Passage Bio, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. Passage Bio is a clinical-stage genetic medicines company developing gene therapies for rare monogenic central nervous system diseases. It reported no product revenue.
Financial performance and liquidity
| Metric | Q1 2021 | Q1 2020 / comparison |
|---|---|---|
| Revenue | None reported | None reported |
| Research and development expense | $25.0 million | $13.1 million |
| Acquired in-process R&D expense | $1.5 million | None |
| General and administrative expense | $12.5 million | $4.8 million |
| Operating loss | $38.9 million | $17.9 million |
| Net loss | $38.9 million | $17.6 million |
| Net loss per share, basic and diluted | $0.76 | $1.00 |
| Cash used in operating activities | $30.7 million | $21.9 million |
| Cash and cash equivalents | $249.5 million | $135.0 million at Dec. 31, 2020 |
| Marketable securities | $188.1 million | $169.8 million at Dec. 31, 2020 |
| Total assets / stockholders’ equity | $465.2 million / $441.5 million | $328.0 million / $304.7 million at Dec. 31, 2020 |
Cash, cash equivalents and marketable securities totaled $437.6 million at quarter-end. Current assets were $450.9 million and current liabilities $19.5 million. The filing reports no credit facility or committed external funding source and no debt balance on the balance sheet. Management said available funds were expected to cover operating expenses and capital expenditures for at least 24 months from the filing date. No operating margin is meaningful because the company had no product revenue.
Financing provided $165.6 million of net cash in Q1, primarily from a January follow-on offering of 8.05 million shares at $22 per share, yielding $165.8 million net proceeds. Investing cash use was $20.4 million, including purchases and maturities of marketable securities, a $0.5 million technology license payment and $0.8 million of property and equipment purchases.
Changes versus the prior comparable period
- Net loss increased $21.3 million year over year, while operating cash use increased $8.9 million.
- R&D expense rose $11.9 million, reflecting higher clinical manufacturing, personnel and clinical-development costs, partly offset by lower preclinical research spending.
- G&A expense rose $7.7 million as headcount, professional fees, facilities and public-company costs increased.
- R&D included a one-time $5.2 million share-based compensation charge related to modifications of options following the departure of the Acting Head of R&D. Total share-based compensation was $9.7 million, versus $2.4 million a year earlier.
- Loss per share improved despite the larger net loss, mainly alongside a larger weighted-average share count following the 2020 IPO.
Outlook, programs and notable risks
- Clinical outlook: Passage Bio dosed the first patient in the PBGM01 Imagine-1 Phase 1/2 trial in March 2021 and expected initial safety and 30-day biomarker data in Q4 2021. It expected to initiate PBFT02’s upliFT-D trial in Q2 or Q3 2021, with initial data expected in the first half of 2022. It expected to initiate PBKR03’s GALax-C trial in Q3 2021, with initial data also expected in the first half of 2022.
- All three lead candidates had received FDA IND clearance. PBGM01 and PBKR03 had additional trial authorizations reported in the UK, Canada or Brazil; PBFT02 had received Canadian authorization by April 2021. These are forward-looking plans and regulatory milestones, not evidence of trial outcomes.
- Management expected expenses and operating losses to increase as clinical trials, manufacturing and company operations expand. It stated that substantial additional capital would ultimately be needed; future financing could dilute shareholders or require rights to be surrendered.
- COVID-19 had delayed some site-initiation activities, including ethics-review meetings and hospital staffing, and affected expected clinical timelines.
- Safety uncertainty is material: the filing reports trigeminal and dorsal root ganglia toxicity in preliminary nonhuman-primate toxicology studies for PBGM01 and PBFT02. The company may need further studies or could delay or halt development.
- Key contractual commitments include Penn research funding of $5.0 million annually through May 2025 and a Catalent minimum commitment of $10.6 million annually for five years beginning November 2020, subject to adjustments. Future minimum lease payments were $52.0 million.
- Regenxbio asserted that use of the AAVhu68 capsid may infringe licensed patent claims and raised claims relating to ICM administration. Passage Bio said it believed it had valid defenses; an adverse outcome could require a license. The company also reported instituting a post-grant review petition challenging a related patent.
- Management concluded disclosure controls and procedures were effective at a reasonable-assurance level as of March 31, 2021. No material legal proceeding was reported as pending, though the patent dispute remains a disclosed contingency.
Most important facts for investors to verify
- Whether clinical trials began on the stated schedules and whether safety, biomarker and efficacy results support continued development.
- Whether reported nonhuman-primate ganglia toxicity has implications for human dosing, safety monitoring or program timelines.
- Whether the stated 24-month cash runway remains reasonable given the rising operating burn and clinical/manufacturing commitments.
- Progress and cost of Catalent manufacturing, and the company’s ability to secure future commercial-scale capacity.
- Developments in the Regenxbio patent claims and post-grant review, including any need for a license or changes to vector or administration plans.
- Future dilution and share-based compensation: the January offering increased issued shares, and the filing reported substantial unrecognized option compensation expense.