Item 1. Business
ITEM
1. BUSINESS.
DESCRIPTION
OF BUSINESS
Research
and Development
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 Biologics License Application, or 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 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 type 2 diabetic 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.
1
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 intend to conduct two Phase III studies concurrently in patients with type 2 diabetes. These studies involve
about 1,125 patients to provide evidence of ORMD-0801’s safety and efficacy in type 2 diabetic patients over a treatment
period of 6 to 12 months. A geographically diverse patient population will be recruited from multiple sites throughout the United
States, European, and Israel. Our phase III study will be composed from 2 protocols:
ORA-D-013-1 :
This study will treat type 2 diabetic patients with inadequate glycaemic control who are currently on 1, 2 or 3 oral glucose-lowering
agents. This U.S. study will recruit 675 patients from 75 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 expect to initiate this trial on the fourth quarter of 2020.
ORA-D-013-2 :
This study will include type 2 diabetic 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 expect to initiate this trial on the first half of 2021.
If we successfully
complete the pivotal studies, we expect to conduct a pre-BLA meeting with the FDA to finalize the plans and data for the BLA submission.
After BLA submission and review, if the BLA is approved by the FDA, a full 12 years of marketing exclusivity would be granted.
NASH Study: In
June 2020, we presented preliminary data from our open-label study of the first 8 patients of a planned 40-patient multi-center
(U.S., Europe and Israel) pilot study, aimed to assess the safety, tolerability, and early effects of 16 mg ORMD-0801 (2x8 mg capsules)
on liver fat in type 2 diabetic patients with nonalcoholic steatohepatitis, or NASH. The 12-week, once-daily treatment had no serious
adverse events, and induced an observed mean 6.9±6.8% reduction in liver fat content (p value: 0.035), and the relative
reduction was 30%, as measured by MRI-derived proton density fat fraction. 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).
Type
1 Study: In November 2019, we initiated a crossover study of type 1 diabetic patients to compare the effects of ORMD-0801
given once daily versus the effects of ORMD-0801 given three times daily. This study showed no statistically significant, or clinically
meaningful differences in total exogenous insulin requirements, or plasma glucose levels in type 1 diabetic subjects treated with
ORMD-0801 8mg dosed once daily in the evening compared to those dosed with ORMD-0801 three times daily.
Oral
GLP-1 : 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 are using 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. Based on
this trial results, we will conduct a follow-up Phase I trial in type 2 diabetic patients which will start its enrollment by the
end of 2020 in the United States under an IND submitted to the FDA.
2
The
following table gives an overview of the above described primary R&D pipeline:
Our
clinical trials are planned in order to substantiate our results as well as for purposes of making future filings for drug approval.
We also plan to conduct further research and development by deploying our proprietary drug delivery technology for the delivery
of other polypeptides in addition to insulin, and to develop other innovative pharmaceutical products.
Other Products:
We are developing a new drug candidate, a weight loss treatment in the form of an oral leptin capsule. We anticipate initiating
a proof of concept single dose study for this candidate to evaluate its pharmacokinetics and pharmacodynamics (glucagon reduction)
in 10 type 1 adult diabetic patients. During the third quarter of 2020, we finalized the study without any safety issues, and we
are waiting for the final lab results.
Raw
Materials
Our
oral insulin capsule is currently manufactured by Fidelio Healthcare, a diversified European Contract Development and Manufacturing
Organization (CDMO) in the pharmaceutical and healthcare industries.
In
July 2010, Oramed Ltd. entered into the Manufacturing and Supply Agreement, or MSA, with Sanofi-Aventis Deutschland GMBH, or Sanofi-Aventis.
According to the MSA, Sanofi-Aventis will supply Oramed Ltd. with specified quantities of recombinant human insulin to be used
for clinical trials. We also entered into an Insulin Supply Agreement in September 2020 with Hefei Tianmai Biological Technology
Development Limited, who will also supply Oramed Ltd. with specified quantities of recombinant human insulin to be used for clinical
trials.
We
purchase, pursuant to separate agreements with third parties, the raw materials required for the manufacturing of our oral capsule.
