SEC Filing | Orchard Therapeutics

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10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-38722

ORCHARD THERAPEUTICS PLC

(Exact Name of Registrant as Specified in its Charter)


England and Wales	Not Applicable
( State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
245 Hammersmith Road London, United Kingdom	W6 8PW
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: +44 (0) 203 808-8286

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading
Symbol(s)

Name of each exchange on which registered

American Depositary Shares, each representing one
ordinary share, nominal value £0.10 per share

ORTX

The Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 10, 2022, the registrant had 126,689,717 ordinary shares, nominal value £0.10 per share, outstanding.

Summary of the Material Risks Associated with Our Business

Our business is subject to numerous risks and uncertainties that you should be aware of in evaluating our business. These risks include, but are not limited to, the following:

•

We have incurred net losses since inception. We expect to incur net losses for the foreseeable future and may never achieve or maintain profitability.

•

We will need additional funding, which may not be available on acceptable terms or at all. Failure to obtain this necessary capital when needed may force us to delay, limit or terminate our product development efforts or other operations.

•

Our gene therapy product candidates are based on a novel technology, which makes it difficult to predict the time and cost of product candidate development and of subsequently obtaining regulatory approval.

•

The results from our clinical trials for OTL-200 for metachromatic leukodystrophy, or MLD, and for any of our other product candidates may not be sufficiently robust to support marketing approval or the submission of marketing approval. Before we submit our product candidates for marketing approval, the U.S. Food and Drug Administration or the European Medicines Agency may require us to conduct additional clinical trials or evaluate patients for an additional follow-up period.

•

Interim data and ad hoc analyses are preliminary in nature. Success in preclinical studies or early clinical trials may not be indicative of results obtained in later trials.

•

Gene therapies are novel, complex and difficult to manufacture. We have limited manufacturing experience, and we rely on third-party manufacturers that are often our single source of supply. We could experience manufacturing problems that result in delays in the development or commercialization of our commercial products or our product candidates or otherwise harm our business.

•

Libmeldy™, Strimvelis® and our product candidates and the process for administering Libmeldy, Strimvelis and our product candidates may cause serious or undesirable side effects or adverse events or have other properties that could delay or prevent regulatory approval, limit commercial potential or result in significant negative consequences for our company.

•

We may find it difficult to enroll patients in our clinical trials, which could delay or prevent us from proceeding with clinical trials of our product candidates.

•

If we are unable to establish effective sales and marketing capabilities or enter into agreements with third parties to market, sell and gain reimbursement for Libmeldy and any product candidates that may be approved, our product revenue may be adversely affected and our business may suffer.

•

If the size and value of the market opportunities for our commercial products or product candidates are smaller than our estimates, or if we have difficulty in finding patients that meet eligibility requirements for Libmeldy or any of our product candidates, if approved, our product revenue may be adversely affected and our business may suffer.

•

We face significant competition in our industry and there can be no assurance that Libmeldy or our product candidates, if approved, will achieve acceptance in the market over existing established therapies. In addition, our competitors may develop therapies that are more advanced or effective than ours, which may adversely affect our ability to successfully market or commercialize any of our products or product candidates.

•

Business interruptions resulting from the ongoing COVID-19 pandemic have caused and may continue to cause a disruption to the development of our product candidates and adversely impact our business.

•

We may not be able to protect our intellectual property rights throughout the world.

•

We may become subject to claims that we are infringing certain third-party patents, for example, patents relating to lentiviral vectors, or other third-party intellectual property rights, any of which may prevent or delay our development and commercialization efforts and have a material effect on our business.

•

We have entered into collaborations with third parties to develop or commercialize product candidates and we may enter into additional collaborations in the future. If these collaborations are not successful, our business could be adversely affected.

•

The market price of our ADSs may be highly volatile and may fluctuate due to factors beyond our control.

•

We are not currently in compliance with the minimum bid price rule of the Nasdaq Capital Market, and a delisting could limit the liquidity of our ADSs, increase their volatility and hinder our ability to raise capital.

