Passage BIO, Inc. Q2 FY2022 Earnings Call

Good morning and welcome to the Passage Bio Second Quarter 2022 Financial and Operating Results Conference Call. Please be advised that this call is being recorded at the company's request. Now I'd like to turn the call over to Stuart Henderson, Vice President of Corporate Development and Investor Relations. 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, Chip Cale, Interim Chief Executive Officer, will review our second quarter 2022 and recent business highlights; Mark Forman, our Chief Medical Officer, will review our clinical programs; and Simona King, our Chief Financial Officer, will review our second quarter 2022 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; the impact 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 its 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 Chip Cale. Chip?

Thanks, Stuart, and thank you all for joining us this morning. We continue to make important progress advancing our programs in our mission to develop transformative therapies for devastating CNS disorders with limited or no approved treatment options. As we advance our three ongoing clinical programs, we look forward to delivering multiple value-creating clinical milestones in the second half of this year. These milestones build upon several recent accomplishments including: first, strong momentum in advancing our Imagine-1 trial for GM1 gangliosidosis. We have now progressed the study to recruit the final cohort, Cohort 4, in the dose-ascending phase of the trial and we are excited to have begun recruiting patients for this cohort. Second, Mark will review these data in more detail shortly and we look forward to reporting initial data from Cohorts 2 and 3 later this year. Finally, the FDA clearance of our IND application for a Phase I study of PBML04 in metachromatic leukodystrophy. This marks our fourth consecutive IND clearance as a company and our third rare pediatric lysosomal storage disorder program to reach clinical development. This clearance is a testament to the strong CMC and analytics capabilities we have developed internally at our state-of-the-art CMC laboratory in New Jersey and the high-quality preclinical data supporting the program through our strong partnership with Penn's Gene Therapy Program. In addition, we continue to recruit additional patients in Cohort 1 of our GALax-C clinical trial for early infantile Krabbe disease and look forward to reporting initial data from a subset of Cohort 1 by year-end. Consistent with our current guidance, we also expect to dose the first patient in our upliFT-D clinical trial for frontotemporal dementia shortly. Clinical trial execution remains a core priority for us. We have established a global network of trial sites across each of our ongoing clinical programs with active sites in the United States, Brazil, Canada, the UK, Israel, and the Netherlands. We also continue to employ various strategies to drive patient identification across our programs, including several initiatives focused on identifying frontotemporal dementia patients with a granulin mutation. These efforts have increased genetic testing among FTD patients over the last few months. Underpinning our execution is a strong cash position, which we estimate will fund our continued operations into the second quarter of 2024. Lastly, we were pleased to have recently added Michael Kamarck, PhD to our Board of Directors. Dr. Kamarck is a seasoned biopharmaceutical executive with over 40 years of experience in discovery research, process development, and technical operations. We look forward to drawing on his expertise. With that, I will now turn it over to our Chief Medical Officer, Mark Forman, who will review the progress made across each of our ongoing clinical programs.

