Orchard Therapeutics PLC (ORTX) 2023 Q2 法說會逐字稿

Good day, and thank you for standing by. Welcome to the Orchard Therapeutics Second Quarter 2023 Earnings Conference Call. (Operator Instructions) Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Bobby Gaspar, CEO and Co-Founder.

Hello, everyone. I'm Bobby Gaspar, CEO and Co-Founder of Orchard Therapeutics. Welcome to our second quarter 2023 conference call. We're especially delighted to share with you some important regulatory and business update as well as provide our quarterly financial results.

Before we get started, I want to remind everyone that throughout this call, we will be making forward-looking statements. Please refer to the supplemental presentation materials and our latest SEC filings for more information. As we'll highlight on today's call, Orchard continues to successfully execute across all aspects of our business, including commercial, regulatory, R&D as well as operational management.

The news we announced this morning reinforces Orchard's leadership position in the HSC gene therapy field. I have 2 members of the leadership team joining me on today's call. Following my remarks, Frank Thomas, President and Chief Operating Officer, will provide a summary of our commercial momentum in Europe as well as an overview of our financial results for the quarter. Braden Parker, our Chief Commercial Officer, will also be joining for Q&A.

We will keep our prepared remarks focused on 3 primary topics. First, you'll hear about the continued progress we are making to advance OTL-200 towards a potential U.S. approval. Second, we'll share updates regarding the commercial momentum we are building in Europe. And third, we'll provide a general business update and outline our quarterly financial results.

Let's start with an update on the regulatory status of OTL-200 in the U.S., which is intended for the treatment of early onset metachromatic leukodystrophy or MLD. In the most severe form of MLD, babies develop normally and late infancies start to rapidly lose the ability to walk, talk and interact with the world around them. These children may require 24-hour care and the majority pass away within 5 years of disease onset, creating an enormous burden on patients, their families and health care systems. The medical need is significant, and we are seeing the value of our gene therapy for MLD being recognized by payers throughout Europe, where it has been approved since late 2020. As we've announced in this morning's press release, we have completed the [role] solution of our BLA to the U.S. FDA for OTL-200, which previously received both rare pediatric disease and RMAT designations from the agency. Orchard has requested priority review, which if granted, would put OTL-200 on track for potential U.S. approval in the first half of 2024.

Reflecting on the tremendous progress we've collectively made in the 7 months since our Type B clinical meeting with the FDA, I want to take a moment to express my sincere gratitude to the Orchard team as well as our clinical collaborators and external partners who contributed to the achievement of this milestone.

While there's still work to be done, today, we are one significant step closer to bringing this important therapy to children and their families in the U.S. living with MLD who currently have no treatment options beyond supportive care. We are looking forward to working with the agency throughout the filing and review process and expect to hear from the FDA regarding acceptance of the BLA in the third quarter of this year.

We are also planning to present the full OTL-200 BLA clinical data, comprising more than 230 years of patient experience at an upcoming medical meeting. These dates are important because they demonstrate consistent outcomes using an endpoint discussed and agreed with the FDA as being clinically meaningful.

Before we discuss our commercial and financial update, let's take a moment to highlight the notable data we recently presented from across our HSC gene therapy portfolio, which underscores the transmissive potential of our approach and continue to demonstrate the ability of gene-modified HSCs to migrate into multiple organ systems, including bone, CNS and GI tract and deliver therapeutic enzymes and proteins locally to affect disease correction.

Several presentations demonstrating Orchard leadership in neurometabolic and CNS disorders were featured at ASGCT in Los Angeles. This included new data from the ongoing proof-of-concept study of OTL-203 for patients diagnosed with the Hurler form of MPS-I, which demonstrated extensive metabolic correction in the skeletal system of patients resulting in normal growth rates for skeletal remodeling, improvement in joint function and progressive acquisition of motor skills.

The current standard of care for MPS-IH is allogeneic hematopoietic stem cell transplant, which does not adequately address the growth as skeletal manifestations of the disease, among other clinical outcomes.

