Passage Bio, Inc. — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021. Unaudited. Passage Bio is a clinical-stage genetic medicines company developing therapies for central nervous system disorders; it reported no product revenue.
Financial position and results
- Q3 2021: Operating expenses were $47.1 million and net loss was $46.9 million, or $0.87 per share, compared with a $28.5 million net loss, or $0.63 per share, in Q3 2020.
- Nine months: Operating expenses were $134.6 million and net loss was $134.2 million, or $2.53 per share, versus a $73.8 million operating loss and $73.3 million net loss, or $2.02 per share, in the prior-year period. No meaningful operating margin is reported because the company had no product revenue.
- Expenses: Nine-month research and development expense was $84.7 million (up $30.8 million); general and administrative expense was $42.9 million (up $22.9 million). Acquired in-process R&D expense was $7.0 million, versus none in 2020.
- Cash and liquidity: Cash, cash equivalents and marketable securities totaled $354.4 million at September 30, 2021. Current assets were $366.5 million and current liabilities $22.3 million. Management expected available funds to cover operating and capital needs for at least 24 months from the filing date.
- Cash flow: Operating activities used $96.1 million and investing activities used $42.2 million in the first nine months; financing provided $166.2 million. Cash and cash equivalents increased $27.9 million to $162.9 million. The January 2021 common-stock offering generated $165.8 million net.
- Capitalization: Total assets were $390.9 million, total liabilities $28.7 million, and stockholders’ equity $362.2 million. The balance sheet shows no borrowings or other debt. Accumulated deficit was $305.1 million.
Material changes and business developments
- Losses increased as clinical manufacturing, clinical development, staffing and public-company costs grew. Nine-month R&D increases included $20.0 million in clinical manufacturing and $5.2 million in clinical development and professional services. G&A increases reflected headcount, share-based compensation and professional fees.
- In August 2021, Passage Bio amended its Penn collaboration to add exploratory research in Alzheimer’s disease and temporal lobe epilepsy, paid Penn $5.0 million upfront, and accepted reimbursement and potential milestone and transaction-fee obligations. The amendment contributed to acquired in-process R&D expense.
- Share-based compensation was $25.1 million for the nine months, including $6.3 million of expense associated with award modifications.
- The company’s lead programs are PBGM01 for GM1 gangliosidosis, PBFT02 for FTD-GRN and PBKR03 for Krabbe disease. The first PBGM01 patient was dosed in March 2021. The company expected initial safety and 30-day biomarker data for PBGM01 in Q4 2021, and expected to initiate the PBFT02 and PBKR03 trials in Q4 2021, with initial data in the first half of 2022.
Outlook, risks and commitments
- Management expects significant future operating losses and higher R&D and G&A spending. Additional capital will be needed; there is no credit facility or committed external source of capital. Future financing may dilute shareholders or require the company to reduce programs or grant rights to assets.
- COVID-19-related site and hospital constraints substantially affected planned initiation of the PBFT02 and PBKR03 trials; further delays remain possible.
- Clinical, regulatory, safety, manufacturing, patient-enrollment and commercialization outcomes are uncertain. The filing highlights potential AAV-related toxicities, including findings of trigeminal and dorsal root ganglia toxicity in preliminary non-human-primate studies.
- Passage Bio disclosed a patent claim from Regenxbio concerning AAVhu68 and potential claims relating to intrathecal administration. The company believes it has valid defenses; an adverse outcome could require a license or affect development.
- Notable obligations include a Catalent minimum commitment of $10.6 million annually for five years beginning November 2020; Penn discovery funding of $5.0 million annually through 2026; and $51.2 million of future minimum lease payments as of September 30, 2021. These commitments are not all current liabilities.
- No material legal proceedings were reported. Management concluded disclosure controls were effective at a reasonable assurance level, with no material changes in internal control reported for the quarter.
Key facts for investors to verify
- Whether the stated 24-month cash runway remains adequate as clinical, manufacturing and facility spending progresses.
- Actual trial initiation and data timing for PBGM01, PBFT02 and PBKR03, including effects from COVID-19 and clinical safety findings.
- The components and recurrence of the $7.0 million acquired in-process R&D charge and the $6.3 million share-award modification expense.
- Cash requirements and termination terms under the Catalent agreement, Penn collaboration and lease commitments.
- Developments in the Regenxbio patent matter and any resulting licensing, litigation or program implications.