Passage Bio, Inc. (PASG) Q3 2022 Earnings Report, Transcript and Summary

Good morning and welcome to the Passage Bio Third Quarter 2022 Financial and Operating Results Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] 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 our recently appointed Chief Executive Officer, Will Chou, will review our third 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 third 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 disorder; manufacturing plans and strategies; our expectations with respect to cash runway and trends with respect to financial performance and cash flows; the company's ability to fund research and development programs; 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 Will.

Thanks Stuart, and thank you all for joining us this morning. Before providing an update for the quarter, I want to take a moment to say how thrilled I am to have joined the talented team here at Passage Bio. I've worked with genetic medicines for the last eight years, and as a physician every day, I continue to be inspired and motivated by the dramatic impact these therapies can have on patients and their families. I'm humbled by the opportunity to lead Passage through our next phase of development as we work to bring life transforming therapies to patients with CNS disease. Over the past year, Passage has built real momentum in advancing our portfolio. The core value proposition of our programs remains compelling, and in the face of a difficult external market, we have a strong team to support our operations. As we pursue our ambitious mission, we must continue to be thoughtful in our resource allocation to ensure we can successfully deliver meaningful clinical data across our programs and maintain a best-in-class pipeline. With these goals in mind, and after conducting a thorough review of our business, we will be refocusing our efforts and streamlining our operations in the following ways. We will continue to focus on clinical trial execution and advancing our Imagine-1 clinical trial for GM1 gangliosidosis and our upliFT-D clinical trial for frontotemporal dementia, both of which have the potential to make a differential impact on patients' lives. We will prioritize advancing our preclinical programs in amyotrophic lateral sclerosis and Huntington's Disease through our ongoing partnership with Penn's Gene Therapy Program. We will continue to leverage our strong in-house analytical capabilities at our CNC lab at Princeton West, as we believe these capabilities provide a competitive advantage and are critical to support ongoing and future clinical development of our programs. Due to financial considerations, we are stopping further clinical development of PBKR03 for Krabbe disease. We understand this is disappointing for the patient communities and for the healthcare providers caring for patients with Krabbe disease, and we are committed to exploring strategic alternatives to advance this program, as well as our PBML04 four program for metachromatic leukodystrophy, which received IND clearance earlier this year. Operationally, we will streamline our organization via a 23% workforce reduction and decreased operating expenses. As a result of these changes, we now expect our existing cash resources to fund operations into the first half of 2025. These prioritization decisions were difficult, because of their impact on patients, their families and providers, and on the many talented people at Passage Bio who worked to move these programs forward. That said, these changes put our company in a strong position to succeed in bringing our most advanced programs to patients in need. We have built strong momentum in our GM1 and FTD programs throughout 2022 and continue to build upon that momentum. We have established a global network of trial sites with active sites in the United States, Brazil, Canada, and the U.K. For GM1, we have dosed a total of seven patients and expect to complete treating patients in those ascending phase of our Phase 1/2 study by year-end. We plan to report initial safety and biomarker data from cohorts 2 and 3 from the GM1 one program in December. As we move into 2023, we expect initial data from cohort 4 to become available, and we plan to engage with the regulatory agencies to align on the registrational pathway for this program. In August, we were excited to dose the first patient in our uplifted trial for frontotemporal dementia. We are encouraged by the increase in genetic testing observed as a result of our patient identification initiatives and look forward to continued enrollment in this study. The changes we are making will allow us to focus our efforts on continuing the positive momentum into 2023. I am excited by the path ahead for Passage. We have a mission to bring life transforming therapies to patients with CNS disorders, and we plan to deliver on that mission. With that, I will now turn it over to Mark to discuss our clinical programs.