We generally depend upon a limited number of suppliers for the raw materials. Although alternative sources of supply for these
materials are generally available, we could incur significant costs and disruptions if we need to change suppliers. The termination
of our relationships with our suppliers or the failure of these suppliers to meet our requirements for raw materials on a timely
and cost-effective basis could have a material adverse effect on our business, prospects, financial condition and results of operations.
Market
Overview
Diabetes is a disease
in which the body does not produce or properly use insulin. Insulin is a hormone that causes sugar to be absorbed into cells, where
the sugar is converted into energy needed for daily life. The cause of diabetes is attributed both to genetics (type 1 diabetes)
and, most often, to environmental factors such as obesity and lack of exercise (type 2 diabetes). According to the International
Diabetes Federation, or IDF, an estimated 463 million adults (20-79 years) worldwide suffered from diabetes in 2019 and the IDF
projects this number will increase to 700 million by 2045. Also, according to the IDF, in 2019, an estimated 4.2 million people
died from diabetes. According to the American Diabetes Association, or ADA, in the United States there were approximately 34.2
million people with diabetes, or 10.5% of the United States population in 2018. Diabetes is a leading cause of blindness, kidney
failure, heart attack, stroke and amputation. The latest report of the ADA that analyzed the economic costs of diabetes in the
U.S in 2017 indicates that the total cost of diagnosed diabetes in the United States in 2017 was $327 billion.
3
Intellectual
Property
We
own a portfolio of patents and patent applications covering our technologies, and we are aggressively protecting these technology
developments on a worldwide basis.
Leadership
Management :
We are led by an experienced management team knowledgeable in the treatment of diabetes. Our Chief Scientific Officer, Miriam
Kidron, PhD, is a recognized pharmacologist and a biochemist and the innovator primarily responsible for our oral insulin technology
development and know-how.
Scientific
Advisory Board : Our management team has access to our internationally recognized Scientific Advisory Board whose members
are thought-leaders in their respective areas. The Scientific Advisory Board is comprised of Dr. Roy Eldor, Professor Ele Ferrannini,
Professor Avram Hershko, Dr. Harold Jacob, Dr. Julio Rosenstock and Dr. Jay Skyler.
Strategy
We
plan to ultimately seek a strategic commercial partner, or partners, with extensive experience in the development, commercialization,
and marketing of insulin applications and/or other orally digestible drugs. We anticipate such partner or partners would be responsible
for, or substantially support, late stage clinical trials (Phase III) to increase the likelihood of obtaining regulatory approvals
and registrations in the appropriate markets in a timely manner. We further anticipate that such partner, or partners, would also
be responsible for sales, marketing and support of our products in these markets. Such planned strategic partnership, or partnerships,
may provide a marketing and sales infrastructure for our products as well as financial and operational support for global clinical
trials, post marketing studies, label expansions and other regulatory requirements concerning future clinical development. In
2015 we successfully executed this strategy when we, Oramed Ltd. and HTIT entered into a Technology License Agreement pursuant
to which we granted HTIT an exclusive commercialization license in the territory of the People’s Republic of China, Macau
and Hong Kong, or the Territory, related to our oral insulin capsule, ORMD-0801. Any future strategic partner, or partners, may
also provide capital and expertise that would enable the partnership to develop new oral dosage forms for other polypeptides.
While our strategy is to partner with an appropriate party, no assurance can be given that we will in fact be able to reach an
agreeable partnership with any third party. Under certain circumstances, we may determine to develop one or more of our oral dosage
forms on our own, either world-wide or in select territories.
In
addition to developing our own oral dosage form drug portfolio, we are, on an on-going basis, considering in-licensing and other
means of obtaining additional technologies to complement and/or expand our current product portfolio. Our goal is to create a
well-balanced product portfolio that will enhance and complement our existing drug portfolio.
Potential
Material Impact of COVID-19
The COVID-19 pandemic
has negatively impacted the global economy, disrupted consumer spending and global supply chains and created significant volatility
and disruption of financial markets. Although to date the COVID-19 pandemic has not had a material adverse effect on us, the COVID-19
pandemic may have a material adverse effect on our business and financial performance in the future. The extent of the impact of
the COVID-19 pandemic, including our ability to execute our business strategies as planned, will depend on future developments,
including the duration and severity of the pandemic, which are highly uncertain and cannot be predicted.
