Oramed Pharmaceuticals Inc. — Form 10-Q Summary
Business context and reporting period
Oramed is a clinical-stage pharmaceutical company developing oral insulin (ORMD-0801) and other oral drug-delivery candidates. This fiscal third-quarter report covers the three and nine months ended May 31, 2019; dollar amounts below are U.S. dollars. Revenue was primarily recognized from the company’s China licensing agreement with HTIT, not from product sales.
Key financial results
| Metric | Three months ended May 31, 2019 | Nine months ended May 31, 2019 |
|---|---|---|
| Revenue | $682,000 | $2.022 million |
| Research and development | $3.861 million | $11.322 million |
| General and administrative | $899,000 | $2.896 million |
| Operating loss | $4.078 million | $12.286 million |
| Net loss | $4.072 million | $12.075 million |
| Basic and diluted loss per share | $0.23 | $0.69 |
| Cash used in operating activities | — |
For the nine-month period, cash used in operating activities was $9.672 million, investing activities provided $8.622 million, and financing activities provided no cash. Cash and cash equivalents fell by $1.050 million to $3.946 million. At May 31, the company also reported $27.425 million of short- and long-term bank deposits and $5.623 million of marketable securities.
Current assets were $26.588 million and current liabilities were $5.216 million, giving reported working capital of $21.372 million. Total assets were $37.432 million; stockholders’ equity was $21.557 million. The filing reports no conventional borrowings; contract liabilities, primarily deferred license consideration, were $13.042 million in total. The filing does not provide a gross-margin measure.
Changes versus the prior comparable periods
- Nine-month revenue rose 10% from $1.832 million; three-month revenue rose 11% from $617,000, mainly reflecting HTIT milestone consideration and the associated revenue-recognition schedule.
- Nine-month R&D expense increased 22% from $9.245 million, principally due to clinical-trial activity. Three-month R&D expense declined 8% from $4.194 million, reflecting lower manufacturing scale-up and stock-compensation costs, partly offset by trial and toxicology spending.
- Nine-month net loss increased to $12.075 million from $9.801 million; quarterly net loss improved to $4.072 million from $4.354 million. Nine-month loss per share was $0.69 versus $0.68; quarterly loss per share was $0.23 versus $0.30.
- Working capital declined from $26.484 million at August 31, 2018, mainly because of operating cash use. The company received no equity-issuance or option-exercise proceeds in the nine months, unlike the prior-year period.
Outlook, management commentary, risks and unusual items
- Management said existing resources and commitments were expected to support planned activity and spending for at least the next 12 months and beyond, while cautioning that unexpected expense increases could require earlier financing. It was evaluating public- and private-market financing alternatives.
- The Phase IIb, 90-day ORMD-0801 trial in about 300 type 2 diabetes patients was projected to complete its initial part in calendar Q4 2019; a lower-dose extension began in May 2019. A six-month toxicology study was completed in March 2019, with results expected in calendar Q1 2020.
- If the Phase IIb trial is successful, management anticipated two six-month Phase III trials and a potential BLA filing, with possible FDA approval by the end of the first half of calendar 2024. These are forward-looking expectations, not assured outcomes.
- HTIT informed Oramed that China’s drug-evaluation authority had approved its IND for two ORMD-0801 doses; HTIT expected China trials to begin in the second half of calendar 2019. Oramed had received $20.5 million of the license agreement’s potential $37.5 million milestone payments by May 31, 2019. Additional milestone and royalty receipts depend on specified conditions and future commercial activity.
- Oramed completed a Phase I pharmacokinetic study of oral GLP-1 candidate ORMD-0901 and expected results in the second half of calendar 2019. The filing also describes exploratory ORMD-0801 work in NASH and a planned leptin study.
- Adoption of ASC 606 produced a $1.773 million adjustment to opening accumulated deficit. For the nine months, reported revenue was $103,000 lower than it would have been without ASC 606; quarterly revenue was $101,000 lower. Changes in fair value of D.N.A. and Entera investments are now recognized in earnings; the nine-month period included a $270,000 fair-value loss. A $300,000 income-tax expense arose from withholding tax on a license milestone payment.
- Key risks include clinical-trial delays or failure, third-party CRO performance, regulatory approval uncertainty, the need for additional financing, and the possibility that future revenue may not adequately support operations. The company reported no material off-balance-sheet arrangements and no significant change in market-risk exposure.
Important facts for investors to verify
- Results and timing of the ORMD-0801 Phase IIb trial, toxicology work, and any subsequent Phase III plans.
- Cash burn, remaining liquid resources, and whether additional financing is needed to sustain development plans.
- HTIT’s progress toward China trials and the conditions, timing, and collectability of remaining milestone payments.
- How ASC 606 revenue recognition and investment fair-value changes affect reported results, given that current revenue is licensing-related rather than product sales.
- Clinical, regulatory, and vendor commitments, including the extent to which planned development costs may change.