- Giant pharma Merck's co-developed oral coronavirus drug with Ridgeback Biotherapeutics has raised interest in non-injected vaccine alternatives.
- The space was already occupied by Oramed, a clinical-stage biotech, whose oral vaccine is based on its POD technique, together with India's Premas Biotech COVID technology.
- This is a huge market, but also a highly competitive one due to the sheer number of biotechs involved, but the Israeli company can use previous experience in diabetes and NASH.
- Still, the fact that its shares have been adversely impacted after Merck's update shows that investors suffered from acidity when digesting the news.
- I remain bullish on this diversified stock, with market action also showing that its shares have been less battered than for established COVID biotechs.
After having covered a biotech developing a vaccine in the form of a nasal spray last month, I now cover Oramed Pharmaceuticals (NASDAQ:NASDAQ:ORMP), focused on developing an oral COVID-19 vaccine.
The shares of the Israeli biotech as well as the established vaccine makers, like BioNTech (NASDAQ:BNTX), and Moderna (NASDAQ:MRNA), have been moving downwards after Merck (MRK) posted early data for its experimental oral coronavirus therapy co-developed with Ridgeback Biotherapeutics.
However, the fact that Oramed's stock has known less of a percentage decline during the last week compared to the two other biotechs deserves to be highlighted.
This signifies that the market still has some degree of trust in Oramed's oral vaccine.
The rationale of an oral product
First, for investors, Oramed has a partnership with MyMD Pharmaceuticals (NASDAQ:MYMD), with the clinical development being entrusted to the latter's subsidiary Oravax Medical. Now, Oravax, a private company is partially owned by MyMD together with majority partner Oramed. The partnership also includes India-based Premas Biotech.
Second, it is important to differentiate Oramed’s jab-free oral Covid-19 vaccine and Merck's drug.
For this purpose, according to the National Institute of Health, a vaccine works by stimulating a person’s immune system to produce immunity to a specific disease, and for this purpose, Oramed will be using Premas' virus-like particle protein subunit technology. Also, vaccines are usually administered through needle injections, but can also be administered by mouth.
On the other hand, a drug like Merck’s Molnupiravir is a biological product that produces a broad spectrum of antiviral activity with ribonucleoside analog (used in therapeutic drugs to prevent viral replication in infected cells) for treatment and prevention of transmission against SARS-CoV-2. It has shown efficacy against non-hospitalized adult patients with mild-to-moderate COVID-19.
With both oral products, there is no need for an injection or medical personnel, with considerable potential for home delivery. In this context, with only 43.7% of the world's population having received a vaccine, the fight against the pandemic is far from over. Oral vaccines are of particular interest to developing countries because they ease the logistics of immunization campaigns. However, their roles are not limited to the developing world as they could also provide a boost to immunization in wealthy countries, where fear of injections is a factor contributing to reluctance in getting jabbed.
Coming to the therapy, it is based on Oramed’s Protein Oral Delivery ("POD") technique and Premas’s vaccine technology. Here, one of its main differentiators is that the Oravax vaccine candidate targets three structural proteins of the novel coronavirus, as opposed to the single spike protein targeted by the two current mRNA vaccines.
Source: Corporate presentation
As such, according to an interview given by the CEO, in the Jerusalem Post, Oramed's CEO Nadav Kidron said that “this vaccine should be much more resistant to COVID-19 variants.” According to him, even if the virus gets through the first two lines of defense, there is a third one.
For this purpose, the vaccine was tested in preclinical studies against COVID-19 variants, including the Delta one. Thus, a pilot animal study found that the vaccine promoted the development of Immunoglobulin G (IgG) antibodies and Immunoglobulin A ("IgA"). IgA is necessary for longer-term immunity.
The vaccine is being developed for use both as a standalone vaccine and as a booster for people who have been previously vaccinated. Oravax was preparing to commence clinical trials as of August 10 in Israel and India.
Now, an oral COVID-19 vaccine certainly has a lot of appeals, but there must also be caveats, as otherwise, we would already have been buying pills for home consumption instead of queuing in the cold to get jabbed.
The challenges of an oral vaccine
According to the National Institute of Health, in order to prompt a robust immune response, the oral delivery of antigens needs to overcome multiple physicochemical and biological barriers in the gastrointestinal tract. Thus, despite theoretical positives, few oral vaccines have seen success because the active ingredients tend not to survive as they pass through the digestive tract.
Oramed's technology, by shielding the capsule with a sensitive enteric coating may have overcome the technical hurdles of a vaccine capable of surviving the highly acidic environment of the digestive system.
