Earnings Call Transcript - PASG Q3 2020

Operator, Operator

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

Zoe Mita, Executive

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 third 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 the timing and execution of anticipated milestones, including the resolution of FDA feedback on INDs; 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 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 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?

Bruce Goldsmith, CEO

Thanks, Zoe, and thank you all for joining us this morning. This year, we have continued to make significant strides in strengthening our operations in anticipation of having our three lead programs in clinical development next year. Powering our progress has been our growing team of talented leaders, dedicated to achieving our mission of providing life-transforming gene therapies for patients with rare, monogenic CNS diseases, all while building lasting relationships with the communities we serve. The foundation of the company, as you know, is based on our strategic partnership with Dr. James Wilson, who leads the preeminent University of Pennsylvania's Gene Therapy Program GTP. This partnership provides us with unrivaled access to cutting-edge research and clinical candidates that are the result of world-class expertise and resources capable of translating science into optimal gene therapies with a higher probability of technical and regulatory success. On today's call, we'll mostly focus on where we stand with our three lead programs in GM1 gangliosidosis, frontotemporal dementia, and Krabbe disease. We also have three pre-clinical programs in earlier stages of development in Amyotrophic Lateral Sclerosis, Metachromatic Leukodystrophy, and Charcot-Marie-Tooth Disease, Type 2Aa. In addition to our GTP partnership, we have the option to license a total of 17 programs focused on rare, monogenic disorders of the CNS, making our potential pipeline quite robust. We are also well-funded to support our operations. This financial flexibility is another key asset as we advance our initial three programs into clinical development. Today, I am excited to review some of our recent accomplishments, particularly across patient identification, clinical site preparedness, and manufacturing readiness. I will start with an update on our lead program PBGM01. As a reminder, GM1 is a rare monogenic lysosomal storage disease caused by mutations in the GLB1 gene encoding the enzyme beta-galactosidase. We are targeting the infantile form of the disease, which is the most severe with a rapid disease course and no current treatment options. Our lead program PBGM01 is a best-in-class gene therapy utilizing the next-generation proprietary AAVhu68 capsid, an optimized gene expression cassette to deliver a GLB1 transgene encoding β-gal to increase β-gal enzyme activity in the brain and peripheral tissues. During our second quarter earnings call, we announced the FDA had placed our IND for PBGM01 on clinical hold due to questions concerning the biocompatibility of our proposed intra cisterna magna delivery device. As previously disclosed, we have now received our official letter from the FDA confirming that the hold was due solely to these biocompatibility concerns. Based on guidance from the FDA, we are conducting a biocompatibility risk assessment and testing to resolve their questions as quickly as possible. We continue to engage with the Agency and remain confident that we will be able to adequately address any concerns and we continue to expect to receive IND clearance. Because of our work to satisfy the FDA's biocompatibility requirements, we now expect to initiate the Phase 1/2 clinical trial in the first quarter of 2021 and to report initial safety and biomarker data mid-2021. While we work towards IND clearance, our clinical trial preparations remain on track. As we discussed on our previous call, we have aligned with the Agency on an updated trial design. As a reminder, this trial will be an open-label, dose escalation study of PBGM01, administered by a single injection into the intra cisterna magna in pediatric subjects with early and late infantile GM1. For the dose escalation portion of the trial, we have changed the design specifically to study early and late infantile patients in separate smaller cohorts. We will now be enrolling a total of four cohorts of two patients each, with separate dose escalation cohorts for late-onset infantile GM1 and early-onset infantile GM1. Because the safety of our patients is our top priority, in addition to the trial amendments, we've also implemented approaches for the GM1 study that address the challenges of the current COVID-19 environment. Such approaches include remote clinical assessments, structured video capture of study subjects in the home, and concierge services through third-party vendors to facilitate travel due to increased burdens and restrictions. We believe these measures will provide patient support while also maintaining the rigor of our clinical trials and our ability to provide this potentially life-altering therapy to patients. As we have discussed, GM1 is a devastating disease that impacts patients worldwide, and we are dedicated to serving affected patients in the U.S. and across additional demographics and geographies. Clinical supply for the Phase 1/2 trial has been manufactured and is ready for dosing. In addition to submitting our IND to the FDA, we have also filed for clinical trial approvals in countries outside of the U.S. We are pleased with our overall progress in activating clinical sites around the world. The need for an effective therapy is underscored by a recent orphan disease designation in Europe granted to PBGM01 by the European Commission in October. PBGM01 previously received orphan drug and rare pediatric disease designations in the U.S. We look forward to working with these and other government agencies to fill the treatment gap for GM1 globally. Our aim is to keep patients at the center of PBGM01's development and to work with families and physicians to drive the best possible outcomes for patients. As we prepare for clinical site activations, we are ramping up patient identification and education efforts, starting with our recently announced partnership with Invitae, a leading medical genetic testing company, to increase genetic testing