Executive Summary / Key Takeaways

• Oramed Pharmaceuticals is at a critical inflection point, balancing its foundational oral protein delivery technology, particularly for insulin, against recent clinical setbacks and a significant strategic pivot towards financial investments and diversification.
• The core oral insulin program (ORMD-0801), while showing promise in specific patient subpopulations from prior trial analysis, faces uncertainty regarding the initiation of a revised Phase 3 trial due to the current hold on the joint venture with HTIT, primarily impacted by U.S.-China trade tensions.
• Recent financial performance for Q1 2025 reflects increased R&D spending for the paused Phase 3 trial preparation and higher G&A costs, alongside a substantial shift in financial results driven by the revaluation of significant investments, notably in Scilex.
• The company has aggressively pursued a capital allocation strategy through substantial investments in Scilex notes/royalties, real estate loans/acquisitions, and a significant stake in Alpha Tau Medical, aiming to enhance financial flexibility and stockholder value outside of its core R&D pipeline.
• Oramed maintains a strong liquidity position with over $100 million in cash and short-term deposits as of March 31, 2025, which management believes is sufficient to fund planned activities for at least the next 12 months, although the long-term financial trajectory is heavily influenced by both R&D outcomes and the performance of its diverse investment portfolio.

The Quest for Oral Delivery: Oramed's Foundational Ambition

Oramed Pharmaceuticals was founded in 2002 with a singular, ambitious goal: to revolutionize drug delivery by enabling the oral administration of therapeutic proteins that traditionally require injection. At the heart of this mission lies the company's proprietary Protein Oral Delivery (POD) technology. This platform is designed to overcome the significant biological barriers in the gastrointestinal tract that typically degrade proteins before they can be absorbed into the bloodstream. By protecting the protein and enhancing its passage through the gut wall, Oramed aims to offer patients a more convenient, less invasive, and potentially more compliant treatment option.

The initial and most prominent application of this technology has been ORMD-0801, an oral insulin capsule developed for the treatment of diabetes. The potential benefits of an effective oral insulin are substantial, promising improved patient quality of life by eliminating painful injections and potentially leading to better adherence and glycemic control. Early clinical inferences from Oramed's work suggested the technology could offer enhanced bioavailability compared to traditional oral methods, although specific quantitative metrics on this advantage over alternatives like inhaled insulin (e.g., MannKind's Afrezza) or injectable insulins (from giants like Novo Nordisk or Eli Lilly) have been challenging to definitively quantify across broad patient populations in late-stage trials. The strategic intent, however, remains clear: leverage the POD technology to capture market share by addressing the significant unmet need for non-injectable protein therapies.

Navigating a Shifting Landscape: Setbacks and Strategic Pivots

Oramed's journey has not been without significant challenges. A major setback occurred in January 2023 when the ORA-D-13-1 Phase 3 trial for oral insulin in type 2 diabetes patients failed to meet its primary and secondary endpoints. This led to the termination of that trial and a parallel Phase 3 study. While a detailed analysis of the trial data later revealed that specific subpopulations of patients, defined by parameters like BMI, baseline HbA1c, and age, did show a statistically significant reduction in HbA1c (over 1% placebo adjusted), the initial broad failure necessitated a strategic re-evaluation.

In response to this pivotal moment, Oramed embarked on a dual-pronged strategy. First, it sought to refine its core oral insulin program, submitting a protocol for a revised Phase 3 trial (ORA-D-13-3) focused specifically on the patient subpopulations that demonstrated a positive response. Second, and perhaps more significantly, the company initiated a broad evaluation of potential strategic opportunities aimed at enhancing stockholder value, leading to a series of substantial financial investments and diversification efforts.

Diversification and Investment Strategy

Over the past year, Oramed has actively deployed capital into a diverse portfolio of investments, signaling a strategic shift beyond its historical pure-play R&D focus. A significant component of this strategy involves investments in Scilex Holding Company (SCLX). Through the 2023 Scilex Transaction and the 2024 Refinancing, Oramed acquired senior secured promissory notes (Tranche A and Tranche B), warrants, and royalty rights related to Scilex's pain management and gout/migraine products (ZTlido, SP-103, Gloperba, Elyxyb). As of March 31, 2025, the fair value of these Scilex-related investments totaled approximately $29.7 million. This complex arrangement includes Oramed holding a 50% equity interest in RoyaltyVest Ltd., a joint venture established with other investors to manage certain ex-U.S. product rights and royalties from Scilex assets.

