Orchard Therapeutics PLC (ORTX) 2019 Q2 法說會逐字稿

Good day, ladies and gentlemen. Welcome to the Orchard Therapeutics Second Quarter 2019 Earnings Conference Call. (Operator Instructions) As a reminder, this conference call is being recorded.

I would now like to turn the conference over to Renee Leck, Director of Investor Relations. Ma'am, you may begin.

Thanks, operator. Good morning, everyone, and welcome to Orchard's Second Quarter 2019 Investor Update. You can access slides for today's call by going to the Investors section of our website, orchard-tx.com.

Before we get started, I'd like to remind everyone that statements we make on this call will include forward-looking statements. Actual events and results could differ materially from those expressed or implied by any forward-looking statements as a result of various risk factors and uncertainties, including those set forth in the most recent Form 20-F filed with the SEC and any other filings that we may make. In addition, any forward-looking statements made on this call represents our views only as of today and should not be relied upon as representing our views as of any subsequent date. We specifically disclaim any obligation to update or revise any forward-looking statements.

And with that, I'll turn the call over to our President and CEO; Mark Rothera.

Thanks, Renee. Welcome, and I hope everyone is enjoying their summer. After a review of our recent activities, we'll be using today's call to spend some time on our programs in Wiskott-Aldrich Syndrome, or WAS, and X-linked chronic granulomatous disease or X-CGD.

These are 2 primary immune deficiencies that follow our lead programs in ADA-SCID and metachromatic leukodystrophy or MLD. Before we get started, I'd like to spend a few minutes reminding you about Orchard's vision and our use of hematopoietic stem cell or HSC gene therapy as our scientific platform. We're a pure-play gene therapy company with a focused approach and a singular vision to deliver potentially curative therapies to patients suffering from life-threatening rare genetic diseases around the world.

Our expertise lies in developing ex vivo autologous HSC gene therapies, a platform approach that has demonstrated proof-of-concept in 5 different diseases across 3 physiological systems. To expand upon the curative potential of our therapies, one sustained engraftment of gene-modified cells and therapeutic gene expression are achieved. We see the potential for life-long benefit in children treated with our therapies. We are well on our way towards delivering on this vision with 2 regulatory filings for ADA-SCID and MLD, on track for the first half of next year.

To remind you, our programs cover 3 franchises: neurometabolic disorders, primary immune deficiencies and hemoglobinopathies. With over 150 patients treated across our portfolio and follow up showing durability of response going out to 8 years or more, we believe we have one of the most robust and comprehensive clinical data sets in the field of gene therapy.

Now turning to our recent news. Last week, we were proud to announce that the FDA granted RMAT designation for our third registrational program in WAS, which is on track for both FDA and EMA filings in 2021. RMAT designation enables us to have a close and frequent dialogue with the FDA and the opportunity for an expedited review process for this program. This designation also recognizes the unmet medical need and the strength of the clinical evidence we've generated in this disease so far. Within the neurometabolic franchise, we continue to build a momentum from our news in May, announcing the in-licensing of a clinical stage, MPS-I program from our partners at Ospedale San Raffaele and Tgit.

We are pleased to announce the 2 abstracts from our programs in MPS-I and in MLD, have been accepted for oral presentations at the society for the study of inborn areas of metabolism meeting known as SSIEM in early September. For MPS-I, Tgit will be presenting updated results from the ongoing proof-of-concept trial. Investigators are continuing to identify and treat patients and enrollment in this program is on track to complete in the first half of 2020. For MLD, the presentation will go beyond the pivotal data set presented in March to cover an integrated set of results from the 20 patient registrational trial as well as 9 patients from expanded access programs.

The clinical results for OTL-200, which extend out to 8 years have shown the cessation of neurodegeneration in patients treated early enough in the progression of their disease. This is a condition to remind you that's characterized by a devastating loss of motor and cognitive function, resulting in death, often by the age of 5 in the most severe form. Our goal is to get this therapy approved for patients around the world as rapidly as possible.

