Passage BIO(PASG) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the unaudited interim financial statements and management's analysis for the period ended June 30, 2025 Item 1. Interim Financial Statements (Unaudited) The unaudited interim financial statements for June 30, 2025, report a net loss of $24.8 million and total assets of $79.2 million Balance Sheets Total assets decreased to $79.2 million by June 30, 2025, with cash increasing to $57.6 million and equity declining Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $57,626 | $37,573 | | Marketable securities | $0 | $39,183 | | Total current assets | $60,315 | $78,815 | | Total assets | $79,198 | $102,412 | | Liabilities & Equity | | | | Total liabilities | $40,940 | $41,151 | | Total stockholders' equity | $38,258 | $61,261 | | Accumulated deficit | $(684,025) | $(659,235) | Statements of Operations and Comprehensive Loss Net loss improved to $9.4 million for Q2 2025 and $24.8 million for six months, due to lower operating expenses Operating Results (in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $5,814 | $10,430 | $13,551 | $21,965 | | General and administrative | $4,520 | $6,510 | $10,605 | $13,025 | | Impairment of long-lived assets | $0 | $438 | $2,637 | $438 | | Loss from operations | $(10,334) | $(17,378) | $(26,793) | $(35,428) | | Net loss | $(9,385) | $(15,991) | $(24,790) | $(32,702) | | Net loss per share | $(2.96) | $(5.09) | $(7.83) | $(10.87) | Statements of Stockholders' Equity Stockholders' equity decreased to $38.3 million by June 30, 2025, primarily due to a $24.8 million net loss - Total stockholders' equity decreased by $22.9 million in the first six months of 2025, mainly due to the net loss of $24.8 million[19] Statements of Cash Flows Net cash used in operations was $20.2 million, with investing activities providing $40.2 million, increasing cash to $57.6 million Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(20,177) | $(32,065) | | Net cash provided by investing activities | $40,216 | $26,299 | | Net cash provided by financing activities | $14 | $8,827 | | Net increase in cash | $20,053 | $3,061 | | Cash at end of period | $57,626 | $24,770 | Notes to Unaudited Interim Financial Statements Notes detail the company's focus on neurodegenerative therapies, recurring losses, $684.0 million accumulated deficit, and a 12-month cash runway - The company is a clinical-stage genetic medicines company focused on neurodegenerative diseases, with its lead candidate being PBFT02 for frontotemporal dementia (FTD-GRN)[25] - As of June 30, 2025, the company had an accumulated deficit of $684.0 million but expects its current cash and cash equivalents to be sufficient to fund operations for at least the next 12 months[26][30][31] - A 1-for-20 reverse stock split was effected on July 14, 2025, to regain Nasdaq compliance, with all share and per-share data retroactively adjusted[34][118] - In January 2025, the company reduced its workforce by 55% and ceased lab operations, incurring $1.7 million in severance and a $2.6 million impairment charge[47][85][86] - The company out-licensed three programs to Gemma Biotherapeutics, receiving $9.7 million in payments recorded as a liability pending revenue recognition[81][84] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses PBFT02, reduced operating losses, a $57.6 million cash runway into Q1 2027, and strategic business developments Overview and Pipeline The company focuses on neurodegenerative genetic medicines, with lead candidate PBFT02 for FTD-GRN, and out-licensed three pediatric programs - The lead clinical product candidate is PBFT02, a gene therapy for FTD-GRN, showing robust increases in CSF progranulin (PGRN) levels in the upliFT-D trial[140][149] - Development of PBFT02 is expanding to FTD-C9orf72 and ALS, with positive regulatory feedback on the clinical pathway[141][153][159] - Three pediatric programs (for GM1, Krabbe disease, and MLD) have been out-licensed to Gemma Biotherapeutics[142] Results of Operations Operating results improved, with net loss decreasing to $9.4 million for Q2 2025 and $24.8 million for H1 2025, due to reduced R&D and G&A Comparison of Operating Results (in thousands) | Period | Metric | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | R&D Expenses | $5,814 | $10,430 | $(4,616) | | | G&A Expenses | $4,520 | $6,510 | $(1,990) | | | Net Loss | $(9,385) | $(15,991) | $6,606 | | Six Months Ended June 30 | R&D Expenses | $13,551 | $21,965 | $(8,414) | | | G&A Expenses | $10,605 | $13,025 | $(2,420) | | | Net Loss | $(24,790) | $(32,702) | $7,912 | - The decrease in R&D expenses was primarily due to lower preclinical research costs, reduced wages and benefits from lower headcount, and decreased facility and manufacturing expenses following the cessation of lab operations in Hopewell, New Jersey[193][197][201] - An impairment charge of $2.6 million was recorded in the first six months of 2025 related to laboratory equipment that was subsequently sold[204] Liquidity and Capital Resources The company holds $57.6 million in cash, with a runway into Q1 2027, and reduced net cash used in operations to $20.2 million - The company's cash and cash equivalents of $57.6 million as of June 30, 2025, are expected to provide a cash runway into the first quarter of 2027[168][206] - Net cash used in operating activities decreased to $20.2 million for the first half of 2025 from $32.1 million in the first half of 2024, reflecting lower operating expenses[213][214][215] - The company has an ATM facility with $15.8 million of capacity remaining, though its use is limited by 'baby shelf' rules due to its public float[211][257] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company has indicated that quantitative and qualitative disclosures about market risk are not applicable - The company has indicated that quantitative and qualitative disclosures about market risk are not applicable[234] Item 4. Controls and Procedures Management concluded disclosure controls were effective as of June 30, 2025, with no material changes to internal controls - Management concluded that as of June 30, 2025, the company's disclosure controls and procedures were effective[235] - No material changes were made to the internal control over financial reporting during the quarter ended June 30, 2025[236] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, defaults, and other required disclosures Item 1. Legal Proceedings The company is involved in ongoing litigation with a former employee regarding a disputed settlement, with a favorable judgment under appeal - The company is involved in ongoing litigation with a former employee regarding a disputed settlement agreement from 2020[239] - A trial judge delivered a judgment in the company's favor in December 2024, finding no binding agreement was reached, with the plaintiff's appeal pending[115][239] Item 1A. Risk Factors The company faces significant financial, development, third-party reliance, commercialization, and regulatory risks, including losses and dependence on PBFT02 - Financial Risks: The company has a history of operating losses ($684.0 million accumulated deficit) and will need to raise additional capital, which may not be available on acceptable terms[242][245][253] - Development Risks: The business is dependent on its sole clinical candidate, PBFT02, with gene therapy development being lengthy, expensive, and uncertain[244][261][270] - Third-Party Reliance: The company relies on Gemma for preclinical research and Catalent for manufacturing, creating risks related to performance and disruptions[317][322][348] - Commercialization & Regulatory Risks: Significant competition, market acceptance, pricing, reimbursement, and a complex, evolving regulatory landscape pose substantial challenges[369][374][433] Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities The company reported no unregistered sales of equity securities during the reporting period - The company reported no unregistered sales of equity securities for the period[534] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - There were no defaults upon senior securities[536] Item 4. Mine Safety Disclosures Mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable[537] Item 5. Other Information No directors or officers adopted, modified, or terminated a Rule 10b5-1 trading plan during the quarter - No directors or officers adopted, modified, or terminated a Rule 10b5-1 trading plan during the quarter[538] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including license agreement amendments and SOX certifications - Filed exhibits include amendments to license agreements with Gemma Biotherapeutics, Inc. for the GM1, Krabbe, and MLD programs[541] - Certifications by the CEO and CFO as required by Sections 302 and 906 of the Sarbanes-Oxley Act are included as exhibits[541]