Orchard Therapeutics plc (NASDAQ:ORTX) Q3 2022 Earnings Conference Call November 14, 2022 8:00 AM ET
Company Participants
Bobby Gaspar – Chief Executive Officer
Braden Parker – Chief Commercial Officer
Frank Thomas – President and COO
Leslie Meltzer – Chief Medical Officer
Conference Call Participants
Pete Stavropoulos – Cantor Fitzgerald
David Hoang – SMBC Group
Operator
Thank you for standing by. My name is Rihanna and I will be your conference operator today. At this time I would like to welcome everyone to the Orchard Therapeutics Q3 2022 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question-and-answer session. [Operator Instructions]
I will now turn the call over to CEO, Bobby Gaspar. You may begin your conference.
Bobby Gaspar
Thank you. Hello, everyone, and welcome to Orchard Therapeutics Third Quarter 2022 Financial Results and Corporate Webcast. I’m CEO and Co-Founder, Bobby Gaspar. Before we get started, I want to remind everyone that this presentation contains forward-looking statements. Please refer to the slide and our latest SEC filings for more information.
I have three members of the leadership team joining me on today’s call. Braden Parker, our Chief Commercial Officer, will highlight recent commercial activities for Libmeldy. Frank Thomas, President and Chief Operating Officer, will review our financial results for the quarter and Leslie Meltzer, our Chief Medical Officer, will also be joining for Q&A.
As many of you know, Orchard’s aim is to leverage the power of gene modified hematopoietic stem cells or HSCs to treat and potentially cure severe genetic diseases. Our focus in this area is twofold. We have a commercial and late-stage clinical pipeline of therapies for neurodegenerative conditions, where the migration of gene modified HSCs into the CNS is key to delivering the gene where it is needed.
Secondly, we are developing HSC gene therapy for specific larger disease indications with genetic susceptibilities, such as the NOD2 form of Crohn’s disease, one of our research programs approaching IND enabling studies next year. With Libmeldy, our HSC gene therapy for metachromatic leukodystrophy or MLD, we have seen how this approach can lead to clinical benefit, regulatory approval, and increasingly sustained commercial success.
Throughout this year, we have made great strides for curing reimbursement for Libmeldy in Europe, establishing qualified treatment centers, and treating our first MLD patient with commercial therapy. We are especially encouraged by the continued progress we are making to identify, refer and treat eligible patients and believe disease awareness for MLD is growing among the physicians diagnosing and managing patients.
This is important because given the rapid progression of MLD, early diagnosis, especially through the adoption of universal newborn screening programs, will be key to unlocking the Libmeldy’s full commercial potential. In fact, in this morning’s release, we announced important news on this front. ARCHIMEDlife has now confirmed the first case of MLD from their newborn screening pilot study. This positive identification provides critical evidence necessary to advance the potential adoption of universal screening for MLD in key regions.
Newborn screening will also help refine our understanding of the true epidemiology of this disease. As newborn screening studies for MLD expand, we anticipate additional patients will be identified prior to symptom onset, so they may benefit from Libmeldy’s life changing potential.
Turning to the U.S., in this morning’s release, we provided an update on our ongoing interactions with the FDA leveraging RMAT designation we are in active discussions, and are receiving feedback on elements of our clinical and CMC packages. Prior to scheduling a pre-BLA meeting, the FDA has requested completion of ongoing CMC interactions and has recommended that Orchard request a Type B meeting to discuss specific elements of the clinical package, in particular, the classification of pre-symptomatic patients and the natural history comparator arm.
We’ve requested that clinical Type B meeting which we anticipate will occur in early 2023 and intend to provide a subsequent update. We believe we have the data and information needed to move forward with a BLA submission for OTL-200 and are committed to working urgently with the agency to prepare our submission.
Following MLD is our OTL-203 program for MPS-I Hurler syndrome. Our proof-of-concept study has showed some very compelling data that addresses the multi-systemic aspects of the disease. With feedback from regulators, we are in the final stages of developing a protocol for global registrational trials that can show a meaningful difference between OTL-203 and the current standard of care, allogeneic hematopoietic stem cell transplant. This will be important not only for regulators, but ultimately for payers commercially.
As we announced Earlier this month, we’re very pleased that data from our ongoing proof-of-concept study in MPS-IIIA has been accepted for an oral presentation at the upcoming ASH meeting in December with our partners at the University of Manchester, and Royal Manchester Children’s Hospital. This is a five-patient proof-of-concept study that has so far shown sustained engraftment and encouraging biochemical data, including supraphysiological SGSH enzyme levels, and normalization of the substrate heparin sulphate. Ash will be the first time neurocognitive outcomes from the study will be presented.