And our initial regulatory filing is on track in Europe for the first half of 2020. Now preparing to commercialize on a global scale is crucial to the success of our potential launches in MLD ADA-SCID and our future gene therapies. This work is well underway, with operations established in North America and a growing presence in Europe, where we have set up commercial leadership and are in the process of establishing launches in France, Germany and Italy. Within the next few years, we also plan to expand into Latin America, Turkey, the Middle East and Asia.

We've also made key hires in such global functions as market access, diagnostics and patient advocacy to promote knowledge of and access to our therapies. Some of our gene therapies represent the first potential treatments for the diseases they are targeting. Therefore, we see new impetus in patient communities and with health care professionals to ensure that effective diagnostic pathways for these diseases are in place.

We are also establishing treatment centers in the first countries where we expect to launch and are putting in place a well-controlled supply chain. So moving to the earlier stage pipeline. Beyond our lead indications, we have a deep pipeline that includes clinical stage programs in X-CGD and transfusion-dependent beta-thalassemia, which both recently achieved proof-of-concept. We're now turning our attention to the work of designing registrational trials for these programs, engaging with regulators and undertaking commercially focused CMC process development work.

So 2019 has been a year of tremendous execution, and I'm really proud of the team as we continue to deliver on our strategy and remaining milestones for the year. For the rest of our time together, we'll use the following agenda. Bobby Gaspar, our Chief Scientific Officer, will spend some time on manufacturing in addition to WAS and X-CGD; Frank Thomas, our Chief Financial Officer and Chief Business Officer, will then review our second quarter financial results and upcoming milestones. I'll return to close with some commentary on how we are thinking about value in relation to our investigational gene therapies.

So Bobby, over to you.

Thank you, Mark. We're very excited about our lead programs in ADA-SCID and MLD that are approaching their initial regulatory filings in the first half of next year and is the result of a tremendous amount of work by our team. However, today, I would like to focus the majority of my time on WAS and X-CGD, 2 primary immunodeficiencies, where we have previously spent a little less time, where we are equally excited by the opportunity to really benefit patients. I also want to touch on the topic of manufacturing, which we see as a very important area as we plan for our investigational gene therapies to move into the commercial arena. So let's start with manufacturing. Our 3 most advanced programs, MLD, ADA-SCID and WAS, will use the CMO network in place for the ongoing clinical trials for commercial manufacturing as well.

Oxford BioMedica handles back to manufacturing and Lonza, the drug product manufacturing for ADA-SCID. For MLD and WAS, MolMed manages both of these functions. Looking ahead to programs such as X-CGD and transfusion-dependent beta-thalassemia, the ability to optimize the manufacturing process will help reduce the cost of goods and improve drug product characteristics and consistency. We are making good progress in this space. With ongoing work using the transaction enhances the manufacture of the drug product. This was exemplified by our agreement with SIRION late last year to license the use of LentiBOOST technology for certain programs. We are also looking at improving the way we make lentiviral vectors, and we are automating many different aspects of the transaction process. I'm proud to note that at Orchard, we have been expanding our research and discovery efforts to support these innovations with the goal of implementing these developments in future trials and programs. We are also planning the build-out of our Fremont facility in California, which is intended for both vector and drug product manufacture.

Design work is well underway, and we remain on track to open in 2021. All of this highlights our commitment to develop optimal processes for our products, so they can manufacture at scale and serve global patient populations across multiple diseases. I look forward to discussing these developments with you in greater detail at a future time point. Now to talk about Wiskott-Aldrich syndrome. I now want to provide some additional information on the recent press release we issued about the RMAT designation, which we received for OTL-103 for the treatment of WAS.

In addition to facilitating a close dialogue with the FDA, this designation recognizes the life threating nature of WAS, a severe immunodeficiency and bleeding disorder as well as the existing unmet need for this population. The current standard of care is an allogeneic hematopoietic stem cell transplant, which can carry risks of mortality and significant mobility such as graft-versus-host disease. The RMAT designation also indicates that the clinical evidence generated for OTL-103 so far, has the potential to address these needs.

