[FORM 10-Q Filing Information](index=1&type=section&id=FORM%2010-Q%20Filing%20Information) This section details Passage Bio, Inc.'s Form 10-Q filing for Q1 2021, including registrant status and common stock outstanding - Passage Bio, Inc. filed its Quarterly Report on Form 10-Q for the period ended **March 31, 2021**[1](index=1&type=chunk) Registrant Status and Securities | Category | Status | | :--- | :--- | | Filing Type | Quarterly Report (Form 10-Q) | | Period Ended | March 31, 2021 | | Commission File Number | 001-39231 | | State of Incorporation | Delaware | | IRS Employer Identification No. | 82-2729751 | | Common Stock Trading Symbol | PASG | | Exchange Registered | The Nasdaq Stock Market LLC (Nasdaq Select Global Market) | | Reports Filed (preceding 12 months) | Yes | | Interactive Data File Submitted | Yes | | Filer Status | Non-accelerated filer, Smaller reporting company, Emerging growth company | - As of **May 3, 2021**, the registrant had **53,977,484 shares** of common stock outstanding[5](index=5&type=chunk) [CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS](index=3&type=section&id=CAUTIONARY%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This section advises that the report contains forward-looking statements subject to risks and uncertainties, which the company does not plan to publicly update - The report contains forward-looking statements based on current expectations and projections, subject to known and unknown risks, uncertainties, and assumptions, including those detailed in 'Risk Factors' and 'Management's Discussion and Analysis of Financial Condition and Results of Operations'[6](index=6&type=chunk)[7](index=7&type=chunk) - These statements are predictions and actual results could differ materially; the company does not plan to publicly update or revise them, except as required by law, and intends them to be covered by safe harbor provisions[7](index=7&type=chunk)[8](index=8&type=chunk) [PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This part covers unaudited interim financial statements, management's discussion, market risk, and internal controls [Item 1. Interim Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Interim%20Financial%20Statements%20(Unaudited)) This section presents Passage Bio, Inc.'s unaudited interim financial statements, including Balance Sheets, Statements of Operations, Stockholders' Equity, and Cash Flows, with detailed notes [Balance Sheets](index=5&type=section&id=Balance%20Sheets) This section provides a summary of Passage Bio, Inc.'s unaudited balance sheet as of March 31, 2021, and December 31, 2020 Balance Sheet Highlights (in thousands) | Metric | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $249,521 | $135,002 | | Marketable securities | $188,068 | $169,815 | | Total current assets | $450,949 | $317,183 | | Total assets | $465,172 | $328,007 | | Total current liabilities | $19,469 | $21,175 | | Total liabilities | $23,668 | $23,293 | | Total stockholders' equity | $441,504 | $304,714 | | Accumulated deficit | $(209,777) | $(170,895) | [Statements of Operations and Comprehensive Loss](index=6&type=section&id=Statements%20of%20Operations%20and%20Comprehensive%20Loss) This section presents the unaudited statements of operations and comprehensive loss for the three months ended March 31, 2021 and 2020 Statements of Operations and Comprehensive Loss (Three Months Ended March 31, in thousands) | Metric | 2021 | 2020 | | :--- | :--- | :--- | | Research and development | $24,970 | $13,117 | | Acquired in-process research and development | $1,500 | $— | | General and administrative | $12,464 | $4,795 | | Loss from operations | $(38,934) | $(17,912) | | Interest income, net | $52 | $327 | | Net loss | $(38,882) | $(17,585) | | Net loss per share (basic and diluted) | $(0.76) | $(1.00) | | Weighted average common shares outstanding | 51,331,449 | 17,624,011 | | Comprehensive loss | $(38,877) | $(17,585) | [Statement of Stockholders' Equity](index=7&type=section&id=Statement%20of%20Stockholders%27%20Equity) This section details the changes in stockholders' equity for the three months ended March 31, 2021 Stockholders' Equity Changes (Three Months Ended March 31, 2021, in thousands) | Item | Common Stock (Shares) | Common Stock (Amount) | Additional Paid-in Capital | Accumulated Other Comprehensive Loss | Accumulated Deficit | Total | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Balance at January 1, 2021 | 45,614,807 | $4 | $475,617 | $(12) | $(170,895) | $304,714 | | Vesting of early exercise option awards | 173,117 | $— | $41 | $— | $— | $41 | | Exercise of stock options | 10,400 | $— | $81 | $— | $— | $81 | | Sale of common stock, net | 8,050,000 | $1 | $165,804 | $— | $— | $165,805 | | Unrealized gain on marketable securities | — | $— | $— | $5 | $— | $5 | | Share-based compensation expense | — | $— | $9,740 | $— | $— | $9,740 | | Net loss | — | $— | $— | $— | $(38,882) | $(38,882) | | Balance at March 31, 2021 | 53,848,324 | $5 | $651,283 | $(7) | $(209,777) | $441,504 | [Statements of Convertible Preferred Stock and Stockholders' Equity (Deficit)](index=8&type=section&id=Statements%20of%20Convertible%20Preferred%20Stock%20and%20Stockholders%27%20Equity%20(Deficit)) This section outlines changes in convertible preferred stock and stockholders' equity (deficit) for the three months ended March 31, 2020 Convertible Preferred Stock and Stockholders' Equity (Deficit) Changes (Three Months Ended March 31, 2020, in thousands) | Item | Series A-1 Shares | Series A-1 Amount | Series A-2 Shares | Series A-2 Amount | Series B Shares | Series B Amount | Common Stock Shares | Common Stock Amount | Additional Paid-in Capital | Accumulated Deficit | Total | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Balance at January 1, 2020 | 63,023,258 | $63,099 | 22,209,301 | $46,311 | 33,592,907 | $109,897 | 4,293,039 | $— | $2,410 | $(58,663) | $(56,253) | | Vesting of early exercise option awards | — | — | — | — | — | — | 454,971 | $— | $32 | $— | $32 | | Conversion of convertible preferred stock upon IPO | (63,023,258) | (63,099) | (22,209,301) | (46,311) | (33,592,907) | (109,897) | 26,803,777 | $3 | $230,602 | $— | $230,605 | | Sale of common stock in IPO, net | — | — | — | — | — | — | 13,798,900 | $1 | $227,498 | $— | $227,499 | | Share-based compensation expense | — | — | — | — | — | — | — | $— | $2,368 | $— | $2,368 | | Net loss | — | — | — | — | — | — | — | $— | $— | $(17,585) | $(17,585) | | Balance at March 31, 2020 | — | $— | — | $— | — | $— | 45,350,687 | $4 | $462,910 | $(76,248) | $386,666 | [Statements of Cash Flows](index=9&type=section&id=Statements%20of%20Cash%20Flows) This section summarizes the company's cash flows from operating, investing, and financing activities for the three months ended March 31 Cash Flow Summary (Three Months Ended March 31, in thousands) | Activity Type | 2021 | 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | $(30,718) | $(21,851) | | Net cash used in investing activities | $(20,397) | $(99) | | Net cash provided by financing activities | $165,634 | $229,904 | | Net increase in cash and cash equivalents | $114,519 | $207,954 | | Cash and cash equivalents at beginning of period | $135,002 | $158,874 | | Cash and cash equivalents at end of period | $249,521 | $366,828 | - Operating activities consumed **$30.7 million** in Q1 2021, primarily due to a net loss of **$38.9 million**, partially offset by non-cash charges and changes in operating assets/liabilities[25](index=25&type=chunk)[146](index=146&type=chunk)[147](index=147&type=chunk) - This represents an increase from **$21.9 million** used in Q1 2020[25](index=25&type=chunk)[147](index=147&type=chunk) - Investing activities used **$20.4 million** in Q1 2021, mainly due to purchases of marketable securities (**$60.3 million**) and a technology license (**$0.5 million**), partially offset by sales/maturities of marketable securities (**$41.2 million**)[25](index=25&type=chunk)[149](index=149&type=chunk) - This is a significant increase from **$99 thousand** used in Q1 2020[25](index=25&type=chunk)[149](index=149&type=chunk) - Financing activities provided **$165.6 million** in Q1 2021, primarily from net proceeds of common stock issuance (**$165.8 million**)[25](index=25&type=chunk)[150](index=150&type=chunk) - This is lower than the **$229.9 million** provided in Q1 2020, which included IPO proceeds[25](index=25&type=chunk)[150](index=150&type=chunk) [Notes to Unaudited Interim Financial Statements](index=11&type=section&id=Notes%20to%20Unaudited%20Interim%20Financial%20Statements) This section provides detailed notes explaining the company's operations, accounting policies, and financial instrument details [1. Nature of Operations](index=11&type=section&id=1.%20Nature%20of%20Operations) This note describes Passage Bio, Inc.'s focus as a genetic medicines company for rare CNS diseases and its key collaborations - Passage Bio, Inc. is a genetic medicines company focused on rare monogenic central nervous system (CNS) diseases, incorporated in **July 2017**[28](index=28&type=chunk) - The company has a strategic research collaboration with the University of Pennsylvania's Gene Therapy Program (GTP) for discovery and preclinical development, and an agreement with Catalent Maryland, Inc. for clinical scale manufacturing[28](index=28&type=chunk) [2. Risks and Liquidity](index=11&type=section&id=2.%20Risks%20and%20Liquidity) This note discusses the company's recurring losses, need for additional capital, and risks associated with early-stage biotechnology development - The company has incurred recurring losses and negative cash flows since inception, with an accumulated deficit of **$209.8 million** as of **March 31, 2021**[29](index=29&type=chunk) - A follow-on public offering in **January 2021** generated net proceeds of **$165.8 million**, but substantial additional capital will be needed to fund operations and product development[30](index=30&type=chunk)[31](index=31&type=chunk) - The company faces risks associated with early-stage biotechnology, including significant R&D efforts, preclinical and clinical testing, manufacturing capacity, regulatory approval, and intellectual property defense[31](index=31&type=chunk) [3. Summary of Significant Accounting Policies](index=11&type=section&id=3.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the significant accounting policies used in preparing the financial statements, including estimates and new pronouncements - Financial statements are prepared in accordance with GAAP and SEC Rule 10-01 of Regulation S-X, with management making estimates and assumptions that affect reported amounts[35](index=35&type=chunk)[36](index=36&type=chunk)[37](index=37&type=chunk) - Key policies include classifying marketable securities as available-for-sale, capitalizing equity financing costs, measuring share-based awards at grant-date fair value, and computing basic and diluted net loss per share[43](index=43&type=chunk)[44](index=44&type=chunk)[45](index=45&type=chunk)[48](index=48&type=chunk) Potentially Dilutive Securities Excluded from EPS (Three Months Ended March 31) | Security Type | 2021 | 2020 | | :--- | :--- | :--- | | Stock options (including shares subject to repurchase) | 8,708,503 | 6,359,947 | | Unvested restricted stock units | 170,000 | — | | Employee stock purchase plan | 32,821 | — | | **Total** | **8,911,324** | **6,359,947** | - The company is evaluating the impact of recently issued accounting pronouncements on Leases (ASU 2016-02, effective **Jan 1, 2022**) and Financial Instruments-Credit Losses (ASU 2016-13, effective after **Dec 15, 2022**)[51](index=51&type=chunk)[52](index=52&type=chunk) [4. Cash, cash equivalents and marketable securities](index=14&type=section&id=4.