What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2025-03-04 compared with 2024-03-04 · 287 added, 151 removed, 525 unchanged (45% of the section changed)

48 unchanged sentences

Accrued expenses and other current liabilities

Non-refundable sublicense and transition services payments received

Operating lease liabilities

22 unchanged sentences

Research and development

Acquired in‑process research and development

General and administrative

27 unchanged sentences

Balance at January 1, 2024

Issuance of common stock under the ATM Facility, net of offering costs

Exercise of stock options and vesting of restricted stock units

14 unchanged sentences

Impairment of long-lived assets

Acquired in‑process research and development

Changes in operating assets and liabilities:

1 unchanged sentence

Prepaid research and development

Non-refundable sublicense and transition services payments received

Right of use assets and operating lease liabilities

Accounts payable

Accrued expenses and other current and noncurrent liabilities

Accrued expenses and other current liabilities

Net cash provided by (used in) operating activities

3 unchanged sentences

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 under the ATM Facility, net of offering costs

Proceeds from the exercise of stock options

Proceeds from the issuance of common stock under employee stock purchase plan

Payments for insurance premium financing

Net cash provided by (used in) financing activities

5 unchanged sentences

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

Right of use assets recognized upon the adoption of Topic 842

Operating lease liabilities recognized upon the adoption of Topic 842

Right of use assets recognized upon the commencement of sublease

Operating lease liabilities recognized upon the commencement of sublease

See accompanying notes to financial statements.

3 unchanged sentences

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.

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.

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

The Company’s lead clinical product candidate is 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

2 unchanged sentences

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

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.

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

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

2 unchanged sentences

Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize revenue from product sales.

On March 5, 2021, the Company entered into a Sales Agreement, or the Sales Agreement, with Cowen and Company, LLC, or Cowen, relating to the applicable terms of at-the-market equity offerings, or the ATM Facility, pursuant to which the Company may, but is not obligated to, offer and sell, from time to time, shares of its common stock with an aggregate offering price up to $ 125.0 million through Cowen, as sales agent in the ATM Facility.

The Company issued 6,000,000 shares of common stock under the ATM Facility, resulting in net proceeds of $ 8.7 million, after deducting offering costs of $ 0.3 million in March 2024.

As a result of the Company’s public float as of January 6, 2025, the Company is currently limited to $ 15.8 million in its capacity to offer and sell shares of its common stock under the Sales Agreement pursuant to its shelf registration statement on Form S-3, filed on March 4, 2024.

The Company plans to seek additional funding through public or private equity offerings, debt financings, other collaborations, strategic alliances and licensing arrangements.

2 unchanged sentences

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 accordance with Accounting Standards Update, or ASU, No.

In accordance with the Financial Accounting Standards Board’s, or FASB, 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 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.

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 12 months from the issuance date of these financial statements.

Passage Bio, Inc.

3 unchanged sentences

The accompanying financial statements have been prepared in accordance with generally accepted accounting principles in the United States, or GAAP.

Any reference in these notes to applicable guidance is meant to refer to GAAP as found in the Accounting Standards Codification, or ASC, and Accounting Standards Updates promulgated by the Financial Accounting Standards Board, or FASB.

Any reference in these notes to applicable guidance is meant to refer to GAAP as found in the Accounting Standards Codification, or ASC, and ASU promulgated by the Financial Accounting Standards Board, or FASB.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and contingent liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period.

Actual results could differ from those estimates.

3 unchanged sentences

Concentration of Credit Risk

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

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

4 unchanged sentences

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

Segment Information

Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance.

The Company views its operations and manages its business in one segment.

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

Cash equivalents as of December 31, 2024 consisted of various securities described in Note 4.

Cash consists of cash deposits at banking institutions.

Passage Bio, Inc.

Notes to Financial Statements (cont.)

Marketable Securities

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.

The Company classifies its marketable securities with original maturities of greater than three months as available-for-sale.

Marketable securities as of December 31, 2024, consisted of various securities as described in Note 4.

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.

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.

Passage Bio, Inc.

Notes to Financial Statements (cont.)

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.

1 unchanged sentence

Property and Equipment, Net

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

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

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

2 unchanged sentences

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.

