Oramed Pharmaceuticals Inc. — Form 10-Q Summary
Reporting period: Three and nine months ended May 31, 2016 (fiscal third quarter). The unaudited statements are in U.S. dollars, thousands, except per-share and share data.
Business context and results
Oramed is a development-stage pharmaceutical company focused on oral delivery of insulin and other polypeptides. It has not generated significant operating revenue. Its reported revenue came from the HTIT license arrangement, not product sales.
| Metric | Three months 2016 | Three months 2015 | Nine months 2016 | Nine months 2015 |
|---|---|---|---|---|
| Revenue | $163 | $0 | $288 | $0 |
| Research and development expense, net | $1,718 | $915 | $4,926 | $3,353 |
| General and administrative expense | $555 | $719 | $1,833 | $1,857 |
| Operating loss | $2,110 | $1,634 | $6,471 | $5,210 |
| Net loss | $1,996 | $1,583 | $6,204 | $5,116 |
| Basic and diluted loss per share | $0.15 | $0.15 | $0.50 | $0.48 |
For the nine months, R&D expense rose 47%, mainly due to clinical-trial costs, particularly the Phase IIb ORMD-0801 trial. Quarterly R&D expense rose 88%. G&A declined 1% for the nine months and 23% for the quarter. Net financial income was $267 for the nine months and $114 for the quarter. Comprehensive loss was $6,448 for the nine months and $1,912 for the quarter; the nine-month figure included a $244 unrealized loss on available-for-sale securities.
Cash, liquidity and capitalization
- At May 31, 2016, cash and cash equivalents were $3,302; short- and long-term bank deposits totaled $28,641; and marketable securities totaled $3,898. Total assets were $36,305.
- Current assets were $25,142 versus current liabilities of $1,338, yielding reported working capital of $23,804. Liabilities included $4,595 of deferred revenue, of which $3,945 was long-term. The filing reports no borrowings or debt balance.
- Nine-month operating cash use was $2,148, compared with $3,917 in the prior-year period. Investing activities used $9,700, primarily for deposits and securities; financing provided $11,932, including the HTIT share investment and exercises of warrants and options. Cash and cash equivalents ended at $3,302.
- Net stock issuance and exercises increased shares outstanding from 11.56 million at August 31, 2015 to 13.13 million at May 31, 2016. HTIT’s December 2015 placement accounted for 1.155 million shares and $12 million gross proceeds.
Developments, outlook and risks
- Oramed completed a 180-patient, 28-day Phase IIb ORMD-0801 trial in April 2016 and reported positive top-line results in May: the primary endpoint, reduction in weighted mean nighttime glucose, was achieved. A glucose-clamp study was expected to finish in calendar Q3 2016. The company also expected analysis of a non-FDA-approved ORMD-0901 study in Q3 2016 and projected initiation of a U.S. Phase II multi-center study in Q2 2017.
- Under its exclusive China, Macau and Hong Kong ORMD-0801 license, HTIT is responsible for specified pre-commercialization and regulatory activities and agreed to pay aggregate consideration of approximately $37.5 million, subject to agreements, milestones and conditions, plus royalties generally at 10% of net sales. The initial $3 million payment was received in January 2016. In June 2016, HTIT indicated it intended to make a $6.5 million milestone payment after the Phase IIb results; receipt was expected in calendar Q3 2016. These payments are subject to the agreement’s terms, and license consideration is recognized over time through the expected June 2023 product-submission date.
- Management estimated $15.755 million of expenditures for the 12 months beginning June 1, 2016: $13.539 million for R&D and $2.216 million for G&A. It believed available resources and commitments would support planned activity for at least the next 12 months, while acknowledging possible need for additional financing if expenses rise unexpectedly and no assurance of financing success.
- Risks include continued operating losses, dependence on external financing, substantial development costs, and uncertainty around clinical outcomes and U.S. and foreign regulatory approvals. The company stated that no assurance could be given that products would be approved or that revenues would become sufficient to support operations.
- Subsequent event: on June 13, 2016, the subsidiary entered a four-year manufacturing-services agreement related to the license, with payments of up to €2.36 million (approximately $2.66 million), including a non-refundable €800,000 (approximately $902,000) due within 12 months and further milestone-based payments.
Most important facts to verify
- Whether HTIT’s indicated $6.5 million milestone payment was received and whether remaining license payments’ conditions are met.
- Full Phase IIb results, subsequent clinical-trial progress, and regulatory plans for ORMD-0801 and ORMD-0901.
- Whether the stated liquidity and financing outlook covers the planned $15.755 million of spending, particularly given ongoing losses and dependence on future financing.
- Potential costs and milestones under the manufacturing-services agreement and other clinical or preclinical commitments.