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.

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 Lumeldi, 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've emerged from this period of broader industry contraction leaner, more focused, well-funded, and as 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.

Thank you. As a reminder, to ask a question, please 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. One moment for questions. Our first question comes from Debjit Chattopadhyay with Guggenheim. You may proceed.

Hey, good morning, team. This is Robert on for Debjit. Congrats on the BLA filing. So on the filing, do you anticipate an outcome 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, you know, with the high unmet need, you know, there's a strong likelihood that we will get priority review. As far as an outcome is concerned, this is the first submission for a 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 OTL200 in this devastating disease, and the lack of other alternatives. for this condition. So if these are focused on those kind of clinical questions, then I think we're in a very strong position. But obviously we'll know at the time, relatively soon, whether we do have an outcome or not.

That's great. Thank you. 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? Yeah.

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 RUS panel. And so there are some of those states, and we've been working with those states And so Illinois has passed legislature to mandate screening for MLD. And it is a, you know, 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 can also start screening before the condition is placed on the RUS panel. And so we're working with those states as well. Now, there are also some other states that can do pilot programs, pilot studies, rather than, you know, kind of mandatory statewide 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 this appears on the rough panel, and so we'll be working with those states.

That's great. Thank you.

Thank you. One moment for questions. Our next question comes from Pete Stavropoulos with Cantor Fitzgerald. You may proceed.

Hi, Bobby, Frank, and team. Congratulations on completing the rolling BLA filing and all the other progress made this past quarter. So I guess, you know, one of the first questions I have is, you know, can you 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 are the European authorities are being... manufactured there? Just, you know, help us gauge the experience of this facility in providing commercial product.

Yeah. 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, Libmeldi, which we are commercializing in the EU, is manufactured there. They are also commercially manufacturing Strumvelis 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 a mock inspection in the way that it may well be conducted by the FDA, identifying issues that may need to be addressed for an FDA inspection in comparison to an EMA inspection. And so this has been, you know, the 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.

Okay, thank you for that. And can you also just sort of remind us of the patients LibMeldie is approved for in the EU? And when you think about it, a U.S. label, do you anticipate, if approved, it'll be a similar label, a broader or more restrictive label?

Well, let me start that, and then I can hand it over to Brayden for any extra information. But essentially, in the EU, LibMeldie is approved for pre-symptomatic patients with either the late infantile or early juvenile form of the disease, and also for early symptomatic patients with the early juvenile form of the symptoms. 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 there. I think you've characterized it well, Bobby. Okay. Thank you. Thanks, Pete. I hope that answers your question.

It does indeed. And just one last question, if you don't mind. You know, so, you know, as you move forward, you know, in filing INDs for the larger indications like Crohn's disease and, you know, the risk benefit may shift for those indications relative to you know, MLD and other neurodevelopmental indications you're currently focused on, you know, what are some of the key findings from your platform, you know, that sort of give you confidence that the risk-benefit profile, you know, will remain favorable for these larger indications?

Yeah, thank you. And this is an important question, one that we've considered very carefully as we've 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 biolenic mutations in a gene called NOD2. And the literature and our KOL outreach suggests that these individuals have the most severe form of Crohn's disease. So these are individuals who are refractory to biologics and immunosuppressants, They have a high rate of surgery, and they have the fistulizing or stricturing form of the disease. So despite what's currently available, there is still a high unmet need. We also know that many individuals with this form of the disease, the severe form of the disease, are taking part in trials of autologous transplantation. So, you know, 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 this severe form of the disease. Now, obviously, we will be going one step further and providing gene-modified, selecting individuals with not two mutations and providing gene-modified cells. So, we believe it is justified. In addition to that, we are also working on reduced intensity conditioning regimes, which, again, may make this form of intervention more applicable to a wider population.

All right. Thank you very much, and congratulations again.

Thanks for helping. Thank you.

Thank you. And as a reminder, to ask a question, please press star 1-1 on your telephone. One moment for questions. Our next question comes from Yaron Werber with TD Cowen. You may proceed.

Hi, this is Brandon for Yaron. Thanks for taking the questions and congrats on your 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.

Yeah, thank you for that question. In terms of learnings from Europe and how they would apply to a 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 assessments in advance of any type of pricing negotiations. 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 post-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 ads and sales in the early years of the launch, as we've seen in Europe as well. It gets 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.

All right, great. 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 NPS1? I know you touched on this a bit, but is it 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.

All right, great. Thanks, everyone. Thank you.

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 question and your time, your attention, and your support as we work to realize Orchard's vision to end the devastation caused by these 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.