WAS presents with severe platelet and immune system abnormalities through the 2 major clinical aspects of the disease, and consequently, the highest cause of mortality or severe bleeding episodes and severe infections. All 8 patients treated in the registrational trial for OTL-103 are alive and are showing significant clinical improvements in these areas. We measure the frequency of bleeding episodes and severe infections, pre and post-treatments and patients treated with OTL-103 had no life-threatening severe bleeding episodes due to an increase in their plate accounts. This is in patients with up to 8 years of follow-up. The patients also showed a significant reduction in the frequency of severe infections with negligible episodes post gene therapy. This is related to an improvement in immune function, including the correction of lymphocyte proliferation, hemoglobin production and improved vaccine specific responses. We will be reporting the 3-year primary endpoint data on all patients in this trial by the end of the year.

In line with our commercial strategy, we have initiated a cryopreserved formulation study in this indication, which is on track to enroll 6 patients by the first half of 2020. In summary, the OTL-103 study is moving forward extremely well. MolMed, who manages vector and drug product manufacturing for the cryo study, will also be the commercial manufacturer for this product without the need for additional bridging studies. The RMAT designation gives us a real opportunity to engage with the FDA and submit the BLA application consistent with our 2021 guidance. We also plan to submit an MAA application in Europe within this time frame.

I now want to turn to the design of our registrational study in X-linked chronic Granulomatous disease, X-CGD, an indication where we demonstrated proof-of-concept at the end of last year. This is shown in the clinical trial where 6 out of 7 evaluable patients had greater than 10% functional neutrophils for 12 months or more, leading to clinical improvements, such as decreased antibiotic usage, hospitalizations and infections.

Best results to date have been seen in late adolescents and adults. There are many individuals living with CGD, who have a lifetime of chronic infections, and as a result, have sustained damage to their lungs and liver. These patients, in turn, become high-risk candidates for an allogeneic transplant, which is the current standard of care. Indeed, all 6 older patients who benefited from OTL-102 fit that description. We are designing the upcoming registrational study with all of this in mind and will likely focus on late adolescent and adult patients initially. This coincides with the highest proportion of the large prevalent population. Registry data, which is often an underestimate, suggests there are well over 2,500 patients in the U.S., EU and Japan.

Overall, we estimate there are as many as 6,500 patients living with this disease in countries that reimburse orphan drugs based on published data. As I mentioned in my previous section, we plan to introduce improvements in the manufacturing process for OTL-102, including the use of transaction enhances and the use of automated processes.

The use of transaction enhances, especially for older patients, will allow us to use less vector per patient while consistently achieving target VCNs, which will be an important factor in this disease. The next step is to discuss the planned registrational trial design with the FDA and obtain their guidance. Once we have everything in place, including the final commercial manufacturing process, we will be able to initiate the registrational study. The teams are working hard across our deep pipeline of exciting programs, and I look forward to updating you as the year carries on.

Frank, over to you.

Thanks, Bobby. You can find the full financial results for the second quarter in this morning's press release, which I will briefly highlight here. We ended the second quarter with more than $420 million after the recent follow-on offering and credit facility. This puts us in a very strong financial position to execute on the many important milestones we have upcoming without the need to access the capital markets.

With 3 potential filings in the U.S. and Europe, the cash on the balance sheet will allow us to accelerate our transition to a company commercializing multiple products around the globe. We expect that our existing cash and investments will fund our anticipated operating and capital expenditures into the second half of 2021. For the second quarter of 2019, R&D expenses were approximately $40 million compared to a $151 million in the same period in 2018. Last year's R&D expenses included a one-time charge associated with the GSK agreement, which we signed in April 2018, totaling about a $134 million. So excluding this charge, research and development expenses would have increased $23 million compared to the same period in 2018.

This increase was primarily driven by the upfront consideration for the license of our new clinical stage MPS-I program as well as higher program and personnel-related costs from a larger portfolio compared to last year.

SG&A expenses were $14 million for the second quarter of 2019 compared to $7 million in the same period last year. The increase was primarily due to higher personnel costs to support public company operations as well as costs to prepare for the potential commercialization of our 3 late-stage development programs. We used about $73 million of cash to fund operations in the first half of 2019, which included a significant pay down of 2018 accrued expenses, some of which related to deferred payments on the GSK transaction for inventory and transition services.

