The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the condensed consolidated
financial statements and the related notes included elsewhere herein and in our
consolidated financial statements, accompanying notes and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
contained in our Annual Report (as defined below).
Forward-Looking Statements
The statements contained in this Quarterly Report on Form 10-Q that are not
historical facts are "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995 and other federal securities
laws. Words such as "expects," "anticipates," "intends," "plans," "planned
expenditures," "believes," "seeks," "estimates," "considers" and similar
expressions or variations of such words are intended to identify forward-looking
statements, but are not deemed to represent an all-inclusive means of
identifying forward-looking statements as denoted in this Quarterly Report on
Form 10-Q. Additionally, statements concerning future matters are
forward-looking statements. We remind readers that forward-looking statements
are merely predictions and therefore inherently subject to uncertainties and
other factors and involve known and unknown risks that could cause the actual
results, performance, levels of activity, or our achievements, or industry
results, to be materially different from any future results, performance, levels
of activity, or our achievements, or industry results, expressed or implied by
such forward-looking statements. Such forward-looking statements include, among
other statements, statements regarding the following:
? the expected development and potential benefits from our products in treating
diabetes;
? the prospects of entering into additional license agreements, or other
partnerships or forms of cooperation with other companies or medical
institutions;
? future milestones, conditions and royalties under the license agreement with
Hefei Tianhui Incubator of Technologies Co., Ltd., or HTIT, as well as our
disagreements with HTIT;
? expected timing of a clinical study for the potential Oravax vaccine and its
potential to protect against the coronavirus, or COVID-19, pandemic;
? our consideration of ways in which our shareholders could benefit more
directly from Oravax, including the potential issuance of some of our shares
in Oravax to our shareholders as a dividend;
? our research and development plans, including pre-clinical and clinical trials
plans and the timing of enrollment, obtaining results and conclusion of
trials, and our expectation to file a Biologics License Application, or BLA
thereafter;
? our belief that our technology has the potential to deliver medications and
vaccines orally that today can only be delivered via injection;
? the competitive ability of our technology based product efficacy, safety,
patient convenience, reliability, value and patent position;
? the potential market demand for our products;
? our expectation that in upcoming years our research and development expenses,
net, will continue to be our major expenditure;
? our expectations regarding our short- and long-term capital requirements;
? our outlook for the coming months and future periods, including but not
limited to our expectations regarding future revenue and expenses;
? information with respect to any other plans and strategies for our business;
and
? our expectations regarding the impact of COVID-19, including on our clinical
trials and operations.
16
Although forward-looking statements in this Quarterly Report on Form 10-Q
reflect the good faith judgment of our management, such statements can only be
based on facts and factors currently known by us. Consequently, forward-looking
statements are inherently subject to risks and uncertainties and actual results
and outcomes may differ materially from the results and outcomes discussed in or
anticipated by the forward-looking statements. Factors that could cause or
contribute to such differences in results and outcomes include, without
limitation, those specifically addressed under the heading "Item 1A. Risk
Factors" in our Annual Report on Form 10-K for the fiscal year ended August 31,
2021, or our Annual Report, as filed with the Securities and Exchange
Commission, or the SEC, on November 24, 2021, as well as those discussed
elsewhere in our Annual Report and expressed from time to time in our other
filings with the SEC. In addition, historic results of scientific research,
clinical and preclinical trials do not guarantee that the conclusions of future
research or trials would not suggest different conclusions. Also, historic
results referred to in this Quarterly Report on Form 10-Q could be interpreted
differently in light of additional research, clinical and preclinical trials
results. Readers are urged not to place undue reliance on these forward-looking
statements, which speak only as of the date of this Quarterly Report on Form
10-Q. Except as required by law, we undertake no obligation to revise or update
any forward-looking statements in order to reflect any event or circumstance
that may arise after the date of this Quarterly Report on Form 10-Q. Readers are
urged to carefully review and consider the various disclosures made throughout
the entirety of this Quarterly Report on Form 10-Q which attempt to advise
interested parties of the risks and factors that may affect our business,
financial condition, results of operations and prospects.
