Orchard Therapeutics plc

Good day and thank you for standing by. Welcome to the Orchard Therapeutics second quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. 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 updates, 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 two 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 three 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 five years of disease onset, creating an enormous burden on patients, their families, and healthcare systems. The medical need is significant, And we're seeing the value of our gene therapy for MLD being recognized by peers throughout Europe, where it has been approved since late 2020. As we announced in this morning's press release, we have completed the role submission of our PLA to the US FDA for OTL200, which previously received both rare pediatric disease and RMAT designations from the agency. Orchard has requested priority review, which if granted, would put OTL200 on track for potential U.S. approval in the first half of 2024. Reflecting on the tremendous progress we've collectively made in the seven months since our IB 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're 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're also planning to present the full OTL200 BLA clinical data comprising more than 230 years of patient experience at an upcoming medical meeting. These data 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 updates, let's take a moment to highlight some notable data we recently presented from across our HSC gene therapy portfolio, which underscores the transformative potential of our approach and continues to demonstrate the ability of gene-modified HSEs 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 autism 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 OTL203 for patients diagnosed with a hurler form of MPS1, which demonstrated extensive metabolic correction in the skeletal system of patients, resulting in normal growth rates, skeletal remodeling, improvement in joint function, and progressive acquisition of motor skills. The current standard of care for MPS1 hurlers is allogeneic hematopoietic stem cell transplant. which does not adequately address the growth and skeletal manifestations of the disease, among other clinical outcomes. Orchard plans to initiate a global 40-patient registrational randomized controlled trial of OCL203 compared to standard care by year end. We are currently working with the clinical sites, our CROs, and the centralized labs to prepare for this first-of-its-kind study. A presentation highlighting updated OTL201 data from the ongoing proof-of-concept study in MPS3A patients showed additional favorable neurocognitive outcomes compared to disease natural history with median follow-up of two and a half years. Similar to MLD, MPS3A represents a significant medical need 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 MPS3A. Patients enrolled in the ongoing proof-of-concept trial will be followed for a minimum of three 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 later stages of development for the program. We also featured the first preclinical data for OTL204 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 normalize predictive biomarkers. At ASGCT, we also presented preclinical data from two 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 OTL104 for NOD2 Crohn's disease, a severe and treatment refractory form of the disease. Additionally, in vivo data demonstrated the development of CAR Treg cells from genetically engineered HSCs as a potential one-time 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 Limeldi, providing a roadmap 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 LaMeldie, 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 LaMeldie 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 MLD in additional European countries. So far in 2023, we have secured reimbursement agreements in four 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 LibMLD 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 abroad 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 six different countries on a commercial basis at four of our five 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, nine prospective studies are actively screening newborns for MLD in key regions, countries, and states. Four confirmed cases of MLD have been identified following the screening of more than 150,000 newborns globally as of June 30th. And many of these MLD patients identified through newborn screening are expected to be treated commercially with LIMELD 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 SB67. 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 US, 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 MLD, 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 help elucidate the true incidence of MLD, which we believe represents a significant annual global market opportunity. Using an estimated incidence rate of one 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 LaMeldie in the US and Europe alone to be more than $200 million annually. Applying those same assumptions to the potential addressable worldwide market, the global opportunity for LaMeldie could reach up to $500 million annually considering countries where we believe therapies like MLD 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 incidence could be closer to one 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 LaMeldie 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 LIMELD 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 LaMeldie 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 non-cash amortization. This resulted in gross margins of approximately 70% for the quarter. Beyond LIMELD 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 two 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 Lib Meldy 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.