Passage BIO, Inc. Q3 FY2021 Earnings Call

Good morning, and welcome to the Passage Bio Third Quarter 2021 Financial and Operating Results Conference Call. Please be advised that this call is being recorded at the company’s request. At this time, I’d like to turn it over to Stuart Henderson, Vice President of Investor Relations and Strategic Finance. Stuart, 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 under the Press Releases and Statements section of Investors and News. On today’s call, Bruce Goldsmith, President and Chief Executive Officer, will discuss recent business highlights. Eliseo Salinas, our Chief Research and Development Officer, will review our key clinical updates. And Simona King, our Chief Financial Officer, will review our third quarter 2021 financial results. 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 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 their respective target CNS disorders; manufacturing plans and strategies; trends with respect to financial performance and 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 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 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 statements to account for or reflect events or circumstances that occur after this call. It is now my pleasure to pass the call over to CEO, Bruce Goldsmith. Bruce?

Thanks, Stuart, and thank you all for joining us this morning. As we near the end of 2021, we are well positioned to deliver on multiple value drivers with the advancement of our clinical-stage pipeline in both pediatric and adult CNS indications for which there is a high degree of unmet clinical need. Our efforts are underpinned by our four strategic pillars: a strong productive partnership with Dr. Jim Wilson and his team at the University of Pennsylvania’s Gene Therapy Program, or GTP, a robust and differentiated pipeline, an integrated manufacturing supply chain and a well-positioned corporate foundation that includes a strong cash balance. Our primary focus continues to be on the execution of our three global Phase I/II programs. Since our last quarterly update, we are pleased to have activated multiple clinical trial sites across these programs despite challenges related to COVID-19. Site activations, coupled with a variety of initiatives to support early patient identification and clinical trial enrollment have paved the way for us to deliver on important clinical milestones by year-end and into 2022. These include: reporting first-in-human data from the initial cohort of patients in our global Imagine-1 trial for the treatment of GM1 gangliosidosis later this quarter, dosing the first patients in our global upliFT-D study for the treatment of frontotemporal dementia with granulin mutations, and our global GALax-C study for the treatment of Krabbe disease by the year-end and reporting initial safety and 30-day biomarker data from the first cohort of patients in our upliFT-D and GALax-C trials in the first half of 2022. These trials are part of our portfolio of seven programs focused on rare monogenic CNS disorders, and we have the option to license an additional 10 programs from GTP. Following the transformative expansion of our strategic collaboration with GTP announced last quarter, these 10 remaining options may also include large CNS diseases. We are initiating our expanded efforts in large CNS diseases with research programs focused on Alzheimer’s disease and temporal lobe epilepsy, and we have the opportunity to explore additional large indications in the future. Passage Bio was founded with the vision of developing transformative therapies for patients with devastating CNS disorders that have limited or no treatment options. And we have assembled one of the leading genetic medicines pipelines to help these patients. As many of you know, our Co-founder and former Chairman of the Board, Dr. Tachi Yamada, passed away suddenly this summer. We are proud to continue his vision and legacy with the recent appointment of our new Chairwoman of the Board, Maxine Gowen. Tachi’s vision is also carried by our seasoned leadership team, complemented by the recent hiring of Simona King as CFO; Mark Forman as CMO; and Maria Tornsen as CCO. We believe we have the resources and expertise needed to execute and propel us forward on our path to becoming a leading CNS genetic medicines company. With that, I will now turn it over to Chief R&D Officer, Eliseo Salinas, who will discuss our clinical programs in more detail.

