3 trial did not meet its primary or secondary endpoints, and ORA-D-013-1 and ORA-D-013-2 were terminated. Oramed says analysis identified certain patient subgroups with a statistically significant, greater-than-1% placebo-adjusted HbA1c reduction; it is developing a protocol for a new Phase 3 trial to submit to the FDA. No trial start date or FDA decision is provided.
- A January 2024 joint venture agreement with HTIT proposes equal initial ownership. HTIT would contribute $70 million and Oramed $20 million, including cash, Oramed shares, and technology and other assets; Oramed would receive a 3% royalty on JV gross revenue from Oramed-related assets. The agreement remains conditional on additional agreements and closing conditions. Oramed applied a 30-day extension through May 22, 2024 for the ancillary agreements.
- Under the Scilex transaction, Oramed holds a secured Note originally issued with $101,875 principal, plus warrants. Scilex made $20 million in principal payments before March 21, 2024; Oramed also reported receiving approximately $9.6 million on May 2, 2024 under mandatory prepayment requirements. The Note matures March 21, 2025, subject to prepayments, and carries interest at Term SOFR plus 8.5% (with a 4% floor), paid in kind.
- Oramed entered into a $75 million at-the-market equity offering facility in March 2024. No shares had been issued under it through May 9, 2024.
Outlook, risks, and contingencies
- Management expects current cash resources and commitments to support planned activity and spending for at least 12 months, but cautions that additional financing may be needed sooner if expenses rise or to pursue strategic-review decisions. Oramed has incurred accumulated losses of $156,020 and has not generated significant operating revenue.
- Key uncertainties include the prospects and FDA pathway for a new oral-insulin trial; completion and closing of the HTIT joint venture; Scilex’s ability to repay the Note and the value and liquidity of its warrants; and potential financing needs and dilution under the ATM facility.
- Oramed is evaluating strategic opportunities and its existing pipeline. It also reported no immediate business-operational risk from the ongoing regional hostilities as of May 9, 2024, while noting Israel-related risks.
- The filing describes a Medicox license for ORMD-0801 in South Korea and says the parties are evaluating a path forward following the Phase 3 results. It also notes that Oramed’s Oravax oral-vaccine program is under evaluation.
Important facts for investors to verify
- Whether the proposed HTIT joint venture’s ancillary agreements were completed by the extended deadline and whether the transaction subsequently closed.
- Scilex’s payment history, remaining Note balance, collateral and credit position, and any subsequent changes in the fair value or liquidity of the related warrants.
- The FDA submission status and proposed design, timing, funding, and target population for a new oral-insulin Phase 3 trial.
- Cash, deposit maturities, remaining short-term borrowing repayments, and any ATM share sales or other financing after the reporting date.
- Whether strategic-review outcomes, the Medicox collaboration, or the Oravax program lead to material changes in spending, revenue prospects, or asset values.