Earnings Transcript for PASG - Q3 Fiscal Year 2021

Operator: Good morning, and welcome to the Passage Bio Third Quarter 2021 Financial and Operating Results Conference Call. [Operator Instructions] Please be advised that this call is being recorded at the company’s request. At this time, I’d like to turn it over to Stuart Henderson, Vice President of Investor Relations and Strategic Finance. Stuart, please proceed.

Stuart Henderson: Thank you, operator. This morning, we issued a press release that outlines the topics we plan to discuss today. This release is available on the Passage Bio website under the Press Releases and Statements section of Investors and News. On today’s call, Bruce Goldsmith, President and Chief Executive Officer, will discuss recent business highlights. Eliseo Salinas, our Chief Research and Development Officer, will review our key clinical updates. And Simona King, our Chief Financial Officer, will review our third quarter 2021 financial results. Before we begin, please note that today’s call may include a number of forward-looking statements, including, but not limited to, comments on our expectations about timing and execution of anticipated milestones, including the initiation of clinical trials and the availability of clinical data from such trials; our expectations about our collaborators and partners’ ability to execute key initiatives; the ability of our lead product candidates to treat their respective target CNS disorder; manufacturing plans and strategies; trends with respect to financial performance and cash flows; the company’s ability to fund research and development programs; impacts of the COVID-19 pandemic on the company’s operations; and its ability to manage costs, along with uses of cash and other matters. These forward-looking statements are based on assumptions that are subject to risks and uncertainties that could cause the company’s actual results to differ significantly from those suggested by these statements. Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements. Please refer to the company’s filings with the SEC for information concerning risk factors that could cause actual results to differ materially from expectations, including any forward-looking statements made on this call. Except as required by law, the company disclaims any obligation to publicly update or revise any forward-looking statements to a account for or reflect events or circumstances that occur after this call. It is now my pleasure to pass the call over to CEO, Bruce Goldsmith. Bruce?

Bruce Goldsmith: Thanks, Stuart, and thank you all for joining us this morning. As we near the end of 2021, we are well positioned to deliver on multiple value drivers with the advancement of our clinical stage pipeline in both pediatric and adult CNS indications for which there is a high degree of unmet clinical need. Our efforts are underpinned by our four strategic pillars

Eliseo Salinas: Thank you, Bruce. First, I will start by discussing our progress with site activations and patient identification efforts for our three lead programs. Passage Bio is in a unique position with each of our three clinical trial programs operating globally, which allow us to be where the patients are. In total, we have an international network of clinical sites at various stages of activation across nine countries in three continents. Despite COVID-19 continuing to impact hospitals and clinical sites across the world, we have activated six sites in the last three months. including two international sites, and we plan to open additional sites in the U.S. and in eight other countries in the next few months. It is because of our international clinical trial approach, our focus on activating multiple clinical sites in parallel. And our ongoing patient identification initiatives that we anticipate having patients dosed in all three of our clinical programs before the end of the year. The initiatives I’ll point to as examples of our extensive patient identification efforts include

Simona King: Thank you, Eliseo. I would like to start by saying how pleased I am to be part of the Passage Bio team. I am honored to work alongside a group of dedicated and passionate leaders who are committed to bringing transformative medicines to patients and families whose lives are impacted by CNS disorders. As we reported in our press release this morning, we ended the quarter with approximately $354 million in cash, cash equivalent and marketable securities as compared to $305 million as of December 31, 2020. R&D expenses were $26.6 million for the third quarter ended September 30 compared to $20.8 million for the same quarter in 2020. The increase was primarily due to $3.1 million in clinical development and professional services expenses, $2.7 million in personnel-related expenses resulting from an increase in employee headcount, 1.1 million in clinical manufacturing expenses and $1.2 million in facility and other expenses. These increases were partially offset by a $2.3 million decrease in research and development expenses associated with the Penn agreement, which relates to expenses incurred in the 3 months ended September 30, 2020, for preclinical work performed in preparation for IND filings or our lead programs. Acquired in-process R&D expenses were $5.5 million for the third quarter ended September 30 compared to 0 expenses in the same quarter of 2020. We incurred $0.5 million in license fees and $5 million in fees related to the August 2021 amendment with Penn, which extended our partnership by 1 year and extended our rights into large CNS indications. G&A expenses were $15 million for the third quarter ended September 30 compared to $7.8 million for the same quarter in 2020. The increase was primarily due to $5.3 million in personnel-related and share-based compensation expenses resulting from an increase in employee headcount. Professional fees and other expenses also increased $1.8 million as we expanded our operations to support our research and development efforts and incurred expenses with operating as a public company. Net loss was $46.9 million for the third quarter of 2021 compared to $28.5 million in the same quarter of 2020. Net loss per basic and diluted share was $0.87 in the third quarter of 2021 compared to $0.63 in the third quarter of 2020. As we continue to advance our pipeline and invest in our capabilities, we are supported by the strength of our balance sheet. We expect our current cash, cash equivalents and marketable securities to fund our operations for at least the next 24 months. Let me now turn to Bruce for closing remarks.

