What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-08-13 compared with 2020-05-11 · 82 added, 54 removed, 300 unchanged (31% of the section changed)

3 unchanged sentences

(in thousands, except share data)

March 31, 2020

June 30, 2020

December 31, 2019

26 unchanged sentences

300,000,000 shares authorized;

45,797,195 shares issued and 45,350,687 shares outstanding at March 31, 2020 and 5,194,518 shares issued and 4,293,039 shares outstanding at December 31, 2019

45,841,971 shares issued and 45,443,541 shares outstanding at June 30, 2020 and 5,194,518 shares issued and 4,293,039 shares outstanding at December 31, 2019

Additional paid‑in capital

5 unchanged sentences

Statements of Operations

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands, except share and per share data)

1 unchanged sentence

Research and development

Acquired in‑process research and development

General and administrative

7 unchanged sentences

Passage Bio, Inc.

Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) For the Three Months Ended March 31, 2020 and 2019

Statements of Convertible Preferred Stock and Stockholders’ Equity

(in thousands, except share data)

Convertible preferred stock

Stockholders’ equity (deficit)

Stockholders’ equity

paid ‑ in capital

Balance at April 1, 2020

Vesting of early exercise option awards

Exercise of stock options

Share‑based compensation expense

Balance at June 30, 2020

Convertible preferred stock

Stockholders’ equity

paid ‑ in capital

Balance at January 1, 2020

Vesting of early exercise option awards

Exercise of stock options

Conversion of convertible preferred stock upon initial public offering

1 unchanged sentence

Share‑based compensation expense

Balance at March 31, 2020

Balance at June 30, 2020

See accompanying notes to unaudited interim financial statements.

Passage Bio, Inc.

Statements of Convertible Preferred Stock and Stockholders’ Deficit

(in thousands, except share data)

Convertible preferred stock

1 unchanged sentence

paid ‑ in capital

Balance at April 1, 2019

Vesting of early exercise option awards

Sale of Series A‑2 convertible preferred stock, net of issuance costs of $1,439

Reclassification of future tranche right upon exercise

Share‑based compensation expense

Balance at June 30, 2019

Convertible preferred stock

Stockholders’ deficit

paid ‑ in capital

Balance at January 1, 2019

1 unchanged sentence

Sale of Series A-1 convertible preferred stock, net of issuance costs of $19

Sale of Series A‑2 convertible preferred stock, net of issuance costs of $1,439

Reclassification of future tranche right upon exercise

Share‑based compensation expense

Balance at March 31, 2019

Balance at June 30, 2019

See accompanying notes to unaudited interim financial statements.

1 unchanged sentence

Statements of Cash Flows

Three Months Ended

Six Months Ended

(in thousands)

2 unchanged sentences

Change in fair value of future tranche right liability

Acquired in‑process research and development

Depreciation and amortization

8 unchanged sentences

Cash flows used in investing activities:

Purchase of technology licenses

Purchases of property and equipment

3 unchanged sentences

Proceeds from the sale of Series A‑1 convertible preferred stock and future tranche right, net of offering costs

Proceeds from the sale of Series A‑2 convertible preferred stock, net of offering costs

Deferred offering costs

Proceeds from early exercise stock options

4 unchanged sentences

Supplemental disclosure of non‑cash investing and financing activities:

Offering costs in accrued expenses and other current liabilities

Offering costs in accounts payable

Reclassification of deferred offering costs paid in a prior period

Reclassification of the future tranche right liability upon exercise

Property and equipment in accounts payable

8 unchanged sentences

Under this collaboration, GTP conducts discovery and investigation new drug enabling preclinical activities and the Company conducts all clinical development, regulatory strategy, and commercialization activities under the agreement.

The Company also has a collaboration agreement and a development services and clinical supply arrangement with Catalent Maryland, Inc.

The Company also has a collaboration agreement and a development services and clinical supply agreement with Catalent Maryland, Inc.

(Catalent) (formerly Paragon Bioservices, Inc.) for clinical scale manufacturing requirements.

Risks and Liquidity

The Company has incurred recurring losses and negative cash flows from operations since inception and had an accumulated deficit of $76.2 million as of March 31, 2020.

The Company has incurred recurring losses and negative cash flows from operations since inception and had an accumulated deficit of $103.4 million as of June 30, 2020.

