Won't do it. I won't do it.
Mark Van.
All right. Morning, everybody. Thanks for joining us. My name is Matt O'Brien. I'm one of the med tech analysts here at Piper. Extremely pleased and excited to have Orchestra BioMed with us. A story that I continue to think is underappreciated and not as well understood as should be understood. From the company, we have Dave, who's the CEO of the company. I see Darren and Andrew in there in the room as well. So thanks for coming out. Really do appreciate it.
My pleasure.
I guess for starters, Dave, like you've been really busy. There's been a lot of news flow. Maybe just talk a little bit, just for starters, about, you know, the recent raise.
Mm-hmm.
What that enables for Orchestra, and kinda what you pulled off by that raise. What's included in the, you know, as far as the rights go and what's not included.
Sure. Well, since early August, we've brought in about $150 million in capital and capital commitments and there were four components, so it is a little complicated. All at once in August, we announced three transactions: two strategic and our first underwritten public equity offering, which Piper actually was our lead underwriter. The three components in total were about $118 million, a little under $118 million. We had the green shoe, which was completed subsequently. Medtronic, our strategic partner for the AVIM therapy program, was a major component of that, so Medtronic made an additional equity investment at the same terms of the public equity deal of around $12 million, but also made an additional commitment to a novel structure of $20 million, which we'll take down in Q2 of next year.
It'll be debt, very favorable terms, no current interest payments as a five-year term, but automatically converts on approval of the of AVIM therapy for the first indication to a credit against the royalty payments. For those of you who don't know the company, our company is focused on being an innovation partner to industry. We have developed two lead programs. AVIM therapy is our is one of those programs, and Medtronic is our strategic partner. The therapy is a treatment for hypertensive heart disease that is delivered entirely by a pacemaker, and in our partnership with Medtronic, we have a substantial revenue share interest in sales of devices that include our therapy, so this financing essentially means we'll still book all that revenue, but we'll credit back 15% of it until Medtronic gets 2X or $40 million total, so we think it really reflects their commitment to the program.
Cost of capital very attractive for the company. The second component of the financing was a new strategic capital relationship with Ligand. Ligand has really become a smaller, but really impactful royalty pharma-like model. Ligand's been around for many years. We know the company. We actually share Jason Aryeh as a board member. Ligand's business model is to support high-impact programs, mainly pharmaceutical programs. So I put in capital work to buy a royalty-based interest in those products. And so our partnership with Ligand covers them buying an interest in both AVIM and Virtue. They've committed $35 million in capital for the royalty part. We took $20 million, and then another $15 million will come in really around the same time as the Medtronic payment. And essentially, they buy an interest in the revenues. Starts a little higher.
It's a low double-digit number on our first $100 million in revenue and drops to only 4% of our revenue going forward. They're really betting on both the long-term success of AVIM therapy and Virtue. So they put in $5 million of equity as well. So you have a total there of over $70 million that came in from strategic investors that have a long-term focus on our products. And then we raised about $46 million in equity. A few months later, we've talked about this in past meetings. We clarified our relationship with Terumo, and that brought another $30 million into the company, upfront payment of $10 million. We changed the deal to a right of first refusal deal on our coronary product.
And they also bought a novel equity structure, a convertible non-voting equity structure that'll convert in the future at a minimum of $12 a share, where the stock currently trades just under $5. So, a lot of capital, four novel deals, and I think it showcases our ability to continue to think outside and operate outside the box, you know, be able to do complex things that we can actually converge, all around the same time. And really proud of the team. Really great to work with those partners. And just a shout-out to our CFO here. The accounting of some of these transactions is truly novel, and we were really happy to be able to communicate that in our recent filing, that we have a good handle on the accounting. And happy to answer any questions there.
The organization is just, you know, operating on all cylinders in terms of its ability to bring in capital on terms that are really favorable to our investors. The amount of dilution that our investors took for that amount of capital was really quite modest. And it really empowers us to go finish our key work on both our trials.
Got it. Do not expect any accounting questions from me.
