Passage BIO, Inc. Q2 FY2020 Earnings Call

Thank you for holding. Good morning and welcome to the Passage Bio Second Quarter 2020 Financial and Operating Results Conference Call. Please be advised that today’s conference is being recorded at the company’s request. At this time, I would like to turn it over to Zoe Mita. Zoe, please proceed.

Thank you, Operator. This morning we issued a press release that outlines the topics we plan to discuss today. This release is available on the Passage Bio website at investors.passagebio.com under the news and events section. On today's call, Bruce Goldsmith, President and Chief Executive Officer, and Rich Morris, Chief Financial Officer, will review our second quarter 2020 financial results and discuss recent business highlights. Gary Romano, our Chief Medical Officer, and Jill Quigley, our Chief Operating Officer, will also be available for the Q&A portion of the call. Before we begin, please note that today's call may include a number of forward-looking statements, including, but not limited to, comments on our expectations about timing and execution of anticipated milestones, including the resolution of the IND. The initiation of clinical trials and the availability of clinical data from such trials; our expectations about our collaborators' and partners' ability to execute key initiatives; the ability of our lead product candidates to treat the underlying causes of their respective target monogenic CNS disorder; manufacturing plans and strategies; trends with respect to financial performance in cash flows; the Company's ability to fund research and development programs; impacts of the COVID-19 pandemic on the Company's operations; and its ability to manage costs along with other uses of cash and other matters. These forward-looking statements are based on assumptions that are subject to risks and uncertainties that could cause the Company's actual results to differ significantly from those suggested by these statements. Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements. Please refer to the Company's filings with the SEC for information concerning risk factors that could cause the actual results to differ materially from expectations, including any forward-looking statements made on this call. Except as required by law, the Company disclaims any obligation to publicly update or revise any forward-looking statement to account for or reflect events or circumstances that occur after this call. It is now my pleasure to pass the call over to Bruce Goldsmith. Bruce?

