Overview of Oramed Pharmaceuticals

Oramed Pharmaceuticals is a pharmaceutical company focused on developing oral delivery solutions for therapeutic proteins. Their technology aims to protect proteins from being broken down in the gastrointestinal tract and allow effective oral delivery.

Key Developments in 2023

In January 2023, Oramed announced that its Phase 3 trial of oral insulin for type 2 diabetes did not meet its primary or secondary endpoints. As a result, a parallel Phase 3 trial was also terminated. However, further analysis identified patient subgroups that responded well to the treatment. Oramed is now working on designing a new Phase 3 trial to submit to the FDA.

In August 2023, Oramed entered into agreements to acquire a stake in Scilex Holding Company, a specialty pharmaceutical company, for $105 million. This included a $100 million loan to Scilex. In September 2023, the deal structure changed - instead of an equity stake, Oramed received debt and warrants from Scilex. This provided Oramed exposure to Scilex’s future growth while reducing near-term cash requirements.

Financial Performance

For the first quarter of 2024, Oramed reported a small net profit of $1.5 million compared to a $3.6 million loss in the first quarter of 2023. Revenues dropped to zero with the conclusion of a licensing deal. Research spending declined by 73% with the termination of Phase 3 trials. These were offset by higher financial income.

Oramed has funded operations through equity issuances, raising $255 million since inception. It had $18.6 million of cash and $80.3 million in short-term bank deposits at the end of March 2024. Based on current resources and spending rates, the company has sufficient capital for at least the next 12 months.

Oral Insulin Program

The Phase 3 trial in patients with type 2 diabetes taking oral medications did not meet its endpoints. However, Oramed’s analysis found positive outcomes in certain subgroups based on body mass index, baseline HbA1c levels, and age. The company is now working on designing a new Phase 3 trial incorporating these learnings.

In January 2024, Oramed entered into a ⁵⁰⁄₅₀ joint venture with HTIT Biotech to further develop and commercialize an oral insulin product globally. The joint venture will provide capital and manufacturing capabilities to progress Oramed’s oral insulin through Phase 3 trials and commercialization.

Scilex Holding Company Investment

In September 2023, Oramed acquired $101.9 million principal of secured debt and warrants in Scilex instead of an equity stake. This provided similar exposure to Scilex’s future potential, while reducing near-term cash requirements by over $100 million.

Scilex is developing non-opioid products for chronic pain and opioids sparing solutions. This aligns with Oramed’s focus on oral delivery of complex medications.

The Scilex debt bears an interest rate of Term SOFR + 8.5% paid in kind. Principal payments begin in 2023, with the balance due in March 2025. The warrants allow Oramed to acquire Scilex shares at $0.01 per share, providing leverage to increases in Scilex’s value.

Financial Position

As of March 31, 2024, Oramed had no debt and working capital of $143.5 million, including $18.6 million in cash. This provides a strong financial position to continue operations for at least 12 months without requiring additional capital.

Oramed has incurred $156 million in losses since inception while raising $255 million from equity issuances. With research spending declining after trial terminations, the current cash balance appears sufficient to fund activities for the coming year.

Outlook

With the oral insulin Phase 3 trial failure, Oramed has substantially reduced spending and is reevaluating its strategic direction. The creation of a joint venture with HTIT Biotech indicates oral insulin remains a key focus.

The Scilex transaction provides financial resources and exposure to potential upside without significant near-term cash requirements. Over the longer term, Oramed will likely need to raise additional capital or enter into other strategic partnerships to advance development of its oral protein delivery technology.