Okay.
My wife's the accountant. She takes care of all that stuff. So the thing that's interesting to me, Dave, is Medtronic makes total sense. Their interest, Terumo, total sense. Ligand is kinda out of left field to me anyway, because to your point, they're typically on the, the biotech side of things. What did they see, and what is kinda new that kinda helps validate what you're doing versus what some people may have, may have thought here, given that Ligand is now involved?
I think the best shout-out I'd give to Ligand is they're really one of the inspirations for Orchestra BioMed. Ligand transformed themselves over the last 15 years from more traditional biotech to a biotech that has royalty interests and royalty engines across a range of different products. And when we founded this company, our core thesis is, how do we take business approaches that have been empowering and enabling of drug development, really partnerships and approaches where innovators like us can participate in the long commercial value through a royalty structure and apply those in the med tech space? Ligand was one of the businesses we studied. And actually, we recruited Jason Aryeh to our board so we could learn more about that business and over time met a lot of the Ligand people. So we had some relationship there.
Fundamentally, Ligand's looking for the best opportunities. They actually are really well capitalized, very active, and I think, you know, one of the challenges for them in med tech is emerging growth med tech companies, as exciting as they might be, oftentimes are really spending most of their effort on commercialization. What Ligand saw in us is not just, you know, two really impactful therapies in two of the largest cardiovascular markets, but because of our business model, they were able to look at Medtronic as we're betting on Orchestra and its technology, but really Medtronic and its market leadership for commercialization and take a slice of what was already structured as a significant, well-thought-through revenue share, and so I think it really reflects one of the best investors in biotech, looking at our business and saying, "These are really powerful assets.
They have thoughtfully been structured and are at a key inflection point in development." And frankly, they took advantage of a great timing. They were well capitalized. We were. We needed a partner that was betting on the long term as we are. And I think they got a great transaction. So did we. I mean, frankly, that's a great deal, and both parties came away really happy. And I think having them as both a shareholder and committed long-term partner has already been an asset. We had to take them through substantial diligence, and our interactions since are always really constructive. And so I think it's a great full circle to learning about them, but now having them as a partner is something we're really proud of.
Yeah. Absolutely. And again, it helps validate what you're doing. You mentioned, you know, the long term. We're seven months away-ish until you complete the AVIM study. It's a three-month follow-up, right?
That gives you a very specific date. Our window of it's a little wider than that, but okay.
Could we see any data by the end of next year?
I think we could, and if it's not the end of next year, obviously, it's a big study, so pulling the data out of the database, cleaning the data, finding the best way to communicate that data, which we'll do collaboratively with Medtronic, is something we'll do thoughtfully. We think it's gonna be maybe the most important milestone in our company's history, so late next year, early the following year is probably the window we're looking at. Really excited about the progress we've made on the trial. You know, we had a lot to learn with the best partner we could have. How do you overlay a powerful novel therapy into one of the longest established, you know, procedures and device procedures that we have in med tech, and we've done that, and the trial really is cranking quite effectively.
So yeah, I think the next big milestone for us is ultimately gonna be that, that data.
Got it. And so what are we looking for in that data?
Yeah.
I think it's efficacy. I think it's safety. The MODERATO II study was really, really good.
Yep.
Really positive. This has powered, you know, to be a bigger study. Why would there be a big delta between what we saw in MODERATO II and what we get here?
You would hope if there's a delta, it's better.
A positive.
Yeah. Let's go through what, what are we looking for? The efficacy is superiority in terms of reducing systolic blood pressure with our AVIM therapy. Now, it's important to note, in our population, we're treating older patients that get pacemakers. Most of these patients have high systolic blood pressure but normal diastolic. So not just the amount of blood pressure reduction that we've driven. And the MODERATO II data just remind everyone, we saw an absolute reduction in 24-hour ambulatory systolic blood pressure at six months of 11 millimeters of mercury. We were statistically significant in terms of superiority to control by over 8 millimeters of mercury. Those are huge reductions in systolic blood pressure. Generally, you're gonna need two or more medications to get that type of reduction. So the data's been great to date. In the BackBeat study, one, we're enrolling a broader patient cohort.
