Oramed Pharmaceuticals Inc. — Q1 2023 Form 10-Q
Business context and period: Unaudited results for the three months ended March 31, 2023, compared with the same 2022 period. Oramed is a clinical-stage pharmaceutical company developing oral delivery of insulin and other therapeutic proteins. Amounts below are in U.S. dollars; financial statement amounts are in thousands unless stated otherwise.
Financial results and position
| Metric | Q1 2023 | Q1 2022 / prior period |
|---|---|---|
| Revenue | $666 | $666 |
| Research and development expense | $4,427 | $5,836 |
| Sales and marketing expense | $184 | $590 |
| General and administrative expense | $1,263 | $5,492 |
| Operating loss | $5,208 | $11,252 |
| Financial income, net | $1,597 | $544 |
| Net loss | $3,611 | $10,708 |
| Net loss attributable to stockholders | $3,395 | $10,425 |
| Basic and diluted loss per share | $0.08 | $0.27 |
| Operating cash used | $5,549 | $9,125 |
Revenue was entirely from the HTIT license arrangement; no cost of revenue was recorded. Gross and operating margins are not especially informative for this development-stage business, and the filing does not state margin percentages.
At March 31, 2023, cash and cash equivalents were $24.1 million, short-term deposits $127.4 million, and marketable securities $2.3 million. Current assets were $155.2 million and current liabilities $5.0 million, yielding working capital of $150.2 million. Total assets were $159.8 million and total equity $150.1 million. The filing reports no borrowings; operating lease liabilities totaled $0.8 million, including $0.2 million current. Accumulated deficit was $166.5 million.
Cash and cash equivalents fell $16.4 million during the quarter. Investing activities used $13.2 million, principally reflecting $19.0 million of short-term deposit purchases, partly offset by maturities and proceeds. Financing activities provided $2.4 million, primarily from common-stock issuance.
Material changes versus Q1 2022
- Net loss narrowed to $3.6 million from $10.7 million, and loss per share declined to $0.08 from $0.27. Lower operating expenses and higher financial income drove the improvement.
- R&D expense declined 24%, mainly because of lower spending on the terminated Phase 3 trials. G&A declined 77% and sales and marketing declined 69%; both decreases included substantially lower stock-based compensation. The filing attributes the year-over-year expense reductions in part to performance awards whose conditions were not met in 2023.
- Financial income rose to $1.6 million from $0.5 million, mainly due to interest on short-term bank deposits. Revenue was unchanged at $0.7 million.
- Weighted-average shares increased to 40.0 million from 38.7 million, mainly due to shares issued under the controlled equity offering.
Outlook, developments, and risks
- Oral insulin: Oramed announced on January 11, 2023 that ORA-D-013-1 Phase 3 did not meet its primary or secondary endpoints. The company terminated that trial and the parallel ORA-D-013-2 trial, and is analyzing the data to assess whether there is a path forward for ORMD-0801. It is also reviewing its pipeline and evaluating strategic opportunities.
- Liquidity outlook: Management believes existing resources and commitments can support planned development activities and spending for at least the next 12 months. It cautions that unexpected expense increases or strategic-review decisions could require additional funding. No assurance is given that financing will be available or that product candidates will receive regulatory approval.
- Revenue dependence: The $666,000 quarterly revenue reflects recognition under the HTIT license agreement through an expected June 2023 product-submission date. The company has not generated significant operating revenue. The Medicox agreement includes $2 million received and deferred, plus potential milestones and royalties; no Medicox revenue was recognized in Q1, and the company was evaluating the collaboration after the Phase 3 results.
- Other pipeline: Oravax reported preliminary positive safety and immunogenicity results for Cohort A of its oral vaccine Phase 1 trial; Cohort B had completed dosing, with data expected in the first half of 2023. Oramed also reported positive top-line safety results and a favorable trend in liver-fat measures in its ORMD-0801 NASH study, while its path forward remained under evaluation.
- Commitments and contingencies: CRO agreements for the terminated oral-insulin trials had amended maximum payments of up to $22.7 million and $15.8 million, respectively; $16.6 million and $8.0 million had been recognized as R&D expense through March 31, 2023. The company had a $96,000 IIA royalty liability. The filing provides no clear estimate here of any remaining CRO obligations after termination.
- Subsequent events: In April and May 2023, the company granted 868,500 time-based RSUs, 245,500 performance-based RSUs, and 20,000 additional RSUs to a board member. These grants occurred after quarter-end.
Important facts for investors to verify
- What the full analysis of the failed Phase 3 trials shows, and whether management identifies a viable development path for ORMD-0801.
- How the strategic review affects planned spending, pipeline priorities, and potential financing needs.
- Whether Medicox continues its Korean collaboration, and the timing and collectability of any contractual consideration.
- The expected timing and conditions for recognizing remaining HTIT deferred revenue, given the expected June 2023 submission date.
- Cash burn and runway assumptions: management’s at-least-12-month estimate depends on current planned activity and may change with unexpected costs or strategic decisions.
- Potential dilution from equity issuance: 1,971,447 shares had been issued under the Cantor offering agreement for aggregate net proceeds of $26.3 million as of March 31, 2023; the agreement authorizes sales up to $100 million in aggregate offering price.