Orchestra BioMed Holdings, Inc. (OBIO) is a biomedical innovation company that is revolutionizing the way cutting-edge medical technologies are brought to patients. Through its unique partnership-enabled business model, Orchestra BioMed is steadfastly accelerating the development and commercialization of its flagship product candidates - atrioventricular interval modulation (AVIM) therapy and Virtue Sirolimus AngioInfusion Balloon (Virtue SAB) - targeting the treatment of hypertension and atherosclerotic artery disease respectively.
Company Background
Orchestra BioMed Holdings, Inc. (formerly known as Health Sciences Acquisitions Corporation 2) was formed in 2020 as a special purpose acquisition company with the purpose of entering into a merger, amalgamation, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses or entities. The company's predecessor, Orchestra BioMed, Inc. (Legacy Orchestra), was incorporated in Delaware in 2017 and completed a recapitalization and mergers with Caliber Therapeutics, Inc., BackBeat Medical, Inc., and FreeHold Surgical, Inc. in 2018. Legacy Orchestra completed the conversions of these entities to limited liability companies in 2019.
Caliber Therapeutics, Inc., incorporated in 2005, began development of its lead product Virtue Sirolimus AngioInfusion Balloon (Virtue SAB) in 2008. BackBeat Medical, Inc., incorporated in 2010, initiated development of its lead product atrioventricular interval modulation (AVIM) therapy that same year. FreeHold Surgical, Inc., also incorporated in 2010, began development of its hands-free, intracorporeal retractor device for minimally-invasive surgery in 2012.
In January 2023, Orchestra BioMed Holdings, Inc. consummated the business combination with Legacy Orchestra, with Legacy Orchestra surviving as a wholly owned subsidiary. This transaction was accounted for as a reverse recapitalization, with Legacy Orchestra treated as the acquirer for financial reporting purposes.
Strategic Partnerships
In June 2019, Orchestra BioMed entered into a landmark agreement with Terumo Medical Corporation, securing global commercialization rights for its Virtue SAB product. Under the terms of the $30 million upfront deal, the company is responsible for completing the development of Virtue SAB to support premarket approval by the FDA for the in-stent restenosis (ISR) indication, while Terumo holds exclusive global commercialization rights.
More recently, in June 2022, Orchestra BioMed announced an exclusive license and collaboration agreement with Medtronic, Inc. for the development and commercialization of its AVIM therapy for the treatment of pacemaker-indicated patients with uncontrolled hypertension. Medtronic will be responsible for the global commercialization of AVIM-enabled pacing systems following regulatory approvals, while Orchestra BioMed sponsors the pivotal study to support regulatory approval.
These high-profile partnerships have been instrumental in advancing Orchestra BioMed's product pipeline while minimizing the company's financial risk and capital requirements. By leveraging the resources, expertise, and commercialization capabilities of industry leaders like Terumo and Medtronic, Orchestra BioMed is able to focus its efforts on the critical task of driving its novel therapies through the regulatory process and towards the market.
Liquidity
As of September 30, 2024, Orchestra BioMed had $25.6 million in cash and cash equivalents, as well as $41.3 million in short-term marketable securities. This liquidity, combined with the potential future proceeds from its partnership agreements, is expected to fund the company's operations into the second half of 2026, based on current internal projections.
The company's debt-to-equity ratio stands at 0.039, indicating a relatively low level of debt compared to equity. Orchestra BioMed's current ratio of 4.23 and quick ratio of 4.21 further demonstrate strong liquidity positions.
In November 2024, the company entered into a $50 million secured term loan facility with Hercules Capital, Inc., with an initial tranche of $15 million drawn down. The loan has a floating interest rate equal to the greater of (i) the Prime Rate plus 2% and (ii) 9.5%, and is repayable over a 4-year period with an initial 2-year interest-only period. This additional financing further strengthens the company's liquidity position and provides flexibility for future operations and development activities.
