Oramed Pharmaceuticals Inc. — FY2014 Form 10-K
Reporting period: Fiscal year ended August 31, 2014; filed November 13, 2014. This is an annual report, not a standalone fourth-quarter report. Oramed is a clinical-stage pharmaceutical company developing oral insulin (ORMD-0801) and oral exenatide/GLP-1 (ORMD-0901). It reported no product or operating revenue.
Financial results and liquidity
| Metric | FY2014 | FY2013 |
|---|---|---|
| Revenue | None | None |
| Research and development expense, net | $3.277 million | $2.272 million |
| General and administrative expense | $2.629 million | $2.032 million |
| Operating loss | $5.906 million | $4.304 million |
| Net loss | $5.696 million | $4.232 million |
| Basic and diluted loss per share | $0.62 | $0.59 |
| Net cash used in operating activities | $4.068 million | $3.396 million |
R&D expense rose 44% and G&A expense rose 29% year over year. The filing attributes higher R&D costs mainly to clinical trials, staffing, bonuses and stock-based compensation; G&A increased mainly due to salaries and bonuses. Stock-based compensation was $1.468 million, versus $719,000 in FY2013. Revenue-based margins are not meaningful because the company had no revenue.
At August 31, 2014, cash and cash equivalents were $1.762 million, short-term deposits $18.481 million, marketable securities $1.047 million and restricted cash $16,000. Current assets were $21.778 million, current liabilities $973,000 and working capital $20.805 million. Total liabilities were $1.009 million; the balance sheet does not show borrowings. Stockholders’ equity was $20.793 million, and accumulated losses were $27.820 million.
Investing activities used $13.088 million, primarily reflecting purchases of short-term deposits; financing activities provided $16.640 million, including $14.887 million net proceeds from the December 2013 stock offering and $1.753 million from warrant and option exercises. Cash and cash equivalents declined $510,000, although funds held in deposits and securities increased overall. Planned expenditures for the 12 months beginning September 1, 2014 were approximately $11.296 million: $8.584 million net R&D and $2.712 million G&A.
Material developments and outlook
- ORMD-0801’s FDA-cleared Phase IIa type 2 study met its primary and secondary endpoints, with reported reductions in glucose readings and fasting blood glucose versus placebo and no serious adverse events. Management planned a randomized, double-blind, 28-day Phase IIb study in about 180 type 2 patients at roughly 30 U.S. sites.
- Results announced in October 2014 from a seven-day type 1 study described the capsule as appearing safe and well tolerated. The study was not powered for statistical significance; reported trends included reduced rapid-acting insulin and glucose measures, alongside increased post-meal hypoglycemia in the active group.
- For ORMD-0901, the company planned further toxicology and clinical work, including non-U.S. Phase Ia/Ib studies. It also planned to defer additional combination-therapy studies while advancing its two lead candidates.
- Management said available resources and commitments were expected to fund planned activity for at least 12 months, while acknowledging possible need for additional financing. A November 2014 agreement to sell 696,378 shares at $7.18 each for approximately $5 million gross was expected to close by November 28; it was a subsequent event, not cash reported at fiscal year-end.
- The filing gives differing timing for the planned type 2 Phase IIb start: one section anticipates the fourth quarter of calendar 2014, while other sections and the pipeline table project the first quarter of calendar 2015.
Risks, contingencies and other notable items
- The company has no approved products or revenues, expects continuing losses and depends on successful clinical development, regulatory approvals, financing and eventual commercialization. Clinical results may not be replicated or may fail to establish safety or efficacy.
- Management estimated a need for approximately $11.3 million to fund the next 12 months’ planned activities. It cited ongoing financing discussions and potential additional grants, but neither financing nor grants were assured.
- Clinical research, supply and manufacturing depend substantially on outside vendors and a limited number of suppliers. Contractual obligations totaled $4.643 million, including $3.588 million for clinical research studies.
- Israeli OCS grants carry royalty and technology-transfer/manufacturing restrictions. The company had received $2.066 million in OCS grants through year-end; royalty payments depend on future sales, and no royalty liability had yet been incurred.
- Oramed held D.N.A Biomedical shares valued at $1.047 million; their market value and liquidity are exposed to share-price and NIS exchange-rate movements. The company did not hedge foreign-currency exposure.
- The filing cites patent protection, competition, reliance on partners, dilution from future equity financing, and political/security conditions in Israel as material risks. It reported no material legal proceedings and no off-balance-sheet arrangements.
- The independent auditor issued an unqualified opinion on the financial statements and internal control over financial reporting; management also concluded controls were effective.
Most important facts for investors to verify
- Whether the November 2014 approximately $5 million private placement closed, and the resulting share count and dilution.
- The actual timing, enrollment, protocol and results of the planned ORMD-0801 type 2 Phase IIb trial; reconcile the filing’s differing start-date projections.
- Complete clinical data for both type 1 and type 2 studies, particularly statistical significance, safety and the type 1 hypoglycemia signal.
- Cash burn and available liquid resources, including the distinction between cash, deposits and the less-liquid D.N.A securities; assess whether resources cover the projected $11.296 million spend.
- Progress and costs for ORMD-0901, and any subsequent regulatory feedback, partner arrangements or additional financing.