Although,
as of the date of this Annual Report on Form 10-K, we do not expect any material impact on our long-term activity, the extent
to which COVID-19 impacts our business will depend on future developments, which are highly uncertain and cannot be predicted,
including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its
impact, among others.
Patents
and Licenses
We
maintain a proactive intellectual property strategy, which includes patent filings in multiple jurisdictions, including the United
States and other commercially significant markets. We hold 26 patent applications currently pending, with respect to various compositions,
methods of production and oral administration of proteins and exenatide. Expiration dates for pending patents, if granted, will
fall between 2026 and 2039.
4
We hold 79 patents,
2 of which were issued during the fiscal year ended August 31, 2020, or fiscal 2020, including patents issued by the United States,
Swiss, German, French, U.K., Italian, Netherlands, Swedish, Spanish, Australian, Israeli, Japanese, New Zealand, South African,
Russian, Canadian, Hong Kong, Chinese, European and Indian patent offices that cover a part of our technology, which allows for
the oral delivery of proteins; patents issued by the Australian, Canadian, European, Austrian, Belgian, French, German, Irish,
Italian, Luxembourg, Monaco, Netherlands, Norwegian, Spanish, Swedish, Swiss, U.K., Israeli, New Zealand, South African, Russian
and Japanese patent offices that cover part of our technology for the oral delivery of exenatide; and patents issued by the European,
Austrian, Belgian, Denmark, French, German, Irish, Italian, Luxembourg, Monaco, Netherlands, Norway, Spanish, Swedish, Swiss, U.K.
and Japanese patent offices for treating diabetes.
Consistent
with our strategy to seek protection in key markets worldwide, we have been and will continue to pursue the patent applications
and corresponding foreign counterparts of such applications. We believe that our success will depend on our ability to obtain
patent protection for our intellectual property.
Our
patent strategy is as follows:
● Aggressively
protect all current and future technological developments to assure strong and broad protection by filing patents and/or continuations
in part as appropriate,
● Protect
technological developments at various levels, in a complementary manner, including the base technology, as well as specific applications
of the technology, and
● Establish
comprehensive coverage in the United States and in all relevant foreign markets in anticipation of future commercialization opportunities.
We
also rely on trade secrets and unpatentable know-how that we seek to protect, in part, by confidentiality agreements. Our policy
is to require our employees, consultants, contractors, manufacturers, outside scientific collaborators and sponsored researchers,
our board of directors, or our Board, technical review board and other advisors, to execute confidentiality agreements upon the
commencement of employment or consulting relationships with us. These agreements provide that all confidential information developed
or made known to the individual during the course of the individual’s relationship with us is to be kept confidential and
not disclosed to third parties except in specific limited circumstances. We also require signed confidentiality or material transfer
agreements from any company that is to receive our confidential information. In the case of employees, consultants and contractors,
the agreements provide that all inventions conceived by the individual while rendering services to us shall be assigned to us
as the exclusive property of our Company. There can be no assurance, however, that all persons who we desire to sign such agreements
will sign, or if they do, that these agreements will not be breached, that we would have adequate remedies for any breach, or
that our trade secrets or unpatentable know-how will not otherwise become known or be independently developed by competitors.
Out-Licensed
Technology
In
June 2010, Oramed Ltd. entered into a joint venture agreement with D.N.A Biomedical Solutions Ltd., or D.N.A, for the establishment
of Entera Bio Ltd., or Entera.
Under the terms of
a license agreement, as amended, that was entered into between Oramed Ltd. and Entera in August 2010, we out-licensed technology
to Entera, on an exclusive basis, for the development of oral delivery drugs for certain indications to be agreed upon between
the parties. The out-licensed technology differs from our main delivery technology that is used for oral insulin and GLP-1 analog
and is subject to different patent applications. Entera’s initial development effort is for an oral formulation for the treatment
of osteoporosis. In March 2011, we entered into a patent transfer agreement, or the Patent Transfer Agreement, to replace the original
license agreement pursuant to which Oramed Ltd. assigned to Entera all of its right, title and interest in and to the patent application
that it had licensed to Entera in August 2010. Under this agreement, Oramed Ltd. is entitled to receive from Entera royalties of
3% of Entera’s net revenues and a license back of that patent application for use in respect of diabetes and influenza.
