Oramed Pharmaceuticals Inc. (NASDAQ:ORMP) is a pharmaceutical company engaged in the research and development of innovative oral drug delivery solutions, with a primary focus on its oral insulin capsule technology. The company has faced both successes and setbacks in its pursuit of bringing its flagship product, ORMD-0801, to market, but remains committed to enhancing value for its shareholders through strategic initiatives.
Business Overview
Oramed has developed an oral dosage form intended to withstand the harsh environment of the stomach and effectively deliver active biological insulin or other proteins. The excipients in the formulation are not intended to modify the proteins chemically or biologically, and the dosage form is designed to be safe to ingest. The company's technology platform allows for the oral delivery of therapeutic proteins, which could potentially revolutionize the treatment of conditions such as diabetes.
Oral Insulin for Type 2 Diabetes
Oramed's primary focus has been on the development of its oral insulin capsule, ORMD-0801, for the treatment of type 2 diabetes. The company conducted the ORA-D-013-1 Phase 3 trial on patients with type 2 diabetes who had inadequate glycemic control and were on two or three oral glucose-lowering agents. The primary endpoint of the trial was to evaluate the efficacy of ORMD-0801 compared to placebo in improving glycemic control as assessed by HbA1c, with a secondary efficacy endpoint of assessing the change from baseline in fasting plasma glucose at 26 weeks.
In January 2023, Oramed announced that the ORA-D-013-1 Phase 3 trial did not meet its primary or secondary endpoints. Following these results, the company also terminated the ORA-D-013-2 Phase 3 trial, a second Phase 3 trial that included type 2 diabetes patients with inadequate glycemic control who were attempting to manage their condition with either diet alone or with diet and metformin.
Comprehensive Data Analysis and New Phase 3 Trial
Despite the disappointing results of the initial Phase 3 trials, Oramed has not given up on its oral insulin technology. In 2023, the company completed a comprehensive analysis of the data from the ORA-D-013-1 Phase 3 trial and found that subpopulations of patients with specific parameters, such as body mass index (BMI), baseline HbA1c, and age, responded well to oral insulin. These subsets exhibited a statistically significant, over 1% placebo-adjusted reduction in HbA1c.
Based on this analysis, Oramed is now working on a protocol for a new Phase 3 clinical trial to be submitted to the U.S. Food and Drug Administration (FDA). The company believes that by targeting specific patient subgroups, it can improve the chances of success for its oral insulin technology.
Joint Venture Agreement with HTIT Biotech
In January 2024, Oramed and its wholly-owned subsidiary, Oramed Ltd., entered into a joint venture agreement with Hefei Tianhui Biotech Co., Ltd. (HTIT Biotech) and Technowl Limited, a wholly-owned indirect subsidiary of HTIT Biotech. The joint venture will focus on the development and worldwide commercialization of innovative products based on Oramed's oral insulin and POD™ (Protein Oral Delivery) pipeline, as well as HTIT's manufacturing capabilities and technologies.
Under the terms of the agreement, Oramed and HTIT Biotech will initially hold equal shares in the joint venture, with each owning 50% of the equity. HTIT Biotech will contribute $70 million in cash to the joint venture, while Oramed will contribute $20 million (comprised of $10 million in cash and $10 million in shares of Oramed common stock) and will transfer intellectual property related to its oral insulin and POD™ technology, as well as other assets in the Oramed pipeline. Oramed will be entitled to receive a 3% royalty on gross revenues of the joint venture generated from Oramed-related assets.
The consummation of the joint venture agreement is subject to the parties entering into additional agreements within a three-month period, including an asset transfer agreement, a commercial supply agreement, and other documents to regulate the relationship of the parties and the joint venture. There is no assurance that the parties will complete and sign these additional agreements within the agreed timeline or at all.
Oral Vaccine for COVID-19
In addition to its work on oral insulin, Oramed has also been involved in the development of an oral vaccine for COVID-19 and other novel coronaviruses. In March 2021, the company entered into a license agreement with Oravax Medical Inc. (Oravax), a 63% owned joint venture, to commercialize oral vaccines based on Premas Biotech Pvt. Ltd.'s proprietary vaccine technology.
