Oramed Pharmaceuticals Inc. — Q2 2023 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2023. Amounts below are in U.S. dollars; financial statement figures are in millions unless noted. The company is a development-stage pharmaceutical business focused on oral delivery of insulin and other therapeutic proteins and has not generated significant operating revenue.
Financial results and liquidity
| Metric | Three months ended June 30, 2023 | Six months ended June 30, 2023 | Prior-year comparable period |
|---|---|---|---|
| Revenue | $0.674 million | $1.340 million | Unchanged in both periods |
| Research and development | $1.821 million | $6.248 million | $9.179 million and $15.015 million |
| Sales and marketing | $0.192 million | $0.376 million | $0.380 million and $0.970 million |
| General and administrative | $2.452 million | $3.715 million | $2.532 million and $8.024 million |
| Net financial income | $2.478 million | $4.075 million | $0.350 million and $0.894 million |
| Net loss | $1.313 million | $4.924 million | $11.067 million and $21.775 million |
| Loss per share, basic and diluted | $0.03 | $0.11 | $0.27 and $0.54 |
Revenue was recognized under the HTIT license agreement; there was no cost of revenue. With no material product sales, a gross margin is not a meaningful indicator of operating performance. Higher interest income and investment revaluation contributed to the lower reported net loss; the company remained loss-making from operations.
For the six-month period, operating cash use was $8.183 million, versus $17.615 million a year earlier. Investing activities used $27.913 million, principally reflecting purchases of short-term deposits; financing provided $2.430 million, mainly from stock issuance. Cash and cash equivalents fell to $6.767 million from $40.464 million at year-end 2022, while short-term deposits rose to $142.491 million. Cash, short-term deposits and marketable securities totaled approximately $150.2 million at June 30.
Current assets were $150.970 million and current liabilities $1.067 million, yielding working capital of $149.903 million. Total liabilities were $5.659 million, including $0.724 million of operating lease liabilities; the filing reports no other borrowing outstanding at June 30. Accumulated deficit was $167.670 million. Shares outstanding rose to 40.219 million from 39.564 million at December 31, 2022.
Changes versus the prior comparable period
- Six-month R&D expense declined 58%; Q2 R&D declined 80%, primarily because the company terminated its two Phase 3 ORMD-0801 trials and related trial spending decreased.
- Six-month G&A expense fell 54%, mainly due to lower stock-based compensation and legal expense. Q2 G&A declined 3%.
- Six-month sales and marketing expense decreased 61%, primarily on lower stock-based compensation and consulting costs.
- Net financial income increased substantially, mainly from interest on short-term deposits and a revaluation gain on the Diasome investment. The reported net loss narrowed accordingly.
- Weighted-average shares increased year over year, principally due to issuance through the company’s controlled equity offering.
Outlook, developments and risks
- Oral insulin: ORA-D-013-1 failed its primary and secondary endpoints; the company terminated it and the parallel ORA-D-013-2 trial. A subsequent analysis found certain patient subgroups with a statistically significant, greater-than-1-percentage-point placebo-adjusted HbA1c reduction. Management is evaluating whether the candidate has a path forward; this analysis does not establish efficacy for a future trial or product.
- Other pipeline: Management is reviewing the pipeline and strategic opportunities. A reported NASH trial showed safety and a favorable trend in liver-fat measures, but management had not determined a development path. Oravax reported preliminary Phase 1 vaccine findings, including positive IgG in approximately 55% of Cohort B participants.
- HTIT collaboration: On August 2, 2023, the company signed a non-binding term sheet for a proposed 50/50 joint venture. The proposal provides for HTIT to invest $60 million and Oramed $10 million and remains subject to definitive agreements. The parties intend to pursue a Phase 3 U.S. oral-insulin trial.
- Sorrento/Scilex transaction after quarter-end: On August 7, amended August 9, Oramed agreed to acquire specified Scilex securities for $105 million through a bankruptcy-court-supervised sale, subject to competing bids, court approval and other conditions. Oramed also agreed to provide Sorrento a $100 million senior secured DIP loan at 15% annual interest, with an additional 3% default rate. The loan is intended to be used as a credit bid toward the purchase price; Oramed expects to pay an additional $5 million cash at closing. The transaction could significantly reduce Oramed’s cash position, and recovery of the loan or completion of the acquisition is not assured.
- To fund the DIP loan, Oramed borrowed $99.55 million on August 8, secured by bank certificates of deposit, at interest rates of 6.66%–7.38%, with maturities from August 2023 to May 2024. These are post-quarter events and materially change the company’s financing and risk profile from the June 30 balance sheet.
- Management said June 30 resources and commitments were expected to support planned development activities for at least 12 months, but warned that additional financing could be needed sooner if expenses rise. The subsequent DIP transaction, proposed acquisition, strategic review and potential JV may change planned expenditures and liquidity. The filing provides no numerical revenue or earnings guidance.
- Other material risks include clinical and regulatory uncertainty, limited operating revenue, possible need for additional financing, the non-binding status and execution risks of the HTIT JV, and the possibility that the Sorrento transaction is outbid, not approved, terminated, more costly than expected, or fails to deliver anticipated benefits. The company reported effective disclosure controls and no material change in internal control over financial reporting.
Most important facts for investors to verify
- Whether the Scilex sale received bankruptcy-court approval, attracted competing bids, closed by the stated deadline, and required the expected $5 million cash payment.
- Whether the $100 million DIP loan and $99.55 million secured borrowings were repaid, converted into purchase consideration, or otherwise recovered, and the effect on Oramed’s unrestricted liquidity and collateral.
- Whether Oramed and HTIT executed definitive JV agreements, including confirmation of the proposed investments, governance, funding obligations and clinical-trial plans.
- Whether the oral-insulin subgroup analysis leads to a defined development plan, and whether the terminated Phase 3 results affect the Medicox Korean license or deferred revenue recognition.
- Cash burn, financing needs and share dilution as the company’s strategic review and development plans evolve.