All right. Afternoon, everybody. Thanks so much for joining me. My name is Matt O'Brien. I cover Med Tech here at Piper Sandler. Very excited to have Orchestra BioMed with us here today. We've got David, who's the CEO and Chairman, I think, of the company.
Yeah.
Then members of management in the audience as well. Thanks so much for coming out here.
Only a few.
Only a few. Yeah. Only a few. So thanks so much for coming out. Really appreciate it.
Yeah. Thanks. We love coming here, Matt.
Of course. So that's great to hear. Maybe start just a little bit with the background of the company. I know you've been public for a little while now, but some in the room, even online, might be a little bit new to the story.
Sure.
We'd love to just talk a little bit about or just have you give us an overview of the business.
Sure. We founded Orchestra BioMed to bring what we think is a fundamental approach to how new drugs are developed to the med tech, med device space, which is really strategic partnering. And our business focuses on driving product development through pivotal clinical evidence in partnership with leading medical device strategics, where they're really much better positioned to do commercialization. So we have a partnership with Medtronic, a partnership with Terumo. Happy to talk about both our products. Under those partnerships, we think we have some of the best commercial organizations already teed up to commercialize our products. We have big revenue shares, so we'll make money alongside our partners over the long arc of value. Better for us, so we don't have to expend huge resources to rebuild what others already have done perfectly well.
Better for them because we protect their P&L and allow them to engage and have access to great growth programs without having to expend the R&D dollars, which is really scarce for these big companies, actually. Real limitation on growth.
Got it. Maybe talk a little bit about the technology as a foundation.
Sure. So we have two flagship programs. Our AVIM, or Atrioventricular Interval Modulation Therapy Program, is a treatment for hypertension that integrates really as firmware into a standard dual-chamber pacemaker, and it is a very potent treatment for hypertension that we are partnered with Medtronic in terms of the first indication, which is treating hypertension in the pacemaker population. Medtronic, as you know, is a dominant market leader in pacing. This is a great overlay to that business, as well as to the business you and I have talked about, that they are launching and growing in renal denervation, but this really treats high-risk hypertension in an existing population. Upwards of 70% of pacing patients have hypertension. They're older patients, and that comorbidity, the most common comorbidity, is really going to be the number one driver of heart attacks, strokes, progression of heart failure.
We're building a new treatment into an existing device. We're now running a pivotal trial. Our other therapy is called Virtue. It is a novel and differentiated sirolimus-based drug-eluting balloon. Here, we're treating both coronary and peripheral artery disease. As you know, the drug-coated balloon space is, I would say, red-hot with Boston Scientific's approval of their paclitaxel balloon. Real paradigm shift in treating coronary artery disease towards drug-coated balloons. Our product gets rid of the coating, delivers the best-in-class drug sirolimus with actually better uptake and elution than you see in a stent. We're excited about moving that into a pivotal trial next year.
So why sirolimus over paclitaxel?
Sirolimus over paclitaxel. Drug-eluting stents have been around for 20+ years. Sirolimus was the first drug that J&J put on the Cypher stent. Boston introduced the next stent with paclitaxel. But then, as those products emerged, huge trials were run. 26 randomized controlled trials. I think upwards of 75 trials that showed definitively that sirolimus had better efficacy and better safety. And it really comes down to what's the drug there for. You use a balloon to essentially open a blocked artery. You do a lot of damage to the tissue in trying to restore vascular blood flow. And so you really want a drug that's managing the healing. And that healing process is about 30 up to maybe 90 days. Sirolimus stops cell proliferation and inflammation while it's present. Essentially, it is a cytostatic drug. Paclitaxel kills cells.
You get the same result, but one does so in a simpler and better way. The data says it is better. However, and so eventually, paclitaxel went away. Every drug-eluting stent in the world is based on a sirolimus drug. Why do we have paclitaxel-coated balloons? Not because the drug is better. But now you've changed the paradigm. You want to have a drug that's on a fragile coating on the balloon. And it goes in for 30-60 seconds. Hopefully, you get enough transfer to the tissue, and it can do its job. Turns out paclitaxel is just much easier to put on as a coating. And so that's been the gold standard. And people haven't really been able to replicate what you need in terms of that long elution of sirolimus with a temporary balloon and a short procedure.
