Oramed Pharmaceuticals Inc. — Form 10-Q summary
Business context and period. Oramed is a development-stage pharmaceutical company focused on oral delivery of insulin and other polypeptides. This fiscal first-quarter report covers the three months ended November 30, 2020; balance-sheet comparisons are with August 31, 2020. Amounts below are U.S. dollars in thousands unless noted otherwise.
Financial performance and position
| Metric | Quarter ended Nov. 30, 2020 | Prior-year quarter |
|---|---|---|
| Revenue | $674 | $674 |
| Research and development expense | $5,774 | $2,022 |
| General and administrative expense | $727 | $1,081 |
| Operating loss | $5,827 | $2,429 |
| Net financial income (expense) | $257 | $(114) |
| Net loss | $5,570 | $2,543 |
| Basic and diluted loss per share | $0.23 | $0.15 |
| Cash used in operating activities | $6,152 | $2,996 |
Cost of revenues was zero in both periods; consequently, reported revenue did not cover the company’s operating expenses. R&D rose 186%, primarily due to initiation of the Phase III oral-insulin program. G&A fell 33%, mainly because of lower legal expense. The shift to net financial income reflected, primarily, an increase in the fair value of D.N.A. shares.
At November 30, cash and cash equivalents were $14,931; short-term deposits, $10,592; and marketable securities, $12,703. Current assets were $36,024 and current liabilities $5,742, yielding working capital of $30,282, down from $35,975 at August 31. Total assets were $40,971 and stockholders’ equity was $28,212. The filing reports no financial borrowings; operating lease liabilities totaled $640, split between $138 current and $502 long-term.
Cash and cash equivalents declined $4,365 during the quarter. Investing activities provided $1,199 and financing activities provided $586. The company reported an accumulated deficit of $98,184. Management said existing resources and commitments were expected to support planned activity for at least 12 months, while noting additional funding might be needed if expenses increase.
Material developments, outlook, and risks
- Clinical program: The first Phase III ORMD-0801 trial began in the fourth quarter of 2020. A second Phase III trial was expected to start in the first half of 2021. Management expected topline results in 2022 and anticipated filing a BLA in 2023; these are forward-looking targets, not assured outcomes.
- Other candidates: After quarter-end, in December 2020, the company began a 40-patient follow-on ORMD-0801 NASH trial. It expected to begin a follow-on ORMD-0901 GLP-1 trial in the first half of 2021.
- HTIT dispute: HTIT disputes pending payment obligations under the China-territory license. Oramed said it disputes HTIT’s claims and was in discussions. The filing describes the disputed obligation as $6,000 in the notes and estimates it at $2,000–$6,000 in MD&A. Deferred revenue was $8,976, including $2,000 associated with the disputed payment.
- Funding and dilution: On December 1, 2020, the company established a new equity distribution agreement for up to $40,000 in stock sales. By January 14, 2021, it had received net proceeds of $2,557 under that agreement. The company expects R&D to remain its main operating expense and may seek further financing.
- Commitments and risks: CRO agreements for the Phase III program provide for payments of $21,589 and $12,343, based on milestones; $2,381 and $1,294, respectively, had been recognized as R&D expense by November 30. Key risks include clinical and regulatory uncertainty, continuing losses and funding needs, and the unresolved HTIT dispute. The filing also identifies potential COVID-19 effects but gives no quantified impact for the quarter.
Important facts for investors to verify
- Confirm Phase III enrollment, trial progress, data timing, and the basis for management’s 2022 topline and 2023 BLA targets.
- Track the HTIT dispute, including the amount and timing of any payment and any effect on deferred revenue or future royalties.
- Assess cash burn against the stated 12-month funding horizon, CRO commitments, and further equity issuance and dilution.
- Reconcile weighted-average share counts: the financial statements report 23,745,980 for the 2020 quarter, while the MD&A table reports 23,754,980.