Business Overview and History

Passage Bio, a clinical-stage genetic medicines company, has carved out a unique niche in the rapidly evolving field of neurodegenerative disease treatments. With a relentless focus on improving the lives of patients, the company has weathered various challenges, including regulatory hurdles and the impact of the COVID-19 pandemic, while making significant strides in advancing its pipeline of promising gene therapy candidates.

Passage Bio was incorporated in July 2017 under the laws of the State of Delaware with the ambitious goal of developing cutting-edge, one-time therapies to target the underlying pathologies of devastating neurodegenerative conditions. Since its inception, the company's operations have primarily consisted of conducting preclinical studies, developing licensed technology, conducting clinical trials, and manufacturing clinical supply to support clinical trials.

The company's origins trace back to a strategic collaboration with the University of Pennsylvania's Gene Therapy Program (GTP), which provided Passage Bio with access to differentiated scientific expertise and a robust preclinical development platform. This collaboration has been instrumental in the company's progress and remains a key component of its research and development strategy.

Passage Bio has incurred recurring losses and negative cash flows from operations since inception. As of December 31, 2024, the company had an accumulated deficit of $659.2 million. To fund its operations, Passage Bio has historically relied on the sale of convertible preferred stock and public offerings of common stock.

In 2019, Passage Bio entered into a collaboration agreement and a development services and clinical supply agreement with Catalent Maryland, a unit of Catalent, Inc. These agreements provided the company with clinical-scale manufacturing capacity for its gene therapy product candidates. However, in 2023, Passage Bio restructured these agreements to eliminate minimum annual purchase commitments and the obligation to pay an annual fee for use of a dedicated clean room suite. This restructuring reflects the company's efforts to optimize its resources and adapt to changing business needs.

A significant milestone in Passage Bio's history occurred in 2024 when the company out-licensed its three clinical-stage pediatric gene therapy programs - PBGM01 for GM1 gangliosidosis, PBKR03 for Krabbe disease, and PBML04 for metachromatic leukodystrophy - to a newly formed company called GEMMA Biotherapeutics. This transaction was part of a series of agreements that also included a new strategic research and collaboration agreement between Passage Bio and GEMMA Biotherapeutics. This strategic move allowed Passage Bio to focus its resources on its lead clinical-stage program, PBFT02 for the treatment of frontotemporal dementia (FTD).

PBFT02, Passage Bio's flagship product candidate, is a gene replacement therapy that utilizes an adeno-associated virus serotype 1 (AAV1) vector to deliver a functional granulin gene, encoding the progranulin (PGRN) protein, directly to the central nervous system. This approach aims to address the underlying pathology of FTD caused by progranulin deficiency, or FTD-GRN, a rare and devastating form of the disease with no approved disease-modifying therapies currently available.

Financial Overview

Passage Bio's financial performance has been characterized by the typical challenges faced by a clinical-stage biotechnology company. The company has reported net losses in each of the past four fiscal years, with the net loss for the fiscal year ended December 31, 2024, standing at $64.77 million. This is a significant improvement from the $102.06 million net loss reported in the previous fiscal year, reflecting the company's efforts to streamline operations and focus its resources on the advancement of PBFT02.

As of December 31, 2024, Passage Bio reported $76.80 million in cash, cash equivalents, and marketable securities, providing a runway to fund its operations into the first quarter of 2027. This strong financial position was bolstered by the company's strategic decision to out-license its pediatric programs, which generated $10 million in initial payments and up to an additional $124 million in potential milestone payments and royalties.

Financials

Passage Bio's financial ratios paint a mixed picture. The company's current ratio of 4.07 and quick ratio of 4.07 suggest a strong liquidity position, while the debt-to-equity ratio of 0.42 indicates a relatively conservative capital structure. However, the company's return on assets (-63.24%) and return on equity (-78.64%) reflect the challenges inherent in developing novel therapies and the significant investments required to bring them to market.

For the fiscal year 2024, Passage Bio reported no revenue, as the company has not yet commercialized any products. The net loss for the year was $64.77 million, an improvement from the previous year's loss of $102.06 million. This reduction in net loss was primarily due to decreased research and development expenses and lower general and administrative costs.

In the most recent quarter (Q4 2024), the company reported no revenue and a net loss of $12.73 million. Operating cash flow and free cash flow figures were not provided for either the full year or the most recent quarter.

Liquidity

Passage Bio's liquidity position remains strong, with $76.80 million in cash, cash equivalents, and marketable securities as of December 31, 2024. This provides the company with a runway to fund its operations into the first quarter of 2027, allowing for continued advancement of its lead program, PBFT02.

The company's debt-to-equity ratio stands at 0.42, indicating a relatively low level of debt compared to equity. Both the current ratio and quick ratio are 4.07, suggesting that Passage Bio has ample short-term assets to cover its short-term liabilities. The company does not disclose any available credit lines or credit facilities.

Operational Highlights and Challenges

Passage Bio's primary focus has been the development of PBFT02 for the treatment of FTD-GRN. In January 2025, the company reported promising interim data from the ongoing Phase 1/2 upliFT-D trial, which demonstrated that a single administration of PBFT02 via intracisternal magna (ICM) delivery resulted in robust and durable increases in cerebrospinal fluid (CSF) progranulin levels, with concentrations reaching up to 34 ng/mL at 12 months post-treatment. This was a significant improvement compared to the range of 3.3 to 8.2 ng/mL found in healthy adult controls.