In
March 2011, we also consummated a transaction with D.N.A, whereby we sold to D.N.A 47% of Entera’s outstanding share capital
on an undiluted basis, retaining a 3% interest as of March 2011. In consideration for the shares sold to D.N.A, we received, among
other payments, ordinary shares of D.N.A. The D.N.A ordinary shares are traded on the Tel Aviv Stock Exchange and its quoted price
is subject to market fluctuations, and may, at times, have a price below the value on the date we acquired such shares. In addition,
the ordinary shares of D.N.A have historically experienced low trading volume; as a result, there is no guarantee that we will
be able to resell the ordinary shares of D.N.A at the prevailing market prices. During the years ended August 31, 2020, 2019 and
2018, we did not sell any of the D.N.A ordinary shares. As of August 31, 2020, we held approximately 5.6% of D.N.A’s outstanding
ordinary shares.
5
As of August 31, 2020,
Entera had not yet realized any revenues. On December 11, 2018, Entera announced that it had entered into a research collaboration
and license agreement, or the Amgen License, with Amgen Inc. related to research of inflammatory disease and other serious illnesses.
As reported by Entera, under the terms of the Amgen License, Entera will receive a modest initial technology access fee from Amgen
and will be responsible for preclinical development at Amgen’s expense. Entera will be eligible to receive up to $270,000,000
in aggregate payments, as well as tiered royalties up to mid-single digits, upon achievement of various clinical and commercial
milestones if Amgen decides to move all of these programs forward. To the extent the Amgen License results in net revenues as defined
in the Patent Transfer Agreement, Oramed Ltd. will be entitled to the aforementioned royalties.
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 License Agreement. According to the License Agreement, we granted HTIT an exclusive commercialization
license in the Territory, related to our oral insulin capsule, ORMD-0801, or the Product. Pursuant to the 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 License Agreement shall remain in effect until the expiration of the Royalty Term. The License
Agreement contains customary termination provisions. Through August 31, 2020, we received aggregate milestone payments of $20.5
million.
On August 21, 2020, we received a
letter from HTIT, disputing certain pending payment obligations of HTIT under the TLA. The payment obligation being disputed is
$4 million, out of which only an amount of $2 million has been received and has been included in Deferred revenue in each of the
consolidated balance sheets as of the fiscal years ended August 31, 2020, and 2019. In addition, the dispute includes a payment
obligation of $2 million for certain milestones that we assert it met under the TLA subsequent to the fiscal year ended August
31, 2020. We wholly dispute the claims made by HTIT and has been engaged in discussions and exchanges with HTIT in an attempt to
clarify and resolve disagreements between the parties regarding milestone payments and work plan implementation.
We
also entered into a separate securities purchase agreement with HTIT, or the SPA, pursuant to which HTIT invested $12 million
in us in December 2015. In connection with the License Agreement and the SPA, we received a non-refundable payment of $500,000
as a no-shop fee.
Government
Regulation
The
Drug Development Process
Regulatory
requirements for the approval of new drugs vary from one country to another. In order to obtain approval to market our drug portfolio,
we need to go through a different regulatory process in each country in which we apply for such approval. In some cases, information
gathered during the approval process in one country can be used as supporting information for the approval process in another
country. As a strategic decision, we decided to first explore the FDA regulatory pathway. The following is a summary of the FDA’s
requirements.
6
The
FDA requires that pharmaceutical and certain other therapeutic products undergo significant clinical experimentation and clinical
testing prior to their marketing or introduction to the general public. Clinical testing, known as clinical trials or clinical
studies, is either conducted internally by life science, pharmaceutical or biotechnology companies or is conducted on behalf of
these companies by CROs.
The
process of conducting clinical studies is highly regulated by the FDA, as well as by other governmental and professional bodies.
Below we describe the principal framework in which clinical studies are conducted, as well as describe a number of the parties
involved in these studies.
Protocols.
