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Leonard Yaffe
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I am an MD by background who runs a healthcare hedge fund. I worked as a sell-side medical analyst for 20 years, covering pharmaceuticals, medical devices, PBMs and drug distributors.
  • Micro-Cap Medical Stocks Should Perform Well In 2014 2 comments
    Jan 3, 2014 1:31 PM

    Following excellent performance of mid-cap and large cap medical stocks in 2013, I expect investors to look "further downstream" for opportunities in the coming year. I have created a basket that includes ADHD, IDRA, INO, MZOR, ONCS, ORMP, PTN and PVCT. As these are early stage development companies with underlying small capitalizations, I would expect the stocks to be volatile. I am highlighting below the first of these companies.

    Oramed (ORMP, mkt cap $180 million) is pursuing a holy grail of pharmaceuticals, the oral delivery of proteins. It's lead candidate, ORMD-0801, is an orally ingestible insulin capsule currently in phase 2 clinical trials for Type 2 diabetes, and it is also being studied in Type 1 diabetes. The company also has an oral exenitide (ORMP-0901). Phase 2a safety data in Type 2 diabetic patients on ORMD-0801 is expected in Q1'14. Novo Nordisk, a leader in insulin therapy, is also working on a version, and is believed to be slightly behind Oramed.

    The potential market size for such a drug is staggering, given the estimated 370 million people with Type 2 diabetes. An advantage to the oral route is that it is more physiologic in that the insulin goes directly to the liver once absorbed, thereby reducing the risk of hypoglycemia. If approved for Type 2, the drug would likely supplement current pharmacotherapy and could also cause patients to use insulin earlier as part of the treatment regimen, thereby slowing the rate of disease progression. Regarding Type 1, which affects 35 million people worldwide, ORMP-0801 could be used to replace mealtime injections. A small 10 day study of 8 Type 1 patients with uncontrolled diabetes demonstrated that preprandial administration of ORMP-0801 resulted in a significant reduction in high glucose readings, especially in the early evening hours.

    It is estimated that the annual market for drugs to treat diabetes is currently $35 billion, and is estimated to grow by 50% over the next 5 years. The global insulin market is estimated at $15 billion. Oramed could potentially expand the market and also replace some short-acting insulins, as noted above. Also, its oral insulin and oral exenitide are being studied as combination therapy, which could enhance the corporate platform

    Oramed is well capitalized, having just raised $15.8 million in a registered direct offering. There is little coverage by Wall Street. I believe that there will be greater investor focus on small-cap companies like Oramed, that have proven management and proprietary technology.

    Disclosure: I am 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.

    Themes: long-ideas
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    How does OPMD"s ORMD compare with MNKD's Affrezza?
    3 Jan 2014, 03:04 PM Reply Like
  • Leonard Yaffe
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    Author’s reply » Hi---Oramed's drug is orally absorbed, and undergoes physiologic first pass to the liver. The other is absorbed through the lungs via inhalation. Novo, a leader in insulin therapy, is also working on an oral insulin.
    3 Jan 2014, 08:05 PM Reply Like
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