Passage Bio, Inc. — 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022; filed March 6, 2023. The filing is an annual report, not a standalone fourth-quarter report. Passage Bio is a clinical-stage genetic medicines company developing therapies for central nervous system disorders. It had no approved products and generated no product-sales revenue.
Financial performance and liquidity
| Metric | 2022 | 2021 |
|---|---|---|
| Revenue from product sales | None | None |
| Research and development expense | $86.1 million | $117.7 million |
| Acquired in-process R&D expense | $3.0 million | $8.0 million |
| General and administrative expense | $49.3 million | $60.1 million |
| Loss from operations | $(138.4) million | $(185.7) million |
| Net loss | $(136.1) million | $(185.4) million |
| Net loss per share, basic and diluted | $(2.50) | $(3.48) |
| Net cash used in operating activities | $(118.2) million | $(126.9) million |
Gross profit and operating margins are not meaningful because the company had no product revenue. Net interest income was $2.3 million in 2022, versus $0.3 million in 2021. Accumulated deficit was $492.4 million at year-end.
- Liquidity: Cash, cash equivalents and marketable securities totaled $189.6 million at December 31, 2022, comprising $34.6 million of cash and equivalents and $155.0 million of marketable securities. Management expected these resources to fund operating expenses and capital expenditures into the first half of 2025; this forecast depends on assumptions and could change.
- Cash flows: Investing activities provided $25.2 million, primarily reflecting net sales and maturities of marketable securities. Financing activities used $1.4 million; unlike 2021, the company made no public stock offering in 2022. Operating cash use remained substantial.
- Debt and obligations: The filing reports no conventional borrowings or committed credit facility. Lease liabilities were $27.1 million, including $3.3 million current and $23.8 million noncurrent. Material commitments include Catalent minimum payments of $10.6 million annually through November 2025, subject to adjustments, and Penn discovery funding of $5.0 million annually through June 2026.
Material changes and business developments
- Operating expenses declined, and net loss narrowed by $49.3 million year over year. R&D expense fell $31.6 million, primarily due to lower clinical manufacturing and operations costs and reduced Penn research expense; G&A expense fell $10.7 million. Timing of development activity contributed to these changes.
- Passage Bio announced workforce reductions of approximately 13% in March 2022 and a further approximately 23% in November 2022, prioritizing programs and reducing costs to extend its cash runway. It recorded $6.1 million in severance and termination-related costs in 2022.
- The company stopped further clinical development of PBKR03 (Krabbe disease) and PBML04 (metachromatic leukodystrophy) to reduce expenses and is exploring strategic alternatives for both assets. It continued to advance PBGM01 and PBFT02 as its lead clinical programs.
- Cash and marketable securities declined from $315.8 million at year-end 2021 to $189.6 million at year-end 2022. Total assets fell to $243.5 million from $355.1 million, and stockholders’ equity fell to $201.4 million from $318.7 million.
Outlook, commentary and risks
- PBGM01 for GM1: The company reported completing dosing in the first four Imagine-1 trial cohorts. Interim safety and biomarker data for the first three cohorts, reported in December 2022 and February 2023, described no serious adverse events and dose-related increases in CSF beta-galactosidase activity; higher-dose patients also showed reductions in CSF GM1 ganglioside. The company reported exploratory developmental and MRI observations, but emphasized that outcomes may depend on disease stage. These small-cohort interim findings are not confirmatory efficacy evidence. Initial Cohort 4 data were expected in mid-2023; higher-dose treatment was planned for the second half of 2023, subject to regulatory review.
- PBFT02 for FTD-GRN: The first patient was dosed in the upliFT-D trial in August 2022. Initial Cohort 1 safety and biomarker data were expected in the second half of 2023.
- Management expected R&D and G&A expenses to remain consistent or decrease in the near term following cost reductions, but said costs could rise if programs advance to later-stage trials or toward commercialization. The company will need additional funding before it can expect profitability; no external financing source is committed. Future funding may require equity, debt, partnerships or licensing and could dilute shareholders or constrain operations.
- Key risks include uncertain clinical efficacy and durability, gene-therapy safety and delayed adverse effects, small patient populations and enrollment challenges, reliance on Penn for preclinical work and on third parties for clinical manufacturing, competition, intellectual-property protection, and the ability to obtain future capital. The filing notes dorsal-root and trigeminal-ganglia findings in nonhuman-primate toxicology studies; a patient in the PBKR03 study experienced a serious adverse event of acute communicating hydrocephalus. Development of PBKR03 was subsequently stopped.
- There were no material legal proceedings reported. KPMG issued an unqualified opinion on the financial statements. Management concluded disclosure controls and internal control over financial reporting were effective; the auditor did not attest to internal control effectiveness.
Important facts for investors to verify
- Whether the reported PBGM01 interim biomarker, safety and exploratory clinical observations are sustained in larger cohorts and translate into meaningful clinical benefit.
- Whether the planned PBGM01 dose escalation and both lead programs’ clinical timelines proceeded as expected after the filing date.
- Whether the stated cash runway into the first half of 2025 remains achievable given trial spending, contractual commitments and any changes to operating plans.
- Whether Passage Bio secures strategic partners or other value-preserving outcomes for PBKR03 and PBML04, and what costs or obligations remain associated with them.
- Future capital needs, potential share dilution, and the status and terms of any financing, collaboration or licensing arrangements.