Thank you, Will. Let me begin with 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 rapid neurological decline and in the most severe forms, unfortunately, tumor mortality within several years. Patients with GM1 are rare and underserved population, and there are no disease modifying therapies for the 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. The dose escalation portion of this global Phase 1/2 trial is an open label study with PBGM01, enrolling four distinct cohorts divided by age and dose level. Our approach uses a next-generation proprietary AAVhu68 capsid, administered by the Cisterna Magna to deliver a code on optimized GLB1 transgene to increase beta galactosidase enzyme activity in the brain and peripheral tissues. Interim data presented from cohort 1 show that PBGM01 is well tolerated with a positive safety profile demonstration of functional transgene expression and meaningful gains in developmental milestones. As previously discussed, we have experienced strong momentum in our Imagine-1 trial. To date, we have dosed a total of seven patients in the study. We have completed dosing of cohorts 1, 2, and 3, representing the low dose cohorts in both early and late infantile patients and the high dose late infantile cohort. We are also pleased to have dosed the first patient in Cohort 4, high dose early infantile. This is the final cohort and the dose ascending phase of the study, and we remain on track to complete dosing in this cohort by year-end. As Will mentioned, we plan to host a webcast to report initial safety and biomarker data from cohorts 2 and 3 in December, and we'll also update cohort 1 data to include additional follow up at that time. The components of these data will be similar to what we have previously reported for cohort 1, including safety and tolerability, beta galactosidase enzyme activity levels in CSF and serum and initial clinical development assessments on the Vineland-II and Bayley-III scales. As data from the study continues to mature into 2023, including initial data from cohort 4, we look forward to better understanding how dose and patient populations relate to treatment effect and plan to engage with the regulatory agencies to align on the registrational pathway for the program. Next, let me discuss PBFT02 for frontotemporal dementia with granular 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 is estimated that about 5% to 10% of FTD is caused by a GRN mutation. We are utilizing the AAV1 capsid to deliver a functional copy of the GRN gene by ICM delivery to the CSF. The goal of this treatment and delivery approach is to potentially provide higher than normal levels of the progranulin protein to the CNS to overcome the progranulin deficiency in GRN gene mutation carrier. Our upliFT-D clinical trial is investigating two dose levels of PBFT02 and is sequentially enrolling two cohorts. Based on the results of the first two cohorts, we have the optionality for a third dose level cohort. The primary endpoint of the study is to evaluate the safety and tolerability of PBFT02. Secondary endpoints include disease biomarkers and clinical outcome measures. In August, we are excited to report that we dose the first patient in the study following the improved momentum experience through our patient identification and recruitment initiatives. Patient identification remains a key focus for us, and we continue to employ a variety of initiatives, including efforts to increase genetic testing among FTD patients through our partnership with informed DNA. This partnership provides no cost genetic counseling and testing for adults who have been diagnosed by their physicians with FTD. These efforts have increased genetic testing among FTD patients over the last few months. We look forward to sharing clinical data from this program as patient enrollment in the cohort continues to advance. With that, I will now turn the call over to Simona to review our financials.

Thank you, Mark. As we reported in our press release this morning, we ended the third quarter with approximately $213.8 million in cash, cash equivalents and marketable securities compared to $239.3 million as of June 30th, 2022. By streamlining our operations and further prioritizing our research and development efforts, we expect these existing cash resources to fund operations into the first half of 2025. R&D expenses were $15.4 million for the quarter ended September 30th, 2022 compared to $26.6 million for the same quarter in 2021. The decrease was primarily due to a decrease of $8.8 million in clinical manufacturing expenses, which relates to the timing of our manufacturing activities to support our clinical trials. Various other expenses had a net decrease of $2.4 million. G&A expenses were $10.7 million for the quarter ended September 30th, 2022 compared to $15 million for the same quarter in 2021. The decrease was primarily due to a $4 million decrease in personnel related and share-based compensation expense related to our March, 2022 workforce reduction and a $0.4 million decrease in our professional fees, facilities and other expenses. Net loss was $26.7 million for the quarter ended September 30th, 2022 compared to $46.9 million for the same quarter in 2021. Let me now turn it back to Will for closing remark.

Thank you, Simona. I'm thrilled to be leading Passage Bio through our next phase of development as we focus on execution and continuing to generate meaningful clinical data from our lead programs in GM1 and FTD. For GM1, we look forward to reporting initial safety and biomarker data from cohorts 2 and 3 of our Imagine-1 trial in December. And we also planned to provide an update on cohort 1 at that time. As we move into 2023 and the data from our clinical programs matures, we look forward to aligning on the registrational pathway for GM1 and continuing to enroll additional patients in our upliFT-D trial. Prior to taking your questions, I would like to thank the patients, families, trial investigators, our colleagues at the Gene Therapy Program, and importantly all the employees at Passage Bio who provided their support and dedication to achieving this mission. With that, I would like to open the call for your questions. Operator?

[Operator Instructions] Our first question comes from Madhu Kumar with Goldman Sachs. Your line is open.