Overview of Operations
We are a pharmaceutical company currently engaged in the research and
development of innovative pharmaceutical solutions, including an oral insulin
capsule to be used for the treatment of individuals with diabetes, and the use
of orally ingestible capsules or pills for delivery of other polypeptides. We
utilize Clinical Research Organizations, or CROs, to conduct our clinical
studies.
Through our research and development efforts, we have successfully developed an
oral dosage form intended to withstand the harsh environment of the stomach and
intestines and effectively deliver active insulin or other proteins, such as
Glucagon-like peptide-1, or GLP-1, leptin, and others. The excipients in the
formulation are not intended to modify the proteins chemically or biologically,
and the dosage form is designed to be safe to ingest. We plan to continue to
conduct clinical trials to show the effectiveness of our technology.
Oral insulin: Our proprietary flagship product, an orally ingestible insulin
capsule, or ORMD-0801, allows insulin to travel from the gastrointestinal tract
via the portal vein to the bloodstream, revolutionizing the manner in which
insulin is delivered. It enables the passage in a more physiological manner than
current delivery methods of insulin.
FDA Guidance: In August 2017, the U.S. Food and Drug Administration, or FDA,
instructed us that the regulatory pathway for the submission of ORMD-0801 would
be a BLA. If approved, the BLA pathway would grant us 12 years of marketing
exclusivity for ORMD-0801, from the approval date, and an additional six months
of exclusivity may be granted to us if the product also receives approval for
use in pediatric patients.
Phase IIb Study: In May 2018, we initiated a three-month dose-ranging Phase IIb
clinical trial of ORMD-0801 (Cohort A). This placebo controlled, randomized,
90-day treatment clinical trial was conducted on 269 type 2 diabetic, or T2D,
patients in multiple centers throughout the United States pursuant to an
Investigational New Drug application, or IND, with the FDA. The primary
endpoints of the trial were to assess the safety and evaluate the effect of
ORMD-0801 on HbA1c levels over a 90-day treatment period. Secondary endpoints of
the trial included measurements of fasting plasma glucose, or FPG, post-prandial
glucose, or PPG levels, during a mixed-meal tolerance test, or MMTT, and weight.
In May 2019, we initiated an extension of this protocol for approximately 75 T2D
patients, who were dosed using a lower dosage of insulin (Cohort B).
Cohort A: In November 2019, we announced positive results from the initial
cohort of the Phase IIb trial. Patients randomized in the trial to once-daily
ORMD-0801 achieved a statistically significant (p-value 0.036) reduction from
baseline in HbA1c of 0.60% (0.54% with placebo adjustment). This 0.54% reduction
in HbA1c is clinically meaningful. Treatment with ORMD-0801 demonstrated an
excellent safety profile, with no serious drug-related adverse events and with
no increased frequency of hypoglycemic episodes when compared to placebo. In
addition, during this 90-day trial, no weight gain was observed. In the initial
cohort, 269 U.S.-based patients were enrolled and treated with a dose-increasing
approach: 16 mg initial dose, titrated to 24 mg per dose, and then titrated to
32 mg per dose. Patients were randomized into three groups to assess dosing
frequency: once-daily (32 mg per day), twice-daily (64 mg per day), thrice daily
(96 mg per day). There was a corresponding placebo for each treatment arm. Two
hundred nine (209) patients completed treatment to the 12-week endpoint and were
included in the data analysis (24 subjects did not complete the full 12 weeks of
treatment). The twice-daily arms achieved statistically significant (p-value
0.042) reductions from baseline in HbA1c of 0.59% (0.53% with placebo
adjustment). The thrice-daily arm did not meet statistical significance (p-value
0.093). In addition, due to evidence of treatment-by-center interaction, two
sites (36 patients (13.4% of enrolled subjects)) were excluded from the
statistical analysis as they showed results opposite from the rest of the
statistically significant results. Our internal investigation as well as an
independent investigation did not find a cause for such discrepancy.
17
Cohort B: In February 2020, we announced positive topline data from the second
and final cohort of the Phase IIb trial with a different regimen across three
daily dose ranges (8 mg, 16 mg, 32 mg). Patients randomized in the trial treated
with 8 mg of ORMD-0801 once-daily achieved a statistically significant (p-value
0.028) observed mean reduction of 1.29% from baseline and a least square mean
reduction of 0.95% from baseline, or 0.81% adjusted for placebo. Patients who
had HbA1c readings above 9% at baseline and received 8 mg of oral insulin
once-daily experienced a 1.26% reduction in HbA1c by week 12. Treatment with
ORMD-0801 at all doses demonstrated an excellent safety profile, with no serious
drug-related adverse events and with no increased frequency of hypoglycemic
episodes or weight gain compared to placebo. The primary efficacy endpoint was a
reduction in HbA1c at week 12.
