10-Q: Oramed Swings to Profit on Investment Gains, Reshapes Strategy

Oramed Pharmaceuticals reported a significant net income for Q3 2025, driven by substantial revaluation gains from its Scilex and Alpha Tau investments, while terminating its oral insulin joint venture with HTIT and planning a smaller clinical trial.

Summary

• Net income for the nine months ended September 30, 2025, was $54,007,000, a significant improvement from a net loss of $8,904,000 in the prior year.
• This profit was primarily driven by $74,278,000 in net financial income, largely from the revaluation of investments in Alpha Tau and Scilex.
• The joint venture agreement with Hefei Tianhui Biotech Co., Ltd. (HTIT) for oral insulin development was terminated on October 23, 2025, due to HTIT's failure to meet closing conditions.
• Oramed plans to initiate a 60-patient, US-based clinical trial for its oral insulin formulation, focusing on high-responder subgroups (lower BMI, older demographics), with a modified, smaller scope.
• The company increased its authorized real estate investments to up to $30,000,000 and has made several significant real estate loans and land acquisitions.
• Oramed's investment in Alpha Tau Medical Ltd. (approximately 17% ownership) generated an unrealized gain of $27,101,000.
• A stock buyback program was extended for one year, with $16,795,000 remaining for repurchases as of September 30, 2025.
• Cash and cash equivalents decreased to $52,179,000 from $54,420,000 at December 31, 2024, while short-term deposits significantly decreased.

Sentiment

Score: 7

Explanation: The company reported a significant net income driven by investment revaluations, which is a strong positive. However, the termination of a key JV and the need for future financing for its core R&D, despite a planned smaller trial, introduce some uncertainty regarding its primary pharmaceutical business. The diversification into real estate and other investments shows a proactive approach to capital management but also introduces new risk profiles.

Positives

• Achieved a net income of $54,007,000 for the nine months ended September 30, 2025, compared to a net loss of $8,904,000 in the prior year.
• Significant financial income of $74,278,000, primarily from revaluation gains on investments in Alpha Tau and Scilex.
• Unrealized gain of $27,101,000 on the investment in Alpha Tau Medical Ltd.
• Successful partial repurchase of Scilex Subsequent Penny Warrants by Scilex for $13,000,000, with an option for an additional $14,000,000.
• Reduced accumulated deficit from $176,616,000 to $122,575,000.
• Research and development expenses decreased by 10% to $4,393,000 for the nine months ended September 30, 2025.
• Extension of the stock buyback program, demonstrating commitment to shareholder value.

Negatives

• Termination of the joint venture agreement with HTIT for oral insulin development due to HTIT's inability to satisfy closing conditions.
• Operating loss slightly increased to $9,416,000 for the nine months ended September 30, 2025, from $9,186,000 in the prior year.
• Cash and cash equivalents decreased by $2,241,000 to $52,179,000 from December 31, 2024.
• Working capital surplus decreased to $129,998,000 from $137,536,000 at December 31, 2024.
• General and administrative expenses increased by 16% to $5,036,000 for the nine months ended September 30, 2025.
• The company will need substantial additional funds for its revised oral insulin clinical trial, and financing may not be available on acceptable terms.

Risks

• Uncertainty in realizing the full value of the Option Agreement and Subsequent Penny Warrants with Scilex, as Scilex's ability to make required payments or complete the repurchase is not assured.
• The company's various real estate and other investments, including Alpha Tau, involve significant risks and may not provide expected long-term value appreciation or income streams.
• If Alpha Tau fails to achieve positive clinical results or obtain regulatory approvals, the value of the investment could decline materially.
• Conditions in the real estate market might change, adversely affecting the value of real estate investments.
• The company is affected by the political, economic, and military risks of having operations in Israel, though no immediate risk to business operations related to current events was identified as of November 13, 2025.

Future Outlook

The company intends to initiate a 60-patient, US-based clinical trial for its oral insulin formulation, focusing on high-responder populations, which is expected to increase research and development expenses in future periods. It also expects to seek additional financing as needed due to substantial future capital requirements. The board has approved increasing real estate investments to up to $30,000,000, anticipating long-term value appreciation and potential income streams.

Management Comments

• "Following extensive analysis of our Phase 2 and Phase 3 clinical data, we identified high-responder subgroups that demonstrated particularly encouraging results."
• "These subgroups, including participants with lower body mass index and older demographics, showed the potential to achieve over 1% reduction in HbA1c, a clinically meaningful outcome that we believe strengthens our regulatory and commercial positioning."
• "The trial is designed to use the smallest adequately powered patient population expected to obtain such validation in what we believe to be the shortest time possible, providing a cost-effective approach to generate additional compelling evidence and refine our patient selection criteria for future potential regulatory submissions."
• "As investors, we believe Alpha Tau represents a compelling opportunity—combining innovative science, a scalable platform, and growing regulatory momentum."
• "With interest rates expected to decline and valuations presenting favorable entry points, the Board believes these [real estate] investments could provide long-term value appreciation and potential income streams, further strengthening our financial position."
• "As we continue to evaluate our business strategy, including potential structural changes, these investments are intended to enhance financial flexibility and maximize shareholder value."
• "As of November 13, 2025, we believe that there is no immediate risk to our business operations related to these events [Israel conflict]."