Hey, guys. Thanks for taking our question. This is Rob on from Madhu. First, were there any safety issues that led to discontinuation of the Krabbe program? And in terms of FTD, how are you thinking about competing with other progranulin replacement drugs in the FTD space for patient recruitment? And how many of these patients are you looking to treat before disclosing data? Thanks.

Great. Thanks for the question. So, to answer your first question, this was a very difficult decision to stop a clinical program. Anytime you do that, we understand the impact on patients and their families. The decision to stop the Krabbe program was purely a resource driven decision. We had to make a hard financial decision, and this is the one we made to advance our most advanced clinical programs, which are GM1 and FTD. To answer your second question on FTD, I think your question was about competitive recruitment. I will give two pieces to that. One, as you know, screening for this mutation is an important part of recruitment for all competitors in this space. And so, the more people that are out there talking about screening, the better it is overall to improve the overall rate of screening. So that's one thing. The second thing I'll say is just in general, in my experience with early clinical trials, as trials gather more data and are able to share more data with trial sites, recruitment improves. I will say we're very pleased with where we are in terms of -- we have three sites open for FTD. We have more sites opening in Q1 of next year, and we have multiple patients with the GRN mutation in the process of enrollment at our sites. I think the last part of your question was disclosing. So, we will look forward to sharing more data from cohort 1 of the upliFT-D trial in 2023.

Thank you. One moment for our next question. Our next question comes from Yaron Werber with Cowen. Your line is open.

Hi, guys. Thanks. Thanks for taking the questions. This is Brendan on for Yaron. Just a couple quick ones from us. First, can you maybe remind us about the actual mechanism of action for the gene therapy and ALS that you're using? How are you actually looking to functionally correct the C9orf72 pathology? I know there's a couple different ways people have tried. And then, wondering when we might actually get to see some preclinical data from that program. And then, similarly for Huntington's, obviously one concern some of these other people using genetic therapies in the space have run into is kind of penetration into some of the deeper brain structures. So, assuming you're planning ICM administration for that as well, what maybe gives you confidence you'll be able to avoid some of those pitfalls?

Yeah. So, we're really excited with the progress we've made together with our colleagues at GTP on our preclinical programs in ALS and Huntington's disease. We're looking forward to sharing more milestones as we get them. I'm going to turn it over to Mark to answer your question about our mechanistic approaches.

Right. So, thanks for the question. So, our approach is using the gene therapy to reduce the expression of the pathological forms of the C9orf, as well as -- it's sort of a knockdown and replace strategy as well as provide a functional copy that we can use to restore function. Again, the mechanism of action for -- the path of physiology of the disease of the -- of the C9orf mutations is not known. So, we believe that using a knockdown and replace strategy allows us the best chance of correcting the potential different pathophysiologic mechanisms in the disease.

Okay. Great. And just on Huntington, do you have evidence that you're able to get into the deeper brain structures so far? Is it something you're seeing preclinically?

Yeah. We're going to explore the effects of our route of administration and we'll be happy to share more data as it emerges next year.

Okay. Thanks very much guys.

One moment for our next question. Our next question comes from Neena Bitritto-Garg with Citi. Your line is open.

Hey, guys. Thanks for taking the question. So on PBFT02, I know you said earlier that you do have multiple patients with TRN mutations in the process of enrolling at some of the three sites that you have open so far. I guess, can you clarify, are those patients definitely likely to actually meet the enrollment criteria and the screening criteria and ultimately get dosed? I'm just trying to kind of understand the timing for potential data next year. Thanks.

Yeah. So, thanks for the question. So, as Will said earlier, our patient identification efforts have led to -- we feel a fairly robust funnel of individuals identified with FTD and granulin gene mutations. And where we are now is those patients are being evaluated for suitability, for enrollment in the trial. And so that will -- and as that -- as we get further along, I think that's what we're prepared to disclose at this time. And we'll talk -- as we have a cohort of data later, we'll be happy to disclose more information.

Okay. Got it. Thank you.

One moment for our next question. Our next question comes from Laura Chico with Wedbush. Your line is open.

Hey, good morning guys. Thank you very much for taking the question. I just have three. So, on FTD, I might follow up and ask this question a little bit differently, but can you remind us what are your assumptions around screening failure rates for FTD patients? And then number two, in the second cohort, is there that same 60-day waiting period between enrollment of different subjects? And lastly, just one on GM1. What areas specifically of alignment are you looking to get from regulators? I guess, any clarity in terms of how you're thinking about that and whether a U.S. launch may come second to other geographies? Thank you.