%20Cash%2C%20cash%20equivalents%20and%20marketable%20securities) This note details the composition and fair value of the company's cash, cash equivalents, and marketable securities portfolios Cash and Cash Equivalents Portfolio (in thousands) | Category | March 31, 2021 (Fair Value) | December 31, 2020 (Fair Value) | | :--- | :--- | :--- | | Cash accounts in banking institutions | $164,094 | $46,660 | | Money market funds | $84,416 | $84,409 | | Commercial paper | $600 | $3,933 | | Corporate debt securities | $411 | — | | **Total** | **$249,521** | **$135,002** | Marketable Securities Portfolio (in thousands) | Category | March 31, 2021 (Fair Value) | December 31, 2020 (Fair Value) | | :--- | :--- | :--- | | Certificates of deposit | $10,418 | $6,115 | | Commercial paper | $40,811 | $47,877 | | Corporate debt securities | $98,825 | $85,577 | | U.S. government securities | $22,220 | $24,344 | | Non-U.S. government securities | $15,794 | $5,902 | | **Total** | **$188,068** | **$169,815** | [5. Fair Value of Financial Instruments](index=16&type=section&id=5.%20Fair%20Value%20of%20Financial%20Instruments) This note explains the fair value measurement hierarchy and presents the fair value of financial assets as of March 31, 2021 - The company classifies fair value measurements into Level 1 (quoted prices in active markets), Level 2 (observable inputs), and Level 3 (unobservable inputs)[58](index=58&type=chunk) Fair Value Measurement Hierarchy (March 31, 2021, in thousands) | Asset Category | Level 1 | Level 2 | Level 3 | | :--- | :--- | :--- | :--- | | **Cash and cash equivalents:** | | | | | Money market fund | $84,416 | $— | $— | | Commercial paper | $— | $600 | $— | | Corporate debt securities | $— | $411 | $— | | **Total cash and cash equivalents** | **$84,416** | **$1,011** | **$—** | | **Marketable securities:** | | | | | Certificates of deposit | $— | $10,418 | $— | | Commercial paper | $— | $40,811 | $— | | Corporate debt securities | $— | $98,825 | $— | | U.S. government securities | $— | $22,220 | $— | | Non-U.S. government securities | $— | $15,794 | $— | | **Total marketable securities** | **$—** | **$188,068** | **$—** | | **Total financial assets** | **$84,416** | **$189,079** | **$—** | [6. Accrued Expenses and Other Current Liabilities](index=18&type=section&id=6.%20Accrued%20Expenses%20and%20Other%20Current%20Liabilities) This note provides a breakdown of accrued expenses and other current liabilities as of March 31, 2021, and December 31, 2020 Accrued Expenses and Other Current Liabilities (in thousands) | Category | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Professional fees | $1,521 | $720 | | Compensation and related benefits | $2,824 | $5,183 | | Research and development | $6,876 | $9,466 | | Other | $2,000 | $541 | | **Total** | **$13,221** | **$15,910** | [7. Commitments and Contingencies](index=18&type=section&id=7.%20Commitments%20and%20Contingencies) This note details the company's contractual commitments, including research agreements, manufacturing services, lease payments, and legal contingencies - The company has a research, collaboration, and licensing agreement with Penn, committing **$5.0 million** annually through **May 2025** for discovery research and exclusive rights to resulting technologies[63](index=63&type=chunk) - R&D expenses under the Penn Agreement were **$4.5 million** for Q1 2021, down from **$7.7 million** for Q1 2020[63](index=63&type=chunk) - A **$1.5 million** development milestone fee was accrued in Q1 2021[63](index=63&type=chunk) - Agreements with Catalent Maryland, Inc. include an annual minimum commitment of **$10.6 million** for **five years** from **November 2020** for the use of a Clean Room Suite and manufacturing services[64](index=64&type=chunk)[66](index=66&type=chunk)[70](index=70&type=chunk) Future Minimum Lease Payments (as of March 31, 2021, in thousands) | Year | Amount | | :--- | :--- | | 2021 | $658 | | 2022 | $2,612 | | 2023 | $3,431 | | 2024 | $3,528 | | 2025 | $3,628 | | Thereafter | $38,123 | | **Total** | **$51,980** | - The company is involved in a patent infringement claim with REGENXBIO Inc. regarding its AAVhu68 capsid and ICM administration method, believing it has valid defenses and does not require a license[77](index=77&type=chunk) [8. Share-Based Compensation](index=21&type=section&id=8.%20Share-Based%20Compensation) This note describes the company's equity incentive plans, share-based compensation expense, and activity for stock options and restricted stock units - The company has two equity incentive plans, with **3,640,677 shares** available for future grants under the 2020 Equity Incentive Plan as of **March 31, 2021**[78](index=78&type=chunk) Share-Based Compensation Expense (Three Months Ended March 31, in thousands) | Expense Category | 2021 | 2020 | | :--- | :--- | :--- | | Research and development | $6,591 | $1,046 | | General and administrative | $3,149 | $1,322 | | **Total** | **$9,740** | **$2,368** | - During Q1 2021, the company recognized an additional **$5.2 million** in R&D expense due to modifications of certain awards[79](index=79&type=chunk) Stock Option Activity (Three Months Ended March 31, 2021) | Activity | Number of Shares | Weighted Average Exercise Price per Share | | :--- | :--- | :--- | | Outstanding at January 1, 2021 | 6,928,111 | $12.36 | | Granted | 1,895,917 | $21.50 | | Exercised | (10,400) | $7.80 | | Forfeited | (105,125) | $24.21 | | **Outstanding at March 31, 2021** | **8,708,503** | **$14.21** | | Exercisable at March 31, 2021 | 2,258,962 | $10.41 | | Vested or expected to vest at March 31, 2021 | 8,708,503 | $14.21 | - Total unrecognized compensation expense for unvested stock options was **$71.4 million** as of **March 31, 2021**, to be recognized over a weighted-average period of **3.2 years**[81](index=81&type=chunk) RSU Activity (Three Months Ended March 31, 2021) | Activity | Number of Shares | Weighted Average Grant Date Fair Value | | :--- | :--- | :--- | | Unvested balance at January 1, 2021 | — | $— | | Granted | 180,000 | $20.18 | | Forfeited | (10,000) | $21.85 | | **Unvested balance at March 31, 2021** | **170,000** | **$20.09** | - The Employee Stock Purchase Plan (ESPP) authorizes up to **890,148 shares**, with **870,039** available for future grants as of **March 31, 2021**[87](index=87&type=chunk) - Employees can purchase stock at **85%** of the lower of the fair market value on the first or last day of the offering period[88](index=88&type=chunk) [9. Subsequent Events](index=25&type=section&id=9.%20Subsequent%20Events) This note confirms that there were no subsequent events requiring disclosure after the reporting period - There were no subsequent events requiring disclosure[90](index=90&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section discusses Passage Bio's business, pipeline, financial performance, liquidity, and capital requirements for Q1 2021, including COVID-19 impacts [Overview and Pipeline](index=26&type=section&id=Overview%20and%20Pipeline) This section provides an overview of Passage Bio's genetic medicines focus and updates on its lead product candidates' clinical development - Passage Bio is a genetic medicines company developing transformative therapies for rare, monogenic CNS disorders, leveraging a strategic research collaboration with the University of Pennsylvania's Gene Therapy Program (GTP)[92](index=92&type=chunk) - PBGM01 for Infantile GM1: FDA cleared IND in **Dec 2020**, first patient dosed in **March 2021**[94](index=94&type=chunk)[95](index=95&type=chunk) - Expect initial safety and 30-day biomarker data in **Q4 2021**[96](index=96&type=chunk) - Granted Orphan Drug, Rare Pediatric Disease, and Fast Track Designations[96](index=96&type=chunk) - PBFT02 for FTD-GRN: FDA cleared IND in **Jan 2021**, upliFT-D Trial expected to initiate in **Q2/Q3 2021**[97](index=97&type=chunk)[98](index=98&type=chunk) - Expect initial safety and 30-day biomarker data in **H1 2022**[99](index=99&type=chunk) - Granted Orphan Drug and Fast Track Designations[99](index=99&type=chunk) - PBKR03 for Krabbe disease: FDA cleared IND in **Feb 2021**, GALax-C Trial expected to initiate in **Q3 2021**[102](index=102&type=chunk)[103](index=103&type=chunk) - Expect initial safety and 30-day biomarker data in **H1 2022**[104](index=104&type=chunk) - Granted Orphan Drug, Rare Pediatric Disease, and Fast Track Designations[104](index=104&type=chunk) - Research programs include PBML04 for MLD, PBAL05 for ALS, PBCM06 for CMT2A, and an undisclosed adult CNS indication, with options for **ten additional** rare, monogenic CNS indications[106](index=106&type=chunk) [Business Overview](index=29&type=section&id=Business%20Overview) This section summarizes the company's financial history, ongoing losses, and current capital resources expected to fund future operations - Since inception in **July 2017**, the company has focused on R&D and capital raising, incurring recurring losses and negative cash flows, with a net loss of **$38.9 million** for Q1 2021 and an accumulated deficit of **$209.8 million**[107](index=107&type=chunk) - The company expects significant expenses and operating losses to continue as product candidates advance through development and clinical trials, and anticipates additional costs as a public company[107](index=107&type=chunk)[108](index=108&type=chunk) - As of **March 31, 2021**, cash, cash equivalents, and marketable securities totaled **$437.6 million**, expected to fund operations for at least the next **24 months**[111](index=111&type=chunk) [COVID-19 Impact](index=31&type=section&id=COVID-19%20Impact) This section discusses the COVID-19 pandemic's impact on clinical trial timelines and the company's ongoing monitoring efforts - The COVID-19 pandemic has caused some delays in clinical site initiation activities, including meeting delays with review bodies and staffing levels at site hospitals, impacting clinical trial timelines[113](index=113&type=chunk) - The company continues to monitor and assess the potential impact of COVID-19 on its business, manufacturing, preclinical development, and clinical trials, with the safety of employees, patients, and partners as a top priority[112](index=112&type=chunk) [Financial Operations Overview](index=31&type=section&id=Financial%20Operations%20Overview) This section outlines key financial agreements, including the Penn license and Catalent manufacturing contracts, and components of operating results [License Agreement (University of Pennsylvania)](index=31&type=section&id=License%20Agreement%20(University%20of%20Pennsylvania)) This section details the financial commitments, milestone payments, and royalties associated with the Penn research, collaboration, and licensing agreement - The Penn Agreement involves annual funding of **$5.0 million** through **May 2025** for discovery research and exclusive rights to resulting technologies[114](index=114&type=chunk) - The company has **ten remaining options** to commence additional licensed programs, each incurring a **$0.5 million** upfront fee and another **$0.5 million** upon a developmental milestone[114](index=114&type=chunk) - Milestone payments up to **$16.5 million** per product candidate for development and up to **$55.0 million** for sales milestones are owed to Penn, along with tiered mid-single digit royalties on