Passage Bio, Inc. — Form 10-Q Summary
Reporting period: Quarter and six months ended June 30, 2020. Filed August 13, 2020. Passage Bio is an early-stage genetic medicines company developing therapies for rare, monogenic central nervous system disorders. It had no product sales or product revenue.
Financial performance and position
| Metric | Q2 2020 | Q2 2019 | Six months 2020 | Six months 2019 |
|---|---|---|---|---|
| Research and development expense | $19.9 million | $6.3 million | $33.0 million | $9.3 million |
| General and administrative expense | $7.4 million | $1.0 million | $12.2 million | $2.1 million |
| Net loss | $27.2 million | $13.4 million | $44.8 million | $21.1 million |
| Net loss per share, basic and diluted | $0.60 | $3.19 | $1.42 | $5.02 |
| Operating cash used | Not stated for quarter | $33.6 million | $11.0 million |
As of June 30, 2020, cash and cash equivalents were $353.4 million, including $284.3 million in money market funds; total assets were $378.1 million, total liabilities $14.7 million, and accumulated deficit $103.4 million. No debt balance or credit facility is reported. The company reported no revenue, so revenue margins are not applicable. Operating and net margins are not meaningful for this pre-revenue company.
Six-month investing cash outflow was $0.2 million; financing provided $228.3 million, primarily from the March 2020 IPO. The IPO raised $227.5 million net from 13.8 million shares sold at $18 per share. Management estimated existing cash would fund operating and capital expenditure needs into the first quarter of 2023; this estimate depends on assumptions and may change.
Changes versus prior comparable period
- Q2 R&D expense rose $13.6 million year over year, mainly due to Penn research, clinical manufacturing and development work, consulting, and higher personnel costs as programs advanced toward IND filings and trials.
- Q2 G&A expense increased $6.4 million, reflecting increased headcount and share-based compensation, professional fees, facilities, and public-company costs.
- Six-month net loss more than doubled year over year, while operating cash use increased to $33.6 million from $11.0 million. The loss per share was lower, partly reflecting the substantially larger weighted-average share count following the IPO and preferred-stock conversion.
- The IPO and conversion of all preferred stock substantially increased equity and liquidity; stockholders’ equity was $363.4 million at June 30, versus a $56.3 million deficit at year-end 2019.
Outlook, management commentary and key risks
- PBGM01 for GM1: The company submitted an IND in June 2020. In July, the FDA placed it on clinical hold pending additional biocompatibility risk assessments and/or testing of the proposed ICM delivery device. Passage Bio expected to respond and projected trial initiation in late 2020 or early 2021, with initial 30-day safety and biomarker data in late first half of 2021. These were forward-looking expectations, not achieved milestones.
- Other programs: PBFT02 for FTD-GRN and PBKR03 for Krabbe disease were expected to have IND submissions in Q4 2020, Phase 1/2 trial starts in first half 2021, and clinical data in second half 2021. These candidates remained in preclinical development.
- COVID-19: Management said programs and research remained on track at the time, but warned that the pandemic could disrupt research, manufacturing, regulatory review, trial-site operations, enrollment, and access to capital.
- Funding and operating commitments: The amended Penn agreement requires $5.0 million annually for five years of discovery research, with quarterly payments beginning Q3 2020, and provides eleven additional program options through May 2025. Exercising an option requires a $1.0 million upfront fee; development and sales milestones and royalties may also be payable. Catalent commitments include a $10.6 million annual minimum for five years after clean-room validation, subject to adjustments. The filing also describes a new headquarters lease with $12.0 million in future minimum payments.
- Intellectual property contingency: Regenxbio asserted that use of the AAVhu68 capsid may infringe licensed patent claims and raised concerns about ICM administration patents. Passage Bio said it believed it had valid defenses and did not then believe it required a license; a successful claim could require a license or affect development. Management reported no legal proceeding it considered likely to have a material adverse effect.
- Development and business risks: The company had recurring losses, no approved products, and no clinical-trial experience as an organization. It relies heavily on Penn for preclinical work and on Catalent for clinical manufacturing. Gene-therapy safety, regulatory uncertainty, manufacturing capacity, patient recruitment, competition, and the need for additional capital are material risks. NHP toxicology studies for PBGM01 and PBFT02 showed trigeminal and dorsal root ganglia toxicity.
- Management stated disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2020; no material change in internal control over financial reporting was reported for the quarter. No subsequent events were reported in the financial-statement notes.
Important facts for investors to verify
- Whether the FDA clinical hold on PBGM01 was resolved, and the status and timing of trial initiation and reported data.
- Cash burn, updated runway assumptions, and any changes in expected operating costs or financing needs.
- Progress on PBFT02 and PBKR03 IND-enabling work and whether stated milestones were met.
- Clean-room validation, Catalent manufacturing performance, and the cash impact of contractual minimums and Penn commitments.
- Developments in the Regenxbio patent dispute and any licensing, litigation, or program implications.
- Emerging clinical or preclinical safety findings, particularly concerning AAV-related toxicity and ICM administration.