Passage Bio, Inc. (PASG) Q2 2020 Earnings Report, Transcript and Summary

Thank you for holding. Good morning and welcome to the Passage Bio Second Quarter 2020 Financial and Operating Results Conference Call. [Operator Instructions] 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 [Indiscernible] and 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 monogenetic 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?

Thanks, Zoe, and thank you all for joining us this morning. We began 2020 with the goals of continuing to build a premier chain therapy company focussed on rare, monogenetic CNS disorders and advancing our pipeline just as the foundation for initial clinical trial data in 2021 from our lead programs. We made important progress through the first half of the year growing our internal team from 22 to 55 people with a focus on bolstering our clinical and manufacturing capabilities as well as strengthening several of our core operational competencies including communications, commercial planning and human resources. Doing so, along with continuing to engage with key partners to support our business to enable continued growth and execution as we move closer to initiating clinical trials for our three lead programs. We have made this progress despite the challenges posed by the COVID-19 pandemic. I’m incredibly proud of the ingenuity and flexibility of our team as they continue to keep the needs of patients who are waiting for therapies like ours front and center. Currently our employees are all working from home and as a leadership team we have decided that this will be the case at least until the end of this year, because their safety and wellbeing are top priority. In order to secure our supply chain, we have begun limited site visits to our manufacturing partners and are taking necessary precautions to ensure this can be done as safely as possible. With that, let me begin today’s call with an update on our lead program, PBGM01 our next-generation hu68 AAV capsid designed to deliver a functional GLB1 gene directly to the central nervous system via intra-cisterna magna injection or ICM for the treatment of infantile GM1 gangliosidosis. As a reminder, GM1 is a rare monogenic recessive lysosomal storage disease caused by mutations in the GLB1 gene encoding the enzyme beta galactosidase with no correct treatment options and a very rapid and severe disease course. Despite the pandemic and the unprecedented disruptions, we are all living through, we are pleased to announce that we met our previously stated guidance with a June submission of our IND to FDA for the treatment of Infantile GM1 one in a Phase 1/2 clinical trial with PBGMO1. We believe this accomplishment continues to demonstrate the effectiveness of the partnership between Passage Bio and the University of Pennsylvania's Gene Therapy Program led by Dr. Jim Wilson. However, following discussions with FDA, we have been notified in a brief communication that the IND has been placed on clinical hold, because the delivery device we are proposing for ICM administration requires additional biocompatibility risk assessment and/or testing. To be clear, we believe that the device we have proposed for use in our trials, utilizes components that are already approved by FDA for existing medical procedures and are highly similar to those in other gene therapy clinical trials, using ICM delivery. We expect to receive formal written communication with additional information from FDA in the near future, and plan to work with FDA in an effort to resolve all questions as promptly as possible. While we await the official clinical hold letter for FDA, we are working with external medical device and regulatory experts to evaluate options for additional risk assessment and testing that could be conducted to further demonstrate the compatibility of the device with the ICM injection procedure. Based on our own internal assessment, we are confident that we can respond rapidly to FDA regarding the biocompatibility risk of our ICM delivery device, and that our device will ultimately clear FDAs biocompatibility requirements. Despite the current clinical hold, we anticipate enrolling the first patient in the Phase 1/2 trial of PBGM01 late in the fourth quarter of 2020, or early first quarter 2021. And we expect to remain on track to report initial 30-day biomarker and safety data late in the first half of 2021. After the discussions with FDA on the IND, we are revising the protocol for our Phase 1/2 trial in order to better understand the dose requirements and ensure safety for both early and late Infantile GM1 patients. As a result of our discussions, FDA informed us in a brief communication that there are no further clinical information requests. As a reminder, this trial has been designed as an open-label dose escalation study of PBGM01, administered by a single injection into the intra-cisterna magna in paediatric subjects with early and late onset Infantile GM1. Early onset Infantile GM1 which is the most severe and common form of the disease is characterized by onset in the first six months of life, while late onset Infantile GM1 is characterized by onset between 6 and 24 months. There are two key goals for the initial dose cohorts in the phase 1/2 study; our first goal is to demonstrate that PBGM01 is safe for patients with Infantile GM1. Our second goal is to demonstrate increased beta-gal in both the CSF and serum. For the dose escalation portion of the trial, we have changed the design to specifically 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. We will initiate dosing with the low dose of PBGM01 in the first cohort of late onset Infantile GM1. Safety in this first cohort will -- dosing in both the high dose late Infantile cohort and low dose early Infantile cohort. Thereafter, dose escalation will occur independently in the early onset and