Oramed Pharmaceuticals Inc. — Form 10-Q Summary
Reporting period: Quarter and six months ended February 28, 2013. Oramed was a development-stage biotechnology company with no operating revenue, focused on oral insulin and other oral peptide-delivery products. Financial statements are unaudited.
Financial results and liquidity
| Metric | Six months ended Feb. 28, 2013 | Prior comparable six months |
|---|---|---|
| Revenue | None | None reported |
| Research and development expense, net | $1.142 million | $0.895 million |
| General and administrative expense | $0.850 million | $0.512 million |
| Net loss | $2.185 million | $1.464 million |
| Cash used in operating activities | $2.066 million | $1.076 million |
| Cash from financing activities | $1.451 million | None |
- For the three months ended February 28, 2013, net loss was $1.226 million, versus $0.985 million in the prior-year quarter. R&D expense was $0.749 million versus $0.711 million; G&A expense was $0.511 million versus $0.230 million.
- At February 28, 2013, cash and cash equivalents were $2.040 million, short-term deposits $2.317 million, and marketable securities $0.987 million. Together these totaled approximately $5.344 million, though securities may be subject to sale and market-price limitations.
- Current assets were $5.939 million and current liabilities $0.469 million. Total assets were $5.957 million. The balance sheet reported no borrowings or other debt; it included a $0.228 million uncertain-tax-position provision and $0.047 million payable to a former shareholder.
- Cash and cash equivalents declined by $2.391 million from August 31, 2012. Accumulated development-stage deficit was $20.076 million. The company had 7,222,636 shares outstanding at February 28, 2013.
Changes and unusual items
- Six-month net loss increased by $0.721 million year over year. Higher R&D spending reflected preparation for the planned Phase 2 insulin study and increased share-based compensation. G&A rose mainly due to share-based compensation, legal fees, and consulting expense.
- Six-month net financial expense was $0.193 million, including a $0.297 million charge associated mainly with removing anti-dilution protections from certain warrant liabilities and issuing a replacement warrant. Those warrants were no longer classified as liabilities after the changes.
- Other comprehensive income included changes in the fair value of D.N.A Biomedical Solutions securities. The company reported $0.987 million of marketable securities, including restricted shares measured using Level 3 inputs.
- In January 2013, Oramed effected a one-for-twelve reverse stock split. The common stock began trading on Nasdaq in February 2013 under ticker ORMP.
Outlook, developments, and risks
- Management estimated approximately $3.855 million in expenditures for the 12 months beginning March 1, 2013: $2.360 million for R&D net of OCS funding, $1.507 million for G&A, partly offset by $0.012 million of expected net financial income. The company anticipated needing approximately $3.9 million to fund the following 12 months and said it believed existing resources and financing efforts would support planned activity for at least 12 months, while warning that additional funding might be needed.
- Oramed had filed an FDA IND for a Phase 2 oral-insulin trial. On March 17, 2013, following an FDA request for a sub-study before the main trial, the company instructed CRO Medpace to temporarily stop work. Medpace’s contract was approximately $3.5 million; $0.541 million had been paid by February 28, and approximately $0.392 million was recorded as receivable for funds expected back after actual trial expenses.
- In April 2013, Oramed filed a new IND for the requested sub-study. It also reported beginning an oral exenatide clinical trial in January and a human trial of oral insulin combined with oral exenatide in February. Exenatide trial results were expected in the second calendar quarter of 2013.
- Management said planned development depends on adequate financing and additional grants. The company warned that regulatory approval is uncertain, development spending is expected to rise, and there is no assurance that it can obtain financing or approvals. It reported cumulative losses of $20.076 million and no revenue since inception.
- Oramed held approximately 12.8% of D.N.A at February 28, 2013; after additional sales, it reported approximately 11.1% ownership as of April 10, 2013. D.N.A securities are exposed to price and liquidity risk. Government grants carry potential future royalties on qualifying sales.
Important facts for investors to verify
- Whether the FDA has accepted the sub-study and when the paused Phase 2 insulin trial can proceed.
- Whether the exenatide and insulin/exenatide clinical trials produced results consistent with management’s expectations.
- Progress and terms of financing efforts, grant receipts, and the company’s ability to fund the stated development plan.
- Actual Medpace expenses, the amount ultimately returned, and any effect of the trial delay on the CRO contract and budget.
- Current value, sale restrictions, and liquidity of the D.N.A securities, as well as the impact of further sales on reported cash resources.