Thank you, Bruce. First, I will start by discussing our progress with site activations and patient identification efforts for our three lead programs. Passage Bio is in a unique position with each of our three clinical trial programs operating globally, which allows us to be where the patients are. In total, we have an international network of clinical sites at various stages of activation across nine countries in three continents. Despite COVID-19 continuing to impact hospitals and clinical sites across the world, we have activated six sites in the last three months, including two international sites, and we plan to open additional sites in the U.S. and in eight other countries in the next few months. It is because of our international clinical trial approach, our focus on activating multiple clinical sites in parallel, and our ongoing patient identification initiatives that we anticipate having patients dosed in all three of our clinical programs before the end of the year. The initiatives I’ll point to as examples of our extensive patient identification efforts include: first, our collaboration with a broad network of disease experts and community leaders. And second, our partnerships with service companies offering free genetic testing and counseling for the three disease areas targeted by our lead programs. Genetic testing is particularly important, as we have heard from physicians that this is one of the critical barriers to early diagnosis. As part of our commitment to patient and physician communities, we will continue to explore ways of reducing this barrier globally. For example, we are working to support early and accurate identification of newborns with Krabbe disease. Early diagnosis is critical because of the rapid decline of patients with this devastating disease. Multiple work in this area has been in partnership with advocacy organizations working state-by-state to encourage statewide adoption of newborn screening requirements. We are pleased with our promise in identifying patients and know that what we are doing now will be instrumental to the ongoing success of our global multiyear clinical programs. Now I will provide a brief update on each of our clinical programs. Our PBGM01 program utilizes a next-generation proprietary AAVhu68 capsid to deliver a common optimized GLB1 gene to increase beta-galactosidase enzyme activity in the brain and peripheral tissues. We are focused on the infantile form of GM1 gangliosidosis, which is the most severe form of the disease with a very rapid disease course and no current treatment options beyond supportive care. The Imagine-1 global Phase I/II trial is an open-label dose escalation study that will enroll four distinct cohorts divided by age and dose level. The first cohort is composed of late-onset infantile patients receiving the initial dose of PBGM01. I am pleased to report that we now have four active clinical sites open for enrollment, and plan to open additional sites here in the U.S. and in four other countries in the next few months. We also remain on track to report first-in-human data from Cohort 1 later this quarter. The primary goal of Cohort 1 is to assess safety and tolerability, allowing for dose escalation and progress into the early infantile cohorts. The data we plan to report will include initial safety information, including results from nerve conduction studies as well as beta-galactosidase activity levels in CSF and serum inventory. We also plan to share IDMC’s assessment on progressing the study to the early infantile and higher dose late infantile cohorts, which may be enrolled in parallel. We have also made significant progress enrolling patients in the prospective GM1 natural history study with more than 10 patients now enrolled. This study will provide important data to improve understanding of overall disease progression and meaningful outcome measures. We look forward to discussing the Imagine-1 data with you before the end of this year. Moving on to our global PBKR03 program in Krabbe disease called GALax-C. Krabbe disease is a condition that progresses rapidly, damaging both the brain and the peripheral nervous system and resulting in a life expectancy of only two years in the severe cases. So far, we have activated two sites and are making significant progress in opening additional sites in the U.S. and in four other countries, paving the way for us to build the first patient for this Krabbe in the fourth quarter of 2021. GALax-C is an open-label, dose escalation study of PBKR03 in patients with early infantile Krabbe disease. The study will run similarly to our Imagine-1 trial, first evaluating an initial dose of PBKR03 in late-onset patients and then progressing into early onset and high dose cohorts during assessment of Cohort 1. Additionally, there will be a confirmatory expansion cohort for both age groups once the dose escalation phase of the study is completed. The main goal of this study is to assess the safety and tolerability of ascending doses of PBKR03 in patients with early infantile Krabbe disease as well as to assess the impact of GALC in CSF and serum. Turning to our third program, PBFT02, for frontotemporal dementia with granulin mutations. FTD is one of the more common causes of early onset dementia, where there is an impairment in behavior, language, and executive function and, of course, has a similar frequency to Alzheimer’s disease in patients younger than 65 years old. The rapid progression of FTD results in an average survival of eight years after the onset of symptoms. We are specifically focused on FTD granulin, where the disease is caused by mutations in the granulin gene that lead to a deficiency of progranulin. It is estimated that about 5% to 10% of FTD is caused by a granulin mutation. Our global Phase I/II clinical trial upliFT-D is an open-label dose escalation study of PBFT02 in FTD granulin patients. So far, we have received regulatory authorization to initiate clinical trials in both the United States and Canada, and we expect three additional country authorizations in the next three months. We plan to enroll two cohorts of three patients each receiving two different ascending doses of PBFT02 with an optional third cohort treatment with higher dose depending on safety and enzyme results observed in the first two cohorts. We have opened our first clinical trial site, and as we said, we are on track to dose the first patient in the fourth quarter of this year. We also have made significant progress advancing site initiation activities at other sites and expect to open those sites soon. Like our other lead programs, our key goals are to assess the safety and durability of ascending doses of PBFT02 as well as its impact on programming levels. In addition to our progress with our three clinical programs, we are making significant strides with our earlier stage pipeline programs and our new discovery research efforts in temporal lobe epilepsy and Alzheimer’s disease. We look forward to sharing more about these efforts in 2022. Advancing programs for CNS diseases requires tremendous support from a variety of stakeholders, and I would like to conclude by recognizing and thanking the caregivers, service providers, advocacy organizations, and patients in the GM1, Krabbe disease, and SPV communities. With that, I will now turn the call over to Simona to review our financials.

