What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-03-04 compared with 2023-03-06 · 214 added, 150 removed, 462 unchanged (44% of the section changed)

16 unchanged sentences

generally accepted accounting principles.

Change in Accounting Principle

As discussed in Notes 1 and 3 to the financial statements, the Company has changed its method of accounting for leases as of January 1, 2022 due to the adoption of Accounting Standards Update (ASU) No.

2016-02, Leases (Topic 842) .

Basis for Opinion

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Balance Sheets

(in thousands, except share data)

(in thousands, except share and per share data)

Current assets:

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Operating lease liabilities - noncurrent

Deferred rent

Total liabilities

1 unchanged sentence

Stockholders’ equity:

Preferred stock, $ 0.0001 par value:

10,000,000 shares authorized;

no shares issued and outstanding at both December 31, 2023 and December 31, 2022

Common stock, $ 0.0001 par value:

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General and administrative

Impairment of long-lived assets

Loss from operations

Interest income, net

Other income (expense), net

Per share information:

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(in thousands, except share data)

Stockholders’ equity

Accumulated other

3 unchanged sentences

Balance at January 1, 2022

Vesting of early exercise option awards

Exercise of stock options and vesting of restricted stock units

Issuance of shares in connection with employee stock purchase plan

Sale of common stock, net of issuance costs of $ 669

Unrealized gain (loss) on marketable securities

1 unchanged sentence

Balance at December 31, 2022

Stockholders’ equity

Accumulated other

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Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Acquired in‑process research and development

Depreciation and amortization

1 unchanged sentence

Amortization of premium and discount on marketable securities, net

Deferred rent

Loss on disposal of property and equipment

Impairment of long-lived assets

Acquired in‑process research and development

Changes in operating assets and liabilities:

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Accounts payable

Accrued expenses and other current liabilities

Accrued expenses and other current and noncurrent liabilities

Net cash provided by (used in) operating activities

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Sales or maturities of marketable securities

Purchases of technology licenses

Purchases of property and equipment

Purchases of technology licenses

Net cash provided by (used in) investing activities

Cash flows provided by (used in) financing activities:

Proceeds from issuance of common stock, net of offering costs

Payment of offering costs

Proceeds from the exercise of stock options

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Unrealized gain (loss) on marketable securities

Property and equipment in deferred rent

Property and equipment in accounts payable and accrued expenses and other current liabilities

Vesting of early exercise option awards

Right of use assets recognized upon the adoption of Topic 842

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Nature of Operations

Passage Bio, Inc., or the Company, a Delaware corporation incorporated in July 2017, is a clinical stage genetic medicines company focused on developing transformative therapies for central nervous system, or CNS disorders, with limited or no approved treatment options.

Passage Bio, Inc., or the Company, a Delaware corporation incorporated in July 2017, is a clinical stage genetic medicines company on a mission to improve the lives of patients with neurodegenerative diseases.

The Company’s primary focus is the development and advancement of cutting-edge, one-time therapies designed to target the underlying pathology of these conditions.

The Company has a strategic research collaboration with the Trustees of the University of Pennsylvania’s, or Penn, Gene Therapy Program, or GTP.

Under this collaboration, GTP conducts discovery and preclinical activities enabling Investigational New Drug, or IND, applications and the Company conducts all clinical development, manufacturing, regulatory strategy, and commercialization activities under the agreement.

Through this collaboration, the Company has assembled a portfolio of genetic medicine product candidates, including two lead clinical product candidates:

PBGM01 for the treatment of GM1 gangliosidosis, or GM1, and PBFT02 for the treatment of frontotemporal dementia, or FTD.

The Company also has a collaboration agreement and a development services and clinical supply agreement with Catalent Maryland, Inc., or Catalent, for clinical scale manufacturing requirements.

Through this collaboration, the Company has developed its lead clinical product candidate, PBFT02, for the treatment of frontotemporal dementia, or FTD, caused by progranulin deficiency, or FTD- GRN , which seeks to elevate progranulin levels to restore lysosomal function and slow disease progression.

Risks and Liquidity

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Substantial additional capital will be needed by the Company to fund its operations and to develop its product candidates.

In January 2021, the Company closed a follow-on public offering in which the Company issued and sold 8,050,000 shares of its common stock at a public offering price of $ 22.00 per share for net proceeds of $ 165.8 million after deducting underwriting discounts, commissions and other offering expenses.

The Company’s operations have consisted primarily of conducting preclinical studies, developing licensed technology, conducting clinical trials, and manufacturing clinical supply to support clinical trials.

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If the Company is unable to obtain funding or prospects of funding are unfavorable, the Company could be required to further delay, reduce or eliminate research and development programs, product portfolio expansion or future commercialization efforts, which could adversely affect its business prospects.

In March 2022 and November 2022, the Company reduced its workforce and prioritized research and development programs to reduce operating expenses and to extend its cash runway.

In accordance with Accounting Standards Update, or ASU, No.

2014-15 , Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern , the Company has evaluated whether there are certain conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern

2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern , the Company has evaluated whether there are certain conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued.

As of the issuance date of these financial statements, the Company expects that its cash, cash equivalents and marketable debt securities will be sufficient to fund its forecasted operating expenses and capital expenditure requirements for at least the next twelve months from the issuance date of these financial statements.

Passage Bio, Inc.

Notes to Financial Statements (cont.)

within one year after the date that the financial statements are issued.

Summary of Significant Accounting Policies

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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.

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

The Company maintains a deposit account in a federally insured financial institution in excess of federally insured limits.

The Company also maintains a money market account in a federally insured financial institution 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 and cash equivalents beyond the normal credit risk associated with commercial banking relationships.

The Company maintains a portfolio of marketable debt securities, which is diversified to limit exposure related to counterparty risk, industry risk, and security type risk.

