Passage BIO(PASG) - 2020 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Interim Financial Statements (Unaudited) Passage Bio, Inc. reported a net loss for Q1 2020, with cash significantly increasing from its IPO and an accumulated deficit growing Balance Sheets Balance Sheet Summary (in thousands) | Account | March 31, 2020 (in thousands) | December 31, 2019 (in thousands) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $366,828 | $158,874 | | Total current assets | $382,089 | $165,775 | | Total assets | $392,427 | $178,613 | | Liabilities & Equity | | | | Total liabilities | $5,761 | $4,261 | | Total convertible preferred stock | $0 | $230,605 | | Total stockholders' equity (deficit) | $386,666 | $(56,253) | | Total liabilities, convertible preferred stock and stockholders' equity (deficit) | $392,427 | $178,613 | - The company's cash and cash equivalents increased significantly from $158.9 million at the end of 2019 to $366.8 million as of March 31, 2020, primarily due to its IPO[15] - Following the IPO in March 2020, all outstanding convertible preferred stock was converted into common stock, resulting in the total convertible preferred stock balance decreasing from $230.6 million to zero[15] Statements of Operations Statements of Operations Summary (in thousands, except per share data) | Account | Three Months Ended March 31, 2020 (in thousands) | Three Months Ended March 31, 2019 (in thousands) | | :--- | :--- | :--- | | Research and development | $13,117 | $3,033 | | General and administrative | $4,795 | $1,154 | | Loss from operations | $(17,912) | $(4,187) | | Net loss | $(17,585) | $(7,669) | | Net loss per share, basic and diluted | $(1.00) | $(1.83) | - Research and development expenses increased more than fourfold to $13.1 million in Q1 2020 from $3.0 million in Q1 2019, reflecting intensified development activities[18] Statements of Cash Flows Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2020 (in thousands) | Three Months Ended March 31, 2019 (in thousands) | | :--- | :--- | :--- | | Net cash used in operating activities | $(21,851) | $(214) | | Net cash used in investing activities | $(99) | $(884) | | Net cash provided by financing activities | $229,904 | $20,157 | | Net increase in cash and cash equivalents | $207,954 | $19,059 | - Financing activities provided $229.9 million in cash during Q1 2020, primarily from the net proceeds of the company's IPO[22] Notes to Unaudited Interim Financial Statements - The company is a genetic medicines company focused on rare monogenic central nervous system (CNS) diseases, with key strategic collaborations with the University of Pennsylvania's (Penn) Gene Therapy Program (GTP) and Catalent for manufacturing[25] - In March 2020, the company completed its IPO, selling 13,798,900 shares of common stock for net proceeds of $227.5 million[27][67] - In May 2020, the company amended its agreement with Penn, committing to fund discovery research at $5.0 million annually for five years and increasing its options for additional licensed programs from six to eleven[53] - The company has an annual minimum commitment of $10.6 million per year for five years to Catalent for manufacturing services and use of a dedicated clean room suite[59] - In February 2020, the company received a letter from Regenxbio Inc. claiming potential patent infringement related to the AAVhu68 capsid and administration method, which the company believes it has valid defenses against[64][66] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's rare CNS disorder focus, pipeline, increased R&D expenses, and strengthened IPO-driven liquidity, with programs on track Overview and Pipeline - Passage Bio is a genetic medicines company focused on rare, monogenic CNS disorders, leveraging a strategic research collaboration with the University of Pennsylvania's Gene Therapy Program (GTP)[86] - The lead product candidates are PBGM01 for GM1 gangliosidosis, PBFT02 for frontotemporal dementia (FTD-GRN), and PBKR03 for Krabbe disease, with IND submissions and Phase 1/2 trials planned for 2020 and early 2021[89][90][91] - The company also has three discovery-stage programs and options to license an additional eleven programs for rare, monogenic CNS indications from Penn[92] Results of Operations Comparison of Operating Expenses (in thousands) | Expense Category | Three Months Ended March 31, 2020 (in thousands) | Three Months Ended March 31, 2019 (in thousands) | Change (in thousands) | | :--- | :--- | :--- | :--- | | Research and development | $13,117 | $3,033 | $10,084 | | General and administrative | $4,795 | $1,154 | $3,641 | - The $10.1 million increase in R&D expenses was primarily due to a $4.8 million increase in costs with Penn for IND filing preparations, a $2.9 million increase in other research costs for upcoming clinical trials, and a $2.3 million