CN.ORTH: First Quarter Update

By John Vandermosten, CFA



First Quarter Fiscal Year 2022 Operational and Financial Results

Ortho Regenerative Technologies Inc. (CSE:ORTH.CN) (OTC:ORTIF) filed its quarterly SEDAR documents and reported first quarter fiscal year 2022 financial and operational results for the period ended April 30 on June 29, 2021. Since the beginning of the year, Ortho has manufactured its first clinical batch of biopolymer, filed its investigational new drug application (IND) and selected its CRO and study protocol. Several clinical sites have also been confirmed. On June 4, 2021 Ortho announced that it has received a clinical hold letter from the FDA that is expected to delay the IND review by four to six weeks. We anticipate that questions will be answered and returned to the agency in line with this original timeline.

Highlights for the first quarter fiscal year 2022 and to-date include:

➢ Engaged Westwicke ICR for investor relations;

➢ Launched Agoracom Platform;

➢ Appointed multiple members to Board of Directors;

➢ Secured DTC eligibility for OTCQB market trading;

➢ Submitted IND application for Ortho-R; and

➢ Received Clinical Hold Letter from the U.S. FDA.

No revenues were reported for the first quarter. For the three months ended April 30, 2021, compared to the three months ended April 30, 2020, operational expenses are as follows:1

➢ Net expenses for research and development were $424,000, up 16% from $365,000, driven by activity related to the long-term service contract with Polytechnique, completion of current good manufacturing practices (cGMP) batches of Ortho-R and work related to the IND application with the FDA. Expenses were offset by investment tax credits and grant funding;

➢ G&A expenses were $416,000, down 18% from $136,000 due to the absence of a non-recurrent management fee incurred in the prior year from an increase in IR spending as well as consulting fees paid to management;

➢ Share-based compensation rose 215% to $63,000 from $20,000 on non-recurring grant to new board members and contractual vesting for management team members;

➢ Financial expenses were $338,000 vs $168,000, rising 101% reflecting the new $3 million non-convertible debenture units, existing convertible debenture units and higher interest expense offset by the pay down of investment tax credit loans in the prior quarter; and

➢ The above line items contributed to a net loss of ($1.24) million vs ($1.06) million, or ($0.04) in each period.2

On April 30, 2021, cash on the balance sheet totaled $1.61 million. Cash burn for FY:21 was ($852,000) which was offset by $135,000 million of cash from financing. This compares to prior year first quarter cash burn of ($460,000) and net financing contributions of $212,000.

IND Application for Ortho-R

Submission of Investigational New Drug Application for Ortho-R

On April 6, 2021, Ortho announced that it had submitted an IND application to the FDA for the initiation of a Phase I/II clinical trial for Ortho-R. Following the submission, the FDA had additional questions and requested protocol modifications. In a June 4 press release, Ortho announced that a clinical hold had been placed on the trial pending the collection of additional chemistry, manufacturing and control (CMC) related data and characterization of the chitosan product. Management initially estimated that collecting and submitting the data will take from four to six weeks and confirmed this timeline in a recent call. Following the delivery of the requested information and assuming the FDA has no further questions, clearance of the IND is anticipated approximately 30 days later, suggesting an August start to the trial.

Phase I/II trial

Following clearance of the IND, Ortho will begin its in-human trial. The company has confirmed seven sites and is in negotiations with about ten others. The target number of sites is from 8 to 12 (up from the previous 6 to 10 sites) with each adding 2 to 6 subjects per month, suggesting completion of the targeted 78 patient enrollment in and completion of trial within six to eight months. Under guidance from the FDA, the first three patients will be treated in the same center with 48 hour separation to ensure there are no safety issues. The trial will be a prospective, randomized, controlled and blinded study to evaluate safety and efficacy of Ortho-R. The treatment will be administered with standard-of-care surgery and will be compared against surgery alone.

Recent Developments

Westwicke IR

On February 4, 2021, Ortho announced that it had retained Westwicke to advance investor relations efforts in the United States. Westwicke Partners is focused on the healthcare sector and provides strategic investor relations and independent capital markets advice.

Investor Outreach

Ortho launched its 12-month online investor outreach campaign through the Agoracom platform, announced in a February 10thpress release. The purpose of the campaign is to broaden Ortho’s shareholder base, and also to attract new investment as well as engaging current shareholders. Agoracom will provide Ortho digital exposure with its over 600 million page views in 2019, serving over 350 public companies. Ortho’s landing page on the Agoracom platform can be found here.

DTC Eligibility for OTCQB Trading

Ortho common shares are now eligible for electronic clearing and settlement through the Depository Trust Company (DTC) in the US, an important step in facilitating the trade of Ortho equity for US based investors and firms. Clearing and settlement through the DTC is expected to allow for faster execution and improved liquidity for company shares. Eligibility was announced March 31, 2021.

Changes to the Board of Directors

The appointment of Howard Walthall and Tim Cunningham to the board of directors was announced in a June 2021 press release. Their experience and skill are expected to help Ortho build into a stronger orthobiologics company on both the operational and financial fronts.