and support early identification of GM1 through a program called Detect Lysosomal Storage Disorders. The Detect LSDs program offers free genetic testing and counseling to encourage earlier diagnosis of lysosomal storage diseases like GM1. Additionally, Invitae will be reaching out to healthcare providers who have patients that have tested positive for GM1 to provide educational information and clinical trial information. We believe this partnership will be a crucial resource, not only for our clinical program but also for the patient community more broadly, as we aim to shorten the timeline for reliable diagnosis, treatment, and ultimately halting the progression of this disorder. We continue to engage with patient advocacy groups on important initiatives such as newborn screening. Currently, we are sponsoring the New York ScreenPlus pilot program, which will offer newborn screening for rare diseases including GM1 to 150,000 to 175,000 ethnically diverse babies in key hospitals across the State of New York. Additionally, we are involved in various meetings and initiatives sponsored by our advocacy partners to determine ways to support and further adopt newborn screening. Preclinical data, including recently published data in the peer-reviewed journal Human Gene Therapy, continue to support the potential of PBGM01 as a treatment for the underlying cause of GM1. In a murine model, the data showed that by increasing β-gal activity in the brain and peripheral tissues, PBGM01 was able to reduce neuronal lysosomal storage lesions, improve neurological function, and increase survival. This data is encouraging and suggests immense potential for GM1 patients. We are excited to advance PBGM01 toward clinical development and begin dosing patients. Based on the supportive preclinical data, physician and advocacy engagement, and productive interactions with the FDA, we look forward to getting this trial started as soon as possible. As for our other lead programs, PBFT02 for FTD and PBKR03 for Krabbe disease, we plan to file our INDs for both once we receive FDA clearance for our GM1 program. Based on our current timelines, we're preparing for Phase 1/2 clinical trial initiations for PBFT02 and PBKR03 in the first half of next year. As we finalize the protocols for our FTD and Krabbe clinical trial programs, we plan to incorporate feedback from the FDA regarding our GM1 program as applicable, in order to design the safest, most efficient trials possible for these two indications. As a reminder, PBFT02 is a gene therapy that utilizes an AAV1 vector to deliver to the brain a functional granulin gene encoding the progranulin protein, a complex and highly conserved protein thought to have multiple roles in cell biology and inflammation. In September, we announced the publication in a peer-reviewed journal of preclinical data from our partners at Penn's GTP. In that data, a single administration of an optimized AAV1 GRN vector of PBFT02 showed the greatest increase in CSF progranulin levels when compared to other AAV vectors, reaching more than 50-fold the normal human CSF progranulin levels. The data showed that AAV1 GRN also appeared to demonstrate extensive transduction of ependymal cells, which line the ventricles of the brain and are involved in the production of CSF. Following these increases in progranulin levels, subjects showed reduced lysosomal storage lesions, normalized lysosomal enzyme expression, and corrected microgliosis. In addition to demonstrating the ability of PBFT02 to drive key biomarker results, data from the study also supported our ICM route delivery, which was shown to be well-tolerated and minimally invasive. Our use of the AAV1 cassette and ICM route of delivery is a result of rigorous preclinical development work conducted by our partners at GTP, illustrating again the benefits of our core business model of unparalleled access to cutting-edge science and research. We are also preparing our third program PBKR03 for Phase 1/2 trial for the treatment of Krabbe disease, a rare and often life-threatening lysosomal storage disease that results in progressive damage to both the brain and peripheral nervous system. As we discussed in detail on our last call, data from preclinical models shows that PBKR03, which utilizes the AAVhu68 capsid to deliver a functional GAL-C gene, increased GAL-C enzyme activity, reduced cytosine accumulation, and restored myelin, leading to a phenotypic correction and increased survival in a naturally occurring canine mouse model. We recently announced that the FDA granted orphan drug and rare pediatric disease designations to PBKR03 for Krabbe disease, further suggesting its potential and emphasizing the need for effective treatment options. We're encouraged that the FDA recognizes the critical unmet need in this patient population. We believe that PBKR03 has the potential to be a life-altering therapy that can address the underlying cause of the disease. We look forward to initiating our Phase 1/2 trial in the first half of 2021. Finally, turning to our earlier stage pipeline, we continue to progress our earlier programs for the treatment of MSA, ARS, and CMT2A. We look forward to providing further updates as these programs move closer to clinical development. Beyond our clinical programs, we are also expanding our operational capabilities and are now excited to announce the completion of our dedicated GMP manufacturing suite at Catalent. Construction of the suite is now complete and has undergone qualifications for GMP manufacturing readiness. We plan to initiate manufacturing activities at our dedicated suite this quarter and will be able to meet production requirements for our lead pipeline products through early commercialization. Manufacturing capacity has been a key tenet of our strategy since launching the company. This milestone marks important progress for securing control of our supply chain, which we believe will set us up for both clinical and commercial success. To support our continued growth and upcoming trial initiations, we continue to make key hires across our clinical, regulatory, manufacturing, and corporate teams. I'm delighted that Passage Bio's mission has resonated with so many talented individuals, and we feel we are assembling the right group of dedicated, experienced leaders to accomplish our goals. And with that, I will turn the call over to Rich to give a financial update.