Thank you, Eliseo. I would like to start by saying how pleased I am to be part of the Passage Bio team. I am honored to work alongside a group of dedicated and passionate leaders who are committed to bringing transformative medicines to patients and families whose lives are impacted by CNS disorders. As we reported in our press release this morning, we ended the quarter with approximately $354 million in cash, cash equivalents, and marketable securities as compared to $305 million as of December 31, 2020. R&D expenses were $26.6 million for the third quarter ended September 30 compared to $20.8 million for the same quarter in 2020. The increase was primarily due to $3.1 million in clinical development and professional services expenses, $2.7 million in personnel-related expenses resulting from an increase in employee headcount, $1.1 million in clinical manufacturing expenses, and $1.2 million in facility and other expenses. These increases were partially offset by a $2.3 million decrease in research and development expenses associated with the Penn agreement, which relates to expenses incurred in the three months ended September 30, 2020, for preclinical work performed in preparation for IND filings for our lead programs. Acquired in-process R&D expenses were $5.5 million for the third quarter ended September 30 compared to zero expenses in the same quarter of 2020. We incurred $0.5 million in license fees and $5 million in fees related to the August 2021 amendment with Penn, which extended our partnership by one year and extended our rights into large CNS indications. G&A expenses were $15 million for the third quarter ended September 30 compared to $7.8 million for the same quarter in 2020. The increase was primarily due to $5.3 million in personnel-related and share-based compensation expenses resulting from an increase in employee headcount. Professional fees and other expenses also increased by $1.8 million as we expanded our operations to support our research and development efforts and incurred expenses with operating as a public company. Net loss was $46.9 million for the third quarter of 2021 compared to $28.5 million in the same quarter of 2020. Net loss per basic and diluted share was $0.87 in the third quarter of 2021 compared to $0.63 in the third quarter of 2020. As we continue to advance our pipeline and invest in our capabilities, we are supported by the strength of our balance sheet. We expect our current cash, cash equivalents, and marketable securities to fund our operations for at least the next 24 months. Let me now turn to Bruce for closing remarks.

