Oramed completes China rights agreement

Oramed CEO Nadav Kidron

Israel's Oramed ($ORMP) has brought its oral insulin capsule into China, Hong Kong and Macau, signing an agreement this week worth up to $50 million with the Chinese Hefei Tianhui Incubator of Technologies for exclusive rights to market the treatment in those three locations.

Oramed's insulin capsule, ORMD-0801, is still in the midst of Phase II trials in the U.S. with the Jerusalem-based company having completed Phase IIa and moving into IIb for both Type 1 and Type 2 diabetes. It has been enrolling patients for the Phase IIb trial as of the middle of September.

Talks were entering the final stages for the China deal earlier this year as the company sold the rights to a consortium of investors including Sinopharm Capital Management (which partially owns Hefei Tianhui) and Hefei Life Science & Technology Park Investments and Development. In July, Oramed found itself between those investors and Guangxi Wuzhou Zhongheng Group, which ultimately backed down.

As for the deal with Hefei, the windfall includes $3 million upfront, milestone payments of up to $35 million and $12 million in equity. FBR Capital analyst Christopher James told SmarterAnalyst: "These royalties could provide significant revenues for Oramed, since China has the largest number of diabetes patients of any nation in the world. The Lancet estimates that over one in 10 people and greater than 100 million adults in China suffer from diabetes." James opined that the deal "further validates the potential of ORMD-0801 for the treatment of diabetes Type 1 and Type 2."

Oramed's treatment offers a new delivery mechanism for patients with diabetes, a market that companies are clamoring to corner. Several of them have come close to creating an effective model, but getting insulin past the gut enzymes can be troublesome. Oramed has gotten the furthest into the clinic, but it has still seen its share of problems with formulation and inconsistent release, while Novo Nordisk ($NVO), Bristol-Myers Squibb ($BMY) and Biocon are also looking into oral options.

"China recently became the country with the largest number of diabetics in the world," Oramed CEO Nadav Kidron said in a statement. "Having signed these definitive license and investment agreements, our oral insulin capsule could help serve the growing population of people in China living with diabetes. In addition to the $50 million in milestone payments and investments, we believe the royalties on net sales throughout China will have a very significant impact on Oramed's future revenues and earnings, upon market approval of ORMD-0801 in China."

- here's the release