Passage Bio, Inc. — FY2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020; this is an annual report, not a standalone fourth-quarter filing. Passage Bio is a clinical-stage genetic medicines company developing gene therapies for rare monogenic central nervous system disorders. It had no approved products and generated no product revenue.
Key financial results and position
| Metric | FY2020 | FY2019 |
|---|---|---|
| Revenue | No product revenue | No product revenue |
| Research and development expense | $81.8 million | $29.7 million |
| General and administrative expense | $30.1 million | $7.0 million |
| Operating loss | $112.9 million | $37.2 million |
| Net loss | $112.2 million | $45.6 million |
| Net loss per share, basic and diluted | $2.91 | $10.77 |
| Net cash used in operating activities | $80.5 million | $39.9 million |
Margins are not meaningful because the company had no product revenue. The loss per share comparison is affected by the substantial increase in weighted-average shares following the 2020 IPO.
- At year-end, cash and cash equivalents were $135.0 million and marketable securities were $169.8 million, totaling $304.8 million. Total assets were $328.0 million; total liabilities were $23.3 million.
- The filing reports no credit facility or committed external source of capital. It does not report borrowings as a material funding source.
- Operating cash use increased year over year as the company expanded development and manufacturing activities. Investing cash use was $172.1 million, largely reflecting purchases of marketable securities; financing provided $228.8 million, principally from the IPO.
- Accumulated deficit was $170.9 million at December 31, 2020.
Material changes and business progress
- R&D expense rose $52.1 million, mainly from clinical manufacturing costs (+$24.7 million), personnel-related costs (+$12.5 million), preclinical work (+$6.6 million), clinical development (+$4.4 million) and consulting (+$3.4 million).
- G&A expense increased $23.2 million, primarily from personnel and share-based compensation, professional fees, insurance and facility costs.
- The company completed its IPO in March 2020, receiving approximately $227.5 million net. In January 2021, it completed a follow-on offering, receiving $165.9 million net. Management expected year-end funds plus the follow-on proceeds to fund operating and capital requirements for at least 24 months from the filing date; this is an estimate dependent on assumptions and spending plans.
- The lead portfolio comprised PBGM01 for GM1 gangliosidosis, PBFT02 for FTD-GRN and PBKR03 for Krabbe disease, alongside four research-stage programs. At year-end, the FDA had cleared PBGM01’s IND; subsequent to year-end, INDs for PBFT02 and PBKR03 were cleared in January and February 2021, respectively. The company planned to begin Phase 1/2 enrollment for all three programs in 2021.
- Year-end contractual obligations included $51.9 million of operating lease payments and $53.0 million of Catalent minimum commitments. Penn discovery funding is $5.0 million annually through May 2025; potential Penn milestones and royalties are additional and not quantified in the contractual-obligations table.
Outlook, commentary and principal risks
- Management expects significant losses and operating expenses to continue as the company advances clinical development, manufacturing and regulatory work. Profitability depends on successful development, approval and commercialization, with no assurance of when or whether that will occur.
- Management said programs remained on track despite COVID-19 as of the filing, while noting potential disruption to trials, patient enrollment, collaborators, regulators and manufacturing supply.
- Nonhuman-primate toxicology studies for all three lead candidates found trigeminal and dorsal-root sensory ganglia changes, with associated axonopathy. Findings were generally asymptomatic and often minimal to mild, but a no-observed-adverse-effect level was not defined. The company plans sensory and neurological monitoring in clinical trials.
- The company depends heavily on Penn for discovery and preclinical/IND-enabling work and on Catalent for clinical manufacturing. Manufacturing capacity, scale-up, quality and supply continuity remain execution risks.
- Regenxbio asserted that use of the AAVhu68 capsid may infringe its licensed patent claims and raised potential claims concerning ICM administration. Passage Bio disputes that a license is currently required and says it believes it has valid defenses; a successful claim could require a license or affect development.
- Other key risks include uncertain gene-therapy safety and efficacy, small patient populations and enrollment challenges, competition, regulatory uncertainty, intellectual-property protection, reimbursement, and the need for further capital.
- The financial statements received an unqualified audit opinion from KPMG. The 10-K did not include management’s assessment or auditor attestation of internal control over financial reporting; management stated it expected to provide its assessment beginning with the 2021 annual report.
Important facts for investors to verify
- Whether the three planned Phase 1/2 trials initiated on schedule, enrolled patients and produced interpretable safety and biomarker data.
- Clinical relevance of the sensory ganglia and axonopathy findings, and whether monitoring or further studies affect dose selection or trial timing.
- Actual cash burn, milestone spending and runway relative to management’s 24-month estimate, including the use of January 2021 offering proceeds.
- Whether Catalent can meet manufacturing, quality and supply needs, and the company’s ability to manage its fixed commitments and planned facilities.
- Developments in the Regenxbio patent dispute and the scope, enforceability and prosecution status of the Penn-licensed patent portfolio.
- Progress and terms of the Penn collaboration, including annual research funding, option exercises, potential milestones and royalties.