SEC Filing | Orchard Therapeutics

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

View:

Download DOC

Download PDF

Download XLS

Download XBRL

10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)c


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

For the quarterly period ended September 30, 2023


☐	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 W6 8PW

United Kingdom

(Address of principal executive offices)

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 ten
ordinary shares, nominal value £0.10 per share

ORTX

The Nasdaq Capital Market

Securities registered pursuant to Section 12(b) of the Act: None

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 9, 2023, the Registrant had 227,610,439 ordinary voting and non-voting shares, nominal value £0.10 per share, outstanding, which if all held in ADS form would be represented by 22,761,044 American Depositary Shares, each representing ten ordinary shares.

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 entered into a definitive agreement pursuant to which Kyowa Kirin Co. Ltd. will acquire all outstanding shares of the Company, subject to the terms and conditions therein. There are material uncertainties and risks associated with the proposed transaction with Kyowa Kirin Co. Ltd. If any of these uncertainties and risks develop into actual events, then our business, financial condition, results and ongoing operations, share price or prospects could be materially adversely affected.

•

The proposed transaction with Kyowa Kirin Co. Ltd. may not be completed in a timely manner or at all. Failure to complete the transaction could negatively impact our business, financial results and the market price of our American Depositary Shares, or ADSs. If the transaction closes, we will cease to be a public company.

•

The definitive agreement relating to our proposed transaction with Kyowa Kirin Co. Ltd. contains provisions that could discourage a potential competing acquirer of us.

•

We have incurred, and will continue to incur, substantial direct and indirect costs as a result of the proposed transaction with Kyowa Kirin Co. Ltd.

•

If our previously announced transaction with Kyowa Kirin Co. Ltd. does not close, we may need additional funding, which may not be available on acceptable terms or at all.

•

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

•

Our Biologics License Application for OTL-200 in the United States may be delayed, may not be granted or may be granted for a different label than applied for.

•

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 any of our 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 pre-clinical 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.

•

Libmeldy™ and our product candidates and the process for administering Libmeldy and our product candidates may cause serious or undesirable side effects or adverse events.

•

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.

•

We may be unable to establish effective sales and marketing capabilities, which would negatively impact our revenue.

•

We may not be able to gain reimbursement for our commercial products or product candidates from government or commercial insurers at acceptable levels, or at all, which could adversely affect the commercial potential of our product candidates.

•

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 revenues may be adversely affected.

•

We face significant competition in our industry and there can be no assurance that our commercial products or our product candidates, if approved, will achieve acceptance in the market.

•

We may be unable to protect our intellectual property rights throughout the world.

•

We may become subject to claims that we are infringing certain third-party patents.

•

We have in the past, and in the future we may, enter into collaborations with third parties to develop or commercialize product candidates. These collaborations may not be successful.

•

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

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	7
Item 1.	Financial Statements (Unaudited)	7
	Condensed Consolidated Balance Sheets	7
	Condensed Consolidated Statements of Operations and Comprehensive Loss	8
	Condensed Consolidated Statements of Shareholders' Equity	9
	Condensed Consolidated Statements of Cash Flows	11
	Notes to Unaudited Condensed Consolidated Financial Statements	12
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41
Item 4.	Controls and Procedures	41
PART II.	OTHER INFORMATION	43
Item 1.	Legal Proceedings	43
Item 1A.	Risk Factors	43
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:

•

our previously announced acquisition by Kyowa Kirin Co. Ltd., including the likelihood of the satisfaction of the conditions to the completion of the transaction, including shareholder approval, and whether and when the transaction will be consummated;

•

the risk of unanticipated costs, liabilities or delays relating to the proposed transaction with Kyowa Kirin Co. Ltd.;

•

the timing, progress and results of clinical trials and pre-clinical studies for our programs and product candidates, including statements regarding the timing of initiation and completion of trials or studies and related preparatory work and the period during which the results of the trials or studies will become available;

•

the timing, scope and likelihood of regulatory submissions, filings and approvals, including with respect to our biologics license application, or BLA, for OTL-200 in the United States;

•

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, commercial products, product candidates and technology;

•

our plans and ability to build out our commercial infrastructure and successfully identify eligible patients for Libmeldy in Europe and our product candidates, if approved for commercial use;

•

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 a resident;

•

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

•

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

•

our ability to establish or maintain collaborations or strategic relationships or obtain additional funding;

•

our competitive position;