Thank you, Simona. Across our three lead programs, we are extremely proud of the accomplishments of our passionate team at Passage Bio. Our clinical operations team has been tireless in their efforts to open clinical trial sites around the globe. We also continue to invest in our in-house CM&C capabilities. This investment includes expanding our manufacturing team, which has made significant progress since opening our new CM&C laboratory in Hopewell, New Jersey last June. This group has been instrumental in developing and advancing differentiated analytics using the latest technologies and methodologies. Our team’s work builds upon GTP’s world-class vector analytical methods. Our patient engagement team has also built productive partnerships with the advocacy community, which has helped tremendously in raising awareness of our clinical trial programs. We look forward to delivering on multiple clinical milestones over the next few months, including reporting initial safety and 30-day biomarker data for the Phase I/II trial for infantile GM1, as well as dosing the first patients in our trial for FTD-GRN and our trial for early infantile Krabbe disease. In the first half of 2022, we also look forward to reporting initial safety and 30-day biomarker data from our FTD and Krabbe clinical trials. Before taking questions, I’d like to thank the incredible Passage Bio team and Jim Wilson and his team at GTP for their hard work bringing our clinical trials to the point where they are today. One of the benefits we have at Passage Bio is being able to draw on the deep scientific expertise of GTP, a world-renowned organization unmatched in its pioneering research contributions to AAV gene therapy. We also want to recognize our partnership with caregivers, healthcare professionals, scientists, and advocacy groups who share and support our vision to transform the lives of patients impacted by devastating CNS disorders. With that, I would like to open the call for questions.

Tessa Romero, your line is now open.

So my question is around the FTD-GRN and Krabbe studies. You made some comments on site activation progress for Krabbe and the regulatory authorization for FTD-GRN. Can you lay out for us where you are in the process in terms of site openings, screening, enrollment, or dosing for each of these studies?

Yes. Tessa, thanks very much for the question. Yes, we’re making great progress amid COVID-19. We’ve been very, I think, open in the past and transparent about the challenges that COVID first had. And then I think the lingering kind of operational challenges just working with sites as the number of studies post-COVID is kind of ramping up. We’ve been very successful at moving some of the studies forward. I think we have four sites open with the GM1 program, two with Krabbe, and we do have one site, which is the University of Pennsylvania, for the frontotemporal dementia program. We anticipate additional sites opening in the near term as well. So we’ve had a great deal of progress on the site activations. You also asked about the kind of patient identification. And maybe Eliseo could comment about the various programs in terms of how we’re identifying patients in collaboration with the sites and the other groups.

Yes. So in all the programs, we have a vast network of physicians, experts, advocacy organizations, and patient organizations to identify new patients. It’s different in the two pediatric leukodystrophies than in FTD. But essentially, they have strong similarities. So we are very well connected with all those networks. And now the rate-limiting step for us is not the identification of patients; the rate-limiting step for us is opening the sites that we are opening, as Bruce said. One quick reminder that when you open sites for a study like this one, it’s not an arithmetic function with a constant rate. It’s a sigmoid function, where the first part is exponential. So we opened, during the first part of the year, one site for GM1. We opened six in the last four months. And we plan to open more than twice that number in the next four months. So we’re very happy with the progress, and we think that we are in good shape to enroll in those trials.

Our next question comes from the line of Neena Bitritto-Garg from Citi.

I wanted to ask about the timing for the FTD-GRN data. I want to clarify that there are 60 days between patient dosing, and we should receive the first 30-day biomarker data 60 days after the third patient is dosed. Based on that timeline, I estimate that we could see the first data around June or July, considering there are three patients in the initial cohort. Can you confirm if I'm thinking about this correctly?

Neena, thanks for the question. Your math is absolutely correct. There is an interval between each patient due to FDA requirements, so we must dose one at a time with gene therapy to build a safety database. We can always engage with the FDA to explore if cumulative safety could expedite this process. You are correct that, as we've shared in our presentations, there is an interval. We also expect it to be late in the first half of 2022. As we move into 2022 and enroll the first patient, which we anticipate will be by the end of this year, we will provide updates on timelines as necessary. If there are delays due to mandated timelines, we will be transparent about that. However, we believe we can still meet the timeline for the first half of 2022, but you are right that it will be later in that period.

Our next question comes from the line of Laura Chico from Wedbush.

