Oramed Pharmaceuticals Inc. — Form 10-Q Summary
Business context and period: The report covers the quarter and nine months ended May 31, 2015. Oramed is a clinical-stage pharmaceutical company developing oral insulin (ORMD-0801) and oral exenatide (ORMD-0901). It had generated no operating revenue.
Financial performance and position
| Metric (USD thousands, except per-share data) | Three months ended May 31, 2015 | Nine months ended May 31, 2015 |
|---|---|---|
| Revenue | None | None |
| Research and development expense, net | $915 | $3,353 |
| General and administrative expense | $719 | $1,857 |
| Operating loss | $1,634 | $5,210 |
| Net financial income | $51 | $94 |
| Net loss | $1,583 | $5,116 |
| Basic and diluted loss per share | $0.15 | $0.48 |
For the nine months, operating cash use was $3.917 million; investing activities provided $1.173 million and financing activities provided $4.841 million. Cash and cash equivalents increased by $2.085 million to $3.847 million.
At May 31, 2015, total assets were $22.129 million, current assets $17.303 million, current liabilities $765,000, and working capital $16.538 million. Cash, short-term deposits, long-term deposits and marketable securities totaled about $21.96 million; some funds were held in deposits rather than cash. Total liabilities were $802,000. The filing reports no borrowing or interest-bearing debt. Stockholders’ equity was $21.327 million.
Operating margins are not meaningful because the company had no revenue. The nine-month net loss included $1.029 million of stock-based compensation.
Changes versus comparable periods
- Nine-month net loss increased to $5.116 million from $4.067 million; R&D expense rose 33% to $3.353 million, mainly reflecting preparation for the ORMD-0801 Phase IIb trial. G&A increased 6% to $1.857 million, largely due to higher stock-based compensation.
- For the quarter, net loss narrowed to $1.583 million from $1.828 million. R&D expense fell 16% and G&A fell 12%, primarily because of lower stock-based compensation.
- Nine-month net financial income declined to $94,000 from $190,000, including no gain on securities sales versus an $80,000 gain in the prior-year period. Other comprehensive loss was $289,000, mainly reflecting a decline in the fair value of D.N.A Biomedical shares.
- Working capital fell from $20.805 million at August 31, 2014, primarily because a portion of offering proceeds was placed in long-term deposits. Net proceeds of $4.833 million from a November 2014 share issuance supported financing during the period.
Outlook, risks and notable items
- Management’s planned expenditure estimate for the 12 months beginning June 1, 2015 was $11.56 million: $9.42 million for R&D, $2.24 million for G&A, offset by estimated net financial income of $100,000. Management expected current resources and financing, including a subsequent offering, to support planned activities for at least 12 months; additional funding may be needed, and there is no assurance it can be obtained.
- After quarter-end, the company closed a registered direct offering on June 10, 2015, selling 714,286 shares at $7.50 per share for approximately $4.9 million net. Investors also received rights to buy additional shares at $10 per share during a future exercise period. The offering adds cash but dilutes shareholders.
- Management reported ORMD-0801 Phase IIb enrollment underway in June 2015, with the last patient’s completion anticipated in calendar Q2 2016. A glucose-clamp study was expected to finish in calendar Q4 2015. For ORMD-0901, the company projected an ex-U.S. Phase Ib start in calendar Q3 2015 and a U.S. Phase II study in calendar Q2 2016.
- Key risks include clinical and regulatory uncertainty, the absence of revenue, continued operating losses, substantial development costs, and dependence on future financing. The Phase IIb CRO agreement had an estimated total cost of $3.29 million, with $768,000 recognized by May 31, 2015. Certain development-vendor agreements also included milestone payments, including potential bonuses of up to $600,000.
- The company had royalty obligations tied to future product sales under Israeli grant programs; it reported no royalty liability because it had no relevant sales. Management stated there were no material off-balance-sheet arrangements and that disclosure controls were effective.
Important facts for investors to verify
- Progress, safety and efficacy results for the ORMD-0801 trials, and whether stated timelines are achieved.
- Whether cash, deposits and subsequent offering proceeds are sufficient for planned spending, and the timing and terms of any additional financing.
- Actual clinical-trial and manufacturing costs compared with the $11.56 million expenditure plan and contractual commitments.
- Potential dilution from future equity issuance, including the outstanding share count and exercise of the June offering’s additional-share rights.
- Fair-value changes in the D.N.A Biomedical investment and any resulting effect on comprehensive income and liquidity.