Before commencing human clinical studies, the sponsor of a new drug or therapeutic product must submit an IND application to the
FDA. The application contains, among other documents, what is known in the industry as a protocol. A protocol is the blueprint
for each drug study. The protocol sets forth, among other things, the following:
● Who
must be recruited as qualified participants,
● How
often to administer the drug or product,
● What
tests to perform on the participants, and
● What
dosage of the drug or amount of the product to give to the participants.
Institutional
Review Board. An institutional review board is an independent committee of professionals and lay persons which reviews clinical
research studies involving human beings and is required to adhere to guidelines issued by the FDA. The institutional review board
does not report to the FDA, but its records are audited by the FDA. Its members are not appointed by the FDA. All clinical studies
must be approved by an institutional review board. The institutional review board’s role is to protect the rights of the
participants in the clinical studies. It approves the protocols to be used, the advertisements which the company or CRO conducting
the study proposes to use to recruit participants, and the form of consent which the participants will be required to sign prior
to their participation in the clinical studies.
Clinical
Trials. Human clinical studies or testing of a potential product are generally done in three stages known as Phase I through Phase
III testing. The names of the phases are derived from the regulations of the FDA. Generally, there are multiple studies conducted
in each phase.
Phase
I. Phase I studies involve testing a drug or product on a limited number of healthy or patient participants, typically 24 to 100
people at a time. Phase I studies determine a product’s basic safety and how the product is absorbed by, and eliminated
from, the body. This phase lasts an average of six months to a year.
Phase
II. Phase II trials involve testing of no more than 300 participants at a time who may suffer from the targeted disease or condition.
Phase II testing typically lasts an average of one to two years. In Phase II, the drug is tested to determine its safety and effectiveness
for treating a specific illness or condition. Phase II testing also involves determining acceptable dosage levels of the drug.
Phase II studies may be split into Phase IIa and Phase IIb sub-studies. Phase IIa studies may be conducted with patient volunteers
and are exploratory (non-pivotal) studies, typically designed to evaluate clinical efficacy or biological activity. Phase IIb
studies are conducted with patients defined to evaluate definite dose range and evaluate efficacy. If Phase II studies show that
a new drug has an acceptable range of safety risks and probable effectiveness, a company will generally continue to review the
substance in Phase III studies.
Phase
III. Phase III studies involve testing large numbers of participants, typically several hundred to several thousand persons. The
purpose is to verify effectiveness and long-term safety on a large scale. These studies generally last two to three years. Phase
III studies are conducted at multiple locations or sites. Like the other phases, Phase III requires the site to keep detailed
records of data collected and procedures performed.
Biological
License Application. The results of the clinical trials for a biological product are submitted to the FDA as part of a BLA. Following
the completion of Phase III studies, assuming the sponsor of a potential product in the United States believes it has sufficient
information to support the safety and effectiveness of its product, the sponsor will generally submit a BLA to the FDA requesting
that the product be approved for marketing. The application is a comprehensive, multi-volume filing that includes the results
of all clinical studies, information about the drug’s composition, and the sponsor’s plans for producing, packaging
and labeling the product. The FDA’s review of an application can take a few months to many years, with the average review
lasting 18 months. Once approved, drugs and other products may be marketed in the United States, subject to any conditions imposed
by the FDA. Approval of a BLA provides 12 years of exclusivity in the U.S. market.
7
Phase
IV. The FDA may require that the sponsor conduct additional clinical trials following new drug approval. The purpose of these
trials, known as Phase IV studies, is to monitor long-term risks and benefits, study different dosage levels or evaluate safety
and effectiveness. In recent years, the FDA has increased its reliance on these trials. Phase IV studies usually involve thousands
of participants. Phase IV studies also may be initiated by the company sponsoring the new drug to gain broader market value for
an approved drug.
Similar
to the U.S., a European sponsor of a biological product may submit a Marketing Approval Application to the EMA for the registration
of the product. The approval process in Europe consists of several stages, which together are summed up to 210 days from the time
of submission of the application (net, without periods in which the sponsor provides answers to questions raised by the agency)
following which, a Marketing Approval may be granted. During the approval process, the sponsor’s manufacturing facilities
will be audited in order to assess Good Manufacturing Practice compliance.
The
drug approval process is time-consuming, involves substantial expenditures of resources, and depends upon a number of factors,
including the severity of the illness in question, the availability of alternative treatments, and the risks and benefits demonstrated
in the clinical trials.
