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Here’s Why Oramed Pharmaceuticals Is a Stock to Watch Right Now

Here's a look at where Oramed fits into the diabetes landscape.

Globally, there are a little over 415 million people living with diabetes. One dollar in every eight dollars spent on healthcare is spent on diabetes treatment and, during 2015, global diabetes healthcare expenditure reached $673 billion. Between now and 2040, estimates suggest that another 227 million individuals will be added to the total count and as many as 15% of everybody on the planet will have either type I or type II diabetes mellitus.

The globally established standard of care for the treatment of people with diabetes right now is injectable insulin. Before injectable insulin became widely available, diabetes deaths were unavoidable and far more prevalent than they are today. However, even as effective a treatment as injectable insulin is, ever since it was first administered, companies and scientists have been trying to create an oral formulation.

Safety, cost, convenience and patient quality of life suggest that an oral formulation of insulin would be preferable to self-administration injections, but is isn’t an easy thing to achieve, which is why it is not available yet.

Insulin is incredibly fragile and is broken down in our gastrointestinal system long before it has a chance to reach the bloodstream and, in turn, the liver, where it’s used to reduce blood glucose levels.

A number of companies have tried and failed to use certain technologies to protect insulin from our GI tract when administered orally but, to date, none have managed to get anything approved in the US.

There is one company right now, however, that is incredibly close to doing just that – Oramed Pharmaceuticals, Inc. (ORMP).

Oramed is an Israeli biotechnology company that has created a platform that allows it to formulate insulin into a pill and to protect the insulin from the various elements of our gastrointestinal system that might otherwise be able to break it down.

As the insulin travels through the GI tract, two things are most likely to damage it and render it inactive – stomach acid and proteases. With its proprietary technology, Oramed has packaged insulin within a pH sensitive enteric coating that only dissolves once it reaches the small intestine. This negates the stomach acid issue. Also included are protease inhibitors, which render the attacking proteases unable to reach the insulin. Finally, the pill contains absorption enhancers so that once it does reach the small intestine, the insulin is quickly absorbed into the bloodstream and can reach the liver through the portal vein, which is the natural method of delivery for self-produced insulin in healthy patients.

So why is all this relevant now?

The company just met with the FDA on the back of a phase 2 trial completion and has come away from the meeting with the news that it will be able to file for approval using a Biologics Licensing Application (BLA). Further, in order to do so, it needs to conduct a 90-day trial we will address in a moment and a confirmatory phase 3 study.

If the company is able to demonstrate safety and efficacy as part of these two studies, the data will be used to underpin a BLA submission, the approval of which will allow not just for Oramed to sell its oral insulin in the US, but will also give the company 12 years marketing exclusivity in the space.

The 90-day trial is about to kick off and there is a good chance that we will see a degree of speculative loading ahead of initiation in anticipation of positive results. Further, once the trial completes and if the data is positive, markets are quickly going to pick up on the fact that this company is the closest any has ever come to actually getting an oral insulin pill on shelves and, by proxy, quickly revalue Oramed from its current market capitalization to reflect this fact.

So, what are we looking for near-term as indicative that the company is moving in the right direction?

The next major catalyst for this stock is the 90-day trial initiation and subsequent data readout on HbA1c, which refers to glycated hemoglobin. When hemoglobin joins with glucose in the blood it becomes glycated. By measuring the amount of glycated hemoglobin, or HbA1c, circulating in a patient’s bloodstream, it is possible to get a picture of what a patient’s average blood sugar levels have been over a period of about 3 months prior to final measurement.

The higher the level of HbA1c, the more severe the diabetes is considered to be. As such, if a drug can reduce HbA1c over time, it could be considered to be contributing to an improvement in a patient’s diabetes by decreasing severity. In a phase 2b study that Oramed completed, the company was able to show that treatment with its oral insulin pill ORMD-0801, HbA1c was reduced considerably (and statistically significantly) as compared to placebo over a period of 29 days.

The idea of the ninety-day study, therefore, is to build on this with the goal of trying to reduce HbA1c even further as compared to placebo across a longer timeframe.

If at the end of 90 days, the patients in the trial population demonstrate this impact, it’s a strong indicator not just that Oramed’s pill technology can safely chaperone insulin through the GI tract, but that, on arrival, the insulin can have both an immediate and a cumulative effect on diabetes severity in patients being treated.

That’s a big deal, and one that could inject some immediate upside momentum into Oramed’s market capitalization as and when they hit press.

From a financial perspective, the company is well-positioned, with just short of $40 million cash and short-term investments on hand and zero debt, with a small float of just 13.3 million shares outstanding, or 15.3 million shares fully diluted.

Once the 90-day trial is complete, focus will shift to the phase 3 confirmatory study and the subsequent BLA submission. Right now, however, and as a near-term investment thesis, the 90-day investigation is the one to keep an eye on.

The company expects to start enrollment at some point during late 2017, or early 2018.

Disclosure: The author has no positions in any of the stocks mentioned in this piece.