Y
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the quarterly period ended | |
OR | |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ________ to ________
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol | Name of each exchange on which registered |
(Nasdaq Global Select Market) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
| ◻ |
| Accelerated filer |
| ◻ |
☒ | Smaller reporting company | |||||
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of November 8, 2024, the registrant had
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements. All statements other than statements of historical facts contained in this Quarterly Report are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “aim,” “may,” “will,” “should,” “expect,” “forecast,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words. All statements other than statements of historical fact contained in this Quarterly Report, including without limitation statements regarding our plans to develop and commercialize our product candidates, the timing and results of our ongoing or planned preclinical studies and clinical trials, risks associated with clinical trials, including our ability to adequately manage clinical activities, unexpected concerns that may arise from additional data or analysis obtained during clinical trials, the timing of and our ability to obtain and maintain regulatory approvals, the clinical utility of our product candidates, our commercialization, marketing and manufacturing capabilities and strategy, our expectations about the willingness of healthcare professionals to use our product candidates, the timing, or amount, of receipt of any potential future milestone and royalty payments, the sufficiency of our cash and cash equivalents, general economic, industry and market conditions, including fluctuating interest rates and inflation, a potential federal government shutdown, instability in the global banking system, and the plans and objectives of management for future operations and capital expenditures are forward-looking statements.
The forward-looking statements in this Quarterly Report are only predictions and are based largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report and are subject to a number of known and unknown risks, uncertainties and assumptions, including those described under the sections in this Quarterly Report entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report.
Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise. We intend the forward-looking statements contained in this Quarterly Report to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act.
2
Table of Contents
3
PART I-FINANCIAL INFORMATION
Item 1. Interim Financial Statements.
Passage Bio, Inc.
Balance Sheets
(Unaudited) | ||||||
(in thousands, except share and per share data) |
| September 30, 2024 |
| December 31, 2023 | ||
Assets |
|
|
|
| ||
Current assets: |
|
|
|
| ||
Cash and cash equivalents | $ | | $ | | ||
Marketable securities | | | ||||
Prepaid expenses and other current assets |
| |
| | ||
Prepaid research and development |
| |
| | ||
Total current assets |
| |
| | ||
Property and equipment, net |
| |
| | ||
Right of use assets - operating leases | |
| | |||
Other assets |
| |
| | ||
Total assets | $ | | $ | | ||
Liabilities and stockholders’ equity |
|
|
| |||
Current liabilities: |
|
|
| |||
Accounts payable | $ | | $ | | ||
Accrued expenses and other current liabilities |
| |
| | ||
Non-refundable sublicense payments received | | — | ||||
Operating lease liabilities | |
| | |||
Total current liabilities |
| |
| | ||
Operating lease liabilities - noncurrent |
| |
| | ||
Total liabilities |
| |
| | ||
Commitments and contingencies (note 10) |
|
|
| |||
Stockholders’ equity: |
|
|
| |||
Preferred stock, $ | ||||||
Common stock, $ |
| |
| | ||
Additional paid‑in capital |
| |
| | ||
Accumulated other comprehensive income (loss) | | ( | ||||
Accumulated deficit |
| ( |
| ( | ||
Total stockholders’ equity |
| |
| | ||
Total liabilities and stockholders’ equity | $ | | $ | | ||
See accompanying notes to unaudited interim financial statements.
4
Passage Bio, Inc.
Statements of Operations and Comprehensive Loss
(Unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
(in thousands, except share and per share data) |
| 2024 |
| 2023 | 2024 |
| 2023 | |||||
Operating expenses: |
|
|
|
|
|
|
| |||||
Research and development | $ | | $ | | $ | | $ | | ||||
General and administrative |
| |
| |
| |
| | ||||
Impairment of long-lived assets | | | | | ||||||||
Loss from operations |
| ( |
| ( |
| ( |
| ( | ||||
Other income (expense), net |
| |
| |
| |
| | ||||
Net loss | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Per share information: |
|
|
|
|
|
|
| |||||
Net loss per share of common stock, basic and diluted | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Weighted average common shares outstanding, basic and diluted |
| |
| |
| |
| | ||||
Comprehensive loss: | ||||||||||||
Net loss | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Unrealized gain (loss) on marketable securities | | | | | ||||||||
Comprehensive loss | $ | ( | $ | ( | $ | ( | $ | ( | ||||
See accompanying notes to unaudited interim financial statements.