Beyond Scilex, Oramed has also ventured into real estate investments and other strategic equity stakes. The Board approved increasing the allocation for real estate investments to up to $30 million, citing attractive market prospects and the goal of long-term value appreciation and potential income streams. This has materialized in specific transactions, including a profit-sharing loan agreement for a real estate project ($1.52 million loan principal, with potential for 20% annual interest or 40% of profits), the acquisition of land in Israel ($1.59 million total purchase price, with $1.22 million paid by May 2025), and significant loan agreements totaling $27.65 million for real estate assets in Jerusalem, bearing a 12% annual interest rate. Subsequent to the quarter end, these real estate loan payments were made.

Most recently, in April 2025, Oramed made a substantial $36.9 million strategic investment in Alpha Tau Medical Ltd. (NASDAQ: DRTS), a company focused on alpha-radiation cancer therapy. This investment included acquiring a significant shareholding and entering into a strategic collaboration agreement, positioning Oramed to leverage its capital markets expertise while aligning with another company focused on innovative delivery methods. These diverse investments reflect Oramed's strategic intent to utilize its capital base to generate returns and enhance financial flexibility while its core pipeline progresses.

Core Pipeline at a Standstill: The HTIT Joint Venture Uncertainty

Despite the strategic diversification, the future of Oramed's flagship oral insulin program, ORMD-0801, remains central to its long-term value proposition. The company had planned to advance the revised Phase 3 trial (ORA-D-13-3) through a joint venture with Hefei Tianhui Biotech Co., Ltd. (HTIT), forming OraTech Pharmaceuticals, Inc. This partnership was envisioned to combine Oramed's technology and funding with HTIT's manufacturing capabilities, creating a dedicated entity with the resources and production capacity to bring oral insulin to market. The JV agreement, amended in February 2025, outlined initial investments of $40 million from HTIT and $7.5 million from Oramed into OraTech, with a planned spin-off of OraTech shares to Oramed's shareholders.

However, the closing of this crucial joint venture is currently on hold. The primary impediment stems from ongoing U.S.-China trade tensions, which have reportedly prevented HTIT from obtaining the necessary regulatory approvals to fulfill its capital contribution and other closing obligations. These delays have also raised concerns about HTIT's ability to provide essential supply and manufacturing support in the near term. Consequently, Oramed has paused its plans to initiate the U.S. Phase 3 clinical trial for ORMD-0801, pending clarity on the JV's status. The company is now evaluating whether a modified structure with HTIT is feasible under the current conditions and concurrently exploring alternative partners and pathways to advance the program independently. This uncertainty casts a shadow over the timeline and execution of the oral insulin program.

Oramed also holds a 63% stake in Oravax Medical Inc., a joint venture focused on oral vaccines for COVID-19 and other coronaviruses. While Oravax reported positive preliminary Phase 1 data in 2022 and 2023, Oramed is currently evaluating the path forward for this program.

Financial Snapshot: Investments Drive Recent Results

Oramed's financial performance for the three months ended March 31, 2025, reflects both its ongoing R&D efforts and the increasing impact of its investment strategy. The company reported $2.0 million in revenue, primarily from the HTIT License Agreement following a waiver of claims related to the JV, compared to no revenue in the prior-year period. Cost of revenues was $1.987 million, largely due to a $2.046 million payment to the Israel Innovation Authority to facilitate the transfer of technology to OraTech, partially offset by an expense reversal.

Research and development expenses increased significantly by 87% to $2.21 million, up from $1.18 million in the same period last year. This rise was mainly attributed to preparations for the new Phase 3 clinical trial protocol, a contrast to the lower expenses in the prior year following the termination of the earlier Phase 3 trials. General and administrative expenses also increased by 29% to $2.31 million, compared to $1.78 million, primarily due to higher stock-based compensation. These operating expenses resulted in an operating loss of $4.50 million for the quarter, wider than the $2.96 million loss in Q1 2024.

The most notable shift in the financial results came from the net financial income/expenses line. This swung from a $5.09 million income in Q1 2024 to a $2.56 million expense in Q1 2025. This change was primarily driven by the revaluation of the investment in Scilex, partially offset by interest income on deposits and the revaluation of other marketable securities. Despite the operating loss and financial expense, the company reported a net income of $7.64 million for the quarter, compared to $1.53 million in Q1 2024, largely influenced by the complex accounting for its investments. Tax on income of $584,000 was recognized, primarily related to the Scilex transactions.