Mr. Walthall’s background includes work in cellular biologics, tissue engineering, medical devices and allografts. He has an extensive background in regenerative medicine, orthopedics and advanced wound care. Howard has overseen multiple highly successful product development projects and new product launches. He is currently the President, Founder and CEO of Lumiheal Therapeutics, a company developing and commercializing a patented technology that uses fluorescent light energy to heal chronic and acute wounds, burns and surgical incisions. Previously, Mr. Walthall was the Executive Vice President Strategy and Market Development for Organogenesis where he led sales, marketing and R&D for the Surgical and Sports Medicine (SSM) product lines. He also led the overall Strategy and Business Development functions for the Company and oversaw the International business unit. Howard was the President and Chief Executive Officer of NuTech Medical where he helped build an advanced orthobiologics and wound care business leading to a successful exit via acquisition by Organogenesis. Howard holds a Bachelor of Science in Engineering Biomedical and Mechanical Engineering (B.S.E.) from Duke University, and a Juris Doctor from Samford University Cumberland School of Law.

Mr. Cunningham brings over 30 years of extensive finance and operations leadership in the biotechnology and software industries to his work with his public and private Danforth clients, as a CFO with a demonstrated record of success in building startup enterprises into industry leaders and scaling larger entities globally. His expertise includes financial & strategic planning, P&L management & execution, acquisitions & divestitures, raising equity and debt and post-merger integration. Tim is a trusted advisor and subject matter expert in strategic planning and creative, scalable, business design, and has a proven track record of driving growth leading to either a successful exit via sale or IPO. Tim has raised more than $500M in private and public equity as well as debt in his career. Tim started his career in public accounting with KPMG in NYC and later with PWC in Boston. Prior to joining Danforth, Tim served as CFO at Organogenesis where he took the company public in 2018, raising $144M in equity and $100M in debt over his tenure. Tim holds an MBA from Boston University, a BS in Accounting from Boston College and is a CPA in New York & Florida.

On February 24, 2021, Ortho announced that Patrick O’Donnell was appointed to its Board, effective immediately. O’Donnell brings company-building experience as well as development and management of strategic partnerships. In addition, O’Donnell has expertise in fund raising as well as executing commercial, clinical, regulatory and reimbursement strategies.

Patrick O’Donnell is President and CEO of HD LifeSciences and has over 25 years of experience leading companies in various stages, specializing in the medical device, orthobiologics and biomaterial industries targeting orthopedic, spine, neurosurgery and sports medicine markets. Prior to serving HD LifeSciences, O’Donnell was Executive Vice President and General Manager of Commercial Operations at Bonesupport A.B., co-founder and CEO of Proteothera, Inc., President and CEO of Histogenics Corporation/Prochon Biotech, Inc., Director of Global Marketing for Confluent Surgical, Inc. and held positions of escalating responsibility in sales and marketing at Johnson & Johnson, DePuy Spine. He received his bachelor’s from the University of Wisconsin-Madison.

Coincident with O’Donnell’s appointment, it was announced that Board members Michael Buschmann and Caroline Hoemann would retire from Ortho’s Board, effective February 22, 2021. Both have served Ortho for over five years as founders, inventors, and as members of both the company’s Board and Scientific Advisory Board (SAB). They will continue to serve on Ortho’s SAB, and Buschmann will continue in his position as Chief Scientific Officer.


Ortho’s lead candidate, Ortho-R, is undergoing the final review before IND clearance and entering the clinic. The product is built on the company’s RESTORE platform and is applied to rotator cuff tear (RCT) injury repair. Ortho-R completed its animal pivotal trials and follow-on histology results, providing the necessary data to submit an IND application. An IND has been filed for Ortho-R and is pursuing approval by the FDA. Pending approval, the Phase I/II trial for Ortho-R is expected to initiate in late summer 2021, enrollment completion in the first half 2022, and study results as early as first half 2023.

Ortho has provided guidance for its meniscus program which is expected to start in 2021, funding permitting. Contract research organization selection and protocol development will be followed by a six-month study in 36 sheep. Interim data will be provided at the three month mark and study results are targeted to be available by 1H:22. Further updates will be provided when available.

Corporate Milestones

➢ IND Filing – April 2021

➢ Clinical Hold Letter – June 2021

➢ Preparation and protocol development for meniscus animal studies – mid 2021

➢ Launch of meniscus animal studies – Fall 2021

➢ Launch of Phase I trial – August 2021

➢ Patient enrollment – October 2021

➢ Phase I/II Clinical Results – 1H:23


Ortho RTI has developed a promising product that is expected to begin enrolling patients by the end of the summer. The unmet need in rotator cuff tear and meniscus tear (MT) repair is clear and sizable, which should provide substantial demand following approval. With a recent string of fundraising successes and progress with the FDA, we anticipate a relatively rapid development process as Ortho advances from pilot to pivotal trials, regulatory authority approval and first sales by 2025 in the United States. Our valuation work assumes addressable markets in RCT and MT in the US, EU and Canada with an anticipated 12% probability of success due to Ortho-R’s preclinical status.

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1. Financial statement items are denominated in Canadian Dollars.

2. The apparent incongruity between net loss and net loss per share is attributable to difference in share count.

3. Source: April 2021 Ortho RTI Corporate Presentation

4. Source: April 2021 Ortho RTI Corporate Presentation

5. See Exhibit I below for timeline detail on the meniscus program.

6. Source: April 2021 Ortho RTI Corporate Presentation

7. Source: April 2021 Ortho RTI Corporate Presentation