I'll end my prepared remarks with a summary of our remaining 2019 milestones. We released 2 of 3 registrational data sets for our lead programs. This positions us well for the initiation of the rolling BLA for ADA-SCID in the U.S. and the submission of an MAA for MLD in Europe in the first half of 2020. Later this year, we will be releasing data from patients who received the cryopreserved formulations of these therapies, providing us with additional supportive clinical evidence for these filings.

We're also on track to present a third registrational data set for WAS by the end of the year. In our X-CGD program, we have made substantial progress on the design of the registrational trial for OTL-102. In terms of next steps, we will walk down our proposed protocol, meet with regulators to discuss the registrational trial design and complete the remaining CMC work. For OTL-203, our newest clinical program treating patients with MPS-I, enrollment is ongoing in a proof-of-concept trial, and we have additional data releases planned for later this year and next. And finally, the submission of a CTA and initiation of a clinical trial for MPS-IIIA in Europe remains on track for this year, highlighting the potential for a seventh clinical stage program in our portfolio. So we believe the second half of 2019 offers a number of important milestones across our programs that will continue to build on the already exciting clinical data generated to date.

Let me now hand the call back to Mark.

Thanks, Frank. As you can tell, we're excited about the clinical and regulatory progress we are making across the business. And now that we're approaching commercialization, we have given great thought to how we characterize the value of our therapies. Ex vivo autologous hematopoietic stem cell gene therapy is fundamentally different from anything we previously experienced in medicine. Instead of chronic treatments that address symptoms of slow disease progression, we are developing therapies that have the potential to correct the underlying genetic defect of some terrible life-threatening pediatric diseases. When sustained engraftment has been achieved with adequate gene expression, we are potentially collapsing a lifetime of benefit into a single intervention. So when we think about value, we begin by thinking about the child and what our therapies, if approved, could do, especially given the sobering reality that today, 30% of children living with a rare disease do not live to see their fifth birthday. So let's start with the child.

Today, a child with one of these conditions will miss many birthdays, holidays and other life milestones due to frequent hospitalization and other interventions. And for the children, we are seeking to treat, their life spans are severely limited. On the other hand, a child treated with gene therapy could have the opportunity to live a completely different life, a life potentially free from the symptoms and related suffering caused by disease. But it's about more than the child. Think about the effects on the family as well. The financial toll that comes from carrying for a very ill child is quite real. Parents may have to quit or scale back their employment. And it takes an emotional toll as well with great stress placed on family relationships.

As any parent knows, particularly a parent who has cared for a child with a serious disease, the opportunity to transform the life of a child creates the opportunity to also transform the lives of everyone in that family. Now think of the community, our schools, civic organizations and employers, they all step in to support the family and they care for a sick child.

This requires significant infrastructure, including people and equipment within homes and schools. Making a child better means that everyone around that child is then able to contribute to the community in other ways. Let's also think about the health care system. Specialist physicians and other health care providers now have the opportunity to deliver a potentially curative therapy, where previously, they would have had few or no treatment options for their patients. In some cases, the health care system would also save vast resources that otherwise may have been spent on chronic and palliative care. Costly interventions such as ER visits, long-term hospitalizations and surgical procedures will no longer be required. And finally, think of society. Each of us within broader society benefits, no matter who we are. We would all be better off living in a world where dreaded diseases that impact children could potentially be stopped in their tracks. So that's how we are considering value as it branches out to touch the lives of not just the child and the family, but also the community, the health care system and society.

We recognize our responsibility and are committed to working in partnership with others to help ensure a sustainable path forward for potentially curative gene therapies, and we are undertaking the work necessary to evaluate all of our programs in this light. Thank you for your time and attention today.

Operator, you may now open the line for questions.

(Operator Instructions) Our first question comes from Graig Suvannavejh with Goldman Sachs.

Congrats on the progress in the quarter. I've just got 2 questions, please. The first is on your newest pipeline opportunity, OTL-203. I know that you'll have data coming up in early September. But could you perhaps frame for us what kind of data we should expect to see at that conference? I probably won't be able to attend.