The Company anticipates incurring additional losses until such time, if ever, that it can generate significant sales of its product candidates currently in development.

43 unchanged sentences

The expected life of the stock options is estimated using the "simplified method,"

as the Company has no historical information from which to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior for its stock option grants.

as the Company has limited historical information from which to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior for its stock option grants.

The simplified method is the midpoint between the vesting period and the contractual term of the option.

7 unchanged sentences

The following potentially dilutive securities have been excluded from the computation of diluted weighted-average shares of common stock outstanding, as they would be anti-dilutive:

Six Months Ended June 30,

Series A‑1 convertible preferred stock

Future tranche right

Series A‑2 convertible preferred stock

Stock options (including shares subject to repurchase)

Stock options vested and exercised, but subject to settlement of nonrecourse promissory notes

Employee stock purchase plan

Amounts in the above table reflect the common stock equivalents.

23 unchanged sentences

(in thousands)

March 31, 2020:

June 30, 2020:

Cash equivalents (Money Market Fund)

7 unchanged sentences

(in thousands)

March 31, 2020

June 30, 2020

December 31, 2019

4 unchanged sentences

Amended and Restated Research, Collaboration and License Arrangement with Penn

In May 2020, the Company amended and restated its research, collaboration and licensing agreement with Penn (the Penn Expansion Agreement) for research and development collaborations and exclusive license rights to patents for certain products and technologies, which supersedes the Company’s existing sponsored research, collaboration and licensing agreement with Penn, dated September 18, 2018, as amended.

Under the Penn Expansion Agreement, the Company agreed to fund discovery research conducted by Penn for five years, beginning in May 2020, and will receive exclusive rights, subject to certain limitations, to technologies resulting from the discovery research for the Company’s products developed with GTP, such as novel capsids, toxicity reduction technologies and delivery and formulation improvements.

This funding commitment is $5.0 million annually, with quarterly payments of $1.3 million.

The Penn Expansion Agreement also increased the number of remaining options available to the Company to commence additional licensed programs for rare, monogenic CNS indications from six to eleven, and extended the option exercise window by three years.

In May 2020, the Company amended and restated its research, collaboration and licensing agreement with Penn (the Penn Agreement) for research and development collaborations and exclusive license rights to patents for certain products and technologies, which superseded the Company’s existing sponsored research, collaboration and licensing agreement with Penn, dated September 18, 2018, as amended.

Under the Penn Agreement, the Company will fund discovery research conducted by Penn for five years, beginning in May 2020, and will receive exclusive rights, subject to certain limitations, to technologies resulting from the discovery research for the Company’s products developed with GTP, such as novel capsids, toxicity reduction technologies and delivery and formulation improvements.

This funding commitment is $5.0 million annually, with quarterly payments of $1.3 million beginning in the third quarter of 2020.

The Penn Agreement also increased the number of remaining options available to the Company to commence additional licensed programs for rare, monogenic CNS indications from six to eleven, and extended the option exercise window by three years.

Accordingly, the window to exercise all eleven remaining options extends to May 2025.

10 unchanged sentences

The Company has the right to terminate the Manufacturing and Supply Agreement for convenience or other reasons specified in the Manufacturing and Supply Agreement upon prior written notice.

If the Company terminates the

If the Company terminates the Manufacturing and Supply Agreement, it will be obligated to pay an early termination fee to Catalent.

Passage Bio, Inc.

Notes to Unaudited Interim Financial Statements

Manufacturing and Supply Agreement for convenience and certain other specified events, it will be obligated to pay an early termination fee to Catalent.

Under both the Collaboration Agreement and the Manufacturing and Supply Agreement, the Company has an annual minimum commitment of $10.6 million per year owed to Catalent for five years, subject to certain inflationary adjustments.

Operating Leases

1 unchanged sentence

The lease is classified as an operating lease and the Company recognizes rent expense on a straight-line basis over the lease term.

The Company recognized rent expense of $36,000 and $51,000 during the three months ended March 31, 2020 and 2019, respectively, related to this lease.

The future minimum lease payments under the Company’s Existing Lease Agreement as of March 31, 2020 is $0.2 million for the remainder of 2020.

In April 2020, the Company entered into a new lease agreement (New Lease Agreement) for larger office space in Philadelphia to accommodate the Company’s continued growth and serve as the new corporate headquarters.