Industry Context

Oramed Pharmaceuticals is pivoting its strategy, moving beyond its primary pharmaceutical R&D focus to significant financial and real estate investments. This diversification, particularly into clinical-stage oncology (Alpha Tau) and real estate, suggests a broader capital allocation strategy aimed at maximizing shareholder value amidst the challenges and opportunities in the biotech and real estate sectors. The termination of the HTIT oral insulin JV highlights the inherent risks and complexities of drug development partnerships, while the planned smaller oral insulin trial reflects a more targeted, de-risked approach in a highly competitive diabetes treatment market. The investment in BioXcel, a biopharmaceutical company leveraging AI, aligns with broader industry trends in technology-driven drug discovery.

Comparison to Industry Standards

• The company's shift towards significant financial and real estate investments, alongside its core pharmaceutical R&D, is a notable deviation from typical biotech industry standards, where capital is usually concentrated on pipeline development.
• The planned 60-patient oral insulin trial, targeting high-responder subgroups, represents a more focused approach compared to broad Phase 3 trials, potentially aiming for faster, more cost-effective validation, which could be seen as a strategic adaptation in a challenging clinical development landscape.
• The investment in Alpha Tau Medical Ltd., a clinical-stage oncology company, aligns with the broader trend of pharmaceutical companies seeking to diversify their therapeutic portfolios, particularly into high-growth areas like oncology and novel radiation therapies (Alpha DaRT).
• The termination of the HTIT joint venture underscores the high failure rate and complexities of pharmaceutical partnerships, a common occurrence in the industry.
• The company's substantial financial income driven by investment revaluations, rather than product sales, indicates a business model that currently relies heavily on capital allocation and market fluctuations, which is atypical for a traditional pharmaceutical R&D company.

Corporate Governance

Related Party Transactions

• Consulting agreement with KNRY Ltd. (owned by the Chief Scientific Officer) for CSO services, effective April 1, 2025, with a monthly fee of NIS 67,275 (approximately $20,000).
• Employment agreement with the Chief Scientific Officer through the Subsidiary, effective April 1, 2025, with a gross monthly salary of NIS 51,750 (approximately $16,000).
• Consulting agreement with Shnida Ltd. (owned by the President and Chief Executive Officer) for President and CEO services, effective July 1, 2024, with a monthly fee of NIS 111,349 (approximately $34,000).
• Employment agreement with the President and Chief Executive Officer through the Subsidiary, effective July 1, 2024, with a gross monthly salary of NIS 59,330 (approximately $18,000).
• Investment in Alpha Tau Medical Ltd. (approximately 17% ownership) is considered a related party due to significant influence, including the right to nominate two directors.
• Service Agreement with Alpha Tau for investor relations and public relations services, with a fee of $3,000,000 over three years and warrants to purchase 3,237,000 Alpha Tau shares.

Stakeholder Impact

• Shareholders: Positive impact from significant net income and reduced accumulated deficit, driven by investment revaluations. Potential for further shareholder value through the extended stock buyback program. However, the termination of the HTIT JV and the need for future financing for core R&D introduce uncertainty.
• Employees: Continued R&D activities, albeit with a revised clinical trial scope, suggest ongoing employment in the core pharmaceutical segment. Stock-based compensation plans are in place.
• Customers (potential): The revised, smaller oral insulin clinical trial aims to validate efficacy in specific high-responder populations, potentially leading to a more targeted product in the future.
• Creditors: The company's improved net income and substantial current assets provide a stronger financial position, potentially enhancing creditworthiness. Repayments on Scilex notes and other loans are ongoing.
• Partners (Scilex): Ongoing complex financial arrangements with Scilex, including note extensions, warrant repurchases, and royalty agreements, indicate a continued, albeit evolving, partnership.
• Partners (HTIT): Termination of the JV agreement with HTIT marks the end of a significant partnership for oral insulin development, potentially impacting future collaboration opportunities.

Next Steps

• Initiate a 60-patient, US-based clinical trial for oral insulin in high-responder populations.
• Continue to evaluate the terms and scope of the CRO Services Agreement to align with the revised clinical trial design.
• Scilex has an option to repurchase the remaining 3,370,000 Subsequent Penny Warrants for $14,000,000 on or before December 31, 2025.
• Continue to pursue value-enhancing activities in connection with the acquired land in Mevaseret Zion, Israel, with the goal of increasing its potential return upon future sale.
• Seek additional financing through private placements or public offerings in the future, as needed.
• Evaluate the impact of new accounting pronouncements (ASU 2023-09, ASU 2024-03, ASU 2025-05, ASU 2025-07) on consolidated financial statements disclosures.

Key Dates

Recommendation

While Oramed Pharmaceuticals reported a strong net income driven by significant investment revaluations, the core pharmaceutical business faces ongoing strategic shifts, including the termination of a key joint venture and a scaled-down clinical trial plan for oral insulin. The company's increasing reliance on financial and real estate investments for profitability, while enhancing financial flexibility, introduces a different risk profile than a pure-play biotech. The need for future capital raises for R&D, despite current liquidity, suggests continued dilution risk. Given the mixed signals from core operations versus investment performance, a 'hold' recommendation is appropriate, awaiting clearer progress in the oral insulin program and sustained, diversified revenue streams.

Keywords

Oramed Pharmaceuticals, ORMP, SEC 10-Q, Quarterly Report, Financial Results, Oral Insulin, Clinical Trials, Scilex, Alpha Tau Medical, Real Estate Investment, Biotechnology, Pharmaceuticals, Investment Gains, Stock Buyback, HTIT Joint Venture, Drug Development, Corporate Strategy