The oral insulin pill. It has been described countless times as the 'holy grail' of the $20 billion global insulin market. It's what people living with diabetes want. It's what drug makers have poured hundreds of millions into developing. Yet, it's 2015 and still there is no FDA approved insulin pill. Enter Oramed Pharmaceuticals (NASDAQ:ORMP).
Oramed just announced it dosed the first patient in its Phase IIb trial for its oral insulin capsule in the treatment of Type 2 diabetes. And with that announcement, this small biotech with an $83 million market cap has become the global leader in bringing an insulin pill to market, the blockbuster of blockbuster drugs.
Pharma giant Novo Nordisk is the other key player in the oral insulin pill race. Novo completed a Phase I, single dose trial in 2013. Based on my research, it has not yet announced anything definitive about a Phase II trial for an insulin pill. Earlier this year, however Novo did report positive results from its Phase II trial of its oral GLP-1 drug which promotes the body's natural production of insulin. Oramed also has a GLP-1 capsule in Phase I and plans to initiate a multi-center Phase II study in the first quarter of 2016.
Oramed leads in insulin capsules and Novo leads in GLP-1 tablets. The diabetes market is certainly a big part of Novo's business, but it is still one part of a larger business which makes much of its revenues from traditional diabetes products like injectables. The beauty of this situation for Oramed and its investors is this: the size of the market for its capsule, if approved, is enormous, while the investment in cost and time of Phase II and III trials for this indication is small, when compared to other indications like cancer. This combination is potential gold for a smaller biotech like Oramed. Its focus, its size and its speed may well serve to keep Oramed far ahead of Novo past the finish line of FDA approval for an oral insulin capsule.
In 2013 Novo's Senior VP and Head of Diabetes Research, Dr. Peter Kurtzhals made the following statement in an article published on the company's website: "It has been a learning curve for Novo Nordisk to establish technologies, animal models and exploratory clinical trials to support the development of oral insulin and GLP-1 formulations, and the company currently has two oral insulin and three oral GLP-1 formulations in phase 1 clinical trials." Novo reportedly spent over $500 million on the development of these oral diabetes drugs, and since 2013 it has only advanced one of its GLP-1 formulations through Phase II.
Innovative and focused, Oramed is a small biotech with expertise in inventing new ways of treating disease, in a much smarter and more cost-effective way than Novo. In stark contrast to Novo's reported $500 million spend, Oramed has spent $10 million on R&D in the past five years and a total of $15.2 million since inception. And the result? While Novo has concluded a Phase I single dose trial for oral insulin dosing approximately 84 patients, Oramed has delivered over 2,000 doses to 196 people prior to starting its current Phase IIb study.
Oramed's Phase IIb trial protocol includes over 30 U.S. sites for approximately 180 patients and has both efficacy and safety as its primary end-points. The trial will last 28 days. Although the company has not announced its timeline for when it will report results, I assume investors will hear top line efficacy results well before the end of this year. This kind of timeline is a far cry from drugs being developed for diseases like cancer, which can take years and serve a smaller market. Make no mistake, all of those drugs and treatments being developed to save lives for indications including cancer are critically important to patients, as well as the companies developing the treatments. However, from an investor point of view, especially for investors looking for results in a shorter timeframe, insulin's economics are very different. According to new data just published by Grand View Research, the global market for insulin is projected to grow from $20.97 billion in 2013 to $47.54 billion by 2020. There were 371 million diabetics worldwide in 2012, with 25.8 million of those in the U.S.
I've written about Oramed in the past and I continue to believe that its unique technology and method for delivering insulin through the digestive system will lead to a much wanted and needed capsule so that Type 2 diabetics can finally say goodbye to needles and even the less commonly used jet injectors, inhalers and pumps.
Oramed's strong balance sheet will get an additional $30 million from the largest medical group in China upon closing of a licensing deal in the next 60 days. This gives Oramed a $50 million cash position to drive its technology through FDA approval and transform the treatment of diabetes. It also puts Oramed in a very strong position to negotiate even larger licensing deals in other major world markets.
To sum it up, I couldn't say it any better than what Novo's Dr. Kurtzhals stated in his 2013 article, "The simplicity and convenience of oral insulin would be amazing. While it takes time to learn how to inject insulin with a pen, everyone knows how to swallow a pill. This in turn could support greater compliance and lead to much better treatment outcomes to the benefit of patients, healthcare providers and society."
I'm sure that Dr. Kurtzhals at Novo and the rest of the diabetes industry, along with some smart investors, are wondering how Oramed's 28-day Phase IIb trial may change the dynamics of diabetes treatment. We won't have to wait too long to find out.
Disclosure: I am/we are long ORMP.