Orchard plans to initiate a global 40-patient registrational, randomized, controlled trial of OTL-203 compared to standard of care by year-end. We are currently working with the clinical sites, our CROs and the satellite lab prepare for this first-of-its-kind study. A presentation highlighting updated OTL-201 data from the ongoing proof-of-concept study in MPS-IIIA patients showed additional favorable neurocognitive outcomes compared to disease natural history with median follow-up of 2.5 years.

Similar to MLD, MPS-IIIA represents a significant medical needs, given the disease severity and the fact that there are no approved therapists. Treatment with allogeneic HSCT or enzyme replacement therapy has not been shown to be effective for MPS-IIIA. Patients enrolled in the ongoing proof-of-concept trial will be followed for a minimum of 3 years during which time the study investigators will continue to report additional biochemical and clinical outcomes. We look forward to continuing to follow patients in this study to inform the late stages of development for the program.

We also featured the first preclinical data for OTL-204 for the progranulin-deficient form of frontotemporal dementia, which highlighted the ability of HSC gene therapy to express progranulin in the CNS, modulate neuroinflammation and normalized predictive biomarkers.

At ASGCT, we also presented preclinical data from 2 of our in-house research programs, which demonstrate the broad potential of our platform to address larger indications. This included preclinical proof-of-concept data showing the therapeutic potential of OTL 104 for NOD2-Crohn's disease, a severe and treatment-refractory form of disease. Additionally, in vivo data demonstrated the development of CAR-Treg cell from genetically engineered HSC as a potential onetime treatment for autoimmune disorders.

Together, our rich pipeline continues to provide multiple opportunities for near-term data and inflection points, both through internal investment and business development. Moreover, they are all based on the same HSC gene therapy platform as Libmeldy, providing a road map and common infrastructure to help us achieve scientific, clinical, regulatory and commercial success.

With that, let me turn the call over to Frank to discuss the commercial momentum we are building in Europe with Libmeldy as well as our quarterly financial performance.

Thank you, Bobby. We've always believed in the curative potential of HSC gene therapy for severe and other genetic diseases. With the approval and launch of Libmeldy in Europe, we are making that promise a reality for patients with MLD.

Our commercial and medical teams continue to work with all members of the MLD, KOL and patient community to identify, refer and support treatment of eligible patients. We also continue to make progress obtaining reimbursed access to Libmeldy in additional European countries.

So far in 2023, we have secured reimbursement agreements in 4 additional European countries, exceeding our annual goal in just the first half of this year. Most recently, the decision forum for new approaches in Norway agreed to authorize Libmeldy for all eligible patients with early onset MLD. Patients in the country will be referred to the treatment center in Sweden once it's fully qualified. Reimbursement discussions are ongoing in several European countries.

In addition, we have been successful in expanding our commercial reach geographically through early access mechanisms in France through cross-border pathways in Eastern Europe and through treatment of broad programs in the Middle East, which are important growth drivers during this relatively early stage of launch.

To date, we have now treated patients from 6 different countries on a commercial basis at 4 of our 5 qualified centers in Europe. We continue to achieve a 100% success rate in drug product production and are confident we can take this commercial model and successfully apply it to the U.S., following a potential FDA approval for OTL-200.

We've spoken frequently about the importance of newborn screening to aid early diagnosis and treatment of MLD patients. To date, 9 prospective studies are actively screening newborns for MLD in key regions, countries and states. 4 confirmed cases of MLD have been identified following the screening of more than 150,000 newborns globally as of June 30. And many of these MLD patients identified through newborn screening are expected to be treated commercially with Libmeldy in 2023 and beyond. By the end of the year, more than 200,000 newborns are expected to have been screened, creating an opportunity to identify additional patients and adding to the referrals being generated through early symptomatic diagnosis and family screening. Furthermore, the data from these studies will provide critical evidence to support applications for universal screening of MLD in the U.S. and around the world.

On that front, recently, the Illinois state legislature passed the Newborn Metabolic Screening Act, also known as SB-67, which requires the State Department of Public Health to screen all newborns for MLD. The bill was signed by the governor last week and it is expected that Illinois will start the process of implementing statewide screening for MLD this year. This represents the culmination of a multi-stakeholder initiative working together to support screening for MLD, and a very big step forward for newborn screening in the U.S., where we are actively laying the groundwork for the implementation of MLD screening programs in other states.

