PASSAGE BIO, INC. You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q. In addition to historical financial information, this discussion and analysis contains forward-looking statements based upon current expectations that involve risks and uncertainties, such as statements of our plans, objectives, expectations, intentions and beliefs. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the section titled "Risk Factors" under Part II, Item 1A below.
Overview and Pipeline
We are a clinical stage genetic medicines company focused on developing
transformative therapies for central nervous system, or CNS, disorders. Our
vision is to finally fulfill the promise of gene therapy by developing
groundbreaking therapies that transform the lives of patients with CNS diseases.
The field of genetic medicine is rapidly expanding and we believe we have a
differentiated approach to developing treatments for CNS disorders that enables
us to select and advance product candidates with a higher probability of
technical and regulatory success. We have entered into a strategic research
collaboration with the Trustees of the
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* 10 additional CNS pipeline license options.
† Program includes ongoing natural history study of infantile and juvenile GM1 gangliosidosis patients.
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PBGM01 for the Treatment of GM1
We are currently developing PBGM01, which utilizes a proprietary, next-generation AAVhu68 capsid to deliver to the brain and peripheral tissues a functional GLB1 gene encoding ?-gal for infantile GM1. Infantile GM1 is the most common and severe form of GM1 gangliosidosis, or GM1, in which patients have mutations in the GLB1 gene that produce little or no residual ?-gal enzyme activity. ?-gal is an enzyme that catalyzes the first step in the natural degradation of GM1 ganglioside. Reduced ?-gal activity results in the accumulation of toxic levels of GM1 ganglioside in neurons throughout the brain, causing rapidly progressive neurodegeneration, with a life expectancy of two to four years. Currently, there are no disease-modifying therapies approved for the treatment of GM1. Early onset infantile GM1 is characterized by onset in the first 6 months of life, while late onset infantile GM1 is characterized by onset between 6 and 24 months. We believe PBGM01 may provide patients with significantly improved outcomes. In NHP studies, we have observed meaningful transduction of both the CNS and peripheral organs critical for GM1 patients. We are conducting clinical trials using an intra cisterna magna, or ICM, method of administration, which involves an injection at the craniocervical junction.
In
The FDA has granted Orphan Drug Designation, or ODD, Rare Pediatric Disease
Designation, or RPDD, and Fast Track Designation, to PBGM01 for the treatment of
GM1. The
We have manufactured the PBGM01 clinical supply and have established a clinical
supply chain to support the global clinical trial, including in
PBFT02 for the Treatment of FTD-GRN
We are currently developing PBFT02, which utilizes an AAV1 capsid to deliver to the brain a functional granulin, or GRN, a gene encoding for progranulin, or PGRN, for the treatment of frontotemporal dementia caused by progranulin deficiency, or FTD-GRN. FTD-GRN is an inheritable form of FTD in which patients have mutations in the GRN gene, causing a deficiency in PGRN. PGRN is a complex and highly conserved protein thought to have multiple roles in cell biology, development and inflammation. Emerging evidence suggests that PGRN's pathogenic contribution to FTD and other neurodegenerative disorders relates to a critical role in lysosomal function. Currently, there are no disease-modifying therapies approved for the treatment of FTD-GRN. We believe PBFT02 may provide patients with significantly improved outcomes. In a non-human primate, or NHP, model, we observed superior transduction results of the CNS using our ICM method of administration and an AAV1 capsid compared to other AAV capsids.
In
The FDA has granted ODD and Fast Track Designation to PBFT02 for the treatment
of FTD-GRN. In
We have manufactured the PBFT02 clinical supply to support clinical trial
initiation in
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PBKR03 for the Treatment of Krabbe disease
We are currently developing PBKR03, which utilizes a proprietary, next-generation AAVhu68 capsid to deliver to the brain and peripheral tissues a functional GALC gene encoding the hydrolytic enzyme galactosylceramidase for Krabbe disease. Krabbe disease is an autosomal recessive lysosomal storage disease caused by mutations in the GALC gene, which provides instructions for making an enzyme called galactosylceramidase, which breaks down certain fats, including galactosylceramide and psychosine. This results in the accumulation of galactolipids and psychosine, resulting in widespread death of myelin-producing cells in the CNS and in the peripheral nervous system, or PNS. Without myelin, nerves in the brain and other parts of the body cannot transmit signals properly, leading to the signs and symptoms of Krabbe disease. We believe PBKR03 may provide patients with significantly improved outcomes. In preclinical models, we have observed meaningful transduction of both the CNS and other critical peripheral organs for Krabbe disease patients using our ICM method of administration in combination with our next-generation AAVhu68 capsid.