The summary risk factors described above should be read together with the text of the full risk factors below, in the section entitled “Risk Factors” in Part II, Item 1.A. and the other information set forth in this Quarterly Report on Form 10-Q, as well as in other documents that we file with the U.S. Securities and Exchange Commission. The risks summarized above or described in full below are not the only risks that we face. Additional risks and uncertainties not precisely known to us, or that we currently deem to be immaterial, may also materially adversely affect our business, financial condition, results of operations and future growth prospects.

Table of Contents


		Page
PART I.	FINANCIAL INFORMATION	1
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations and Comprehensive Loss	2
	Condensed Consolidated Statements of Cash Flows	3
	Condensed Consolidated Statements of Shareholders’ Equity	4
	Notes to Unaudited Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	35
PART II.	OTHER INFORMATION	37
Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	100
Item 3.	Defaults Upon Senior Securities	100
Item 4.	Mine Safety Disclosures	100
Item 5.	Other Information	100
Item 6.	Exhibits	101
Signatures		102

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, or 10-Q, contains express or implied forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve substantial risks and uncertainties. In some cases, forward-looking statements may be identified by the words “may,” “might,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “objective,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue,” “ongoing,” or the negative of these terms, or other comparable terminology intended to identify statements about the future. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. The forward-looking statements and opinions contained in this 10-Q are based upon information available to our management as of the date of this 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. Forward-looking statements contained in this 10-Q include, but are not limited to, statements about:

•

the initiation, timing, progress and results of our preclinical studies and clinical trials, and our research and development programs;

•

the timing, scope or likelihood of regulatory submissions, filings and approvals;

•

our ability to develop and advance product candidates into, and successfully complete, clinical trials;

•

our expectations regarding the market opportunity for and size of the patient populations for Libmeldy (OTL-200) and our product candidates, if approved, for commercial use;

•

the implementation of our business model and our strategic plans for our business;

•

our plans and ability to build out our commercial infrastructure, including our ability to successfully identify patients and market and sell Libmeldy in Europe and any of our product candidates for which we receive marketing approval;

•

our commercialization, marketing and manufacturing capabilities and strategy;

•

the pricing and reimbursement of Libmeldy and any of our product candidates, if approved, including reimbursement for patients treated in a country where they are not resident;

•

the adequacy, scalability and commercial viability of our manufacturing capacity, methods and processes, including those of our manufacturing partners, and plans for future development;

•

the rate and degree of market acceptance and clinical utility of our commercial products and product candidates, in particular, and gene therapy, in general;

•

our ability to establish or maintain collaborations or strategic relationships;

•

our ability to obtain additional funding for our operations;

•

the impact of the COVID-19 global pandemic on our business operations, including clinical trials, regulatory strategy, and the operations of our third-party manufacturers, suppliers and partners;

•

the scope of protection we and our licensors are able to establish and maintain for intellectual property rights covering our commercial products and product candidates;

•

developments and projections relating to our competitors and our industry;

•

our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;

•

the impact of laws and regulations;

•

our ability to attract and retain qualified employees and key personnel;

•

our ability to contract with third party suppliers, clinical sites and manufacturers and their ability to perform adequately;

•

our projected financial condition, including the sufficiency of our cash, cash equivalents and investments to fund operations in future periods and future liquidity, working capital and capital requirements;

•

our ability to comply with the listing requirements of The Nasdaq Capital Market;

•

the impact of inflation on our business, results of operations or financial condition;

•

the impact of geopolitical events, including the ongoing conflict between Russia and Ukraine; and

iii

•

other risks and uncertainties, including those listed under the caption “Item 1A. Risk Factors” in this 10-Q.