In addition, following the previously announced positive identification of a newborn with MLD in Germany from a prospective study, the necessary steps are being taken to apply for nationwide screening in that country. The other patients who have been identified through these studies in Germany have either been treated with Libmeldy are scheduled for treatment in future quarters or are continuing to be evaluated to determine appropriate treatment options.

Beyond identifying treatment-eligible patients and supporting efforts to advance universal screening, these research studies also helped elucidate the true incidence of MLD, which we believe represents a significant annual global market opportunity. Using an estimated incidence rate of 1 per 100,000 live births cited in existing literature and applying today's average per patient net price realized since the European launch, we project the potential market opportunity for Libmeldy in the U.S. and Europe alone to be more than $200 million annually.

Applying those same assumptions to the potential addressable worldwide market, the global opportunity for Libmeldy could reach up to $500 million annually, considering countries where we believe therapies like Libmeldy will be reimbursed. This peak opportunity will only be realized if universal newborn screening is in place, enabling the incidence population to be identified prior to the onset of symptoms. While this can take time, the momentum we're seeing with the entire MLD community coming together can make it a reality.

The data from these newborn screening studies are still early to draw definitive conclusions. However, preliminary findings suggest that the incident could be closer to 1 in 50,000 live births. And consequently, the commercial opportunity may be even higher than previously estimated in the literature. This could create a market opportunity exceeding $1 billion per year globally.

The commercial potential and longevity of Libmeldy is further bolstered by its long-term durable clinical impact, also the high barriers to market entry, and the fact that there are currently no other approved therapies or clinical candidates in development following the recent news of the discontinuation of other programs.

Now turning to our financial performance. It has been another quarter of solid execution and operational excellence with a strong balance sheet, growing Libmeldy revenue and a continued reduction in our operating expenses. The $34 million in proceeds from the second closing of our strategic financing ensures that we are well capitalized to progress U.S. launch preparations, continue investing in initiatives aimed at accelerating revenue growth in Europe and to advance our next-in-line neurometabolic programs in MPS disorders.

Notably, the securities comprising the second closing were sold at $8 per ADS, which represents a 64% premium to the share price on the date of issuance. We expect funding from the first and second closing to extend our cash runway to mid-2025. The company could bring in up to an additional $120 million in proceeds at $11 per share, following potential U.S. approval of OTL-200 in 2024, if all the warrants sold are exercised by participating investors. This would further offset the company's financing needs for the foreseeable future, especially as we expect to grow our revenues to a level that could sustain our business.

Total revenue for the second quarter was $7.3 million, comprising $6.6 million in Libmeldy sales representing the highest quarter to date and $0.7 million in collaboration revenue. The cost of product sales was $2.2 million, which primarily consists of manufacturing costs, royalties to third parties and noncash amortization. This resulted in gross margins of approximately 70% for the quarter.

Beyond Libmeldy revenue and cost of product sales, you can find the full financial results from the second quarter in this morning's press release. Importantly, we continue to be good stewards of our capital and are closely managing our expenses. Total operating expenses declined 22% in the second quarter compared to the same period in 2022. The reductions were realized across our business with both R&D investment and SG&A expenses declining more than 20% from the corresponding period last year.

We ended the quarter with cash and investments of approximately $155 million and runway into the middle of 2025. So approximately 2 years of cash and a revenue-generating product with growing sales. Our financial goals for the remainder of 2023 are focused on continuing to grow Libmeldy sales year-over-year and managing our operating expenses, which we expect will lead to a continued downward trend in our annual burn rate.

I'll now hand it over to Bobby for some final comments.

Thank you, Frank. As we've outlined, it's been an incredible period of progress for Orchard, and we look forward to carrying this momentum throughout the rest of the year and beyond.

Over the next 12 months, Orchard is well positioned to become the breakout leader in HSC gene therapy. Our business continues to get stronger as our top line growth, coupled with the recent strategic financing puts us on track to become a self-sustaining enterprise. Great progress has been made across many areas of our business, including commercial, regulatory, clinical development, manufacturing and early research.