In October 2022, Oravax reported positive preliminary Phase 1 data for Cohort A of a Phase 1 clinical trial, meeting primary or secondary endpoints of safety and immunogenicity. These results included significant antibody response as measured by multiple markers of immune response to virus-like particle vaccine antigens observed in the majority of the patients dosed, and no safety issues were observed. Cohort B completed dosing in January 2023, with positive Immunoglobulin G (IGG) results against the spike (S) protein in approximately 55% of the patients dosed. Oramed is currently evaluating its path forward for Oravax's oral vaccines for COVID-19.
Scilex Transaction and Investments
In September 2023, Oramed entered into and consummated a transaction with Scilex Holding Company (Scilex), a subsidiary of Sorrento Therapeutics, Inc. Pursuant to the transaction, Scilex issued to Oramed a Senior Secured Promissory Note due 18 months from the date of issuance in the principal amount of $101.875 million, as well as warrants to purchase up to an aggregate of 13 million shares of Scilex common stock.
The transaction also included the transfer of certain outstanding warrants to purchase up to an aggregate of 4 million shares of Scilex common stock with an exercise price of $11.50 per share. Oramed accounted for the transaction, including the note and warrants, at fair value, which resulted in a gain of $3.552 million during the first quarter of 2024.
As of March 31, 2024, the fair value of the transaction was $98.741 million, split between the note ($77.733 million), the warrants ($19.544 million), and the transferred warrants ($1.464 million). The company received the first principal payment of $5 million on December 21, 2023, and the second principal payment of $15 million prior to March 21, 2024. On May 2, 2024, Oramed received an additional payment of approximately $9.6 million from Scilex in accordance with the mandatory prepayment requirements under the note.
Financials
For the fiscal year ended December 31, 2023, Oramed reported annual net income of -$37.764 million, annual revenue of $2.703 million, annual operating cash flow of -$27.918 million, and annual free cash flow of -$28.414 million. The company's financial performance has been impacted by the termination of the ORA-D-013-1 and ORA-D-013-2 Phase 3 trials, as well as the ongoing research and development efforts for its oral insulin and oral vaccine technologies.
In the first quarter of 2024, Oramed reported revenues of $0 million, compared to $0.666 million in the same period of the previous year. Research and development expenses decreased by 73% to $1.179 million, while general and administrative expenses increased by 41% to $1.783 million. The company reported net income of $1.534 million for the first quarter of 2024, compared to a net loss of $3.611 million in the same period of the previous year.
As of March 31, 2024, Oramed had $18.576 million in cash and cash equivalents, $80.285 million in short-term deposits, and $77.733 million in investments at fair value. The company's total current assets were $177.095 million, and its total current liabilities were $33.556 million, resulting in a working capital surplus of $143.539 million.
Risks and Challenges
Oramed faces several risks and challenges in its pursuit of bringing its oral insulin and oral vaccine technologies to market. The failure of the ORA-D-013-1 and ORA-D-013-2 Phase 3 trials for its oral insulin capsule was a significant setback, and the company's ability to successfully develop and obtain regulatory approval for a new Phase 3 trial is not guaranteed.
Additionally, the company's joint venture agreement with HTIT Biotech is subject to the successful completion of additional agreements within a three-month period, as well as the satisfaction of certain closing conditions. If the parties are unable to finalize the necessary agreements or meet the closing conditions, the joint venture may not be consummated.
Oramed also faces competition from other companies developing oral insulin and oral vaccine technologies, as well as the potential for regulatory hurdles and reimbursement challenges. The company's reliance on third-party suppliers for raw materials and manufacturing could also pose risks to its operations.
Outlook
Despite the challenges it has faced, Oramed remains committed to advancing its oral insulin and oral vaccine technologies. The company's comprehensive analysis of the ORA-D-013-1 Phase 3 trial data and its plans to initiate a new Phase 3 trial for its oral insulin capsule demonstrate its determination to find a path forward for this promising technology.
The joint venture agreement with HTIT Biotech also represents a strategic opportunity for Oramed to leverage its expertise and intellectual property, while benefiting from HTIT's manufacturing capabilities and financial resources. If the joint venture is successfully consummated, it could provide a significant boost to the company's long-term prospects.
Oramed's investment in Scilex and the associated note and warrants also provide the company with additional financial resources and potential upside, though the ultimate value of these investments will depend on Scilex's ability to repay the note and the performance of its common stock.
Conclusion
Overall, Oramed Pharmaceuticals remains a company with significant potential, but one that must navigate a challenging regulatory landscape and competitive environment. The company's ability to successfully develop and commercialize its oral insulin and oral vaccine technologies will be crucial in determining its long-term success and its ability to enhance value for its shareholders.