The baseline blood pressures in MODERATO II were only around 136, 137. So an 11 mm drop in systolic blood pressure is pretty much as good as you could ask of any therapy. May we have a higher baseline in this study? Potentially. Could we then be able to showcase more blood pressure reduction? Potentially. Do we need to be able to have a blockbuster result? We don't. But I do think that a larger sample size is gonna give us an opportunity. We're also focusing on what is a more typical timeframe for measuring blood pressure in drug or device studies, which is three months. So we had results at six months. The longer you go, you tend to have more background noise in terms of compliance and adherence to meds. They tend to favor the control group.
We're also hopeful that, you know, now that we've focused on a three-month endpoint, which is typical, that, you know, all this could hopefully just give us a better backdrop for data. But we're really excited about, one, the efficacy data. And I'll just go back to that isolated systolic hypertension. Having a therapy that seems to be able to target systolic blood pressure in a patient population where you want to target systolic blood pressure selectively is super powerful. Older patients, different blood vessels, different ventricles. That's transformational. So our efficacy data is not just the magnitude, but the quality of that data for the target patient population. Safety. So the prime endpoint also at three months is the appropriate safety endpoint, but it's novel. We've been treating patients with pacemakers for over six decades.
It's one of those fields where we have a really good understanding of what are the anticipated serious adverse device events. These patients do have adverse events. What this study is designed to look at, and there's other studies in pacing that have used this endpoint, is there unanticipated safety events? We're gonna look at that at the same time. That will really help us understand, is this pacing-delivered therapy, which is targeting blood pressure, doing anything unusual that we should be concerned about? We haven't seen that. We're, once again, really well-powered, in many ways overpowered for both endpoints. We think those are the key endpoints that will drive regulatory approval and ultimately adoption of the therapy.
Got it. Why is ambulatory the right metric to use versus office?
We see it 'cause we do, you know. Screening is done initially with office blood pressure. It's just highly variable. We do as much as we can in the study to use the same device and the same techniques, but patients react differently to being in a hospital or in a clinic. Sometimes that means their blood pressure's lower. Sometimes it's higher, so ambulatory blood pressure, you're taking at least usually 40-50 measurements over the course of 24 hours, and you're really getting that number is giving you a sense of what is the blood pressure profile of the patient over that full 24-hour period, so it's the more sensitive reading. It's a burden for the patients, but that's the best way to assess, do we have a potent therapy that can impact patients long term, and the data we've had to date is great.
One of the things, one of my favorite slides, we don't always show it. You've seen it, is looking at the baseline of the whole patient population versus the six-month result. Very clean separation. AVIM therapy is an always-on therapy. It's programmable, and it seems to really do its job 24 hours a day, which is what you'd want.
Right. Yeah.
No, I mean, the results are phenomenal. They're some of the best in all the space. Speaking of which, you mentioned the three-month follow-up.
Mm-hmm.
Much of the industry is 6, 12. I mean, we have three-year data now on Argyn from Medtronic. Why is three months the right number and then, or the right duration? And then are you gonna get any kinda pushback on the clinical side from people saying, "Look, you know, this is just based on three-month data. I wanna see 12 months," etc?
I think it's actually the opposite. Keep in mind, you're trying to get a clean result in a population of patients where they're on a baseline set of meds, individual for the patient, and that medication doesn't change. We wanna evaluate if the therapy.
Right.
Having an impact on blood pressure. Actually, from a clinical perspective, a regulatory perspective, the feedback that we've gotten, you can look at, you know, there's a couple companies developing some nice new drugs for hypertension. Those studies tend to be 8-12 weeks, 12 weeks being the most common, three months. So when you're trying to keep that patient where therapy is always challenging in terms of particularly older patients, you know, do I need to retitrate meds, change meds? Here, we're keeping patients on a stable background for them individually and just trying to evaluate what's AVIM therapy doing for the patient. So three months actually seems to be the ideal endpoint. Longer efficacy is important, and we certainly have seen it. We actually showcased recently some of the long-term efficacy results out to almost four years in patients.