We've also learned a lot from the development and commercialization of Libmeldy and have applied those insights to strategically advance our HSC gene therapy platform in indications where it has the greatest probability to disrupt current standards of care. It's been a difficult environment for the gene therapy sector. And while a number of other companies continue to face headwinds and setbacks, we have emerged from this period of broader industry contraction, leaner, more focused, well-funded and is mission-driven as ever because ultimately, our approach has shown the ability to potentially cure devastating diseases.

With that, we'll open the call for questions.

(Operator Instructions) Our first question comes from Debjit Chattopadhyay with Guggenheim.

This is Robert on for Debjit. Congrats on the BLA filing. So on the filing, do you anticipate an AdCom for OTL-200?

Thank you. It's Bobby. And I'll take that question. I think the -- well, let me just step back a second to say that we will be requesting priority review or we have requested priority review. We do have RMAT designation and with the high unmet need, there's a strong likelihood that we will get priority review.

As far as an AdCom is concerned, this is the first submission for a therapy for MLD. So it may well be that we get an AdCom. And I think we would quite welcome that to again show the FDA the high level of unmet need, the significant difference that we are making with OTL-200 in this devastating disease and the lack of other alternatives for this condition. So if these are focused on those kinds of clinical questions, then I think we're in a very strong position. But obviously, we'll know relatively soon, whether we do have an AdCom or not.

That's great. And maybe one follow-up. Any color that you could provide on the catalyst for statewide screening in Illinois? And any learnings that you can apply to other states?

Yes. So screening in the U.S. is on a state-by-state basis and different states will have different procedures for implementing screening. There are some states where legislature allows them to screen statewide even before the condition is recommended for screening by the RUSP panel. And so there are some of those things, and we've been working with those states. And so Illinois has passed legislature to mandate screening for MLD, and it is a high birth rate state. So we're extremely pleased with the progress there, and they may well be implementing by the end of this year or early next year. So that is, I think, a very, very significant moment in screening for MLD in the U.S.

Now there are other states which could also start screening before the condition is placed on the RUSP panel and so we are working with those states as well. Now there are also some other states that can do pilot programs, pilot studies rather than kind of mandate through state-wide screening. And so those are other states that we are working with. So there's an awful lot of activity ongoing in other states, apart from Illinois that may well start screening before disappears on the RUSP panel, and so we'll be working with those states.

(Operator Instructions) Our next question comes from Pete Stavropoulos with Cantor Fitzgerald.

Congratulations on completing the rolling BLA filing and all the other progress made this past quarter. So I guess one of the first questions I have is, can you just provide any color on the inspection for the manufacturing facility? And can you just remind us if there's any approved agents by the FDA being manufactured at that facility? And how many approved agents the European authorities are being manufactured there? Just help us gauge the experience of this facility in providing commercial product.

Yes. So the CDMO that we're working with is AGC Biologics, which is based in Milan. They have been approved for commercial manufacture in the EU. So Libmeldy is -- which we are commercializing in the EU is manufactured there. They are also commercial manufacturing from Dallas as well, and I think they have manufactured other products in the past. So they have been through, obviously, EMA inspections. They haven't previously been through an FDA inspection, and this will be their first FDA inspection. We have worked very closely with AGC Biologics. We have performed mock inspections using FDA or past FDA inspectors. So going through mock inspection in the way that it may well be conducted by the FDA, identifying issues that they -- that may need to be addressed for an FDA inspection in comparison to an EMA inspection. And so this has been a subject of a lot of activity by us, and we are working very closely with them to put everything in place for a successful FDA inspection.

And can you also just sort of remind us of the patients Libmeldy approved for in the EU? And when you think about it U.S. label, do you anticipate, if approved, it will be a similar label or broader or more restrictive label?

Well, let me start that, and then I can hand it over to Braden for any extra information. But essentially, in the EU, Libmeldy is approved for presymptomatic patients with either the late infantile or early juvenile form of disease and also for early symptomatic patients with the early juvenile form of the system by early symptomatic, it is defined as individuals, children who still have the ability to walk independently and who have normal IQ. We will be applying for a very similar label with the FDA.