The Company maintains an investment policy which dictates the allocation of funds within its portfolio of marketable debt securities.

The Company has not experienced any material losses in such portfolio.

Segment Information

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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 December 31, 2022 consisted of money market funds and commercial paper.

Cash equivalents as of December 31, 2023 consisted of money market funds, commercial paper, and corporate debt securities.

Cash consists of cash deposits at banking institutions.

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Marketable securities

The Company classifies its marketable securities as available-for-sale, which include commercial paper, certificates of deposit, corporate debt securities, and United States, or U.S., government debt securities with original maturities of greater than three months.

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

government agency 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 income (loss) within stockholders’ equity.

Gains or losses on marketable securities sold are recognized as a component of other income, net in the statement of operations and comprehensive loss on the specific identification method.

Any premium or discount arising at purchase of debt securities is amortized and/or accreted over the term of the security to other income (expense), net.

Gains or losses on marketable securities sold are recognized as a component of other income (expense), net in the statement of operations and comprehensive loss on the specific identification method.

All marketable securities are available for use, as needed, to fund operations and therefore, the Company classifies all marketable securities as current assets within the balance sheet.

Property and Equipment, net

Property and equipment consists of laboratory equipment, office equipment, computer hardware and software, furniture and leasehold improvements and are recorded at cost.

Property and equipment consists of laboratory equipment, office equipment, computer hardware and software, furniture and fixtures, and leasehold improvements and are recorded at cost.

Maintenance and repairs that do not improve or extend the lives of the respective assets are expensed as incurred.

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Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the asset.

When property is retired or otherwise disposed of, the costs and accumulated depreciation are removed from the respective accounts, with any resulting gain or loss recognized concurrently.

In the year ended December 31, 2023, the Company recognized losses on disposals of property and equipment of $ 0.5 million within research and development expenses, compared to none in the year ended December 31, 2022.

The Company reviews long-lived assets, such as property and equipment, for impairment when events or changes in circumstances indicate the carrying amount of the assets may not be recoverable.

If circumstances require a long-lived asset to be tested for possible impairment, recoverability is measured by comparison of the carrying amount of the assets to estimated future undiscounted cash flows that the assets are expected to generate.

If the carrying amount of an asset exceeds its estimated future cash flows, then impairment expense is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset.

For the years ended December 31, 2022, and 2021, no impairment expenses were recognized.

During the year ended December 31, 2023, the Company recognized impairment expenses for property and equipment of $ 3.2 million, compared to none in the year ended December 31, 2022.

These impairment expenses represent the proportional allocation of total impairments recognized for the asset groups subject to impairment testing in connection with the Company’s sublease agreements, as further described in Note 9.

The Company evaluates leases at their inception to determine if they are an operating lease or a finance lease.

As of December 31, 2023, the Company has classified all leases with terms greater than one year, as operating leases.

The Company recognizes assets and liabilities for operating leases at their inception, based on the present value of all payments due under the lease agreement.

The Company uses its incremental borrowing rate to determine the present value of operating leases, which is determined by referencing collateralized borrowing rates for debt instruments with terms similar to the respective lease.

The Company utilizes the accounting policy election to not separate lease and non-lease components and the accounting policy election to not apply the recognition requirement to leases with a term of twelve months or less.

The Company reviews long-lived assets, such as right of use assets, for impairment when events or changes indicate the carrying amount of the right of use assets may not be recoverable.

During the year ended December 31, 2023, the Company recognized impairment expenses for right of use assets of $ 2.2 million, compared to none in the year ended December 31, 2022.

These impairment expenses represent the proportional allocation of total impairments recognized

Passage Bio, Inc.

Notes to Financial Statements (cont.)

for the asset groups subject to impairment testing in connection with the Company’s sublease agreements, as further described in Note 9.

Share-based compensation

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Estimating the fair value of stock option awards requires the input of assumptions, including, the expected term of stock options, and stock price volatility.

The Company accounts for forfeitures for stock option awards as they occur.

The assumptions used in estimating the fair value of share-based awards represent management's estimate and involve inherent uncertainties and the application of management's judgment.

As a result, if factors change and management uses different assumptions, share-based compensation expense could be materially different for future awards.

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

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 expected term of the stock options is estimated using the “simplified method,” 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.

1 unchanged sentence

The selection of comparable public company data requires the application of management’s judgement.

Passage Bio, Inc.

Notes to Financial Statements (cont.)

The Company accounts for forfeitures for stock option awards as they occur.

The Company accounts for forfeitures of RSUs and stock option awards as they occur.

Research and Development

Research and development costs are expensed as incurred and consist primarily of expenses incurred with Penn, contract research organizations, contract manufacturing organizations, internal analytical and testing activities, and employee-related expenses, including salaries, benefits, and share-based compensation.

Research and development costs are expensed as incurred and consist primarily of expenses incurred with GTP, contract research organizations, contract manufacturing organizations, internal analytical and testing activities, and employee-related expenses, including salaries, benefits, and share-based compensation.

Management makes estimates of the Company’s external accrued research and development expenses, which primarily relates to contract research organizations and contract manufacturing organizations, as of each balance sheet date in the Company’s financial statements based on an estimate of progress to completion of specific tasks using facts and circumstances known to the Company at that time.

The Company determines the estimates by reviewing contracts, vendor agreements and change orders, and through discussions with our internal clinical personnel and external service providers as to the progress to completion of services and the agreed-upon fee to be paid for such services.

The Company determines the estimates by reviewing contracts, vendor agreements, change orders, and through discussions with the Company’s internal clinical personnel and external service providers as to the progress to completion of services and the agreed-upon fee to be paid for such services.

If the actual timing of the performance of services or the level of effort varies from the estimate, the Company will adjust the accrual and related expenses accordingly.

