Passage Bio, Inc. — Q1 2020 Form 10-Q
Reporting period: Three months ended March 31, 2020. Unaudited. Passage Bio is a preclinical genetic medicines company developing therapies for rare, monogenic CNS disorders. It reported no product revenue and no product candidates in clinical trials.
Financial results and position
| Metric | Q1 2020 | Q1 2019 |
|---|---|---|
| Revenue | None reported | None reported |
| Research and development expense | $13.1 million | $3.0 million |
| General and administrative expense | $4.8 million | $1.2 million |
| Loss from operations | $17.9 million | $4.2 million |
| Net loss | $17.6 million | $7.7 million |
| Basic and diluted net loss per share | $1.00 | $1.83 |
| Net cash used in operating activities | $21.9 million | $0.2 million |
At March 31, 2020, cash and cash equivalents were $366.8 million, total assets $392.4 million, total liabilities $5.8 million, and accumulated deficit $76.2 million. The filing reports no borrowings or credit facility. Operating margins are not meaningful because the company had no revenue. Management estimated its cash would fund operating and capital needs into Q1 2023; this is an estimate dependent on assumptions and spending plans.
The March IPO raised $227.5 million net: 13,798,900 shares were sold at $18.00 per share. Preferred stock converted into 26,803,777 common shares. Financing cash flow was $229.9 million. Cash increased by $208.0 million during the quarter.
Material changes and unusual items
- R&D expense rose $10.1 million year over year, primarily reflecting higher Penn and other research costs, program preparation, and personnel costs. G&A rose $3.6 million, mainly from personnel and share-based compensation, professional fees, and facility costs.
- Net loss increased $9.9 million year over year. Q1 2019 included a $3.5 million loss from the fair-value change in a future tranche right liability; there was no such charge in Q1 2020. Q1 2020 included $0.3 million of interest income.
- Share-based compensation was $2.4 million versus $0.2 million. The company recognized an additional $0.7 million from modifications to certain awards.
- Management’s cash-flow discussion says operating cash use was $21.1 million, whereas the financial statements report $21.851 million. Investors should reconcile this difference.
Outlook, commitments, and risks
- Management expected an IND submission for PBGM01 in Q2 2020, a Phase 1/2 trial to start in Q4 2020, and initial 30-day safety and biomarker data in late H1 2021. For PBFT02, it expected an IND in H2 2020 and a Phase 1/2 trial in H1 2021; for PBKR03, an IND in H2 2020 and a Phase 1/2 trial in H1 2021. These were forward-looking plans, not achieved milestones.
- In April, the FDA granted Orphan Drug Designation to PBGM01. In May, after quarter-end, Passage Bio amended its Penn agreement: it committed $5.0 million annually for five years, with quarterly payments of $1.3 million, and gained rights to resulting technologies and eleven additional program options. Exercising an option would require a $1.0 million upfront fee per indication.
- Catalent arrangements include a minimum commitment of $10.6 million annually for five years, subject to specified adjustments. A new Philadelphia headquarters lease signed in April is expected to begin in January 2021; disclosed future minimum payments total $12.0 million, with a tenant improvement allowance of up to $2.8 million.
- COVID-19 was being monitored; management said lead programs and research remained on track at the filing date. The filing warns that the pandemic could disrupt research, manufacturing, regulatory activity, trial sites, enrollment, and financing.
- Regenxbio asserted that use of the AAVhu68 capsid may infringe licensed patent claims and raised potential claims relating to ICM administration. Passage Bio said it believed it had valid defenses and did not then believe it required a license. A successful claim could require a license or affect development and commercialization.
- Preclinical toxicology studies for PBGM01 and PBFT02 showed trigeminal and dorsal root ganglia toxicity. All lead programs remained preclinical, so safety, efficacy, regulatory approval, manufacturing, and commercialization are uncertain. The company also relies heavily on Penn for preclinical work and Catalent for clinical-scale manufacturing.
Important facts for investors to verify
- Whether the projected cash runway into Q1 2023 remains valid as clinical, manufacturing, and Penn/Catalent commitments develop.
- Progress against the stated IND, trial-start, and data timelines, including any COVID-19-related changes.
- Developments in the Regenxbio patent dispute and potential licensing or litigation exposure.
- Details and cash effects of the Penn expansion, Catalent minimum commitments, and new headquarters lease.
- The reported operating cash-flow amount: financial statements show $21.851 million used, while MD&A states $21.1 million.