In
The FDA has granted ODD, RPDD, and Fast Track Designation to PKBR03, and in
We have manufactured PBKR03 clinical supply to support trial initiation in
Research Programs
We also have four rare, monogenic CNS programs in the research stage under our license agreement with Penn: PBML04 for MLD, PBAL05 for ALS, PBCM06 for CMT2A and an undisclosed program to treat an adult CNS indication. PBML04 is targeting patients with MLD who have mutations in the ARSA gene, PBAL05 is targeting patients with ALS who have a gain-of-function mutation in the C9orf72 gene, PBCM06 is targeting patients with CMT2A who have a mutation in the MFN2 gene and an undisclosed program to treat an adult CNS indication. In addition, pursuant to the recent Amendment (as defined below), we also have established exploratory research programs with Penn in Alzheimer's Disease and Temporal Lobe Epilepsy. Beyond this portfolio, through our research collaboration with GTP, we also have the option to license programs for ten additional new indications in CNS along with rights and licenses to new gene therapy technologies developed by Penn, such as novel capsids, toxicity reduction, delivery and formulation technologies.
Business Overview
We were incorporated in
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ultimately, seek regulatory approval. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution. Furthermore, we expect to incur additional costs associated with operating as a public company, including significant legal, accounting, investor relations and other expenses that we did not incur as a private company. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials and our expenditures on other research and development activities.
We will need to raise substantial additional capital to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we plan to finance our operations through the sale of equity, debt financings or other capital sources, which may include collaborations with other companies or other strategic transactions. There are no assurances that we will be successful in obtaining an adequate level of financing as and when needed to finance our operations on terms acceptable to us or at all. Any failure to raise capital as and when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies. If we are unable to secure adequate additional funding, we may have to significantly delay, scale back or discontinue the development and commercialization of one or more product candidates or delay our pursuit of potential in-licenses or acquisitions.
As of
COVID-19 Impact
We are continuing to proactively monitor and assess the current coronavirus
disease 2019, or COVID-19, global pandemic. Since early
As we diligently work to activate sites for our clinical programs, we are experiencing some impacts to our site initiation activities related to COVID-19, such as, meeting delays with various investigational review bodies or ethics committees that have prioritized COVID-19 -related clinical trials and staffing levels at site hospitals. For example, the clinical initiation of our upliFT-D clinical study for PBFT02 and the GALax-C clinical study for PBKR03 were substantially impacted by COVID-19-related issues. Our expected timelines for clinical trials could be further delayed by these impacts.
Financial Operations Overview License AgreementUniversity of Pennsylvania
We have a research, collaboration and licensing agreement, as amended most
recently in
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The Penn Agreement requires that we make payments of up to (i)
Upon successful commercialization of a product using the licensed technology, we are obligated to pay to Penn, on a licensed product-by-licensed product and country-by-country basis, tiered royalties (subject to customary reductions) in the mid-single digits on annual worldwide net sales of such licensed product. In addition, we are obligated to pay to Penn a percentage of sublicensing income, ranging from the mid-single digits to low double digits, for sublicenses under the Penn Agreement.
We and Penn entered into an amendment, or the Amendment, to the Penn Agreement,
on
Collaboration and Manufacturing and Supply Agreements
Catalent
In
In
Under the terms of the Manufacturing and Supply Agreement, Catalent has agreed to manufacture batches of drug product for our gene therapy product candidates at the Clean Room Suite provided for in the Catalent Collaboration
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Agreement. There is a minimum annual purchase commitment owed to Catalent for
five years beginning in
We have the right to terminate the Manufacturing and Supply Agreement for convenience or other reasons specified in the Manufacturing and Supply Agreement upon prior written notice. If we terminate the Manufacturing and Supply Agreement, we will be obligated to pay an early termination fee to Catalent.
