Type 2 diabetes (T2D) care and management has improved dramatically across the last two decades, both from an availability of treatment perspective and from a patient education perspective. There is still lots of room for improvement in a number of areas of diabetic healthcare, however - areas that for whatever reason - time, resources, capital etc. - healthcare institutions and companies in the space have to-date been unable to address.
One of these major issues is very early stage care. By this, we mean healthcare from the point at which a physician first diagnoses a patent with T2D. For a variety of reasons, physicians are reluctant to start patients on an injectable insulin regimen right after they diagnose the patient with the condition. Instead, they will generally recommend a combination of diet and exercise, in an attempt to gain control of the condition naturally, before shifting to a chemical treatment regimen if and when the condition worsens. (Spoiler alert: it practically always does worsen.)
The reasons for this vary, from physicians not fully understanding the implications of delaying insulin treatment, to the patient not liking needles, or even a patient not thinking he or she can stick to an injectable dosing regimen for the rest of his or her life.
In the past, these have all seemed like valid reasons to delay. Why force a patient to inject themselves with insulin when there is a chance the disease can be controlled by eating less sugar and exercising more? Seems reasonable. Well, now we know it's not. There is a large body of evidence, a body which is growing every day, that demonstrates the negative impact that delaying insulin treatment can have on a T2D patients' long term progression.
As the above linked studies show, all the data now points to a correlation between early insulin administration and an improved prognosis medium to long term. To put this another way, the quicker a patient starts to dose with insulin after diagnosis, the slower the progression of his or her T2D will be, and the less severe the T2D will be in the long run.
With this said, it's all well and good establishing this correlation, but it's very difficult to actually do anything about it - at least under current conditions. Patients that are scared of needles will still be reluctant to self-administer, and those who are prone to falling short of a dosing regimen will likely be so whether a physician educates them as to the benefits of strict adherence or not. Similarly, there will always be physicians who - despite the evidence - are reluctant to jump to injectable insulin as a go-to first line, when they've been prescribing diet and exercise for decades.
There's an unmet need here, and a number of companies are working to fill it: find a way to administer insulin fro the outset, without having to force a patient to self-inject, and without having to have physicians prescribe injectable devices.
There's a front runner alternative right now, and a couple of companies are leading the pack in this alternative's development. The candidate is oral insulin, and the company we think is ahead of the curve in bringing it to market is Oramed Pharmaceuticals, Inc.(NASDAQ:ORMP).
For those not familiar with Oramed, and by way of a brief introduction, the company is an Israel based junior biotech with a primary focus on oral insulin. Its lead candidate is called ORMD-0801 (we'll get to this in a little more detail shortly) and it's currently carrying this candidate through mid to late stage clinical trials.
The oral insulin market (if it materializes) is expected to be worth more than $15 billion by the end of 2024, and right now there are two companies that are basically neck and neck when it comes to be first to bringing a pill to market. These are Oramed and Novo Nordisk A/S (ADR)(NYSE:NVO). For reference, Novo completed a phase II at the end of last year and reported what it refers to as 'favorable' results, but there seems to be some question over the company's motive for bringing such a drug to market. If effective, it could decimate Novo's legacy injectable insulin platform, and while the company would recover some of the lost injectable revenues through the sale of its oral product (assuming it targets a replacement, as opposed to a complimentary, indication), the company would be open to generic competition within a decade. Unless it's very carefully managed, in other words, Novo's oral candidate could end up doing far more harm for the company than good.
The rest of the companies are way behind, with very few even having crossed from pre clinical to human studies.
What does this mean? Well, that Oramed is the only company on the market right now that has both a late stage oral insulin asset, and has nothing to lose by picking up a marketing authorization from the FDA for the product. There's an unmet need at the diagnosis end of the T2D spectrum, a $15 billion opportunity across the entire sector, and just two companies in the race - one of which might very well be limiting its own progress so as to reduce the near to medium term impact on its behemoth insulin portfolio.
So, what has Oramed developed?
The drug in question is the above mentioned ORMD-0801, and while we know it's an oral insulin pill, that's pretty much the extent of our insight into how the drug works. This isn't through lack of understanding on our part - Oramed has been tight lipped about its science from day one. We don't see this as a concern, so long as the company can offset the opacity of its science with solid trial data, and to date, it has done just that.
To quickly share what we do know, the company describes its pill as insulin mixed with an absorption enhancer, protease inhibitors and an enteric coating. The protease inhibitor (it's likely an IDE inhibitor if we are to speculate on specificity) is there to stop enzymes (NYSE:IDE) breaking down the insulin. The enteric coating is just as it sounds - a coating designed to stop the pill degrading in the stomach. The absorption enhancer is what you might call the secret ingredient. It's what promotes the uptake of the insulin, and it's the element of this type of treatment that has to-date proven elusive in effective application. We know that Novo is using something called sodium caprate, and that this has proven an effective enhancer to a certain degree in a number of trials to-date. We can speculate that Oramed is using something similar, but at this stage it would be just that - speculation.
To reiterate our point, however, right now, it doesn't matter what the company is using. Nor from an investment thesis perspective. All we are looking at is performance, and so far, it looks good.
Data from a phase II hit press back in May, and the company built on this data with a more in depth release at the end of July. The trial, called ORA-D-007, was set up as a double-blind, randomized, 28-day study designed to assess the safety and efficacy of the drug in T2D patients.
The initial data, reported in May, demonstrated a stat sig decrease in the pooled night-time glucose mean percentage change (the primary endpoint of the trial) of 6.47% from run-in, between placebo and active cohorts. The p value on the study was 0.0268, easily surpassing the 0.05 threshold required for significance. The follow up data highlighted a number of key secondary endpoint hits, including a stat sig reduction in mean 24-hour glucose, fasting glucose, and daytime glucose, and a stat sig difference in what's called HbA1c, or glycated hemoglobin, which is considered the holy grail of diabetes management.
As a side note, this HbA1c measurement is optimized for a three-month measurement. As such, the one-month measurement used in the above discussed trial isn't overly useful. However, as the company moves into a pivotal, chances are we will see an extension on the timeframe and the glycated hemoglobin measurement will play a key role in the topline, registration-supporting numbers.
So let's stick with the subject of a pivotal - when are we expecting a phase III? Well, the company has now drawn a line under its phase II study, and is actively putting together a protocol for a pivotal investigation as we speak. While management hasn't given a specific timeframe to watch from an enrollment and dosing perspective, we'd be very surprised if the company didn't get things rolling before the close of first quarter 2017. It will probably be a three-month trial, meaning we will be looking for topline at some point during early third quarter next year.
Beyond that, we're looking for extended applications of the science as potential market boosters/upside catalysts, near term. The thing with this sort of science is, proving it and applying for the first time is the hard part. Once it's established as working, Oramed can replace the insulin in its pills with another drug, and repeat the process. The first in line will be GLP-1. GLP-1 is is a peptide that induces the pancreas to release insulin in response to rising glucose (blood sugar) levels in plasma. There are a number of these currently available as self administration injectables, with perhaps the most well known being Novo's Victoza, and conversion to oral administration is just behind insulin on the list of tomorrow's diabetes markets and revenue streams.
The bottom line here is this: studies have proven that the earlier a T2D patient starts an insulin course, the better their prognosis in the long term. Oral insulin overcomes many of the hurdles to early stage prescription, and a marketed product could quickly fill what is a large, and growing, unmet need. Two companies are spearheading the development process right now, one large (Novo) and one small (Oramed), but Oramed has far more to gain from being first to market and we believe this gives it the edge, despite the comparable size difference between the two players.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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.
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