Passage Bio, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Passage Bio is a clinical-stage genetic medicines company developing therapies for central nervous system disorders. It reported no product revenue and has no approved products.
Financial performance and position
Amounts below are in millions of dollars, except per-share data.
| Metric | Q1 2022 / March 31, 2022 | Q1 2021 / December 31, 2021 |
|---|---|---|
| Research and development expense | $26.2 | $25.0 |
| Acquired in-process R&D expense | $1.5 | $1.5 |
| General and administrative expense | $15.1 | $12.5 |
| Operating loss | $(42.8) | $(38.9) |
| Net loss | $(42.8) | $(38.9) |
| Basic and diluted loss per share | $(0.79) | $(0.76) |
| Net cash used in operating activities | $(44.7) | $(30.7) |
| Cash, cash equivalents and marketable securities | $267.1 | $315.8 |
| Total assets | $333.2 | $355.1 |
| Total liabilities | $51.9 | $36.4 |
| Stockholders’ equity | $281.3 | $318.7 |
Revenue and profit margins are not meaningful for this pre-revenue company. Operating expenses exceeded the prior-year quarter, increasing net loss by $3.9 million. R&D rose $1.2 million, primarily due to higher clinical manufacturing and development costs; lower Penn-related and personnel expenses partly offset the increase. G&A rose $2.6 million, mainly from personnel and share-based compensation, including severance-related costs. Q1 2021 R&D included $5.2 million of expense from award modifications, which did not recur in Q1 2022.
Operating cash outflow increased by $14.0 million year over year. Investing activities provided $17.3 million, principally reflecting marketable security maturities exceeding purchases; financing activities provided $0.05 million from option exercises. Q1 2021 financing included $165.8 million of net public-offering proceeds. The company reported no credit facility or committed external capital source. It had $101.6 million of cash and cash equivalents and $165.5 million of marketable securities at quarter-end.
Operating lease liabilities totaled $27.6 million, including $3.1 million current and $24.4 million noncurrent. The company adopted lease accounting Topic 842 on January 1, 2022, recognizing lease assets and liabilities. This is a lease obligation, not a reported borrowing facility.
Material developments and outlook
- Cash runway: Management expects existing cash, cash equivalents and marketable securities to fund operating expenses and capital expenditure requirements into Q2 2024. This estimate depends on assumptions and may change.
- Cost and portfolio actions: In March 2022, the company announced a 13% workforce reduction and prioritized programs to reduce expenses and extend runway. It continued three clinical programs, preclinical programs in MLD, ALS and Huntington’s disease, and exploratory research in Alzheimer’s disease and temporal lobe epilepsy. It slowed investment in its pilot plant, delaying its establishment beyond the previously anticipated end of 2022.
- Clinical outlook: Passage Bio expected initial biomarker and safety data for PBGM01 cohorts in the second half of 2022; it expected the first PBFT02 patient dose in mid-2022 and interim safety and 30-day biomarker data from the initial PBKR03 cohort by year-end 2022.
- PBKR03 safety event: The first patient dosed in the Krabbe disease trial experienced grade 4 acute communicating hydrocephalus 26 days after dosing and underwent shunt surgery. The event was assessed as possibly related to treatment or study procedures; disease progression may also have contributed. The independent monitoring committee recommended continuing the trial with protocol and monitoring changes, and the company increased the first cohort from three to four patients. Preliminary biomarkers showed normalization of GALC activity and reduced psychosine within 30 days.
- Other trial progress: Passage Bio reported developmental improvement in assessments for the first two low-dose PBGM01 patients, with no serious adverse events reported in that initial cohort. COVID-19-related site and staffing issues had substantially affected initiation of the PBFT02 and PBKR03 studies and could further delay timelines.
- Subsequent event: On May 11, 2022, the company returned rights to the Canavan disease, Charcot-Marie-Tooth Type 2A and Parkinson’s disease programs to Penn, without termination costs.
Risks, commitments and unusual items
- The company has recurring losses and negative operating cash flows, an accumulated deficit of $399.1 million, and expects additional losses. It will need substantial additional capital; financing may dilute shareholders or may not be available on acceptable terms.
- Clinical, regulatory, manufacturing and enrollment outcomes remain uncertain. The company relies on Penn for preclinical research and on third parties, including Catalent, for manufacturing. COVID-19 disruptions, gene-therapy safety risks and the reported PBKR03 adverse event could affect trial progress.
- Under its Catalent agreements, the company has a minimum annual commitment of $10.6 million for five years from November 2020, subject to adjustments. The Penn agreement includes $5.0 million annual discovery-research funding through 2026, as well as potential development and sales milestones, royalties and other payments.
- Regenxbio asserted that use of the AAVhu68 capsid may infringe patent claims and identified pending claims relating to intracisterna magna administration. Passage Bio stated it believed it had valid defenses; an adverse outcome could require a license. Management said it was not party to legal proceedings expected to have a material adverse effect.
- Marketable securities recorded a $0.9 million unrealized loss in Q1 2022, reported in comprehensive loss. Management concluded disclosure controls were effective at a reasonable assurance level and reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether quarterly cash use and the planned expense reductions support the stated runway into Q2 2024, particularly given clinical and manufacturing commitments.
- Updated safety findings, protocol changes and enrollment progress in the PBKR03 trial, and subsequent data from all clinical programs.
- Whether the stated 2022 clinical milestones were achieved and whether COVID-19 or other factors changed trial timelines.
- The status and potential financial or development consequences of the Regenxbio patent assertions and Passage Bio’s licensed intellectual property.
- The effect of the program returns to Penn and pilot-plant delay on the development pipeline, manufacturing plans and future capital needs.