Passage Bio, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. Passage Bio is a clinical-stage genetic medicines company developing therapies for central nervous system disorders. It reported no product revenue. Unless noted otherwise, financial figures below are in millions of dollars.
Financial results and liquidity
| Metric | Q1 2023 | Q1 2022 or comparison |
|---|---|---|
| Research and development expense | $16.8 | $26.2 |
| General and administrative expense | $19.0 | $15.1 |
| Operating loss | $35.9 | $42.8 |
| Other income, net | $1.5 | De minimis |
| Net loss | $34.3 | $42.8 |
| Basic and diluted loss per share | $0.63 | $0.79 |
| Net cash used in operating activities | $22.4 | $44.7 |
- Cash and cash equivalents were $33.4 million and marketable securities were $134.4 million at March 31, 2023, totaling $167.8 million, down from $189.6 million at year-end 2022.
- Operating cash use was partly offset by $21.2 million of net cash provided by investing activities, largely reflecting marketable securities sales and maturities exceeding purchases. Financing activities provided no cash in Q1 2023.
- Total assets were $213.2 million; total liabilities were $42.9 million, including $27.0 million of operating lease liabilities. The filing reports no credit facility or committed source of capital and does not report borrowings.
- Accumulated deficit was $526.7 million. The company expects existing cash, cash equivalents and marketable securities to fund operating expenses and capital expenditures into the first half of 2025; this estimate depends on assumptions that may change.
- Margins are not meaningful because the company had no product revenue. No profitability was reported.
Changes versus the prior comparable period
- Net loss narrowed by $8.5 million year over year, and operating cash use declined by $22.3 million.
- R&D expense fell $9.4 million, primarily due to a $9.2 million reduction in clinical manufacturing expense and lower wages, benefits and share-based compensation. These reductions were partly offset by increased preclinical and clinical activity.
- G&A expense rose $3.9 million, but included $11.3 million of Catalent-related charges. Excluding those charges, G&A decreased $7.4 million.
- Other income increased to $1.5 million, comprising $1.1 million of interest income and $0.4 million from the sale of certain tax credits.
Business, outlook and material developments
- PBGM01 (GM1): The company had completed dosing the first four Imagine-1 trial cohorts, comprising eight patients. Interim data from the first three cohorts indicated tolerability, no serious adverse events reported, dose-related increases in CSF beta-gal activity and decreases in CSF GM1 ganglioside, and developmental improvements in some patients. The company expected initial Cohort 4 safety and biomarker data in mid-2023. It submitted a protocol amendment for a Dose 3 level twice the existing high dose and expected, subject to regulatory review, to dose the first patient at Dose 3 in the second half of 2023.
- PBFT02 (FTD-GRN): The first patient was dosed in the upliFT-D trial in August 2022. Initial safety and biomarker data from Cohort 1 were expected in the second half of 2023.
- Portfolio prioritization: Further clinical development of PBKR03 (Krabbe disease) and PBML04 (MLD) had been stopped to reduce operating expenses; the company was exploring strategic alternatives for both assets.
- Catalent agreements: March 2023 amendments eliminated the $10.6 million annual minimum commitment through November 2025 in exchange for aggregate payments of $6.0 million due between June 2023 and May 2024. The company also wrote off a $5.3 million prepaid asset after giving up exclusive access to the dedicated clean room. The agreements were extended through November 2030 and provide a limited exclusive manufacturing relationship for FTD and GM1 programs, subject to stated conditions.
- Management expected R&D and G&A expenses to remain consistent or decrease in the near term, excluding the Catalent agreement effects; expenses could rise as programs advance. The company expects continued losses and will need substantial additional capital. Future funding may require equity, debt, collaborations, strategic alliances or licensing, with potential dilution or loss of rights.
Risks, contingencies and other items
- The company has incurred recurring losses and negative operating cash flows since inception. Although management expected available funds to last at least 12 months from issuance of the financial statements, it also stated that additional capital is needed and may not be available on acceptable terms or at all.
- Key risks include uncertain early-stage clinical outcomes, gene-therapy safety and regulatory requirements, enrollment challenges in rare diseases, reliance on Penn for preclinical research, reliance on third-party manufacturers and CROs, and intellectual-property risks. The filing describes a prior grade 4 serious adverse event of acute communicating hydrocephalus in a PBKR03 study.
- Potential future funding needs may require program delays, reductions or discontinuation. The company also disclosed market and banking-system risks, including uninsured cash balances held at financial institutions; it stated it held no cash directly at Silicon Valley Bank.
- The filing reported no material legal proceedings and no subsequent events. Management concluded disclosure controls and procedures were effective at a reasonable-assurance level as of March 31, 2023, with no material changes in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether the $167.8 million liquidity balance and projected runway into the first half of 2025 remain consistent with current cash burn and updated operating plans.
- Subsequent clinical-trial safety, biomarker and efficacy data for PBGM01 and PBFT02, including regulatory review and timing of the proposed higher-dose PBGM01 cohort.
- Whether strategic alternatives for PBKR03 and PBML04 result in transactions, and any resulting costs, proceeds or retained obligations.
- The actual payment schedule and any additional fees or termination obligations under the amended Catalent agreements, as well as manufacturing capacity and supply risks.
- The amount, timing and terms of any additional financing, including potential dilution or licensing of product rights.