Other
Regulations
Various
federal, state and local laws, regulations, and recommendations relating to safe working conditions, laboratory practices, the
experimental use of animals, the environment and the purchase, storage, movement, import, export, use, and disposal of hazardous
or potentially hazardous substances, including radioactive compounds and infectious disease agents, used in connection with our
research are applicable to our activities. They include, among others, the U.S. Atomic Energy Act, the Clean Air Act, the Clean
Water Act, the Occupational Safety and Health Act, the National Environmental Policy Act, the Toxic Substances Control Act, and
Resources Conservation and Recovery Act, national restrictions on technology transfer, import, export, and customs regulations,
and other present and possible future local, state, or federal regulation. The compliance with these and other laws, regulations
and recommendations can be time-consuming and involve substantial costs. In addition, the extent of governmental regulation which
might result from future legislation or administrative action cannot be accurately predicted and may have a material adverse effect
on our business, financial condition, results of operations and prospects.
Competition
Competition
in General
Competition
in the area of biomedical and pharmaceutical research and development is intense and significantly depends on scientific and technological
factors. These factors include the availability of patent and other protection for technology and products, the ability to commercialize
technological developments and the ability to obtain regulatory approval for testing, manufacturing and marketing. Our competitors
include major pharmaceutical, medical products, chemical and specialized biotechnology companies, many of which have financial,
technical and marketing resources significantly greater than ours. In addition, many biotechnology companies have formed collaborations
with large, established companies to support research, development and commercialization of products that may be competitive with
ours. Academic institutions, governmental agencies and other public and private research organizations are also conducting research
activities and seeking patent protection and may commercialize products on their own or through joint ventures. We are aware of
certain other products manufactured or under development by competitors that are used for the treatment of the diseases and health
conditions that we have targeted for product development. We can provide no assurance that developments by others will not render
our technology obsolete or noncompetitive, that we will be able to keep pace with new technological developments or that our technology
will be able to supplant established products and methodologies in the therapeutic areas that are targeted by us. The foregoing
factors could have a material adverse effect on our business, prospects, financial condition and results of operations. These
companies, as well as academic institutions, governmental agencies and private research organizations, also compete with us in
recruiting and retaining highly qualified scientific personnel and consultants.
8
Competition
within our sector is increasing, so we will encounter competition from existing firms that offer competitive solutions in diabetes
treatment solutions. These competitive companies could develop products that are superior to, or have greater market acceptance,
than the products being developed by us. We will have to compete against other biotechnology and pharmaceutical companies with
greater market recognition and greater financial, marketing and other resources.
Our
competition will be determined in part by the potential indications for which our technology is developed and ultimately approved
by regulatory authorities. In addition, the first product to reach the market in a therapeutic or preventive area is often at
a significant competitive advantage relative to later entrants to the market. Accordingly, the relative speed with which we, or
our potential corporate partners, can develop products, complete the clinical trials and approval processes and supply commercial
quantities of the products to the market are expected to be important competitive factors. Our competitive position will also
depend on our ability to attract and retain qualified scientific and other personnel, develop effective proprietary products,
develop and implement production and marketing plans, obtain and maintain patent protection and secure adequate capital resources.
We expect our technology, if approved for sale, to compete primarily on the basis of product efficacy, safety, patient convenience,
reliability, value and patent position.
Competition
for Our Oral Insulin Capsule
We
anticipate the oral insulin capsule to be a competitive diabetes drug because of its anticipated efficacy and safety profile.
The following are some of the treatment options for type 1 and type 2 diabetic patients:
● Insulin
injections,
● Insulin
pumps, or
● A
combination of diet, exercise and oral medication which improve the body’s response to insulin or cause the body to produce
more insulin.
Scientific
Advisory Board
We
maintain a Scientific Advisory Board consisting of internationally recognized scientists who advise us on scientific and technical
aspects of our business. The Scientific Advisory Board meets periodically to review specific projects and to assess the value
of new technologies and developments to us. In addition, individual members of the Scientific Advisory Board meet with us periodically
to provide advice in their particular areas of expertise. The Scientific Advisory Board consists of the following members, information
with respect to whom is set forth below: Dr. Roy Eldor, Professor Ele Ferrannini, Professor Avram Hershko, Dr. Harold Jacob, Dr.