We built a different product to do that. We've demonstrated that both preclinically and clinically, and are ready to move into a pivotal. So we think we have the right drug, hands down. But we had to engineer a very different solution to get the benefits of that drug in a balloon-based procedure.
So for the simpleton that I am, David, talk a little bit about the code you've cracked there on the sirolimus side versus others.
We really focused, actually, and we have an office in New Hope. We focused on the pharmaceutical dynamics, the pharmacokinetics of the drug. We didn't change the drug. We take generic sirolimus. We developed a novel bioabsorbable encapsulation. Our formulation then becomes what we call Sirolimus EFR, extended focal release. Our pharmaceutical team really thinks this is cutting-edge technology that extends both the tissue and the blood half-life of the drug. Most importantly, that drug is an amorphous drug. It's bioavailable. It can be active to be taken up into cells and do its job. That component is critical. How do you facilitate getting a drug into tissue, creating a local depot, and then releasing that drug over time when you don't have a permanent metal implant like a stent to be the platform? We really started with that.
And then what we effectively are delivering is that drug in water, in liquid. And so we re-engineered the device. Instead of having to have a surface coating and the challenge with the surface coating, it's a very difficult engineering challenge. You want a surface coating that can sit on the shelf, but then go in the body and only come off and all come off at the time you inflate the balloon. None of them really do that well. They lose most of the drug in transit. You don't get great transfer. You actually create a lot of particulate. And most importantly, procedurally, the challenge we got to rush because of all that. Ours has no coating. We actually deliver. We use the drug formulation as the inflation medium.
We're delivering it through very precisely engineered holes that allow you to actually do high-pressure angioplasty while protecting the drug and delivering it where you want. So both device innovation, drug innovation. And we're excited, actually. That has a lot of potential to open up both coronary, peripheral, and other indications in the future and potentially have both other applications in the body. So it's a fundamental innovation.
Yeah. I want to get to that in a bit. And it's amazing engineering and development work. But why is this model you've selected, partnering with the bigger providers, the right one? Because you may not get as much attention from reps at another firm versus doing it yourself. Why is this the right model? And maybe just kind of run through a little bit this model, how it differs from others that we're accustomed to.
I think it allows us to focus on being best at what we need to be best at. So it's best at developing the optimal technology, so that fundamental R&D. And then most importantly, being best at execution of studies. At the end of the day, it's about having the clinical evidence. So our organization, relatively small, about 70 people, are people that have spent their whole career doing those things and have the continuity to be thinking about doing that as well as possible into the future, doing it without having to think about, "Wait a minute. Do I need to find another job in two years? Are we going to transition the organization now to focus on sales?" We focus on that. And we then allow our partners to be at the table. And a lot of times, big companies, let's just go back to that fundamental question.
The average R&D spend for large med tech annual is 7% of revenue. Compare that to pharma, where it's 20%. So Medtronic, our partner, has to work within the constraints. They're a little bit higher spend, about 8%, and make bets to try and grow their business, same with all of their peers. And so what we're allowing them and our other partners to do is be at the table with us, but leverage an organization that is passionately committed to getting the best data, taking their input, shaping it to their standards, and then have a planned handoff of responsibility at the time of data. They can integrate into their quality system. They can plan commercialization. But we've protected the P&L while allowing to get the best of both worlds. And so we think it's a model that has great legs. We're proving it.
The best flattery will be eventually you have another company up here saying, "Oh, we're following in Orchestra's footsteps." But we think that's really the best part of what we do.
Got it. OK. And what about economically? Maybe just share that a little bit once we get to commercialization.
We found programs where we can align with partners that we're going to drive significant growth for them, but within structures where we're not going to hurt their margins so we can have a big revenue share. For example, assuming no change to the reimbursement for a pacemaker, an AVIM-enabled pacemaker, Orchestra will make between $500- $1,600 on every device Medtronic sells in the future. We have a big stake. Medtronic can do that in a way where they can grow their existing dominant business. They hopefully can improve their margins while we're still sharing that revenue. Similarly, with our Terumo partnership, we have an up to 15% net sales royalty, and we supply the drug. Big stakes that can be impactful for Orchestra.