late onset Infantile cohorts. Following these dose escalation cohorts, each patient population will be enrolled into a separate confirmatory cohort. Patients will be evaluated over two years for safety and efficacy followed by an additional 36 months of long term follow up. The initial data readout from the first cohort, which we expect to report late in the first half of 2021, will include safety data as well as key biomarker data, including change of baseline beta galactosidase activity in both CSF and serum. Our teams are now working to prepare for enrollment in anticipation of the clinical trial initiation. In parallel with our site initiations, we recognize that patient identification and engagement of families are key tenants of successful rare disease therapeutic development programs. We are working with our partners at Penn, as well as with other external groups such as our key opinion leaders and patient advocacy partners to identify patients as rapidly as possible. In addition to our site preparations and patient identification initiative, we've also secured clinical stage manufacturing capacity for gene therapy programs under our agreement with Catalant. We are excited to share that our GM1 clinical supply has been manufactured and we have established a global, clinical supply chain. We also expect our dedicated manufacturing suite to be functional by year-end. Once it is up and running, the cGMP suite will be capable of meeting production requirements for our current lead product candidate’s clinical needs through early commercialization. Having our own dedicated suite is an important step toward our goal of having expanded control of the supply chain, which we believe will set us up for both clinical and commercial success by allowing for greater flexibility in terms of scalability and prioritization as we move products through development. To that end, we have also signed agreements with many suppliers for both upstream manufacturing components and service providers. Across our company we remain extremely excited to advance PDGM01 towards the potential treatment of patients with substantial unmet medical need and to enter into this new phase of development. As I said earlier, we are confident that we can address the questions raised by FDA quickly and efficiently. And we look forward to providing an update soon. Before turning the call over to Rich to discuss our financial results, I also wanted to quickly review our extended pipeline of gene therapy candidates. Our next most advanced program PBFT02 is for the treatment of frontotemporal dementia or FTD. PBFT02 is an AAV1 capsid based product that is designed to deliver to the brain, a functional granulin gene encoding the progranulin protein. Preclinical studies have demonstrated the ability of PBFT02 to significantly increase progranulin above normal levels in the cerebral spinal fluid. Progranulin is a complex and highly conserved protein such as multiple roles in cell biology, development and inflammation. Emerging evidence suggests that progranulin’s pathogenic contribution to FTD and other neurodegenerative disorders relates to a critical role in lysosomal function. As part of our preclinical studies, we tested ICM administration of the AVV1 capsid against other capsid types in non-human primates and found that AAV1 provided the strongest transduction and also achieved up to 50 times the normal human CFS level of progranulin. Based on the encouraging data from our completed preclinical and toxicology studies, we continue to advance the manufacturing as well as site selection, and we plan to initiate a Phase 1/2 trial in the first half of 2021. We have also completed our preclinical and toxicology studies and are undergoing manufacturing on site selection for our third program, PBKR03, a potential treatment for Infantile Krabbe disease that utilizes the same next generation AAV hu68 capsid used in the GM1 program. Infantile Krabbe disease is a rare and often life threatening lysosomal storage disease that results in progressive damage to both the brain and peripheral nervous system. PBKR03 utilizes AAV hu68 to deliver a functional GALC to increase GALC enzyme activity and reduce psychosine accumulation and restore myelin. At the ASGCT conference in mid-May preclinical data from the University of Pennyslavania’s gene therapy program showcased the promising potential of CSF vector administration to achieve robust, scalable effects utilizing cross correction on central and peripheral nerve function. These data demonstrated that a single injection of a AAV hu68 carrying functional GALC gene resulted in normalization of GALC enzyme activity, and improved all parameters in animal models of Krabbe disease. For example, treated Krabbe dogs showed nerve conduction normalization, CSF psychosine levels normalization, improved brain histopathology, phenotypic correction and increased survival. We believe that PBKR03 has the potential to be a life-altering therapy that can address the underlying cause of disease and plan to initiate a Phase 1/2 trial in the first half of 2021. Finally, our early stage pipeline programs in metachromatic leukodystrophy amyotrophic lateral sclerosis, and Charcot-Marie-Tooth disease Type 2A are currently in discovery and at the candidate selection stage and continue to progress. And with that, I will turn the call over to Rich to give a 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 filing, an increase of $4 million in clinical manufacturing costs, as well as an increase in other research costs of point $0.5 million as we've prepare 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 -- we were 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 PBGM01 Phase 1/2 study later in the year. We also remain on track in moving our FTD and Krabbe programs towards 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?