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

The Company did no t recognize any losses on disposals of property and equipment for the year ended December 31, 2024.

The Company recognized losses on disposals of property and equipment of $ 0.5 million within research and development expenses in the year ended December 31, 2023.

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.

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 recognized impairment expenses for property and equipment of $ 2.7 million and $ 3.2 million in the years ended December 31, 2024 and 2023, respectively.

These impairment expenses primarily relate to the proportional allocation of total impairments recognized for the asset groups subject to impairment testing 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.

2 unchanged sentences

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

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

The Company recognized impairment expenses for ROU assets of $ 2.5 million and $ 2.2 million in the years ended December 31, 2024 and 2023, respectively.

These impairment expenses include the proportional allocation of total impairments recognized for the asset groups subject to impairment testing as further described in Note 9.

Research and Development

Research and development costs are expensed as incurred and consist primarily of expenses incurred with the University of Pennsylvania’s Gene Therapy Program, or GTP, and Gemma Biotherapeutics, Inc., or Gemma, 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

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.

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, 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.

Other Income (Expense), Net

Other income (expense), net consists of interest earned on cash equivalents and marketable securities, amortization of premium and discount on marketable securities, income from subleases, and the sale of certain tax credits.

The Company recorded $ 5.6 million to other income (expense), net for the year ended December 31, 2024, which consisted of $ 4.3 million attributable to interest income and the amortization of premium and discount on the Company’s marketable securities, $ 1.0 million from sublease income, and $ 0.3 million 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.

Share-Based Compensation

10 unchanged sentences

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 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.

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.

Acquired In-Process Research and Development

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 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.

License and Other Revenue

The Company may enter into license agreements and transition services agreements (see Note 8) under which it may license rights to research, develop, manufacture, and commercialize its product candidates to third parties, and provide

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 $ 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).

transition services for such licenses.

Payments under these arrangements may include non-refundable, upfront fees, reimbursement of certain costs, payments upon the achievement of certain milestones, and royalties on product sales.

The Company applies FASB ASC Topic 606, Revenue from Contracts with Customers , or ASC 606, when all of the following criteria are met, to determine a valid contract exists:

(i) the parties have approved the contract and are committed to perform their respective obligations;

(ii) the Company can identify each party’s rights regarding the goods or services to be transferred;

(iii) the Company can identify the payment terms for the goods or services to be transferred;

(iv) the contract has commercial substance;

and (v) the Company will collect substantially all of the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer.

Once it is determined that a valid contract exists, the Company performs the following steps:

(i) identification of the promised goods or services in the contract;

(ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract;

(iii) measurement of the transaction price, including consideration of the constraint on variable consideration;

(iv) allocation of the transaction price to the performance obligations on a relative stand-alone selling price basis;

and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.

As part of the accounting for these arrangements, the Company must use its judgment to determine the number of performance obligations, the transaction price, the stand-alone selling price for each performance obligation identified in the contract for the allocation of transaction price, the contract term and pattern of satisfaction of the performance obligations.

The Company uses judgment to determine whether milestones or other variable consideration, except for certain sales-based milestone payments and royalties, should be included in the transaction price as described further below.

At the inception of each arrangement that includes milestone payments, the Company evaluates whether the milestones are considered probable of being achieved and estimates the amount to be included in the transaction price using the most likely amount method set forth in ASC 606.

If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price.

Milestone payments that are not within the control of the Company or the licensee, such as those subject to regulatory approvals, are not considered probable of being achieved until those approvals are received.

The Company evaluates factors such as the scientific, clinical, regulatory, commercial and other risks that must be overcome to achieve the particular milestone in making this assessment.

There is considerable judgment involved in determining whether it is probable that a significant revenue reversal would not occur.

At the end of each subsequent reporting period, the Company reevaluates the probability of achievement of all milestones subject to constraint and, if necessary, adjusts its estimate of the overall transaction price.

Any such adjustments are recorded on a cumulative catch-up basis in the statements of operations in the period of adjustment.

For customer contracts in the scope of ASC 606, amounts due to the Company are recorded as accounts receivable on the Company’s balance sheet when the Company’s right to consideration is unconditional.