Phase III Study: Based on guidance received from the FDA as part of the
end-of-phase II meeting process for our oral insulin candidate, ORMD-0801, we
have submitted to the FDA the protocols for our upcoming pivotal Phase III
studies. In line with the FDA's expectations and recommendations, we are
currently conducting two Phase III studies concurrently in patients with T2D.
These studies involve about 1,125 patients to provide evidence of ORMD-0801's
safety and efficacy in T2D patients over a treatment period of 6 to 12 months. A
geographically diverse patient population is being recruited from multiple sites
throughout the United States, Europe, and Israel. Our Phase III study is
composed from 2 protocols:
ORA-D-013-1: This study will treat T2D patients with inadequate glycaemic
control who are currently on 2 or 3 oral glucose-lowering agents. This U.S.
study will recruit 675 patients from over 90 clinical sites located throughout
the U.S. Patients will be randomized 1:1:1 in this double-dummy study into
cohorts of: 8 mg ORMD-0801 once-daily at night and placebo 45 minutes before
breakfast; 8 mg ORMD-0801 twice-daily, at night and 45 minutes before breakfast;
and placebo twice-daily, at night and 45 minutes before breakfast. The primary
endpoint of the study is to evaluate the efficacy of ORMD-0801 compared to
placebo in improving glycaemic control as assessed by HbA1c, with a secondary
efficacy endpoint of assessing the change from baseline in fasting plasma
glucose at 26 weeks. We initiated this trial in December 2020. In November 2021,
we announced that 75% of the 675 patients were enrolled and randomized.
ORA-D-013-2: This study will include T2D patients with inadequate glycaemic
control who are managing their condition with either diet alone or with diet and
metformin monotherapy. A total of 450 patients will be recruited through 36
sites in the U.S. and 25 sites in Western Europe and Israel. Patients will be
randomized 1:1 into two cohorts dosed with: 8 mg ORMD-0801 at night; and placebo
at night. The primary endpoint is to evaluate the efficacy of ORMD-0801 compared
to placebo in improving glycaemic control as assessed by HbA1c over a 26-week
treatment period, with a secondary efficacy endpoint of assessing the change
from baseline in fasting plasma glucose at 26 weeks. We initiated this trial in
the U.S. in March 2021. In August 2021, we announced that over 25% of the 450
patients were enrolled and randomized.
We expect to receive the efficacy data from the trials after patients have
completed the first 6 months of treatment. Safety will be further monitored as
patients will be exposed to the drug over an additional 6 months (total 12
months). The trial's topline results are expected in calendar 2022 and we
anticipate filing a BLA with the FDA in calendar 2024. A BLA would grant us 12
years of marketing exclusivity from the date of approval in the U.S.
NASH trial: In June 2020, we presented topline data of 8 patients from an
open-label trial that assessed the safety, tolerability, and early effects of 16
mg ORMD-0801 (2x8 mg capsules) on liver fat in T2D, patients with nonalcoholic
steatohepatitis, or NASH. The 12-week dosing had no serious adverse events and
it induced an observed mean 6.9±6.8% reduction in liver fat content (p-value:
0.035), and the relative reduction of 30%, as measured by MRI-derived proton
density fat fraction, or MRI-PDFF. In parallel, concentrations of
gamma-glutamyltransferase (GGT), a key marker of chronic hepatitis, were
significantly lower after 12 weeks of treatment as compared to baseline
(-14.6±13.1 U/L; p value: 0.008).
In September 2020, we initiated an open label clinical trial of our oral insulin
capsule, ORMD-0801, for the treatment of NASH. This 10 patient multi-center
trial is comprised of three clinical sites in Belgium. The trial will measure
change and percent change in MRI-PDFF from baseline to week 12.