net sales[115](index=115&type=chunk)[117](index=117&type=chunk) [Collaboration and Manufacturing and Supply Agreements (Catalent)](index=33&type=section&id=Collaboration%20and%20Manufacturing%20and%20Supply%20Agreements%20(Catalent)) This section describes the agreements with Catalent Maryland, Inc. for clinical scale manufacturing capacity and associated financial commitments - Agreements with Catalent Maryland, Inc. secure clinical scale manufacturing capacity, including an upfront fee for a Clean Room Suite and an annual minimum commitment of **$10.6 million** for **five years** from **November 2020**[118](index=118&type=chunk)[119](index=119&type=chunk)[120](index=120&type=chunk)[122](index=122&type=chunk) [Components of Results of Operations](index=33&type=section&id=Components%20of%20Results%20of%20Operations) This section explains the primary drivers and expected trends for research and development, general and administrative expenses, and interest income - Research and development expenses include preclinical/clinical studies, technology licenses, personnel, third-party research, manufacturing, regulatory activities, and facility costs[122](index=122&type=chunk)[123](index=123&type=chunk)[126](index=126&type=chunk) - These are expected to increase significantly[126](index=126&type=chunk) - General and administrative expenses cover personnel, corporate facility costs, legal, accounting, and consulting fees, and are expected to increase due to continued R&D, potential commercialization, and public company operations[128](index=128&type=chunk)[129](index=129&type=chunk) - Interest income, net, is derived from cash equivalents and marketable securities, offset by amortization of premium and discount[130](index=130&type=chunk) [Results of Operations](index=36&type=section&id=Results%20of%20Operations) This section analyzes the changes in research and development, general and administrative expenses, and net loss for the three months ended March 31 Results of Operations (Three Months Ended March 31, in thousands) | Metric | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Research and development | $24,970 | $13,117 | $11,853 | | Acquired in-process research and development | $1,500 | $— | $1,500 | | General and administrative | $12,464 | $4,795 | $7,669 | | Loss from operations | $(38,934) | $(17,912) | $(21,022) | | Interest income, net | $52 | $327 | $(275) | | Net loss | $(38,882) | $(17,585) | $(21,297) | - Research and development expenses increased by **$11.9 million** to **$25.0 million** in Q1 2021, driven by a **$5.1 million** increase in clinical manufacturing, a **$0.4 million** increase in clinical development, and an **$8.9 million** increase in personnel-related costs (including a one-time **$5.2 million** share-based compensation charge)[133](index=133&type=chunk) Research and Development Expenses by Program (Three Months Ended March 31, in thousands) | Program | 2021 | 2020 | | :--- | :--- | :--- | | GM1 | $3,523 | $2,410 | | FTD-GRN | $1,268 | $3,456 | | Krabbe | $4,052 | $2,252 | | MLD | $955 | $890 | | ALS | $148 | $249 | | CMT2A | $199 | $211 | | Undisclosed program | $431 | $— | | Internal costs, including personnel related | $14,394 | $3,649 | | **Total** | **$24,970** | **$13,117** | - General and administrative expenses increased by **$7.7 million** to **$12.5 million** in Q1 2021, primarily due to a **$4.3 million** increase in personnel-related and share-based compensation and a **$3.2 million** increase in professional fees and facility costs[136](index=136&type=chunk) [Liquidity and Capital Resources](index=38&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's cash position, future funding requirements, and potential financing strategies to support operations - As of **March 31, 2021**, the company had **$437.6 million** in cash, cash equivalents, and marketable securities, expected to fund operations for at least **24 months**[138](index=138&type=chunk) - Future funding requirements are substantial and depend on factors like the scope and timing of R&D, clinical trials, manufacturing costs, intellectual property, and commercialization efforts[139](index=139&type=chunk)[140](index=140&type=chunk)[143](index=143&type=chunk) - The company expects to finance operations through equity offerings, debt financings, collaborations, and licensing arrangements, with potential for stockholder dilution or restrictions on operations[144](index=144&type=chunk) Cash Flow Summary (Three Months Ended March 31, in thousands) | Activity Type | 2021 | 2020 | | :--- | :--- | :--- | | Cash used in operating activities | $(30,718) | $(21,851) | | Cash used in investing activities | $(20,397) | $(99) | | Cash provided by financing activities | $165,634 | $229,904 | | Net increase in cash and cash equivalents | $114,519 | $207,954 | [Off-Balance Sheet Arrangements](index=42&type=section&id=Off-Balance%20Sheet%20Arrangements) This section confirms the absence of off-balance sheet arrangements or trading activities involving non-exchange traded contracts - The company has no relationships with unconsolidated entities or financial partnerships for off-balance sheet arrangements and does not engage in trading activities involving non-exchange traded contracts[151](index=151&type=chunk) [Critical Accounting Policies and Estimates](index=42&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section states that there were no material changes to critical accounting policies and estimates from the prior annual report - There were no material changes to critical accounting policies and estimates from those described in the company's Form 10-K filed on **March 3, 2021**[152](index=152&type=chunk) [JOBS Act Accounting Election](index=42&type=section&id=JOBS%20Act%20Accounting%20Election) This section explains the company's status as an 'emerging growth company' and its election for an extended transition period for accounting standards - The company is an 'emerging growth company' under the JOBS Act and has elected to use the extended transition period for complying with new or revised accounting standards, making its financial statements potentially non-comparable to other public companies[153](index=153&type=chunk)[154](index=154&type=chunk) - The company will remain an emerging growth company until the earliest of reaching **$1.07 billion** in annual gross revenues, becoming a large accelerated filer, issuing over **$1.0 billion** in non-convertible debt, or **December 31, 2025**[155](index=155&type=chunk) [Recent Accounting Pronouncements](index=42&type=section&id=Recent%20Accounting%20Pronouncements) This section refers to Note 2 of the interim financial statements for details on recent accounting pronouncements - Refer to Note 2 of the interim financial statements for a description of recent accounting pronouncements applicable to the financial statements[156](index=156&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=44&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that there are no quantitative and qualitative disclosures about market risk applicable to the company - This item is not applicable to the company[158](index=158&type=chunk) [Item 4. Controls and Procedures](index=44&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the evaluation of the company's disclosure controls and procedures, concluding their effectiveness, and reports no material changes in internal control over financial reporting - As of **March 31, 2021**, management, with the participation of the Principal Executive Officer and Principal Financial and Accounting Officer, concluded that disclosure controls and procedures were effective at a reasonable assurance level[159](index=159&type=chunk) - There were no changes in internal control over financial reporting during the quarter ended **March 31, 2021**, that materially affected or are reasonably likely to materially affect internal control over financial reporting[160](index=160&type=chunk) [PART II. OTHER INFORMATION](index=45&type=section&id=PART%20II.%20OTHER%20INFORMATION) This part covers legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and exhibits for the reporting period [Item 1. Legal Proceedings](index=45&type=section&id=Item%201.%20Legal%20Proceedings) This section states that the company is not currently a party to any legal proceedings that would have a material adverse effect on its business - The company is not presently a party to any legal proceedings that, in management's opinion, would have a material adverse effect on its business[163](index=163&type=chunk) - Litigation, regardless of outcome, can adversely impact the company due to defense and settlement costs, diversion of management resources, and negative publicity[163](index=163&type=chunk) [Item 1A. Risk Factors](index=45&type=section&id=Item%201A.%20Risk%20Factors) This section outlines significant risks related to Passage Bio's financial position, product development, third-party reliance, manufacturing, commercialization, and intellectual property [Summary of Risk Factors](index=45&type=section&id=Summary%20of%20Risk%20Factors) This section provides a high-level overview of key risks, including operating losses, funding needs, clinical trial uncertainties, and reliance on third parties - The company is a clinical-stage genetic medicines company with a history of operating losses and may not achieve profitability, requiring additional funding[165](index=165&type=chunk)[168](index=168&type=chunk) - Business is dependent on advancing product candidates through preclinical/clinical trials, obtaining marketing approval, and commercialization, which is a lengthy, expensive, and uncertain process[165](index=165&type=chunk)[198](index=198&type=chunk) - Risks include the impact of COVID-19, potential undesirable side effects, difficulty identifying patients for rare diseases, reliance on third-party collaborations (e.g., Penn, Catalent), manufacturing complexities, intense competition, and challenges in obtaining and maintaining intellectual property protection[165](index=165&type=chunk)[170](index=170&type=chunk) [Risks Related to Our Financial Position and Need for Additional Capital](index=47&type=section&id=Risks%20Related%20to%20Our%20Financial%20Position%20and%20Need%20for%20Additional%20Capital) This section details risks associated with the company's recurring losses, substantial capital requirements, and potential stockholder dilution from future financing - The company has incurred net losses since inception (**$38.9 million** for Q1 2021, **$209.8 million** accumulated deficit as of **March 31, 2021**) and expects to continue incurring significant losses for the foreseeable future[169](index=169&type=chunk) - Substantial additional capital will be required to complete preclinical and clinical development, and potentially commercialize product candidates[175](index=175&type=chunk)[178](index=178&type=chunk) - Failure to obtain this funding could force delays or termination of development efforts[178](index=178&type=chunk) - Raising additional capital through equity or convertible debt securities will dilute stockholders' ownership, and debt financing may impose restrictive covenants[181](index=181&type=chunk)[184](index=184&type=chunk) [Risks Related to Product Development and Regulatory Approval](index=53&type=section&id=Risks%20Related%20to%20Product%20Development%20and%20Regulatory%20Approval) This section covers risks inherent in the lengthy and uncertain process of product development, clinical trials, gene therapy regulation, and patient