Amounts received prior to satisfying the related performance obligations are classified on the Company’s balance sheet as current deferred revenue if expected to be recognized as revenue within 12 months following the balance sheet date and as deferred revenue, net of current portion, if amounts are not expected to be recognized as revenue within the 12 months following the balance sheet date.

The Company does not evaluate a contract for a significant financing component if payment is expected within one year or less from the transfer of promised items to the customer.

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

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards.

2 unchanged sentences

Under ASC 740, a valuation allowance is required when it is more likely than not all or some portion of the deferred tax assets will not be realized through generating sufficient future taxable income.

FASB ASC Subtopic 740-10, Accounting for Uncertainty of Income Taxes , (ASC 740-10) defines the criterion an individual tax position must meet for any part of the benefit of the tax position to be recognized in financial statements prepared in conformity with GAAP.

Passage Bio, Inc.

Notes to Financial Statements (cont.)

FASB ASC Subtopic 740-10, Accounting for Uncertainty of Income Taxes , or ASC 740-10, defines the criterion an individual tax position must meet for any part of the benefit of the tax position to be recognized in financial statements prepared in conformity with GAAP.

The Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not such tax position will be sustained on examination by the taxing authorities, based solely on the technical merits of the respective tax position.

5 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 Financial Statements (cont.)

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:

3 unchanged sentences

Employee stock purchase plan

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU No.

2016-13, Financial Instruments-Credit Losses:

Measurement of Credit Losses on Financial Instruments , or 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 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.

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2023, the FASB issued ASU No.

3 unchanged sentences

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.

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

In November 2024, the FASB issued ASU No.

2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40), or ASU 2024-03:

Disaggregation of Income Statement Expenses , or ASU 2024-03, which requires entities to provide disclosures to disaggregate operating expenses into specific categories, such as salaries and wages, depreciation, and amortization, to provide enhanced transparency into the nature and function of expenses.

ASU 2024-03 is effective for the Company’s first fiscal year beginning after December 15, 2026, and for interim periods within the Company’s first fiscal year beginning after December 15, 2027, with early adoption permitted.

ASU 2024-03 may be applied retrospectively or prospectively.

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

Recently Adopted Accounting Pronouncements

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

Passage Bio, Inc.

Notes to Financial Statements (cont.)

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 Company adopted the new accounting pronouncement for the year beginning on January 1, 2024.

See “Note 14 - Segment Reporting” for additional disclosures.

Cash, Cash Equivalents and Marketable Securities

8 unchanged sentences

Commercial paper

Corporate debt securities

December 31, 2023:

2 unchanged sentences

Commercial paper

Corporate debt securities

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

8 unchanged sentences

government securities

government agency securities

December 31, 2023:

3 unchanged sentences

government securities

government agency securities

Passage Bio, Inc.

Notes to Financial Statements (cont.)

The contractual maturities of the Company’s marketable securities as of December 31, 2024, are as follows:

27 unchanged sentences

Commercial paper

Corporate debt securities

Total cash equivalents

4 unchanged sentences

government securities

government agency securities

Total marketable securities

4 unchanged sentences

Commercial paper

Corporate debt securities

Total cash equivalents

4 unchanged sentences

government securities

government agency securities

Total marketable securities

6 unchanged sentences

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 following long-lived assets were measured at fair value, on a nonrecurring basis, during the years ended December 31, 2024 and 2023.

Assets remeasured in 2023 are not included in the fair values presented as of December 31, 2024.

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

Fair Value Measurements as of December 31, 2024 of assets remeasured during 2024

Year ended December 31, 2024

(in thousands)

2 unchanged sentences

Right of use assets

Fair Value Measurements as of December 31, 2023 of assets remeasured during 2023

Year ended December 31, 2023

(in thousands)

Impairment Losses

Property and equipment, net

Right of use assets

Property and Equipment, Net

Property and equipment, net, consist of the following:

10 unchanged sentences

Accumulated depreciation and amortization

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

Depreciation and amortization expense was $ 3.1 million and $ 3.7 million for the years ended December 31, 2024 and 2023, respectively.

Passage Bio, Inc.

Notes to Financial Statements (cont.)