Source: Corporate presentation
For investors, this technology was developed long before the pandemic struck, namely for the delivery of oral insulin and interestingly, subsidiary Oravax just has to use the same mechanism for the oral vaccine against COVID-19.
Now, insulin is an essential drug for diabetics which, so far, has only been administered through injection. According to the company, its technique protects oral insulin with a capsule whose coating degrades slowly. The capsule also releases molecules that prevent enzymes from attacking insulin in the small intestine. This oral insulin has been tested on hundreds of patients in clinical trials in the United States and is currently in phase 3, an advanced stage in clinical trials.
Thus, in addition to COVID, Oramed is deep into research for oral insulin with the ORMD-0801 trial in type 2 diabetes (T2D). Patient screening for Phase 3 started last year in November. As per my verification in clinicaltrials.gov, the company is involved in fifteen clinical studies with its ORMD-0801 drug candidate.
Source: Corporate presentation
It is also enrolling patients in a global Phase 2 Nonalcoholic Steatohepatitis ("NASH") study with oral insulin, initiated in December 2020 in the U.S. In this respect, data from a pilot study of ORMD-0801 in diabetic patients with NASH showed a 30% relative reduction in fatty liver content, as measured by MRI-PDFF (Non-invasive, quantitative assessment of liver fat).
The company had enrolled over 50% of patients planned for Phase 2 trial as of September 15, with patients continuing to be screened at sites in the U.S. and Israel. The trial is assessing the safety and potential efficacy of ORMD-0801 in Type 2 diabetes patients with NASH.
Looking across the medical industry, NASH is a serious, progressive liver disease caused by a buildup of fat in the liver and accompanied by inflammation, liver cell damage. Now, with more than half of NASH patients having diabetes, ORMD-0801 has the potential to improve outcomes for patients in both conditions, including the possibility of averting the need for liver surgery.
Valuations and key takeaways
In addition, with millions of diabetics in the world today having to inject insulin on a daily basis and wishing for oral dosage, ORMD-0801 has significant potential.
The Phase 2 trials had met the primary endpoint in indicating that taking the drug at bedtime curtailed increases of night-time glycemia. Oramed is advancing ORMD-0801 in two pivotal Phase 3 studies targeting diabetes patients and in March, the company announced that it had enrolled and randomized 25% of subjects in the ORA-D-013-1 study for ORMD-0801, with topline data from the trial expected in 2022.
Now, clinical studies remind us of large sums of money having to be spent, making it important to look at financials.
In this case, total net cash used in operating activities was $15 million in the first nine months which ended on May 31, but with cash proceeds from financing activities (issuance of common stock and exercising of options), there was $57.4 million in the balance sheet as at the end of the company's third quarter. In addition, there are $5 million of short-term bank deposits and $14.5 million of marketable securities.
Source: Seeking Alpha
Going deeper, cash burn was up by more than $5 million from September 2020 to May 2021 compared to the corresponding period in 2019-2020, and insignificant revenues were generated from operations. Thus, the company believed (as per the third quarter SEC filings ending in May 2021), that it would be able to maintain its current planned development activities and the corresponding level of expenditures for at least the next 12 months. However, no assurance was given that additional funds would not be needed.
Well, this has been the case and there has been a $28 million equity sale on June 16, resulting in a balance sheet totaling $105.4 million of cash. As per my reasoning, this may be required for additional expenses pertaining to the development of the COVID pill, which in turn would imply that a clinical Phase 1 study should soon be announced.
Therefore, the catalyst to propel the shares back to the $23.8-24 level is there.
For metrics-focused investors, based on a price of about $700 per treatment and considering just ten thousand of them, there could be annual revenues of $70 million. Added to this, if we consider 500 million more treatments at just $5 each for India, where Premas Biotech is continuing tests with the vaccine technology, billions of dollars of sales are possible in a revenue-sharing agreement. However, even those amounts cannot justify Oramed's current forward Price to Sales multiples of 233x, unless the addressable market expands further, which is feasible given the propensity of the coronavirus to mutate. Also, the NASH market should be valued at around 84 billion dollars by 2029.
Ending on a cautionary note, Merck announced on early Friday that its anti-COVID pill, reduced hospitalization or death from the disease by about 50% in a Phase 3 trial. Hence, the pressure is on Oramed to deliver and shares are likely to suffer from more volatility following further updates by Merck.
Still, given the fact that it took 5-6 months for Moderna to advance from Phase 3 to the Emergency Use Authorization stage despite its vaccine candidate exhibiting >90% efficacy, together with the need to manufacture, it will take time for Molnupiravir to be globally available in drugstores. This means that there are still prospects for Oramed.
This article was written by
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