You should refer to the section titled “Item 1A. Risk Factors” in this 10-Q for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot be assured that the forward-looking statements in this 10-Q will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, these statements should not be regarded as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame or at all. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

You should read this 10-Q and the documents that we reference in this 10-Q and have filed as exhibits to this 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

ORCHARD THERAPEUTICS PLC

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts)

(unaudited)


	September 30,			December 31,
	2022			2021
Assets
Current assets:
Cash and cash equivalents	$	80,751		$	55,912
Marketable securities		65,803			164,195
Accounts receivable		4,233			1,480
Prepaid expenses and other current assets		16,991			23,011
Research and development tax credit receivable		11,475			30,723
Total current assets		179,253			275,321
Operating lease right-of-use-assets		23,133			24,316
Property and equipment, net		7,804			4,767
Restricted cash		4,266			4,266
Intangible assets, net		3,487			4,149
Research and development tax credit receivable		4,312			—
Other assets		11,795			9,590
Total assets	$	234,050		$	322,409
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	6,518		$	10,008
Accrued expenses and other current liabilities		28,267			24,318
Deferred revenue, current		1,375			346
Operating lease liabilities		6,248			7,335
Notes payable, current		7,857			786
Total current liabilities		50,265			42,793
Notes payable, long-term		25,265			32,086
Deferred revenue, net of current portion		9,101			12,519
Operating lease liabilities, net of current portion		19,083			19,278
Other long-term liabilities		6,633			5,783
Total liabilities		110,347			112,459
Commitments and contingencies (see Note 13)
Shareholders’ equity:
Ordinary shares, £0.10 par value, authority to allot up to a maximum nominal value of £13,023,851.50 of shares at September 30, 2022 and December 31, 2021, respectively; 126,572,749 and 125,674,095 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively.		16,370			16,253
Additional paid-in capital		952,761			940,675
Accumulated other comprehensive income		47,573			3,246
Accumulated deficit		(893,001	)		(750,224	)
Total shareholders’ equity		123,703			209,950
Total liabilities and shareholders’ equity	$	234,050		$	322,409

The accompanying notes are an integral part of these condensed consolidated financial statements.

ORCHARD THERAPEUTICS PLC

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share amounts)

(unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Product revenue, net	$	5,377		$	700		$	14,217		$	700
Collaboration revenue		400			492			1,452			492
Total revenue		5,777			1,192			15,669			1,192
Costs and operating expenses:
Cost of product revenue		1,645			226			4,338			226
Research and development		18,103			20,846			68,302			63,631
Selling, general and administrative		11,496			13,039			38,525			41,353
Total costs and operating expenses		31,244			34,111			111,165			105,210
Loss from operations		(25,467	)		(32,919	)		(95,496	)		(104,018	)
Other income (expense):
Interest income		404			65			686			349
Interest expense		(799	)		(683	)		(2,146	)		(1,814	)
Other expense, net		(22,787	)		(4,041	)		(47,066	)		(2,049	)
Total other expense, net		(23,182	)		(4,659	)		(48,526	)		(3,514	)
Loss before income taxes		(48,649	)		(37,578	)		(144,022	)		(107,532	)
Income tax benefit (expense)		1,084			1,133			1,245			(704	)
Net loss attributable to ordinary shareholders	$	(47,565	)	$	(36,445	)	$	(142,777	)	$	(108,236	)
Net loss per share attributable to ordinary shareholders, basic and diluted	$	(0.37	)	$	(0.29	)	$	(1.12	)	$	(0.88	)
Weighted average ordinary shares outstanding, basic and diluted		128,132,092			127,376,562			127,895,426			122,765,516
Other comprehensive income:
Foreign currency translation adjustment		21,459			3,826			44,504			3,388
Unrealized gain (loss) on marketable securities		84			94			(177	)		(27	)
Total other comprehensive income		21,543			3,920			44,327			3,361
Total comprehensive loss	$	(26,022	)	$	(32,525	)	$	(98,450	)	$	(104,875	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

ORCHARD THERAPEUTICS PLC

Condensed Consolidated Statements of Cash Flows

(In thousands)

(unaudited)


