Passage Bio, Inc. — Q2 2023 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2023. Amounts are in U.S. dollars; financial statement amounts are in millions unless noted. Passage Bio is a clinical-stage genetic medicines company and reported no product revenue.
Business context and pipeline
The company is focused on gene therapies for central nervous system disorders and relies on its research collaboration with the University of Pennsylvania for preclinical research. Its primary clinical programs are PBGM01 for GM1 gangliosidosis and PBFT02 for FTD-GRN. Further development of PBKR03 (Krabbe disease) and PBML04 (metachromatic leukodystrophy) had been stopped to reduce costs; the company was exploring strategic alternatives for both assets.
Financial performance and liquidity
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Research and development expense | $17.3 | $26.8 | $34.2 | $53.0 |
| General and administrative expense | $8.1 | $13.0 | $27.1 | $28.1 |
| Operating loss | $25.4 | $39.8 | $61.3 | $82.6 |
| Net loss | $23.9 | $39.5 | $58.2 | $82.4 |
| Net loss per share | $0.44 | $0.73 | $1.06 | $1.52 |
| Operating cash used | Not provided for quarter | Not provided for quarter | $39.6 | $70.8 |
- At June 30, 2023, cash and cash equivalents were $30.3, marketable securities were $121.2, and combined cash, cash equivalents and marketable securities were approximately $151.5.
- Total assets were $193.7; total liabilities were $43.3; stockholders’ equity was $150.4. Accumulated deficit was $550.6.
- Cash and cash equivalents declined $4.3 during the first six months. Investing cash flow was a net inflow of $35.2, primarily reflecting marketable-security maturities and sales exceeding purchases.
- The filing reports no credit facility or committed external capital source. No interest-bearing borrowings are identified; reported lease liabilities totaled $26.7, including $3.3 current and $23.4 noncurrent.
- Margins are not meaningful because the company had no product revenue.
Material changes and unusual items
- Year-over-year Q2 research and development expense fell $9.5, mainly due to lower clinical manufacturing costs and reduced personnel-related costs. Six-month R&D expense fell $18.9, with lower manufacturing and headcount costs partly offset by higher Penn expenses.
- Q2 general and administrative expense decreased $4.9 year over year. Six-month G&A declined only $1.0 because of $11.3 in nonrecurring Catalent-related charges; excluding those charges, management said six-month G&A decreased $12.3.
- The March 2023 Catalent amendments eliminated annual minimum commitments of $10.6 through November 2025, in exchange for $6.0 of aggregate payments due through May 2024. The company also wrote off a $5.3 prepaid asset after giving up exclusive access to the dedicated clean room suite. At June 30, $5.0 remained accrued and $1.0 had been paid.
- Other income was $3.1 for the first six months, including $2.6 of interest income and $0.5 from selling certain tax credits.
- In July 2023, after quarter-end, the company announced a 26% workforce reduction, primarily in CMC, intended to align spending with its focused development strategy and extend runway. Severance expenses were expected in Q3 2023.
Outlook, management commentary and risks
- Management estimated existing cash, cash equivalents and marketable securities would fund operating expenses and capital expenditures into Q4 2025. It also stated the resources were sufficient for at least twelve months from issuance of the financial statements. The estimate depends on assumptions and could change; the company expects continuing losses and needs additional capital.
- Management expected R&D and G&A expenses to remain consistent or decrease in the near term, excluding Catalent-related effects. Costs could rise if programs advance into later-stage trials or commercialization.
- For PBGM01, the first patient was dosed at a new, higher dose in July 2023. Initial safety and biomarker data at that dose were expected by mid-2024. For PBFT02, initial Cohort 1 safety and biomarker data were expected in Q4 2023. These are forward-looking expectations, not reported results.
- The company described clinical, regulatory, manufacturing and financing uncertainty as material risks. Early clinical or biomarker findings may not predict later results; rare-disease patient recruitment, third-party manufacturing capacity, reliance on Penn, and the ability to obtain future financing are notable dependencies.
- The filing notes PBGM01 had previously been placed on FDA clinical hold, later removed. It also describes serious adverse events in gene therapy generally and reports a grade 4 serious adverse event of acute communicating hydrocephalus in a PBKR03 study; PBKR03 development had been stopped.
- No material legal proceedings were reported. Management concluded disclosure controls were effective at a reasonable assurance level, with no material changes to internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether the Q4 2025 cash-runway estimate remains achievable after the workforce reduction, clinical spending and other commitments.
- Progress and timing of PBGM01 dose-3 enrollment and data, and PBFT02 Cohort 1 data; assess final data rather than relying solely on preliminary biomarker results.
- Strategic alternatives and funding prospects for PBKR03 and PBML04, and any consequences of asset divestiture under the Catalent agreements.
- Actual Catalent payments, remaining contractual obligations, and the company’s access to adequate manufacturing capacity for its lead programs.
- Future financing needs and potential dilution, given recurring operating losses, no product revenue, and no committed external capital source.