Oramed: Progress On Oral Insulin Pill

| About: Oramed Pharmaceuticals (ORMP)

Summary

For nearly 100 years, no one has figured out how to make insulin into an oral therapy.

Oral insulin is more than just a convenience. It would increase compliance and enable doctors to prescribe insulin as a first-line early therapy immediately upon diagnosis.

Two studies in 2009 and 2013 provide evidence that early insulin therapy affects clinical outcomes and slows disease progression considerably.

Oramed's ORMD-0801 has succeeded in a Phase II trial, showing that oral insulin is possible and has a measurable effect on blood sugar.

Phase III is currently being planned.

Imagine you had a life-threatening chronic illness, but instead of recommending the best-known medication for controlling the condition, your doctor first put you on less effective medications instead. Both the doctor and patient know that these less effective medications will eventually become ineffective as the condition worsens, but your doctor starts you there anyway. Why? Because the most effective medicine is available by daily injection only, which is uncomfortable at best and taboo to most.

This is not the best way to go about treating a serious illness. And yet, it is the most commonly accepted way to treat type II diabetes. The most directly effective method of diabetes control is of course insulin therapy. However, a first-line general practitioner is not in a position to sit down and put patients directly on injectable therapy without first resorting to easier oral alternatives first, if less effective over the long term.

Doctors usually begin diabetes treatment with a drug called metformin. Metformin helps improve blood sugar by suppressing glucose production in the liver, rather than affecting the pancreas or insulin production directly. It just indirectly gives the pancreas a break by allowing it to produce less insulin because there is less glucose to deal with. Eventually though, metformin becomes ineffective as pancreatic beta cells continue to die off and the body loses the ability to generate insulin at all. At that point, metformin can no longer help.

There is another reason that doctors don't generally prescribe insulin in the early stages of diabetes, and that is that many diabetes patients are not compliant with daily insulin injections. An August 2013 study found that recommended glycemic goals for diabetics are achieved by less than 50% of patients, which partly has to do with failing to follow diet and exercise recommendations, but is also heavily influenced by failure to administer insulin injections daily even if prescribed.

Yet, a third reason why injectable insulin is initially avoided even though it is very effective is that insulin in the bloodstream causes sugar to be stored in fat and muscle rather than the liver. This causes weight gain, which in turn worsens the condition, not to mention that patients do not generally want to immediately go on a medication that is known to cause weight gain.

An oral insulin tablet could solve all three of these problems, but for 100 years, no company has figured out how to even theoretically administer insulin orally. That is, until now. Oramed Pharmaceuticals, Inc. (NASDAQ:ORMP) has proven in principle through a recent Phase II study that insulin can be taken orally in the correct formulation, and does lower nighttime pooled glucose compared with placebo, at least according to one trial. A larger Phase III study will have to confirm these findings and is currently being planned, but the basic evidence is now here and has never before been achieved in any clinical trial at all.

An oral insulin therapy, if effective, would not only put general practitioners in the position to prescribe insulin immediately upon a diagnosis of diabetes, but would also greatly increase compliance and take away the taboo and pain of daily injection and probably some of the subsequent weight gain. The importance of early insulin therapy cannot be overstated. In a November 2009 study in the journal Diabetes Care, it was found that early and aggressive management of blood sugar can make controlling type 2 diabetes easier as time goes by. The reason is that metformin and other early-line treatments generally do not take much load off the pancreas, which still has to produce insulin in order to metabolize sugar. Insulin, of course, does lighten the burden on the pancreas, which helps it save some energy so to speak for later in life as diabetes progresses, preserving and prolonging pancreatic function.

A later study conducted in September 2013 found that treatment-naïve patients, meaning patients who have never taken any diabetes drugs before, had their pancreatic beta cell function improve after early insulin therapy. The same study noted that early insulin therapy does affect long-term outcomes in people with the disease and is actually a treatment strategy supported by international guidelines. It's just that patients don't want to resort to it immediately and doctors either don't want to or can't prescribe it as a first-line therapy. But more than that, the study also found that early insulin therapy improves insulin sensitivity, which means insulin resistance sets in slower in individuals who start therapy early. They generally need lower doses over time and disease progression is much less aggressive.

How Oral Insulin Works

Oramed's oral insulin therapy works, theoretically at least, by protecting the insulin molecules from the acidity of the stomach through common enteric coating. This is nothing groundbreaking. Beyond that, protease inhibitors prevent digestion of some of the insulin in the small intestine, and absorption enhancers enable some of it to cross the intestinal barrier to get directly to the liver. Granted, probably not all of it gets through, but enough does in order to affect pooled night time blood sugar.

The key is that because oral insulin never actually reaches the blood stream though, it does not immediately cause sugar to be absorbed first in fat and muscle initially. Instead, it enables the liver to store much of it as glycogen as is the case in people without diabetes.

While Sanofi's (NYSE:SNY) inhalable insulin collaboration with MannKind (NASDAQ:MNKD) has so far failed to take root, oral insulin could be much more quickly adopted by the market if and when approved. Inhalable insulin only has the advantage of no injections, but it still delivers insulin directly into the blood through the lungs rather than to the liver through the intestine/portal vein, so the weight gain issues are still there. Besides, the prospect of inhaling insulin can be unsettling, whereas taking a pill is commonplace.

Of course, when considering a position in Oramed, it is important to keep in mind that replicating Phase II results in a Phase III is not a foregone conclusion. Oftentimes, larger Phase III trials cannot replicate the results of smaller ones, and it is still possible that given a larger patient sample, the pill could still be ineffective. Timing wise, Oramed has plenty of cash and is very well capitalized for a company of its size and cash burn rate. The company has over $36M in current and long-term assets, the vast majority of which are liquid, plus a recent $6.5M milestone payment for finishing Phase II. This puts total liquid resources at around $43M and an average quarterly burn rate of $2.1M. That gives Oramed nearly five years of runway at the current burn, but let's be conservative and say three years if Phase III eats through more cash more quickly. Either way, there is no imminent threat of dilutive financing.

If Phase III fails, the company will probably lose 30-40% of its value, though Oramed has other prospects for its oral formulation technology including a GLP-1 candidate for type II diabetes, which is considered an easier molecule to successfully get through the intestine. A successful Phase III could triple the stock or more, depending on financial arrangements with partners.

In the end, the point is that an oral insulin formulation is not simply a reformulation of a popular drug for convenience sake. Thought it is certainly that, it changes the way the body processes the medication, and could greatly improve compliance among patients. An oral formulation would not only make diabetes treatment easier, but it also could vastly lower the morbidity and mortality rates of diabetes sufferers and make the disease a lot less serious than it is today. There is a chance it could end up transforming diabetes from the life-threatening condition it has been considered for the last 100 years to just a simple nuisance requiring a daily pill and some dietary adjustments, much like Hashimoto's thyroiditis.

Disclosure: I am/we are long ORMP.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.