	Nine Months Ended September 30,
	2022			2021
Cash flows from operating activities:
Net loss attributable to ordinary shareholders	$	(142,777	)	$	(108,236	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		2,020			1,651
Share-based compensation		12,084			17,198
Non-cash interest expense		279			297
Amortization of provision on loss contract		(276	)		(898	)
Amortization of premium on marketable securities		66			1,162
Deferred income taxes		2,318			758
Unrealized foreign currency and other non-cash adjustments		46,215			10,277
Changes in operating assets and liabilities:
Accounts receivable		(3,058	)		(213	)
Research and development tax credit receivable		11,315			(13,498	)
Prepaid expenses, other current assets and other assets		(303	)		(2,452	)
Operating leases, right-of-use assets		4,059			3,725
Accounts payable, accrued expenses and other current liabilities		7,171			(9,473	)
Deferred revenue		(178	)		13,725
Operating lease liabilities		(4,420	)		(5,724	)
Other long-term liabilities		1,582			—
Net cash used in operating activities		(63,903	)		(91,701	)
Cash flows from investing activities:
Proceeds from sales and maturities of marketable securities		169,360			198,013
Purchases of marketable securities		(71,206	)		(242,315	)
Purchases of property and equipment		(6,030	)		(1,955	)
Payments on intangible assets		—			(887	)
Receipt of funds from construction deposit		—			216
Net cash provided by (used in) investing activities		92,124			(46,928	)
Cash flows from financing activities:
Proceeds from employee equity plans, net of taxes withheld		118			2,761
Proceeds from the issuance of ordinary shares in private placement		—			150,000
Payment of placement agent fees and offering costs		—			(6,355	)
Proceeds from issuance of shares as part of collaboration agreement		—			4,135
Proceeds from modification of credit facility, net of debt issuance costs paid		—			7,375
Net cash provided by financing activities		118			157,916
Effect of exchange rate changes on cash, cash equivalents, and restricted cash		(3,500	)		(98	)
Net increase in cash, cash equivalents and restricted cash		24,839			19,189
Cash, cash equivalents, and restricted cash, beginning of period		60,178			59,401
Cash, cash equivalents, and restricted cash, end of period	$	85,017		$	78,590
Supplemental disclosure of noncash activities
Property and equipment and intangible assets included in accounts payable and accrued expenses	$	—		$	2,870
Supplemental disclosure of cash flow information:
Lease assets obtained in exchange for new operating lease liabilities, net		4,912			350
Non-cash adjustments to operating lease right-of-use assets and liabilities		530			—
Cash paid for interest		1,843			1,517

The accompanying notes are an integral part of these condensed consolidated financial statements.

ORCHARD THERAPEUTICS PLC

Condensed Consolidated Statements of Shareholders’ Equity

(In thousands, except share amounts)

(unaudited)


								Accumulated
					Additional			Other
	Ordinary Shares				Paid-in			Comprehensive			Accumulated
	Shares		Amount		Capital			Income (Loss)			Deficit			Total
Balance at December 31, 2021		125,674,095	$	16,253	$	940,675		$	3,246		$	(750,224	)	$	209,950
Share-based compensation expense		—		—		4,660			—			—			4,660
Exercise of share options		222,381		28		(29	)		—			—			(1	)
Vesting of restricted stock units, net of shares withheld for taxes		3,217		1		(4	)		—			—			(3	)
Ordinary shares issued as part of a consulting agreement		5,252		1		—			—			—			1
Foreign currency translation		—		—		—			5,595			—			5,595
Unrealized loss on available for sale debt securities		—		—		—			(260	)		—			(260	)
Net loss attributable to ordinary shareholders		—		—		—			—			(44,296	)		(44,296	)
Balance at March 31, 2022		125,904,945		16,283		945,302			8,581			(794,520	)		175,646
Share-based compensation expense		—		—		3,956			—			—			3,956
Exercise of share options		175,153		24		(23	)		—			—