enrollment - The COVID-19 pandemic has caused delays in clinical site initiation activities, impacting clinical trial timelines, and could further disrupt business operations, manufacturing, and preclinical/clinical development[186](index=186&type=chunk)[190](index=190&type=chunk)[191](index=191&type=chunk) - Product development is an early, lengthy, and expensive process with uncertain outcomes; success in early studies may not predict later results, and clinical trials can fail at any stage[192](index=192&type=chunk)[198](index=198&type=chunk)[211](index=211&type=chunk) - Gene therapy is a novel technology with unclear and changing regulatory requirements, making it difficult to predict development time and cost, and potentially leading to unforeseen side effects or adverse public perception[214](index=214&type=chunk)[215](index=215&type=chunk)[220](index=220&type=chunk) - Low prevalence of target disorders may make patient identification and enrollment difficult, leading to trial delays or abandonment, and potentially limiting commercial revenue[223](index=223&type=chunk)[226](index=226&type=chunk)[227](index=227&type=chunk) - Regulatory approval is uncertain, may be for narrow indications, or subject to post-marketing requirements[228](index=228&type=chunk)[233](index=233&type=chunk)[242](index=242&type=chunk) - Failure to obtain foreign approvals would limit market potential[242](index=242&type=chunk) [Risks Related to Our Reliance on Third Parties](index=75&type=section&id=Risks%20Related%20to%20Our%20Reliance%20on%20Third%20Parties) This section highlights risks stemming from the company's dependence on third-party collaborations for R&D, clinical trials, and potential commercialization - The company relies exclusively on its collaboration with the University of Pennsylvania (Penn) for preclinical R&D, and any failure, delay, or termination of this agreement would materially harm the business[244](index=244&type=chunk)[245](index=245&type=chunk) - Reliance on third-party CROs for preclinical and clinical trials means less direct control over timing and quality, and their failure to perform could delay or terminate development programs[250](index=250&type=chunk)[254](index=254&type=chunk)[256](index=256&type=chunk) - Future collaborations may not lead to successful product development or commercialization due to limited control over collaborator resources, potential conflicts, or termination of agreements[260](index=260&type=chunk)[261](index=261&type=chunk)[262](index=262&type=chunk) - Inability to find additional collaborators or successfully complete strategic transactions (acquisitions, in-licensing) could adversely affect pipeline development, cash position, and management focus[265](index=265&type=chunk)[271](index=271&type=chunk)[274](index=274&type=chunk) [Risks Related to Manufacturing](index=85&type=section&id=Risks%20Related%20to%20Manufacturing) This section addresses challenges in gene therapy manufacturing, reliance on third-party manufacturers and suppliers, and potential delays or quality issues - Gene therapies are complex to manufacture, and problems (e.g., equipment malfunctions, contamination, raw material shortages) could cause delays in development or commercialization programs[275](index=275&type=chunk)[276](index=276&type=chunk) - Changes in manufacturing methods or formulation during development may lead to additional costs, delays, or require further testing and regulatory approval[281](index=281&type=chunk) - The company relies on third-party manufacturers for clinical supply and has not secured commercial manufacturing agreements, facing intense competition for services and risks of non-compliance with cGMP regulations[282](index=282&type=chunk)[284](index=284&type=chunk)[287](index=287&type=chunk) - Dependence on third-party suppliers for raw materials carries risks of limited control over pricing, availability, quality, and potential supply interruptions or contamination[293](index=293&type=chunk)[295](index=295&type=chunk) [Risks Related to Commercialization](index=91&type=section&id=Risks%20Related%20to%20Commercialization) This section discusses risks concerning market competition, product acceptance, the need for sales capabilities, and resource allocation for product candidates - The company faces significant competition from other biotechnology and pharmaceutical companies, many with greater resources, which could lead to competitors achieving regulatory approval faster or developing more effective therapies[296](index=296&type=chunk)[301](index=301&type=chunk) - Commercial success depends on market acceptance by physicians, patients, and third-party payors, which is uncertain for novel gene therapy products and influenced by efficacy, safety, cost, and administration methods[302](index=302&type=chunk)[305](index=305&type=chunk) - Inability to establish internal or third-party sales and marketing capabilities would hinder commercialization and revenue generation[306](index=306&type=chunk)[307](index=307&type=chunk) - Expending limited resources on specific product candidates or indications may cause the company to miss more profitable opportunities[308](index=308&type=chunk)[311](index=311&type=chunk) [Risks Related to Intellectual Property](index=97&type=section&id=Risks%20Related%20to%20Intellectual%20Property) This section outlines risks in obtaining and maintaining patent protection, reliance on third-party licenses, potential infringement claims, and changes in IP law - Commercial success depends on obtaining and maintaining patent protection and other IP rights, but patentability is uncertain, expensive, and subject to litigation and challenges[312](index=312&type=chunk)[316](index=316&type=chunk)[320](index=320&type=chunk) - All current product candidates and research programs are licensed from third parties (primarily Penn), and termination or narrow interpretation of these agreements would materially adversely affect development[327](index=327&type=chunk)[328](index=328&type=chunk)[330](index=330&type=chunk) - Third parties, including Regenxbio Inc., may allege intellectual property infringement, leading to costly litigation, potential licensing requirements, or redesign of products[337](index=337&type=chunk)[341](index=341&type=chunk)[346](index=346&type=chunk) - Inability to protect trade secrets, comply with patent agency requirements, or protect IP globally could harm competitive position and business[348](index=348&type=chunk)[351](index=351&type=chunk)[352](index=352&type=chunk) - Changes in patent law (e.g., America Invents Act, Supreme Court rulings) and government-funded programs (Bayh-Dole Act 'march-in' rights) could diminish patent value and limit exclusive rights[359](index=359&type=chunk)[362](index=362&type=chunk)[363](index=363&type=chunk)[369](index=369&type=chunk) [Risks Related to Government Regulation](index=115&type=section&id=Risks%20Related%20to%20Government%20Regulation) This section details risks concerning product pricing, reimbursement, regulatory designations, post-marketing requirements, healthcare legislation, and compliance with anti-fraud laws - Uncertainty in pricing, insurance coverage, and reimbursement for newly approved products, especially for small patient populations, could limit marketability and revenue[370](index=370&type=chunk)[372](index=372&type=chunk)[373](index=373&type=chunk) - Designations like Breakthrough Therapy, RMAT, and Fast Track do not guarantee faster development, review, or approval, nor do they increase the likelihood of marketing approval[380](index=380&type=chunk)[381](index=381&type=chunk)[382](index=382&type=chunk)[383](index=383&type=chunk)[386](index=386&type=chunk) - Orphan Drug Designation provides financial incentives and potential market exclusivity, but does not guarantee approval or protection from competition if a clinically superior or different drug is approved[387](index=387&type=chunk)[388](index=388&type=chunk) - Approved products are subject to extensive post-marketing regulatory requirements, and non-compliance or unforeseen problems could lead to restrictions, penalties, or market withdrawal[391](index=391&type=chunk)[394](index=394&type=chunk)[396](index=396&type=chunk) - Competition from biosimilars, changes in healthcare legislation (e.g., ACA), and increased scrutiny over pharmaceutical pricing practices could adversely affect market approval, commercialization, and profitability[398](index=398&type=chunk)[404](index=404&type=chunk)[408](index=408&type=chunk) - Operations are subject to anti-kickback, fraud and abuse, and other healthcare laws, with potential for significant penalties, reputational harm, and diminished profits for non-compliance[409](index=409&type=chunk)[412](index=412&type=chunk)[413](index=413&type=chunk) [Risks Related to Employee Matters, Managing Growth and Other Risks Related to Our Business](index=131&type=section&id=Risks%20Related%20to%20Employee%20Matters%2C%20Managing%20Growth%20and%20Other%20Risks%20Related%20to%20Our%20Business) This section covers risks associated with managing rapid growth, retaining key personnel, cybersecurity, tax limitations, employee misconduct, and product liability - Rapid expansion in manufacturing, development, and regulatory capabilities may lead to difficulties in managing growth, diverting management resources and potentially disrupting operations[416](index=416&type=chunk) - Future success depends on retaining key executives and attracting qualified scientific, clinical, and manufacturing personnel, with the loss of such individuals potentially harming business strategy[417](index=417&type=chunk)[418](index=418&type=chunk) - Internal computer systems or those of third-party collaborators may fail or suffer security breaches, leading to disruptions in development programs, loss of proprietary information, and increased costs[420](index=420&type=chunk)[421](index=421&type=chunk) - The ability to utilize net operating loss carryforwards may be limited by ownership changes under IRC Sections 382 and 383, potentially increasing future tax liability[422](index=422&type=chunk)[423](index=423&type=chunk) - U.S. federal income tax reform (TCJA) and changes in other tax laws could adversely affect the company's financial results, and employee misconduct could lead to regulatory sanctions and reputational harm[424](index=424&type=chunk)[427](index=427&type=chunk)[428](index=428&type=chunk) - Product liability lawsuits pose an inherent risk, potentially leading to substantial liabilities, decreased demand, reputational damage, and diversion of resources[429](index=429&type=chunk)[430](index=430&type=chunk)[431](index=431&type=chunk) [Risks Related to Our Common Stock](index=136&type=section&id=Risks%20Related%20to%20Our%20Common%20Stock) This section addresses risks concerning stock price volatility, influence of principal stockholders, dividend policy, internal control, and reduced disclosure as an emerging growth company - The price of the common stock may be volatile due to various factors, including clinical trial results, regulatory decisions, competition, and general market conditions, potentially resulting in substantial losses for investors[433](index=433&type=chunk)[435](index=435&type=chunk) - Executive officers, directors, and principal stockholders exercise significant influence over the company, potentially limiting other stockholders' ability to influence corporate matters or prevent changes in control[436](index=436&type=chunk)[437](index=437&type=chunk) - The company does not anticipate