So, see if I can keep the questions all straight. So, the first question was regarding the assumptions on the screen failure rates in the FTD trial. And in the FTD trial, I mean, the inclusion criteria that we currently are utilizing allow patients is -- are relatively broad for this first in human trial, which is really focused on safety. So, as long as patients are able to live in the community, they're eligible for enrollment in the trial. So, in general, we expect -- for patients that are identified with FTD and progranulin gene mutations, we expect the vast majority of them to be eligible for enrollment in the trial unless they meet specific exclusion criteria regarding other health conditions. The second question, can you remind me?

Yeah. Just with respect to the FTD enrollment, I believe in the first cohort there's a 60-day spacing between enrollment of subjects. So, enroll one, wait 60 days, it just was not necessarily clear. If in the subsequent cohort, do you still have that 60-day wait between subject enrollments?

Right. So in the -- yes. So, for all of the patients currently, -- for the entire -- the FTD trial, the first this PBFT0 protocol one, there is a 60-day waiting period for all patients as we enroll the trial, both in cohort 1 and higher dose cohorts, we believe that's important as we need to establish safety at the higher doses as we escalate. So, yes, there is a 60-day waiting period for all of our patients in the trial. And the third question was on…

Yeah. So…

Yeah. So, in terms of -- I think there are a number of things that we need -- that we would like to align with the health authorities. As we gear up to initiate the registrational study, which is the use of our external cohorts to support the registration of that study and the study design itself, and making sure that we have alignment with the agencies before we proceed with initiating that trial so that we -- it will meet the -- it will meet the requirements that the agencies are expecting in order to support a registrational study.

Thanks very much.

One moment for our next question. Our next question comes from Danielle Brill with Raymond James. Your line is open.

Hi, guys. Good morning. Thanks for the questions. So I have a couple bigger picture questions here. First, just can you walk us through how you decided which programs to prioritize and the considerations that you made? And then, pertaining to the FTD GM1 program. I'm just curious, what's the biggest, like, bottleneck here? The challenge with recruitment, is it opening sites, identifying the suitable patients or I guess, motivating them to enroll in the study given competition? Thank you.

Sure. So, let me take the first question. So, this was a difficult decision in terms of prioritizing our programs. Let me start by saying that all four of our clinical stage programs, and I'm including MLD and Krabbe in this, all four of our clinical stage programs have the potential to transform patients' lives. When we looked hard at all the programs and where they were, we made the decision to move forward with our most advanced clinical programs, and that is GM1 and FTD. Looking at our preclinical program, our partnership with Dr. Wilson and his team at GTB is critical to what makes Passage Bio, Passage Bio. And so, we also have prioritized the most advanced programs there. And in terms of our manufacturing capabilities, having our own in-house analytical capability, we believe is a competitive advantage and allows us not only future success registration, but success in terms of executing on our clinical programs right now. The second question was on bottlenecks, and I'll let Mark answer that, but I will say that all of the things that you mentioned we're focused on. So, you have to go across the board with reaching the patients, keeping the patients all the way through the process, getting more screening, and of course, getting more sites started. So, what we are going to be laser-focused on this year is execution around all aspects of our clinical programs. And we're going to be pushing on all those aspects.

Right. So, thanks Will. I mean, just to sort of -- to sort of go a little bit deeper, as Will said, I think the two big things, patient identification, specifically patients with GRN mutations has been one of the bottleneck, the other is getting sites open. And we're -- as well as talked about, we're focused on getting sites. We have multiple sites open, and we're looking to add multiple more sites in the coming months. In addition, we have launched sort of a multi-pronged effort to enhance our sort of patient identification activities, including efforts sort of locally, sort of site specific tailored activities that are around each of our individual sites. Secondly, we have broad outreach to healthcare providers who are caring for FTD patients to enhance their understanding of disease and the role of genetic testing to really increase the genetic testing throughput. And the third thing is we're involved with a number of advocacy groups to really -- at a pre-competitive level to once again increase awareness on genetic testing and genetic counseling and the availability and the understanding of what -- of the -- multiple clinical trial activities and options there are for patients if they happen to test positive for genetic -- for various gene mutations. So, all of those we believe have really started to bear fruit. And as we've mentioned a few times, there's -- we now have a funnel of patients that we feel that our recruitment is -- an enrollment is going to proceed efficiently going forward.

