Orchestra BioMed Holdings, Inc. — Q1 2024 10-Q
Reporting period: Three months ended March 31, 2024; balance-sheet comparisons are to December 31, 2023. The unaudited results are for a development-stage biomedical company whose revenue is primarily partnership-related and whose product candidates are not yet commercialized.
Financial performance and liquidity
| Metric | Q1 2024 | Q1 2023 / prior date |
|---|---|---|
| Total revenue | $0.62 million | $1.16 million; down 47% |
| Partnership revenue | $0.50 million | $1.02 million; down 51% |
| Product revenue | $0.12 million | $0.15 million; down 15% |
| Research and development expense | $9.11 million | $8.25 million; up 10% |
| Selling, general and administrative expense | $5.90 million | $4.41 million; up 34% |
| Operating loss | $14.42 million | $11.55 million |
| Net loss | $13.46 million | $10.94 million |
| Basic and diluted loss per share | $0.38 | $0.40 |
| Net cash used in operating activities | $13.11 million | $14.38 million |
Product gross margin was approximately 72% (revenue less product cost of revenue); this excludes the substantial research and development and corporate costs. Interest income was $1.02 million, up from $0.89 million, mainly reflecting returns on investments and the absence of loan interest expense in 2024.
At March 31, cash and cash equivalents were $23.32 million and marketable securities were $51.69 million, totaling $75.02 million, versus $87.53 million at year-end. Net loss was $13.46 million and accumulated deficit was $262.32 million. The company reported no outstanding debt; its former $10 million loan was repaid in October 2023. Operating lease liabilities totaled $1.62 million. Deferred revenue was $16.94 million, including $3.07 million current.
Material changes and business developments
- Revenue declined as Terumo-related partnership revenue recognized from the upfront payment fell, and FreeHold retractor sales decreased.
- R&D expense rose $0.86 million, with increased clinical and program costs partly offset by lower non-clinical development costs. SG&A rose $1.49 million, including increased stock-based compensation and public-company professional fees.
- Operating cash use improved year over year, but cash and marketable securities together declined by $12.51 million from December 31. Investing cash flow was $5.86 million, primarily reflecting net marketable-security maturities; financing cash flow was $0.02 million.
- The company began enrollment in its BACKBEAT pivotal study in January 2024 and says it is prioritizing spending on the AVIM therapy program.
Outlook, risks and unusual items
- Management estimates available cash, cash equivalents, marketable securities and potential future proceeds could fund operations into the second half of 2026. This estimate depends on clinical spending, program progress and potential partnership or other proceeds; management cautions that additional financing or earlier cost reductions may be needed. It concluded resources were sufficient for at least one year after issuance of the financial statements.
- The Virtue SAB ISR-US pivotal study has been delayed pending changes to the Terumo agreement that provide satisfactory additional capital and review of the study design following FDA approval of a competing paclitaxel-coated balloon. The filing says three $5 million time-based milestone target dates had passed without achievement and the company is unlikely to meet remaining time-based targets for $20 million. Milestone consideration is excluded from the recognized transaction price; future payments are uncertain.
- Terumo negotiations may not conclude on mutually acceptable terms, potentially further affecting Virtue SAB development and commercialization. Deferred Terumo revenue is expected to be recognized through an estimated 2029 completion date, subject to changes in program timing and cost estimates.
- Medtronic has exclusive commercialization rights for AVIM-enabled pacemakers after regulatory approval; Orchestra funds the pivotal study and reimburses certain Medtronic development costs. No Medtronic revenue had been recognized through March 31, 2024.
- The company identifies clinical, regulatory, manufacturing, financing, reimbursement, intellectual-property and commercialization risks. It reported no material legal proceedings, no material change in previously disclosed risk factors, and effective disclosure controls as of March 31, 2024.
- A resale registration statement covers approximately 18.6 million shares, about 52% of shares outstanding as of May 1, 2024. The company warns potential selling pressure could affect the stock price and make equity financing more dilutive. Potential warrant proceeds are excluded from liquidity plans because many warrants are out of the money.
Most important facts for investors to verify
- Progress, enrollment and spending for the BACKBEAT pivotal study, and the clinical and regulatory path for AVIM therapy.
- Whether Orchestra and Terumo reach a revised agreement, the resulting funding terms, and the revised Virtue SAB study design and timetable.
- Quarterly cash burn and the assumptions underlying the stated runway into the second half of 2026, including any anticipated partnership proceeds.
- Changes in R&D and SG&A spending, revenue recognition estimates, and the timing of recognition of the remaining Terumo deferred revenue.
- Potential dilution and stock-price pressure from registered resales, outstanding equity awards and warrants.