Bruce Goldsmith: Thank you, Simona. Across our three lead programs, we are extremely proud of the accomplishments of our passionate team at Passage Bio. Our clinical operations team has been tireless in their efforts to open clinical trial sites around the globe. We also continue to invest in our in-house CM&C capabilities. This investment includes expanding our manufacturing team, who have made significant progress since opening our new CM&C laboratory in Hopewell, New Jersey last June. This group has been instrumental in developing and advancing differentiated analytics using the latest in technologies and methodologies. Our team’s work builds upon GTP’s world-class vector analytical methods. Our patient engagement team has also built productive partnerships with the advocacy community, which has helped tremendously in raising awareness of our clinical trial programs. We look forward to delivering on multiple clinical milestones over the next few months, including reporting initial safety and 30-day biomarker data for the Phase I/II trial for infantile GM1 as well as dosing the first patients in our trial for FTD-GRN and our trial for early infantile Krabbe disease. In first half 2022, we also look forward to reporting initial safety and 30-day biomarker data from our FTD and Krabbe clinical trials. Before taking questions, I’d like to thank the incredible Passage Bio team and Jim Wilson and his team at GTP for their hard work bringing our clinical trials to the point where they are today. One of the benefits we have at Passage Bio is being able to draw on the deep scientific expertise of GTP, a world-renowned organization unmatched in its pioneering research contributions to AAV gene therapy. We also want to recognize our partnership with caregivers, health care professionals scientists and advocacy groups who share and support our vision to transform the lives of patients impacted by devastating CNS disorders. With that, I would like to call -- open the call up for questions. Operator?

Operator: [Operator Instructions] Tessa Romero, your line is now open.

Tessa Romero: So my question is around the FTD-GRN and Krabbe studies. You made some comments on site activation progress for Krabbe and the regulatory authorization for FTD-GRN. Can you lay out for us where you are in the process in terms of site openings, screening, enrollment or dosing for each of these studies?

Bruce Goldsmith: Yes. Tessa, thanks very much for the question. Yes, we’re making great progress amid COVID-19. We’ve been very, I think, open in the past and transparent about the challenges that COVID first had. And then I think the lingering kind of operational challenges just working with sites as the number of studies post-COVID is kind of ramping up. We’ve been very successful at moving some of the studies forward. I think we have four sites open with the GM1 program, two with Krabbe. And we do have one site, which is the University of Pennsylvania, for the frontotemporal dementia program. And we anticipate additional sites opening in the near term as well. So we’ve had a great deal of progress on the site activations. You also asked about the kind of patient identification. And maybe Eliseo could comment about the various programs in terms of how we’re identifying patients in collaboration with the sites and the other groups.

Eliseo Salinas: Yes. So in all the programs, we have a vast network of physicians, experts, advocacy organizations and patient organizations to identify new patients. It’s different in the two pediatric leukodystrophies than in FTD. But essentially, they have strong similarities. So we are very well connected with all those networks. And now the rate-limiting step for us is not the identification of patients, and rate-limiting step for us is opening the sites that we are opening, as Bruce said. One quick reminder that when you open sites for a study like this one, it’s not an arithmetic function with a constant rate. It’s a sigmoid function, where the first part is exponential. So we opened, during the first part of the year, one side for GM1. We opened six in the last four months. And we plan to open more than twice that number in the next four months. So we’re very happy with the progress, and we think that we are in good shape to enroll in those trials.

Operator: Our next question comes from the line of Neena Bitritto-Garg from Citi.

Neena Bitritto-Garg: So I just wanted to ask a question about timing for the FTD-GRN data so I’d make sure that I understand. I know there’s 60 -- kind of 60 days between dosing of the patients and then we should get kind of the first 30-day biomarker data 60 days only after the third patient is dosed, I believe. So if I do the math out on that, I think I’m getting close to like a June, July kind of time frame for the first data, just given that there’s three patients in that first cohort. I guess, just help me understand if that’s kind of the right way to think about it?

Bruce Goldsmith: Your math -- Neena, thanks for the question. And your math is absolutely correct. So there is an interval between each patient, and that’s kind of FDA-mandated, so that we do have to do so-called sentinel patients, where you dose one at a time with gene therapy. As we -- just as an aside is we do create a safety database. There’s always an opportunity to interact with FDA and see if the cumulative safety could accelerate that. But you’re absolutely right. As we’ve disclosed in all our slides, there is an interval. And you’re also absolutely right on the math that we do expect it to be late in the first half of 2022. And as we have in the past, as we enter 2022, we’ll certainly update -- and as we enroll the first patient that we anticipate by the end of this year, we will update time lines as appropriate. And if that moves back because of the kind of mandated time lines, we’ll certainly be transparent in that. But we certainly -- we also believe we can meet the first half 2022. But you’re absolutely right that it will be late in the half.