We are also planning to host an IR webcast on December the 12th to review the data with two of the study’s principal investigators, doctors Rob Wynn, and Simon Jones, which we hope you’ll be able to attend. In addition to the formal data from the study, they’ll be able to describe the clinical outcomes they are seeing in study patients, compared to patients who have not undergone any treatments. So we are very excited to see the continued progress that our HSC gene therapy programs are making in these severe, difficult to treat conditions where there is such a high unmet need.
I’ll now turn the call over to Braden to review our progress with Libmeldy in Europe.
Braden Parker
Thanks, Bobby. We’re really pleased with the progress we’ve made so far in 2022, activating the commercial network and infrastructure needed to identify and treat as many eligible MLD patients as possible. We treated two patients in the third quarter, including our first UK patient under the NHS agreement. Between those patients and others currently in process, we are confident we will treat more Libmeldy patients in the second half of the year than we did in the first.
In addition, we have now treated patients in four out of the five qualified treatment centers where turnaround time from apheresis to infusion has averaged approximately 50 days. In terms of our reimbursement initiatives, we are actively working to expand access to Libmeldy in additional European markets, and have recently completed Health Technology Assessments with joint HTA consortia Beneluxa and Finose.
In France, where we have treated two patients under the AP2 process we have secured the renewal of the Early Access Program for another year. During this time, Orchard will receive revenue for any eligible patients treated in France while we negotiate a reimbursement agreement. We are also undertaking plans to enlarge our network of treatment centers by qualifying centers to administer Libmeldy in Sweden and Spain in addition to our five existing sites in the UK, and across Continental Europe. By design, the investments in this framework are built to support additional ways of neurodegenerative programs in the MPS space in the future.
As Bobby mentioned earlier, the positive identification through the ARCHIMEDlife study marks an important step in efforts to drive early diagnosis and treatment via the adoption of universal newborn screening. In total, over a dozen newborn screening studies have been initiated in Europe, the Middle East, and the U.S. with six studies actively screening newborns. These programs could also identify eligible MLD patients to be treated commercially, if reimbursement is in place.
In the Middle East, our partners continue to identify patients who may be eligible to receive Libmeldy through reimbursed international treatment abroad at qualified treatment centers in Europe. This type of partnership is an example of how we have expanded our geographic footprint in a capital efficient manner. Overall, we are making great strides in the commercialization of this innovative therapy and we are proud of the pioneering work of the entire Orchard team.
I’ll turn it over to Frank to discuss revenues and the rest of our financials.
Frank Thomas
Thanks, Braden. Some of you may have noticed a reference to some personal news of mine in this morning’s release and in a previous 8-K, which is that I have made the decision to continue serving as Orchard’s President and Chief Operating Officer. I’ve always believed in the technology we have at Orchard and our ability to have an incredible impact on patients.
While the gene therapy space broadly has faced many challenges over the past couple of years, I believe Orchard has all the ingredients to establish ourselves as the breakout leader in the field, to demonstrate our ability to find patients, to gain reimbursements, to expand globally, and to establish a successful gene therapy business model. I’m encouraged by the progress we’ve made as a company and the potential to create value as we move forward with a very focused portfolio. I’m committed to working with Bobby, the leadership team and the extended Orchard organization to make this company and technology a success.
Now turning to our financial performance for the quarter starting with Libmeldy revenues. In the third quarter we recognized $4.8 million in revenue from two commercial patients who were treated with Libmeldy, bringing the total revenue from product sales to $13 million for the first nine months of 2022. Similar to prior quarters, the cash flow from these patients is paid upfront after treatment with Libmeldy, and most of the revenue is recognized at the time of treatment.
We also treated another patient with Strimvelis and recognized additional product revenue totaling $600,000 in the quarter. Cost of product sales were $1.6 million for the period. As a reminder, three primary items make up cost of goods, the cost of manufacturing, third party royalties, and non-cash amortization for both products. This resulted in gross margins from product sales of approximately 70% for the quarter, and year-to-date periods.
Beyond Libmeldy revenue and COGS, you can find the full financial results from the third quarter in this morning’s press release. We ended the third quarter of 2022 with cash and investments of $146.6 million. We’re now seeing the full savings from our March restructuring reflected in our quarterly burn rate and financial results.
