Oramed inks huge $50m deal with Chinese pharma firm

In one of the biggest deals so far between Israel and China – and one of the biggest in the Israeli medical technology industry – Israeli pharma firm Oramed on Monday signed a licensing and investment deal with China’s Hefei Life Science & Technology Park Investments and Development Co. (HLST), a subsidiary of Chinese pharma giant Sinopharm, for the rights to its oral insulin capsule.

“It’s a hugely important deal not just for Oramed, but for Israel in general,” the company’s CEO, Nadave Kidron, told The Times of Israel. “China is very interested in all sorts of technology from Israel, but med tech and biotech are a matter of life and death. There is great interest among the Chinese in all areas of Israeli tech, but especially in health and aging related technology.”

Worth $50 million in total, the deal was considered so important that it was signed by representatives of Oramed and HLST at the Knesset. The deal includes an immediate payment of $11 million, and an additional payment of $27 million next year. In addition, HLST will pay a 10% royalty on net sales of pills produced based on Oramed’s technology. In return, HLST will get over a million shares of Oramed common stock, each of which will cost the company $10.39, for an additional payment of $12 million (Oramed, which trades on the NASDAQ, was trading at $7.75 per share at the time of the sale).

Out of all the technology areas Israel and China have worked on together over the past several years – from mobile technology to agriculture and water to processors and communications technology – health care is emerging as the most important, both in terms of the levels of investment, and benefitting the residents of China. In 2013, Shanghai Fosun Pharmaceutical purchased 95% of Israel’s Alma Laser, a maker of medical laser devices, for some $220 million, and in 2014 Fosun led a a round of Chinese investment in Israel’s Check-Cap, developer of technology that allows non-invasive colon cancer screening. Also last year, Chinese pharmaceutical giant WuXi PharmaTech, one of the world’s largest medical research companies, opened an office in Israel, in order to reach Israeli customers, and, with help from VC firm Pontifax, to seek out promising investments in the biotech and medical devices spheres.

And out of all the medical technologies Israel produces, the need for a treatment for diabetes is perhaps the most acute. A 2013 Journal of the American Medical Association study estimated that there were 113.9 million Chinese with diabetes, as well as a whopping 493 million with pre-diabetes – and according to US government figures, as many as a third of those people are likely to develop the disease itself.

For those who do contract diabetes, Oramed specializes in developing orally ingestible versions of drugs that are usually administered by injection – such as insulin, the first drug the company has developed (others are in the pipeline, Oramed said).

The company’s theory (borne out, it says, by several studies) is that taking a medicine like insulin orally, in pill form, will make it much more likely that patients will comply with doctors’ orders to take their meds.

An additional benefit, according to the studies, is that intestinally absorbed oral insulin mimics insulin’s natural location and gradients in the body by first passing through the liver before entering the bloodstream, making it more effective than injected insulin, said the company.

The company has been granted patents in numerous countries, including the US, for its delivery of injectable drugs orally. Oramed’s oral insulin (ORMD-0801) has yet to be approved in China, but officials at HLST said that the approval was imminent and that it was preparing to build a factory to locally produce the drug.

“China recently became the country with the largest number of diabetics in the world,” said Kidron. “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 10% royalty on net sales throughout China will have a very significant impact on Oramed’s future revenues and earnings.

“Many of my Chinese colleagues tell me how impressed they are with Israeli technology,” added Kidron. “As we get to know each other better, I believe that our relationship will snowball, and that there will be many other big deals between Israel and China – especially in health-related areas.”