increase in personnel-related costs[118] Research and Development Expenses by Program (in thousands) | Program | Three Months Ended March 31, 2020 (in thousands) | Three Months Ended March 31, 2019 (in thousands) | | :--- | :--- | :--- | | GM1 | $2,410 | $541 | | FTD-GRN | $3,456 | $1,670 | | Krabbe | $2,252 | $264 | | MLD | $890 | $233 | | ALS | $249 | $153 | | CMT2A | $211 | $0 | | Internal costs, including personnel related | $3,649 | $172 | - General and administrative expenses rose by $3.6 million, mainly due to a $2.2 million increase in personnel and share-based compensation from increased headcount, and higher professional fees and facility costs[120][121] Liquidity and Capital Resources - As of March 31, 2020, the company had $366.8 million in cash and cash equivalents and an accumulated deficit of $76.2 million[124] - The company received net proceeds of $227.5 million from its IPO in Q1 2020[124] - Existing cash and cash equivalents are expected to fund operating expenses and capital expenditure requirements into the first quarter of 2023[124] Summary of Cash Flows (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2020 (in thousands) | Three Months Ended March 31, 2019 (in thousands) | | :--- | :--- | :--- | | Cash used in operating activities | $(21,851) | $(214) | | Cash used in investing activities | $(99) | $(884) | | Cash provided by financing activities | $229,904 | $20,157 | Quantitative and Qualitative Disclosures About Market Risk This section is noted as 'Not applicable', as the company, a smaller reporting entity, is not required to provide this information - The company has indicated that this section is not applicable[141] Controls and Procedures Management concluded disclosure controls were effective as of March 31, 2020, with no material changes in internal control over financial reporting - Management concluded that as of March 31, 2020, the company's disclosure controls and procedures were effective at a reasonable assurance level[142] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[143] PART II. OTHER INFORMATION Legal Proceedings The company is not currently a party to any legal proceedings that would materially adversely affect its business - The company is not presently a party to any legal proceedings that management believes would have a material adverse effect on the business[146] Risk Factors The company faces extensive risks including its preclinical stage, operating losses, need for capital, gene therapy development challenges, third-party dependencies, and intellectual property disputes - The company is a preclinical stage entity with a history of operating losses ($76.2 million accumulated deficit as of March 31, 2020) and will require substantial additional funding to advance its product candidates[148][149][154] - The COVID-19 pandemic could adversely impact business operations, including preclinical development activities and planned clinical trials, by causing delays in supply chains, regulatory reviews, and patient enrollment[161][162] - The business is critically dependent on its collaboration with the University of Pennsylvania (Penn) for all preclinical research and development, and any failure or termination of this relationship would materially harm the business[212][213] - The company faces intellectual property risks, including a claim from Regenxbio Inc. that the use of the AAVhu68 capsid infringes on its licensed patents, which could require a license or cessation of technology use[297][298] - Gene therapy is a novel and complex technology, making it difficult to manufacture and predict development timelines and costs, with the company relying on third-party manufacturer Catalent for clinical supply[183][241] Unregistered Sales of Equity Securities and Use of Proceeds The company detailed pre-IPO stock option issuances, preferred stock conversion upon IPO, and the use of $227.5 million in net IPO proceeds - Prior to its IPO, the company issued stock options to purchase an aggregate of 3,470,051 shares of common stock to employees, directors, and consultants under its equity incentive plans[404] - The IPO in Q1 2020 yielded net proceeds of approximately $227.5 million after deducting underwriting discounts, commissions, and other offering expenses[406] - There has been no material change in the planned use of IPO proceeds as described in the company's prospectus[407] Exhibits This section lists all exhibits filed with the Form 10-Q, including key agreements and officer certifications - Key agreements filed as exhibits include the Development Services and Clinical Supply Agreement with Catalent Maryland, Inc. and a new lease agreement for office space in Philadelphia[414] - The filing includes required certifications from the Principal Executive Officer and Principal Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[415]