During the third quarter, the company used about $24 million in cash to fund operations. This burn rate is down from $30 million in Q2 of this year, and $38 million in Q1 of this year, excluding one-time tax refunds in those periods. We expect to see a continued downward trend in our quarterly burn rate based on growing revenue from the number of Libmeldy patients currently in the referral pipeline, and ongoing strong expense management. And as a result, we’re now guiding our cash runway to last into the second quarter of 2024.
As we think about funding the business beyond 2024, we also see opportunities for business development across the platform. The ideal partners would bring more than just capital, but also have an existing set of capabilities, disease state knowledge, geographic footprint or commercial infrastructure, or new indication that could leverage our HSC gene therapy platform as was the case with our existing partnership with farming [ph]. We continue to be active in business development to leverage the full potential of our scientific and manufacturing platform.
I believe Orchard is poised to become the breakout leader in gene therapy as we continue to gain traction on the Libmeldy launch in Europe as we prepare for a U.S. filing, and as we advance our exciting pipeline of clinical and research candidates. And we’re 100% dedicated to making the promise of our therapies a reality for the benefit of patients, our community, and our stakeholders.
With that, I’ll turn the call over to the operator for questions.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions] Your first question comes from Gena Wang with Barclays. Your line is now open.
Unidentified Analyst
Hello, can you hear me?
Bobby Gaspar
Yes, Gena? We can.
Unidentified Analyst
Oh, hi. Thank you very much for taking our questions this is Shu [ph] for Gena. I have two questions regarding Libmeldy. The first thing about the patient treated, so how many patients have you identified, but have not treated so far and how many patients do you expect to trade in fourth quarter of this year?
My second question is about the U.S. filing for Libmeldy. So could you give more color on the Type B meeting with the FDA, like more granularity as to what are the specific elements? Is FDA or what was FDA looking for? And do you expect to be BLA filing in 2023? Thank you.
Bobby Gaspar
Okay, thank you very much for that, those questions. I’m going to hand the first one over to Braden to discuss.
Braden Parker
Yes, thanks for that question. We haven’t guided to the specific number of leads or referrals that have come in this year, though I can speak to the fact that the number of referrals and leads that we’re receiving this year are significantly outpacing last year and that’s due to the increasing awareness of not only MLD with the launch of the Libmeldy but also Libmeldy itself as we speak to different treatment centers as well as the community in general.
In terms of the number of patients we treated this year, we’ve treated five to date, if you recall three in the first half, including the Middle Eastern patient that was treated at OSR, in Italy. And we’ve previously said that we would treat more patients in the second half of the year than in the first half of the year. So three patients in the first half of the year, and with these two patients in the third quarter, and those that we’ve treated or are in process for the remaining quarter, we anticipate treating more patients in the second half than in the first half.
Bobby Gaspar
Thanks very much Braden. Just on the U.S. filing, you asked about the clinical Type B meeting, so let me just put this in context. If you remember, last year, we had, we submitted an IND, we had RMAT designation and then we had some very constructive meetings with the FDA on the clinical package and they outlined what they would like to see in the clinical package. And so we’ve been making submissions to the FDA. They’ve been reviewing those submissions, and now they want to hold a clinical Type B meeting to discuss some very specific aspects of that, of that. So we’re very encouraged by the active engagement we’ve had with the FDA around this program, and the fact that they’re coming forward and saying that they want to focus on specific elements. So on that, let me just — I’ll highlight a couple of elements and then I’ll ask Leslie our CMO, just to go into a bit more detail.
The first thing is, remember, we’ve treated a number of patients in the pre-symptomatic phase, because we know that that’s when Libmeldy can have its greatest effect. And what the FDA would like to know is, if you’re treating them pre-symptomatically, how can you be sure that they will have a late infantile phenotype or early juvenile phenotype? And so we and that’s a very valid question and we think we have all of the information to support that. And Leslie will talk about why we’re able to do that effectively.
And the second thing is, again, about the, remember there’s no standard of care for MLD and we’re comparing it to natural history. And the FDA wants to understand whether that our natural history package is an appropriate comparator. And again, what is the evidence to support that against the treated population. So those are the two main issues that they’d like to discuss at the clinical Type B meeting. So we feel we have the evidence and to be able to support answering those questions. So I’m just going to ask Lesley to go into a bit more detail about that.