Thank you, Chip. First, let me discuss our lead program PBGM01 for GM1 gangliosidosis. GM1 is a fatal neurological lysosomal storage disease caused by a GLB1 gene mutation that results in low activity of the beta-galactosidase enzyme. This leads to a rapid neurological decline and in the most severe form, unfortunately, to mortality within several years. Patients with GM1 are a rare and underserved population, and there are no disease-modifying therapies for their disorder currently. Our Imagine-1 clinical trial focuses on the early and late infantile forms of GM1, which are the most severe forms of the disease. This global Phase I/II trial is an open-label dose-escalation study with PBGM01 enrolling four distinct cohorts divided by age and dose level. As a reminder, we were pleased to report updated positive interim safety, biomarker, and clinical efficacy data from Cohort 1 at ASGCT in May. These data show that the low dose of PBGM01 was well-tolerated and had a favorable safety profile with patient 1 data through 13 months and patient 2 data through 7 months. No serious adverse events, no complications related to ICM administration, and no evidence of dorsal root ganglion toxicity were observed in either patient. Both patients showed continued improvement across developmental areas on the Vineland-II, a caregiver-assessed scale and Bayley 3, an investigator-assessed scale following PBGM01 administration. Patient 1 showed improvement across all developmental areas through the 12-month assessment with notable progression in motor and language domains. Patient 2 showed improvement across multiple developmental domains despite having severe developmental delay at baseline and a prior history of regression. This patient progressed from standing with support for 5 seconds to standing with support for one to three minutes and walking without support. We were extremely pleased to see continued and meaningful improvement in developmental milestones for these children, including the regaining of lost milestones. Volumetric MRI data showed meaningful growth in brain volume for Patient 1, who was 15 months of age at gene transfer. Patient 2, who had severe developmental delay at baseline and was 31 months of age at gene transfer, showed a slight decline in brain volume following the baseline at 6 months. Longer-term biomarker data for beta-galactosidase enzyme activity in CSF and serum showed functional transgene expression. As Chip mentioned, our Imagine-1 trial has experienced strong momentum. To date, we have dosed a total of five patients in the study; we have completed dosing of Cohorts 1 and 3 low dose in late and early infantile patients, respectively, and have dosed the first patient in the high-dose late infantile Cohort 2. Following positive review of interim safety data from Cohort 3 by the independent data monitoring committee, we are excited to have now advanced the study to recruitment of patients for Cohort 4 high dose early infantile GM1. This is the final patient cohort in the dose-ascending phase of the study. We remain on track to report initial safety and biomarker data from Cohorts 2 and 3 in the second half of 2022. Moving on to our global PBKR03 program GALax-C, which is an open-label dose-escalation study in patients with early infantile Krabbe disease. Krabbe disease is a condition that progresses rapidly damaging both the brain and the peripheral nervous system, resulting in a life expectancy of only two years in the severe cases. Krabbe disease is a fatal neurological lysosomal storage disease caused by a GALC gene mutation that results in decreased enzyme activity of galactosylceramidase. Like GM1, this is also a pediatric leukodystrophy and lysosomal storage disease with an underserved population and devastating disease progression. Our approach to treating Krabbe is similar to our approach to GM1, utilizing the same proprietary capsid and ICM delivery to potentially address both CNS and peripheral disease manifestations. We have dosed the first patient in the study and are actively recruiting additional patients in Cohort 1. We look forward to reporting initial safety and biomarker data from a subset of Cohort 1 by the end of 2022. Our third clinical program, PBFT02, is for frontotemporal dementia with granulin mutations. FTD is a devastating form of early-onset dementia affecting patients between the ages of 40 to 65. The form of the disease we are seeking to treat with our therapy is caused by a granulin or GRN gene mutation, which results in a deficiency of progranulin. It's estimated that about 5% to 10% of FTD is caused by a GRN mutation. We are utilizing the AAV1 capsid to deliver the GRN gene via ICM delivery to the CSF. As a reminder, the study design consists of 2 cohorts of 3 patients each receiving 2 different ascending doses of PBFT02 with an optional third cohort treated with a higher dose depending on safety and biomarker data results observed in the first 2 cohorts. We now have 3 active clinical trial sites, including 2 in the US and 1 in Brazil, and activation efforts at additional sites continue. We also continue to employ a variety of patient identification initiatives, including efforts to increase genetic testing among FTD patients. We've now identified prospective patients with a granulin mutation that could dose the first patient in the study shortly. Turning lastly to PBML04, our program for metachromatic leukodystrophy or MLD. Infantile MLD is a fatal inherited disease caused by mutations in the ARSA or the arylsulfatase A gene. MLD is characterized by muscle weakness, rigidity, gait disorder, and developmental delays, and unfortunately, children typically die by the age of 5. Worldwide incidence is approximately 1 in 100,000 live births. Our approach is similar to our approach to GM1 and Krabbe, utilizing the same proprietary capsid AAVhu68 and ICM delivery to express ARSA and potentially address both central nervous system and peripheral manifestations of this devastating disease. We announced in June that the FDA cleared our IND marking our fourth IND clearance as a company and our third pediatric lysosomal storage disorder program to reach clinical development. We're thrilled to have achieved this milestone and are excited by the promise of our potential therapy. As we continue to evaluate our resources and operating expenses, I will now turn the call over to Simona to review our financials.