1 unchanged sentence

Fees paid to obtain research and development technology licenses are recognized as acquired in-process research and development expense if the research and development technology licensed has not reached technological feasibility and has no alternative future use.

For the years ended December 31, 2022, and 2021, all fees paid to obtain technology licenses were recognized as acquired in-process research and development expense.

For the year ended December 31, 2022, all fees paid to obtain technology licenses were recognized as acquired in-process research and development expense.

No fees were paid during the year ended December 31, 2023.

Passage Bio, Inc.

Notes to Financial Statements (cont.)

Other Income (Expense), net

Other income (expense), net consists of interest earned on the Company’s cash equivalents and marketable securities, and amortization of premium and discount on our marketable securities.

Additionally, in the year ended December 31, 2023, the Company recognized other income related to the sale of certain tax credits.

The Company recorded $ 6.3 million to other income (expense), net for the year ended December 31, 2023, which consisted of $ 5.6 million attributable to interest income and the amortization of premium and discount on the Company’s marketable securities, and $ 0.7 million related to the sale of certain tax credits.

The Company recorded $ 2.3 million to other income (expense), net for the year ended December 31, 2022, which consisted of $ 2.3 million attributable to interest income and the amortization of premium and discount on the Company’s marketable securities..

Income taxes are accounted for under the asset-and-liability method as required by FASB ASC Topic 740, Income Taxes (ASC 740).

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The tax benefits recognized in the financial statements from such a tax position should be measured based on the largest benefit having a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority.

In accordance with the disclosure requirements of ASC 740-10, the Company’s policy on statement of operations classification of interest and penalties related to income tax obligations is to include such items as part of total interest income, net.

Net Loss Per Share

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Diluted loss per share of common stock includes the effect, if any, from the potential exercise or conversion of securities, such as stock options, which would result in the issuance of incremental shares of common stock.

For diluted net loss per share, the weighted-average number of shares of common

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 Financial Statements (cont.)

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.

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:

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Recently Adopted Accounting Pronouncements

In February 2016, the FASB issued ASU No.

2016-02, Leases (Topic 842) , or ASU 2016-02, which requires a lessee to record a right-of-use asset and a corresponding lease liability on the balance sheet for all leases with terms longer than 12 months.

The Company adopted ASU 2016-02 on January 1, 2022 using the modified retrospective transition method and elected the following transition practical expedients:

(i) to not reassess lease identification, lease classification and initial indirect costs related to those leases entered into prior to the adoption of Topic 842;

and (ii) to not separate lease and non-lease components for the Company’s operating lease portfolio.

The Company recorded an operating lease right-of-use asset and lease liability of $ 20.4 million and $ 27.3 million respectively, related to the adoption of the Topic 842.

See note 9 for further details.

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU No.

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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 starting in fiscal year 2023.

The Company does not expect that the adoption of ASU 2016-13 will have a material impact on its financial statements.

This guidance was effective for the Company starting in fiscal year 2023.

The Company adopted ASU 2016-13 as of January 1, 2023, which did not have a material impact on its financial statements.

In November 2023, the FASB issued ASU No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , or ASU 2023-07, which expands segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets.

The disclosures required under ASU 2023-07 are also required for public entities with a single reportable segment.

ASU 2023-07 is effective for the Company’s first fiscal year beginning after December 15, 2023 and for interim periods within the Company’s first fiscal year beginning after December 15, 2024, with early adoption permitted.

The Company does not expect the adoption of ASU 2023-07 to have a material impact on its financial statements or disclosures.

In December 2023, the FASB issued ASU No.

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures , or ASU 2023-09, which requires that an entity, on an annual basis, disclose additional income tax information, primarily related to the rate reconciliation and income taxes paid.

The amendments in ASU 2023-09 are intended to enhance the transparency and decision usefulness of income tax disclosures.

The amendments in this ASU are effective for annual periods beginning after December 15, 2024 with early adoption permitted.

The Company is currently evaluating the impact of this guidance on disclosures.

Passage Bio, Inc.

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Commercial paper

Corporate debt securities

December 31, 2022:

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government securities

government agency securities

December 31, 2022:

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government securities

The contractual maturities of our marketable securities as of December 31, 2022, are as follows:

The contractual maturities of the Company’s marketable securities as of December 31, 2023, are as follows:

(in thousands)

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Due after one year through five years

Fair Value of Financial Instruments

Fair Value of Financial Instruments and Non-Financial Instruments

Financial Instruments

Fair value is the price that could be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

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Commercial paper

Corporate debt securities

Total cash equivalents

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government securities

government agency securities

Total marketable securities

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government securities

Total marketable securities

Total financial assets

Non-Financial Instruments

Long-lived non-financial assets are measured at fair value on a nonrecurring basis for purposes of calculating impairment using Level 3 inputs as defined in the fair value hierarchy.

The fair value of long-lived assets using Level 3 inputs is determined by estimating the amount and timing of net future cash flows (which are unobservable inputs) and discounting them using a risk-adjusted rate of interest.

Significant increases or decreases in actual cash flows may result in valuation changes.

Passage Bio, Inc.

Notes to Financial Statements (cont.)

The following non-financial instruments were measured at fair value, on a nonrecurring basis, during the year ended December 31, 2023.

The significant assumptions utilized, which relate to future net cash flows, are further described in Note 9:

(in thousands)

Impairment Losses

Property and equipment, net

Right of use assets

Property and Equipment, net

Property and equipment, net, consist of the following:

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Accumulated depreciation and amortization

Depreciation expense was $ 3.7 million and $ 1.5 million for the years ended December 31, 2022 and 2021, respectively.

Depreciation expense was $ 3.7 million for both of the years ended December 31, 2023 and 2022.