Leslie Meltzer
Sure. Thanks, Bobby. And I’ll reiterate that these are topics that we have discussed with the agency previously, and over the past year have been providing through IND amendments and submissions, information that addresses those questions. And the objective of this meeting is really to discuss the information that’s been provided in response to those questions. So with regard to pre-symptomatic patients, and appropriately classifying them, the key thing to remember is that 100% of the pre-symptomatic patients in our development program have an older sibling that experienced symptoms, which led to that sibling being diagnosed.
There’s very high concordance between sibling pairs in terms of the subtype of MLD that they will experience. And this is due to them sharing a genotype and the relationship between genotype and phenotype. So that is how patients have been assigned. The agency asked for some additional background on how this takes place, and also asked that we perform an independent review with U.S. KOLs, U.S. experts to validate the patient classification. That has taken place. That information has been shared with the FDA, and part of the discussion will be around this assessment and aligning on those results.
With regard to the natural history, the site that conducted the trial also conducted the natural history study. It’s one of the largest natural history studies that’s been done in MLD. And there were questions about the representativeness of this natural history population. As part of that we have conducted a comprehensive review of natural history studies across the globe in MLD. We will be sharing the literature supporting those natural history studies with the FDA and demonstrating consistency and outcomes between our natural history population and natural history populations compiled elsewhere.
The Independent Review Committee also validated the patient classifications in that natural history study as well. And we believe by discussing with the agency those data generation activities that we have conducted and those literature review activities we have conducted, we can address the questions that have been raised previously, that we haven’t yet had a chance to discuss in-depth with the agency.
Bobby Gaspar
Thank you, Leslie. And then to your final point, we intend to update after that Type B meeting and then once we have clarity of that meeting we can give you some more information about the specific timeline for filing.
Unidentified Analyst
Thank you very much.
Operator
Your next question comes from Pete Stavropoulos with Cantor Fitzgerald. Your line is now open.
Pete Stavropoulos
Good morning, Bobby and team, congratulations on all the progress, and thanks for taking our questions. First question I have is, you’ve given several updates on 203 program in MPS-IH since the New England Journal of Medicine publication, just about a year ago. So from the data that you’ve disclosed, I just want to get your perspective on two or three addressing the various manifestations of Hurler syndrome, especially when administered in younger patients. And taking into consideration what is observed in terms of clinical benefit in patients undergoing allo-HSC transplant, where do you see 203 being superior?
Bobby Gaspar
Yes, thanks a lot Pete and thank you for the question. So, again, 203 we’re very excited about 203. There is another neurometabolic, neurodegenerative condition, high unmet need, there is a standard of care in allogeneic transplantation, but we know it has limitations and those limitations are around safety. There’s a mortality associated with disease, there’s allogeneic reactivity leading to graft versus host disease, and some patients have to go back onto enzyme replacement therapy. So there’s a number of major issues around that. And then there’s efficacy as well.
So we know that after transplantation, there are patients who still have limitations as far as cognition is concerned, especially in the musculoskeletal area with restrictions in joint mobility and there are other problems, such as in hearing, in vision as well. So it’s a complex disease, many different factors that we want to address. And that’s been a part and we’ve taken a lot of feedback from both the FDA and the EMA, we’ve talked to KOLs. And we’re really in the final stages of putting a global registrational study together, that shows superiority over allogeneic transplantation. I think that’s a very, very important point to make, that our therapy needs to show superiority over allogeneic. transplant. So we have been designing a study to be able to show that, and it will, as endpoints feature those aspects that I’ve just talked about.
Pete Stavropoulos
Okay, and again, in terms of Hurler syndrome, are there newborn screening programs in place, and if so, are they effective in actually identifying patients that you may be able to enroll in your registration studies?
Bobby Gaspar
Yes, no, that’s a very, very good point. I mean, we’ve talked about newborn screening being important in MLD, but in fact, for MPS-I newborn screening is already in place. And if I remember correctly, I think 33 states in the U.S. are already screening for MPS-I. So that will mean that patients are being identified early and can be referred for our global registrational study. So that’s a good place to start right from the beginning.
Pete Stavropoulos
All right, and in terms of the EU, did you also screen there?