The New Lease Agreement is expected to commence in January 2021 and is expected to expire in November 2031.

Upon signing the New Lease Agreement, the Company amended the Existing Lease Agreement such that the Existing Lease Agreement will terminate five days after the commencement of the New Lease Agreement with no further payments due under the Existing Lease Agreement.

The New Lease Agreement is expected to commence in March 2021 and is expected to expire in January 2031.

The Company has an option to extend the term of the New Lease Agreement by up to two five-year terms.

The landlord also will provide the Company with a tenant improvement allowance of up to $2.8 million.

1 unchanged sentence

(in thousands)

The estimated future minimum lease payments under the Company’s Existing Lease Agreement as of June 30, 2020 is $0.1 million.

The Company recognized rent expense of $0.1 million and $36,000 during the three months ended June 30, 2020 and 2019, respectively, and $0.1 million and $87,000 during the six months ended June 30, 2020 and 2019, respectively, related to its operating leases.

Employment Agreements

The Company has entered into employment agreements with key personnel providing for compensation and severance in certain circumstances, as described in the respective employment agreements.

Other Research and Development Arrangements

The Company enters into agreements with contract research organizations (CROs) to assist in the performance of research and development activities.

Expenditures to CROs will represent a significant cost in clinical development for the Company.

The Company could also enter into additional collaborative research, contract research, manufacturing, and supplier agreements in the future, which may require upfront payments and long-term commitments of cash.

Passage Bio, Inc.

Notes to Unaudited Interim Financial Statements

Patent Infringement Claim

1 unchanged sentence

(Regenx), which stated its view that the use of the Company’s AAVhu68 capsid infringes patent claims to which Regenx has an exclusive license and which expire in 2024.

Passage Bio, Inc.

Notes to Unaudited Interim Financial Statements

Regenx believes may, if issued, cover the Company’s planned method of administration for the Company’s lead product candidates.

Regenx also stated that it has exclusive licenses to various pending patent applications regarding the use of AAV vectors administered via instar-cisterna magna injection, and that these applications may lead to issued claims that Regenx believes may, if issued, cover the Company’s planned method of administration for the Company’s lead product candidates.

The Company believes it has valid defenses to the issued claims set forth by Regenx relating to AAVhu68.

17 unchanged sentences

New awards can only be granted under the 2020 Equity Incentive Plan (the Plan).

The total number of shares authorized under the Plan as of March 31, 2020 was 5,362,823.

Of this amount, 4,435,181 shares were available for future grants as of March 31, 2020.

The total number of shares authorized under the Plan as of June 30, 2020 was 5,362,823.

Of this amount, 3,942,905 shares were available for future grants as of June 30, 2020.

The number of shares of the Company’s common stock that may be issued pursuant to rights granted under the Plan shall automatically increase on January 1st of each year, commencing on January 1, 2021 and continuing for ten years, in an amount equal to five percent of the total number of shares of the Company’s common stock outstanding on December 31st of the preceding calendar year, subject to the discretion of the board of directors or compensation committee to determine a lesser number of shares shall be added for such year.

5 unchanged sentences

The Company recorded share-based compensation expense in the following expense categories in its accompanying statements of operations for the period presented:

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

1 unchanged sentence

General and administrative

During the three months ended March 31, 2020, the Company modified certain awards and recognized an additional $0.7 million related to the modifications, $0.6 million of which was recognized in research and development expense and $0.1 million was recognized in general and administrative expense.

The following table summarizes stock option activity for the three months ended March 31, 2020:

During the six months ended June 30, 2020, the Company modified certain awards and recognized an additional $0.7 million related to the modifications, $0.6 million of which was recognized in research and development expense and $0.1 million was recognized in general and administrative expense.

The following table summarizes stock option activity for the six months ended June 30, 2020:

exercise price

Outstanding at January 1, 2020

Outstanding at March 31, 2020

Exercisable at March 31, 2020

Vested or expected to vest at March 31, 2020

The weighted-average grant date fair value of options granted was $9.93 and $0.73 for the three months ended March 31, 2020 and 2019, respectively.

As of March 31, 2020, the total unrecognized compensation expense related to unvested stock option awards was $41.8 million, which the Company expects to recognize over a weighted-average period of 2.53 years.

