Oramed Pharmaceuticals Inc. — FY2015 Form 10-K
Reporting period: Fiscal year ended August 31, 2015. Oramed is a pre-revenue pharmaceutical research and development company focused on oral delivery of insulin and other proteins. Amounts below are U.S. dollars unless noted.
Business context and development
- Lead candidate ORMD-0801, an oral insulin capsule, entered an FDA-authorized Phase IIb trial in approximately 180 patients with type 2 diabetes in June 2015. The randomized, double-blind study was planned for 28 days at about 30 U.S. sites; management expected the last patient to complete it in the first quarter of calendar 2016.
- Oramed reported earlier Phase IIa results as showing a favorable safety profile and glucose-related improvements in type 2 diabetes; its type 1 study showed tolerability and directional trends but was not powered for statistical significance.
- ORMD-0901, an oral exenatide/GLP-1 capsule, began a non-FDA-approved type 2 diabetes study in August 2015; completion was expected in the first quarter of calendar 2016. A separate glucose-clamp study of oral insulin was expected to finish in the second quarter of calendar 2016.
- In August 2015, the company agreed to conduct a feasibility study using an international pharmaceutical company’s injectable compound with Oramed’s oral-delivery technology. The study was intended to inform a possible license agreement.
Financial performance and liquidity
| Metric | FY2015 | FY2014 |
|---|---|---|
| Revenue | None generated | None generated |
| Research and development expense, net | $4.781 million | $3.277 million |
| General and administrative expense | $2.602 million | $2.629 million |
| Operating loss | $7.383 million | $5.906 million |
| Net loss | $7.232 million | $5.696 million |
| Basic and diluted loss per share | $0.67 | $0.62 |
| Cash used in operating activities | $4.946 million | $4.068 million |
| Cash used in investing activities | $3.312 million | $13.088 million |
| Cash provided by financing activities | $9.721 million | $16.640 million |
- R&D expense rose 46%, principally reflecting clinical-trial costs and lower recognized Israeli research grants. Net loss increased about 27% year over year.
- At August 31, 2015, cash and cash equivalents were $3.213 million; short- and long-term bank deposits were about $19.945 million; and marketable securities totaled about $3.028 million. Working capital was $15.883 million, versus $20.805 million a year earlier.
- Total assets were $26.354 million, total liabilities approximately $1.526 million, and stockholders’ equity $24.828 million. The filing reports no material debt balance; its disclosed liabilities were primarily accrued expenses, a $500,000 advance under the proposed license, employee-related obligations and tax provisions.
- Operating cash use exceeded the prior year. Financing inflows included approximately $5 million net from a November 2014 private placement and $4.880 million net from the June 2015 offering.
- No meaningful product margins are reported because the company had no revenue. No cash dividends have been paid, and none were expected in the foreseeable future.
Outlook, risks and notable items
- Management estimated approximately $11.150 million in expenditures for the 12 months beginning September 1, 2015: $9.090 million for net R&D and $2.060 million for general and administrative costs. It said available resources and commitments were expected to support planned activities for at least 12 months, while acknowledging possible additional financing needs.
- The company remains loss-making and depends on capital raising, successful clinical development, regulatory approvals and potential commercial partners. There is no assurance that any candidate will prove safe or effective, receive approval, or be commercialized.
- A proposed China transaction with HLST remained non-binding. It contemplated a sale of 1,155,367 shares for approximately $12 million, a territorial oral-insulin license, milestone payments and 10% royalties on net sales. The filing describes the license economics differently in different passages—including approximately $37.5 million in license payments, with $11 million upfront and $26.5 million tied to milestones—and reports a $500,000 non-refundable no-shop fee. The exclusive negotiation period was extended through December 22, 2015; definitive agreements were not yet completed.
- Other material risks include clinical delays or failure, reliance on third-party manufacturers and CROs, uncertain patent protection, competition, need for future capital and dilution, exposure to Israeli political/security conditions, and currency fluctuations. The company did not hedge currency exposure.
- Israeli government research grants carry royalty and know-how transfer restrictions. Oramed reported no contingent liability to the Israeli Office of the Chief Scientist at year-end; royalties would generally be due only on qualifying future product revenue.
- The independent auditor gave an unqualified opinion on the financial statements. Management concluded disclosure controls and internal control over financial reporting were effective as of August 31, 2015.
Key facts for investors to verify
- Current status and results of the ORMD-0801 Phase IIb trial, and whether the expected completion timing was achieved.
- ORMD-0901 and glucose-clamp study results, and whether any additional trials or FDA interactions changed development plans.
- Whether definitive HLST agreements were signed, the final payment schedule and equity terms, and any subsequent cash receipts or milestones.
- Cash, deposits, marketable securities and actual operating cash burn after August 31, 2015; distinguish liquid funds from longer-dated deposits and securities subject to sale limitations.
- Potential dilution from future financing, outstanding options and warrants, and any issuance under the $25 million at-the-market sales agreement.
- Supplier and CRO commitments, patent status, and any changes in grant-related obligations or material contingencies.