A hallmark disease of an overweight, desk bound nation, diabetes instigates a staggering economic burden on our healthcare system where total costs, including hospital inpatient care, doctor visits, medication, and reduced or lost productivity have been estimated at $245 billion in 2012, a 41% increase in the last five years. Further, diabetes costs the average sufferer $13,700 per year in tending to the disease to maintain a certain quality of life and avoid death.
Keeping in step with the climb of obesity in the U.S., diabetes is big business with pharmaceutical firms committing large portions of their R&D budgets to new and better ways to get insulin into and throughout the body. Most have failed, but the brass ring remains an oral version -- a pill, taken discretely every day just like vitamins or aspirin. Now it appears a small, Israeli biotechnology firm, laboring almost anonymously in early phase trials will become the world's first drug developer with an insulin pill, and fulfill the dream of not only millions of diabetics but a number of very competitive, deep-pocketed pharmaceutical firms.
Oramed Pharmaceuticals Inc. (ORMP), designer of drug delivery technologies established in 2006, just received FDA approval for its investigational new drug (IND), oral insulin capsule ORMD-0801, to begin shipping to clinical sites for human Phase II testing, and in an astoundingly short time; the application was submitted only last month. The study will consist of 147 Type 2 patients to start with a larger trial scheduled in the future, and aims to slow the disease through a proprietary method of oral insulin delivery. Data from an earlier trial with eight Type 1 diabetics, typically sicker than Type 2s, was presented in late April at the Global Technology Community Diabetes Summit 2013 and showed significantly stabilized glucose levels in the face of uncontrollable blood sugar levels with the administration of three pills daily. Safety and tolerability had already been established in 132 Type 1 and 2 patients where ORMD-0801 reduced overall blood sugar levels but did not cause any severe hypoglycemic event.
Insulin given orally naturally has great advantages over injection because of pain, compliance, convenience and embarrassment. Even more, when effectively surviving stomach acids and delivered without degradation to the liver, oral insulin mimics the body's distribution and levels of insulin to the bloodstream and, eventually, to organs. Injected insulin runs the risk of peaks and valleys while in the body, leading to hypo- and hyperglycemia that in turn may lead to a need for medical care.
Oramed has successfully designed a compound that resists inactivation during digestion and delivers a full therapeutic dose across the intestinal wall with all its components intact; this is elegantly done with known materials that do not need a separate FDA nod as new chemical entities. These ingredient adjuvants, or helpers, protect the oral capsules' contents and are engineered to release them into the body's general circulation where they make their way into the liver through the hepatic portal vein.
Past attempts to create a method to control insulin without injection make interesting history. The biggest lemon has to be Pfizer Inc.'s (PFE) Exubera, an insulin inhaler for Type 1 and 2 diabetics approved and introduced in 2006. Besides the side effects of coughing and sore throat, the inconvenience of mandatory 6-month pulmonary exams, a cost three times that of insulin and the fact it did not work in many Type 1 patients, Pfizer missed one detail -- patients hated using it. The device was the size of a large flashlight and dosages were difficult to manage correctly; so much for addressing inconvenience and indiscretion. What also contributed to the debacle was that the size of insulin needles became so thin as to make them virtually painless. All of these factors left Pfizer with a device that was once touted to bring in $2 billion, but instead caused a $2.8 billion write-off.
Mannkind Corp. (MNKD), however, has not given up on inhalable insulin and continues its multi-billion dollar effort to create Afrezza, a smaller, easier to use version of Exubera. It's not without problems - in January 2010, the FDA refused completion of the device's application review process because the company did not supply sufficient data on upgrades of the inhaler's design -- an amateurish mistake, in my opinion. In 2011, the FDA sent Mannkind a complete response letter -- the agency's official "no way" -- based on unclear drug performance data, how the device is used, how it will be labeled, packaged, shipped and stored, and incomplete safety information. For the $2 billion-plus it's costing to bring Afrezza to market, you would think these are questions Alfred Mann could answer in his sleep.
Having failed alternate delivery routes for insulin, drug makers turned to making insulin last longer with fewer injections. Here again the FDA has wielded its worrisome complete response letter, most recently and surprisingly with Novo Nordisk A/S (NVO), a heavyweight in the commercial diabetes drug market.
Investors were stunned earlier this year when the squeaky-clean Danish firm received an FDA refusal to approve its long-acting, once-daily injectable insulin Tresiba because of risks to the heart -- a brutal slap to a company that derives 80% of its revenue from diabetes medications. Making matters worse is Novo's assertion that data could not be provided this year, nor could it in 2014, and roll-out of the drug, badly needed to compete with rival Sanofi (SNY) and its blockbuster Lantus, may be delayed until 2015 or beyond assuming new clinical trials enroll quickly and no new problems emerge. Tresiba is now only marketed in Europe and Japan.
Because offering an oral medication is critical to remaining a leader in diabetes, Novo Nordisk has partnered with Emisphere Technologies (OTCQB:EMIS) since 2010 to develop an oral version of Novo's GLP-1 agonist in a recently amended and accelerated licensing agreement using Emisphere's Eligen technology that now provides a $10 million upfront payment as opposed to future payments as Phase II and III milestones. The original agreement was signed five years ago, and the compound has not ventured past Phase I, putting it far behind Oramed's ORMD-0801.
Things look very good for Oramed when investors consider emerging evidence that the newer diabetes drugs are linked with cancer. As early as 2007, the FDA began hearing reports of pancreatitis from doctors prescribing Byetta, a popular injectable GLP-1 agonist marketed by Bristol-Myers Squibb (BMY) and originally developed by Amylin Pharmaceuticals. Two years later Merck & Co's (MRK) $4 billion Januvia, a non-insulin oral for controlling blood glucose in patients who do not need insulin injections, also came under fire that intensified when both drugs were cited in the March 2013 issue of the Journal of American Medical Association that points to a doubling of the risk of pancreatitis, a strong precursor to swiftly-progressing pancreatic cancer.
With the release of a UCLA study of diabetes drugs and cancer risk, Novo's Victoza became part of the FDA investigation into this class of drugs that mimic certain hormones the body produces naturally to stimulate the release of insulin after eating. Last month, a motion was filed to consolidate all pancreatic lawsuits by former users of Januvia, Byetta and Victoza. If there is such a thing as a perfect time for Oramed to make progress in a therapeutic indication, now is it.
The overriding risk to investing in Oramed is, of course, whether or not the compound works in a large set of diabetic patients. We see this risk as mitigated somewhat by pre-existing clinical data and its high statistical significance, particularly when the opportunity for oral insulin to be degraded in the gastrointestinal tract would be present no matter what the sample size. There is also some postulation that insulin given orally may be toxic due to the vehicles used. I view this risk as virtually non-existent because the absorption enhancers and degradation inhibitors Oramed uses are FDA-endorsed GRAS (generally recognized as safe) compounds.
Since Eli Lilly (LLY) introduced the first bio-engineered human insulin product Humulin in 1982, drug makers have been clamoring for an oral version. Oramed is making amazing progress toward this goal and stands an excellent chance of giving the global medical community the biggest breakthrough in diabetes treatment in 30 years. With the FDA highly skittish of current innovations, Oramed should receive deferential treatment from the agency and has already witnessed a rapid turnaround from submission to approval of its IND. The diabetes industry is huge and growing, with an estimated 350 million diabetics worldwide. At current levels, Oramed's stock price is a small one to pay for such enormous potential returns.