Accrued Expenses and Other Current Liabilities

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Property and equipment

Amount due to Catalent in connection with Amended Catalent Agreements

In July 2023, the Company announced a workforce reduction to reduce operating expenses and to extend its cash runway.

In connection with the announcement, the Company reduced headcount by approximately 26 %.

In accordance with ASC 420, Exit and Disposal Activities, the Company recorded severance and termination-related costs of $ 1.0 million in general and administrative expenses and $ 1.4 million in research and development expenses for the year ended December 31, 2023.

Passage Bio, Inc.

Notes to Financial Statements (cont.)

In March 2022 and November 2022, the Company announced workforce reductions and that it has prioritized certain research and development programs to reduce operating expenses and to extend its cash runway.

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In accordance with ASC 420, Exit and Disposal Activities , the Company recorded severance and termination-related costs of $ 3.8 million in general and administrative expenses and $ 2.3 million in research and development expenses for the year ended December 31, 2022.

As of December 31, 2022, $ 2.1 million of severance and termination-related costs were unpaid and recognized in the balance sheet within Accrued expenses and other current liabilities.

On January 1, 2022, the Company adopted ASU No.

2016-02, Leases , using a modified retrospective approach and recorded operating lease right-of-use, or ROU, assets and operating lease liabilities of $ 20.4 million and $ 27.3 million, respectively, related to the Company’s Lease Agreement and Laboratory Lease Agreement, or collectively, the Leases, which are each defined below.

The Company elected the package of practical expedients available under ASU No.

As of December 31, 2023, no severance or termination-related costs were unpaid and recognized in the balance sheet within accrued expenses and other current liabilities.

2005 Market Street Lease Agreement

The Company is party to a lease agreement for office space, or the 2005 Market Street Lease Agreement, in Philadelphia, Pennsylvania.

Under the 2005 Market Street Lease Agreement, the Company leased approximately 37,000 square feet.

The 2005 Market Street Lease Agreement commenced in February 2021 and is expected to expire in December 2031.

The Company has an option to extend the term of the 2005 Market Street Lease Agreement by two additional terms of five years each.

The Company has an option to early terminate the 2005 Market Street Lease Agreement as of April 2029, given notice is provided to the landlord no less than fifteen months prior to April 2029.

The optional extension and termination terms were not recognized as part of the Company’s measurement of the right of use, or ROU, asset and operating lease liability as of December 31, 2023.

Sublease Agreement A

On August 7, 2023, the Company entered into a sublease agreement with a counterparty, or Sublessee A, to sublease approximately 8,000 square feet of the 2005 Market Street Lease Agreement, or Sublease Agreement A.

This sublease term began on November 1, 2023, and continues through March 31, 2029.

In the event the Company does not elect its early termination option under the 2005 Market Street Lease Agreement, Sublessee A has an option to extend the sublease agreement through November 30, 2031.

The base sublease rent is $ 12,426 per month and increases by 2.75 % annually through the expiration of the agreement.

Additionally, Sublessee A is required to pay the portion of the common area maintenance expenses, operating expenses and use and occupancy taxes which the Company is required to pay under the 2005 Market Street Lease Agreement.

Pursuant to ASC 842, the Company concluded the sublease is a separate lease, as the Company was not relieved of the primary obligation under the 2005 Market Street Lease Agreement.

The Company continues to account for the 2005 Market Street Lease Agreement as a lessee and in the same manner as prior to the execution of Sublease Agreement A.

The Company accounted for Sublease Agreement A as the lessor, and concluded the lease qualified as an operating lease, as it did not meet the criteria of a sales-type or direct financing lease.

As a result of Sublease Agreement A, the Company determined an impairment indicator was present.

The Company compared the estimated undiscounted cash flows to the carrying value of the asset group, which includes right of use assets, leasehold improvements, and other property and equipment allocable to Sublease Agreement A.

The Company concluded the carrying value of the asset group was not recoverable as it exceeded the estimated undiscounted cash flows.

The Company calculated the amount of impairment using a discounted cash flow model to calculate the fair value of the asset group which incorporated the net identifiable cash flows for the term of Sublease Agreement A, including an estimate for cash flows in the residual period, and an estimated borrowing rate of a market participant subtenant.

Passage Bio, Inc.

Notes to Financial Statements (cont.)

02 and as such, did not reassess any of the Company’s existing or expired contracts or any other agreements that were previously concluded to not contain a lease for the following practical expedient guidance:

(1) whether the arrangement is or contains a lease, (2) lease classification and (3) whether previously capitalized costs continue to qualify as initial direct costs.

In addition, the Company applied the accounting policy election to not separate lease and non-lease components and the accounting policy election to not apply the recognition requirement under ASU No.

2016-02 to leases with a term of twelve months or less.

The Company was not required to record a cumulative effect adjustment upon adoption as the Company did not capitalize any material initial direct costs nor were any contracts reassessed leading to changes in the terms or contractual payments of historical arrangements that would impact expense recognition, however, the Company eliminated $ 3.2 million of deferred rent liabilities and $ 3.8 million of tenant improvement allowances as of January 1, 2022 related to the Leases as these liabilities are reflected in the operating lease ROU assets.

The Company used incremental borrowing rates, or IBRs, of 9.0 % and 10.0 % to discount the operating lease liabilities for the Lease Agreement and the Laboratory Lease Agreement, respectively.

The Company’s IBRs were quoted by an unrelated third-party lender and reflect a collateralized borrowing with similar terms and amounts as the Leases.

The Company is party to a lease agreement for office space, or the Lease Agreement, in Philadelphia, Pennsylvania.

The Lease Agreement commenced in February 2021 and is expected to expire in December 2031.

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

This option to extend was not recognized as part of the Company's measurement of the ROU asset and operating lease liability as of December 31, 2022.