Thank you, Mark. Before reviewing our expenses for the quarter, I want to reiterate our strong cash position. As we reported in our press release this morning, we ended the second quarter with approximately $239.3 million in cash, cash equivalents, and marketable securities compared to $267.1 million as of March 31, 2022. We continue to expect these existing cash resources to fund operations into Q2 2024 and continue to manage our cash carefully to ensure we can deliver on meaningful clinical milestones over the coming quarters. R&D expenses were $26.8 million for the quarter ended June 30, 2022, compared to $33.1 million for the same quarter in 2021. The decrease was primarily due to a decrease of $10.9 million in clinical manufacturing expenses, which relates to the timing of our manufacturing activities. This amount was partially offset by $4.6 million of increases in clinical operations expenses, expenses associated with the Penn agreement, and facility and other expenses. G&A expenses were $13 million for the quarter ended June 30, 2022, compared to $15.4 million for the same quarter in '21. The decrease was primarily due to a $2.3 million reduction in personnel-related and share-based compensation expense related to our workforce restructuring, which was partially offset by severance expenses incurred in the 3 months ended June 30, 2022, related to the separation of our Chief Executive Officer. Net loss was $39.5 million for the quarter ended June 30, 2022, compared to $48.4 million for the same quarter in 2021. Let me now turn it back to Chip for closing remarks.

Thank you, Simona. With three ongoing clinical programs and state-of-the-art analytics capabilities, we believe we are well positioned to achieve several important milestones over the coming months. We continue to experience strong momentum in our Imagine-1 trial and expect to report initial data from Cohorts 2 and 3 in the second half of 2022. Additional expected near-term milestones include: first, reporting initial safety and biomarker data from a subset of Cohort 1 of our GALax-C trial by the end of 2022 and second, consistent with our guidance, dosing the first patient in our upliFT-D trial soon. Prior to taking your questions, I would like to thank the patients, families, and trial investigators as well as the employees at Passage Bio and our colleagues at the Gene Therapy Program for their support and dedication to our mission. With that, I'd like to open the call for your questions. Operator?

Our first question comes from Brendan Smith with Cowen. Your line is open.

Just a couple of quick ones from us. Sorry if I missed this. But for the initial Krabbe data and actually maybe for the GM1 update as well in the second half, is this something we should probably expect in like a press release or are you targeting something more formal as like a medical meeting? And then just really quickly for MLD, can you maybe just expand a bit on your decision for clinical development for the time being? Is this probably something that we would see for additional pipeline programs? Is it more of a way to strategize and prioritize the current programs you have in the clinic or does it have something to do more with the drug itself?

Brendan, I appreciate your questions. Regarding the Krabbe and GM1 data, we are currently assessing how to best release that information. We are considering whether it would be appropriate to present it at a scientific conference, depending on when the data is available and the schedule of those meetings. If that’s not feasible, we would issue a press release instead. This decision is still pending as we are exploring various options. As for your inquiry about MLD and the decision to pause its further development, I want to reiterate that this is not about the asset itself but rather our assessment of our current financial situation and priorities. We are focused on determining the best way to proceed and prioritize the necessary assets.

Our next question comes from the line of Neena Bitritto-Garg with Citi. Your line is open.

