Oramed Pharmaceuticals Inc. — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022. The company changed its fiscal year to the calendar year in 2022; comparable figures below are for the same periods ended September 30, 2021. Amounts are U.S. dollars in millions unless otherwise noted.
Business context and results
Oramed is a clinical-stage biotechnology company developing oral delivery technology for insulin and other proteins. Its lead candidate, ORMD-0801, is in two Phase 3 trials for type 2 diabetes. The company has not generated significant operating revenue; reported revenue primarily reflects its HTIT license arrangement.
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $0.682 | $0.682 | $2.022 | $2.022 |
| Research and development | $5.347 | $6.086 | $20.362 | $15.452 |
| Sales and marketing | $0.463 | $0.172 | $1.433 | $0.172 |
| General and administrative | $3.061 | $1.909 | $11.085 | $4.937 |
| Operating loss | $8.189 | $7.485 | $30.858 | $18.539 |
| Net loss | $7.253 | $7.536 | $29.028 | $17.508 |
| Loss per share | $0.18 | $0.21 | $0.72 | $0.54 |
There was no cost of revenue, so a meaningful operating gross margin is not reported. Nine-month net financial income was $1.930 million, versus $1.031 million a year earlier; Q3 financial income was $1.036 million versus a $0.051 million expense. The nine-month loss attributable to Oramed stockholders was $28.018 million; the difference from consolidated net loss reflects non-controlling interests.
Cash, liquidity and capital
- At September 30, cash and cash equivalents were $33.196 million, short-term deposits $121.119 million, and marketable securities $5.234 million. Current assets were $160.172 million and current liabilities $6.525 million, giving working capital of $153.647 million.
- Operating activities used $19.856 million in the first nine months, compared with $13.899 million in the prior-year period. Investing activities provided $18.951 million; financing activities provided $6.604 million. Cash increased $5.740 million from year-end 2021.
- Total liabilities were $11.290 million, including $0.900 million of operating lease liabilities. The balance sheet reports no borrowings or other conventional debt.
- Stockholders’ equity was $153.808 million; accumulated deficit was $154.538 million. Shares outstanding increased from 38.159 million at December 31, 2021 to 39.113 million at September 30, 2022. The company reported 39,114,736 shares outstanding on November 10, 2022.
Material changes and unusual items
- Nine-month R&D expense rose 32%, mainly due to Phase 3 trial costs; Q3 R&D fell 12%, mainly reflecting lower Oravax costs. Nine-month sales and marketing and G&A expenses increased substantially, with added compensation, consulting, legal and stock-based compensation costs.
- Stock-based compensation totaled $8.961 million for the nine months and was a significant non-cash expense. The company also paid $0.850 million in April 2022 to settle a Delaware stockholder lawsuit; the payment was recorded in Q1 G&A expense.
- The company invested approximately $2.700 million in Diasome preferred stock in August 2022 and holds less than 5% on a diluted basis.
- Financing cash inflows were much lower than in the prior-year period ($6.604 million versus $97.739 million), when larger share issuance and warrant/option exercise proceeds were received. During the 2022 nine-month period, net common-stock issuance proceeds were $7.345 million.
Outlook, developments and risks
- Management believes current resources and commitments support planned development and spending for at least 12 months, but says additional financing may be needed sooner if expenses rise unexpectedly. R&D is expected to remain the company’s major operating expense. No formal revenue or earnings guidance is provided.
- ORA-D-013-1 completed enrollment of 710 patients in May 2022; topline efficacy data was expected in January 2023. The second Phase 3 study planned for 450 patients was approximately 50% enrolled as of July 2022. Management anticipated a BLA filing in 2024 or 2025.
- Oramed reported positive topline results in September 2022 from a 30-patient ORMD-0801 NASH trial: the treatment met the safety primary endpoint, with measures showing a consistent clinically meaningful trend in favor of treatment. Results do not establish efficacy or regulatory approval.
- After quarter-end, on October 11, 2022, Oravax reported positive preliminary Phase 1 Cohort A safety and immunogenicity results for its oral COVID-19 vaccine. Cohort B data was expected in the first half of 2023. Trial recruitment had been slower than anticipated.
- The September 2022 Medicox memorandum is mostly non-binding. Medicox paid $2.0 million, recorded as deferred revenue, in return for an undertaking not to negotiate Korean ORMD-0801 distribution rights with others through December 15, 2022. A definitive agreement remains subject to mutual acceptance.
- HTIT disputes $6.0 million of pending payment obligations; Oramed contests HTIT’s position and reports ongoing discussions. The $2.0 million already received in relation to the disputed obligation remains deferred revenue. HTIT revenue recognition assumes product submission in June 2023.
- Management cites approximately six months of clinical-trial delays from slower recruitment. It sees no material COVID-19 impact on timeline or liquidity at present, while warning that further delays could occur. Development, regulatory approval, financing and clinical outcomes remain uncertain.
Important facts for investors to verify
- Timing and results of both ORMD-0801 Phase 3 trials, and whether the anticipated BLA timeline remains achievable.
- HTIT dispute status, collectability of contested milestones, and the June 2023 revenue-recognition assumption.
- Actual cash burn, planned trial commitments and whether additional financing or share issuance will be required.
- Whether the Medicox MOA leads to a definitive license, and the progress and data from Oravax’s vaccine trial.
- Impact of stock-based compensation, dilution, and the company’s ability to control operating expenses while generating limited revenue.