Thank you, Zoe, and thank you all for joining us this morning. We began 2020 with the goal of establishing a leading gene therapy company focused on rare, monogenic CNS disorders and advancing our pipeline in preparation for initial clinical trial data in 2021 from our primary programs. We made significant strides in the first half of the year, expanding our internal team from 22 to 55 members with an emphasis on enhancing our clinical and manufacturing capabilities while also strengthening several key operational areas such as communications, commercial planning, and human resources. This progress, alongside our continuous engagement with key partners, supports our growth and execution as we near the commencement of clinical trials for our three lead programs. We have achieved these milestones despite the obstacles presented by the COVID-19 pandemic. I am extremely proud of the ingenuity and adaptability of our team as they maintain focus on the needs of patients awaiting therapies like ours. Currently, all our employees are working from home, and as a leadership team, we have decided that this arrangement will continue at least until the end of the year, prioritizing their safety and well-being. To ensure our supply chain remains intact, we have started limited site visits to our manufacturing partners with precautions in place for safe conduct. Now, let me provide an update on our lead program, PBGM01, our next-generation hu68 AAV capsid intended to deliver a functional GLB1 gene directly to the central nervous system through intra-cisterna magna injection for the treatment of infantile GM1 gangliosidosis. GM1 is a rare monogenic recessive lysosomal storage disease caused by mutations in the GLB1 gene that encodes the enzyme beta-galactosidase, and currently, there are no adequate treatment options available. Despite the pandemic and the accompanying challenges, we are pleased to report that we met our earlier guidance, submitting our IND to the FDA in June for the treatment of Infantile GM1 in a Phase 1/2 clinical trial with PBGM01. This success highlights the strength of the collaboration between Passage Bio and the University of Pennsylvania's Gene Therapy Program led by Dr. Jim Wilson. However, following discussions with the FDA, we learned that the IND has been placed on clinical hold because the delivery device proposed for ICM administration requires further biocompatibility risk assessment and/or testing. We believe that the device we intend to use in our trials consists of components already approved by the FDA for other medical procedures and are very similar to those in other gene therapy trials using ICM delivery. We anticipate receiving formal written communication with more details from the FDA soon and plan to collaborate with them to address any questions as quickly as possible. While we await the official clinical hold letter, we are consulting with external medical device and regulatory experts to explore options for additional risk assessment and testing to further validate the device compatibility with the ICM injection procedure. Our internal review indicates that we can respond swiftly to the FDA regarding the biocompatibility concerns of our ICM delivery device, and we expect it to meet the FDA's biocompatibility requirements. Despite the clinical hold, we aim to enroll the first patient in the Phase 1/2 trial of PBGM01 late in the fourth quarter of 2020 or early in the first quarter of 2021, and we remain on track to report initial 30-day biomarker and safety data in the first half of 2021. Following our discussions with the FDA concerning the IND, we are revising the protocol for our Phase 1/2 trial to better understand dosage requirements and ensure safety for both early and late Infantile GM1 patients. The FDA has informed us that no further clinical information requests are necessary at this time. This trial is designed as an open-label dose escalation study of PBGM01, administered through a single injection into the intra-cisterna magna targeting pediatric subjects with early and late onset Infantile GM1. The early onset form, which is the most severe and common, manifests within the first six months of life, while late onset occurs between 6 and 24 months. The initial dose cohorts in this study have two key objectives: to demonstrate the safety of PBGM01 in Infantile GM1 patients and to show an increase in beta-galactosidase in both cerebrospinal fluid and serum. We modified the trial design to specifically investigate early and late Infantile patients in smaller cohorts, with four cohorts of two patients each for late onset and early onset Infantile GM1. We will start dosing with a low dose of PBGM01 in the first cohort of late onset patients. Safety in this cohort will influence dosing in both the high dose late Infantile cohort and low dose early Infantile cohort. After this, dose escalation will proceed independently in both cohorts, followed by enrolling each patient group into their own confirmatory cohort. Each participant will be evaluated over two years for safety and efficacy, with an additional 36 months of long-term follow-up. We expect to report initial data from the first cohort late in the first half of 2021, including safety data and key biomarker information about beta-galactosidase activity in both CSF and serum. Our teams are now preparing for participant enrollment in anticipation of trial initiation. Alongside site initiations, we recognize that identifying and engaging families is crucial for successful rare disease therapeutic development programs. We are collaborating with partners at Penn and other external organizations, including key opinion leaders and patient advocacy partners, to swiftly identify eligible patients. We have also secured clinical stage manufacturing capacity for our gene therapy programs under our agreement with Catalant and are pleased to report that our GM1 clinical supply has been manufactured, establishing a global clinical supply chain. Additionally, we anticipate that our dedicated manufacturing suite will be operational by year-end. Once fully functional, this suite will meet production demands for our lead product candidate throughout early commercialization. Having a dedicated manufacturing suite is a critical step towards expanding our control of the supply chain, fostering clinical and commercial success by allowing greater scalability and prioritization as we advance products through development. Furthermore, we have formalized agreements with several suppliers for both upstream manufacturing components and services. We remain highly motivated to advance PBGM01 for patients with significant unmet medical needs and to embark on this new developmental phase. As I mentioned earlier, we are optimistic about quickly addressing the concerns raised by the FDA, and we look forward to sharing updates soon. Before passing the call to Rich for a financial update, I would also like to briefly outline our broader pipeline of gene therapy candidates. Our next advanced program, PBFT02, targets frontotemporal dementia (FTD). This AAV1 capsid-based therapy aims to deliver a functional granulin gene to the brain, producing the progranulin protein. Preclinical studies have shown that PBFT02 significantly increases progranulin levels above normal in cerebrospinal fluid. Progranulin is a crucial protein implicated in cell biology, development, and inflammation, with emerging evidence linking it to FTD and other neurodegenerative diseases due to its role in lysosomal function. Our preclinical studies resulted in promising data demonstrating that ICM administration of the AAV1 capsid provided the highest transduction rates in non-human primates, achieving up to 50 times the normal human CSF levels of progranulin. Encouraged by these findings, we continue advancing manufacturing and site selection and plan to begin a Phase 1/2 trial in the first half of 2021. Additionally, we have completed preclinical and toxicology studies and are focusing on manufacturing and site selection for our third program, PBKR03, a potential treatment for Infantile Krabbe disease, also utilizing the hu68 capsid from the GM1 program. Infantile Krabbe disease is a rare and life-threatening lysosomal storage condition that causes progressive damage to the brain and peripheral nervous system. PBKR03 aims to deliver a functional GALC gene to enhance GALC enzyme activity, reduce psychosine accumulation, and restore myelin. Data presented at the ASGCT conference showcased the potential of CSF vector administration to achieve remarkable, scalable effects via cross-correction in nerve function, illustrating that a single AAV hu68 injection containing a functional GALC gene normalized GALC enzyme activity and improved various parameters in animal models. For example, treated Krabbe dogs displayed normalized nerve conduction, reduced CSF psychosine levels, improved brain histopathology, phenotypic correction, and increased survival rates. We believe that PBKR03 could be a transformative therapy addressing the underlying cause of the disease, and we plan to initiate a Phase 1/2 trial in the first half of 2021. Lastly, our early-stage programs targeting metachromatic leukodystrophy, amyotrophic lateral sclerosis (ALS), and Charcot-Marie-Tooth disease Type 2A are currently progressing through discovery and candidate selection stages. Now, I will turn the call over to Rich for the financial and operations update.

