What changed in this filing

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Item 1. Financial Statements

2020-11-10 compared with 2020-08-13 · 141 added, 57 removed, 325 unchanged (38% of the section changed)

3 unchanged sentences

(in thousands, except share data)

June 30, 2020

September 30, 2020

December 31, 2019

1 unchanged sentence

Cash and cash equivalents

Marketable securities

Prepaid expenses

23 unchanged sentences

300,000,000 shares authorized;

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

45,885,052 shares issued and 45,534,682 shares outstanding at September 30, 2020 and 5,194,518 shares issued and 4,293,039 shares outstanding at December 31, 2019

Additional paid‑in capital

Accumulated other comprehensive loss

Accumulated deficit

3 unchanged sentences

Passage Bio, Inc.

Statements of Operations

Three Months Ended June 30,

Six Months Ended June 30,

Statements of Operations and Comprehensive Loss

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands, except share and per share data)

5 unchanged sentences

Change in fair value of future tranche right liability

Interest income

Interest income, net

Per share information:

1 unchanged sentence

Weighted average common shares outstanding, basic and diluted

Comprehensive loss:

Unrealized loss on available-for-sale securities

Comprehensive loss

See accompanying notes to unaudited interim financial statements.

4 unchanged sentences

Stockholders’ equity

Accumulated other

paid ‑ in capital

Balance at April 1, 2020

comprehensive loss

Balance at July 1, 2020

Vesting of early exercise option awards

Exercise of stock options

Unrealized loss on available-for-sale investments

Share‑based compensation expense

Balance at June 30, 2020

Balance at September 30, 2020

Convertible preferred stock

Stockholders’ equity

Accumulated other

paid ‑ in capital

comprehensive loss

Balance at January 1, 2020

3 unchanged sentences

Sale of common stock in initial public offering, net of issuance costs of $3,495

Unrealized loss on available-for-sale investments

Share‑based compensation expense

Balance at June 30, 2020

Balance at September 30, 2020

See accompanying notes to unaudited interim financial statements.

5 unchanged sentences

paid ‑ in capital

Balance at April 1, 2019

Balance at July 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

Sale of Series B convertible preferred stock, net of issuance costs of $102

Share‑based compensation expense

Balance at June 30, 2019

Balance at September 30, 2019

Convertible preferred stock

5 unchanged sentences

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

Sale of Series B convertible preferred stock, net of issuance costs of $102

Reclassification of future tranche right upon exercise

Share‑based compensation expense

Balance at June 30, 2019

Balance at September 30, 2019

See accompanying notes to unaudited interim financial statements.

1 unchanged sentence

Statements of Cash Flows

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

5 unchanged sentences

Share‑based compensation

Amortization of premium and discount on marketable securities, net

Deferred rent

6 unchanged sentences

Cash flows used in investing activities:

Purchases of marketable securities

Purchase of technology licenses

5 unchanged sentences

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

Proceeds from the sale of Series B convertible preferred stock, net of offering costs

Deferred offering costs

7 unchanged sentences

Reclassification of the future tranche right liability upon exercise

Series B convertible preferred stock offering costs in accrued expenses

Unrealized loss on marketable securities

Property and equipment in accounts payable

6 unchanged sentences

(the Company), a Delaware corporation incorporated in July 2017, is a genetic medicines company focused on advancing transformative therapies for rare monogenic central nervous system diseases.

The Company has a strategic research collaboration with the Trustees of the University of Pennsylvania’s (Penn’s), Gene Therapy Program (GTP) that provides the Company with access to one of the premier research institutions in the world for the discovery and preclinical development of genetic medicine product candidates and exclusive rights to certain rare, monogenic central nervous system (CNS) indications.

The Company has a strategic research collaboration with the Trustees of the University of Pennsylvania’s (Penn) Gene Therapy Program (GTP) that provides the Company with access to one of the premier research institutions in the world for the discovery and preclinical development of genetic medicine product candidates and exclusive rights to certain rare, monogenic central nervous system (CNS) indications.

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.

2 unchanged sentences

Risks and Liquidity

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 has incurred recurring losses and negative cash flows from operations since inception and had an accumulated deficit of $132.0 million as of September 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.

1 unchanged sentence

In March 2020, the Company closed its initial public offering (IPO) in which the Company issued and sold 13,798,900 shares of its common stock, which included shares sold pursuant to an option granted to the underwriters to purchase additional shares, at a public offering price of $18.00 per share for net proceeds of $227.5 million after deducting underwriting discounts, commissions and other offering expenses.

The Company’s operations have consisted primarily of organizing the Company, securing financing, developing licensed technology, performing research and conducting preclinical studies.

The Company’s operations have consisted primarily of organizing the Company, securing financing, developing licensed technology, performing research, conducting preclinical studies and preparing to commence clinical trials.