Additionally, the company observed a 13% decrease in plasma neurofilament light chain (NfL) levels, a biomarker associated with disease progression, at 12 months post-treatment. This contrasted with the expected 29% annual increase in plasma NfL levels in untreated, symptomatic FTD-GRN patients, according to published natural history data.

While the interim results for PBFT02 in FTD-GRN were encouraging, the company has also faced challenges. In 2023, Passage Bio encountered issues related to the COVID-19 pandemic, which disrupted patient enrollment and the conduct of clinical trials. The company also grappled with the aftermath of the out-licensing of its pediatric programs, which required navigating the transition of these assets to GEMMA Biotherapeutics and establishing a new strategic research collaboration.

Furthermore, Passage Bio has had to contend with the complexities inherent in gene therapy development, including manufacturing challenges and regulatory hurdles. The company has made progress in addressing these issues, such as completing the scale-up of a high-productivity, suspension-based manufacturing process for PBFT02 and receiving positive feedback from the FDA on the suitability of a potency assay for the release of the product candidate.

Future Outlook and Risks

Looking ahead, Passage Bio is focused on advancing PBFT02 through its clinical development program. The company plans to report 12-month safety and biomarker data from the Dose 1 cohort and interim safety and biomarker data from the Dose 2 cohort of the upliFT-D trial in the second half of 2025. Additionally, Passage Bio intends to seek regulatory feedback on the design of a pivotal trial for PBFT02 in FTD-GRN in the first half of 2026.

The successful development and potential commercialization of PBFT02 are critical to Passage Bio's future. The company's ability to navigate the regulatory landscape, overcome manufacturing challenges, and demonstrate the long-term safety and efficacy of its lead candidate will be key to its success. Failure to achieve these milestones could significantly impact the company's prospects and erode investor confidence.

Passage Bio also faces competition from other companies developing therapies for FTD-GRN and other neurodegenerative diseases, such as Prevail Therapeutics (part of Eli Lilly) and AviadoBio. The ability of Passage Bio to differentiate its approach and demonstrate the superiority of PBFT02 over competing therapies will be crucial in the market.

Furthermore, the company's reliance on its collaboration with GEMMA Biotherapeutics and the University of Pennsylvania's Gene Therapy Program introduces additional risks related to the successful execution of these partnerships and the potential for disputes or disagreements that could disrupt Passage Bio's operations.

Human Capital Management

Passage Bio recognizes the critical importance of its workforce in achieving its strategic objectives. As of December 31, 2024, the company had 60 full-time employees, with 17 holding Ph.D., Pharm.D., or M.D. degrees, and 40 engaged in research, development, and technical operations. However, in January 2025, Passage Bio implemented a restructuring plan that included a 55% reduction in its workforce to better align with its strategic research and development priorities, resulting in 27 full-time employees as of January 31, 2025.

The company is committed to creating and maintaining a diverse, equitable, and inclusive workplace. Passage Bio provides a comprehensive total rewards package to its employees, including competitive market pay, healthcare benefits, life insurance, disability benefits, paid time off, parental leave, flexible work schedules, and an annual stipend for professional development. The company also offers equity ownership through its equity plans, governed by the Compensation Committee of the Board of Directors.

To address human capital management challenges, Passage Bio implements targeted talent acquisition strategies, cross-training programs, and enhanced employee communication and support initiatives. The company leverages its collaborative research partnerships to access specialized expertise and expand its talent pool. Additionally, Passage Bio invests in employee training and development programs to upskill its existing workforce and create a more adaptable, cross-functional team.

The Board of Directors, through its Compensation Committee, provides oversight and guidance on the company's human capital management strategies and practices. Passage Bio discloses several key human capital metrics in its public filings, including total number of employees, percentage of employees with advanced degrees, and percentage of employees engaged in research, development, and technical operations.

Legal Matters

Passage Bio is currently involved in litigation with a former employee who filed a lawsuit in 2019 asserting claims for breach of contract and violation of the Pennsylvania Wage Payment and Collection Law. The former employee claimed he was promised 150,000 shares of company stock as part of a settlement agreement in 2020, but the company responded that the shares would have been subject to the reverse stock split. After a trial in October 2024, the jury found an agreement was reached but agreed with the company that any shares to be awarded were subject to the reverse split. The judge later ruled in the company's favor, finding no binding agreement was reached. The former employee has filed an appeal which is currently pending.

Conclusion

Passage Bio has navigated a challenging path in its pursuit of developing transformative gene therapies for neurodegenerative diseases. The company's unwavering focus on PBFT02 and its promising interim results in the FTD-GRN trial have provided a glimmer of hope for patients and investors alike. However, the road ahead remains fraught with regulatory hurdles, manufacturing complexities, and intense competition.

As Passage Bio continues to execute on its strategic plan, investors will closely monitor the company's ability to overcome these obstacles and deliver on the potential of its lead candidate. The company's strong financial position, bolstered by the out-licensing of its pediatric programs, provides a solid foundation for the continued advancement of PBFT02 and the potential expansion of its pipeline. Passage Bio's commitment to innovation, strategic human capital management, and its relentless pursuit of improved patient outcomes will be critical factors in determining the company's long-term success in the dynamic and rapidly evolving field of genetic medicines.