Thank you, Bruce. As we reported in our press release this morning, we ended the quarter with cash and cash equivalents of approximately $353 million as compared to $159 million as of December 31, 2019. We expect our current cash balance to fund our operations into 2023. R&D expenses were $19.9 million for the quarter ended June 30, compared to $6.3 million for the same quarter in 2019. The increase was primarily due to an increase of $0.5 million in R&D costs incurred with Penn in connection with the preparation of several IND filings, an increase of $4 million in clinical manufacturing costs, as well as an increase in other research costs of $0.5 million as we've prepared for clinical trials to begin in the second half of 2020 and early 2021. We also had a $3.1 million increase in personnel-related costs, and a $0.1 million increase in facility and other costs due to increases in employee headcount in the R&D function. G&A expenses were $7.4 million for the quarter ended June 30, compared to $1 million for the same quarter in 2019. The increase was primarily due to a $4.7 million increase in personnel-related and share-based compensation expense due to increases in employee headcount. Our professional fees and facility costs also increased by $0.7 million and $1 million, respectively, as we expanded our operations to support our research and development efforts. Net loss was $27.2 million for the second quarter of 2020 compared to $13.4 million in the same quarter of 2019. Net loss per basic and diluted share was $0.60 in the second quarter of 2020 compared to a $3.19 net loss per basic and diluted share in the second quarter of 2019. Now, I'll turn the call back to Bruce for closing remarks.

Thanks, Rich. The coming months will be transformative for Passage Bio as we continue to prepare for clinical stage development of three promising pipeline assets. Our ultimate goal is to provide patients who currently have limited or no available treatment options with innovative, safe and effective therapies. As I shared earlier, we are very excited to collaborate with the gene therapy program to file our IND in June. As we work with the FDA to resolve their questions regarding device biocompatibility, we anticipate treating our first patient in the Phase 1/2 trial of PBGM01 late in the fourth quarter of 2020 or early in the first quarter of 2021. We continue to expect that we will remain on track to report initial 30-day biomarker and safety data for the first cohort late in the first half of 2021. We look forward to providing further updates on the progress of the PBGM01 Phase 1/2 study later in the year. We also remain on track in moving our FTD and Krabbe programs toward clinical study initiations in the first half of 2021. As I mentioned earlier, our headcount continues to grow as we expand our clinical, manufacturing, and operations teams to support these programs, along with future development of additional pipeline candidates, all with the goal of helping patients suffering from serious, life-threatening, rare, monogenic central nervous system diseases. At this time, we'd like to open the call up for your questions. Operator?

Our first question comes from Anupam Rana with JPMorgan. Your line is now open.

Thank you for taking my question. Can you clarify which components of the proposed ICM device are similar to other administration methods? Also, to be clear, is this discussion with the FDA specific to GM1, or does it involve broader questions about other programs using ICM as well? That's my first question.

Hi, Anupam, it's Bruce. Thank you for being on the call and for your question. We believe that the components are very similar to those used in other devices, typically consisting of a syringe, a connector, and an injection needle. This is the usual setup for an ICM injection, which we think aligns closely with other methods. However, the specifics are proprietary to different companies and clinical studies. Therefore, we can only share our insights based on our device and our understanding of the field. I want to stress that we have not received any official written feedback from the agencies, so we cannot provide detailed comments on any specific component or the device as a whole. We believe the issues raised are technical in nature and can be addressed through additional risk assessments and testing, which we have already initiated. This assessment also includes our internal capabilities and feedback from several regulatory device experts who have significant prior experience with the FDA. Based on all of this, we are confident that we can respond swiftly to the FDA. If you could repeat the second part of your question. The second part pertains to whether this concerns the GM1 filing. It is indeed related to the GM1 IND filing, which is the only aspect we can discuss at this time. We believe that resolving this matter will enhance our chances of moving forward successfully with the remaining studies as well. That’s why we are keen to address it for the GM1 IND filing, although we have not yet received feedback or submitted for the other programs.

Great, thanks for taking our question.

Thank you. Our next question comes on the line of Salveen Richter with Goldman Sachs. Your line is open.

Thanks for taking our questions. This is Andrea on for Salveen. Maybe just one on the FTD program. We'd love to hear your comments on the competitive dynamics mistakes and how your approach is being differentiated? Thanks so much.

