Orchard, Fueled by GSK’s Ex-Gene Therapy Biz, Nets $200M in IPO

Xconomy Boston — 

GlaxoSmithKline’s former gene therapy portfolio is at the center of a $200 million IPO, among the larger biopharma offerings on Wall Street over the last several years.

Orchard Therapeutics, a London, Boston, and San Francisco-based biotech, sold 14,285,715 shares in its IPO late Tuesday at $14 apiece, raising just over $200 million before discounts due to underwriters.

Orchard sold about 1 million more shares than it projected last week and within the $14 to $16 per share range it had set. It will use the cash to develop a group of gene therapies for rare diseases, including a few it acquired from British pharma firm GSK earlier this year. The company’s will start trading on the Nasdaq Wednesday morning under the ticker symbol “ORTX.”

Orchard’s offering sits at the high end of what’s been a historically active period for biotech IPOs. In a report published earlier this month, analyst firm Leerink Partners found that 269 biopharma companies had gone public over the past six years, raising an average of $90 million per offering.

Orchard has more than doubled that total, and as it heads to the Nasdaq on Wednesday it’s worth noting a few other trends seen in Leerink’s report: Short term returns for biopharma IPOs have been consistently positive, while long-term success for such firms has been far more elusive. Of the 251 biopharma IPOs between 2013 and 2018, the average return a day after the IPO is 14 percent and 1 month later is 23 percent.

Those trends have held in 2018, with average returns at 14 percent one day post-IPO and 22 percent a month later. But only 44 percent of the IPOs Leerink tracked have generated a cumulative positive return over the long haul since going public. What’s more, those returns have largely come from a small number of “spectacular IPOs,” the ones that draw investors to the sector.

“The obvious strategy for investors should be to buy every IPO book, and hold the stocks through the first 30 days, and thereafter, aim to identify which stocks might have the potential to be in that top quintile of long-term performers,” the report said.

Time will tell whether Orchard is among the companies in that group. But it has gone public at a time when gene therapy, an unconventional form of medicine meant to provide a long-lasting effect from a single infusion, has come of age after years of ups and downs. Three products have been approved in Europe and the U.S., more are likely on the way, and several gene therapy developers are now publicly traded.

Orchard is developing an ex vivo variety of gene therapy, in which patients’ stem cells are harvested, equipped with a healthy version of a gene, and then infused back into the body. The company is developing gene therapies for rare immune and metabolic diseases, and it bolstered that portfolio with the GSK deal. Through that agreement, GSK took a stake in Orchard, sold the company Strimvelis—one of the few approved gene therapies in the world—and experimental programs for metachromatic leukodystrophy (MLD), Wiskott Aldrich syndrome (WAS), and beta-thalassemia.

Strimvelis has struggled commercially. The treatment, approved in Europe in 2016 for adenosine deaminase severe combined immunodeficiency (ADA-SCID), has been used on only a “limited number of patients” and its revenue won’t be enough to make the company profitable, Orchard has said in its IPO prospectus. Orchard, which lost around $139 million in 2017, is also developing its own ACA-SCID gene therapy, OTL-101, and hopes to file for U.S. approval of the treatment in 2020.

Orchard’s other advanced programs came from GSK. One is for MLD (OTL-200), a rare neurometabolic disorder, and the other for WAS (OTL-103), an inherited immune disease. Both are in late-stage testing.

According to its prospectus, Orchard plans to use $65.8 million of the IPO proceeds to fund clinical trials and regulatory work for its drug pipeline, and $17.8 million to support commercialization of Strimvelis in Europe. The company has also budgeted $84.5 million to build a manufacturing facility in Fremont, CA.