Under both the Collaboration Agreement and the Manufacturing and Supply
Agreement, we have an annual minimum commitment of
Components of Results of Operations
Research and
Research and development expenses consist primarily of costs incurred in connection with the discovery and development of our product candidates. These expenses include:
expenses incurred to conduct the necessary preclinical studies and clinical ? trials required to obtain regulatory approval, including payments to Penn for
preclinical development;
? expenses incurred in obtaining technology licenses related to technology that
has not reached technological feasibility and has no alternative future use;
? personnel expenses, including salaries, benefits and share-based compensation
expense for employees engaged in research and development functions;
expenses related to funding research performed by third parties, including ? pursuant to agreements with CROs, as well as investigative sites and
consultants that conduct our preclinical studies and clinical trials;
expenses incurred under agreements with contract manufacturing organizations, ? or CMOs, including manufacturing scale-up expenses and the cost of acquiring
and manufacturing preclinical study and clinical trial materials;
? expenses and fees paid to consultants who assist with research and development
activities;
? expenses related to regulatory activities, including filing fees paid to
regulatory agencies; and
? allocated expenses for facilities costs, including rent, utilities,
depreciation and maintenance.
We track outsourced development expenses and other external research and development expenses to specific product candidates on a program-by-program basis, such as expenses incurred under our collaboration with Penn, fees paid to CROs, CMOs and research laboratories in connection with our preclinical development, process development, manufacturing and clinical development activities. However, we do not track our internal research and development expenses on a program-by-program basis as they primarily relate to compensation, early research and other expenses which are deployed across multiple projects under development.
Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development expenses than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect our research and development expenses to increase significantly over the next several years as we increase personnel expenses, including share-based compensation, conduct our clinical trials, including later-stage clinical trials, for current and future product candidates and prepare regulatory filings for our product candidates.
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Expenses incurred in obtaining technology licenses are charged to research and development expense as acquired in-process research and development if the technology licensed has not reached technological feasibility and has no alternative future use.
General and Administrative Expenses
General and administrative expense consists primarily of personnel expenses, including salaries, benefits and share-based compensation expense, for employees and consultants in executive, finance, accounting, legal, commercial, quality and human resource functions. General and administrative expense also includes corporate facility expenses, including rent, utilities, depreciation and maintenance, not otherwise included in research and development expense, as well as legal expenses related to intellectual property and corporate matters, expenses related to information technology, and expenses for accounting and consulting services.
We expect that our general and administrative expense will increase in the
future to support our continued research and development activities, potential
commercialization efforts and increased expenses of operating as a public
company. These increases will likely include increased expenses related to the
hiring of additional personnel and fees to outside consultants, lawyers and
accountants, among other expenses. Additionally, we anticipate continued
expenses associated with being a public company, including expenses related to
services associated with maintaining compliance with the requirements of
Interest Income, net
Interest income, net consists of interest earned on our cash equivalents and marketable securities, offset by amortization of premium and discount on our marketable securities.
Results of Operations
Comparison of the Three Months Ended
The following table sets forth our results of operations for the three months
ended
Three months ended
September 30,
(in thousands) 2021 2020 Change
Operating expenses:
Research and development $ 26,623 $ 20,837 $ 5,786
Acquired inprocess research and development 5,500 - 5,500
General and administrative 14,978 7,793 7,185
Loss from operations (47,101) (28,630) (18,471)
Interest income, net 186 99 87
Net loss $ (46,915) $ (28,531) $ (18,384) Research and Development Expenses
Research and development expenses increased by
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our lead programs. Expenses associated with the Penn Agreement will continue to vary from quarter to quarter based on the status of our preclinical pipeline and the timing of preclinical work performed.