And then when might you expect that next key set of critical data for that program? And then the second question really has to do with the pricing environment. There's been a lot of -- that's been written about Zolgensma and some of the challenges they're seeing given the pricing that they have established for that product. I just wanted to know, as we continue down this path of having exciting new gene therapies on the market, how you're thinking around what you're seeing with competitors and their pricing, how that might impact, or not, your thinking?

Great. Thank you very much for those 2 questions. So we begin then with your MPS-I one question. And maybe, Bobby, you could speak to the SSIEM forthcoming abstract.

Yes. Thanks, Mark, and thanks for your question, Greg. So the presentation at the SSIEM meeting will really be primarily on longer follow-up on the patients that have been recruited into this MPS-I study. And if you remember, we presented data at ASGCT earlier this year that was on 4 patients and in patients who had sufficient follow-up, we were able to demonstrate supernormal expression of the IDUA enzyme and also significant reduction in the accumulation of substrates, both in the periphery and also in the CSF as well. And given that we know that biochemical correction correlates well with clinical outcome, this is obviously very exciting and encouraging data. And at the meeting in, let's say, at the meeting in September, we'll be presenting further and long follow-up more data on those patients.

Greg, maybe I could then move on to the second question about the pricing environment. As you know, we have 2 filings coming up in the first half of next year. And so thereafter, we're looking at launching those 2 first gene therapy programs from our pipeline. It's clearly too early to be guiding you to our specific pricing philosophy or specific guidance on pricing, but we do feel that it's very important to initiate the conversation around the value or benefit of these one-off potentially curative therapies, which, as I addressed in the earlier remarks, that can have an enormous impact not just on the child but on the families and society and the health care system. And we can go into that in more detail.

But we think that right now, it's very important to bring to life, if you like, the value of these -- or the benefit of these medicines, which could be life-long but flocks into one single administration. And so I think that's our focus today.

And in time, as we articulate the value for each of our therapies, we'll be working also with the stakeholders or the payers, other than the health care system, to talk about how we pay for these. And I think there, we can be very flexible and think about what's the best methodology, working with them in partnership. But it starts with really what is the value of being able to so dramatically change the course of a child's life. To give them the potential, the full potential to think about eliminating substantial health care resources through not needing chronic care, hospitalizations, ER visits, we're also thinking about surgical interventions. So there are many, many aspects to this that we're going to work on for each and every one of our programs.

Our next question comes from Anupam Rama with JPMorgan.

This is Matt on for Anupam. So just a couple from us. So first, on 201 and MPS-IIIA. I think last quarter, you guys highlighted some 3-month data from one patient that you're colleagues at Manchester had treated. So just wondering if any additional follow-up has been made available to you and if so, how does that look?

And then secondly, just at a higher level. And not to get too far out of myself, but beyond the slate of rare diseases that your team's currently pursuing, what is your appetite for expanding to some broader indications? Is it something we're starting to see a little bit more in gene therapy? So just curious to get your thoughts on that.

Great. Thank you very much for those questions. Maybe I'll hand over to Bobby in a second on the MPS-IIIA question. But just to remind you, we're really excited about the whole neurometabolic field because, as you know, we've generated substantial evidence, clinical evidence going out to 8 years in MLD, demonstrating that hematopoietic stem cell gene therapy can address a neurodegenerative condition.

We're also encouraged by the data we're beginning to see coming out of the MPS-I program. And so to have a third program going into the clinic by the end of this year, I think, is a really great place to be. Bobby, I don't know if you want to add any points around that specific patients that you were mentioning in the question.

Yes. So if you remember, Anupam, the type of patient who was treated outside of the formal clinical trial, a child who had no other treatment options and then was, therefore, treated at Manchester under a specialist license, which is available for treatment to the patients in the U.K. And so that child underwent the gene therapy procedure and actually went through a process that will be used in the upcoming clinical trial. But the encouraging data 3 months showed super normal expression of the enzyme and engraftment of gene modified cell.

So that was at 3 months there. I know that the child will be coming up for further or follow-up soon, but we just haven't been -- we haven't had any data shared with us as far as that is concerned. But clearly, that is something that the physicians in Manchester will do, and we look forward to communicating with them about that, and they may share that more publicly, but I say, we'll wait and see as far as that is concerned. And just to remind you that the CTA for the formal trial has been submitted, and we're looking forward to opening that trial and starting to enroll patients later this year. And so we'll look forward to updating you as far as that is concerned.