That data's. I don't know if we haven't discussed it, but really the on-off ability of AVIM therapy to work, keep working, be able to be reversible, and then reactivate it is very powerful. But longer-term data, you have a lot of background noise and change in meds. You see it in the Argyn data too. The trends are really nice, but, you know, really you have a group of patients that are staying on their meds, often being on more meds. That's great. We just wanna control blood pressure. But we think three months is actually the powerful endpoint in blood pressure measurement.
Okay. I understood. And this is just a clarification question for folks in the room, but and on the webcast, why isn't AVIM cannibalistic for renal denervation?
Look, hypertension is arguably the biggest medical problem in the world. Worldwide, we estimate there's 1.2 billion patients with high blood pressure. The United States alone has 120 million patients. It's one of the largest markets there is. In that market, there are high-need patient populations that represent markets larger than some of the biggest med tech markets that we've realized. I already talked about one of the things that we think clearly separates, at least for the moment, you know, renal denervation is a great opportunity from AVIM therapy is a great opportunity. We're focused on older patients that have predominantly isolated systolic hypertension. Renal denervation has been studied in patients with combined hypertension, and the recent national coverage decision actually is specific to combined hypertension. That's a huge opportunity for Medtronic, a huge opportunity for Recor and others that get into the space.
That's not what we're focused, and so we have a therapy that seems to be ideal for the target patient population that we're focused on. It's a target patient population that no one serves better than Medtronic, and our view is over time, these two levers are a really powerful combination in a broader device-based hypertension portfolio where, in fact, a patient, and we've seen a few, by the way, over the years, but a patient that gets treated with renal denervation at some point in the future could be a great candidate for AVIM therapy. It's a progressive disease, so you know, it's an ocean of patients. I think Medtronic has a tremendous potential portfolio with renal denervation and obviously their relationship with us in AVIM therapy. The overlap doesn't bother us at all.
Right. So to that point, how do we think about the market opportunity for this, Dave?
Mm-hmm.
I mean, you've got this, you know, isolated systolic hypertension patient population. They're going after, you know, systolic, diastolic, hypertension patients. But yours is on a, you know, gonna be on a pacemaker. How do we think about that?
The significant, and frankly, this is all we are doing. It's a big enough opportunity for our shareholders, but it's not. But where we're focused with Medtronic at the moment is they are the market leader in cardiac pacing therapies.
What's the market share?
Roughly half.
Yeah.
I'm not gonna speak for Medtronic, but.
Globally.
You know, about globally, one in every two devices. In the U.S., it's more than half.
Yep.
So if you need a pacemaker, the odds are you're gonna have a Medtronic pacemaker. That population is what we've studied because it's the easiest backdrop to bring a new therapy. Not easy, by the way. Actually, introducing a new therapy on top of the existing market has its challenges. But the thought process that I think we share is a, there's a potential to become a new standard of care because this therapy can be made available in a new commercial device for that patient population. Let's go through the numbers. Worldwide, over 1.1 million pacemakers are implanted every year. That is growing, and I think we're gonna see more growth in pacing because pacemakers are getting safer. Conduction system pacing is rapidly being adopted, which is taking off some of the breaks on pacing. Leadless pacemaking is getting adopted. China's finally catching up in terms of penetration.
So the market is growing. The number one comorbidity amongst those patients is high blood pressure, particularly high systolic blood pressure. So 70%+ of patients are gonna have high blood pressure. Our view is our trial has the clear potential to show that we can be effective. We can be effective and safe. If you're getting a pacemaker, I'd like to ask a question. If you have a therapy like AVIM that's been proven to be effective and safe, why wouldn't a physician wanna make that device available? That doesn't mean you'll flip a switch in the market, but no company is better positioned than Medtronic with their existing footprint to make AVIM therapy devices available broadly on a global basis. And, you know, it's been an exciting year. We have breakthroughs. There's a lot of opportunity. Medtronic, and we talk a lot about the commercial opportunity.