The Company faces risks associated with early-stage biotechnology companies whose product candidates are in development.

Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval prior to commercialization.

Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing, establishing manufacturing capacity and regulatory approval prior to commercialization.

These efforts require significant amounts of additional capital for the Company to complete its research and development, achieve its research and development objectives, defend its intellectual property rights, and recruit and retain skilled personnel, and key members of management.

23 unchanged sentences

Prior to the IPO, significant areas that required management’s estimates included the fair value of the Company’s future tranche right liability and its common stock.

After the IPO, the most significant judgements are used in estimates to determine the fair value of stock options issued.

Fair Value of Financial Instruments

1 unchanged sentence

The future tranche right liability was recorded at its estimated fair value.

Share-based compensation

The Company measures share-based awards at their grant-date fair value and records compensation expense on a straight-line basis over the vesting period of the awards.

Concentration of credit risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents, and marketable securities.

The Company maintains deposits in federally insured financial institutions in excess of federally insured limits.

The Company has not experienced any losses in such accounts and believes it is not exposed to significant risk on its cash, cash equivalents, and marketable securities.

Passage Bio, Inc.

Notes to Unaudited Interim Financial Statements

Cash and cash equivalents

The Company considers all highly liquid investments that have maturities of three months or less when acquired to be cash equivalents.

Cash equivalents as of September 30, 2020 consisted of money market mutual funds invested in U.S.

Treasury obligations, certificates of deposit, commercial paper, and corporate debt securities with original maturities of three months or less.

Marketable securities

The Company classifies its marketable securities as available-for-sale, which include commercial paper, certificates of deposit, corporate debt securities and U.S.

government and non-U.S.

government debt securities with original maturities of greater than three months.

These securities are carried at fair market value, with unrealized gains and losses reported in comprehensive loss and accumulated other comprehensive loss within stockholders’ equity.

Gains or losses on marketable securities sold are based on the specific identification method.

Share-based compensation

The Company measures share-based awards at their grant-date fair value and records compensation expense on a straight-line basis over the vesting period of the awards.

Estimating the fair value of share-based awards requires the input of subjective assumptions, including, prior to the IPO, the estimated fair value of the Company's common stock, and, for stock options, the expected life of the options and stock price volatility.

13 unchanged sentences

For diluted net loss per share, the weighted-average number of shares of common stock is the same for basic net loss per share due to the fact that when a net loss exists, dilutive securities are not included in the calculation as the impact is anti-dilutive.

Passage Bio, Inc.

Notes to Unaudited Interim Financial Statements

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,

Three and Nine Months Ended September 30,

Series A‑1 convertible preferred stock

Series A‑2 convertible preferred stock

Series B convertible preferred stock

Stock options (including shares subject to repurchase)

8 unchanged sentences

The Company is currently evaluating the expected impact that the standard could have on its financial statements and related disclosures.

In June 2016, the FASB issued ASU No.

2016-13, “ Financial Instruments-Credit Losses:

Measurement of Credit Losses on Financial Instruments ” (“ASU 2016-13”), which replaces the incurred loss impairment methodology under current U.S.

GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

ASU 2016-13 was subsequently updated by ASU No.

2019-04, “ Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments ”, to clarify that entities should include recoveries when estimating the allowance for credit losses.

This guidance is effective for the Company for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022 and must be adopted using a modified retrospective approach, with certain exceptions.

The Company is currently evaluating the impact of this standard on its financial statements and related disclosures.

Passage Bio, Inc.

Notes to Unaudited Interim Financial Statements

Cash, cash equivalents and marketable securities

The following table provides details regarding the Company’s portfolio of cash and cash equivalents:

(in thousands)

Amortized cost

Unrealized gains

Unrealized losses

September 30, 2020:

Cash accounts in banking institutions

Money market funds

Certificates of deposit

Commercial paper

Corporate debt securities

December 31, 2019:

Cash accounts in banking institutions

Money market funds

The following table provides details regarding the Company’s portfolio of marketable securities:

(in thousands)

Amortized cost

Unrealized gains

Unrealized losses

September 30, 2020:

Certificates of deposit

Commercial paper

Corporate debt securities

government securities

The Company did not have marketable securities as of December 31, 2019.

Fair Value of Financial Instruments

7 unchanged sentences

Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Passage Bio, Inc.

Notes to Unaudited Interim Financial Statements

Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liabilities.

5 unchanged sentences

(in thousands)

June 30, 2020:

Cash equivalents (Money Market Fund)

September 30, 2020:

Cash and cash equivalents:

Money market fund

Certificates of deposit

Commercial paper

Corporate debt securities

Total cash and cash equivalents

Marketable securities:

Certificates of deposit

Commercial paper

Corporate debt securities

government securities

Total marketable securities

Total financial assets

December 31, 2019:

Cash equivalents (Money Market Fund)

Cash and cash equivalents:

Money market fund

The Company evaluated the future tranche right feature within the Series A-1 convertible preferred stock issued in 2018 and determined that the future tranche right was a freestanding financial instrument that was classified as a liability and was re-measured at each reporting period until the redemption feature was exercised in connection with the sale and issuance of the Series A-2 convertible preferred stock in May 2019.