Now to the other question you asked about the application of ex vivo hematopoietic stem cell gene therapy to broader indications. Let me just first start by saying we're in a remarkable position. By the end of this year, we're going to have 7 programs in the clinic for a variety of rare disease indications, many of which have little or no treatment options today. And as you've seen, we're showing some really remarkable data and potential for this gene therapy approach in these indications.

And we have a significant preclinical pipeline that goes beyond that. And so we really do see a sustainable and significant business model in building out the rare disease arena and launching these medicines around the world and continuing to bring through more indications for patients with rare diseases.

Now could this platform also be applied to broader indications? I think the answer is yes. And there will be, I suspect, at some point, a view as to whether we should go in that direction. It's too early to speculate around that today. But if and when we do move in that direction, we'll be letting people know.

Great, and congrats on some really solid progress.

Our next question comes from David Nierengarten with Wedbush Securities.

I just had one on X-CGD. When you think about talking to the regulators and the clinical trial design, what would your -- I guess, what would your ideal trial look like in terms of endpoints, duration, number of patients that you could set some deadlines, as you're thinking about?

Sure. Thank you, David, for the question. Clearly, we're excited by our development in this indication. It's an area of high unmet need. It's a relatively high -- a large population that's living with X-CGD around the world. Perhaps, Bobby, would you like to just share some of our thinking as we look at the design and the execution of this trial?

Sure. Thanks, Mark, and thanks, David, for your question. So as we think about the registrational study in CGD, we really want to start that study in the population where we've seen the strongest efficacy. And that has actually been in the late adolescent and adult population. So if I remind you of the strong proof-of-concept data that we've previously shared in 6 out of 7 evaluable patients, that was greater than 10% functional neutrals are sustained for a year or later. So long-term reconstitution of the underlying defect as a result of that one-off gene therapy.

Now in fact, all of the patients that benefit those 6 patients were all in that late adolescent and adult populations. So it makes sense to start the registrational study there. Now in addition, that is where there's the largest proportion of the large prevalent population that we've talked about. So we estimate anything up to 6,500 patients. So that is a large population. There's an unmet need there. There are patients that have had a lifetime of living with CGD, with chronic lung disease or liver disease as a result of recurrent infections, and they're often poor candidates for an allogeneic transplant, which is the current standard of care.

So that is the population that would be best addressed by the registrational study. And of course, as far as endpoints are concerned, we'll be looking not just at biochemical endpoints but also clinically meaningful endpoints, and we're confirming that. And once we have the design in place, we'll go to the regulators to talk about the design of the study.

Maybe a quick follow-up. We've seen in multiple instances where obviously, engraftment and transplants are a little bit better tolerated by younger patients. Would there be any plans to expand into a younger patient population, understanding that the prevalent population is late adolescent and young adult?

Sure. So just again, we recap the number of patients who are valuable in the younger age group is very limited in the study so far. We had one patient with 12-month follow-up, who've had poor engraftment, the reasons that we've talked about previously as to why that might be the case. But there's no biological reason why this treatment shouldn't work in this condition. We just haven't been able to evaluate enough patients to be able to do that. And of course, so what we'll do is to look at that pediatric population in more detail, evaluate further patients, and hopefully, we'll be able to move into that at a later stage.

And I'm showing no further questions at this time. I would like to turn the call back over to Mark Rothera for closing remarks.

So thank you all for joining the call today. As I hope we demonstrated, we're building a great deal of momentum as we gear up for 2 regulatory filings next year and one the year after while also delivering our milestones across our rich portfolio of clinical and preclinical programs. I'm very proud of what the team has accomplished in this first half of the year. We're making tremendous progress towards our mission of bringing potentially curative therapies to patients around the world. And if approved, we believe that our therapies have the potential to provide a lifetime of benefit to patients through a single administration. We look forward to sharing additional progress in the second half of this year, and thank you all again for joining us, and have a great day.

Ladies and gentlemen, this concludes today's conference. Thank you for joining, and have a wonderful day.