Won't go into it more in this forum, but a lot of opportunity to maximize the market and penetration just in that existing patient population. When we think beyond it, we still think about a fraction of 1% of the overall opportunity being older patients, predominantly ISH patients that have diastolic dysfunction or HFpEF. That's our breakthrough designation. Frankly, we when we give a market estimate, we take the breakthrough population and shrink it by about 80%+. In the U.S., we're thinking about a million patients roughly where clearly our therapy could offer benefit. The device is a pacemaker.
Yep.
We've been putting these pacemakers in for years. Physicians know how to do it. Obviously, you'd have to build out a lot more implant labs to accommodate that volume. But our therapy offers the potential to prevent heart attack, stroke, but most importantly for that population to reduce the risk of progression to heart failure, which is driven by systolic blood pressure elevation.
Got it. Got it. I wanna make sure we cover a little bit on Virtue. I mean, you know, I know you love both of your, both of your children, but, you know.
I have three kids actually at home, but I do hear what you're saying.
Why is sirolimus the right drug to use versus paclitaxel?
There have been 26 randomized controlled trials done with drug-eluting stents that showed superiority, at least numerical superiority, not always statistical, between sirolimus and paclitaxel in terms of efficacy and safety, still measured by the same outcome, target lesion failure. Did a patient have an event or need to be revascularized? You will not find a paclitaxel, coronary paclitaxel stent anywhere in the world anymore. Yet the market-leading products in the U.S. and in Europe still are paclitaxel-based. And, you know, paclitaxel, if we never discovered sirolimus for the coronary arteries, paclitaxel would be a great drug. It's gonna do a lot of good for patients. But sirolimus has a more appropriate cytostatic mechanism of action to stop proliferation and essentially enable vessel healing. And we saw that with stents, and that's why it's the winner. You shift to a drug-coated balloon, okay?
We don't have one, but that's what everyone else is using. You're looking to try and figure out how to get drug across in a very short window of time in the procedure, with a coating that you really wanna come off but not create downstream problems. And that was just a lot easier to do with paclitaxel. You know, the early products were paclitaxel, and we saw proliferation of those products. We're probably now in second, third generation. They're a little better, but it's still fundamentally the same thing. The challenge when you go to sirolimus is you need the drug to get delivered but also stay present for at least 30 days. We know also from drug-eluting stents, if you don't get the profile of release and elution and pharmacokinetics with sirolimus right, you don't get good efficacy.
Every one of those limus-based stents essentially is showing a release curve that's the same and aims to have at least one nanogram per milligram of drug at the end of 30 days. We worked on early, could we create a coated balloon to do that? And we found we couldn't. So we took a different approach, and we fundamentally engineered how do we get the drug, which has a short half-life and doesn't wanna go into tissue, into tissue? How do we keep it there irrespective of the device? And then we had this novel idea. Why don't we deliver the drug with a large dose as liquid through the balloon? So our system we think is optimal because we're taking the best drug, engineered for the best uptake. And we've shown, by the way, tenfold drug delivery versus a stent.
How do we deliver the best dose without any of those procedural challenges of drug loss and particulate? That's the reason we have paclitaxel coated balloons. Some companies have done a decent job of getting sirolimus through a coated balloon. Sirolimus balloon should be better than paclitaxel balloon. The recent data shows they're basically equivalent. It looks like Virtue is the only product that is optimizing the drug, and our early clinical results are better. We're hoping now in our pivotal study to be able to showcase that as well.
Got it. Got it. Okay. Well, it looks like we're all out of time. So I have to cap it there. Sorry, I didn't get as many Virtue questions in there, but.
You asked me questions that set me up to.
I know.
Deliver passion today.
There we go. But yeah, thanks everybody for coming out, and thanks so much for all the feedback.
Thank you.
We appreciate it.