Orchard Therapeutics (ORTX): Severely discounted, should you buy?

Orchard Therapeutics (ORTX) is severely discounted, this little known gene editing company and has a game changing technology with the ability to editing, correcting or reinserting a patient’s cells in order to cure them of any disease.

  • Low coverage biopharma gene therapy company trading near 52-week lows despite two assets completing clinical stage trials
  • Company commands the leading and most extensive drugs in the treatment of a basket of rare-diseases and operates in a niche market with massive barriers to entry
  • Promising disease market with potential room for further growth given increase in diagnosis, awareness, and early testing players
  • Consistent positive release of promising data sets on ongoing trials
  • Pending further approval and continued optimistic results, the stock is poised for significant upside potential
  • Operational strategy geared towards refocus on money makers and leaner operations post-restructuring (look at Q1 transcript for the juice)
  • In 2018, ORTX beat out bids from rival companies to acquire GSK’s rare disease portfolio.
  • The CEO attributed the win to a “profound understanding” of the tech and “the expertise to not just bring these assets through development, but all the way through to commercialization.”
  • Over the last two years, ORTX “[has] proven that their technology is effective, safe and durable…One of the scientific co-founders has taken on the CEO role and has initiated a new strategic plan to transition Orchard to a successful commercial stage company.”
  • Operational streamlining and portfolio refocus has given their cash flow position runway through 2022

Orchard Therapeutics (ORTX): The Orchard Platform

The ORTX treatment basically involves removing a patient’s cells, editing/correcting them, and re-inserting them to cure the disease. ORTX has successfully applied this approach to “many mono-genetic diseases, some of which are life-altering and/or life-ending diseases, for which there are no effective treatments.” Basically, the barriers to entry are immense and ORTX has by far the most advanced product in the space.

  1. OTL-200 for Metachromatic Leukodystrophy (MLD)

“MLD is caused by a faulty gene and results in patients missing a critical enzyme. Onset of MLD can happen in infancy, childhood or even adulthood” Nerve fibers breakdown, muscles work poorly, and patients are not able to develop cognitively (symptoms like cerebral palsy)

Patients are vegetative by ages 2-3 and often dead by ages 5-6.

After seeing treated patients, the mother of an MLD patient who was rendered paralyzed, blind and end-stage wrote, ”experts in the field called the results from GSK’s (Orchard’s) clinical trials of gene therapy for MLD “stunning.” Children who should have been unable to talk or walk, who needed feeding tubes and hospice care, were instead attending school and riding bicycles and living remarkably normal lives.

The drug is being hailed as a life-saver and given its potential impact and life-saving effects, pricing can be an incredibly powerful and justifiable.

Competitors for OTL-200

  1. Stem Cells:

Only current treatment available is a stem cell transplant. The therapies may slow the disease but need to be administered early in the process and published literature indicates they carry a meaningful risk of complications. It also shows ineffectiveness in aggressive late-infantile MLD (which is a large proportion of the target market).

  1. Other gene therapy players:
  • Homology Medicines (FIXX) has a gene therapy in preclinical stages for MLD.
  • Takeda (TAK) has an enzyme replacement treatment that is in clinical trials but isn’t scheduled to be approved until 2023. If it proves effective, TAK-611 would be chronically administered, perhaps intrathecally, on a weekly basis. It may be a useful treatment for more advanced patients but it is likely to be expensive, the ongoing intrathecal administration would be burdensome and it is not curative.

Pricing for OTL-200

The pricing is likely to be very high – most comparable is Zolgensma which goes for $2.1M in the United States. However, insurance companies don’t mind paying for two reasons:

  1. It’s extremely rare and consequently the price per member per month is actually very small. It is estimated that insurance coverage for gene therapy adds less than $12 annually to a premium.
  2. It is a single treatment cure so insurance companies don’t have to worry about recurring payments demanded by treatments that could exist in a few years.

Assuming a price of $2,000,000 per patient and 100 patients treated annually (which is conservative given the diagnosis rate is increasing), OTL-200 would provide revenue of $200 million annually (FYI the entire company’s market cap is currently at $500M).

Orchard Therapeutics (ORTX): Upcoming regulatory feedback

EU approval for OTL-200 is expected later this year and launch in the region is planned for early 2021. Plans for filing an IND this year and feedback from the FDA and EMA has been positive with indications that they have more than enough datasets to prove efficacy and safety.

  1. OTL-103 for Wiskott Aldrich Syndrome (WAS)

Wiskott Aldrich Syndrome, another extremely rare disease that impairs immune function and prevents platelets from being properly produced leading to bleeding disorders, has an average life span of 14 years.

Orchard Therapeutics estimates 100-300 births and a prevalence of 3K-5K patients of whom it is estimated that 55 percent are un-transplanted. The CEO, describes it as a slower progressing disease and that patients can be treated in later stages. Because of this, OTL-103 has a better commercial opportunity as there are a few thousand existing patients who could benefit from treatment.

At ~2M per patient price tag, 300 patients treated annually, that’s another $600M in annual sales. Timeline for approval is expected in 2021 by FDA and EMA with commercial launches planned in 2022.

Is Orchard Therapeutics (ORTX) a good investment?

Shares of Orchard Therapeutics (ORTX) appear to be a very good investment option, the Money Midnight Indicator is expecting its price to increase considerably in the next several months. The majority of the metrics point to this investment being highly attractive.

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Tim Rolle
Investor of 6 years and Managing Editor of Money Midnight, a news outlet focused on highly profitable investment ideas and bold underground research.
Articles: 117

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