paying cash dividends in the foreseeable future, meaning capital appreciation will be the sole source of gain for stockholders[438](index=438&type=chunk) - Failure to establish and maintain effective internal control over financial reporting could impair the ability to produce accurate financial statements, harming operating results and stock value[441](index=441&type=chunk)[442](index=442&type=chunk) - As an 'emerging growth company' and 'smaller reporting company,' reduced disclosure requirements may make the common stock less attractive to investors, potentially leading to a less active trading market and more volatile stock price[444](index=444&type=chunk)[445](index=445&type=chunk)[447](index=447&type=chunk) - Exclusive forum provisions in corporate charter documents may limit stockholders' ability to bring claims in preferred judicial forums, potentially discouraging lawsuits[448](index=448&type=chunk)[453](index=453&type=chunk) [General Risk Factors](index=146&type=section&id=General%20Risk%20Factors) This section includes general business risks such as securities litigation, data privacy compliance, global economic conditions, and natural disasters - The company may be subject to securities litigation, which is expensive and could divert management attention, and negative research reports from securities analysts could cause stock price decline[460](index=460&type=chunk)[461](index=461&type=chunk) - Compliance with various privacy and data security laws (e.g., GDPR, CCPA) is rigorous and costly, and failure to comply could result in significant fines and penalties[462](index=462&type=chunk)[465](index=465&type=chunk)[466](index=466&type=chunk) - Unfavorable global economic conditions could adversely affect business, financial condition, or results of operations, and natural disasters could severely disrupt operations[467](index=467&type=chunk)[468](index=468&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=151&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports no unregistered sales of equity securities and confirms that the use of proceeds from the March 2020 IPO remains consistent with the initial plan - There were no unregistered sales of equity securities during the period[471](index=471&type=chunk) - The company completed its IPO on **March 9, 2020**, selling **13,800,000 shares** at **$18.00 per share**, generating approximately **$227.7 million** in net proceeds[472](index=472&type=chunk)[473](index=473&type=chunk) - There has been no material change in the planned use of proceeds from the IPO[474](index=474&type=chunk) [Item 3. Defaults Upon Senior Securities](index=151&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section states that there were no defaults upon senior securities - There were no defaults upon senior securities[475](index=475&type=chunk) [Item 4. Mine Safety Disclosures](index=151&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section indicates that mine safety disclosures are not applicable to the company - This item is not applicable to the company[476](index=476&type=chunk) [Item 5. Other Information](index=151&type=section&id=Item%205.%20Other%20Information) This section states that there is no other information to report - There is no other information to report[477](index=477&type=chunk) [Item 6. Exhibits](index=152&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed or furnished as part of the Quarterly Report on Form 10-Q, including employment agreements and certifications Selected Exhibits Filed | Exhibit Number | Description | Filed/Furnished Herewith | | :--- | :--- | :--- | | 10.1 | Second Amended and Restated Employment Agreement with Gary Romano | X | | 31.1 | Certification of Principal Executive Officer (Section 302) | X | | 31.2 | Certification of Principal Financial Officer (Section 302) | X | | 32.1* | Certification of Principal Executive Officer (Section 906) | X | | 32.2* | Certification of Principal Financial Officer (Section 906) | X | - Certifications under Section 906 are deemed not filed for purposes of Section 18 of the Exchange Act[480](index=480&type=chunk)

Passage Bio, Inc. (NASDAQ:PASG) Q4 2020 Earnings Conference Call March 3, 2021 8:30 AM ET Company Participants Stuart Henderson - Vice President of Investor Relations and Strategic Finance Bruce Goldsmith - President and Chief Executive Officer Rich Morris - Chief Financial Officer Gary Romano - Chief Medical Officer Jill Quigley - Chief Operating Officer Conference Call Participants Anupam Rama - JP Morgan Salveen Richter - Goldman Sachs Neena Bitritto-Garg - Citi Gbola Amusa - Chardan Laura Chico - Wedbus ...

Part I [Business](index=5&type=section&id=Item%201.%20Business) Passage Bio is a clinical-stage genetic medicines company focused on rare, monogenic CNS disorders, leveraging a strategic collaboration with the University of Pennsylvania's Gene Therapy Program (GTP) [Overview and Pipeline](index=5&type=section&id=Overview%20and%20Pipeline) The company develops therapies for rare, monogenic CNS disorders through a strategic collaboration with the University of Pennsylvania's Gene Therapy Program (GTP), with three lead candidates and a deep pipeline - The company focuses on rare, monogenic CNS disorders with limited or no approved treatments, leveraging a strategic research collaboration with the University of Pennsylvania's Gene Therapy Program (GTP)[16](index=16&type=chunk) Lead Product Candidates | Product Candidate | Indication | Development Stage | Key Milestone | | :--- | :--- | :--- | :--- | | PBGM01 | GM1 Gangliosidosis | Phase 1/2 | IND active; CTA from UK & Canada; Enrollment expected Q1 2021 | | PBFT02 | Frontotemporal Dementia (FTD-GRN) | Phase 1/2 | IND active; Enrollment expected H1 2021 | | PBKR03 | Krabbe Disease | Phase 1/2 | IND active; Enrollment expected H1 2021 | - Beyond the three lead candidates, the company has four research programs for Metachromatic Leukodystrophy (MLD), Amyotrophic Lateral Sclerosis (ALS), Charcot-Marie-Tooth Type 2A (CMT2A), and an undisclosed target, and holds an option to license ten additional programs from Penn[21](index=21&type=chunk) [Our Strategy and Approach](index=8&type=section&id=Our%20Strategy%20and%20Approach) The company's strategy focuses on rapidly advancing transformative therapies for rare CNS indications, expanding its pipeline, engaging patient groups, and developing proprietary manufacturing capabilities - Key strategic pillars include focusing on rare CNS diseases, rapidly advancing lead candidates, expanding the pipeline via the GTP collaboration, engaging with patient groups, and developing manufacturing capabilities[31](index=31&type=chunk)[36](index=36&type=chunk) - The company's scientific approach prioritizes optimal route of administration (ICM), capsid and transgene selection, leveraging cross-correction for broader effect, and using measurable biomarkers for efficient development[40](index=40&type=chunk)[41](index=41&type=chunk)[48](index=48&type=chunk) - A strategic collaboration with Catalent provides access to a dedicated manufacturing suite, with plans to open an in-house analytical lab in Q2 2021 and eventually establish a proprietary manufacturing facility for commercial supply[36](index=36&type=chunk) [PBGM01 for GM1 Gangliosidosis](index=12&type=section&id=PBGM01%20for%20GM1%20Gangliosidosis) PBGM01 is an AAVhu68-based gene therapy for infantile GM1 gangliosidosis, showing promising preclinical results and cleared for a Phase 1/2 trial in Q1 2021 - PBGM01 utilizes an AAVhu68 capsid to deliver the GLB1 gene via ICM injection to treat infantile GM1, a rapidly progressive neurodegenerative disease with a life expectancy of **two to four years**[24](index=24&type=chunk)[49](index=49&type=chunk) - In a GLB1 knockout mouse model, PBGM01 treatment led to increased β-gal enzyme activity in the brain, CSF, and peripheral organs, normalized brain abnormalities, improved neurological function (gait), and significantly increased survival[58](index=58&type=chunk)[72](index=72&type=chunk)[77](index=77&type=chunk) - A 120-day NHP toxicology study found ICM administration of PBGM01 to be well-tolerated, with high gene transfer to the brain and spinal cord, though the primary adverse finding was asymptomatic degeneration of dorsal root ganglia (DRG) sensory neurons[90](index=90&type=chunk)[96](index=96&type=chunk) - The FDA cleared the IND for PBGM01 in December 2020, and the company received CTA approvals from the UK and Canada, with a Phase 1/2 trial set to begin in Q1 2021 and initial 30-day safety and biomarker data expected mid-year 2021[25](index=25&type=chunk)[102](index=102&type=chunk) [PBFT02 for Frontotemporal Dementia (FTD-GRN)](index=26&type=section&id=PBFT02%20for%20Frontotemporal%20Dementia%20(FTD-GRN)) PBFT02 is an AAV1-based gene therapy for FTD-GRN, showing preclinical efficacy in increasing PGRN levels and cleared for a Phase 1/2 trial in H1 2021 - PBFT02 is an AAV1-based gene therapy delivered via ICM injection to treat FTD-GRN, a form of early-onset dementia caused by a deficiency in the progranulin (PGRN) protein[26](index=26&type=chunk)[110](index=110&type=chunk)[111](index=111&type=chunk) - In a GRN knockout mouse model, PBFT02 administration corrected key neuropathological features, including reducing lipofuscin accumulation and neuroinflammation[131](index=131&type=chunk) - NHP studies showed that the AAV1 vector resulted in robust PGRN expression in the CSF, over **50-fold higher** than normal human levels, with superior transduction of ependymal cells compared to other capsids[125](index=125&type=chunk)[126](index=126&type=chunk) - The FDA cleared the IND for PBFT02 in January 2021, with a Phase 1/2 dose-escalation trial planned to begin in the first half of 2021 and initial data expected in late 2021 or early 2022[150](index=150&type=chunk)[155](index=155&type=chunk) [PBKR03 for Krabbe Disease](index=36&type=section&id=PBKR03%20for%20Krabbe%20Disease) PBKR03 is an AAVhu68-based gene therapy for infantile Krabbe disease, demonstrating improved motor function and survival in preclinical models, and cleared for a Phase 1/2 trial in H1 2021 - PBKR03 is an AAVhu68-based gene therapy delivered via ICM injection to treat infantile Krabbe disease, a fatal disorder caused by mutations in the GALC gene, leading to widespread death of myelin-producing cells[27](index=27&type=chunk)[156](index=156&type=chunk)[157](index=157&type=chunk) - In a twitcher mouse model, PBKR03 administration improved clinical scores, motor coordination (rotarod test), and sciatic nerve histology compared to vehicle-treated mice[168](index=168&type=chunk)[170](index=170&type=chunk)[174](index=174&type=chunk) - In a Krabbe dog model, PBKR03-treated dogs maintained normal motor function, had normalized nerve conduction velocities, and showed increased survival compared to vehicle-treated dogs, which were euthanized due to disease progression[184](index=184&type=chunk)[190](index=190&type=chunk) - The FDA cleared the IND for PBKR03 in February 2021, with a Phase 1/2 dose-escalation trial planned to begin in the first half of 2021 and initial data expected in late 2021 or early 2022[212](index=212&type=chunk)[217](index=217&type=chunk) [Manufacturing, Competition, and Agreements](index=51&type=section&id=Manufacturing,%20Competition,%20and%20Agreements) The company leverages a platform manufacturing approach with Catalent, plans internal lab capabilities, faces competition in gene therapy, and operates under an exclusive license agreement with the University of Pennsylvania - The company