Rich Morris, CFO

Thank you, Bruce. As we reported in our press release this morning, we ended the quarter with cash, cash equivalents, and marketable securities of approximately $336 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 $20.8 million for the quarter ended September 30, compared to $10.4 million for the same quarter in 2019. The increase was primarily due to an increase of $8.3 million in clinical manufacturing costs and a $1.9 million increase in clinical development costs as we prepare for clinical trials to begin in early 2021. These increases were offset by a $4.3 million decrease in preclinical research and development costs incurred as we finalize work associated with our lead indications in preparation for IND filing. We also had a $4.5 million increase in personnel-related costs, including share-based compensation due to increased employee headcount in the R&D function. G&A expenses were $7.8 million for the quarter ended September 30, compared to $1.2 million for the same quarter in 2019. The increase was primarily due to a $4.4 million increase in personnel-related and share-based compensation expenses due to increases in employee headcount. Our professional fees and facility costs also increased by $0.6 million and $1.6 million, respectively, as we expanded our operations to support our research and development efforts. Net loss was $28.5 million for the third quarter of 2020 compared to $11.4 million in the same quarter of 2019. Net loss per basic and diluted share was $0.63 in the third quarter of 2020 compared to a $2.02 net loss per basic and diluted share in the third quarter of 2019. Now I will turn the call back to Bruce for closing remarks.

Bruce Goldsmith, CEO

Thanks, Rich. As we are close to the end of this year, I want to take a moment to reflect on our progress throughout 2020. This year, we expanded the foundation of the company as we continue to prepare the clinical stage development of three promising pipeline assets next year, taking us closer to our goal of offering innovative, safe, and effective therapies to patients who currently have limited or no treatment options. As I shared earlier, we are engaging with the FDA to resolve their questions regarding device biocompatibility. We anticipate dosing our first patient in the Phase 1/2 trial PBGM01 in the first quarter of 2021. We continue to prepare our clinical sites for dosing in both the U.S. and abroad and are undergoing measures to support patient safety amidst the evolving COVID-19 pandemic. We expect to record initial 30-day biomarker and safety data for the first cohort of late-onset infantile GM1 patients in mid-2021. We also remain on track to initiate Phase 1/2 trials for FTD and Krabbe programs in the first half of 2021. As I mentioned earlier, we continue to expand our clinical manufacturing and operations teams to support these programs along with the future development of additional pipeline candidates, all with the goal of transforming the lives of patients suffering from serious, life-threatening rare, monogenic central nervous system diseases. The reason we have been able to be so productive despite a challenging year is because of our talented, committed team of employees at Passage Bio. I'd like to take this opportunity to recognize and thank them for their flexibility, hard work, and diligence as we head into the final months of this year. It's because of them that we are well prepared to take on what promises to be a milestone-filled year, 2021. At this time, we'd like to open the call up for your questions. Operator?