The landlord provided the Company with a tenant improvement allowance of $ 2.8 million, for which the related expenditures were paid directly by the landlord.

Sublease Agreement B

On September 29, 2023, the Company entered into a sublease agreement with a counterparty, or Sublessee B, to sublease approximately 29,000 square feet of the 2005 Market Street Lease Agreement, or Sublease Agreement B.

This sublease term began on March 1, 2024, and continues through August 2026.

Sublessee B has an option to extend the term of the sublease agreement through March 31, 2029.

The base sublease rent is $ 75,000 per month for the entire term of the sublease.

Additionally, Sublessee B is required to pay applicable use and occupancy taxes but is not obligated to make payments for operating expenses and common area maintenance expenses which the Company is required to pay under the 2005 Market Street Lease Agreement.

Pursuant to ASC 842, the Company concluded the sublease is a separate lease, as the Company was not relieved of the primary obligation under the 2005 Market Street Lease Agreement.

The Company continues to account for the 2005 Market Street Lease Agreement as a lessee and in the same manner as prior to the execution of the Sublease Agreement B.

The Company accounted for Sublease Agreement B as the lessor, and concluded the lease qualified as an operating lease, as it did not meet the criteria of a sales-type or direct financing lease.

As a result of Sublease Agreement B, the Company determined an impairment indicator was present.

The Company concluded the carrying value of the asset group was not recoverable as it exceeded the estimated undiscounted cash flows.

The Company calculated the amount of impairment using a discounted cash flow model to calculate the fair value of the asset group which incorporated the net identifiable cash flows for the term of Sublease Agreement B, including an estimate for cash flows in the residual period, and an estimated borrowing rate of a market participant subtenant.

Based on the analyses for Sublease Agreement A and Sublease Agreement B, the Company recognized impairment expense of $ 5.4 million, including $ 2.2 million for the right of use assets and $ 3.2 million for the property and equipment during the year ended December 31, 2023.

Laboratory Lease Agreement

The Company is also party to a lease agreement for laboratory space, or the Laboratory Lease Agreement, in Hopewell, New Jersey.

The laboratory is initially focused on state-of-the-art analytical capabilities, assay development and validation, and clinical product testing to support both viral vector manufacturing and clinical development.

The Laboratory Lease Agreement commenced in March 2021 and is expected to expire in February 2036.

The laboratory is focused on state-of-the-art analytical capabilities, assay development and validation, and clinical product testing to support both viral vector manufacturing and clinical development.

The Laboratory Lease Agreement commenced in March 2021 and is expected to expire in March 2036.

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

This option to extend was not recognized as part of the Company's measurement of the ROU asset and operating lease liability as of December 31, 2023.

The landlord provided the Company with a tenant improvement allowance of $ 1.3 million in connection with the Laboratory Lease Agreement, for which the related expenditures were paid by the Company and will be reimbursed by the landlord.

As of December 31, 2022, $ 0.1 million of reimbursements were unpaid by the landlord and recorded within other current assets.

The following table summarizes the Company’s operating leases:

Passage Bio, Inc.

Notes to Financial Statements (cont.)

The following table summarizes future minimum lease payments for the Company’s lessee operating leases, which comprises of the 2005 Market Street Lease Agreement and the Laboratory Lease Agreement.

The below table does not include expected cash inflows related to Sublease Agreement A and Sublease Agreement B, as the Company was not relieved of its primarily obligation under the 2005 Market Street Lease Agreement:

(in thousands)

Total undiscounted lease payments

imputed interest

Total lease liabilities

The following table summarizes lease expense by lease type that was recognized during the years ended December 31, 2023 and 2022:

($ in thousands)

December 31, 2023

December 31, 2022

Operating lease cost

Cash paid for amounts included in the measurement of operating cash flows from operating leases

Variable lease cost

The following table shows the weighted average discount rate and weighted average remaining lease term of the operating leases:

($ in thousands)

December 31, 2023

December 31, 2022

Weighted-average discount rate

Weighted-average remaining lease term (years)

The cash paid for amounts included in the measurement of our operating lease liabilities for the years ended December 31, 2023 and 2022 were $ 3.5 million and $ 2.9 million, respectively, in operating cash flows.

Passage Bio, Inc.

Notes to Financial Statements (cont.)

The following table summarizes future minimum lease payments under the Company’s operating lease agreements:

(in thousands)

Total undiscounted lease payments

imputed interest

Total lease liabilities

Commitments and Contingencies

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The Company has a research, collaboration and licensing agreement with Penn, as amended, or the Penn Agreement, for research and development collaborations and exclusive license rights to patents for certain products and technologies.

Under the Penn Agreement, the Company has obligations to fund certain research relating to the preclinical development of selected products in research programs as well as the exploratory research program in non-rare and/or non-monogenic, or large CNS indications, currently TLE.

In addition, the Company will fund discovery research conducted by Penn through August 3, 2026 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, the Company has the option to obtain exclusive licenses to, and to fund, certain research relating to the preclinical development of selected products in research programs in rare monogenic central nervous system, or CNS indications.

The Company has eight remaining options available to commence additional licensed programs for CNS indications until August 3, 2026.

The Penn Agreement includes an exploratory research program to identify targets and early product candidates in certain agreed upon non-monogenic, non-rare, or large, CNS indications.

The initial term of the exploratory research program is three years, or until August 2024, which term can be extended by mutual agreement.

During such term, we will have an exclusive right of first negotiation to include additional targets to the exploratory research program in the agreed upon large CNS indications.

Under the exploratory research program, the Company will have the right to further develop and commercialize any gene therapy product candidates specific for those selected targets that arise from the exploratory research programs by exercising one of its remaining eight options.