I was just wondering if you could give us an update on some of the safety events that you saw in the initial patient that was dosed with PBKR03. And I'm just curious how many additional patients you built and if you've seen any similar safety signals? And then on PBFT02, it sounds like you have identified some patients so just kind of curious what the gating factor is to getting at least the first patient dosed there.

Neena, I'll hand it over to Mark to talk about the safety events that we've seen with PBKR03. But on FTD, consistent with our guidance, we're happy to announce that we expect to be dosing shortly and that is a result of we think ongoing patient identification activities that we've been doing. So I'll hand it over now to Mark to talk about the safety issues on the Krabbe asset.

As we mentioned earlier, our first patient developed acute hydrocephalus about 30 days after administration. This patient had a ventriculoperitoneal shunt placed to manage the CSF buildup in the brain, which is a standard treatment for this condition. Following this intervention, the patient has recovered well and is currently stable, and the serious adverse event has been updated to indicate resolution. In light of this event and as previously disclosed, we have revised the protocol to enhance safety monitoring. We are now actively recruiting additional patients for this study, though we haven't administered any doses yet.

Our next question comes from the line of Madison Elsaadi with Raymond James. Your line is open.

This is Alex speaking on behalf of Danielle Brill. Neena, you covered my questions, but I wanted to ask about the progress on expanding additional sites for SCD recruitment. How is that effort going and what is the status of patient influx? I know COVID was a major concern regarding screening initiatives, so I’d like to understand if the recent variants have affected patient recruitment for that study.

I think I'll hand it over to Mark to talk about the latest on our site expansion and our patient ID activities and how that may be helping screening. But just as a general comment, as we've commented over the past few quarters, we have been focusing a lot on our patient ID efforts and we believe that we're beginning to see some benefit from that. But with that, I'll hand it over to Mark.

We are adopting a global strategy for the FTD program, and currently, we have three active clinical sites following the recent activation of trial sites in Houston and Brazil. There are two sites open in the US and one in Brazil, and we are making progress toward opening additional sites in other countries, which we expect to see results from in the coming months. Regarding patient identification, as Chip mentioned, we are thrilled to be on the verge of dosing our first patient, which we believe highlights the success of our patient identification initiatives. We are collaborating closely with each of our study investigators to create tailored plans for patient identification and recruitment. Additionally, we are engaging in extensive outreach to healthcare providers to inform them about the benefits and availability of our genetic testing program. These efforts have resulted in a notable increase in genetic testing among FTD patients through our sponsored programs over the last three months, which is quite promising. We have identified several patients with GRN mutations who are now being assessed for study participation, and we anticipate dosing our first patient soon.

Our next question comes from the line of Laura Chico with Wedbush. Your line is open.

I apologize for joining a bit late. I have two questions. First, regarding FTD recruitment, I wanted to clarify whether the main issue is related to diagnosis or if there are other factors at play in the competitive environment. Also, I missed this part earlier—any updates on the CEO search?

I think I'll take your second question first and then hand it over to Mark to talk about FTD recruitment. But on the CEO search, the Board has engaged Russell Reynolds to conduct a public search for the new CEO. The search is active and the Board is evaluating potential candidates and is making good progress. While the search is ongoing, our strong capable executive leadership team remains focused on driving execution of our near-term milestones and managing our cash. With that, I'll hand it over to Mark to talk about what the issues and what we're doing to resolve the issues with the FTD recruitment.

I believe the challenges we’ve faced with recruitment are due to several factors. A key issue is identifying patients, which is why our extensive outreach efforts are aimed at increasing the number of candidates. There is certainly competition from other companies with active trials. Additionally, the patients we identify must meet certain eligibility criteria. It’s a combination of all these factors. However, I want to emphasize that our outreach efforts to enhance the throughput of genetic testing are yielding positive results, and we now have a group of individuals being assessed for eligibility.

Thank you. And I'm showing no further questions in the queue at this time. Ladies and gentlemen, thank you for participating in today's conference call. This does conclude your program and you may disconnect. Everyone, have a great day.