I guess I’d like to drill into the site activation comments a little bit more. You mentioned, if I heard correctly, six sites were activated in the last three months. And by clinical trials, it looks like across the three studies, there are six recruiting sites. So I guess I wanted to understand, are the constraints on site activation improving? And really trying to understand what the key barriers are actually moving towards getting recruitment started. And then I have one quick follow-up.

Sure. Thanks for the question. This is an operational issue related to receiving budgets from the sites. While it might seem like there would be an opportunity to speed this up since it's a budget, these budgets typically arrive quite late in the process because any considerations from individual reviews need to be integrated. There are multiple departments in each hospital we are working with, the pharmacy being one of them. Ultimately, it comes down to operational factors. From our benchmarking, we've found that the time to open sites and enroll the first patients, particularly in gene therapy, is not very far from what we see in the academic centers. The first center we opened for the GM1 study was in a community setting with a centralized IRB. Each of the new centers is taking some time due to IRB processes and budget negotiations. We are not inactive while waiting for the sites to get up and running; there is significant interaction among patient engagement groups, the clinical operations team, and our leadership with each site to identify potential patients. However, it is a balancing act because until a site is open, we can't officially screen patients. Eliseo, do you have any other comments, or does that cover everything?

It’s very comprehensive, but I would add one thing. If you want to plot a curve, you need three points. Over the past sixteen months, we opened one site, St Peter’s Community Hospital. In the last three months, we opened six sites, and in the next four months, we plan to open two or three, which indicates exponential growth. The early part of the curve does not predict the later part. The six sites we opened recently are indicative of continued growth. Eventually, we will reach the desired number of sites. At that point, the reasonable step would involve the availability of patient incidents, but for now, we're completed.

Yes. And I guess, as Eliseo speaking, the other thing we are doing is working across the globe. So these are not just U.S. sites; we have sites now in the U.S. and Canada. We’ve been very open and transparent on clinicaltrials.gov. They were also opening sites in Brazil, the U.K., Europe, and the Middle East. There are individual complexities for each review of the gene therapy, especially that creates some challenges, et cetera. So we’re very pleased with the first sites that are outside the United States being opened as well. So all of that is coming together to say that we very strongly believe that we’re in a great position, and we have probably the biggest network in these studies, we believe, and we’re very proud of that.

Super helpful.

You had a follow-up, please.

Yes. If you don’t mind, it’s just kind of related more to Imagine-1. And obviously, it’s early in the process for recruitment. But I’m just curious about screening failures. And are there any aspects of the inclusion/exclusion criteria that might be impacting recruitment thus far?

Thank you, Laura. I want to clarify the definition. In each of these studies involving the pediatric population, there are age limits and developmental stages, as well as milestones, that are necessary due to our interactions with regulatory agencies, input from efficacy experts, and the treating clinicians. I don’t want to suggest that there are no criteria influencing enrollment, as these children face serious diseases and rapid progression. Some may have deficiencies that prevent them from initially entering the study, which we hope to address later. Additionally, as I mentioned earlier, while working with sites, advocacy groups, and testing programs to find patients, there may be candidates identified who could age out of eligibility if sites are closed, as was the case earlier this year. So, I want to emphasize that it isn't so much about inappropriate entry criteria limiting enrollment and screening but rather the consistent application of those criteria across the patient population and the challenges these patients encounter.

Our next question comes from the line of Yun Zhong from BTIG.

Myself, apologies. And so on the 30-day biomarker data that you expect to report in the fourth quarter, are you expecting to report the substrate reduction as well? And also on the beta-gal in the CSF, I believe other companies have talked about the challenge in quantification in the CSF. So can you talk about the comfort level that you believe that the data will accurately reflect how much enzyme you’re producing in the CSF, please?

