Oramed Pharmaceuticals Inc. — Form 10-Q Summary
Reporting period: Fiscal first quarter ended November 30, 2011. The company is a development-stage pharmaceutical business focused on oral delivery of insulin and other polypeptides. It reported no revenue from planned operations.
Financial performance and position
- Revenue: None reported.
- Net loss: $478,519, or $0.01 per basic and diluted share, compared with $602,784, or $0.01 per share, in the prior-year quarter.
- Operating loss: $465,917, versus $601,617. Research and development expense, net of grants, was $184,016; general and administrative expense was $281,901.
- Cash flow: Operating activities used $466,689; investing activities provided $448,939, including $450,000 received from the sale of the Entera investment; financing activities provided no cash. Cash and cash equivalents declined $17,750 to $1,495,615.
- Liquidity: At November 30, 2011, current assets were $3,865,484, including $1,805,030 of short-term deposits and $380,359 of marketable securities. Current liabilities were $424,372.
- Debt and equity: No borrowings are reported on the balance sheet. Stockholders’ equity was $3,317,388; 70,104,583 shares were issued and outstanding at period-end.
- Margins: Not meaningful because the company reported no revenue.
Material changes versus the prior-year quarter
- Net loss decreased by $124,265. Research and development expense fell from $286,488 to $184,016, primarily because clinical-trial activity and related costs temporarily declined after a third-party contractor delayed development and production of required materials.
- Research and development grants recognized decreased to $41,257 from $151,976.
- General and administrative expense decreased to $281,901 from $315,129, with lower stock-based compensation partly offset by increased investor-relations consulting costs.
- Financial expenses, net, increased to $12,602 from $1,167.
- Marketable securities were no longer subject to trading restrictions from October 1, 2011 and were measured using active-market quoted prices. The quarter included a $4,205 other comprehensive loss related to the investment.
Outlook, risks and notable items
- Going concern: The company said it lacked sufficient cash resources to meet requirements for the 12 months following November 30, 2011. It estimated spending needs of approximately $4.9 million for that period and disclosed substantial doubt about its ability to continue as a going concern without additional financing. Management was pursuing public or private equity financing and further Office of the Chief Scientist funding; success was not assured.
- Planned spending and development: Planned expenditures for the 12 months beginning December 1, 2011 were $4.925 million, including $4.028 million in net research and development costs and $898,000 in general and administrative expenses. The company planned to file an FDA Investigational New Drug application for oral insulin in the third quarter of 2012, with an FDA-approved Phase 2 study expected to follow, subject to financing and grants.
- Development and execution risks: The company remained dependent on clinical progress, regulatory review, third-party contractors and a limited number of suppliers. It also highlighted risks concerning patent protection, potential infringement claims and its ability to obtain strategic partners.
- Commitments: A new September 2011 Hadasit clinical-trial and consulting agreement provided for $200,000 of consideration; none had been recognized or paid by quarter-end. A $600,000 purchase order for an oral-capsule ingredient was also outstanding and unpaid. Additional obligations included consulting, clinical-trial and regulatory-service arrangements.
- Unusual and subsequent items: The company received $450,000 when D.N.A Biomedical paid its promissory note on November 14, 2011. On December 12, 2011, Oramed issued 83,000 shares valued at $24,900 for advisory services.
- Controls and legal matters: Management concluded disclosure controls and procedures were not effective as of November 30, 2011. The company reported no material legal proceedings and no material changes in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether the company obtained financing or additional grants sufficient to cover its stated $4.9 million near-term funding need.
- Whether the planned third-quarter 2012 FDA IND filing and subsequent Phase 2 study proceeded, and how contractor delays affected the development timetable.
- The status and terms of outstanding clinical, manufacturing and consulting commitments, including the $600,000 purchase order and the new Hadasit agreement.
- Whether disclosure-control weaknesses were remediated and whether any subsequent filings identify additional control issues.
- The development, regulatory and patent status of Oramed’s oral-insulin and other drug-delivery programs; the filing provides plans and historical study descriptions, not assurance of approval or commercialization.