[Operator Instructions] our first question comes from the line of Anupam Rana with JPMorgan. Your line is now open.

Hey, guys, thanks so much for taking the question. Can you clarify your comments on what components of the proposed ICM device are similar to other administration of the same method? And then -- like to be clear, this is a discussion with the FDA on GM1 Specific right, or does it pump broader questions about the other programs using ICM as well? That's our first question.

Hi, Anupam, it's Bruce. Thanks for joining the call. Thanks for the question. So, we believe that the components are highly similar to other devices. It's typically a syringe, a connector and an injection needle. That's typically the setup for an ICM injection. And again, we believe that's highly similar to how other approaches are given. But obviously, those are proprietary to other companies and other clinical studies. So we can only comment on what we believe to be the case based on but based on our device and our knowledge of the field. We don't have -- I just want to emphasize that, we don't have official written feedback from the agencies. So we can't comment further on which particular component or the entire device what is the -- is the focus. We think that they're either the questions are technical nature and can be addressed through additional risk assessments and/or testing, which we've already begun. And we've also based this assessment it should know it on, certainly our internal capabilities, but input from multiple regulatory device experts, some of whom have significant experience with FDA in their former employment. So, putting all that together, we think that we can respond rapidly to the FDA. And so, I think that's the answer to your first question. If you can repeat the second part. I oh, sorry. The second part is whether this relates to GM1? It is the GM1 IND filing. So that's the only thing that we can comment on. We obviously think that this -- once we resolve this, that this will increase the probability and likelihood of us moving forward smoothly with all of the other studies as well. And that's why we're eager to resolve it for the GM1 IND filing, but we obviously haven't, haven't gotten feedback or submitted yet for the other programs.

Great, thanks for taking our question.

Absolutely. Thank you.

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 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. Thanks, Andrea. I'm happy to take the question. So for the FTD program, there are a couple of different aspects of differentiation that we think. Now one is, is obviously we do think that the, the on-going studies using the antibody approach to block the serotonin receptor are certainly interesting. And we noted that there's an advancement into a randomized phase three program that really show the actual efficacy of that approach in blocking the re-uptake of progranulin through that receptor, That's one point of differentiation, obviously, it's the modality. It's the -- it's the frequency of administration there, which is I believe monthly. And obviously, it's the -- it's the difference between shifting endogenous levels of progranulin from intracellular to extracellular potentially, versus, versus creating a gene therapy that will obviously increase progranulin levels through the expression of protein. So the -- other approach that's out there that is that has an IND active is looking at using the AAV9 [ph] approach through an ICM injection. And that's obviously been shown to be effective in preclinical models to increase CSF levels of progranulin through a gene therapy expression -- through gene therapy delivery and protein expression. We did note that, the levels of increased progranulin appear to be in the approximately two to two and a half fold levels. That's, certainly interesting, and it's certainly hopeful. Going back to our differentiation, which is using an AAV1 approach. What we showed is that AAV1 actually can when delivered through ICM can actually shift progranulin levels up to 50 times the levels of progranulin without concomitant systemic exposure. So, we do think that the -- and that has to do with this specific transduction of Pinnacle [ph] cells. So putting all this together, the gene therapy approach is obviously different than an anti-body approach that is systemically administered number one and number two, our approach based on a selection and essentially a comparison of AAV1 to other vectors, shows that we can ship progranulin much higher than other gene therapies, and that may be important in stabilizing or potentially from a long term perspective stabilizing or hopefully addressing disease.

Thanks so much. Thank you.

Thank you.

[Operator Instructions] Our next question comes from the line of 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 in 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 in a suppressant 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 debts. 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 regime 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 this 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 using [Indiscernible] is one of those 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, on the lighter end. Of course, we're watching carefully what's happening in the field and that could 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 versus you mentioned that there could be other additional testing that FDA might be requiring, in addition to bio compatibility. 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 bio compatibility 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 e-mail with follow up a telephone call. And then, we expect a 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, so to 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, 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 consumer class concerns about AAV9. Can you give us a sense of what's going to be included in the Phase ½? 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 and 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, that you're aware of that. So what we're going to do is, 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. And 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. Our next question comes from the line of [Indiscernible]. Your line is now open.

Hi, good morning. Thanks for taking my call. So just a quick one on the question of biocompatibility of the proposed ICM delivery device. And forgive me for asking about external parties. And I understand if you can't comment. But are you aware of any similar clinical holds on ICM devices, what the issues were and how quickly they resolved?

Yes, unfortunately, [Indiscernible] This is Bruce. Thanks for your question. Unfortunately, we're not aware, so they either obviously didn't occur or were not disclosed. And we aren't sure, which is the case. And obviously, that is subject to, proprietary discussions along the pathway to IND between companies in the FDA. So unfortunately, we can't comment. What we do know both for internal experience, as well as talking to our experts is the device that we are using, which is essentially most three components of approved individual components. It is highly similar to other companies so we're not again until we have the final kind of official letter, we're not clear exactly what the tests and risk assessments that are required, but we're hoping based on precedent and based on our experts that it'll be a fairly rapid back and forth between us and the FDA. And we're certainly looking forward to working with them to resolve this.

Great, thanks, Bruce.

Thank you.

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.