Thank you for the question and for joining the call. We have been quite transparent about our focus on closing the beta-galactosidase enzyme activity in cerebrospinal fluid and serum. The principal endpoint is safety, which will allow us to progress to higher dosing and include younger patients. We are being cautious about the substrates because, while other companies have shared this information, we want to ensure that we fully understand the pharmacodynamics and have a longitudinal perspective. Similar caution applies to clinical endpoints; we haven't committed to disclosing that information at this time but are concentrating on cerebrospinal fluid for now. As we move forward, we will continue to evaluate this. Regarding your second question about measuring serum and cerebrospinal fluid, Eliseo, would you like to address that in relation to Yun's question?

Yes. Admittedly, it’s a challenging asset to develop. Some sponsors have struggled with that. As you know, the concentrations in the CSF are much smaller. So it requires a very sensitive, but also a very specific test. We are confident with the test we have developed. And because of the administration and the type of disease we’re dealing with, we think that that’s very, very important.

Our next question comes from the line of Danielle Brill from Raymond James.

So I don’t know if I’m beating a dead horse here, but I just wanted to clarify the FTD program specifically. Are you actively screening and identifying patients now that you’ve got some sites open? And then if I understood correctly, it sounds like you’ll update timelines when you enroll the first patients in the study. I'm wondering if you’ll provide an update when subsequent patients are also enrolled?

Thanks, Danielle. So yes, I appreciate the question. So we have focused on sites such as the University of Pennsylvania that have a relatively intact and large comparatively, in patients that are being actively either monitored or tracked and followed from a family perspective, from an FTD perspective. And so other sites are similar to that with various degrees of numbers of patients that are already in the treatable system, for example. But we’re supplementing that by also supporting InformedDNA from a genetic screening and counseling perspective. So we are actively working as we have across all of our studies to identify patients; we couldn’t obviously bring patients into screening formally until the studies are open, but we can certainly and have across the various sites and interactions with physicians, pre-identified patients that may be eligible. But obviously, the final determination is when they’re actually at the site. So that’s a little bit of a combination to answer your question. The other point I’ll make is that there are large natural history studies, such as the GENFI study and the all FTD studies that we’re also looking at those sites that have those relationships as well. So that is part of the patient population that is already kind of involved with the medical community and the sites that we are interested in, to an extent. To your second question, I think I said we may update this when we have the first patient dosed. We typically update our timelines and think about this when we enter into early 2022, and we set out our goals. So we’ll have to look at the enrollment of the first patient and our estimation of other sites coming on. As Eliseo said, we’re making great progress on that and then the projection of patient enrollment. So it’s a combination of all of those things; it may not be at the time of the first patient dosed. And then I think the third part of your question is, are we going to update as we enroll individual patients? And what we’ve been doing in the past as we have with the GM1 study is announcing the first patient dosed and then the target date of data disclosure. And we don’t really want to get into the granular detail of each individual patient timing because it just isn’t an individual corporate goal. We’re really interested in the enrollment of the first patient and the data disclosure. And so that’s what our approach has been.

Our next question comes from the line of Yaron Werber from Cowen.

This is Brendan speaking on behalf of Yaron. I have a quick question regarding the earlier pipeline. Apologies if I missed it; I've been a bit preoccupied. I was wondering if we might be able to see any data related to MLD or ALS, or any preclinical data at all, next year. Also, when should we expect that in relation to how to think about those?

No, thank you for the question, and I appreciate being on the call. We are certainly focused on this, and we recognize that our pipeline is one of the strongest in the area of genetic medicines for CNS, which we are very proud of and that continues to expand not only with the initial seven programs but also with additional options we may pursue, including the Alzheimer’s program and the TLA, which could be significant. To address your question directly, we have not specifically updated the timelines. We might consider doing so as we approach early 2022 when we evaluate the data that is available and may become public. In the past, we have stated that our ability to share information is closely tied to the progress of the gene therapy program under Jim Wilson. As they advance and gain confidence in the data they are producing, we will feel more comfortable sharing it. This sharing includes both publications and public disclosures. I think this is an important topic for us to reflect on as we enter 2022, and we look forward to discussing it further in the coming year.

Thank you. This concludes today’s conference call. Thank you for participating. You may now disconnect.