Yeah. And -- thanks, Mark. And let me just remind everyone, as I'm sure you know, our preclinical data in FTD is quite strong. We've shown that we've been able to achieve super physiologic levels of progranulin in the CSF, and we are very much looking forward in 2023 to see how that preclinical data translates into the clinic. As I mentioned before, and we've seen this in GM1, the more data that you actually generate, the more interest the trial gets. And so, we're looking forward to seeing that effect also in our FTD trial.

Great. Thank you so much. Appreciate the additional color.

Sure.

One moment for our next question. Next question comes from Geulah Livshits with Chardan. Your line is open.

Hi. Good morning. This is Lori [ph] on for Geulah. Two from us. So, for the Krabbe program, does this manual no longer be providing an update later this year? And for the preclinical portfolio, can you talk about factors that you're weighing in to prioritize advancing these programs with the GTP and of the available options that you have left? Can you remind us of the timelines opting in a selection criteria given the new strategies to streamline in we focus?

Sure. So, first, your first question on Krabbe. As we are no longer enrolling patients in this trial, we will no longer be reporting data from it. We will continue to follow the first patient as per outlined in our clinical protocol. On the preclinical portfolio, the prioritization was really our most advanced programs. So, we're furthest along with both ALS and Huntington's, and we have eight options remaining through 2026.

Thank you. One moment for our next question. Our next question comes from Yun Zhong with BTIG. Your line is open.

Hi, good morning. Thank you very much for taking the question. So, the first question is a follow up question on Krabbe program. I understand that the DSMB deemed the safety finding to be potentially related to study treatment or study procedures. I wonder, were you able to make a conclusion whether that was the case, and if that was the case, I understand that Krabbe patient probably have a higher risk for hydrocephalus, but do you think the GM1 patient or potentially FTD patient will have this kind of risk as well given the same procedure? I have a follow up question.

So, thanks for the question. So, with regards to Krabbe trial, I mean, the SAE of acute hydrocephalus has been assessed as possibly related to treatment. There is evidence in the literature that acute hydrocephalus is observed in Krabbe patients, but because of the temporal association relative to the administration of drug, we couldn't rule out that it was related to our treatment. So, it remains unknown. It's impossible. We can't draw a definitive conclusion one way or the other as to definitive causality. But we assume from a safety perspective and a trial perspective that it's related as the most conservative approach. We don't have any reason to believe that this -- that there is evidence of hydrocephalus in FTD -- of risk of acute hydrocephalus. So, we don't believe that that's a risk. And note that we haven't seen any of evidence of acute hydrocephalus in our GM1 trial where we've dosed against seven patients. So, we don't think it's a procedure related. We can't completely rule that out, but it doesn't -- given both our experience and the literature throughout using the ICM procedure for gene therapy where it's not been reported by any of our -- any of the other companies that are working in this space. We don't believe that it's a generally related to the study procedure itself and the ICM administration.

Okay. Great. And second question is, when you report clinical update in December from the GM1 study, is it reasonable to expect that we will be able to see functional measures from early infantile patient? And do you think Vineland and also Bayley would be the most appropriate measures to look at the functional endpoints, please?

Sure. So, let me tackle that one at a high level and then I'll turn it over to Mark. So, I think it's important to remember what the goals of this Phase 1/2 trial are. So, first, we want to establish the safety profile for product. We also want to establish the dose that we will take forward to the pivotal stage of the program. And then importantly, we want to identify patient populations that could better benefit from the product. And in December, we look forward to sharing our progress towards all three of those goals. To your specific question, I'm going to turn it over to Mark.

Thanks Will. So, yeah -- so what we anticipate disclosing in December is similar what we've disclosed for cohort 1 data previously. We're obviously focused on safety and tolerability as Will just described first. We also will provide data on beta galactosidase activity. So, evidence of what I would call like target engagement. The drug is getting into the target. So, we're looking at beta galactosidase activity in both the CSF and the periphery, as well as clinical development milestones including both the Bayley and Vineland scales. So that's really what we anticipate providing as an update in the -- at the December -- when we disclose data in December.

Great. Thank you very much. End of Q&A:

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 does conclude your program, and you may now disconnect. Everyone have a great day.