Outstanding at June 30, 2020

Exercisable at June 30, 2020

Vested or expected to vest at June 30, 2020

The weighted-average grant date fair value of options granted was $11.09 and $0.76 for the six months ended June 30, 2020 and 2019, respectively.

As of June 30, 2020, the total unrecognized compensation expense related to unvested stock option awards was $47.4 million, which the Company expects to recognize over a weighted-average period of 3.4 years.

The fair value of each option was estimated on the date of grant using the weighted average assumptions in the table below:

Three months ended March 31,

Six Months Ended June 30,

Expected volatility

5 unchanged sentences

The repurchase price is the lesser of the original exercise price or the then fair value of the Company’s common stock.

At March 31, 2020, $44,000 of proceeds from unvested early exercised options were recognized as a non-current liability in other liabilities in the accompanying balance sheet.

At June 30, 2020, $43,000 of proceeds from unvested early exercised options were recognized as a non-current liability in other liabilities in the accompanying balance sheet.

Passage Bio, Inc.

3 unchanged sentences

Therefore, no interest income was recognized.

The following table summarizes activity relating to early exercises of stock options during the three months ended March 31, 2020:

The following table summarizes activity relating to early exercises of stock options during the six months ended June 30, 2020:

Number of shares

Unvested balance at January 1, 2020

Unvested balance at March 31, 2020

Unvested balance at June 30, 2020

Nonrecourse Promissory Notes with Related Parties

In February 2019, the Company’s interim chief executive officer and chief operating officer elected to early exercise 688,875 and 309,994 stock options, respectively, in exchange for cash proceeds of $0.2 million and nonrecourse promissory notes (the Notes) of $0.8 million.

The Notes bore interest at 2.91% and were secured by the underlying shares of common stock that were issued until January 2020, when the Company forgave the Notes and associated interest related to the early exercise of stock options by the interim chief executive officer and chief operating officer.

The Notes bore interest at 2.91% and were secured by the underlying shares of common stock that were issued.

In January 2020, the Company forgave the Notes and associated interest related to the early exercise of stock options by the interim chief executive officer and chief operating officer.

An aggregate of 406,894 shares that were previously not considered outstanding for accounting purposes due to being secured by the Notes became outstanding upon the forgiveness of the Notes in January 2020.

11 unchanged sentences

Accordingly, share-based compensation expense is determined based on the option’s grant-date fair value as estimated by applying the Black Scholes option-pricing model and is recognized over the withholding period.

The Company recognized share-based compensation expense of $23,000 during the three months ended March 31, 2020 related to the ESPP.

The Company recognized share-based compensation expense of $62,000 and $85,000 during the three and six months ended June 30, 2020 related to the ESPP.

Passage Bio, Inc.

3 unchanged sentences

Penn is a stockholder of the Company.

Research and development expenses with Penn during the three months ended March 31, 2020 and 2019 were $7.7 million and $2.9 million, respectively.

The Company made $12.6 million in cash payments to Penn during the three months ended March 31, 2020, and had a prepaid research and development asset of $10.7 million and $5.7 million as of March 31, 2020 and December 31, 2019, respectively, in the accompanying balance sheets.

Research and development expenses with Penn during the three months ended June 30, 2020 and 2019 were $10.2 million and $6.2 million, respectively.

Research and development expenses with Penn during the six months ended June 30, 2020 and 2019 were $17.9 million and $9.1 million, respectively.

The Company made $16.3 million in cash payments to Penn during the six months ended June 30, 2020, and had a prepaid research and development asset of $10.5 million and $5.7 million as of June 30, 2020 and December 31, 2019, respectively, in the accompanying balance sheets.

Consulting Agreement

Wilson, M.D., Ph.D., an employee of Penn and a stockholder of the Company, serves as the Company’s chief scientific advisor pursuant to a consulting agreement.

The Company recognized $31,000 of expense related to these services during the three months ended March 31, 2020, including $6,000 of share-based compensation expense.

The Company recognized $31,000 and $62,000 of expense related to these services during the three and six months ended June 30, 2020, including $6,000 and $12,000, respectively, of share-based compensation expense.

Subsequent Events

Outside of the items disclosed in Note 6, there are no other subsequent events that warrant disclosure.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements