Passage Bio, Inc. — Q3 2020 Form 10-Q
Reporting period: Quarter ended September 30, 2020; filed November 10, 2020. Amounts below are in U.S. dollars unless stated otherwise.
Business context
Passage Bio is a pre-revenue genetic medicines company developing therapies for rare, monogenic central nervous system diseases. Its pipeline depends substantially on research collaboration with the University of Pennsylvania (Penn); Catalent is its clinical-scale manufacturing partner. All lead product candidates remained in preclinical development at quarter-end.
Financial results and liquidity
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Revenue | None reported | None reported | None reported | None reported |
| Research and development expense | $20.8 million | $10.4 million | $53.9 million | $19.8 million |
| General and administrative expense | $7.8 million | $1.2 million | $20.0 million | $3.3 million |
| Net loss | $28.5 million | $11.4 million | $73.3 million | $32.5 million |
| Net loss per share, basic and diluted | $0.63 | $2.68 | $2.02 | $7.70 |
At September 30, cash and cash equivalents were $200.6 million and marketable securities were $135.1 million, totaling $335.7 million. Current assets were $349.5 million and current liabilities were $19.1 million. Total liabilities were $19.8 million; the filing reports no credit facility or committed source of capital and no debt balance. Accumulated deficit was $132.0 million. Gross margin is not applicable because the company reported no revenue.
For the first nine months, operating cash use was $51.1 million, investing cash use was $135.6 million (primarily purchases of marketable securities), and financing provided $228.4 million, principally from the March IPO. Cash and cash equivalents increased by $41.7 million during the period. The IPO raised $227.5 million net from 13.8 million shares sold at $18 per share.
Changes versus comparable periods
- Q3 net loss widened by $17.1 million year over year; nine-month net loss widened by $40.8 million.
- R&D growth reflected higher clinical manufacturing, development, consulting and personnel costs as the company prepared for trials. Q3 R&D increased $10.4 million; nine-month R&D increased $34.1 million.
- G&A increased with higher headcount, share-based compensation, facilities and public-company costs. Nine-month share-based compensation was $10.3 million, compared with $0.4 million in 2019; $0.7 million related to award modifications.
- The March IPO converted all preferred shares into common stock and materially strengthened liquidity. Marketable securities, absent at year-end 2019, stood at $135.1 million at quarter-end.
Outlook, developments and risks
- Management expected existing cash, cash equivalents and marketable securities to fund operating and capital expenditure needs into the first quarter of 2023. This estimate depends on assumptions and could change; additional capital will be needed to advance development, and no financing is committed.
- PBGM01’s FDA investigational new drug application was placed on clinical hold in August 2020 pending further biocompatibility assessment or testing of the proposed delivery device. The company expected to begin a Phase 1/2 trial in Q1 2021 and report initial 30-day safety and biomarker data mid-2021, subject to resolving the hold.
- Management expected to submit INDs for PBFT02 and PBKR03 after FDA clearance of the GM1 IND, with Phase 1/2 trial starts targeted for the first half of 2021 and clinical data anticipated in the second half of 2021. These are forward-looking expectations, not guaranteed outcomes.
- The amended Penn agreement requires $5.0 million annually for five years of discovery research, with quarterly payments of about $1.3 million. Catalent commitments include minimum annual payments of $10.6 million for five years from clean-room validation, subject to adjustments. The new Philadelphia office lease has disclosed future minimum payments of $12.0 million.
- REGENXBIO asserted that use of the AAVhu68 capsid may infringe licensed patent claims and raised potential claims concerning ICM administration. Passage Bio stated it believed it had valid defenses and did not believe a license was then required; an adverse outcome could require a license or affect development.
- The company cited material development, safety, manufacturing, patient-enrollment, intellectual-property, financing and COVID-19-related risks. It said lead programs and research remained on track at the time of the report. Management judged disclosure controls effective at a reasonable assurance level and reported no material quarter changes in internal control over financial reporting.
Important facts for investors to verify
- Whether the FDA clinical hold on PBGM01 was resolved, and whether the clinical-trial and data-readout timelines were met.
- Whether the $335.7 million liquidity position and projected runway into Q1 2023 remain adequate as trial and manufacturing spending increases.
- Actual progress, costs and obligations under the Penn and Catalent agreements, including the minimum manufacturing commitments.
- Developments in REGENXBIO’s patent assertions and any resulting licensing, litigation or program implications.
- Whether clinical, safety, manufacturing and enrollment outcomes support advancement of the preclinical pipeline.