Orchestra BioMed Holdings, Inc. (OBIO) is a biomedical innovation company that is accelerating high-impact technologies to patients through risk-reward sharing partnerships with leading medical device companies. The company's partnership-enabled business model focuses on forging strategic collaborations with leading medical device companies to drive successful global commercialization of its products.

Business Overview

Orchestra BioMed was formed in 2018 by assembling a pipeline of multiple late-stage clinical product candidates originally developed by its founding team. The company's lead product candidate is BackBeat Cardiac Neuromodulation Therapy (BackBeat CNT), also known as Atrioventricular Interval Modulation Therapy (AVIM therapy), for the treatment of hypertension (HTN), the leading risk factor for death worldwide. Orchestra BioMed also has an exclusive license and collaboration agreement with Medtronic, Inc. for the development and commercialization of AVIM therapy for the treatment of HTN in patients indicated for a cardiac pacemaker.

In addition to AVIM therapy, Orchestra BioMed is developing the Virtue Sirolimus AngioInfusion Balloon (Virtue SAB) for the treatment of atherosclerotic artery disease, the leading cause of mortality worldwide. The company has a strategic collaboration with Terumo Medical Corporation (Terumo) for the development and commercialization of Virtue SAB for the treatment of coronary and peripheral artery disease.

Since its inception, Orchestra BioMed has devoted the substantial majority of its resources to performing research and development and clinical activities in support of its product development and collaboration efforts. The company has funded its operations primarily through the issuance of convertible preferred stock, proceeds from the Business Combination, as well as through proceeds from its distribution agreement with Terumo, borrowings under debt arrangements, and, to a lesser extent, from product revenue from its subsidiary, FreeHold Surgical, LLC.

Financials

As of March 31, 2024, Orchestra BioMed had raised a cumulative $166.8 million in gross proceeds through the issuance of convertible preferred stock and $70.0 million in gross proceeds from the Business Combination. The company has also received $30.0 million from the Terumo Agreement through March 31, 2024.

Despite these funding sources, Orchestra BioMed has incurred net losses each year since its inception. The company's net losses were $13.5 million and $10.9 million for the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, the company had an accumulated deficit of $262.3 million.

In terms of quarterly performance, Orchestra BioMed reported revenue of $620,000 for the three months ended March 31, 2024, compared to $1.16 million for the same period in 2023. The decrease in revenue was primarily due to a 51% decline in partnership revenue, which was partially offset by a 15% decrease in product revenue.

The company's research and development expenses increased by 10% to $9.1 million for the three months ended March 31, 2024, from $8.3 million in the same period of 2023. This increase was primarily driven by higher personnel-related expenses and increased clinical development costs to support the advancement of the BACKBEAT pivotal study and the planned Virtue SAB pivotal study.

Selling, general, and administrative expenses increased by 34% to $5.9 million for the three months ended March 31, 2024, from $4.4 million in the same period of 2023. This increase was mainly due to higher stock-based compensation and an increase in accounting, finance, legal, investor relations, and public relations expenses related to the company's growth and public company status.

Liquidity

Orchestra BioMed's cash, cash equivalents, and marketable securities totaled $75.0 million as of March 31, 2024, providing the company with sufficient liquidity to fund its operations into the second half of 2026, based on its current estimates. However, the company's ability to continue funding its operations is dependent on various factors, including the cost and pace of its clinical studies and research and development activities, the strength of results from its clinical studies and other research, development, and manufacturing efforts, as well as the potential receipt of revenues or other payments or investments under a restructured Terumo Agreement, the Medtronic Agreement, and/or future collaborations.

Outlook

Regarding the company's outlook, Orchestra BioMed has prioritized planned spending on its BackBeat CNT (AVIM therapy) program and the execution of its BACKBEAT pivotal study, for which it announced the commencement of enrollment on January 8, 2024. The company has also reduced its 2024 planned spending related to its Virtue SAB program and the execution of its Virtue ISR-US pivotal study, for which it announced conditional IDE approval from the FDA on August 8, 2023. However, the initiation of the Virtue ISR-US pivotal study has been delayed until the company can restructure its partnership agreement with Terumo in a manner that provides it with a satisfactory amount of additional capital.

In terms of geographic breakdown, Orchestra BioMed's product revenue is currently generated solely in the United States from the sale of FreeHold's intracorporeal organ retractors. The company's partnership revenue, on the other hand, is derived from its Terumo Agreement, which covers global development and commercialization of Virtue SAB.

Looking ahead, the successful execution of Orchestra BioMed's clinical studies, the potential restructuring of the Terumo Agreement, and the realization of future revenues or investments from its partnerships will be crucial in determining the company's long-term growth and profitability. Investors should closely monitor the company's progress in these areas, as well as its ability to manage its operating expenses and maintain a strong liquidity position to fund its ongoing operations and development activities.

Conclusion

Overall, Orchestra BioMed's focus on accelerating high-impact medical technologies through strategic partnerships, its promising product pipeline, and its experienced management team make it a compelling investment opportunity in the biomedical innovation space. However, investors should also be mindful of the company's history of net losses, the risks associated with the development and commercialization of its product candidates, and the potential challenges it may face in securing additional funding and restructuring its Terumo Agreement.