Operator: Our next question comes line of Laura Chico from Wedbush.

Laura Chico: I guess I’d like to drill into the site activation comments a little bit more. You mentioned, if I heard correctly, six sites were activated in the last three months. And by clinic trials, it looks like across the three studies, there are six recruiting sites. So I guess I wanted to understand, are the constraints on site activation improving? And really trying to understand what the key barriers are actually moving towards getting a recruitment started. And then I have one quick follow-up.

Bruce Goldsmith: Sure. Thanks, Laura, and I appreciate the question. So it is an operational consideration. It has to do with we’re getting budgets back from the sites and you think that there would be an opportunity to accelerate that because it’s a budget. But in fact, any budgets actually come usually very late in the process because if there are any considerations by the individual reviews, then they have to be incorporated, et cetera. And there’s multiple departments in each hospital that we’re dealing with. For example, the pharmacy is one of them. And it really does come back down to operational considerations. The reason -- when we’ve done benchmarking and looked at the time to kind of open sites to enroll first patients, especially in gene therapy, it does -- we’re not so far out of that realm, especially because these are academic centers. The first center that we opened for the GM1 study was a community center with a centralized IRB. Each of these new centers are just taking a bit of time because of the IRBs, the budget negotiations, et cetera. So it really is down to that. At the same time, we’re not sitting kind of idly by as these sites are kind of up and running. There’s a lot of interaction between the patient engagement groups, the clinical operations team and the clinical teams and our leadership with each individual site to work with them to identify potential patients along the way. But of course, it’s a balance because until the site is open, patients can’t be officially screened. Eliseo, do you have any other comments? Or is that fairly comprehensive?

Eliseo Salinas: It’s very comprehensive, but I would add only one thing. If you want to plot a curve, you need three points. The sixteen months of the year, we opened one site. St Peter’s Community Hospital. The last four months -- three months, we opened six sites. And the next four months, we plan to open two or three, which is an exponential growth. So what happened in the beginning part of the curve does not predict the second part of the curve. What happened in the recent past, the six sites we opened in four months, that’s predictive -- continue to grow. And then we will reach the plateau number of sites we want. At that time, the reasonable step would be the availability of the incidents of the patients, but now we were done.

Bruce Goldsmith: Yes. And I guess, as Eliseo speaking, the other thing we are doing is working across the globe. So these are not just U.S. sites, we have sites now in the U.S. and Canada. We’ve been very open and transparent on clinicaltrials.gov. They were also opening sites in Brazil, the U.K., Europe and the Middle East. And there are individual complexities for each review of the gene therapy, especially that creates some challenges, et cetera. So we’re very pleased with the first sites that are outside the United States being opened as well. So all of that is coming together to say that we very strongly believe that we’re in a great position, and we have the -- probably the biggest network in these studies, we believe, and we’re very proud of that.

Laura Chico: Super helpful.

Bruce Goldsmith: You had a follow-up, please.

Laura Chico: Yes. If you don’t mind, it’s just kind of related more to Imagine-1. And obviously, it’s early in the process for recruitment. But I’m just curious about screening failures. And are there any aspects of the inclusion/exclusion criteria that might be impacting recruitment thus far?

Bruce Goldsmith: Thanks, Laura. So I don’t believe it’s the -- well, so let’s be careful about the definition. So for each of these studies, there are -- in the pediatric population, there are age limits and also developmental stage and developmental milestones that are required because of both the interaction with the regulatory agencies, interaction with the community of efficacy or folks that have had input in these studies and also, of course, the treating clinicians. So I don’t want to say that there are no criteria affecting enrollment because two things can happen to these children because they have really devastating diseases and incredibly fast progression sometimes. So they may kind of have deficits that preclude initial entry into the study. That may be patients we can hopefully address later on, but there are those limitations. And the second thing is -- and this has been a focus and something that I alluded to earlier, as we were working sites to -- and advocacy groups and the testing programs in Vitae [ph] and InformedDNA to identify patients, there may be patients that are identified, but without sites open at the time such as really early this year, patients could then age out and be too old for the studies. So I want to be very careful to say, It’s not specifically entry criteria that are inappropriate that we believe are constraining enrollment and screening, but it’s rather, I think, the consistent application of those across the patient population and the difficulty that these patients face.

Operator: Our next question comes from the line of Yun Zhong from BTIG.