Accrued Expenses and Other Current Liabilities

6 unchanged sentences

Research and development

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.

In connection with these announcements, the Company reduced headcount by approximately 13 % and 23 % in March 2022 and November 2022, respectively.

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

Gemma License Agreement

On July 31, 2024, the Company entered into a series of sublicense agreements with Gemma in connection with the outlicense of PBGM01 for the treatment of GM1 gangliosidosis, or GM1, PBKR03 for the treatment of Krabbe disease, and PBML04 for the treatment of metachromatic leukodystrophy, or MLD, collectively the Outlicensed Programs, and such agreements, the Gemma Sublicenses.

Pursuant to the Gemma Sublicenses, the Company is entitled to receive (i) initial payments of $ 10.0 million for licenses and clinical product supply, $ 5.0 million of which was received in the three months ended September 30, 2024, and $ 5.0 million of which is due in December 2024;

(ii) up to an additional $ 10.0 million contingent on the completion by Gemma of certain business milestones;

(iii) up to an additional $ 114.0 million in development and commercial milestone payments;

and (iv) single digit royalties as a percentage of annual worldwide net sales, in exchange for sublicenses to relevant intellectual property, transfer of regulatory dossiers and transfer of clinical trial materials and product supply related to the Outlicensed Programs.

Gemma will be responsible for all payments due to the Trustees of the University of Pennsylvania, or Penn, under the Company’s research, collaboration and licensing agreement with Penn, or the Penn License Agreement, related to the Outlicensed Programs.

On July 31, 2024 the Company also entered into a transition, services agreement with Gemma, or the Transition Services Agreement, as amended by the First Amendment to the Transition Services Agreement, dated January 31, 2025, pursuant to which, the Company will provide transitional services at cost to Gemma through May 31, 2025, unless terminated earlier, and be entitled to reimbursement for transitional services performed retroactively from March 1, 2024, related to the transfer of the Outlicensed Programs.

As of December 31, 2024, the Company has collected $ 5.0 million in initial payments and $ 3.2 million in transition services payments under these agreements.

As Gemma is a newly-formed company with a limited history of operations, the Company will not recognize revenue under ASC 606 until the Company either (i) has received payment and there are no remaining obligations to transfer goods and services under the Gemma Sublicenses and Transition Services Agreement (as payments received by Gemma are nonrefundable), or (ii) concludes that substantially all of the transaction price is collectible.

As of December 31, 2024, the Company has received an initial payment of $ 5.0 million associated with the aggregate $ 10.0 million of payments to be made under the Gemma Sublicenses for licenses and clinical product supply and $ 3.2 million associated with the Transition Services Agreement.

The Company recorded the $ 8.2 million received as non-refundable sublicense and transition services payments received on the balance sheet as of December 31, 2024, as the criteria set forth above has not yet been met.

2005 Market Street Lease Agreement

2 unchanged sentences

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 extend the term of the 2005 Market Street Lease Agreement by two

Passage Bio, Inc.

Notes to Financial Statements (cont.)

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.

The optional extension and termination terms were not recognized as part of the Company’s measurement of the ROU asset and operating lease liability as of December 31, 2024.

During 2023 the Company subleased all of the space at 2005 Market Street as further described in Sublease Agreement A and Sublease Agreement B below.

Sublease Agreement A

2 unchanged sentences

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.

The base sublease rent is $ 0.1 million per year 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.

Pursuant to ASC Topic 842, Leases , or 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.

As a result of Sublease Agreement A, in 2023 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 ROU 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.)

The impairment charge was recorded as of the sublease execution date.

Sublease Agreement B

2 unchanged sentences

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.

The base sublease rent is $ 0.9 million per year 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.

2 unchanged sentences

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.

As a result of Sublease Agreement B, in 2023 the Company determined an impairment indicator was present.

Passage Bio, Inc.

Notes to Financial Statements (cont.)

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.

The impairment charge was recorded as of the sublease execution date.

1835 Market Street Sublease Agreement

On February 20, 2024, the Company entered into a sublease agreement with a counterparty, or the 1835 Market Street Sublease Agreement.

Under the 1835 Market Street Sublease Agreement, the Company subleased approximately 16,000 square feet of office space in Philadelphia, Pennsylvania.

The sublease term began on March 26, 2024 and expires on September 30, 2025.

The Company has the option to extend the term of the sublease agreement through February 28, 2029.

The base sublease rent is $ 0.3 million per year for the original 18-month term of the sublease.

Additionally, the Company is required to pay utility costs associated with the subleased premises.

The optional extension was not recognized as part of the Company’s measurement of the ROU asset and operating lease liability as of December 31, 2024.

Laboratory Lease Agreement

4 unchanged sentences

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, 2024.

Hopewell Sublease Agreement

On September 4, 2024, the Company entered into a sublease agreement with a counterparty, or Sublessee C, to sublease approximately 3,200 square feet, or 5 % of its approximately 62,000 square feet of leased laboratory space under the Laboratory Lease Agreement, or Hopewell Sublease Agreement.

This sublease term began on September 11, 2024 and expires on December 31, 2029.

Sublessee C has the option to extend the term of the sublease through December 2032.

The base sublease rent is $ 0.1 million per year and increases by 2.5 % annually through the expiration of the Hopewell Sublease Agreement.

Additionally, Sublessee C is required to pay the portion of the common area maintenance expenses, operating expenses, and use and occupancy taxes that the Company is required to pay under the Laboratory 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 Laboratory Lease Agreement.

The Company continues to account for the Laboratory Lease Agreement as a lessee and in the same manner as prior to the execution of the Hopewell Sublease Agreement.

The Company accounted for the Hopewell Sublease Agreement 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 actions in connection with previous announcements in (i) July of 2023, for an organizational redesign, and (ii) August of 2024, for the outlicense of PBGM01 for the treatment of GM1 gangliosidosis, PBKR03 for the treatment of Krabbe disease, and PBML04 for the treatment of metachromatic leukodystrophy, and the execution of the Hopewell Sublease Agreement, the Company determined triggering events were present, primarily related to changes in how underlying assets were being used in operations.

As a result, the Company reassessed the asset groups related to its laboratory space under the Laboratory Lease Agreement, which resulted in changes to the Company’s identified asset groups.

The Company determined whether an impairment indicator was present for each of the new asset groups.

Where an impairment indicator was present, the Company compared the estimated undiscounted cash flows to the carrying

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:

value, which includes ROU assets, leasehold improvements, and other property and equipment allocable to the laboratory space for those asset groups.

The Company concluded the carrying values of certain asset groups were not recoverable as it exceeded the estimated undiscounted cash flows.

The Company calculated the amount of impairment on those asset groups 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 the Hopewell Sublease Agreement, including an estimate for cash flows in the residual period, and an estimated borrowing rate of a market participant subtenant.

As a result, certain asset groups were impaired and the Company recognized impairment expense of $ 4.8 million, including $ 2.5 million for the ROU assets and $ 2.3 million for the property and equipment during the year ended December 31, 2024.

The following table summarizes future minimum lease payments for the Company’s lessee operating leases, which comprises of the 2005 Market Street Lease Agreement, 1835 Market Street Sublease Agreement, and the Laboratory Lease Agreement.

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

(in thousands)

17 unchanged sentences

Notes to Financial Statements (cont.)

The following table summarizes sublease income that was recognized in other income (expense), net during the years ended December 31, 2024 and 2023:

($ in thousands)

December 31, 2024

December 31, 2023

Sublease rental income

Commitments and Contingencies

Amended and Restated Research, Collaboration and License Arrangement with Penn

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 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 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.

In connection with the transfer of the Outlicensed Programs (GM1, Krabbe, and MLD), the Company restructured its research, collaboration and license agreement with Penn, as amended, previously the Penn Agreement and now referred to as the Penn License Agreement.

Pursuant to the Penn License Agreement, as of July 31, 2024, the Company (i) terminated the funding of discovery research programs;

(ii) terminated the research and exploratory research programs;

(iii) terminated the remaining eight options it had for future central nervous system, or CNS, indications;

(iv) terminated the transaction fee payable to Penn in the event of certain corporate transactions;

and (v) retained its current exclusive and non-exclusive licenses to its programs in FTD, GM1, Krabbe and MLD and certain platform technologies resulting from the discovery programs that it funded.