Sure. Thank you, Andrea. I'm glad to address the question. Regarding the FTD program, we believe there are several aspects that differentiate our approach. First, the ongoing studies that use the antibody method to block the serotonin receptor are quite intriguing. We've observed progress with the advancement into a randomized phase three program that demonstrates the effectiveness of this method in blocking the reuptake of progranulin through that receptor. This gives us one point of differentiation, particularly in the modality and the frequency of administration, which is monthly. Additionally, there's a notable difference between shifting endogenous levels of progranulin from intracellular to extracellular versus employing gene therapy to increase progranulin levels via protein expression. Another existing method with an active IND is the AAV9 approach using ICM injection, which has shown promise in preclinical models by enhancing CSF levels of progranulin through gene therapy delivery and protein expression, with increases of about two to two and a half times. However, going back to our differentiation, using the AAV1 approach allows us to shift progranulin levels up to 50 times higher without systemic exposure. We believe this specificity in the transduction of Pinnacle cells is key. Overall, our gene therapy method is distinct from the antibody approach, and our comparison of AAV1 with other vectors indicates that we can achieve significantly higher levels of progranulin than other gene therapies, which could be crucial in stabilizing and addressing the disease in the long run.

Thanks so much. Thank you.

Our next question comes from Yaron Werber with Cowen. Your line is now open.

Yes. Hi, good morning, and thanks so much for taking my question. Bruce, I have a couple if you don’t mind. The first one is just a follow up on the last question. And, can you give us a sense across your programs, are you planning on using immunosuppressants in addition to high dose steroids, maybe just give us a sense sort of, well, to the extent that you can, what's the steroid regimen more or less and be using an immunosuppressant to reduce the adaptive immune response? And then I have a follow up?

Sure, we understand you know, the prompt of the question and thanks for your question, Yaron. So I'll start and then maybe I'll turn it over to Gary. I'm not sure that we've given the specific operational details of the immunosuppression regimen, but we do think it's important to have at least an approach that has a brief course of steroids. And, it's also important to note that we haven't seen significant immune reactions in our nonhuman primate studies. So, I'll turn it over to Gary to talk about just a global approach that we think about immunosuppression in our studies for all of our programs.

Yes, thank you, Bruce. So yes, we do intend to use a prophylactic immunosuppression beginning with steroid treatment. And we're not going to go into the details of the immunosuppression regimen for each program, but I just want to say that it's going to be adaptive in the sense that if there were immuno-related adverse events that could obviously be adjusted and led by the investigator for key positions.

And Gary, but it sounds like it's going to be steroids only, or are you planning to use extra immunosuppressants?

Yes, good question. Thanks. We haven't seen any evidence in any of our three toxicology studies across all the programs of immuno-related changes in pathology or clinical any clinical manifestations. And so for that reason, our intention is to start with steroid prophylaxis, which is on the scale, on the milder end of the immunosuppressant. As you know, there's many different regimens out there and use in gene therapy programs and this is on the lighter end. Of course, we're watching carefully what's happening in the field and that could change for future programs based on emerging data.

Okay, great. And you mentioned, I'm just going to shift back to the GM1. You mentioned that there could be other additional testing that the FDA might be requiring, in addition to biocompatibility. Can you give us a sense of what are those additional testing?

Sorry, just to be clear, the additional testing or risk assessment is taken from their brief communication and that all has to do with the biocompatibility. So the way that they phrase the clinical hold communication is that they're looking at the biocompatibility of the device and may require additional risk assessments and/or testing. And so, just to be clear, that is not perfectly known yet to review the process, and I think it's worthwhile. The clinical hold is typically made by FDA guidelines by a brief communication, either by telephone or in this case email with follow up on a telephone call. And then, we expect full communication with feel full written communication with an explanation, approximately within 30 days. And we just want to be clear that we've received the initial feedback, but we have not received the full feedback at that point. So we're somewhat limited in what we can give you. But what we have done then is reached out to all of our internal experts and external experts, and defined various risk assessments and testing that are very typical for a medical device. And that follows a range of testing, as simple as for example, toxicity of the device, for example, because it comes in contact with skin. Now some of this I will mention also, as I said many of these devices that we're using, or all of them, we believe are approved. So we're also gathering information on those that could potentially address the FDA concerns. So it's a mix of a risk assessment and potential testing that we are ready for when we're waiting for the FDA letter.

Okay, great. And then just a final question in terms of the DRG or sensory sort of testing is part of the concerns about AAV9. Can you give us a sense of what's going to be included in the Phase 1/2? Thank you.

Sure. And, two points to that. It's not just AAV9 that has the DRG. Jim Wilson and his group at the gene therapy program presented at ASGCT an analysis across multiple AAV subtypes and showed that the DRG toxicity, which is just a pathology right now and doesn't look like it has clinical manifestations occurs actually across multiple AAV subtypes, just wanted to make sure that you're aware of that. So what we're going to do is, in all of our studies, but certainly in the GM1 study is we're going to monitor the nerve conduction of limbs and make sure to see if we can detect any changes in nerve conduction studies. That follows the assessment in non-human primates that we could see that again, without any clinical manifestations.

Great, thanks so much.

Thank you, Yaron.

Thank you. I'm showing no further questions in the queue at this time. Ladies and gentlemen, thank you for your participation in today's conference. You may now disconnect. Everyone, have a great day.