Passage Bio, Inc. — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021. The unaudited financial statements are prepared under U.S. GAAP. Passage Bio is a clinical-stage genetic medicines company focused on central nervous system disorders; it had no approved products and reported no product revenue.
Financial results and liquidity
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | No product revenue reported | No product revenue reported | No product revenue reported | No product revenue reported |
| Research and development expense | $33.1 million | $19.9 million | $58.1 million | $33.0 million |
| General and administrative expense | $15.4 million | $7.4 million | $27.9 million | $12.2 million |
| Net loss | $48.4 million | $27.2 million | $87.3 million | $44.8 million |
| Net loss per share, basic and diluted | $0.90 | $0.60 | $1.66 | $1.42 |
| Net cash used in operating activities | Not separately provided for the quarter | $55.0 million | $33.6 million |
- At June 30, 2021, cash and cash equivalents were $215.5 million and marketable securities were $192.3 million, totaling $407.8 million. Current assets were $418.8 million; current liabilities were $31.2 million.
- Total liabilities were $37.3 million and stockholders’ equity was $402.3 million. The filing reports no credit facility or committed external source of capital; no debt balance is identified in the balance sheet.
- Operating cash use increased year over year. Financing provided $166.2 million in the first half, primarily from a January 2021 follow-on stock offering that generated $165.8 million net proceeds. Investing activities used $30.7 million, including securities purchases and maturities, $4.8 million of property and equipment purchases, and a $2.0 million technology-license payment.
- The company reported an accumulated deficit of $258.2 million. Profit margins are not meaningful because the company had no product revenue and incurred operating losses.
Material changes versus the prior comparable period
- Q2 research and development expense rose $13.2 million, principally because of higher clinical manufacturing costs, personnel costs, and clinical development and professional services; lower Penn-related preclinical and pass-through costs partly offset increases.
- Q2 general and administrative expense rose $8.0 million, reflecting higher personnel and share-based compensation, professional fees, and facility costs.
- First-half net loss nearly doubled year over year, increasing $42.6 million. Research and development expense increased $25.1 million and general and administrative expense increased $15.7 million.
- First-half 2021 research and development expense included $1.5 million of acquired in-process research and development related to a Penn development milestone. Share-based compensation was $18.3 million for the first half, including $6.1 million tied to modified stock options.
- Property and equipment, net, increased to $13.5 million from $2.8 million at year-end 2020, alongside expansion of laboratory and office facilities. Common shares outstanding at June 30 were 53.96 million, up from 45.61 million at December 31, 2020, mainly reflecting the follow-on offering.
Outlook, commentary, risks, and unusual items
- Management expected existing cash, cash equivalents, and marketable securities to fund operating expenses and capital expenditure requirements for at least 24 months from the filing date. This is management’s estimate and depends on assumptions; the company expects ongoing losses and says it will need substantial additional capital to advance development.
- Pipeline milestones described in the filing included initial PBGM01 safety and 30-day biomarker data expected in Q4 2021; initiation of PBFT02 and PBKR03 trials expected in Q3 2021, with initial safety and biomarker data expected in the first half of 2022. These are forward-looking expectations, not guaranteed outcomes.
- On August 3, 2021, after quarter-end, Passage Bio amended its Penn agreement to add exploratory research in large CNS indications, initially Alzheimer’s disease and temporal lobe epilepsy, and extend the research term to August 2026. The amendment provides for a $5.0 million upfront payment, reimbursement of exploratory research expenses, up to $39.0 million in development milestones per selected large-CNS product candidate, and a 1%–2% transaction fee on certain change-of-control proceeds, in addition to applicable royalties and commercial milestones.
- The company has a $10.6 million annual minimum commitment to Catalent for five years beginning November 2020, subject to adjustments; early termination may trigger a fee. It also has substantial future lease payments, reported at $51.6 million in total.
- COVID-19-related delays at clinical sites and review bodies could affect trial timelines. Other significant risks include early-stage clinical uncertainty, patient recruitment for rare diseases, reliance on Penn and third-party manufacturers, gene-therapy safety and manufacturing risks, and the need for additional financing.
- The filing describes a patent infringement claim asserted by REGENXBIO concerning the AAVhu68 capsid and potential claims related to intracisterna magna administration. Passage Bio said it believed it had valid defenses and had filed a post-grant review petition challenging a Penn patent exclusively licensed to REGENXBIO. An adverse outcome could require a license or affect development or commercialization.
- Preclinical toxicology studies for PBGM01 and PBFT02 showed trigeminal and dorsal root ganglia toxicity; the company noted that additional studies or development delays could result. Management reported disclosure controls and procedures were effective at a reasonable assurance level and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether the stated 24-month cash runway remains adequate as clinical, manufacturing, facility, and Penn-program spending develops.
- Clinical-trial start dates, enrollment progress, and the timing and interpretation of interim safety and biomarker data for PBGM01, PBFT02, and PBKR03.
- The clinical significance and follow-up of ganglia toxicity findings, and any resulting regulatory or trial-design requirements.
- The status and potential financial or operational impact of the REGENXBIO patent dispute and post-grant review.
- The actual costs and obligations arising from the August 2021 Penn amendment, Catalent commitments, and facility leases.
- Future cash burn, potential financing needs and dilution, and any change in the company’s stated cash-runway outlook.