We really think we can build a phenomenally profitable business and a top-line growth that's oftentimes in the same league as some of the emerging growth companies you cover. But at the same time, these are going to be very impactful programs to our partners. So we focus on big ideas, big impact, big markets, where, to your other question, Medtronic, Terumo are always going to do better than a startup company, we think, in leveraging these technologies in a portfolio where they have strong relationships and have been there for years and years and years. So that's our view.
OK. Maybe talk a little bit more about the benefit to Medtronic as far as BackBeat goes. What do they really, I mean, they've already got dominant share. Are they going to be able to charge more for this thing? Are they going to be able to get paid more for this AVIM-enabled system? How's that going to look for them?
So yes and yes. Certainly, so Medtronic has a phenomenal pacing business. And they're doing a lot of things to make that business even better. They've led innovation in conduction system pacing, which is taking over transvenous pacemaker systems, probably more importantly, leadless, making the devices safer, opening up ways of using these devices for new therapies. What AVIM, though, does is makes that same device, without changing the procedure, without changing even initially the patient population, able to treat the number one comorbidity that drives morbid and mortal events in these patients. So we think we can allow Medtronic to do better for their patients, better for their existing customers, have something, by the way, that we've built a patent portfolio that is approaching 120 issued patents, the live, refreshing portfolio that we have exclusively licensed to Medtronic for the pacemaker population.
So have something that their competitors don't have, maybe for many years, that allows them to charge more, gain market share while doing a lot of good for the market. So we think it's a phenomenal partnership. And it's something we're proud to be doing together with Medtronic.
Got it. OK. Maybe talk a little bit more about the trial enrollment on BackBeat. How are things progressing in terms of enrollment and any way of accelerating that, especially given how busy our companies are?
Sure. We just provided an update on that. But I think I want to first talk about the construct of the market and kind of what we see as the addressable market. This is a therapy that can be activated in the device programmer, in an implant that is going to be in the patient usually for eight, 10, 12 years. Some patients will get to maybe even three. So what's important about thinking about the therapy is the decision to buy an implant, an AVIM-enabled pacemaker in the future, will be a 10-year decision. You get paid for and you get reimbursed for the implant. So it's important to note that while you have a 10-year decision, 70% of the patients, it's really that therapy could do good for the patient out of the gates or maybe six months or 12 months or two years later.
So we think there's a very attractive market, which is really the whole hypertensive pacemaker market. The trial goes different. We're the first to have developed this therapy. We and Medtronic are embarking on a trial where we have to enroll patients that have hypertension, meet the inclusion criteria, are at the. We'll eventually have up to 100 centers at the selection of centers we have. And so we learned very quickly. We followed a construct used previously to do a download into implanted devices. We started with just having 90 days after the pacemaker implant. And we went pretty quickly to the FDA and said, hey, we think the practical use of this therapy should allow us to look at a longer window. So we now have implemented up to a year, both looking forward and backwards, to find the patient when they have uncontrolled hypertension despite medical therapy.
And so we've made some changes that we announced just recently just to make sure we can embark on this study and effectively enroll. It's a pretty big study, 500 patients, one-to-one randomized. So we've learned. We've adapted. We're really deploying ours and Medtronic's resources thoughtfully and aggressively. Our target is to try and get the trial done in 2025. And we're looking at how those changes are going to impact our timeline. This will be a big undertaking. But it'll be landmark and open up that opportunity once again to have a therapy that we think a physician and a patient is a very compelling decision. We have the kind of efficacy. And we're talking about over 10 millimeters of ambulatory systolic blood pressure, data out in patients out to four years, no compliance or adherence issues because it's running in the background.
Those are the big problems for these patients. There are lots of drugs. Maybe the drugs will work. Can they stay on the drugs? Can they tolerate the drugs? If you don't, that's when your blood pressure moves into dangerous territory. We think we are doing the hard work that leads to what could be a transformational big launch for essentially an existing market with a big problem.
