Passage Bio, Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. Financial statements are unaudited. Passage Bio is a clinical-stage genetic medicines company developing therapies for central nervous system disorders. It reported no commercial product revenue.
Financial performance and position
| Metric | Q2 2022 / June 30, 2022 | Comparable period / prior year-end |
|---|---|---|
| Research and development expense | $26.8 million for Q2; $53.0 million for first half | $33.1 million for Q2 2021; $58.1 million for first half 2021 |
| General and administrative expense | $13.0 million for Q2; $28.1 million for first half | $15.4 million for Q2 2021; $27.9 million for first half 2021 |
| Net loss | $39.5 million for Q2; $82.4 million for first half | $48.4 million for Q2 2021; $87.3 million for first half 2021 |
| Net loss per share, basic and diluted | $0.73 for Q2; $1.52 for first half | $0.90 for Q2 2021; $1.66 for first half 2021 |
| Cash, cash equivalents and marketable securities | $239.3 million | $315.8 million at December 31, 2021 |
| Operating cash used | $70.8 million for first half | $55.0 million for first half 2021 |
| Total assets / total liabilities | $299.4 million / $51.4 million | $355.1 million / $36.4 million at December 31, 2021 |
Operating loss was $39.8 million for Q2 and $82.6 million for the first half. Interest income, net, was $0.3 million for each period. The company reported no debt facility or committed capital sources; reported liabilities include operating lease obligations. Profitability and conventional operating margins are not meaningful given the absence of product sales and ongoing losses.
Cash and cash equivalents decreased to $91.1 million from $129.0 million at year-end; marketable securities were $148.1 million, down from $186.8 million. Investing activities provided $33.3 million in the first half, mainly reflecting net maturities and sales of securities; financing activities used $0.4 million. The company reported an accumulated deficit of $438.6 million.
Changes and notable developments
- Q2 net loss narrowed by $8.9 million year over year. R&D expense fell $6.3 million, primarily due to lower clinical manufacturing costs; G&A expense fell $2.4 million, mainly due to lower personnel and share-based compensation costs.
- For the first half, net loss narrowed by $5.0 million year over year, despite operating cash use increasing by $15.7 million. R&D expense declined $5.0 million, while G&A expense increased $0.2 million.
- In March 2022, the company announced a 13% workforce reduction and prioritized programs to reduce expenses and extend its cash runway. It returned rights to Canavan disease, Charcot-Marie-Tooth Type 2A and Parkinson’s disease programs to Penn, and slowed investment in its pilot plant.
- On January 1, 2022, the company adopted lease accounting Topic 842, recording a $20.4 million operating lease right-of-use asset and $27.3 million lease liability. At June 30, lease liabilities totaled $27.5 million.
Outlook, risks and contingencies
- Management expected existing cash, cash equivalents and marketable securities to fund operating expenses and capital expenditures into the second quarter of 2024. The filing cautions that this estimate depends on assumptions that may change. The company expects ongoing losses and says it will need additional capital; it had no credit facility or committed funding source.
- PBGM01: The company reported developmental improvements in assessments for both patients in the initial low-dose cohort. It had dosed one high-dose late-onset patient and completed dosing the low-dose early-onset cohort. Initial safety and biomarker data from these cohorts were expected in the second half of 2022.
- PBFT02: The FDA IND was active and foreign trial authorizations had been obtained. The first patient in the upliFT-D trial was expected to be dosed in mid-2022; the filing does not confirm that dosing occurred by quarter-end.
- PBKR03: The first trial patient experienced a grade 4 acute communicating hydrocephalus event 26 days after dosing. The event was assessed as possibly related to treatment or study procedures, though disease progression was also considered. The independent monitoring committee recommended continuing with protocol modifications and additional monitoring. Interim safety and biomarker data from part of Cohort 1 were expected by year-end 2022.
- PBML04: The FDA cleared the IND in May 2022, but the company decided to hold clinical development activities while evaluating resources and operating expenses.
- Key risks include clinical safety and efficacy uncertainty, trial enrollment and COVID-19-related delays, dependence on Penn and third-party manufacturers, financing needs, and intellectual-property exposure. Regenxbio asserted that use of the AAVhu68 capsid may infringe licensed patent claims; Passage Bio said it believes it has valid defenses. A successful claim could require a license.
- Commitments include $5.0 million annually for Penn discovery research through 2026 and Catalent minimum annual commitments of $10.6 million for five years from November 2020, subject to adjustments. The Penn agreement also includes potential development and sales milestones, royalties and other payments.
- No legal proceeding was identified as material by management. The filing reported no subsequent events and stated disclosure controls were effective at a reasonable-assurance level.
Most important facts for investors to verify
- Whether clinical updates and timelines for PBGM01, PBFT02 and PBKR03 were achieved after the filing date, including follow-up on the serious hydrocephalus event.
- Whether the stated cash runway into Q2 2024 remains supportable as trial costs, manufacturing plans and other spending evolve, and what financing options are available.
- Whether the PBML04 development hold or portfolio prioritization leads to further program reductions or changes in spending.
- The status and potential financial or development consequences of the Regenxbio intellectual-property matter.
- How much of the Catalent and Penn commitments will require cash over the remaining contract terms, alongside lease obligations.