Yun Zhong: Myself, apologies. And so on the 30-day bio market data that you expect report in the fourth quarter, are you expecting to report the substrate reduction as well? And also on the beta-gal in the CSF, I believe other companies have talked about the challenge in quantification in the CSF. So can you talk about the comfort level that you believe that the data will accurately reflect how much enzyme you’re producing in the CSF, please?

Bruce Goldsmith: For the question and joining the call. So -- what we’ve committed to is -- and we’ve been, I think, very transparent in doing this is just closing beta-galactosidase enzyme activity in CSF and serum. And of course, the safety, which is the principal endpoint so that we can move on to higher dosing and also to including earlier stage -- earlier age patients. The substrates we’ve been a little bit careful because although other companies have disclosed this, we want to make sure that we look at the pharmacodynamics and understand the longitudinal view of that. And the same comments apply to, for example, clinical endpoints. So we’ve not committed to disclosing that at this point, but we’ve really focused on CSF. We’ll obviously, as we move forward, continue to think about this. And then your second question was kind of on the measurement of serum and CSF. Eliseo, do you want to comment on that in Yun’s comment or question?

Eliseo Salinas: Yes. Admittedly, it’s a challenging asset to develop. Some sponsors have struggled with that. As you know, the concentrations in the CSF are much smaller. So it requires a very sensitive, but also a very specific test. We are confident with the test we have developed. And because of the rather administration and the type of disease we’re dealing with, we think that that’s very, very important.

Operator: Our next question comes from the line of Danielle Brill from Raymond James.

Danielle Brill: So I don’t know if I’m beating out the dead horse here, but I just wanted to clarify the FTD program specifically. Are you actively screening and identifying patients now that you’ve got some sites open? And then if I understood correctly, it sounds like you’ll update time lines when you enroll the first patients in the study. I wondering if you’ll provide an update when like subsequent patients are also enrolled?

Bruce Goldsmith: Thanks, Danielle. So yes, I appreciate the question. So we have focused on sites such as the University of Pennsylvania that have a relatively intact and large comparatively, in patients that are being actively either monitored or tracked and followed from a family perspective, from an FTD perspective. And so other sites are similar to that with various degrees of numbers of patients that are already in the treatable system, for example. But we’re supplementing that by also supporting InformedDNA from a genetic screening and counseling perspective. So we are actively working as we have across all of our studies to identify patients, we couldn’t obviously bring patients into screening formally until the studies are open, but we can certainly and have across the various sites and interactions with physicians, pre-identified patients that may be eligible. But obviously, the final determination is when they’re actually at the site. So that’s a little bit of a combination to your -- of an answer to your question. The other point I’ll make is that there are large natural history studies such as GENFI study and the all FTD studies that we’re also looking at those sites that have those relationships as well. So that is part of the patient population that is already kind of involved with the medical community and the sites that we are interested in, to an extent. To your second question, I think I said we may update this when we have the first patient dosed. We typically update our time lines and think about this when we enter into early 2022, and we set out our goals. So we’ll have to look at the enrollment of the first patient and our estimation of other sites coming on. As Eliseo said, we’re making great progress on that and then the projection of patient enrollment. So it’s a combination of all of those things. may not be at the time of first patient dosed. And then I think the third part of your question is, are we going to update as we enroll individual patients? And what we’ve been doing in the past as we have with the GM1 study is announcing the first patient dosed and then the target date of data disclosure. And we don’t really want to get into the granular detail of each individual patient timing, because it just isn’t -- it isn’t an individual corporate goal. We’re really interested in the enrollment of the first patient and the data disclosure. And so that’s what our approach has been.

Operator: Our next question comes from the line of Yaron Werber from Cowen.

Brendan Smith: This is Brendan on for Yaron. Actually, just a quick one on the earlier pipeline. Sorry if I missed, I’ve been bouncing around a little bit. But I was actually wondering if we might be able to see some -- especially MLD or ALS data, any of the preclinical data at all next year? And maybe when we might be able to expect that in terms of how to think about those?

Bruce Goldsmith: No, thanks for the question, and I appreciate being on the call. So again, we certainly are focused on that, and we understand the depth of our pipeline is, I think, probably one of the strongest genetic medicines pipeline in CNS that is -- that we are really proud of and continues to grow with the -- not only those programs, which are the first seven, but also obviously, additional options that we may exercise and then the addition of the Alzheimer’s and the TLA is potentially large. To go specifically to your question, we haven’t specifically updated the time lines. We may do so as we enter early 2022 and we think about the data that is available and may become public. What we’ve said in the past is that our ability to share this information is really in partnership with the gene therapy program in Jim Wilson as they advance and feel comfortable with the data that they’re generating, then we feel comfortable then sharing it. And part of this is publications, part of this is public disclosures. So, I think it’s a great question for us to consider as we entered 2022, and we’ll maybe look forward to having that conversation as we enter the year.

Operator: Thank you. This concludes today’s conference call. Thank you for participating. You may now disconnect.