Oramed Pharmaceuticals Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. The company changed its fiscal year to the calendar year; this was its first quarterly report under the new year. Comparative results are for the three months ended March 31, 2021. Unless stated otherwise, financial figures below are in U.S. dollars and millions.
Business context and results
Oramed is a development-stage biotechnology company focused on oral delivery of insulin and other biologics. It also consolidates Oravax, in which it held a 63% interest, which is developing an oral COVID-19 vaccine. The company reported no significant operating revenue apart from recognition of consideration under its HTIT license agreement.
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | $0.666 | $0.666 |
| Research and development | $5.836 | $6.168 |
| Sales and marketing | $0.590 | — |
| General and administrative | $5.492 | $1.102 |
| Operating loss | $11.252 | $6.604 |
| Net loss | $10.708 | $6.063 |
| Net loss attributable to Oramed stockholders | $10.425 | $5.670 |
| Basic and diluted loss per share | $0.27 | $0.20 |
| Operating cash used | $9.125 | $3.682 |
Gross profit was $0.666 million because cost of revenue was zero in both periods. The resulting operating margin was approximately negative 1,689%, compared with negative 991% a year earlier; the small revenue base makes this ratio less informative. Net financial income was $0.544 million, versus $0.541 million.
Liquidity, balance sheet and cash flow
At March 31, 2022, cash and cash equivalents were $27.967 million; short- and long-term deposits totaled $131.519 million; and marketable securities totaled $9.230 million. Current assets were $143.562 million and current liabilities were $6.324 million, yielding reported working capital of $137.238 million, down from $140.569 million at December 31, 2021. Total assets were $172.224 million and total equity was $162.223 million.
Operating activities used $9.125 million; investing activities provided $7.359 million, primarily from deposit and bond maturities; and financing activities provided $2.292 million, primarily from common-stock issuance. Cash increased $0.511 million to $27.967 million. No conventional borrowing balance is presented; operating lease liabilities totaled $1.108 million. The company reported an accumulated deficit of $136.945 million.
Material changes and unusual items
- Net loss increased $4.645 million year over year, while revenue was unchanged. R&D expense fell 5%, mainly reflecting lower Phase 3 and prior-year Oravax in-process R&D costs, partly offset by higher stock compensation.
- G&A expense rose 398% to $5.492 million, attributed mainly to higher stock-based compensation, legal costs, and public/investor relations expenses. Total stock-based compensation was $4.029 million, compared with $0.647 million. The filing notes an $850,000 attorneys’ fee settlement approved and paid in April 2022, included in G&A.
- During the quarter, Oramed issued shares for net proceeds of $2.969 million. At March 31, 38.564 million shares were outstanding, compared with 38.159 million at December 31. Separately, the company reported $15.275 million of aggregate net proceeds from its Cantor equity distribution agreement through May 12, 2022; this program permits sales of up to $100 million, subject to its terms.
- The company added leased Israeli office space beginning February 2022; the new five-year lease has annual payments of approximately NIS 435, or about $137,000.
Outlook, development programs and risks
- Management believes existing resources and commitments can support planned activity for at least 12 months, but warns that unexpected expense increases could require financing sooner. The company expects R&D to remain its major operating expense and has not generated significant operating revenue.
- Two Phase 3 trials of oral insulin candidate ORMD-0801 are underway. The filing gives expected topline results in January 2023 and anticipated BLA filing in 2024. Subsequent to quarter-end, Oramed announced that one trial had completed enrollment at 710 patients, above its 675-patient target. The second trial was recruiting toward 450 patients.
- Oramed reported approximately six months of clinical-trial delays from slower recruitment. It said it did not then expect a material COVID-19 impact on development timing or liquidity, while acknowledging possible further delays.
- Two ORMD-0801 NASH trials had data expected in the second half of 2022; enrollment in the 30-patient trial was completed in March. Data from an oral GLP-1 trial were also expected in the second half of 2022.
- Oravax’s Phase 1 oral COVID-19 vaccine trial in South Africa faced screening and enrollment delays because the protocol required participants without prior vaccination or infection. Oravax was considering protocol changes or another site. The filing also describes an agreement for an initial prepurchase of 10 million vaccine doses in Southeast Asia; commercial execution and regulatory progress remain uncertain.
- HTIT disputes $6 million of pending milestone-payment obligations; Oramed disputes HTIT’s position and was seeking resolution. Of the disputed amount, $2 million had been received and remained deferred revenue. No HTIT royalties had been recognized.
- Product development, regulatory approvals, clinical outcomes, financing availability, and the HTIT disagreement are significant uncertainties. Oramed states that approval of product candidates is not assured and that it may be years before revenue supports operations, if at all.
Most important facts for investors to verify
- Enrollment, completion, safety and topline timing for both ORMD-0801 Phase 3 trials, and the assumptions behind the planned 2024 BLA filing.
- Cash burn, investment maturities, management’s 12-month liquidity assessment, and any additional equity issuance under the Cantor program.
- Resolution and collectability of HTIT milestone payments, and the basis for revenue recognition through the expected June 2023 submission date.
- Oravax trial progress, regulatory status, and the terms and enforceability of the reported 10-million-dose prepurchase agreement.
- The effect of stock-based compensation and legal costs on recurring operating expenses; confirm the settlement expense and payment treatment in subsequent reporting.