18
In December 2020, we initiated a double blind, placebo controlled clinical trial
of our oral insulin capsule, ORMD-0801, for the treatment of NASH. This 30
patient multi-center trial is comprised of five clinical sites: three in the
U.S. and two in Israel. The trial will measure change and percent change in
MRI-PDFF from baseline to week 12. In September 2021, we announced that over 50%
of the patients were enrolled and randomized.
Oral Glucagon-Like Peptide-1: Oral GLP-1, is an incretin hormone, which
stimulates the secretion of insulin from the pancreas. In addition to our
flagship product, the ORMD-0801 insulin capsule, we use our technology for an
orally ingestible GLP-1 capsule, or ORMD-0901.
In February 2019, we completed a Phase I pharmacokinetic trial to evaluate the
safety and pharmacokinetics of ORMD-0901 compared to placebo in healthy
volunteers. We initiated a follow-on trial in T2D patients, in June 2021 in the
U.S. under an IND submitted to the FDA.
Oral Vaccine
On March 18, 2021, we entered into a license agreement, or the Oravax License
Agreement, with Oravax. For more information about the Oravax License Agreement,
please see below under "Out-Licensed Technology".
Oravax, Oramed's 63% owned joint venture combines our proprietary POD™ oral
delivery technology and the novel vaccine technology of Premas Biotech Pvt.
Ltd., or Premas. We are considering ways in which our shareholders could benefit
more directly from Oravax, including potentially issuing some of our shares in
Oravax to our shareholders as a dividend, which would make Oravax a publicly
held company that may in turn apply for listing on a stock exchange.
A single dose of Oravax's oral vaccine produced a significant antibody response
in a preclinical in-vivo study. Oravax's novel vaccine technology may be a
candidate for protection against COVID-19 and its variants due to triple antigen
targeting, easier distribution and ease of administration.
On October 29, 2021, we announced Oravax's oral COVID-19 vaccine has received
clearance from the South African Health Products Regulatory Authority to
initiate a Phase I trial and subsequently to commence patient enrollment in a
first in human, Phase 1 clinical trial, for its oral COVID-19 vaccine and on
December 14, 2021, Oravax screened and enrolled the first participant in a Phase
1 clinical trial of its oral virus-like particle (VLP) COVID-19 vaccine in
Johannesburg, South Africa.
On December 29, 2021, Oravax signed a cooperation and purchase agreement for an
initial pre-purchase of 10 million doses of oral COVID-19 vaccines with Tan
Thanh Holdings to commercialize the vaccine in Southeast Asia.
Other Products
We are developing a new drug candidate, a weight loss treatment in the form of
an oral leptin capsule. During the third quarter of the 2020 calendar year, we
finalized a proof of concept single-dose trial for this candidate to evaluate
its pharmacokinetics and pharmacodynamics (glucagon reduction) in 10 type 1
adult diabetic patients without any safety issues. Patients who received leptin
on average had a decrease in glucose as compared to the placebo group during the
first 30-180 minutes following dosing. At different time periods, the leptin
treated patients on average had glucagon values that were either lower than or
similar to, those in the placebo group. We are currently in the middle of a
second study of 15 type 1 adult diabetic patients who serve as both the active
and placebo arms in this study, with anticipated results in the first quarter of
the 2022 calendar year.
19
Out-Licensed Technology
HTIT License
On November 30, 2015, we, Oramed Ltd. and HTIT entered into a Technology License
Agreement, or TLA, and on December 21, 2015, these parties entered into an
Amended and Restated Technology License Agreement that was further amended by
the parties on June 3, 2016 and July 24, 2016, or the HTIT License Agreement.