has a collaboration with Catalent for cGMP manufacturing of clinical supplies in a dedicated suite and plans to open its own analytical lab in Q2 2021, with a long-term goal of building its own commercial manufacturing facility[227](index=227&type=chunk)[229](index=229&type=chunk)[231](index=231&type=chunk) - Key competitors include Sio Gene Therapies and Lysogene (GM1), Alector and Prevail Therapeutics (FTD-GRN), and Forge Biologics (Krabbe disease)[234](index=234&type=chunk)[235](index=235&type=chunk)[236](index=236&type=chunk) - The company's core technology is licensed from the University of Pennsylvania under an agreement covering up to **17 rare monogenic CNS indications**, including obligations for up to **$16.5 million** in development milestones and **$55.0 million** in commercial milestones per product, plus tiered mid-single-digit royalties[239](index=239&type=chunk)[244](index=244&type=chunk) [Intellectual Property and Government Regulation](index=54&type=section&id=Intellectual%20Property%20and%20Government%20Regulation) The company's intellectual property is based on in-licensed patents from the University of Pennsylvania, and its gene therapies are subject to extensive FDA regulation, with lead candidates receiving Orphan Drug and Rare Pediatric Disease Designations - The company's patent protection is derived from an exclusive license from the University of Pennsylvania for patent applications covering AAVhu68 capsids and specific rAAVs for treating GM1, Krabbe, FTD, and MLD[249](index=249&type=chunk)[250](index=250&type=chunk) - The company's products, as gene therapies, are regulated as biologics by the FDA and require a Biologics License Application (BLA) for approval, following extensive preclinical and clinical testing to establish safety and efficacy[256](index=256&type=chunk)[257](index=257&type=chunk) - PBGM01, PBFT02, and PBKR03 have received Orphan Drug Designation, which provides potential for **seven years of market exclusivity** upon approval, and PBGM01 and PBKR03 also received Rare Pediatric Disease Designation, making them eligible for a priority review voucher[108](index=108&type=chunk)[154](index=154&type=chunk)[216](index=216&type=chunk) [Risk Factors](index=68&type=section&id=Item%201A.%20Risk%20Factors) The company faces substantial risks including operating losses, high development risks for novel gene therapies, reliance on third parties, potential adverse side effects, and intellectual property challenges - The company has a history of operating losses of **$112.2 million in 2020** and will require substantial additional funding to advance its clinical programs, which may not be available on acceptable terms[317](index=317&type=chunk)[319](index=319&type=chunk)[324](index=324&type=chunk) - The business is highly dependent on the success of its early-stage product candidates, which are based on novel gene therapy technology with a lengthy, expensive, and uncertain development and regulatory approval process[338](index=338&type=chunk)[341](index=341&type=chunk)[351](index=351&type=chunk) - The company relies exclusively on its collaboration with the University of Pennsylvania for its preclinical pipeline and on third-party manufacturers like Catalent for clinical supply, making it vulnerable to disruptions in these relationships[380](index=380&type=chunk)[412](index=412&type=chunk) - Preclinical NHP studies for lead candidates have shown asymptomatic trigeminal and dorsal root ganglia (DRG) toxicity, an AAV platform risk that requires careful clinical monitoring and could impact future development[218](index=218&type=chunk)[354](index=354&type=chunk) - The company received a letter from Regenxbio Inc. in February 2020 claiming that the use of the AAVhu68 capsid infringes on its licensed patents, which could lead to litigation or require a license[463](index=463&type=chunk) [Properties](index=119&type=section&id=Item%202.%20Properties) The company is expanding its physical footprint with new executive offices in Philadelphia and a significant laboratory space in Hopewell, New Jersey - The company is expanding its physical footprint with a new approximately **37,000 sq. ft.** principal executive office in Philadelphia, PA, expected to commence in March 2021[573](index=573&type=chunk) - A new **15-year lease** for approximately **62,000 sq. ft.** of laboratory space at the Princeton West Innovation Campus in Hopewell, NJ, has been signed to support CMC and analytical capabilities[574](index=574&type=chunk) [Legal Proceedings](index=120&type=section&id=Item%203.%20Legal%20Proceedings) The company is not currently involved in any legal proceedings expected to have a material adverse effect on its business - As of the report date, the company is not involved in any material legal proceedings[576](index=576&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities](index=122&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters,%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock began trading on Nasdaq in February 2020, has not paid dividends, and raised approximately **$227.7 million** from its IPO - The company's common stock has been listed on The Nasdaq Global Market under the symbol **"PASG"** since its IPO on **February 28, 2020**[580](index=580&type=chunk) - The company has never paid cash dividends and intends to retain any future earnings to fund business operations and growth[582](index=582&type=chunk) - The company completed its IPO on March 9, 2020, raising net proceeds of approximately **$227.7 million**[584](index=584&type=chunk)[585](index=585&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=124&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) The company reported a net loss of **$112.2 million** in 2020, driven by increased R&D and G&A expenses, but maintains strong liquidity with **$304.8 million** in cash and equivalents as of year-end Results of Operations (2020 vs. 2019) | (in thousands) | 2020 | 2019 | Change | | :--- | :--- | :--- | :--- | | Research and development | $ 81,788 | $ 29,738 | $ 52,050 | | General and administrative | $ 30,114 | $ 6,951 | $ 23,163 | | **Loss from operations** | **$ (112,902)** | **$ (37,189)** | **$ (75,713)** | | **Net loss** | **$ (112,232)** | **$ (45,634)** | **$ (66,598)** | - The increase in R&D expenses was primarily driven by a **$24.7 million** increase in clinical manufacturing costs, a **$6.6 million** increase in preclinical R&D, and a **$12.5 million** increase in personnel-related costs as the company prepared for its clinical trials[614](index=614&type=chunk) - The increase in G&A expenses was mainly due to a **$15.3 million** increase in personnel and share-based compensation from higher headcount, along with higher professional fees and facility costs to support expanded operations[617](index=617&type=chunk) - As of December 31, 2020, the company had **$304.8 million** in cash, cash equivalents, and marketable securities, with a follow-on offering in January 2021 adding net proceeds of **$165.9 million**[594](index=594&type=chunk)[621](index=621&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=135&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's market risk is primarily interest rate sensitivity on its marketable securities, considered minimal due to short-term, low-risk investments, with immaterial foreign currency exposure - The primary market risk is interest rate sensitivity on the company's **$304.8 million** portfolio of cash, cash equivalents, and marketable securities, which is considered minimal due to the short-term nature of the investments[658](index=658&type=chunk)[659](index=659&type=chunk) - Exposure to foreign currency exchange rate risk is not material, as the majority of expenditures are denominated in U.S. dollars[660](index=660&type=chunk) [Financial Statements and Supplementary Data](index=136&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the audited financial statements for Passage Bio, Inc. for 2020 and 2019, including Balance Sheets, Statements of Operations, and Cash Flows, with an unqualified opinion from KPMG LLP Key Balance Sheet Data (as of Dec 31, 2020) | (in thousands) | Amount | | :--- | :--- | | **Assets** | | | Cash and cash equivalents | $ 135,002 | | Marketable securities | $ 169,815 | | Total Assets | $ 328,007 | | **Liabilities & Equity** | | | Total Liabilities | $ 23,293 | | Total Stockholders' Equity | $ 304,714 | Key Statement of Operations Data (Year ended Dec 31, 2020) | (in thousands) | Amount | | :--- | :--- | | Research and development | $ 81,788 | | General and administrative | $ 30,114 | | **Loss from operations** | **$ (112,902)** | | **Net loss** | **$ (112,232)** | Key Cash Flow Data (Year ended Dec 31, 2020) | (in thousands) | Amount | | :--- | :--- | | Cash used in operating activities | $ (80,520) | | Cash used in investing activities | $ (172,106) | | Cash provided by financing activities | $ 228,754 | [Controls and Procedures](index=157&type=section&id=Item%209A.%20Controls%20and%20Procedures) As a newly public company, Passage Bio is not yet required to provide management's assessment or auditor attestation on internal controls over financial reporting until the 2021 Annual Report - The company is not yet required to provide a management assessment or auditor attestation on internal control over financial reporting due to its status as a newly public company[773](index=773&type=chunk) - The first management report on internal controls will be required for the fiscal year ending **December 31, 2021**[773](index=773&type=chunk) Part III [Directors, Executive Compensation, Security Ownership, and Related Transactions](index=159&type=section&id=Item%2010,%2011,%2012,%2013,%2014) Information for Items 10-14, covering directors, executive compensation, security ownership, and related transactions, is incorporated by reference from the company's forthcoming 2021 Proxy Statement - Information regarding directors, executive officers, corporate governance, executive compensation, security ownership, related transactions, and principal accountant fees is incorporated by reference from the company's forthcoming **2021 Proxy Statement**[780](index=780&type=chunk)[782](index=782&type=chunk)[783](index=783&type=chunk)[785](index=785&type=chunk)[787](index=787&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=164&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists exhibits filed with the Form 10-K, including corporate governance documents and key agreements, with financial statement schedules omitted as not applicable - Financial statement schedules required by Item 15(a) are omitted because they are not applicable or the information is already included in the financial statements[790](index=790&type=chunk) - Key filed exhibits include corporate governance documents, material contracts such as the license agreement with the University of Pennsylvania and the manufacturing agreement with Catalent, and executive employment agreements[791](index=791&type=chunk)[792](index=792&type=chunk)

Fulfilling the Promise of Gene Therapies for Central Nervous System Disorders 39th Annual J.P. Morgan Healthcare Conference Bruce Goldsmith, PhD | CEO NASDAQ GS: PASG January 11, 2021 Forward-Looking Statement This presentation includes "forward-looking statements" within the meaning of, and made pursuant to the safe harbor provisions of, the Private Securities Litigation Reform Act of 1995, including, but not limited to: our expectation about timing and execution of anticipated milestones, including our pl ...

