Oramed (ORMP, Financial) just announced the outcome of a meeting with the FDA and, as per the announcement, we got a couple of key insights into its late-stage lead program.
First, that the primary endpoint of its registration study for ORMD-0801 would be rooted in the effect of ORMD-0801 on glycated hemoglobin (HbA1c). This refers to a test used to measure the levels of hemoglobin A1c in a patient's blood, which suggests that the endpoint in question will be rooted in a comparison between HbA1c and placebo and, specifically, whether the active arm can get HbA1c within normal levels in the patients being dosed.
Second, that the asset will be registered by way of a Biologics Licensing Application, which brings with it various advantages over more traditional application types. Specifically, the pathway will grant a full 12 years of marketing exclusivity for ORMD-0801 if approved and an additional six months of exclusivity can be granted if the product also receives approval for use in pediatric patients.
Management expects that this trial will kick off at some point before the end of this year, meaning we should see the top line readout for the study (assuming enrollment runs smoothly and given the size of this target diabetes population there's no obvious reason why it won't) at some point before mid-2019.
Diabetes is dominated by health care's biggest names, three of which are Eli Lilly and Co. (LLY, Financial), Novo Nordisk A/S (NVO, Financial) and GlaxoSmithKline PLC (GSK, Financial). When you are bringing an asset to a market that already has an established handful of leaders and, further, when these market leaders are of the size and caliber of those three just mentioned, you've got to bring something special to the table.
So why does Oramed think it's got a chance to grab a portion of the diabetes market?
ORMD-0801 is an orally administered insulin pill.
The ability to counter the effect of diabetes in both type 1 and type 2 forms of the condition with a pill is one that the patient population is crying out for but one that, unfortunately, many companies have tried and failed to offer. The problem is that insulin is very fragile, and the harsh environment it must pass through on its way to the liver (where the insulin is needed) renders it unusable on arrival.
Oramed is attempting to overcome this issue through the use of a proprietary technology that allows it to encapsulate insulin and – by proxy – to protect it from the harsh environment associated with the gastrointestinal tract. The company has also built an absorption enhancer into the pill, meaning that when it reaches the small intestine, the maximum possible amount of insulin is safely absorbed and reaches the liver.
But surely this can't compete with subcutaneous delivery?
Oral administration is still a limiting factor in the amount of insulin that can reach the liver and no company (at least with the currently available technology) is going to be able to produce a pill that can match subcutaneous delivery in terms of active concentration. The key point to recognize here, though, is that this doesn’t necessarily mean there's no advantage in delivering a lower amount of insulin to the liver through an easier and safer administration method (like a pill).
For example, there's strong evidence that suggests a post-meal insulin boost, as provided by an oral formulation, could stave off the point at which a diabetes patient needs to start self-administering regularly through subcutaneous injection. If this is the case, and if Oramed's asset can provide the amount of insulin required to achieve this end (this is, essentially, what's under investigation in the upcoming Phase 3 trial), then there's a large potential market in prediabetic therapy.
With a target market in line with the above, the necessity to compete with the big names in the space is removed. Oramed could go after the patients that later become Novo's customers, for example, and delay the time it would normally take for them to start requiring insulin injections from the latter.
What are the chances of success?
A Phase 2b that the company conducted prior to establishing the protocol for the Phase 3 demonstrated that the pill might well be able to meet the threshold of delivery outlined above as required to make an impact in post-meal glucose control. The data showed a statistically significant decrease in the primary endpoint, pooled night-time glucose mean percentage change of 6.47% from run-in, between placebo and active cohorts. It also showed that the drug is safe and tolerable in the type 2 diabetes population, with the assumption being that this is true for the wider diabetes population as a whole.
The next major catalyst for this company, then, is the initiation of the Phase 3 study that's going to (with any luck for shareholders) underpin registration.
As a final note on risk, Oramed is likely going to have to issue to raise cash at some point between now and the initiation of the pivotal trial discussed above. This sort of dilution risk is common at this end of the biotechnology space and, for many, it won't be prohibitive to an exposure, especially given the potential upside on offer if the study can open up a path to the diabetes market for the company's oral insulin asset.
With that said, dilution is dilution so while it might be inconsequential longer term, it's a near-term consideration nonetheless.
Disclosure: The author has no positions in any of the stocks mentioned in this piece.