How de-risked do you think it is to get a good outcome in this study? Just because I know we've seen data before. Is this all comers? Are there any risks of some subtleties to the data?
Our study is thoughtfully designed. But we're trying to be as inclusive as possible. We did exclude some patients, for example, symptomatic heart failure. Frankly, we didn't do a lot of good for those patients. Being thoughtful about the patient population, we do think the inclusion criteria opens up as much as half of the pacemaker population. Finding them at the right time is obviously what we're focused on. But this mechanism of AVIM is very clear. And the data we have to date is also very clear. We drop blood pressure on beat one. Those drops in blood pressure tend to be double-digit. They are durable. And it's interesting. The therapy to get in the trial, you need to be set up. All patients get set up with the therapy. We need to have a threshold effect of at least five millimeters to qualify.
So a lot of confidence that we're going to have patients, A, responders, then turn off the therapy. And you have a true double-blind randomized study. But a belief that this really should drop blood pressure significantly in the majority of patients. We believe in the efficacy. And we're going to see it pretty quickly. It's a three-month endpoint after we enroll the study. The safety is also looking at a 70-year history of what we know to be the anticipated events. And these are older patients. They have events. What we're looking for is, is there a signal from AVIM that's unanticipated? We've treated nearly 100 patients, long-term follow-up. We're fairly confident in the safety profile. And that last point about conduction system pacing, frankly, that's a very complementary element, once again, to Medtronic's driving that has made it a great time to be doing this trial.
Physician enthusiasm about an active pacing therapy combined with doing conduction system pacing is really an optimal time. So we feel confident. We feel confident in the efficacy, the safety, and the outcome. And we just have to do the work to bring the patients in.
Perfect. Got it. What about the reduction in pressures? I'm trying to remember back to some of the other studies on other technologies. Is that the best pressure reduction that we've seen across the space? Maybe there was one that was 12 or 13. But.
Consistently, we've seen double-digit reductions in ambulatory systolic blood pressure.
And that's important, too, right? This is not an office-based test. This is ambulatory versus.
You see consistency in the MODERATO II trial, which was our pilot. Think of it as our phase II double-blind randomized study. We saw an absolute effect in treated patients of 11 millimeters. It was statistically significant, superior to control by over 8. It was 12 millimeters in office. So, seeing a very consistent effect. The effect actually got better out to two years, and the safety looked really great. So we are motivated and excited because we think we have something that really can work well for patients. There's a lot of things coming in hypertension drugs, and we're big believers. You and I have talked a lot about what I believe to be a business that would be successful in renal denervation, but this is an implant. It's active. It's potent, and it is for these older, high-risk patients.
We think we can do a lot of good for them.
Do you think we can get approval in the first half of 2027?
I think if we execute like hell, it's possible. We have not made any guidance prognostications about approval. It's something we're going to work closely with Medtronic on. And the goal is obviously to run the right study, get the right data, do so efficiently, and empower Medtronic with that data to get a regulatory approval for the broadest indication and allow them to commercialize. No company is better positioned to take that approval and then run with it. And that's what we're excited about.
OK. Understood. Appreciate that. What about Virtue? And this is the sirolimus-eluting product that Dave was talking about earlier. But should I be worried about Terumo and not getting this agreement done? I know it's been ongoing for a while. It just makes me a bit cautious.
Fundamentally, we believe we have the best-in-class product. I think the biggest thing to worry about is we've demonstrated a commitment to getting this product into position. We're not going to be first to market, but we are confident that we can be best. Terumo could be a great partner. They've gone through significant leadership changes, and as we've said publicly, we're looking to restructure some financial elements. We're committed to the program. We're confident we're going to be in a pivotal trial next year, and we're optimistic that we're going to get a great result with the partnership. Unequivocally, if we can align with Terumo, we think they're great options and alternatives, but we're actively engaged with them, and frankly, they're really well -positioned, particularly in the most valuable market here in the US. They are in most cath labs with great premium-priced products.