Passage Bio Corporate Presentation NOVEMBER 2020 Forward-Looking Statements This presentation includes "forward-looking statements" within the meaning of, and made pursuant to the safe harbor provisions of, the Private Securities Litigation Reform Act of 1995, including, but not limited to: our expectation about timing and execution of anticipated milestones, including our planned IND submissions and initiation of clinical trials; our expectations about our collaborators' and partners' ability to execute ke ...

Financial Data and Key Metrics Changes - The company ended the quarter with cash, cash equivalents, and marketable securities of approximately $336 million, compared to $159 million as of December 31, 2019, indicating strong financial health [36] - R&D expenses were $20.8 million for the quarter ended September 30, compared to $10.4 million for the same quarter in 2019, primarily due to increased clinical manufacturing and development costs [37] - G&A expenses increased to $7.8 million for the quarter ended September 30, compared to $1.2 million for the same quarter in 2019, driven by personnel-related costs and professional fees [39] - The net loss was $28.5 million for the third quarter of 2020, compared to $11.4 million in the same quarter of 2019, with a net loss per share of $0.63 compared to $2.02 in the prior year [40] Business Line Data and Key Metrics Changes - The company is focused on three lead programs: PBGM01 for GM1 gangliosidosis, PBFT02 for frontotemporal dementia, and PBKR03 for Krabbe disease, with plans to initiate clinical trials in early 2021 [10][25] - PBGM01 has received orphan drug and rare pediatric disease designations in the U.S. and orphan disease designation in Europe, highlighting its potential in addressing unmet medical needs [19][31] Market Data and Key Metrics Changes - The incidence of GM1 is predicted to be about 0.5 in 100,000 live births, translating to approximately 50 patients potentially diagnosed per year [58] - The company is actively engaging with patient advocacy groups and initiatives like the New York ScreenPlus pilot program to enhance patient identification and support for GM1 and Krabbe disease [22][54] Company Strategy and Development Direction - The company aims to provide life-transforming gene therapies for patients with rare, monogenic CNS diseases, leveraging partnerships with leading research institutions [8][9] - The completion of a dedicated GMP manufacturing suite is a strategic milestone to secure control of the supply chain and support clinical and commercial success [33] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in addressing FDA concerns regarding biocompatibility and anticipates initiating the Phase 1/2 trial for PBGM01 in the first quarter of 2021 [14][44] - The company is preparing for clinical trial initiations for FTD and Krabbe programs in the first half of 2021, with ongoing efforts to expand clinical manufacturing and operations teams [45] Other Important Information - The company has a robust pipeline with a total of 17 programs focused on rare, monogenic disorders of the CNS, supported by a strong financial position [11] - Recent preclinical data supports the potential of PBGM01 as a treatment for GM1, showing improvements in neurological function and increased survival in animal models [23] Q&A Session Summary Question: Plans for Invitae collaboration regarding Krabbe disease - Management indicated that while Krabbe is not currently included in the New York ScreenPlus, there are ongoing pilot programs in multiple states for Krabbe screening [54] Question: Expected patient identification from Invitae partnership - The company estimates that the incidence of GM1 is around 50 patients per year, but recognizes that underdiagnosis may increase this number through enhanced awareness and testing initiatives [58][59] Question: Impact of FDA discussions on filing plans for other diseases - Management confirmed that IND submissions for FTD and Krabbe are planned for early 2021, following the resolution of the clinical hold for GM1 [63]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ⌧ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2020 OR ◻ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission File Number: 001-39231 PASSAGE BIO, INC. (Exact Name of Registrant as Specified in its Charter) Delaware ...

Financial Data and Key Metrics Changes - The company ended the quarter with cash and cash equivalents of approximately $353 million, compared to $159 million as of December 31, 2019, indicating a strong cash position expected to fund operations into 2023 [38] - R&D expenses increased to $19.9 million for the quarter ended June 30, compared to $6.3 million for the same quarter in 2019, primarily due to increased clinical manufacturing costs and preparation for clinical trials [39] - G&A expenses rose to $7.4 million for the quarter ended June 30, compared to $1 million for the same quarter in 2019, driven by increased personnel-related costs and expanded operations [40] - The net loss for the second quarter of 2020 was $27.2 million, compared to $13.4 million in the same quarter of 2019, with a net loss per share of $0.60 compared to $3.19 in the prior year [42] Business Line Data and Key Metrics Changes - The company is advancing its lead program PBGM01 for the treatment of infantile GM1 gangliosidosis, with an IND submission to the FDA in June 2020, although it is currently on clinical hold due to device biocompatibility concerns [12][14] - The company is preparing for clinical trials for its other programs, including PBFT02 for frontotemporal dementia and PBKR03 for infantile Krabbe disease, with plans to initiate trials in the first half of 2021 [28][35] Market Data and Key Metrics Changes - The company is focused on rare, monogenetic CNS disorders, which represent a significant unmet medical need, and is working to establish a global clinical supply chain for its gene therapy programs [25][27] Company Strategy and Development Direction - The company aims to build a premier gene therapy company focused on rare CNS disorders and is expanding its internal team to enhance clinical and manufacturing capabilities [8][10] - The strategy includes securing a dedicated manufacturing suite to control the supply chain and support clinical and commercial success [26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in addressing FDA concerns regarding the biocompatibility of the delivery device and anticipates enrolling the first patient in the Phase 1/2 trial of PBGM01 by late 2020 or early 2021 [17][46] - The company remains on track to report initial biomarker and safety data in the first half of 2021 and is excited about the potential of its pipeline candidates [47] Other Important Information - The company has secured clinical stage manufacturing capacity and is working with external experts to evaluate options for additional risk assessment and testing related to the FDA's clinical hold [16][25] Q&A Session Summary Question: Clarification on the proposed ICM device components and FDA discussions - Management clarified that the components of the proposed ICM device are similar to those used in other clinical studies, and the current discussions with the FDA are specific to the GM1 IND filing [51][53] Question: Competitive dynamics of the FTD program - Management highlighted differentiation in their FTD program through the use of AAV1, which can significantly increase progranulin levels compared to other approaches, potentially stabilizing the disease [58][61] Question: Immunosuppression plans for clinical trials - Management indicated that a prophylactic immunosuppression regimen will begin with steroid treatment, with adjustments possible based on emerging data from ongoing studies [66][68] Question: Additional testing required by the FDA - Management noted that the additional testing relates to biocompatibility and that they are preparing for various risk assessments and testing as required by the FDA [70][71] Question: DRG or sensory testing in the Phase 1/2 trial - Management confirmed that they will monitor nerve conduction in the GM1 study to detect any changes, following assessments in non-human primates [73]

Part I. Financial Information [Item 1. Interim Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Interim%20Financial%20Statements%20%28Unaudited%29) Unaudited interim financial statements for June 30, 2020, reflect asset growth from the March 2020 IPO, continued net losses, and increased operating expenses [Balance Sheets](index=4&type=section&id=Balance%20Sheets) The balance sheets show a substantial increase in cash and total assets, driven by the IPO, and a shift from deficit to equity Balance Sheet Summary (as of June 30, 2020 vs. December 31, 2019) | Metric | June 30, 2020 (in thousands) | December 31, 2019 (in thousands) | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $353,423 | $158,874 | | Total current assets | $368,230 | $165,775 | | Total assets | $378,097 | $178,613 | | **Liabilities & Equity** | | | | Total current liabilities | $14,134 | $3,681 | | Total liabilities | $14,701 | $4,261 | | Total convertible preferred stock | $0 | $230,605 | | Total stockholders' equity (deficit) | $363,396 | $(56,253) | - The significant increase in cash and cash equivalents from **$158.9 million** to **$353.4 million** is primarily due to the net proceeds from the company's **IPO in March 2020**[14](index=14&type=chunk)[29](index=29&type=chunk) - All convertible preferred stock was converted to common stock upon the IPO, resulting in a shift from a stockholders' deficit of **$56.3 million** to a stockholders' equity of **$363.4 million**[14](index=14&type=chunk)[19](index=19&type=chunk) [Statements of Operations](index=5&type=section&id=Statements%20of%20Operations) Statements of operations show increased R&D and G&A expenses, leading to higher net losses for the three and six months ended June 30, 2020 Statements of Operations Summary (Unaudited) | Metric (in thousands) | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $19,902 | $6,299 | $33,019 | $9,332 | | General and administrative | $7,402 | $968 | $12,197 | $2,122 | | Loss from operations | $(27,304) | $(7,767) | $(45,216) | $(11,954) | | Net loss | $(27,172) | $(13,426) | $(44,757) | $(21,095) | | Net loss per share | $(0.60) | $(3.19) | $(1.42) | $(5.02) | - Research and development expenses for the six months ended June 30, 2020, increased to **$33.0 million** from **$9.3 million** in the prior year period, driven by preparations for IND filings and clinical trials[17](index=17&type=chunk)[127](index=127&type=chunk) - General and administrative expenses for the six months ended June 30, 2020, rose to **$12.2 million** from **$2.1 million** year-over-year, primarily due to increased headcount and costs associated with operating as a public company[17](index=17&type=chunk)[131](index=131&type=chunk) [Statements of Cash Flows](index=8&type=section&id=Statements%20of%20Cash%20Flows) Cash flow statements highlight a significant increase in cash from financing activities, primarily the IPO, offsetting increased cash used in operations Cash Flow Summary (Six Months Ended June 30) | Metric (in thousands) | 2020 | 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | $(33,566) | $(10,994) | | Net cash used in investing activities | $(193) | $(1,541) | | Net cash provided by financing activities | $228,308 | $66,463 | | **Net increase in cash** | **$194,549** | **$53,928** | - Financing activities provided **$228.3 million** in cash for the first six months of 2020, primarily from the net proceeds of the company's **IPO**[24](index=24&type=chunk)[144](index=144&type=chunk) - Net cash used in operating activities increased to **$33.6 million** for the first six months of 2020, up from **$11.0 million** in the same period of 2019, reflecting the increased net loss and operational scale-up[24](index=24&type=chunk)[141](index=141&type=chunk) [Notes to Unaudited Interim Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Interim%20Financial%20Statements) Notes detail the company's focus on genetic medicines, the impact of its March 2020 IPO, significant financial commitments, and a patent infringement claim - The company is a **genetic medicines company** focused on **rare monogenic CNS diseases**, with a strategic research collaboration with the **University of Pennsylvania's (Penn) Gene Therapy Program (GTP)**[27](index=27&type=chunk) - In **March 2020**, the company closed its **IPO**, raising net proceeds of **$227.5 million**[29](index=29&type=chunk)[67](index=67&type=chunk) - The company has significant commitments, including an amended agreement with Penn requiring **$5.0 million annually** for five years for discovery research, and an annual minimum commitment of **$10.6 million** to Catalent for manufacturing for five years upon validation of the clean room[53](index=53&type=chunk)[59](index=59&type=chunk) - In February 2020, the company received a letter from **Regenxbio Inc.