According to the HTIT License Agreement, we granted HTIT an exclusive
commercialization license in the territory of the People's Republic of China,
Macau and Hong Kong (the "Territory"), related to our oral insulin capsule,
ORMD-0801, or the Product. Pursuant to the HTIT License Agreement, HTIT will
conduct, at its own expense, certain pre-commercialization and regulatory
activities with respect to our subsidiary's technology and ORMD-0801 capsule,
and will pay (i) royalties of 10% on net sales of the related commercialized
products to be sold by HTIT in the Territory, or Royalties, and (ii) an
aggregate of $37.5 million, of which $3 million was payable immediately, $8
million will be paid subject to our entry into certain agreements with certain
third parties, and $26.5 million will be payable upon achievement of certain
milestones and conditions. In the event that we will not meet certain
conditions, the Royalties rate may be reduced to a minimum of 8%. Following the
final expiration of our patents covering the technology in the Territory in
2033, the Royalties rate may be reduced, under certain circumstances, to 5%. The
royalty payment obligation shall apply during the period of time beginning upon
the first commercial sale of the Product in the Territory, and ending upon the
later of (i) the expiration of the last-to-expire licensed patents in the
Territory; and (ii) 15 years after the first commercial sale of the Product in
the Territory, or the Royalty Term. The HTIT License Agreement shall remain in
effect until the expiration of the Royalty Term. The HTIT License Agreement
contains customary termination provisions. Through November 30, 2021, we
received aggregate milestone payments of $20.5 million out of the aggregate
amount of $37.5 million.
On August 21, 2020, we received a letter from HTIT, disputing certain pending
payment obligations of HTIT under the TLA. We wholly dispute said claims and we
are in discussions with HTIT in an attempt to reach a mutually agreeable
solution.
Oravax License
On March 18, 2021, we entered into the Oravax License Agreement with Oravax,
pursuant to which we will grant to Oravax an exclusive, worldwide license, or
the License, under our rights in certain patents and related intellectual
property in which Oravax will receive certain rights relating to our proprietary
oral delivery technology to further develop, manufacture and commercialize oral
vaccines for COVID-19 and other novel coronaviruses based on Premas's
proprietary vaccine technology involving a triple antigen virus like particle,
or the Oravax Product, which was previously owned by Cystron Biotech LLC, or
Cystron, and later acquired by Akers Biosciences Inc., or Akers.
In consideration for the grant of the License, the Oravax License Agreement
provides that we will receive (i) royalties equal to 7.5% on net sales, as
defined in the Oravax License Agreement, of each product commercialized by
Oravax, its affiliates and permitted sublicensees related to the License during
the term specified in the Oravax License Agreement, (ii) sublicensing fees equal
to 15% of any non-sales-based consideration received by Oravax from a permitted
sublicensee and (iii) other payments ranging between $25 million to $100
million, based on certain sales milestones being achieved by Oravax. The parties
further agreed to establish a development and steering committee, which will
consist of three members, of which two members will be appointed by us, that
will oversee the ongoing research, development, clinical and regulatory activity
with respect to the Oravax Product. In addition, we agreed to buy and Oravax
agreed to issue to us 1,890,000 shares of common stock of Oravax, representing
63% of the common stock of Oravax for the aggregate amount of $1.5 million.
Akers agreed to contribute to Oravax $1.5 million in cash and substantially all
of the assets of Cystron, including a license agreement to Premas's novel
vaccine technology. Nadav Kidron, the Company's President and Chief Executive
Officer, was one of the former members of Cystron.
20
Results of Operations
Comparison of three month periods ended November 30, 2021 and November 30, 2020
The following table summarizes certain statements of operations data of the
Company for the three month periods ended November 30, 2021 and November 30,
2020 (in thousands of dollars except share and per share data):
Three months ended
November 30, November 30,
2021 2020
Revenues $ 674 $ 674
Cost of revenues - -
Research and development expenses 6,410 5,774
Sales and Marketing expenses 585 -
General and administrative expenses 1,739 727
Financial income (expenses), net (38 ) 257
Taxes on income - -
Net loss for the period $ 8,098 $ 5,570Loss per common share - basic and diluted $ 0.22 $ 0.23
Weighted average common shares outstanding 36,672,551 23,754,980
Revenues
Revenues consist of proceeds related to the HTIT License Agreement that are
recognized on a cumulative basis when it is probable that a significant reversal
in the amount of cumulative revenue recognized will not occur, through the
expected product submission date of June 2023 using the input method.
Revenues were $674,000 for each of the three month periods ended November 30,
2021 and November 30, 2020.
Cost of revenues
Cost of revenues consists of royalties related to the HTIT License Agreement
that will be paid over the term of the HTIT License Agreement in accordance with
revenue recognition accounting and the Law for the Encouragement of Industrial
Research, Development and Technological Innovation, 1984, as amended, including
any regulations or tracks promulgated thereunder.