And they don't have a competitive product like this. This would be a flagship. So we're optimistic. But at the end of the day, part of the risk of this business is both technology and our execution. But making sure we need to have motivated, aligned partners. And if we don't have that, we're going to make sure we go out and get it. So we're hoping to have a great outcome with Terumo. But we're committed to the program and really excited about what's going to come.
And just back to BackBeat for a second. If there is any kind of turnover at the, I'm not sure, CVG you're working with, people there at Medtronic. But if there's turnover across the leadership there, is that another risk that things slow down on the BackBeat side?
There's some friends of Medtronic here in the room. The reality is we've experienced turnover.
But they're all in. They're committed.
We have gone from team members already. And we've built deep relationships. There is great collaboration that is very active at big companies, small companies. I'm not looking for any turnover in my role. But there is always changes. This program, I think, has great reason for them to stay committed. And we've already experienced some of it. So it's something we know how to adapt to. We've experienced it at Terumo, too. It is something that is a risk in our business. But frankly, if we build these partnerships and manage them the right way, it's a strength.
Understood. What about an update on the Virtue program?
We believe we have things to say in the early parts of next year. We have watched carefully how Boston did a great job of executing their AGENT study. Great job of getting approval. I think they had some stumbles or there were some challenges in getting the pass-through payments. But it looks like that came in place, and everything we've watched this very carefully is they're going to have. I know you cover it. But they're going to have great success. They have a monopoly for a few years. There's competitors coming, including Medtronic and other companies. But here, our view is that there's little differentiation amongst the coated balloon products. They're going to do better for patients than what else out there. Virtue is really designed, as we said, to have the best drug delivered in the best way with the best solution profile.
Let's talk about clinical results. The main result is target lesion failure. Did you need to reintervene? Generally, these studies look at one year. Did you need to reintervene or did the patient have an adverse event? Boston's data showed overall about a TLF around 18% versus in the mid-20s overall for POBA. So better. Statistically significantly better. But still, if you're a patient, one in five patients is essentially going to be a failure. When we looked at just one layer stent, they had about 13.5% TLF. Our pilot study with Virtue was 2.8% in a comparable population. So the best data that we've seen. So are we going to have that result in the pivotal? I'm not promising that. But do we believe that the differentiation in our technology offers a chance to have better data? We believe that's there.
We believe our study will allow us to show that once we go through it. And we've been working hard on thinking about the best study to run. So that'll be our first update in 2025, the study we're going to run and get it underway. But interventional cardiology, probably more than any market in medical device, moves based on data and moves quickly. And so our view is we will have a great partner. Terumo can certainly do this. That can take advantage of data to move market share. And that's our belief that we have a technology that can drive that.
Got it. OK. And last one here in the last 30 seconds or so. Just talk maybe a little bit. I was going to save this for Andrew. But just talk a little bit about the balance sheet, where you guys stand today, and then what's needed to get you to the point of commercialization.
Sure. So balance sheet as of the end of last quarter was just under about $80 million. We have some inflows that we assume from our Terumo partnership as well as from one with some exciting data, TCT, on a closure device we helped develop that Haemonetics is expected to buy called PerQseal. So including those expected budget items, we expect cash to carry us currently into mid the second half of 2026. There's obviously some things that have to go our way. But we think we're well-financed to execute in the plan ahead and really focus one of the parts of this business is focusing our strategic partnerships to be the primary way that we move the company forward. We've been not active as a public company in the capital markets. Certainly, we have those options. We're more interested in seeing investors come in through open markets.
At the moment, we're well-capitalized to do what we need to do. And the business design is designed to be capital efficient, to get to a point where at this inflection point, we hand off expense and hopefully begin to see significant royalty cash flow. We still believe that's one of the things that makes this business particularly attractive to investors, the idea that they can see a turn to profitability quickly. At the same time, there's tons of opportunity for us out there. This business model solves problems that are endemic to the industry. And so we hope to be in a position to layer on more opportunity thoughtfully in the future.
Got it. OK. All right, Dave. I think we're over time here. So we'll have to cap it there. Thanks so much for all the feedback today. Appreciate it.
Matt, thanks for having me. As always, great questions.