Oramed Pharmaceuticals
New Questions around Recent Phase IIa '801 Data
Trigger Weakness; Sell-off Overdone
ORMP shares are down 28% intra-day today, with the weakness, we believe, based on a negative media article on the P2a safety data announced last week for lead asset ORMD-0801 (oral insulin). Our bottom line is that the P2a data for '801 very much were (and still are) fine and acceptable to us, and thus we find the criticisms in the article a bit harsh and unfair. To recap our investment thesis, while ORMP is still at a fairly early stage of development, based simply on the large commercial opp'y that exists for novel oral therapies for diabetes (a market dominated by injectables), we see blockbuster potential for '801 as well as ORMD-0901 (an oral GLP-1 analog). Therefore, with the stock now trading ~50% below the YTD high seen just 2-3 weeks ago (on Jan. 13), we find today's weakness very overdone and recommend being opportunistic at current levels.
• P2a '801 data under attack. Today's weakness appears to stem from an article appearing on a well-known blog site that has questioned ORMP's P2a data for
'801 in Type 2 patients. (Recall that ORMP announced the P2a data on Jan.
30, concluding: 1) '801 to be "safe and well-tolerated"; and 2) "the study met
all primary and secondary endpoints.") In today's article, the author takes a
decidedly negative view of the strength and integrity of the P2a data and also
questions the method and timeliness of disclosure of additional (i.e., more
specific) details that were made available for that data.
• We see nothing wrong. As alluded to in the note we published on Jan. 30, we found the P2a study results very much in line with our expectations. There were few details provided, but this was also as expected, as the release (as is common practice) was meant to convey only top-line results. Fuller details are typically reserved for medical/scientific conferences, and we confirmed that day with ORMP that was its intention (likely ADA '14 in SF). To its credit, ORMP did voluntarily post additional details of the data on its website that day (which we easily found, viewed, and were able to download); in fact, as
shown in p.2 of this note, '801 showed even less adverse events than placebo. Thus, today's weakness, on a fundamental basis, seems very overdone.
• A look ahead. With the P2a safety data for '801 now behind the company, we're next expecting the following events (and potential stock catalysts) to be coming out of ORMP over the balance of the year: 1) initiation of a P2a trial for '801 in Type 1 diabetics (potentially by the end of 1Q14); 2) initiation of a P2b trial for '801 in Type 2 diabetics (late 2Q14/early 3Q14); 3) initiation of toxicology studies for '901 (end of 2Q14); 4) presentation of the full P2a dataset in Type 2 diabetics (likely at the ADA meeting, June 13-17); 5) issuance of US IP for ORMP's assets and technology (difficult to predict timing); and
6) clarity around whether '801 can be pursued via an NDA 505(b)(2) strategy
(which would enable accelerated developmental timelines).
• Valuation/risks. Our current PT is based on an '801 and '901-driven DCF taken out to 2028, using a 25% discount rate and a 0% terminal growth rate. Key risks include: negative clinical trial data for either '801 or '901; regulatory delays/ setbacks, a failure in obtaining US patents; and any dilutive financings.
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ORMD-0801: Phase IIa Safety Data
Below, we include a summary of adverse events (AEs) as reported by the company for ORMD-0801’s Phase IIa study. Subjects on placebo reported the greatest number of AEs (50%) followed by subjects dosed with ‘801 at 690 IU (40%) and 460 IU (30%). Data demonstrate that subjects on ‘801 experienced fewer AEs than subjects on placebo. Though we don’t have information on whether any of the AEs were Grade 1-4, according to the company, the AEs were not serious in nature. We expect ORMP to release more details around the data at an upcoming scientific conference.
As a reminder, sample sizes in Phase IIa studies are significantly smaller than later phase studies due to the germane purpose of Phase 2a trials (i.e., safety profiles). In this case, there were 30 subjects. As a result, we view the below data as supportive of the main purpose of demonstrating the safety of ‘801 as viewed in light of placebo.