Operator, Operator

Thank you, sir. We will now take any questions you may have. The first question comes from Anupam Rana from JPMorgan. Please go ahead.

Anupam Rana, Analyst

Hey, guys, thanks so much for taking the question. Just a quick one for me for the Invitae collaboration with Krabbe also being a lysosomal storage disorder, are there plans, ultimately to include this indication as part of the collaboration to facilitate genetic testing and patient identification? And if I could squeeze one more in on the biocompatibility risk assessments and testing of the ICM device, maybe any more color on the final gating factors in kind of completing this and discussions with the FDA? Thanks so much.

Gary Romano, CMO

Yeah, this is Gary. We may have lost Bruce's connection. So let me take.

Bruce Goldsmith, CEO

I'm sorry.

Gary Romano, CMO

Okay, go ahead.

Bruce Goldsmith, CEO

Gary, I apologize, I was on double mute as opposed to single mute at that time. So thanks for your question. Thanks for joining the call, apologies for the delay. So I'll take the second question. And then I'll turn it over to Jill for a discussion on the Invitae collaboration and other approaches we're taking on patient identification. So yeah, we're essentially, the gating items in the discussions with the FDA are really completing some of the testing and finalizing the reports and moving forward with the final risk assessment. This has been based on an interactive discussion with the FDA since receiving a letter earlier this year, and simply completing those tests. We had indicated back in I think, September and August that those were probably going to take about seven to eight weeks. We're generally on that timeline and still on track for our initiation of the clinical study in the first quarter of next year. This is for GM1. And then we'll file for FTD and Krabbe sequentially after that. So the initiation of those studies should be in the first half of next year, so overall, we're still moving forward with the initial plans, and really just finalizing all of those tests and risk assessment. Jill?

Jill Quigley, COO

Sure. And so - and upon the question about the newborn screening initiative for Krabbe. Currently, Krabbe is not included on New York ScreenPlus. But Krabbe, as you know, has newborn screening pilots in multiple states. I think we're up to about nine states that are now screening for Krabbe. One of the reasons we initially focused on supporting the inclusion of GM1 for New York ScreenPlus is because there are no states doing any newborn screening for GM1 currently. Certainly, as the program progresses, we can consider adding Krabbe although there are multiple states that have pilot programs already for that.

Bruce Goldsmith, CEO

Yeah, and the same approach for Invitae as well, which is that the Lysosomal Storage Disease Detect program is certainly able to be expanded as we move forward.

Anupam Rana, Analyst

Thanks so much for taking our questions.

Operator, Operator

Thank you. Our next question comes from the line of Salveen Richter. Go ahead.

Sonia Gupta, Analyst

Hi, this is Sonia on for Salveen. You recently announced a partnership with Invitae towards the goal of increasing patient identification efforts in GM1, could you comment on the number of patients you would expect to identify from the partnership? And then have you had discussions with the FDA? Have your discussions with the FDA impacted your filing plans for either of the diseases on GM1?