For the Company’s licensed programs in FTD, GM1, Krabbe and MLD, the Penn License Agreement requires that it make payments of up to $ 16.5 million per product candidate.

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.

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.

In addition, the Company is obligated to pay to Penn a percentage of sublicensing income, ranging from the mid-single digits to low double digits, for sublicenses under the Penn Agreement.

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 worldwide net sales of the licensed product in excess of defined thresholds.

Pursuant to the Gemma Sublicenses, Gemma is responsible for the payments to Penn related to the Outlicensed Programs.

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 percentage on annual worldwide net sales of such licensed product.

In addition, other than the Gemma Sublicenses, the Company is obligated to pay to Penn a percentage of sublicensing income, ranging from the mid-single digits to low double digits, for sublicenses under the Penn License Agreement.

The agreement will expire on a licensed product-by-licensed product and country-by-country basis upon the later of (i) the expiration of the last valid claim of the licensed patent rights that covers the exploitation of such licensed product in such country, and (ii) the expiration of the royalty period.

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, 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.

Pursuant to the Gemma Sublicenses, Gemma is responsible for the payments to Penn related to the Outlicensed Programs.

Gemma - Research, Collaboration and License Agreement

In connection with the transfer of the Outlicensed Programs, on July 31, 2024, the Company entered into a research, collaboration and license agreement with Gemma, or the Gemma Collaboration Agreement.

Pursuant to the Gemma Collaboration Agreement, (i) Gemma will conduct certain preclinical and IND-enabling work for the Company’s active research program in Huntington’s disease and a currently paused research program in Temporal Lobe Epilepsy, or TLE, which were previously being conducted by Penn under the Penn Agreement and (ii) Gemma will grant the Company options to conduct mutually-agreed research programs in four new CNS indications.

The Gemma Collaboration Agreement requires the Company to make payments of up to (i) $ 16.5 million per product candidate in the aggregate for Huntington’s disease and any future CNS indications available to the Company under its four options and (ii) $ 39.0 million per product candidate in the aggregate arising from the research program for TLE.

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 Gemma, on a licensed product-by-licensed product and country-by-country basis, tiered royalties (subject to customary reductions) in the mid-single digits percentage on annual worldwide net sales of such licensed product.

In addition, the Company is obligated to pay to Gemma a percentage of sublicensing income, ranging from the mid-single digits to low double digits, for sublicenses under the Gemma Collaboration Agreement.

If the Company was to exercise any of the four options under the Gemma Collaboration Agreement, it would owe Gemma 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 has also entered into the Gemma Sublicenses and Transition Services Agreement as described in Note 8.

The Gemma Sublicenses, the Transition Services Agreement, and the Gemma Collaboration Agreement are collectively referred to as the Outlicense Transaction Agreements.

Catalent Agreements

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

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

acquired by Novo Holdings A/S, 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.

3 unchanged sentences

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.

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 November 2020 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.

Passage Bio, Inc.

Notes to Financial Statements (cont.)

year owed to Catalent through November 2025 under the Original Catalent Agreements.

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

As of December 31, 2024, the Company has made all payments related to this obligation under the Amended Catalent Agreements.

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.

The outlicense of GM1 to Gemma under the Outlicense Transaction Agreements, and subsequent business decisions implemented by Gemma in their sole discretion, could be considered an event related to the divesture of GM1 under the Amended Catalent Agreements and require us to make payment of certain fees to Catalent, which fees are immaterial.

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.

1 unchanged sentence

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.)

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.

The Company has no t recorded any amounts for loss contingencies as of December 31, 2024.

The Company is a defendant in litigation with a former employee, who filed a lawsuit in the Court of Common Pleas of Philadelphia County asserting claims for breach of contract and violation of the Pennsylvania Wage Payment and Collection Law.

The plaintiff, who was terminated from his employment in 2019, contended that the Company entered into a binding settlement agreement in February 2020 under which he was to receive shares of company stock and additional compensation.

Specifically, he contended that before the announcement of the Company’s initial public offering in February 2020, he was promised 150,000 shares of stock as part of the settlement, and that those shares were not subject to the reverse stock split that was implemented for all shareholders.

The Company responded that the shares offered in settlement negotiations in 2020 were to be subject to the reverse split, and that had the settlement been finalized, the plaintiff would have been entitled to 33,836 shares.

A trial in this case was held in October 2024.

The jury found that an agreement was reached, but it agreed with the Company that any shares to be awarded to the plaintiff were subject to the reverse split.

The jury awarded damages in an amount that was roughly equal to what the Company contended had been offered to the plaintiff before the initial public offering.

Both sides then challenged the verdict, and on December 12, 2024, the judge who presided over the trial delivered a judgment in the Company’s favor, finding that no binding agreement was reached and that the plaintiff was not entitled to recover any damages.

On December 23, 2024, the plaintiff filed an appeal with the Superior Court of Pennsylvania, which is currently pending.

The Company intends to continue to defend against this claim.

Passage Bio, Inc.

Notes to Financial Statements (cont.)

The Company recorded $ 1.0 million for loss contingencies within general and administrative expenses in the quarter ended September 30, 2024 in connection with this matter, which was reversed in the quarter ended December 31, 2024, as it is no longer deemed probable the Company will pay any such amounts.

Other than the above, we are not presently a party to any legal proceedings that, in the opinion of management, would, if decided against us, have a material adverse effect on our business.

Regardless of outcome, litigation can have an adverse impact on us due to defense and settlement costs, diversion of management resources, negative publicity and reputational harm, and other factors.

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.

The Company issued 6,000,000 shares of common stock under the ATM Facility, resulting in net proceeds of $ 8.7 million, after deducting offering costs of $ 0.3 million in March 2024.

Share-Based Compensation

6 unchanged sentences

As of December 31, 2024, 8,604,096 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.

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 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 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 3,103,089 and 2,747,206 shares in January 2025 and 2024, respectively.

2 unchanged sentences

The Inducement Plan was approved by the Company’s board of directors in July 2021.

The total number of shares authorized under the Inducement Plan as of December 31, 2023 was 2,500,000 , as a result of an increase to the shares authorized for issuance in February 2023.

Of this amount, 1,110,300 shares were available for future grants as of December 31, 2023.

The total number of shares authorized under the Inducement Plan as of December 31, 2024 was 2,500,000 .

Of this amount, 1,528,313 shares were

Passage Bio, Inc.

Notes to Financial Statements (cont.)

available for future grants as of December 31, 2024.

The Inducement Plan provides for the granting of nonqualified stock options and restricted stock awards to employees hired by the Company, as determined by the Company’s board of directors.

11 unchanged sentences

( 2,571,789 )

( 2,372,713 )

Outstanding at December 31, 2024

2 unchanged sentences

The weighted-average grant date fair value of options granted was $ 1.01 and $ 0.81 for the years ended December 31, 2024 and 2023, respectively.

The aggregate intrinsic value of options exercised, options outstanding, and options exercisable were each de minimus during the years ended December 31, 2024 and 2023.

As of December 31, 2024, the total unrecognized compensation expense related to unvested stock option awards was $ 5.7 million, which the Company expects to recognize over a weighted-average period of 2.3 years.

8 unchanged sentences

Restricted Stock Units

The Company issues restricted stock units, or RSUs, to employees that vest over periods as determined by the board of directors.

The Company issues restricted stock units, or RSUs, to employees that vest over periods of time as determined by the board of directors.

Any unvested shares are forfeited upon termination of services.

The fair value price of the RSUs is equal to the fair market value of the Company’s common stock on the date of grant.

The fair value of the RSUs is equal to the fair market value of the Company’s common stock on the date of grant.

Compensation expense is recognized on a straight-line basis over the vesting period of the RSUs.

12 unchanged sentences

As a result, on January 1, 2025, 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.

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

4 unchanged sentences

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.

In accordance with the guidance in ASC Topic 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.

the purchase date) represents an option and , therefore, the ESPP is a compensatory plan under this guidance.

10 unchanged sentences

Operating lease liabilities

Depreciation and amortization

Total gross deferred tax assets before valuation allowance

3 unchanged sentences

Right of use assets - operating leases

Depreciation and amortization

Total deferred tax liabilities

1 unchanged sentence

In assessing the need for a valuation allowance, management must determine that there will be sufficient taxable income to allow for the realization of deferred tax assets.

Based upon the historical and anticipated future losses, management has determined that the deferred tax assets do not meet the more-likely-than-not threshold for realizability.

Based upon the historical and anticipated future losses, management has determined the deferred tax assets do not meet the more-likely-than-not threshold for realizability.

Accordingly, a full valuation allowance has been recorded against the Company’s net deferred tax assets as of December 31, 2024 and 2023.

The valuation allowance increased by $ 19.1 million and $ 20.9 million during the years ended December 31, 2024 and 2023, 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:

3 unchanged sentences

Permanent differences

Equity compensation

Research and development and orphan tax credits

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:

18 unchanged sentences

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

Passage Bio, Inc.

Notes to Financial Statements (cont.)

Segment Reporting

Operating segments are defined as components of an enterprise which engages in business activities from which it may recognize revenues and incur expenses about which separate discrete information is available for evaluation by the chief operating decision maker, or CODM, in deciding how to allocate resources and in assessing performance.

The Company operates in a single reportable segment, developing and advancing genetic medicines designed to target critical underlying pathology of neurodegenerative diseases.

The accounting policies of the single segment are the same as those described in the summary of significant accounting policies.

The Company’s CODM is its chief executive officer.

The measure of segment assets is reported on the balance sheet as total assets.

All assets are located within the United States.

The CODM uses net loss as reported on our statement of operations to assess the Company’s performance.

Our CODM also uses cash forecast in deciding where to invest or expand operations within the business.

In these cash forecasts, research and development expenses and general and administrative expenses exclude certain non-cash items such as share based compensation and depreciation and amortization expenses.

The following table summarizes significant segment expenses:

(in thousands)

Research and development

Wages, benefits and other payroll

Third-party costs

Share-based compensation

Depreciation and amortization

Total research and development expenses

General and administrative

Wages, benefits and other payroll

Third-party costs

Amended Catalent agreements expense

Share-based compensation

Depreciation and amortization

Total general and administrative expenses

Impairment of long-lived assets

Loss from operations

Other (income) expense, net

The components of Other (income) expense, net are futher described in note 3 to the financial statements.

Passage Bio, Inc.

Notes to Financial Statements (cont.)

Subsequent Events

On January 8, 2025, the board of directors of the Company approved, and management began to implement, a restructuring plan, or the Restructuring Plan, to (i) cease its lab operations at its leased laboratory space in Hopewell, New Jersey and (ii) reduce operating costs and better align its workforce with the needs of its strategic research and development strategy.

The implementation of the Restructuring Plan should be substantially complete by the end of the first quarter 2025.

Under the Restructuring Plan, the Company is reducing its overall workforce by approximately 55 % .

Impacted employees are eligible to receive severance benefits which the Company estimates will approximate $ 1.7 million.

These severance benefits are contingent upon an impacted employee’s execution (and non-revocation) of a severance agreement, which includes a general release of claims against the Company.

Following the Restructuring Plan, as of January 31, 2024, the Company had 27 full-time employees.

In connection with the Restructuring Plan, the Company is pursuing opportunities to sublease the remaining space leased under the Laboratory Lease Agreement to offset portions of its financial obligations and is pursuing opportunities to sell the laboratory equipment.

As a result, the Company reassessed asset groups and evaluated such asset groups for impairment under FASB ASC Topic 360, Long-lived assets:

Impairment or disposal of long-lived assets , for all long-lived assets related to the leased laboratory space, which comprises primarily of ROU assets, leasehold improvements and laboratory equipment.

As a result, the Company expects to recognize impairment expenses for its laboratory equipment of approximately $ 1.0 million to $ 3.0 million in the three-month period ending March 31, 2025.

This range is preliminary and may change subject to management’s finalization of assumptions used in impairment testing.

On January 31, 2025 the Company amended its Transition Services Agreement with Gemma Biotherapeutics, pursuant to the First Amendment to the Transition Services Agreement, dated January 31, 2025, which extended the agreement through May 31, 2025, unless terminated earlier.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data