Passage Bio, Inc. — Q3 2023 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2023. Passage Bio is a clinical-stage genetic medicines company focused on CNS disorders. It reported no product revenue and has no approved products.
Financial performance and position
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | None reported | |||
| Research and development expense | $15.1M | $15.4M | $49.3M | $68.4M |
| General and administrative expense | $8.2M | $10.7M | $35.3M | $38.8M |
| Impairment of long-lived assets | $5.4M | — | $5.4M | — |
| Net loss | $27.1M | $26.7M | $85.3M | $109.1M |
| Net loss per share, basic and diluted | $0.49 | $0.49 | $1.56 | $2.01 |
| Cash used in operations | Not provided by quarter | $58.7M | $94.2M |
All amounts are U.S. dollars. Gross margin and operating margin are not meaningful because the company reported no product revenue. Nine-month net loss narrowed by $23.8M year over year, chiefly alongside lower R&D costs and higher other income. Q3 net loss increased $0.4M, with a $5.4M impairment charge offset in part by lower operating expenses and greater other income. Nine-month other income included $2.1M of interest income, $2.0M from amortization of investment premiums and discounts, and $0.5M from sale of tax credits.
At September 30, 2023, cash and cash equivalents were $33.6M and marketable securities were $99.2M, totaling $132.8M. Current assets were $135.7M versus current liabilities of $19.8M. Total assets were $169.3M; total liabilities were $43.0M, principally operating lease liabilities of $26.5M. The filing reports no credit facility or committed capital source. Management said available cash, cash equivalents and marketable securities were expected to fund operations into Q4 2025, and to cover at least the next 12 months from issuance of the statements.
Material changes and operating developments
- R&D expense fell $19.1M for the first nine months, mainly due to lower clinical manufacturing costs, headcount-related reductions and lower clinical operations costs; Penn expenses increased $2.7M.
- In July 2023, Passage Bio reduced its workforce by approximately 26% to lower operating expenses and extend its cash runway. It recorded $2.4M of severance and termination costs in Q3.
- Two subleases for part of its Philadelphia office space prompted a $5.4M non-cash impairment charge: $2.2M against right-of-use assets and $3.2M against property and equipment. The subleases do not release the company from its primary lease obligations.
- Amendments to Catalent agreements eliminated minimum annual commitments of $10.6M through November 2025, but require $6.0M in payments by May 2024. Passage Bio expensed $11.3M in the first nine months, including the payment obligation and write-off of a $5.3M prepaid asset; $4.0M remained accrued at quarter-end. The agreements extend to 2030 and include limited exclusivity for manufacturing PBFT02 and PBGM01.
- PBKR03 and PBML04 clinical development has been stopped to reduce costs; the company is pursuing strategic alternatives for both assets. PBGM01 and PBFT02 remain its lead clinical programs.
Outlook, commentary and key risks
- Management expected R&D and G&A expenses to remain stable or decline in the near term, excluding the Catalent agreement effects. Costs could rise if programs advance into later-stage trials.
- For PBGM01, the company had dosed the first patient at a new, higher dose in July 2023 and expected initial safety and biomarker data by mid-2024. It reported favorable interim safety and biomarker findings from earlier cohorts, but cautioned that early data may not predict later results.
- For PBFT02, the company expected initial safety and biomarker data from three Cohort 1 patients in Q4 2023.
- Passage Bio expects continued losses and says substantial additional capital will be needed. Financing may dilute shareholders, impose restrictive terms or be unavailable; failure to raise funds could force further delays, reductions or discontinuation of programs.
- Key risks include clinical and regulatory uncertainty, small and difficult-to-identify patient populations, gene-therapy safety and manufacturing risks, reliance on Penn and third-party manufacturers, and the possibility that sublease receipts will not offset lease obligations as expected. The filing also identifies Nasdaq minimum-bid-price compliance as a risk.
- Management reported disclosure controls and procedures were effective at a reasonable assurance level as of September 30, 2023, with no material change in internal control over financial reporting during the quarter. No material legal proceedings or subsequent events were reported.
Important facts for investors to verify
- Whether the reported cash runway into Q4 2025 remains supported by actual spending, trial plans and any changes in operating strategy.
- PBGM01 dose 3 safety, biomarker results and dose-selection plans, and the status and timing of PBFT02 Cohort 1 data.
- Progress in finding strategic alternatives or partners for PBKR03 and PBML04, and any resulting costs, proceeds or changes to development plans.
- Actual Catalent payments, manufacturing capacity and exclusivity implications, alongside sublease collections and continuing office lease costs.
- Potential financing needs and the status of Nasdaq listing compliance; the filing does not provide a clear value for any subsequent financing or resolution of the listing risk.