Today, we take an in-depth look at an intriguing development concern with one product approved and on the market and more importantly a more lucrative candidate that appears on its way to approval in Europe. A full analysis on this Busted IPO follows in the paragraphs below.

Orchard Therapeutics (ORTX) is a London, United Kingdom-based biopharmaceutical company that IPO'd in 2018. The company is focused on developing gene therapies for rare conditions. In 2018, Orchard acquired GSK's rare disease gene therapy portfolio, which originated from a collaboration between GSK and the San Raffaele Telethon Institute for Gene Therapy. The company's unique approach involves inserting a working copy of the missing or malfunctioning gene into a patient's own blood stem cells. This approach circumvents the need for a bone marrow transplant since it leverages blood stem cells intrinsic capacity to self-renew in a patient's bone marrow and produce new blood cells of all types. The company's overarching goal is to permanently correct genetic disorders via a single treatment.

The company does have one approved product called Strimvelis, which is indicated for patients with severe combined immunodeficiency due to adenosine deaminase deficiency for whom no suitable human leukocyte antigen matched related stem cell donor is available; however, the drug has only been approved by the EMA and not the FDA. The company's pipeline is candidate rich, spanning a variety of indications that are compartmentalized into three categories: neurometabolic/neurodegenerative disorders, immunological disorders, and blood disorders. The company has a couple of late-stage candidates. Orchard Therapeutics has a market capitalization of roughly $450 million and trades for approximately $4.50 a share.

Pipeline

Source: Company Presentation

OTL-200

OTL-200 is an ex vivo autologous gene therapy in development to treat metachromatic leukodystrophy. The drug uses a modified virus to insert an operational copy of the ARSA gene into a patient's cells. OTL-200 has received rare pediatric disease designation from the FDA. MLD is a rare and deadly inherited disease. The disease is characterized by the accumulation of fats called sulfatides, which causes a breakdown in the protective fatty layer surrounding nerves in the central and peripheral nerve systems. It is estimated that 1 in 40,000 to 1 in 160,000 people have the disease worldwide. OTL-200 was developed in partnership with the San Raffaele Telethon Institute for Gene Therapy.

Source: Company Presentation

On October 16th, the company announced that it received a positive CHMP opinion for the drug, which recommended full marketing authorization for the treatment of early-onset metachromatic leukodystrophy patients in the European Union. The positive opinion will now be reviewed by the European Commission. A final decision is expected by the end of 2020. If approved, the company would be targeting a launch in the first half of 2021.

Furthermore, the company is pursuing a regenerative medicine advanced therapy designation, and it filed an investigational new drug application or IND in the U.S., which was accepted by the FDA on November 19th. Orchard has also applied for Regenerative Medicine Advanced Therapy designation for OTL-200 to help facilitate additional dialogue with the FDA

In addition, within the neurometabolic/neurodegenerative disorders category, it was announced in September that the European Medicines Agency has granted Priority Medicines designation to OTL-203 for the treatment of mucopolysaccharidosis type I. This comes not long after 203 received Orphan Drug designation in the U.S.

Source: Company Presentation

OTL-103

OTL-103 is an ex vivo autologous gene therapy in development to treat Wiskott-Aldrich syndrome. The drug uses a modified virus to insert a working copy of the WAS gene into a patient's cells. WAS is a rare, X-linked, recessive, inherited immune disorder, which is characterized by reoccurring severe infections, autoimmunity, eczema and severe bleeding episodes. The company has received Rare Pediatric Disease designation and Regenerative Medicine Advanced Therapy designation from the FDA. OTL-103 is being developed in partnership with the San Raffaele Telethon Institute for Gene Therapy.

Looking ahead, the company is preparing to file a BLA in the U.S. and an MAA in the EU for OTL-103 in WAS in 2021.

Source: Company Presentation

As of September 30th, 2020, Orchard Therapeutics had cash and cash equivalents of $41.1 million compared to $19 million on December 31st, 2019. Research and development expenses for the third quarter were $14.6 million compared to $28.4 million in Q3 of 2019. Selling, general and administrative expenses were $12.9 million in the quarter compared to $14.2 million in the same quarter of 2019. The company did $1.9 million in product revenue for the quarter compared to $1.9 million in Q3 of 2019. Overall, the company reported a net loss of $20.2 million compared to a net loss of $36.7 million in Q3 of 2019. Management stated in the latest quarterly update that it expects its current financial position to cover its anticipated operating and capital expenditure requirements into 2022.

The company is sparsely covered in the United States despite a healthy market cap as our most names in this space domiciled overseas. The most recent recommendation comes from Oppenheimer on September 14th. The firm lowered its price target from $26 a share to $16 a share, but it maintained its overweight rating. The analyst stated that the updated price target reflects a more subdued opinion on the pace of pipeline development for MPS-1 and MPS-IIIA. It reiterated this rating on November 19th.

Both Barclays ($13 price target, down from $15 previously) and Goldman Sachs ($9 price target, down from $13) reiterated Buy ratings on ORTX albeit revising the price targets lower. Finally, on May 22nd, JPMorgan lowered its price target from $26 a share to $17 a share and maintained its overweight rating. The analyst's note did seem upbeat despite the lowered price target in that the analyst thinks that the company's pipeline possesses "broad potential".

Two things prevent Orchard from being considered for a large holding. First, the company looks like it will have to raise additional capital in the very near future. I think the company will raise capital immediately after the next positive news event. Second, overseas biotech concerns don't ever seem to get the attention from analysts or valuation from investors that companies domiciled in the States do. That said, the company has multiple shots on goal and definable potential catalysts on the near-term potential. Add in the possible wildcard of being a potential buyout target at some point, and ORTX would seem worthy of a small "watch item" stake at this time.

Bret Jensen is the Founder of and authors articles for the Biotech Forum, Busted IPO Forum, and Insiders Forum.

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Disclosure: I am/we are long ORTX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Originally posted here:
Our View On Orchard Therapeutics - Seeking Alpha