There was no cost of revenues for the three month periods ended November 30,
2021 and November 30, 2020.
21
Research and development expenses
Research and development expenses include costs directly attributable to the
conduct of research and development programs, including the cost of salaries,
employee benefits, costs of materials, supplies, the cost of services provided
by outside contractors, including services related to our clinical trials,
clinical trial expenses, the full cost of manufacturing drugs for use in
research and preclinical development. All costs associated with research and
development are expensed as incurred.
Clinical trial costs are a significant component of research and development
expenses and include costs associated with third-party contractors. We outsource
a substantial portion of our clinical trial activities, utilizing external
entities such as CROs, independent clinical investigators and other third-party
service providers to assist us with the execution of our clinical studies.
Clinical activities, which relate principally to clinical sites and other
administrative functions to manage our clinical trials, are performed primarily
by CROs. CROs typically perform most of the start-up activities for our trials,
including document preparation, site identification, screening and preparation,
pre-study visits, training, and program management.
Clinical trial and pre-clinical trial expenses include regulatory and scientific
consultants' compensation and fees, research expenses, purchase of materials,
cost of capsule manufacturing, payments for patient recruitment and treatment,
as well as salaries and related expenses of research and development staff.
Research and development expenses for the three month period ended November 30,
2021 increased by 11% to $6,410,000, from $5,774,000 for the three month period
ended November 30, 2020. The increase is primarily due to an increase in
expenses related to our Phase 3 and NASH clinical trials in addition to expenses
related to the in process research and development costs related to Oravax.
Stock-based compensation costs for the three month period ended November 30,
2021 totaled $505,000, as compared to $137,000 during the three month period
ended November 30, 2020. The increase is mainly attributable to awards granted
to a consultant and to new award grants in fiscal 2021.
Government grants
In the three month periods ended November 30, 2021 and November 30, 2020, we did
not recognize any research and development grants. As of November 30, 2021, we
incurred liabilities to pay royalties to the Israel Innovation Authority of the
Israeli Ministry of Economy & Industry of $207,000.
Sales and Marketing expenses
Sales and Marketing expenses include the salaries and related expenses of our
commercial functions, consulting costs and other general costs. We anticipate
that our commercial activities will increase in the future towards and following
potential approval of our planned BLA submission for ORMD-0801.
Sales and Marketing expenses for the three month period ended November 30, 2021
were $585,000 while we incurred no expenses for the three month period ended
November 30, 2020. The increase in costs related to sales and marketing expenses
activities is primarily attributable to stock-based compensation expenses and
salary related expenses. Stock-based compensation costs for the three month
period ended November 30, 2021 totaled $433,000 while there were no stock-based
compensation expenses during the three month period ended November 30, 2020. The
increase is mainly attributable to awards granted to an employee during fiscal
2021.
General and administrative expenses
General and administrative expenses include the salaries and related expenses of
our management, consulting costs, legal and professional fees, travel expenses,
business development costs, insurance expenses and other general costs.
General and administrative expenses for the three month period ended November
30, 2021 increased by 139% to $1,739,000 from $727,000 for the three month
period ended November 30, 2020. The increase in costs related to general and
administrative activities is primarily attributable to an increase in
stock-based compensation expenses and professional fees expenses as well as
public relations and investor relations expenses. Stock-based compensation costs
for the three month period ended November 30, 2021 totaled $772,000, as compared
to $180,000 during the three month period ended November 30, 2020. The increase
is mainly attributable to awards granted to an employee during the three month
period ended November 30, 2021 and to awards granted during fiscal 2021.
22
Financial income (expense), net
Net financial income decreased from net financial income of $257,000 for the
three month period ended November 30, 2020 to net financial expenses of $38,000
for the three month period ended November 30, 2021. The decrease is primarily
attributable to a decrease in fair value of the ordinary shares of Entera Bio
Ltd.
Liquidity and capital resources
From inception through November 30, 2021, we have incurred losses in an
aggregate amount of $122,742,000. During that period and through January 11,
2022, we have financed our operations through several private placements of our
common stock, as well as public offerings of our common stock, raising a total
of $241,432,000, net of transaction costs. During that period, we also received
cash consideration of $27,922,000 from the exercise of warrants and options. We
expect to seek to obtain additional financing through similar sources in the
future, as needed. As of November 30, 2021, we had $31,880,000 of available
cash, $136,156,000 of short-term and long-term bank deposits and $11,704,000 of
marketable securities.
