Oramed Pharmaceuticals Inc. — Form 10-Q Summary
Reporting period: Quarter and six months ended February 28, 2015. All financial amounts below are in U.S. dollars, thousands, unless stated otherwise. Oramed is a development-stage pharmaceutical company focused on oral insulin and other orally delivered polypeptides; it reported no operating revenue.
Financial performance
| Metric | Six months ended Feb. 28, 2015 | Comparable 2014 period | Quarter ended Feb. 28, 2015 | Comparable 2014 quarter |
|---|---|---|---|---|
| R&D expense, net | $2,438 | $1,424 | $1,136 | $674 |
| General and administrative expense | $1,138 | $930 | $538 | $512 |
| Operating loss | $3,576 | $2,354 | $1,674 | $1,186 |
| Net financial income | $43 | $115 | $37 | $71 |
| Net loss | $3,533 | $2,239 | $1,637 | $1,115 |
| Basic and diluted loss per share | $0.34 | $0.26 | $0.15 | $0.12 |
Margins are not meaningful because the company had no operating revenue. Six-month comprehensive loss was $3,885, including $352 of other comprehensive loss, primarily reflecting a decline in the fair value of D.N.A Biomedical Solutions shares.
Cash, liquidity and capitalization
- At February 28, 2015, cash and cash equivalents were $1,102; short-term deposits $16,351; long-term deposits and investments $4,665; and marketable securities $695. Total assets were $22,980.
- Current assets were $18,295 and current liabilities $605, yielding working capital of $17,690, versus $20,805 at August 31, 2014. Management attributed the decline primarily to placing part of the November 2014 financing proceeds in long-term deposits.
- Six-month operating cash use was $3,003; investing cash use was $2,477; financing cash provided was $4,841. Cash and cash equivalents decreased by $660 to $1,102.
- The balance sheet shows no borrowings or other interest-bearing debt. Accumulated losses were $31,353. The company raised approximately $4,833 net from issuing shares in November 2014.
- Management estimates approximately $10.2 million in expenditures for the 12 months beginning March 1, 2015: $7.933 million for R&D, net of grants, and $2.268 million for general and administrative expenses.
Material changes and notable items
- Six-month R&D expense rose 71% year over year, primarily due to preparations for the planned Phase IIb oral-insulin trial. Quarterly R&D expense increased 69%.
- Six-month G&A expense increased 22%, mainly because stock-based compensation rose to $272 from $38. Six-month total stock-based compensation was $564, compared with $333 in the prior-year period.
- Net financial income fell to $43 from $115 for the six-month period, partly because of lower foreign-exchange-related income and no comparable realized gain on marketable securities.
- Oramed held approximately 9.8% of D.N.A Biomedical Solutions at period-end. Its shares had a $343 unrealized loss for the six months, recorded in other comprehensive income.
- After quarter-end, on April 2, 2015, Oramed entered an at-the-market sales agreement allowing it to sell up to $25 million of common stock, with a 3% sales commission. No shares had been sold under the agreement as of the filing.
Outlook, risks and commitments
- Management expected to maintain planned development activities for at least the next 12 months based on available resources and commitments, but cautioned that additional financing could be needed if expenses rise unexpectedly. The company anticipates seeking further financing; success is not assured.
- The company planned to initiate a roughly 180-patient, 28-day Phase IIb U.S. trial of oral insulin for type 2 diabetes in Q2 2015, with the last patient expected to complete before year-end 2015. A glucose-clamp study was also underway, with completion anticipated in Q4 2015.
- For oral exenatide (ORMD-0901), management expected non-U.S. Phase Ib trials and IND-enabling studies to begin in Q2 2015, followed by a planned U.S. Phase II multicenter study in Q1 2016.
- Clinical progress and commercialization depend on trial outcomes, regulatory approvals, and adequate financing. The filing states there is no assurance of approval or that revenues will become sufficient to support operations.
- Committed CRO costs included approximately $3.290 million for the planned Phase IIb trial, of which $761 had been recognized by February 28, 2015. Additional manufacturing and clinical-study agreements were also disclosed. Government-grant royalties may be payable on future product sales; no royalty liability had been incurred because there were no product revenues.
Important facts for investors to verify
- Whether planned clinical trials began on schedule and whether results support continued development.
- Actual cash burn and remaining liquid resources, including the maturity and availability of bank deposits.
- Whether the company uses the $25 million ATM facility or obtains other financing, and the resulting dilution.
- Changes in R&D commitments, grant funding, regulatory requirements, or trial timelines.
- The performance and valuation of the D.N.A Biomedical Solutions investment and its impact on comprehensive income.