The Company currently does not have any active exploratory research programs.

If the Company were to exercise any of the remaining options, it would owe Penn a non-refundable aggregate fee of $ 1.0 million per product indication, with $ 0.5 million due upfront and another $ 0.5 million fee owed upon a further developmental milestone.

The Company also funds discovery research conducted by Penn through August 3, 2026 and will receive exclusive rights, subject to certain limitations, to platform 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 for the discovery research is $ 5.0 million annually, paid in quarterly increments of $ 1.3 million through June 2026.

The Penn Agreement includes an exploratory research program focused on discovering targets and novel gene therapy candidates for large CNS indications, currently focused on TLE, and can be expanded to other large CNS diseases upon mutual agreement.

The initial term of the exploratory research program is until August 2024, which term can be extended by mutual agreement.

During such term, the Company will have an exclusive right of first negotiation to include additional targets to the exploratory research program within the agreed upon large CNS indications.

Under the exploratory research program, the Company will have the right to further develop and commercialize any gene therapy product candidates specific for those selected targets within TLE (and any future large CNS diseases that are mutually agreed upon) that may arise from the exploratory research programs on substantially the same terms of the current Penn Agreement.

Under the Penn Agreement, the Company has eight remaining options available to commence additional licensed programs for CNS indications and has until August 3, 2026, to exercise these options.

If the Company were to exercise any of these options, it would owe Penn a non-refundable upfront fee of $ 1.0 million per product indication, with $ 0.5 million due upfront and another $ 0.5 million fee owed upon a further developmental milestone.

The Company has the obligation to fund certain research relating to the preclinical development of each licensed program.

The Penn Agreement requires that the Company make payments of up to (i) $ 16.5 million per product candidate for rare, monogenic disorders in the aggregate and (ii) $ 39.0 million per product candidate in the aggregate arising from the exploratory program for large CNS indications, currently for TLE.

Each payment will be due upon the achievement of specific development milestone events by such licensed product for a first indication, reduced development milestone payments for the second and third indications and no development milestone payments for subsequent indications.

In addition, on a product-by-product basis, the Company is obligated to make up to $ 55.0 million in sales milestone payments on each licensed product based on annual sales of the licensed product in excess of defined thresholds.

Passage Bio, Inc.

Notes to Financial Statements (cont.)

Upon successful commercialization of a product using the licensed technology, the Company is obligated to pay to Penn, on a licensed product-by-licensed product and country-by-country basis, tiered royalties (subject to customary reductions) in the mid-single digits on annual worldwide net sales of such licensed product.

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In addition, the Company will pay a tiered transaction fee of 1 - 2 % of the net proceeds upon certain change of control events.

During the year ended December 31, 2022, the Company made payments under the Penn Agreement of $ 3.0 million related to the achievement of development milestones for dosing our first patients in PBFT02 for the treatment of FTD and PBKR03 for the treatment of Krabbe disease, which were recognized as in-process research and development expense .

During the year ended December 31, 2021, the Company made payments under the Penn Agreement of $ 1.5 million related to the achievement of a development milestone, $ 1.5 million related to option exercises under the Penn Agreement, and a $ 5.0 million payment related to the August 2021 amendment, which were recognized as in-process research and development expense.

During the year ended December 31, 2023, the Company did not make any payments for acquired in-process research and development.

During the year ended December 31, 2022, the Company made payments under the Penn Agreement for acquired in-process research and development of $ 3.0 million related to the achievement of a development milestone.

Passage Bio, Inc.

Notes to Financial Statements (cont.)

Catalent Agreements

In June 2019, the Company entered into a collaboration agreement, or the Collaboration Agreement, with Catalent.

As part of the Collaboration Agreement, the Company will pay an annual fee for five years ending in 2025 for the use of the Clean Room Suite.

In June 2019, the Company entered into a collaboration agreement, or the Collaboration Agreement, with Catalent Maryland, a unit of Catalent, Inc., or Catalent.

As part of the Collaboration Agreement, the Company was required to pay an annual fee for five years ending in 2025 for the exclusive use of a dedicated clean room suite, or the Clean Room Suite.

In April 2020, the Company entered into a development services and clinical supply agreement, or 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.

The Manufacturing and Supply Agreement confirms the terms contemplated by the Collaboration Agreement.

The Collaboration Agreement continues to be in effect pursuant to its terms.

Under the terms of the Manufacturing and Supply Agreement, Catalent has agreed to manufacture batches of drug product for the Company’s gene therapy product candidates at the Clean Room Suite at a Catalent facility provided for in the Collaboration Agreement.

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 Manufacturing and Supply Agreement also includes minimum annual purchase commitments.

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.

For the years ended December 31, 2022 and 2021, the Company paid amounts in excess of the minimum commitment.

Employment Agreements

The Company has entered into employment agreements with key personnel providing for compensation and, in certain circumstances, severance and acceleration of vesting in stock-based compensation awards, as described in the respective employment agreements.

Under the terms of the Manufacturing and Supply Agreement, Catalent agreed to manufacture batches of drug product for the Company’s gene therapy product candidates at the Clean Room Suite at a Catalent facility provided for in the Collaboration Agreement.

The Manufacturing and Supply Agreement provided for a term of five years .

The Manufacturing and Supply Agreement also included minimum annual purchase commitments.

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

On March 31, 2023, the Company entered into certain letter agreements, the Letter Agreements, amending each of (i) the Collaboration Agreement and (ii) the Manufacturing and Supply Agreement, together with the Collaboration Agreement, the Original Catalent Agreements.

On November 9, 2023, to supersede and implement the terms of the Letter Agreements, the Company entered into an amended and restated collaboration agreement and an amended and restated manufacturing and supply agreement, together the Amended Catalent Agreements.