Management continues to evaluate various financing alternatives for funding
future research and development activities and general and administrative
expenses through fundraising in the public or private equity markets. Although
there is no assurance that we will be successful with those initiatives,
management believes that it will be able to secure the necessary financing as a
result of future third party investments. Based on our current cash resources
and commitments, we believe we will be able to maintain our current planned
development activities and the corresponding level of expenditures for at least
the next 12 months.
As of November 30, 2021, our total current assets were $152,332,000 and our
total current liabilities were $7,660,000. On November 30, 2021, we had a
working capital surplus of $144,672,000 and an accumulated loss of
$122,742,000. As of August 31, 2021, our total current assets were $95,337,000
and our total current liabilities were $6,679,000. On August 31, 2021, we had a
working capital surplus of $88,658,000 and an accumulated loss of $114,852,000.
The increase in working capital from August 31, 2021 to November 30, 2021 was
primarily due to capital raising.
During the three month period ended November 30, 2021, cash and cash equivalents
decreased to $31,880,000 from the $77,245,000 reported as of August 31, 2021,
which is due to the reasons described below.
Operating activities used cash of $6,903,000 in the three month period ended
November 30, 2021, as compared to $6,152,000 used in the three month period
ended November 30, 2020. Cash used in operating activities primarily consisted
of net loss resulting from research and development, sales and marketing and
general and administrative expenses, as well as changes in deferred revenue due
to the HTIT License Agreement and is partially offset by changes in accounts
payable and accrued expenses and stock-based compensation.
23
Investing activities used cash of $99,048,000 in the three month period ended
November 30, 2021, as compared to cash provided by investing activities of
$1,199,000 in the three month period ended November 30, 2020. Cash used in
investing activities in the three month period ended November 30, 2021 consisted
primarily of the purchase of short-term deposits. Cash provided by investing
activities in the three month period ended November 30, 2020 consisted primarily
of the proceeds from the sale of short-term deposits and held to maturity
securities and mutual funds and is partially offset by the purchase of short
term deposits and the purchase of held to maturity securities and corporate
bonds designated at fair value.
Financing activities provided cash of $60,563,000 in the three month period
ended November 30, 2021, as compared to $586,000 provided in the three month
period ended November 30, 2020. Cash provided by financing activities consisted
primarily proceeds from the issuance of our common stock as well as proceeds
from the exercise of options and warrants.
On September 1, 2021, we entered into a controlled equity offering agreement, or
the Cantor Equity Distribution Agreement, with Cantor Fitzgerald & Co., as
agent, pursuant to which the Company may issue and sell shares of its common
stock having an aggregate offering price of up to $100,000,000, through a sales
agent, subject to certain terms and conditions. Any shares sold will be sold
pursuant to our effective shelf registration statement on Form S-3 including a
prospectus dated July 26, 2021 and prospectus supplement dated September 1,
2021. We paid the sales agent a cash commission of 3.0% of the gross proceeds
of the sale of any shares sold through the sales agent under the Cantor Equity
Sales Agreement. As of January 11, 2022, 565,120 shares were issued under the
Cantor Equity Distribution Agreement for aggregate net proceeds of $12,298,000.
On November 3, 2021, we entered into a securities purchase agreement with
several institutional and accredited investors, or the Purchasers, pursuant to
which we agreed to sell, in a registered direct offering, or the Offering, an
aggregate of 2,000,000 shares of our common stock to the Purchasers for an
offering price of $25.00 per share. The closing of the sale of the shares
occurred on November 5, 2021. The net proceeds to us from the Offering, after
deducting the placement agent's fees and expenses and the Company's Offering
expenses, were approximately $46,375,000.
24
Critical accounting policies and estimates
Our critical accounting policies are described in "Management's Discussion and
Analysis of Financial Condition and Results of Operations" contained in our
Annual Report.
Planned Expenditures
We invest heavily in research and development, and we expect that in the
upcoming years our research and development expenses will continue to be our
major operating expense.
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ORAMED PHARMACEUTICALS INC. 
