Oramed Pharmaceuticals Inc (ORMP)

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Oramed And Oral Insulin: Can This Small Company Really Do It?

Apr. 14, 2022 4:02 PM ETOramed Pharmaceuticals Inc. (ORMP)

Summary

Oramed is developing oral insulin in a phase 3 trial, data this year.
Nobody has been able to deliver insulin orally in adequate quantity.
This is a $15bn market, and there is very little competition.

I covered Oramed Pharmaceuticals Inc. (NASDAQ:ORMP) twice before, and both times, readers asked me to research the company's background more closely. They hinted at something scandalous. So I looked, but I didn't find anything, except there's Professor Avram ??Hershko on board, who is a Nobel Prize winner. So I think we will drop that line of investigation unless the reader who was bothered about this sheds more light on it.

No, what we will focus on now is why ORMP stock found a new bottom today.

In my two previous articles, I discussed the problems facing Oramed and its lead asset ORMD-801. These problems are mainly scientific. ORMD-801 is an oral insulin developer. Oral insulin delivery is, in theory, a much superior option to subcutaneous delivery because oral insulin, in many ways, behaves just like endogenous insulin produced in the body. The pain and hassle of an injection are minor problems of SC insulin compared to its proclivity to cause systemic absorption and peripheral hypoglycemia, among other things. So whoever can produce the first oral insulin delivery seamlessly will become a huge company.

However, oral insulins have some typical problems in becoming viable therapies. Two major problems are destruction of insulin in the gut and enabling absorption of insulin from the intestine. Not only is insulin unstable in the stomach, but it also has very low permeability, as low as 1%, through the membranes of the intestine because of large molecular weight and hydrophilicity. As I noted earlier:

..the delivery system must [afford] insulin protection against external acidic environments and enzymatic degradation, in addition to targeted drug delivery…

To address this, Oramed, like I also said before, is doing this:

Oramed (ORMD-0801) incorporates both a species-specific protease inhibitor that protects active ingredients and a potent absorption enhancer that fosters their absorption across the intestinal epithelium.

However, there are a lot of problems with either of these approaches. These two methods, the protease inhibitor and the absorption enhancer, are good for short-term use. However, we know very little about their effects after prolonged use. Admittedly, semaglutide has been successfully developed as an oral medicine using the absorption enhancer salcaprozate sodium (SNAC), but studies seem to have shown semaglutide is somewhat unique in this respect, and even liraglutide could not be so developed with SNAC. Thus, from what little we know, it appears prolonged use will have a terrible effect on the intestinal membrane, causing unacceptable toxicity. Until we have long-term safety data from a large population of trial patients, we cannot be sure it will pan out. This is the most critical problem keeping the stock down.

Meanwhile, there are examples where the oral insulin approach did not work, most notably of Novo Nordisk A/S (NVO), the leader in the diabetes sector. This long-acting basal insulin (IO338) formulated with the medium-chain fatty acid permeation enhancer, sodium caprate (C10), achieved 1-2% higher bioavailability, but that was still not enough to maintain an adequate glycemic index, requiring higher and higher insulin doses, up to 60 times SC amounts, which became prohibitively expensive. For over four decades, various such efforts have been made to produce a viable oral insulin, however, none of them have been successful.

Now, here is Oramed, a small Israeli company led by a mother-son duo (but with, let's not forget, a Nobel laureate in tow) that was severely punished last year for a mere $50mn offering. Oramed has a market cap of $273mn, a cash balance of $146mn, which gives it an effective Enterprise Value of $116mn - a small pittance. This small company has been trying, for over a decade and with commendable persistence, to achieve what Novo Nordisk failed to do - develop an oral insulin that works. This unknown company is aiming to become a leader in the $15bn insulin market - and there is very little competition in oral insulin development. Something just doesn't sound right.

Yet, 2022 is a pivotal year for Oramed. They announced 75% enrollment of their potentially registrational phase 3 trial in November last year. The trial started recruiting a year before that, so I am hoping they will complete enrollment within the next few months. The company says that "Efficacy data for ORA-D-013-1 will become available after all patients have completed the first 6-month treatment period." So I am guessing topline results will be available by end-2022.

That is a big event. The focus of investors should be on safety and adverse event data, especially long-term data when that is available. That the protease inhibitor and absorption enhancer will work is not the major question; the major question is whether the absorption enhancer will damage the intestinal membrane and let out harmful gut biome into the bloodstream. A negative answer to that second question, and we will have a surprise winner here.

So, to answer my original question: why is this stock down? The answer here is the uncertainty surrounding whether such a small company can achieve what Novo Nordisk failed to do. I think that, given the low price of the stock, a small bet on that gamble is not an entirely bad idea.

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