From a liquidity perspective, Oramed remains well-capitalized. As of March 31, 2025, the company held $74.52 million in cash and cash equivalents and $26.70 million in short-term deposits, totaling over $101 million in readily available funds. Total current assets stood at $131.48 million, significantly exceeding total current liabilities of $5.49 million, resulting in a robust working capital surplus of $125.98 million.

Cash used in operating activities was $3.52 million in Q1 2025, an increase from $1.48 million used in Q1 2024. Investing activities provided $23.62 million, primarily from the redemption of short-term deposits and proceeds from the sale of BioXcel (BTAI) shares by RoyaltyVest. There were no financing activities in the quarter, compared to $19.0 million used in Q1 2024 for debt repayment. Subsequent cash outflows for real estate loans and the Alpha Tau investment represent significant uses of this capital base. Management believes its current cash resources and commitments are sufficient to fund planned activities for at least the next 12 months.

Competitive Positioning and Outlook

Oramed operates in the highly competitive pharmaceutical industry, particularly within the diabetes market, where it faces established giants like Novo Nordisk (NVO), Eli Lilly (LLY), and Sanofi (SNY), as well as niche players like MannKind Corporation (MNKD) in alternative delivery methods. Companies like Novo Nordisk and Eli Lilly command significant market share and boast robust financial performance, with strong revenue growth (25-30% in 2024), high margins (net margins around 25-35%), and substantial cash flow generation. Their scale, global distribution networks, and extensive R&D budgets allow them to dominate the market for injectable insulins and newer GLP-1 agonists. Sanofi, while having slower growth (8% in 2024), maintains a significant presence with established insulin products and manageable debt. MannKind, focused on inhaled insulin, represents a smaller, more R&D-intensive competitor with lower margins.

Oramed's competitive differentiation lies squarely in its proprietary POD technology, offering the potential for a truly oral delivery of proteins like insulin. While precise, quantifiable comparative data across all competitors' technologies is not fully detailed, the strategic value of overcoming the injection barrier is immense for patient compliance and market access. However, Oramed's smaller scale, negative operating cash flow, and reliance on investment returns for profitability starkly contrast with the financial strength and established product portfolios of its larger rivals. Oramed's R&D expenses, while increasing, are a fraction of its large competitors' budgets, and its path to commercialization for its core pipeline faces significant hurdles, as highlighted by the HTIT JV delay.

The outlook for Oramed is heavily dependent on resolving the uncertainty surrounding the HTIT joint venture and the subsequent initiation of the revised Phase 3 trial for ORMD-0801. While the company is exploring alternative pathways, the delay impacts the timeline for its most advanced clinical program. The strategic investments in Scilex, real estate, and Alpha Tau provide a buffer and potential alternative sources of value, but they also introduce new risks related to market fluctuations and the performance of these underlying assets. The company expects R&D expenses to increase as the Phase 3 trial preparations continue, although the ultimate cost burden will depend on whether the trial proceeds through OraTech or an alternative structure.

Key risks include the ongoing U.S.-China trade tensions impacting the HTIT JV, the inherent uncertainties of clinical trials, the ability to secure alternative partnerships if the HTIT JV fails, market risks associated with its diverse investment portfolio, and the need for future financing beyond the current 12-month liquidity horizon if R&D costs escalate significantly without new revenue streams.

Conclusion

Oramed Pharmaceuticals stands at a complex juncture, defined by the long-term promise of its oral protein delivery technology and the immediate realities of clinical trial setbacks and strategic diversification. The core investment thesis hinges on the potential of ORMD-0801 to revolutionize diabetes treatment through oral insulin, a prospect that remains compelling but is currently clouded by the stalled HTIT joint venture and the resulting delay in the pivotal Phase 3 trial.

The company's aggressive pivot towards a diverse investment portfolio, including significant stakes in Scilex and Alpha Tau, alongside real estate ventures, represents a pragmatic approach to capital allocation aimed at generating value and enhancing financial flexibility. While these investments provide a financial cushion and potential alternative returns, they also shift a portion of the company's risk profile towards market-dependent assets. Investors must weigh the significant potential of Oramed's foundational technology and the strategic value of its investment portfolio against the execution risks of its core pipeline, the uncertainty surrounding key partnerships, and the competitive pressures from well-established market leaders. The coming quarters will be critical in determining the path forward for the oral insulin program and the success of the company's broader strategic initiatives.