Julio Rosenstock and Dr. Jay Skyler.
Dr.
Roy Eldor , MD, PhD, joined the Oramed Scientific Advisory Board in July 2016. He is an endocrinologist, internist
and researcher with over twenty years of clinical and scientific experience. He is currently Director of the Diabetes Unit at
the Institute of Endocrinology, Metabolism & Hypertension, Tel-Aviv Sourasky Medical Center. Prior to that, Dr. Eldor served
as Principal Scientist at Merck Research Laboratories, Clinical Research - Diabetes & Endocrinology, Rahway, New Jersey. He
has previously served as a senior physician in internal medicine at the Diabetes Unit in Hadassah Hebrew University Hospital,
Jerusalem, Israel; and the Diabetes Division at the University of Texas Health Science Center in San Antonio, Texas (under the
guidance of Dr. R.A. DeFronzo). Dr. Eldor is a recognized expert, with over 35 peer reviewed papers and book chapters, and has
been a guest speaker at numerous international forums.
Professor
Ele Ferrannini , MD, joined the Oramed Scientific Advisory Board in February 2007. He is a past President to the
European Association for the Study of Diabetes, which supports scientists, physicians and students from all over the world who
are interested in diabetes and related subjects in Europe, and performs functions similar to that of the ADA in the United States.
Professor Ferrannini has worked with various institutions including the Department of Clinical & Experimental Medicine, University
of Pisa School of Medicine, and CNR (National Research Council) Institute of Clinical Physiology, Pisa, Italy; and the Diabetes
Division, Department of Medicine, University of Texas Health Science Center at San Antonio, Texas. He has also had extensive training
in internal medicine and endocrinology, and has specialized in diabetes studies. Professor Ferrannini has received a Certificate
of the Educational Council for Foreign Medical Graduates from the University of Bologna, and with cum laude honors completed a
subspecialty in Diabetes and Metabolic Diseases at the University of Torino. He has published over 500 original papers and 50
book chapters and he is a “highly cited researcher,” according to the Institute for Scientific Information.
9
Professor
Avram Hershko, MD, PhD , joined the Oramed Scientific Advisory Board in July 2008. He earned his MD degree (1965) and PhD
degree (1969) from the Hebrew University-Hadassah Medical School of Jerusalem. Professor Hershko served as a physician in the
Israel Defense Forces from 1965 to 1967. After a post-doctoral fellowship with Gordon Tomkins at the University of San Francisco
(1969 - 72), he joined the faculty of the Haifa Technion becoming a professor in 1980. He is now Distinguished Professor
in the Unit of Biochemistry in the B. Rappaport Faculty of Medicine of the Technion. Professor Hershko’s main research interests
concern the mechanisms by which cellular proteins are degraded, a formerly neglected field of study. Professor Hershko and his
colleagues showed that cellular proteins are degraded by a highly selective proteolytic system. This system tags proteins for
destruction by linkage to a protein called ubiquitin, which had previously been identified in many tissues, but whose function
was previously unknown. Subsequent work by Professor Hershko and many other laboratories has shown that the ubiquitin system has
a vital role in controlling a wide range of cellular processes, such as the regulation of cell division, signal transduction and
DNA repair. Professor Hershko was awarded the Nobel Prize in Chemistry (2004) jointly with his former PhD student Aaron Ciechanover
and their colleague Irwin Rose. His many honors include the Israel Prize for Biochemistry (1994), the Gairdner Award (1999), the
Lasker Prize for Basic Medical Research (2000), the Wolf Prize for Medicine (2001) and the Louisa Gross Horwitz Award (2001).
Professor Hershko is a member of the Israel Academy of Sciences (2000) and a Foreign Associate of the U.S. Academy of Sciences
(2003).
Dr.
