Oramed Pharmaceuticals Inc. (NASDAQ:ORMP) is a clinical-stage pharmaceutical company at the forefront of developing innovative oral drug delivery platforms. Founded in 2002, the company has established itself as a pioneer in the field of oral protein delivery, with a core focus on transforming injectable treatments into convenient, orally administered formulations.
Company Background
Oramed’s journey began on April 12, 2002, when it was incorporated as a Delaware corporation with the goal of developing innovative pharmaceutical solutions, including an orally ingestible insulin capsule for the treatment of individuals with diabetes. This vision led to the development of the company’s proprietary Protein Oral Delivery (POD™) technology, which aims to overcome the challenges associated with the oral administration of sensitive therapeutic compounds.
Lead Product and Clinical Trials
The company’s lead product candidate, ORMD-0801, an oral insulin capsule, has been the primary focus of Oramed’s research and development efforts. On January 11, 2023, Oramed announced that its Phase 3 oral insulin trial ORA-D-13-1 did not meet its primary or secondary endpoints. As a result, the company terminated this trial and a parallel Phase 3 trial, ORA-D-13-2. This was considered a triggering event, and Oramed evaluated all of its long-lived assets, but concluded that no impairment was required. However, Oramed’s subsequent analysis of the trial data revealed that specific subsets of patients, characterized by factors such as body mass index (BMI), baseline HbA1c, and age, exhibited a statistically significant reduction in HbA1c levels. Leveraging these insights, the company has submitted a new Phase 3 clinical trial protocol, ORA-D-13-3, to the U.S. Food and Drug Administration (FDA).
Product Pipeline
In addition to its oral insulin program, Oramed has expanded its pipeline to explore the potential of its POD™ technology in the development of oral formulations for other macromolecules, including exenatide, a GLP-1 receptor agonist, and various vaccines. The company’s diversified pipeline underscores its commitment to addressing unmet medical needs and transforming the delivery of therapeutic treatments.
Strategic Partnerships
Oramed’s strategic partnerships have been instrumental in advancing its technology and expanding its reach. In March 2021, the company established a joint venture called Oravax Medical Inc. to commercialize oral vaccines for COVID-19 and other novel coronaviruses. Oramed holds a 63% ownership stake in Oravax. The oral vaccine is based on Premas Biotech’s proprietary vaccine technology involving a triple antigen virus like particle.
More recently, in January 2024, Oramed entered into a joint venture agreement with Hefei Tianhui Biotech Co., Ltd. (HTIT Biotech) and Technowl Limited, a wholly-owned subsidiary of HTIT Biotech. This partnership aims to leverage Oramed’s oral drug delivery technology and HTIT Biotech’s manufacturing capabilities to develop and commercialize innovative products globally. The joint venture is expected to conduct a Phase 3 oral insulin clinical trial in the United States.
Financials
Oramed’s financial position has been strengthened by the company’s strategic transactions, which have provided access to capital and potential revenue streams. In 2023, Oramed entered into a $101.88 million senior secured promissory note agreement with Scilex Holding Company, a transaction that included the issuance of warrants to purchase Scilex’s common stock. In 2024, Oramed further restructured its relationship with Scilex, exchanging a portion of the promissory note for a new tranche of senior secured convertible notes and warrants, while also acquiring the right to receive a percentage of Scilex’s net sales for certain products.
For the fiscal year 2023, Oramed reported revenue of $1.34 million, net income of $5.53 million, operating cash flow of -$10.30 million, and free cash flow of -$10.55 million. However, the most recent quarter (Q3 2024) saw a significant decline in financial performance, with no revenue reported and a net loss of $19.62 million. The operating cash flow for Q3 2024 was -$7.10 million, and free cash flow was -$7.11 million. This decrease in revenue and net income compared to the prior year quarter was primarily due to the termination of the ORA-D-13-1 and ORA-D-13-2 Phase 3 trials for the oral insulin program.
For the nine months ended September 30, 2024, Oramed did not generate any revenues, compared to $1.34 million in the same period of 2023. Research and development expenses decreased by 33% to $4.86 million, while general and administrative expenses decreased by 32% to $4.32 million. The company reported a net loss of $8.90 million for the nine-month period, compared to a net loss of $8.21 million in the prior year period.
Liquidity
As of September 30, 2024, Oramed reported a strong cash and cash equivalents position of $42.10 million, along with short-term deposits of $42.74 million and investments at fair value of $57.45 million. The company’s current assets totaled $142.77 million, while its current liabilities stood at $5.27 million, resulting in a substantial working capital surplus of $137.50 million. This robust financial standing provides Oramed with the resources necessary to advance its research and development initiatives, explore strategic opportunities, and navigate the evolving pharmaceutical landscape.
Oramed’s debt-to-equity ratio as of September 30, 2024, was 0.03, indicating a low level of leverage. The company had a current ratio and quick ratio of 2.25, further demonstrating its strong liquidity position. In August 2023, Oramed borrowed $99.55 million in short-term loans to fund the Tranche A Note as part of the 2023 Scilex transaction. As of September 30, 2024, Oramed has repaid the entire $99.55 million in short-term borrowings.
Scilex Transaction and Joint Venture
In September 2023, Oramed entered into and consummated the 2023 Scilex Transaction, which included the issuance of a senior secured promissory note from Scilex Holding Company with a principal amount of $101.88 million, as well as warrants to purchase up to 4.5 million shares of Scilex common stock with an exercise price of $0.01 per share. As of September 30, 2024, Scilex has repaid $41.70 million of the amount due under the note, and 4.5 million Closing Penny Warrants and 2.0 million Subsequent Penny Warrants are exercisable.
On October 7, 2024, Oramed entered into a securities purchase agreement with Scilex and certain institutional investors to refinance a portion of the Tranche A Note and pay off certain other Scilex indebtedness. Oramed acquired a $25 million Tranche B Note and 3.75 million Tranche B Warrants in the transaction.
Conclusion
Oramed’s commitment to innovation and its focus on transforming the delivery of therapeutic treatments have positioned the company for potential transformative growth. With a diversified pipeline, strategic partnerships, and a strong financial foundation, Oramed is poised to capitalize on the significant market opportunities presented by the oral delivery of proteins and other macromolecules. Despite recent setbacks in its Phase 3 oral insulin trials, the company’s subsequent analysis has revealed promising results in specific patient subpopulations, leading to the submission of a new Phase 3 clinical trial protocol to the FDA.
The company’s strong liquidity position, with low debt levels and substantial cash reserves, provides financial flexibility to continue the development of its oral insulin program and pursue strategic opportunities. However, the termination of the initial Phase 3 oral insulin trials has led to a significant reduction in research and development activities as Oramed evaluates its options and conducts a strategic review.
As Oramed continues to execute on its strategic priorities, including the newly formed joint venture with HTIT Biotech, investors will closely follow the company’s progress and the potential impact of its innovative technologies on the pharmaceutical industry. The success of the planned Phase 3 oral insulin clinical trial in the United States, as well as the development of other products based on Oramed’s POD technology, will be critical factors in determining the company’s future growth and market position.
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