Oramed Pharmaceuticals Inc. — Form 10-Q Summary
Business context and reporting period
Fiscal first quarter ended November 30, 2013. Oramed is a development-stage biotechnology company focused on oral delivery of insulin and other peptide medicines. It reported no operating revenue.
Financial performance and position
- Quarterly net loss was $1.124 million, versus $959,000 in the prior-year quarter; basic and diluted loss per share was $0.14 in both periods.
- Research and development expense was $751,000, up from $393,000, mainly due to progress in Phase 2a studies and higher share-based compensation. General and administrative expense was $418,000, up from $339,000, primarily reflecting higher public-relations costs.
- Net financial income was $44,000, compared with net financial expense of $227,000 a year earlier. The prior-year expense included a $297,000 warrant-related charge.
- Operating cash use was $749,000, compared with $793,000. Investing activities used $162,000; financing activities provided no cash during the quarter. Cash and cash equivalents declined by $901,000.
- At November 30, cash and cash equivalents were $1.371 million, short-term deposits $5.459 million, and marketable securities $962,000. Current liabilities were $669,000; total assets were $8.006 million and stockholders’ equity was $7.305 million. The balance sheet reports no interest-bearing debt.
- As a pre-revenue company, gross and operating margins are not meaningful.
Changes, outlook, and risks
- Management estimated approximately $8.093 million of expenditures for the 12 months beginning December 1, 2013: $6.244 million for R&D net of grants and $1.849 million for G&A. It anticipated needing about $8.1 million to fund that period’s activities.
- After quarter-end, the company completed a registered offering of 1.58 million shares at $10 each, receiving approximately $14.89 million net. In January 2014, it also received $1.304 million from exercise of 217,294 warrants.
- Management said existing resources and commitments were expected to support planned activity for at least 12 months, while noting unexpected expense increases could require further financing. The company depends on financing and grants to execute its development plans.
- Development and commercialization depend on successful clinical studies and regulatory approvals; approval and adequate future revenue are uncertain. The company warned that its D.N.A. marketable securities may be difficult to sell in volume and could fluctuate in value.
- Clinical updates reported after quarter-end included completion of an oral-insulin Phase 2a substudy in December 2013, with a Phase 2b trial expected in calendar Q3 2014; the company also reported successful results from a non-U.S. insulin study. It expected to begin non-U.S. Phase 1a work and IND-enabling studies for oral exenatide in 2014. These are forward-looking plans or company-reported developments.
- Potential future royalties are payable on qualifying product sales under Israeli government and Bio-Jerusalem grants; no royalty liability had been incurred because there were no product revenues. Management reported effective disclosure controls and no material change in internal control during the quarter.
Important facts for investors to verify
- Clinical trial progress, results, regulatory interactions, and timing of planned trials.
- Cash burn against the $8.093 million expenditure plan, and whether financing or grants are needed beyond the December 2013 offering.
- Terms and potential dilution from the offering, warrant exercises, outstanding warrants, and share-based awards.
- Market value and saleability of the D.N.A. securities, and conditions attached to grant-related royalties.