Bobby Gaspar
I think it’s more patchy in the EU and so there is — I think there are fewer national programs for MPS-I in the EU. But again, when these — as this is another condition where there’s a lot of interest in screening for MPS-I because again, the literature shows the sooner that you can treat these patients, the better the outcomes that you can have. Yes, I’m sorry. Leslie just…
Leslie Meltzer
I’ll just add one thing, which is that this, there’s a distinction with Hurler syndrome and late infantile MLD. All of the patients in our proof-of-concept study were diagnosed in the Hurler syndrome study, were diagnosed with symptom onset that’s already taking place. We don’t believe that there would be a requirement that patients be treated pre-symptomatically, the way that we have in late infantile MLD. So newborn screening is helpful in identifying patients early, where we would anticipate the best outcomes, but we believe there’s an opportunity to also improve on current standard of care, even in the symptomatic population.
Pete Stavropoulos
Okay, then, I guess in terms of a pivotal study, you would actually have subgroups and perhaps I mean, my assumption is, the older that you are, it’s already affected neurocognitive — you have neurocognitive symptoms there, and so you would possibly cut it to and to a younger population, and then to an older population and sort of look at different endpoints?
Bobby Gaspar
I think that’s something we’d have to come to at a later stage if we subdivide patients. At the moment our intention is to put all patients together.
Pete Stavropoulos
Okay. Thank you. Thank you for taking my questions.
Bobby Gaspar
Thank you, Pete, thank you very much.
Pete Stavropoulos
Bye-bye.
Operator
Your final question comes from David Hoang with SMBC. Your line is now open.
David Hoang
Hey, good morning. Thanks for the update and taking my questions. So I just had a couple here, just on MLD OTL-200, the pathway into U.S., you talked about sort of some of the things you need to do in the Type B meeting. But just remind us if there’s any CMC work or outstanding CMC requests for that product that FDA requested, which would need to be addressed ahead of the BLA filing.
Bobby Gaspar
Yes, great David. Thank you very much for that question and that’s another important point. So again, just in context, we had a meeting with the FDA late in 2021, where we discussed the CMC package. And again, it was a very constructive meeting, and the FDA guided us to what they would like to see in our CMC package. And so over this year, we have been making submissions to the FDA to address those questions.
One of the questions is around the comparability package. Remember, this is a study program that has been in development over 10 years, there have been iterations to the vector manufacturer and the drug product manufacturer. And obviously, we are going in with a cryo-preserved final product. So there’s a comparative ability package that needs to be generated. So we’ve been making submissions to the FDA, and we’ve on all of these different points, and they have all of that material. And what they’ve indicated to us is that they are reviewing that material and so we’re waiting for their feedback.
And so in terms of, and again, that is something that we hope we will get back to very soon. I hope that the time of the clinical Type B meeting will have had both the CMC feedback, and we’ll have the clinical feedback, and then we can update externally on our timing on our filing guidelines.
David Hoang
Got it. That’s really helpful, thanks. And then I just had a broader question on regulatory landscape. So I’m aware a pure gene therapy company, which did receive, I think, some guidance recently from FDA that they could proceed on the accelerated approval pathway. And so granted, this was for MPS 200 syndrome. So I’m just wondering if you have thought or looked about — looked into potential accelerated approval routes for your MPS franchise looking at things like for example, gag reduction as a surrogate [ph] endpoint?
Bobby Gaspar
That’s again, a very, very good question. And we’ve been watching this space very carefully, as well. And we talked about MPS-I for example and again, this is an opportunity to be able to use specific biomarkers, as far as an accelerated pathway for MPS-I is concerned. So, again, this is very much up for discussion. It’s something that we’re looking into. I think if the FDA is indicating in other programs, that these kind of biomarkers could be used for accelerated approval, that I think it’s very encouraging for the field, as we try and tackle these very severe disorders where sometimes those manifestations only happened over a longer period of time. So this is something we’re watching very carefully, and we’ll obviously, we will think about. Leslie, did you want to add anything to that?
Leslie Meltzer
Yes, just to say that recent FDA comments are also quite supportive of companies exploring the use of the accelerated approval pathway with gene therapies where the mechanism of action is quite direct. And there’s a reasonable likelihood of being able to predict clinical benefit leveraging these biomarker endpoints. So we’re very encouraged by those comments. We’re very encouraged by news that other companies have shared and it is absolutely something we would look to discuss as these programs are going through — as their MPS programs are progressing through the regulatory process.
David Hoang
All right, thanks for taking the question.
Bobby Gaspar
Thank you, David. Thanks.
Operator
There are no further questions at this time. Mr. Gasper, I turn the call back over to you.
Bobby Gaspar
Thank you. And thank you to everyone for your time, your attention and support as we continue to advance Orchard’s mission. Thank you very much.
Operator
This concludes today’s conference call. You may now disconnect.
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