4 unchanged sentences

(in thousands)

June 30, 2020

September 30, 2020

December 31, 2019

5 unchanged sentences

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.

Under the Penn Agreement, in addition to the obligation to fund certain research relating to the preclinical development of selected products, 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.

5 unchanged sentences

As part of the Catalent Collaboration Agreement, the Company paid Catalent an upfront fee for the commissioning, qualification, validation and equipping of a clean room suite (the Clean Room Suite).

Subject to validation of the Clean Room Suite, which is expected to occur by the end of 2020, the Company will pay an annual fee for five years for the use of the Clean Room Suite and is also committed to minimum annual purchase commitments.

Subject to validation of the Clean Room Suite, which was completed in the fourth quarter of 2020, the Company will pay an annual fee for five years for the use of the Clean Room Suite and is also committed to minimum annual purchase commitments.

In April 2020, the Company entered into a development services and clinical supply agreement (the Manufacturing and Supply Agreement) with Catalent to secure clinical scale manufacturing capacity for batches of active pharmaceutical ingredients for the Company’s gene therapy product candidates.

3 unchanged sentences

The Manufacturing and Supply Agreement provides for a term of five years which period may be extended once, at the Company’s option, for an additional five year-period.

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 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

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 Manufacturing and Supply Agreement, 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 from the validation of the Clean Room, subject to certain inflationary adjustments.

9 unchanged sentences

(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.

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

The Company recognized rent expense of $0.2 million and $50,000 during the three months ended September 30, 2020 and 2019, respectively, and $0.3 million and $0.1 million during the nine months ended September 30, 2020 and 2019, respectively, related to its operating leases.

Employment Agreements

23 unchanged sentences

The Company has two equity incentive plans:

the 2018 Equity Incentive Plan, as amended, and the 2020 Equity Incentive Plan.

the 2018 Equity Incentive Plan, as amended (the 2018 Plan), and the 2020 Equity Incentive Plan.

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

Of this amount, 3,654,629 shares were available for future grants as of September 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,

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

1 unchanged sentence

General and administrative

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:

During the nine months ended September 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 nine months ended September 30, 2020:

exercise price

Outstanding at January 1, 2020

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.

Outstanding at September 30, 2020

Exercisable at September 30, 2020

Vested or expected to vest at September 30, 2020

The weighted-average grant date fair value of options granted was $11.27 and $0.76 for the nine months ended September 30, 2020 and 2019, respectively.

As of September 30, 2020, the total unrecognized compensation expense related to unvested stock option awards was $48.3 million, which the Company expects to recognize over a weighted-average period of 3.2 years.

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

Six Months Ended June 30,

Nine Months Ended September 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 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.

At September 30, 2020, $42,000 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.

Notes to Unaudited Interim Financial Statements

The 2018 Equity Incentive Plan allowed for the exercise of options to be financed with nonrecourse notes.

The 2018 Plan allowed for the exercise of options to be financed with nonrecourse notes.

For accounting purposes, payment of principal and interest are viewed as the exercise price of the option.

Therefore, no interest income was recognized.

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

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

Number of shares

Unvested balance at January 1, 2020

Unvested balance at June 30, 2020

Unvested balance at September 30, 2020

Nonrecourse Promissory Notes with Related Parties

15 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 $62,000 and $85,000 during the three and six months ended June 30, 2020 related to the ESPP.

The Company recognized share-based compensation expense of $63,000 and $0.1 million during the three and nine months ended September 30, 2020 related to the ESPP.

Passage Bio, Inc.

2 unchanged sentences

Penn Agreement

Penn is a stockholder of the Company.

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.

As part of the Penn Agreement, Penn was issued shares of the Company’s common stock in 2018.

Research and development expenses with Penn during the three months ended September 30, 2020 and 2019 were $5.4 million and $9.2 million, respectively.

Research and development expenses with Penn during the nine months ended September 30, 2020 and 2019 were $23.3 million and $18.8 million, respectively.

The Company made $19.3 million in cash payments to Penn during the nine months ended September 30, 2020, and had a prepaid research and development asset of $9.9 million and $5.7 million as of September 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 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.

Wilson, M.D., Ph.D., an employee of Penn and one of the co-founders of the Company who was issued shares of the Company’s common stock in 2018, serves as the Company’s chief scientific advisor pursuant to a consulting agreement.

The Company recognized $31,000 and $93,000 of expense related to these services during the three and nine months ended September 30, 2020, including $6,000 and $18,000, respectively, of share-based compensation expense.

Subsequent Events

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