The Amended Catalent Agreements eliminate the minimum annual purchase obligation and the obligation to pay an annual fee for use of the Clean Room Suite, thereby eliminating the annual minimum commitment of $ 10.6 million per year owed to Catalent through November 2025 under the Original Catalent Agreements.

In consideration of this, the Company has an obligation to make aggregate payments to Catalent of $ 6.0 million between June 30, 2023 and May 1, 2024.

The Amended Catalent Agreements extend the term of the Original Catalent Agreements until November 6, 2030, and establish a limited exclusive relationship between the Company and Catalent for the manufacture of bulk drug substance and drug product for the Company’s adeno-associated virus delivery therapeutic product candidates for the treatment of FTD and GM1.

The limited exclusive relationship under the Amended Catalent Agreements converts to a non-exclusive relationship (i) in the event Catalent fails to meet certain performance standards and (ii) following certain conditional events related to the divestiture by the Company of either FTD or GM1, in which case, if such events occur, the Company would pay Catalent certain fees.

In addition, in the event of certain transactions, the Company may terminate the Amended Catalent Agreements for convenience with respect to such products, in which case, the Company would pay to Catalent a certain termination fee.

Immediately prior to the execution of the Letter Agreements, the Company had a $ 5.3 million prepaid asset related to upfront payments made to secure the Clean Room Suite.

In connection with the Letter Agreements, the Company no longer has exclusive access to the Clean Room Suite at Catalent and, as a result, the Company recognized an expense of $ 5.3 million related to the elimination of the prepaid asset during the year ended December 31, 2023.

The Company classified the $ 11.3 million of expenses, which comprises of $ 6.0 million in aggregate payments due to Catalent and the $ 5.3 million elimination of the prepaid asset, as general and administrative expense within the statement of operations for the year ended December 31, 2023, as both amounts do not directly relate to the future advancement of the Company’s research and development programs.

Passage Bio, Inc.

Notes to Financial Statements (cont.)

In January 2021, the Company closed a follow-on public offering in which the Company issued and sold 8,050,000 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 $ 22.00 per share for net proceeds of $ 165.8 million after deducting underwriting discounts, commissions and other offering expenses.

On March 5, 2021, the Company entered into a Sales Agreement, or the Sales Agreement, with Cowen and Company, LLC, or Cowen, pursuant to which the Company may, but are not obligated to, offer and sell, from time to time, shares of the Company’s common stock with an aggregate offering price up to $ 125.0 million through Cowen, as sales agent.

As of December 31, 2023, the Company made payments of $ 4.0 million under the Amended Catalent Agreements.

The remaining $ 2.0 million of aggregate payments due to Catalent under the Amended Catalent Agreements are included in accrued expenses and other current liabilities.

In the normal course of business, the Company from time to time is named as a party to legal claims and actions.

The Company records a loss contingency reserve for a legal proceeding when the potential loss is considered probable and can be reasonably estimated.

The Company has not recorded any amounts for loss contingencies as of December 31, 2023.

The Company is currently a defendant in litigation with a former employee in the Court of Common Pleas of Philadelphia County (Commerce Division), or the Court, relating to a claim of breach of contract and violation of the Pennsylvania Wage Payment and Collection Law.

The plaintiff claims that, pursuant to an alleged settlement agreement reached on February 3, 2020, the Company agreed to issue plaintiff 150,000 shares of its common stock and that such shares would not be subject to the reverse stock split implemented by the Company in connection with its initial public offering on February 14, 2020.

The plaintiff’s claim is for an amount in the mid-single digit millions of dollars.

The Company disagrees with the allegations that there was ever a binding settlement agreement or that any shares would not be subject to the reverse stock split, and the Company believes the plaintiff’s claim is without merit.

In October 2023, the Court denied both the Company’s and the plaintiff’s motions for summary judgement and therefore the Company anticipates that this matter will go to trial in 2024.

The Company intends to vigorously defend against these claims, and believes it has strong arguments to prevail in the litigation.

There can be no assurance that the Company will prevail on its claims.

Employment Agreements

The Company has entered into employment agreements with certain key personnel providing for up to 18 months of salary continuation, up to 150 % of target annual bonus amounts, and acceleration of vesting in stock-based compensation awards in certain circumstances.

On March 5, 2021, the Company entered into a Sales Agreement, or the Sales Agreement, with Cowen and Company, LLC, or Cowen, pursuant to which the Company may, but is not obligated to, offer and sell, from time to time, shares of the Company’s common stock with an aggregate offering price up to $ 125.0 million through Cowen, as sales agent.

No sales of common stock have been made pursuant to this Sales Agreement to date.

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The total number of shares authorized under the Incentive Plan as of December 31, 2023 was 13,101,661 .

Additionally, any awards previously issued under our 2018 Plan which were forfeited become available for issuance under the Incentive Plan.

As of December 31, 2022, 3,880,210 shares were available for future grants under our Incentive Plan.

The number of shares of the Company’s common stock that may be issued pursuant to rights granted under the Incentive Plan shall automatically increase on January 1st of each year, commencing on January 1, 2021 and continue 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.

Additionally, 3,635,337 shares previously issued under the 2018 Plan which were forfeited are available for issuance under the Incentive Plan.

As of December 31, 2023, 8,666,526 shares were available for future grants under the Incentive Plan.

Passage Bio, Inc.

Notes to Financial Statements (cont.)

on December 31st of the preceding calendar year, subject to the discretion of the board of directors to determine a lesser number of shares shall be added for such year.

As a result, the number of shares reserved for issuance under the Incentive Plan increased by 2,747,206 and 2,730,735 shares in January 2024 and 2023, respectively.

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The Company’s restricted stock units awarded to date under the Inducement Plan vest based on requisite service period and have a term based on each award agreement.

Passage Bio, Inc.

