Oramed Pharmaceuticals Inc. — Form 10-Q Summary
Business and period: Oramed is a development-stage pharmaceutical company focused on oral insulin (ORMD-0801) and other orally delivered drugs. This report covers the quarter and six months ended February 28, 2018, the second quarter of the company’s fiscal year. Financial amounts below are in U.S. dollars; unless stated otherwise, figures are in millions.
Financial performance
| Metric | Three months ended Feb. 28, 2018 | Three months ended Feb. 28, 2017 | Six months ended Feb. 28, 2018 | Six months ended Feb. 28, 2017 |
|---|---|---|---|---|
| Revenue | $0.604 | $0.611 | $1.215 | $1.221 |
| Research and development | $2.724 | $3.125 | $5.051 | $5.478 |
| General and administrative | $0.991 | $0.851 | $2.007 | $1.319 |
| Operating loss | $3.111 | $3.365 | $5.843 | $5.763 |
| Net loss | $2.916 | $3.183 | $5.447 | $5.819 |
| Basic and diluted loss per share | $0.20 | $0.24 | $0.38 | $0.44 |
| Operating cash used | Not provided by quarter | $6.204 | $1.427 |
Revenue primarily represents recognition over time of payments under the HTIT license agreement, not sales of marketed products. Six-month revenue was nearly flat year over year. No cost of revenues was recorded in the 2018 six-month period, compared with $0.187 million in 2017. Financial income, net, was $0.396 million for the six months, versus $0.344 million; no income tax was recorded, compared with $0.400 million in the prior period. Other comprehensive loss was $0.088 million for the six months, including a $0.414 million loss in the latest quarter, primarily reflecting the lower fair value of D.N.A. shares.
Financial position and liquidity
| Metric | Feb. 28, 2018 | Aug. 31, 2017 |
|---|---|---|
| Cash and cash equivalents | $3.295 | $3.969 |
| Current assets | $21.127 | $20.297 |
| Current liabilities | $4.718 | $5.165 |
| Working capital | $16.409 | $15.132 |
| Total assets | $38.254 | $38.712 |
| Stockholders’ equity | $20.480 | $19.238 |
| Accumulated loss | $61.943 | $56.496 |
In addition to cash, the company reported $28.167 million of short- and long-term deposits and $6.535 million of marketable securities. No interest-bearing debt is reported. Total liabilities include $15.071 million of deferred revenue ($2.449 million current and $12.622 million long-term).
Six-month operating activities used $6.204 million; investing activities used $0.351 million; and financing activities provided $5.878 million, including $4.881 million net proceeds from common-stock issuance and $0.997 million from warrant and option exercises. Cash and cash equivalents declined by $0.674 million. The company’s ATM sales agreement permits up to $25 million of common-stock sales; additional shares were sold for $0.243 million net in March 2018.
Changes, outlook, and risks
- Six-month R&D expense declined 8%, mainly from lower capsule scale-up and toxicology costs, partly offset by preparation for the planned ORMD-0801 trial. G&A increased 52%, principally due to stock compensation and consulting and travel costs related to the CEO’s relocation to New York.
- Management said available resources and commitments should support planned development and spending for at least the next 12 months and beyond, while also stating that future operations may require additional financing and that financing success is not assured.
- Management planned to start a 90-day, placebo-controlled Phase IIb dose-ranging ORMD-0801 trial in approximately 240 patients with type 2 diabetes in Q2 2018 calendar year, and a type 1 diabetes glucose-clamp study in the same calendar quarter. These were forward-looking plans, not reported completed milestones.
- If the Phase IIb trial is successful, management anticipated two six-month Phase III trials and projected a potential FDA approval by Q3 2023. The FDA had advised that the regulatory pathway would be a Biologics License Application.
- The company also expected to file an IND for oral GLP-1 candidate ORMD-0901 in Q2 2018 and projected studies for oral leptin and ORMD-0801 in NASH. Development schedules and approvals remain uncertain.
- A CRO agreement for the ORMD-0801 type 2 diabetes trial provides for payments of approximately $7.030 million based on milestones; $0.547 million had been recognized through February 28, 2018. Other development and manufacturing agreements also carry milestone-based commitments.
- The company has not generated significant operating revenue and has accumulated losses of $61.943 million. Continued operations depend on funding, successful development, and regulatory approvals; there can be no assurance that any product candidate will be approved or produce adequate revenue.
Important facts for investors to verify
- Whether the planned ORMD-0801 and ORMD-0901 clinical and regulatory milestones occurred on schedule, and the results and safety findings when available.
- Cash burn, the maturity and liquidity of deposits and securities, and whether management’s stated funding runway remains adequate as clinical spending rises.
- Remaining HTIT license payments and milestone conditions: the agreement provides for $37.5 million in aggregate payments, while the filing reports $17.5 million of milestone payments received through February 28, 2018; confirm any subsequent receipts and conditions.
- Potential dilution from ATM sales, warrant and option exercises, and other equity compensation; shares outstanding were 14,405,892 at February 28, 2018.
- Outstanding clinical, manufacturing, and royalty commitments, including the CRO agreement, and any changes to trial budgets or timelines.