** claiming potential **patent infringement** related to the AAVhu68 capsid and ICM administration method. The company believes it has valid defenses[66](index=66&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's focus on rare CNS genetic disorders, pipeline progress, strengthened financial position from the IPO, and increased R&D and G&A expenses [Overview and Pipeline](index=19&type=section&id=Overview%20and%20Pipeline) The company focuses on genetic medicines for rare CNS disorders, with key programs like PBGM01, PBFT02, and PBKR03 advancing towards clinical trials - The company is focused on developing **genetic medicines** for **rare, monogenic CNS disorders**, leveraging a strategic collaboration with the **University of Pennsylvania's Gene Therapy Program (GTP)**[86](index=86&type=chunk) Development Pipeline and Key Milestones | Program | Indication | Status | Anticipated Milestone | | :--- | :--- | :--- | :--- | | PBGM01 | GM1 Gangliosidosis | IND-enabling | Initiate Phase 1/2 trial in 4Q 2020 - 1Q 2021 | | PBFT02 | Frontotemporal Dementia (FTD-GRN) | IND-enabling | Initiate Phase 1/2 trial in 1H 2021 | | PBKR03 | Krabbe Disease | IND-enabling | Initiate Phase 1/2 trial in 1H 2021 | | PBML04 | Metachromatic leukodystrophy (MLD) | Discovery | - | | PBAL05 | Amyotrophic lateral sclerosis (ALS) | Discovery | - | | PBCM06 | Charcot-Marie-Tooth Type 2A (CMT2A) | Discovery | - | - In July 2020, the FDA placed the IND for **PBGM01** on **clinical hold** pending additional biocompatibility risk assessments of the proposed ICM delivery device. The company is confident it can respond rapidly and expects to initiate the trial in late 2020 or early 2021[89](index=89&type=chunk)[91](index=91&type=chunk) [Results of Operations](index=25&type=section&id=Results%20of%20Operations) Results of operations show substantial increases in R&D and G&A expenses for the six months ended June 30, 2020, reflecting operational scale-up - For the six months ended June 30, 2020, R&D expenses increased by **$23.7 million** to **$33.0 million** compared to the same period in 2019. This was driven by increased costs with Penn for IND filings, clinical manufacturing, and higher personnel-related costs[127](index=127&type=chunk) - For the six months ended June 30, 2020, G&A expenses increased by **$10.1 million** to **$12.2 million** year-over-year, primarily due to a **$6.9 million** increase in personnel-related and share-based compensation expense and increased costs of operating as a public company[131](index=131&type=chunk) R&D Expenses by Program (Six Months Ended June 30) | Program (in thousands) | 2020 | 2019 | | :--- | :--- | :--- | | GM1 | $7,509 | $1,522 | | FTD-GRN | $8,563 | $4,261 | | Krabbe | $6,154 | $972 | | MLD | $1,227 | $791 | | ALS | $541 | $686 | | CMT2A | $338 | $0 | | Internal costs, including personnel | $8,687 | $1,100 | | **Total** | **$33,019** | **$9,332** | [Liquidity and Capital Resources](index=27&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity was significantly bolstered by the March 2020 IPO, providing a cash runway into the first quarter of 2023 - As of June 30, 2020, the company had **$353.4 million** in cash and cash equivalents[134](index=134&type=chunk) - The company received net proceeds of **$227.5 million** from its **IPO** in the first quarter of 2020[134](index=134&type=chunk) - Existing cash and cash equivalents are expected to fund operating expenses and capital expenditure requirements into the **first quarter of 2023**[99](index=99&type=chunk)[134](index=134&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=30&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company states that quantitative and qualitative disclosures about market risk are not applicable, indicating no material exposure - The company states that quantitative and qualitative disclosures about market risk are **not applicable**[152](index=152&type=chunk) [Item 4. Controls and Procedures](index=31&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2020, with no material changes in internal control over financial reporting - Management concluded that as of June 30, 2020, the company's disclosure controls and procedures were **effective** at a reasonable assurance level[154](index=154&type=chunk) - **No changes** in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[155](index=155&type=chunk) Part II. Other Information [Item 1. Legal Proceedings](index=32&type=section&id=Item%201.%20Legal%20Proceedings) The company reports no current legal proceedings that would have a material adverse effect on its business - The company reports it is **not presently a party** to any legal proceedings that would have a **material adverse effect** on its business[158](index=158&type=chunk) [Item 1A. Risk Factors](index=32&type=section&id=Item%201A.%20Risk%20Factors) The company faces extensive risks including operating losses, need for capital, preclinical development uncertainties, COVID-19 impacts, reliance on third parties, and intellectual property disputes [Risks Related to Financial Position and Need for Additional Capital](index=32&type=section&id=Risks%20Related%20to%20Our%20Financial%20Position%20and%20Need%20for%20Additional%20Capital) The company, a preclinical stage entity, has a history of operating losses and will require substantial additional capital for future development - The company is a **preclinical stage entity** with a history of **operating losses** (**$103.4 million accumulated deficit** as of June 30, 2020) and expects to incur significant losses for the foreseeable future[160](index=160&type=chunk)[161](index=161&type=chunk) - The company will require **substantial additional capital** to complete development and commercialization of its product candidates, and failure to obtain this funding may force delays, limitations, or termination of its programs[166](index=166&type=chunk) [Risks Related to Product Development and Regulatory Approval](index=35&type=section&id=Risks%20Related%20to%20Product%20Development%20and%20Regulatory%20Approval) Product development faces risks from the COVID-19 pandemic, preclinical stage uncertainties, and the novel, unpredictable nature of gene therapy regulatory approval - The **COVID-19 pandemic** could **adversely impact** the business, including preclinical development and planned clinical trials, through delays in operations of regulatory agencies, CROs, and CMOs[173](index=173&type=chunk)[174](index=174&type=chunk) - All product candidates are in **preclinical development**, and their success is **uncertain**. The IND for PBGM01 has been placed on **clinical hold** by the FDA, which must be resolved before the trial can commence[179](index=179&type=chunk)[185](index=185&type=chunk) - Gene therapy is a **novel technology**, making it **difficult to predict** the time and cost of development and regulatory approval. Only a limited number of gene therapy products have been approved to date[196](index=196&type=chunk) [Risks Related to Our Reliance on Third Parties](index=46&type=section&id=Risks%20Related%20to%20Our%20Reliance%20on%20Third%20Parties) The company's reliance on third parties, particularly the University of Pennsylvania for R&D and CROs for clinical trials, poses significant operational risks - The company relies **exclusively on its collaboration** with the **University of Pennsylvania (Penn)** for all preclinical research and development. A failure or termination of this relationship would **materially harm** the business[222](index=222&type=chunk)[223](index=223&type=chunk) - The company will rely on **third-party CROs** to conduct clinical trials, which means important aspects of development programs, including conduct and timing, will be **outside of its direct control**[226](index=226&type=chunk)[228](index=228&type=chunk) [Risks Related to Manufacturing](index=51&type=section&id=Risks%20Related%20to%20Manufacturing) Manufacturing gene therapies is complex, and the company's reliance on third parties like Catalent for supply, without commercial capabilities, presents significant risks - Gene therapies are **complex and difficult to manufacture**. The company relies on third parties like **Catalent** for clinical supply and may face **delays, contamination, or other problems**[245](index=245&type=chunk) - The company has **not yet secured manufacturing capabilities for commercial quantities** and may be unable to negotiate binding agreements with manufacturers on commercially reasonable terms[252](index=252&type=chunk)[253](index=253&type=chunk) [Risks Related to Intellectual Property](index=57&type=section&id=Risks%20Related%20to%20Intellectual%20Property) Intellectual property risks include reliance on in-licensed patent applications, a patent infringement claim from Regenxbio, and potential government 'march-in' rights - The company's intellectual property protection consists solely of **patent applications in-licensed from Penn**, and there is **no assurance** these will mature into issued patents with sufficient scope[279](index=279&type=chunk) - The company received a letter from **Regenxbio Inc.** in February 2020 claiming that the use of the AAVhu68 capsid and ICM administration method infringes on patents licensed to Regenx. An unfavorable outcome could require the company to obtain a license, which may not be available on reasonable terms[303](index=303&type=chunk)[304](index=304&type=chunk) - Intellectual property licensed from Penn may be subject to **federal regulations**, including **"march-in" rights** by the U.S. government, due to being developed with government funding[330](index=330&type=chunk) [Risks Related to Ownership of Our Common Stock](index=77&type=section&id=Risks%20Related%20to%20Ownership%20of%20Our%20Common%20Stock) Risks related to common stock ownership include price volatility, significant influence by principal stockholders, and reduced disclosure requirements as an emerging growth company - The company's stock price is likely to be **volatile**, influenced by factors such as clinical trial results, regulatory decisions, and competitor success[381](index=381&type=chunk) - As of June 30, 2020, executive officers, directors, and principal stockholders beneficially owned approximately **38%** of the company's capital stock, giving them **significant influence** over corporate matters[385](index=385&type=chunk) - The company is an **"emerging growth company"** and **"smaller reporting company,"** which allows for **reduced disclosure requirements** that may make its common stock less attractive to some investors[395](index=395&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=83&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reports no unregistered equity sales and confirms its Q1 2020 IPO raised $227.5 million, with no material change in the planned use of proceeds - In **Q1 2020**, the company completed its **IPO**, selling 13,798,900 shares of common stock at $18.00 per share, for net proceeds of approximately **$227.5 million**[410](index=410&type=chunk) - There has been **no material change** in the planned use of proceeds from the IPO as described in the prospectus[411](index=411&type=chunk)

Passage Bio Corporate Presentation JUNE 2020 Forward-Looking Statements This presentation includes "forward-looking statements" within the meaning of, and made pursuant to the safe harbor provisions of, the Private Securities Litigation Reform Act of 1995, including, but not limited to: our expectation about timing and execution of anticipated milestones, including our planned IND submissions and initiation of clinical trials; our expectations about our collaborators' and partners' ability to execute key in ...