Oramed Pharmaceuticals Inc. — FY2018 Form 10-K Summary
Reporting period: Fiscal year ended August 31, 2018; this is an annual filing, not a report for calendar 2018 Q4. Amounts below are U.S. dollars unless stated otherwise.
Business context
Oramed is a development-stage pharmaceutical company focused on oral delivery of insulin (ORMD-0801) and other proteins. It had no product sales; reported revenue primarily reflects recognition over time of payments under its China license agreement with HTIT.
Key financial metrics
| Metric | FY2018 | FY2017 |
|---|---|---|
| Revenue | $2.449 million | $2.456 million |
| Research and development expense | $11.979 million | $10.281 million |
| General and administrative expense | $4.083 million | $2.759 million |
| Operating loss | $13.527 million | $10.771 million |
| Net loss | $12.727 million | $10.480 million |
| Basic and diluted loss per share | $0.86 | $0.79 |
| Cash used in operating activities | $14.657 million | $5.831 million |
| Cash and cash equivalents | $4.996 million | $3.969 million |
| Working capital | $26.484 million | $15.132 million |
| Total assets | $47.397 million | $38.712 million |
| Stockholders’ equity | $31.112 million | $19.238 million |
At year-end, short- and long-term deposits totaled approximately $34.416 million, and marketable securities totaled $7.377 million. Current assets were $31.037 million against current liabilities of $4.553 million. The filing reports no interest-bearing debt; liabilities included deferred revenue, payables and other obligations. Profit margins were not meaningful given ongoing losses and the absence of product revenue.
Changes versus the prior year
- Revenue was nearly unchanged, down about 0.3%; it is license revenue recognized over time, not sales of marketed products.
- R&D expense rose 16.5%, mainly reflecting the Phase IIb dose-ranging trial, clamp study and oral leptin development.
- G&A expense rose 48%, including higher stock-based compensation and approximately $430,000 of CEO relocation expenses.
- Net loss increased about 21%; operating cash use rose substantially. Financing activities provided $22.654 million, including approximately $16.484 million net proceeds from a July 2018 registered offering.
- Common shares outstanding increased from 13.669 million to 17.370 million during the year, primarily reflecting equity financing.
Outlook, risks and notable items
- ORMD-0801: a 90-day Phase IIb dose-ranging study in approximately 285 patients with type 2 diabetes began in April 2018. Type 1 diabetes clamp and food-effect studies also began during the year. Management’s further-development plans depend on trial results.
- ORMD-0901 oral GLP-1: the FDA cleared its IND in September 2018, after fiscal year-end; management expected a Phase I study to begin in Q1 2019.
- Post-year-end developments: an exploratory ORMD-0801 study in NASH began in October 2018. Management also projected a 2019 proof-of-concept study for an oral leptin candidate.
- The FDA advised that ORMD-0801’s U.S. regulatory pathway would be a BLA. Elsewhere, the filing refers to an expected NDA, so the stated application pathway should be verified. The filing’s projected development dates are contingent on clinical and regulatory progress.
- Management believed available resources and commitments could support planned activity for at least 12 months and beyond, but warned additional financing might be needed. Oramed has a history of losses, expects continued losses, and may need substantial additional capital.
- HTIT’s license covers China, Macau and Hong Kong, with potential aggregate payments of approximately $37.5 million and 10% royalties on net sales, subject to conditions and possible rate reductions. Oramed had received $17.5 million in milestone payments through year-end; future payments depend on milestones, third parties and regulatory approvals.
- Contractual obligations totaled $14.316 million, including $8.044 million for clinical research and $5.742 million for purchase and technology-transfer commitments, all listed as due within one year.
- Key risks include clinical-trial failure or delay, regulatory approval and manufacturing uncertainty, reliance on suppliers and partners, future financing and dilution, competition, patent protection, and foreign-exchange exposure. The company said it did not hedge currency risk and was not party to material legal proceedings.
- The auditor issued an unqualified opinion on the financial statements. Management concluded disclosure controls and internal control over financial reporting were effective as of August 31, 2018.
Important facts for investors to verify
- Latest enrollment, completion timing and results for the ORMD-0801 Phase IIb trial, and whether the data support further pivotal studies.
- The definitive FDA submission pathway for ORMD-0801 (BLA versus the filing’s separate NDA reference) and the current regulatory timeline.
- Cash burn, committed clinical and vendor spending, financing needs and the assumptions behind management’s stated runway.
- Remaining HTIT milestone conditions, payment timing, royalty terms and progress toward regulatory approval in the licensed territory.
- Potential dilution from outstanding warrants, options and future equity financing; the filing reported 3.008 million warrants outstanding at year-end.