•

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; and

•

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,
	2023			2022
Assets
Current assets:
Cash and cash equivalents	$	23,469		$	68,424
Marketable securities		101,944			75,326
Accounts receivable, net		6,187			8,467
Inventory		6,638			3,400
Prepaid expenses and other current assets		7,451			6,586
Research and development tax credit receivable		8,234			5,942
Total current assets		153,923			168,145
Non-current assets:
Operating lease right-of-use-assets		20,001			22,774
Property and equipment, net		7,131			8,138
Research and development tax credit receivable		3,372			—
Restricted cash		4,215			4,215
Intangible assets, net		3,321			3,560
Other assets		10,303			12,075
Total non-current assets		48,343			50,762
Total assets	$	202,266		$	218,907
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	3,661		$	9,318
Accrued expenses and other current liabilities		29,995			34,437
Deferred revenue		742			959
Operating lease liabilities		5,548			6,424
Notes payable		9,429			9,429
Total current liabilities		49,375			60,567
Notes payable, long-term		16,162			22,991
Deferred revenue, net of current portion		10,345			10,315
Operating lease liabilities, net of current portion		16,681			19,246
PIPE Warrant liabilities		21,068			—
Other long-term liabilities		8,377			7,524
Total liabilities		122,008			120,643
Commitments and contingencies (see Note 17)
Shareholders’ equity:
Ordinary shares (voting and non-voting), £0.10 par value; Most recent authority to allot up to a maximum nominal value of £33,556,809 and £13,023,851.50 of shares at September 30, 2023 and December 31, 2022, respectively; Issued and outstanding — 227,273,209 and 126,947,225 ordinary shares at September 30, 2023 and December 31, 2022, respectively.		29,463			16,419
Additional paid-in capital		994,108			956,711
Accumulated other comprehensive income		22,609			26,018
Accumulated deficit		(965,922	)		(900,884	)
Total shareholders’ equity		80,258			98,264
Total liabilities and shareholders’ equity	$	202,266		$	218,907

The accompanying notes are an integral part of these unaudited 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,
	2023			2022			2023			2022
Product revenue, net	$	5,559		$	5,377		$	12,744		$	14,217
Collaboration revenue		743			400			2,109			1,452
Total revenue		6,302			5,777			14,853			15,669
Costs and operating expenses:
Cost of product revenue		1,745			1,645			4,301			4,338
Research and development		14,553			18,103			47,241			68,302
Selling, general and administrative		11,609			11,496			33,736			38,525
Total costs and operating expenses		27,907			31,244			85,278			111,165
Loss from operations		(21,605	)		(25,467	)		(70,425	)		(95,496	)
Other income (expense):
Interest income		1,505			404			3,925			686
Interest expense		(932	)		(799	)		(2,864	)		(2,146	)
Changes in fair value of PIPE Warrant and PIPE Unit liabilities		(8,801	)		—			3,256			—
Other income (expense), net		(4,510	)		(22,787	)		2,059			(47,066	)
Total other income (expense), net		(12,738	)		(23,182	)		6,376			(48,526	)
Net loss before income taxes		(34,343	)		(48,649	)		(64,049	)		(144,022	)
Income tax benefit (expense)		(976	)		1,084			(989	)		1,245
Net loss	$	(35,319	)	$	(47,565	)	$	(65,038	)	$	(142,777	)
Net loss per ordinary share basic and diluted	$	(0.15	)	$	(0.37	)	$	(0.35	)	$	(1.12	)
Weighted average ordinary shares outstanding, basic and diluted		228,388,561			128,132,092			186,811,772			127,895,426
Other comprehensive income:
Foreign currency translation adjustment		3,978			21,459			(3,523	)		44,504
Unrealized gain (loss) on marketable securities		79			84			114			(177	)
Total other comprehensive income (loss)		4,057			21,543			(3,409	)		44,327
Total comprehensive loss	$	(31,262	)	$	(26,022	)	$	(68,447	)	$	(98,450	)

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

ORCHARD THERAPEUTICS PLC

Condensed Consolidated Statements of Shareholders’ Equity

(In thousands, except share amounts)

(unaudited)



					Additional			Accumulated 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	)		—			—			1
Issuance of ESPP shares		356,115		46		90			—			—			136
Foreign currency translation		—		—		—			17,450			—			17,450
Unrealized loss on available for sale debt securities		—		—		—			(1	)		—			(1	)
Net loss attributable to ordinary shareholders		—		—		—			—			(50,916	)		(50,916	)
Balance at June 30, 2022		126,436,213		16,353		949,325			26,030			(845,436	)		146,272
Share-based compensation expense		—		—		3,468			—			—			3,468
Exercise of share options		115,551		15		(15	)		—			—			-
Vesting of restricted stock units, net of shares withheld for taxes		20,985		2		(17	)		—			—			(15	)
Foreign currency translation		—		—		—			21,459			—			21,459
Unrealized gain on available for sale debt securities		—		—		—			84			—			84
Net loss attributable to ordinary shareholders		—		—		—			—			(47,565	)		(47,565	)
Balance at September 30, 2022		126,572,749	$	16,370	$	952,761		$	47,573		$	(893,001	)	$	123,703



					Additional			Accumulated Other
	Ordinary Shares				Paid-in			Comprehensive			Accumulated
	Shares		Amount		Capital			Income (Loss)			Deficit			Total
Balance at December 31, 2022		126,947,225	$	16,419	$	956,711		$	26,018		$	(900,884	)	$	98,264
Share-based compensation expense		—		—		3,512			—			—			3,512
Exercise of share options		332,209		43		(2	)		—			—			41
Vesting of restricted stock units, net of shares withheld for taxes		310,025		40		(206	)		—			—			(166	)
Sale of voting and non-voting ordinary shares, net of allocated issuance costs of $889		56,666,900		7,369		15,704			—			—			23,073
Foreign currency translation		—		—		—			(5,731	)		—			(5,731	)
Unrealized loss on available for sale debt securities		—		—		—			74			—			74
Net loss attributable to ordinary shareholders		—		—		—			—			(17,412	)		(17,412	)
Balance at March 31, 2023		184,256,359	$	23,871	$	975,719		$	20,361		$	(918,296	)	$	101,655
Share-based compensation expense		—		—		2,578			—			—			2,578
Issuance of ESPP shares		455,550		59		110			—			—