Oramed Pharmaceuticals Inc. — Q2 FY2014 Form 10-Q
Reporting period: Quarter and six months ended February 28, 2014. Oramed is a development-stage pharmaceutical company developing oral insulin and other orally delivered therapies. It reported no operating revenue.
Financial results and position
| Metric | Six months ended Feb. 28, 2014 | Prior-year comparable period |
|---|---|---|
| Revenue | None | None |
| Research and development, net | $1.424 million | $1.142 million |
| General and administrative | $0.930 million | $0.850 million |
| Net loss | $2.239 million | $2.185 million |
| Basic and diluted loss per share | $0.26 | $0.31 |
| Operating cash used | $2.231 million | $2.066 million |
| Cash from financing activities | $16.495 million | $1.451 million |
For the three months ended February 28, 2014, net loss was $1.115 million versus $1.226 million in the prior-year quarter; R&D was $0.673 million versus $0.749 million, and G&A was $0.512 million versus $0.511 million. Profitability and operating margins are not applicable because the company had no revenue.
At February 28, 2014, assets totaled $23.710 million, including cash and equivalents of $3.253 million, short-term deposits of $18.634 million, and marketable securities of $1.464 million. Current liabilities were $0.350 million; current assets were $23.687 million. Stockholders’ equity was $23.328 million. The balance sheet reports no interest-bearing debt; liabilities primarily comprise payables and accrued expenses. The filing cautions that marketable securities may not be readily saleable at their stated value or all at once.
Cash and equivalents increased by $0.981 million from August 31, 2013. Investing activities used $13.293 million, primarily reflecting purchases of short-term deposits, while financing activities provided $16.495 million. The December 2013 registered offering of 1.58 million shares at $10 per share generated approximately $14.887 million net of fees; warrant and option exercises also generated cash. Shares outstanding were 9.776 million at February 28 and 9.943 million as of April 8, 2014.
Changes, outlook, and risks
- Six-month R&D and G&A expenses increased year over year, and net loss rose modestly. Management attributed higher R&D costs mainly to additional staff, employee bonuses, and stock compensation. Lower warrant-related financial expense and increased interest income helped offset expense growth.
- Management estimated approximately $12 million would be needed to finance activities in the 12 months following February 28. Its detailed spending plan for the 12 months beginning March 1 totals $11.817 million: $9.206 million for net R&D, $2.738 million for G&A, partly offset by $0.127 million of net financial income. Management expected to seek additional financing and grants; it said funding was not assured.
- Oramed reported successful results from a Phase 2a insulin study in type 2 diabetes patients, with no serious adverse events reported. It anticipated starting a Phase 2b trial in the third quarter of calendar 2014. A Phase 2a type 1 diabetes study began in March 2014. For oral exenatide, the company expected a non-U.S. Phase 1a trial and IND-enabling studies to begin in the third quarter of calendar 2014.
- Key risks include clinical-trial outcomes, regulatory approvals, the time and cost to develop products, and the ability to secure financing and further grants. The company had accumulated development-stage losses of $24.363 million and stated that continued operations depended on obtaining sufficient funding until profitability, if achieved.
- Potential future obligations include royalties on sales from Israeli government grants (3%–3.5%, subject to grant-related limits and interest) and Bio-Jerusalem funding (4%, subject to a cap). No royalty liability had been incurred because there were no product sales. The filing also describes clinical-trial, consulting, manufacturing, and lease commitments.
Important facts for investors to verify
- Whether available funding, including deposits and securities, can support the planned clinical program and operating needs without further equity issuance.
- Progress, timing, design, and results of the planned insulin and exenatide trials, and any subsequent FDA or other regulatory feedback.
- Cash burn and actual R&D spending versus the $11.817 million forward spending plan.
- Trading liquidity and potential price volatility of the D.N.A Biomedical Solutions shares, which represented approximately 10.3% ownership at February 28.
- Potential dilution from share issuances, warrant and option exercises, and future financing; the filing reports significant equity issuance during the period.