Notes to Financial Statements (cont.)

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.

4 unchanged sentences

General and administrative

During the year ended December 31, 2022, the Company modified certain awards and recognized $ 0.4 million related to the modifications, all of which was recognized in general & administrative expense.

The terms of such modifications included, on an awards-by-award basis, acceleration of the vesting period and extensions of the post-employment period to exercise.

During the year ended December 31, 2021, the Company modified certain awards and recognized $ 7.4 million related to the modifications, $ 6.1 million of which was recognized in research and development expense and $ 1.3 million was recognized in general and administrative expense.

The terms of such modifications included, on an awards-by-award basis, acceleration of the vesting period and extensions of the post-employment period to exercise.

The following table summarizes stock option activity for the year ended December 31, 2023:

2 unchanged sentences

( 3,157,751 )

( 2,372,713 )

Outstanding at December 31, 2023

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The weighted-average grant date fair value of options granted was $ 0.81 and $ 2.33 for the years ended December 31, 2023 and 2022, respectively.

The aggregate intrinsic value of options exercised was $ 0.2 and $ 1.3 million and during the year ended December 31, 2022 and 2021, respectively.

The aggregate intrinsic value of options outstanding as of December 31, 2022 was $ 0.1 million and the aggregate intrinsic value of options exercisable as of December 31, 2022 was de minimus.

As of December 31, 2023, the total unrecognized compensation expense related to unvested stock option awards was $ 8.4 million, which the Company expects to recognize over a weighted-average period of 1.7 years.

The 2018 Plan and 2020 Plan provide certain holders of stock options an election to early exercise prior to vesting.

The Company has the right to repurchase early exercised options without transferring any appreciation in the value of the underlying shares to the employee if the employee terminates employment before the end of the original vesting period.

Passage Bio, Inc.

Notes to Financial Statements (cont.)

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

As of December 31, 2022, 113,932 options to purchase common stock are unvested, but exercisable, under early exercise provisions.

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

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Of this amount, 1,478,155 were available for future grants as of December 31, 2023.

The number of shares of the Company’s common stock that may be issued pursuant to rights granted under the ESPP shall automatically increase on January 1st of each year and continuing for ten years , in an amount equal to one 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.

As a result, on January 1, 2023, the number of shares reserved for issuance under the ESPP increased by 546,147 shares, resulting in a total of 1,981,766 shares authorized for issuance.

The number of shares of the Company’s common stock that may be issued pursuant to rights granted under the ESPP shall automatically increase on January 1st of each year and continuing for ten years , in an amount equal to one 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 to determine a lesser number of shares shall be added for such year.

As a result, on January 1, 2024, subject to the discretion of the board of directors, the shares authorized for issuance under the ESPP was not increased.

Under the ESPP, eligible employees can purchase the Company’s common stock through accumulated payroll deductions at such times as are established by the Compensation Committee.

Eligible employees may purchase the Company’s common stock at 85 % of the lower of the fair market value of the Company’s common stock on the first day of the offering period or on the last day of the offering period.

The offering periods under the ESPP have a duration of

Passage Bio, Inc.

Notes to Financial Statements (cont.)

six months, with periods ending in May and November of each calendar year.

The offering periods under the ESPP have a duration of six months, with periods ending in May and November of each calendar year.

Eligible employees may contribute up to 15 % of their eligible compensation.

Under the ESPP, a participant may not accrue rights to purchase more than $ 25,000 worth of the Company’s common stock for each calendar year in which such right is outstanding or purchase more than 4,000 shares of the Company’s common stock in any single offering period.

Passage Bio, Inc.

Notes to Financial Statements (cont.)

In accordance with the guidance in ASC 718-50, Compensation – Stock Compensation , the ability to purchase shares of the Company’s common stock at 85 % of the lower of the price on the first day of the offering period or the last day of the offering period (i.e.

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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 $ 0.2 million and $ 0.4 million during the years ended December 31, 2022 and 2021, respectively, related to the ESPP.

The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and liabilities were as follows:

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Deferred tax liabilities:

Right of use assets - operating leases (deferred rent for December 31, 2021)

Right of use assets - operating leases

Total deferred tax liabilities

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The valuation allowance increased by $ 20.9 million and $ 44.8 million during the years ended December 31, 2023 and 2022, respectively.

Passage Bio, Inc.

Notes to Financial Statements (cont.)

A reconciliation of the federal income tax rate to the Company’s effective tax rate is as follows:

1 unchanged sentence

State tax, net of federal benefit

Change in state tax rates

Permanent differences

1 unchanged sentence

Change in valuation allowance

Passage Bio, Inc.

Notes to Financial Statements (cont.)

The following table summarizes carryforwards of federal, state and local net operating losses, or NOL, and research and development and orphan drug tax credits:

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For local income tax purposes related to the city of Philadelphia, NOL carryforwards begin expiring in 2024, and expire through 2043.

NOL carryforwards generated prior to 2023 expire after 3 years, whereas NOL carryforwards generated in 2023 expire after 20 years.

As of December 31, 2022, the Company also had federal research and development and orphan drug tax credit carryforwards of $ 32.1 million that will begin to expire in 2038, unless previously utilized.

NOL carryforwards generated prior to 2022 expire after three years, whereas NOL carryforwards generated in 2022 and after expire after 20 years.

As of December 31, 2023, the Company also had $ 10.9 million of federal research and development and $ 34.5 million orphan drug tax credit carryforwards that will begin to expire in 2038 and 2040, respectively, unless previously utilized.

The NOL and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities.

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The NOL and tax credit carryforwards remain subject to review until utilized.

Passage Bio, Inc.

Notes to Financial Statements (cont.)

Subsequent Events

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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-K

Item 8. Financial Statements and Supplementary Data