And so Braden, I don't know whether you want to add anything to what I've just said that?

No, I think you characterized it well, Bobby.

Okay. Thank you. Thanks, Pete. I hope that answered your question.

It does indeed. And just one last question, if you don't mind. So as you move forward, and finally, INDs for the larger indications like Crohn's disease and the risk benefit may ship for those indications relative to MLD and other neurodevelopmental locations you're currently focused on. What are some of the key findings from your platform? That sort of gives you confidence that the risk benefit profile will remain favorable for these larger indications.

Yes. Thank you. And this is an important question, one that we've considered very carefully as we thought about selecting which diseases that we can target. So for Crohn's disease, it is a specific genetic form of Crohn's disease, and these are individuals with bioline mutations in a gene code NOD2. And the literature and our KOL outreach suggest that these individuals have the most severe form of Crohn's disease. So these are individuals who are refractory to biologics and immunosuppressant. They have a high rate of surgery and they have the fistulizing or stricturing form of disease. So despite what's currently available, there is still a high unmet need.

We also know that many individuals with this form of this disease, the severe form of disease, are taking part in trials of autologous transplantation. So where they need to have chemotherapy conditioning and where unmodified autologous cells are reintroduced. So that kind of intervention is still something that is warranted for those individuals with the severe form the disease. Now obviously, we will be going one step further and providing gene -- selecting individuals with NOD2 mutations and providing gene-modified cells. So we believe it is justified. In addition to that, we are also working on reduced intensity conditioning regime, which again make this form of intervention more applicable to a wider population.

(Operator Instructions) Our next question comes from Yaron Werber with TD Cowen.

Congratulations on the filing. Just a quick one from us. Can you maybe just walk us through what kind of learnings or synergies from the European launch at this point that would help expedite a potential U.S. launch? We're just really trying to understand your expectations for the cadence of potential U.S. sales later next year and really into 2025? And then I have a follow-up.

Okay. Well, thanks for that. And I'll hand that one over to Braden, our Chief Commercial Officer.

Yes. Thank you for that question. In terms of learnings from Europe and how they would apply to the U.S. launch, I think there are very similar approaches in terms of the market, in terms of the size of the personnel, the number of qualified treatment centers that we would have. If you look at the size of the market and applying an incidence rate, they're pretty similar from that standpoint. I think the main differences that you see in the U.S. versus Europe is there will not be that lengthy period of time where you're going through health technology assessment in advance of any type of pricing negotiations. So the reimbursement will come much sooner in the U.S. than it has in Europe. So as you think about launch and the launch trajectory, if you will, the number of patients will likely be similar and the ramp will likely be similar, but those sales will happen much sooner than they did in Europe. So almost very soon of those launch. But we do anticipate, given the nature of MLD and the challenges in identifying patients within that treatment window of opportunity that you will see kind of this uneven nature of patient adds and sales in the early years of the launch, as we've seen in Europe as well. It's a little bit lumpy until you have universal newborn screening in place, which will provide much more predictability of patient identification within that treatment window of opportunity.

And then just one quick follow-up. Sorry if I missed this. Can you just maybe remind us what's actually left before initiating a pivotal study in MPS-I. I know you touched on this a bit, but it's a matter of kind of finalizing design with FDA? Or is it really just selecting and getting the sites up and running for the pivotal study?

Thanks. I'll take that. The study design is finalized with the FDA. So we don't have to do anything further as far as any kind of regulatory path is concerned in order to open the study. So now it is really just the kind of logistics and practicalities of getting sites ready for what will be a multicenter, randomized, controlled trial. So you can imagine the work that goes into that, and it is just getting all of that in place, and we anticipate opening the study by the end of the year.

Thank you. I'd now like to turn the call back over to Bobby Gaspar for any closing remarks.

Okay. Thank you very much. And so I just want to say thank you very much for your questions and your time, your attention and your support as we work to realize Orchard's vision to end the devastation caused by the severe genetic diseases through this platform approach, which we think has a curative potential that of HSC gene therapy. So thank you very much.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.