Harold Jacob, MD , joined the Oramed Scientific Advisory Board in November 2016. Since 1998, Dr. Jacob has served as the
president of Medical Instrument Development Inc., a company which provides a range of support and consulting services to start-up
and early stage companies as well as patenting its own proprietary medical devices. Since 2011, Dr. Jacob has also served as an
attending physician at Hadassah University Medical Center, where he has served as the director of the gastrointestinal endoscopy
unit since September 2013. Dr. Jacob has advised a spectrum of companies in the past and he served as a consultant and then as
the Director of Medical Affairs at Given Imaging Ltd., from 1997 to 2003, a company that developed the first swallowable wireless
pill camera for inspection of the intestine. He has licensed patents to a number of companies including Kimberly-Clark Corporation.
Since 2014, Dr. Jacob has served as the Chief Medical Officer and a director of NanoVibronix, Inc., a medical device company using
surface acoustics to prevent catheter acquired infection as well as other applications, where he served as Chief Executive Officer
from 2004 to 2014. He practiced clinical gastroenterology in New York and served as Chief of Gastroenterology at St. John’s
Episcopal Hospital and South Nassau Communities Hospital from 1986 to 1995, and was a Clinical Assistant Professor of Medicine
at SUNY from 1983 to 1990. Dr. Jacob founded and served as Editor in Chief of Endoscopy Review and has authored numerous publications
in the field of gastroenterology.
Dr.
Julio Rosenstock, MD , joined the Oramed Scientific Advisory Board in January 2020. Dr. Rosenstock is the current Director
of the Dallas Diabetes Research Center at Medical City Dallas and a Clinical Professor of Medicine at the University of Texas
Southwestern Medical Center, Dallas. He received his medical degree from the University of Costa Rica School of Medicine and completed
Fellowships in Endocrinology and Diabetes at the Royal Postgraduate Medical School, Hammersmith Hospital, London, UK, and at the
University of Texas Southwestern Medical Center. His clinical research efforts focus on exploring novel agents and therapeutic
strategies to improve glycemic control. Over the last 30 years, he has participated in hundreds of clinical trials and has had
an active role in the development of new oral agents and insulin preparations acting often as a lead clinical investigator and
scientific advisor. He has authored or co-authored 296 peer-reviewed manuscripts and numerous abstracts. Dr. Rosenstock is a member
of the National Board of Directors of the ADA and is currently an Associate Editor of Diabetes Care.
Dr.
Jay Skyler, MD, MCAP , joined the Oramed Scientific Advisory Board in January 2020. Dr. Skyler is Professor of Medicine,
Pediatrics, & Psychology in the Division of Endocrinology, Diabetes & Metabolism, Department of Medicine, University of
Miami Leonard M. Miller School of Medicine. He previously held the position of Director of the Division of Endocrinology, Diabetes
& Metabolism. In addition, Dr. Skyler is Deputy Director of Clinical Research and Academic Programs at the Diabetes Research
Institute, and an Adjunct Professor of Pediatrics at the Barbara Davis Center for Childhood Diabetes, University of Colorado at
Denver. Dr. Skyler’s research focuses on the clinical aspects of diabetes, specifically the conduct of randomized controlled
clinical trials. From 1993 until 2015, he was Chairman of the NIH (NIDDK)-sponsored Diabetes Prevention Trial - Type 1 (DPT-1)
and its successor Type 1 Diabetes TrialNet, a nationwide (and global) network conducting clinical trials to prevent type 1 diabetes.
10
Employees
We
have been successful in retaining experienced personnel involved in our research and development program. In addition, we believe
we have successfully recruited the clinical/regulatory, quality assurance and other personnel needed to advance through clinical
studies or have engaged the services of experts in the field for these requirements. As of August 31, 2020, we have contracted
with twelve individuals for employment or consulting arrangements. Of our staff, four are senior management, four are engaged
in research and development work, and the remaining four are involved in administration work.
Additional
Information
Additional
information about us is contained on our Internet website at www.oramed.com. Information on our website is not incorporated by
reference into this report. On our website, under “Investors”, “SEC Filings”, we make available free of
charge our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports
filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, as soon
as reasonably practicable after we electronically file such material with, or furnish it to, the U.S. Securities and Exchange
Commission, or the SEC. Reports filed with the SEC are made available on its website at www.sec.gov. The following Corporate Governance
documents are also posted on our website: Code of Ethics, Whistleblowing Policy and the Charters for each of the Audit Committee,
Compensation Committee and Nominating Committee of our Board.