We track outsourced development, outsourced personnel expenses and other external research and development costs of specific programs. We do not track our internal research and development expenses on a program-by-program basis. Research and development expenses are summarized by program in the table below:
Three months ended
September 30,
(in thousands) 2021 2020
GM1 $ 3,955 $ 2,840
FTDGRN 4,661 6,151
Krabbe 4,628 5,086
MLD 2,718 959
ALS 98 215
CMT2A 234 240
Undisclosed program 32 -Internal costs, including personnel related and discovery 10,297 5,346
$ 26,623 $ 20,837
We incurred
General and Administrative Expenses
General and administrative expenses increased by
Interest Income, net
Interest income, net was
Comparison of the Nine Months Ended
The following table sets forth our results of operations for the nine months
ended
Nine months ended
September 30,
(in thousands) 2021 2020 Change
Operating expenses:
Research and development $ 84,705 $ 53,856 $ 30,849
Acquired inprocess research and development 7,000 - 7,000
General and administrative 42,864 19,990 22,874
Loss from operations (134,569) (73,846) (60,723)
Interest income 337 558 (221)
Net loss $ (134,232) $ (73,288) $ (60,944)
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Research and Development Expenses
Research and development expenses increased by
We track outsourced development, outsourced personnel expenses and other external research and development expenses of specific programs. We do not track our internal research and development expenses on a program-by-program basis. Research and development expenses are summarized by program in the table below:
Nine months ended
September 30,
(in thousands) 2021 2020
GM1 $ 12,727 $ 10,349
FTDGRN 11,518 14,714
Krabbe 13,567 11,240
MLD 6,895 2,186
ALS 408 756
CMT2A 824 578
Undisclosed program 1,050 -Internal costs, including personnel related and discovery 37,716 14,033
$ 84,705 $ 53,856
We incurred
General and Administrative Expenses
General and administrative expenses increased by
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Interest Income, net
Interest income, net was
Liquidity and Capital Resources
Overview
In
Funding Requirements
Our primary use of cash is to fund operating expenses, most significantly research and development expenditures. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable, accrued expenses and prepaid expenses.
Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical products, we are unable to estimate the exact amount of our operating capital requirements. Our future funding requirements will depend on many factors, including, but not limited to:
? the scope, timing, progress and results of discovery, preclinical development,
laboratory testing and clinical trials for our product candidates;
? the expenses of manufacturing our product candidates for clinical trials and in
preparation for marketing approval and commercialization;
? the extent to which we enter into collaborations or other arrangements with
additional third parties in order to further develop our product candidates;
the expenses of preparing, filing and prosecuting patent applications, ? maintaining and enforcing our intellectual property rights and defending
intellectual property-related claims;
? the expenses and fees associated with the discovery, acquisition or in-license
of additional product candidates or technologies;
? our ability to establish additional collaborations on favorable terms, if at
all;
? the expenses required to scale up our clinical, regulatory and manufacturing
capabilities;
the expenses of future commercialization activities, if any, including ? establishing sales, marketing, manufacturing and distribution capabilities, for
any of our product candidates for which we receive marketing approval; and
? revenue, if any, received from commercial sales of our product candidates,
should any of our product candidates receive marketing approval.
We will need additional funds to meet operational needs and capital requirements for clinical trials, other research and development expenditures, and business development activities. We currently have no credit facility or committed sources of capital. Because of the numerous risks and uncertainties associated with the development and
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commercialization of our product candidates, we are unable to estimate the amounts of increased capital outlays and operating expenditures associated with our current and anticipated clinical studies.
Until such time, if ever, as we can generate substantial product revenue, we expect to finance our operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, existing stockholders' ownership interests will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect existing stockholders' rights as common stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or drug candidates, or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit, reduce or terminate our research, product development or future commercialization efforts, or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Cash Flows
The following table shows a summary of our cash flows for the periods indicated:
Nine months ended
September 30,
(in thousands) 2021 2020
Cash used in operating activities $ (96,104) $ (51,096)
Cash used in investing activities (42,209) (135,560)
Cash provided by financing activities 166,201 228,352
Net increase in cash and cash equivalents
During the nine months ended
During the nine months ended
During the nine months ended
During the nine months ended
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Net Cash Provided by Financing Activities
During the nine months ended
During the nine months ended
Off-Balance Sheet Arrangements
During the periods presented, we did not have, nor do we currently have, any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. We do not engage in off-balance sheet financing arrangements. In addition, we do not engage in trading activities involving non-exchange traded contracts. We therefore believe that we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in these relationships.
Critical Accounting Policies and Estimates
During the nine months ended
JOBS Act Accounting Election
We are an "emerging growth company," as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies.
We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
We will remain an emerging growth company until the earliest of (1) the last day
of our first fiscal year (a) in which we have total annual gross revenues of at
least
Recent Accounting Pronouncements
See Note 3 to our unaudited interim financial statements included elsewhere in this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements applicable to our financial statements.
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