Bruce Goldsmith, CEO

Yes. So I'll take the first part, and that was on Invitae. So the way we think about this is Invitae and also the combination of that with pilot programs like the New York ScreenPlus is to do two things. One is to identify patients and essentially to get the patients that are coded and have a genetic screen and are identified with GM1. Right now, the incidence is predicted to be about 0.5 in 100,000 live births, which is really just around 50 patients potentially per year, 50 children. But we also recognize that the underdiagnosis of a disease that does not have a standardized genetic screen that is in practice may increase the identification of the disease. So we're partnering with Invitae on two aspects. One is to provide free testing, which should hopefully lower an economic barrier for the potential screening of GM1, potentially increasing both the incidence and the detection of that incidence. The second part is that for those patients who have already been identified, there's an educational and awareness campaign to talk about clinical studies that are available. So in all those, the idea as well as the New York ScreenPlus is to raise awareness and potential identification of the patients. So hopefully, that all of the actual patient population is eventually diagnosed and brought into potential therapy. So we don't have a specific number because the gap right now that exists is for those patients who may have the disease but are not aware. Invitae's program, as well as partnerships like New York ScreenPlus and partnerships with advocacy groups are hoping to increase awareness and identification of patients. And could you repeat your second question?

Sonia Gupta, Analyst

Yeah, so I noticed the plan to incorporate feedback from the FDA on GM1 as applicable to Krabbe and FTD indications. So we were just wondering how those discussions with the FDA have impacted your filing plans for other diseases?

Bruce Goldsmith, CEO

Sure, if you don't mind, maybe I'll turn it over to Gary to talk about the filing plans for FTD and Krabbe.

Gary Romano, CMO

Sure. Thanks, Bruce. Yep. Thanks for the question. We are still planning to submit our INDs for FTD and Krabbe probably in the early first quarter of next year, first half of next year. Again, as Bruce mentioned, this is going to follow the FDA getting off the clinical hold from the GM1 program. Immediately following getting off the hold, we intend to move forward with the other IND submissions. As Bruce mentioned that should happen towards the end of this year, beginning of next.

Sonia Gupta, Analyst

Thank you.

Operator, Operator

Thank you. Our next question comes from Yaron Werber from Cowen. Please go ahead.

Brendan Smith, Analyst

Hi, guys, this is Brendan on for Yaron. Thanks, again for taking the question, just a couple of quick ones, from us. I guess first, I just really kind of wanted to get a sense of where recruitment stands for these programs. Obviously, you can't treat with the hold in place. But have you been able to kind of recruit some patients for any of these, I suppose particularly for GM1 there, may be a bit of a bolus there really for when the hold is lifted?

Bruce Goldsmith, CEO

Yeah, I'll start and then I'll turn it over to Gary. I mean, Gary can talk about maybe some of the patient recruitment efforts we're undertaking in connections with sites. But I do want to mention that one of our approaches has always been that if a patient is in need of therapy, they should get therapy. So while sites are certainly engaged, if there are other alternatives, we're really trying to be patient-focused here. Since there's an - there has been uncertainty, obviously, with our timelines, even though we have a projected timeline, we've been very careful not to ask our sites to hold patients, for example, because, as you know, these patients, GM1, Krabbe, and patients with FTD are in a very severe state. So we've been very patient-focused in our approach. And know that once our therapies, the clinical hold is lifted, and that further INDs are filed, we'll obviously be then focused on patient recruitment. Having said that, we've certainly been in touch with the sites and physicians and patient advocacy groups, and maybe Gary can offer some additional commentary about how the reaction is and patients that are interested in participating in the study or families, I should say.

Gary Romano, CMO

Yeah, thanks, Bruce. Yeah, so we've been working with the centers of excellence around the world for GM1. So this includes North America, Europe, South America, and the Middle East. These are the centers that get referrals for these patients throughout the world. So we're really, our intention is to bring patients from different demographics and geographies as quickly as you can into the study. We are, as Bruce mentioned, moving forward with these filings to open sites across the world. We expect that we will have sites ready to enroll as soon as we come off the clinical hold, which we anticipate to be right around early 2021. Yes, we are anticipating that there has been a lot of enthusiasm from all of these sites. As we just mentioned, we're not holding patients in a queue at this point, but we know that patients are out there and our trial will be well positioned to enroll.

Brendan Smith, Analyst

Okay, thanks very much, guys.

Operator, Operator

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. This concludes your program and you may now disconnect. Everyone have a great day.