Challenges and Opportunities
While the company has made significant strides in progressing its lead programs, it continues to navigate a challenging operating environment. The COVID-19 pandemic, supply chain disruptions, and regulatory hurdles have impacted the timelines for both the Virtue SAB and AVIM therapy development programs. As a result, Orchestra BioMed has been unable to achieve certain milestones under the Terumo agreement, potentially jeopardizing future milestone payments.
However, the company remains committed to resolving these issues through ongoing negotiations with Terumo aimed at restructuring the partnership agreement. Additionally, the commencement of the BACKBEAT global pivotal study for AVIM therapy in January 2024, alongside Medtronic, represents a critical milestone that could pave the way for eventual regulatory approval and commercialization.
Financials
In the third quarter of 2024, Orchestra BioMed reported revenue of $987,000, a 136% increase compared to the same period in the prior year. This was driven by a 196% increase in partnership revenue related to the Terumo agreement, partially offset by a 24% decrease in product revenue from the company's FreeHold Surgical subsidiary. Net loss for the quarter was $15.4 million, or $0.41 per share, compared to a net loss of $13.3 million, or $0.38 per share, in the third quarter of 2023.
For the nine months ended September 30, 2024, Orchestra BioMed reported revenue of $2.4 million, a 5% decrease compared to the same period in 2023. Partnership revenue declined by 4% to $1.9 million, while product revenue decreased by 5% to $457,000. The company's net loss for the nine-month period was $44.9 million, or $1.23 per share, compared to a net loss of $36.3 million, or $1.11 per share, in the first nine months of 2023.
For the fiscal year 2023, Orchestra BioMed reported annual revenue of $2.76 million, with a net loss of $49.12 million. The company's annual operating cash flow was negative $46.13 million, and annual free cash flow was negative $46.21 million.
Orchestra BioMed operates in two main product segments: Partnership Revenues and Product Revenues. The partnership revenues primarily relate to the Terumo Agreement, under which the company has recognized $14.5 million in cumulative partnership revenues through September 30, 2024. The company is eligible for up to $65 million in additional milestone payments upon the achievement of certain development and regulatory milestones, as well as royalties on future sales by Terumo ranging from 10-15%. However, due to delays in the Virtue SAB program, Orchestra BioMed has already missed the target achievement dates for three $5 million milestone payments and is unlikely to complete the remaining time-based milestones to earn the additional $20 million in milestone payments.
The Medtronic Agreement, while not yet generating revenue, provides for potential future income based on device sales. Orchestra BioMed will receive between $500 and $1,600 per AVIM therapy-enabled device sold based on a formula.
Product revenues, generated from the sale of FreeHold's intracorporeal organ retractors, have remained relatively stable but make up a smaller portion of Orchestra BioMed's total revenues. For the nine months ended September 30, 2024, product revenues were $457,000, a decrease of 5% compared to the same period in 2023.
Outlook
Despite the challenges faced, Orchestra BioMed remains steadfast in its commitment to advancing its innovative product candidates. The company's partnership-enabled business model, combined with its robust pipeline and experienced leadership team, position it well to capitalize on the growing demand for novel treatments in the cardiovascular and medical device sectors.
As Orchestra BioMed continues to navigate the complexities of the regulatory landscape and operate in a dynamic market environment, investors will closely monitor the company's ability to execute on its strategic priorities, achieve key milestones, and secure additional partnerships that could drive long-term value creation. The outcome of the ongoing negotiations with Terumo regarding the Virtue SAB program, the progress of the AVIM therapy program with Medtronic, and the performance of the FreeHold product line will be critical factors in determining the company's future revenue growth and path to profitability.
The recent secured term loan facility with Hercules Capital provides additional financial flexibility, which may help support the company's ongoing development efforts and operational needs. As Orchestra BioMed moves forward, its ability to leverage its partnerships, advance its clinical programs, and efficiently manage its resources will be key to realizing the potential of its innovative medical technologies and creating value for shareholders.