5
Passage Bio, Inc.
Statements of Stockholders’ Equity
(Unaudited)
Common stock | Additional | Accumulated other | Accumulated | |||||||||||||
(in thousands, except share data) |
| Shares |
| Amount |
| paid‑in capital | comprehensive income (loss) |
| deficit | Total | ||||||
Balance at July 1, 2024 |
| | $ | | $ | | $ | ( | $ | ( | $ | | ||||
Exercise of stock options and vesting of restricted stock units |
| |
| — |
| — |
| — |
| — |
| — | ||||
Unrealized gain (loss) on marketable securities |
| — |
| — |
| — |
| |
| — |
| | ||||
Share‑based compensation expense |
| — |
| — |
| |
| — |
| — |
| | ||||
Net loss |
| — |
| — |
| — |
| — |
| ( |
| ( | ||||
Balance at September 30, 2024 |
| | $ | | $ | | $ | | $ | ( | $ | | ||||
Common stock | Additional | Accumulated other | Accumulated | |||||||||||||
(in thousands, except share data) |
| Shares |
| Amount |
| paid‑in capital | comprehensive income (loss) |
| deficit | Total | ||||||
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 |
| |
| — |
| |
| — |
| — |
| | ||||
Issuance of shares in connection with employee stock purchase plan | | — | | — | — | | ||||||||||
Unrealized gain (loss) on marketable securities |
| — |
| — |
| — |
| |
| — |
| | ||||
Share‑based compensation expense |
| — |
| — |
| |
| — |
| — |
| | ||||
Net loss |
| — |
| — |
| — |
| — |
| ( |
| ( | ||||
Balance at September 30, 2024 |
| | $ | | $ | | $ | | $ | ( | $ | | ||||
See accompanying notes to unaudited interim financial statements.
6
Passage Bio, Inc.
Statements of Stockholders’ Equity
(Unaudited)
Common stock | Additional | Accumulated other | Accumulated | |||||||||||||
(in thousands, except share data) | Shares | Amount | paid‑in capital | comprehensive income (loss) |
| deficit | Total | |||||||||
Balance at July 1, 2023 |
| | $ | | $ | | $ | ( | $ | ( | $ | | ||||
Exercise of stock options and vesting of restricted stock units |
| | — | — | — | — | — | |||||||||
Unrealized gain (loss) on marketable securities |
| — | — |
| — | | — | | ||||||||
Share‑based compensation expense |
| — | — | | — | — | | |||||||||
Net loss |
| — | — | — | — | ( | ( | |||||||||
Balance at September 30, 2023 | | $ | | $ | | $ | ( | $ | ( | $ | | |||||
Common stock | Additional | Accumulated other | Accumulated | |||||||||||||
(in thousands, except share data) |
| Shares | Amount | paid‑in capital | comprehensive income (loss) |
| deficit | Total | ||||||||
Balance at January 1, 2023 |
| | $ | | $ | | $ | ( | $ | ( | $ | | ||||
Exercise of stock options and vesting of restricted stock units | | — | — | — | — | — | ||||||||||
Issuance of shares in connection with employee stock purchase plan | | — | | — | — | | ||||||||||
Unrealized gain (loss) on marketable securities | — | — |
| — | | — | | |||||||||
Share‑based compensation expense |
| — | — | | — | — | | |||||||||
Net loss |
| — | — | — | — | ( | ( | |||||||||
Balance at September 30, 2023 |
| | $ | | $ | | $ | ( | $ | ( | $ | | ||||
See accompanying notes to unaudited interim financial statements.
7
Passage Bio, Inc.
Statements of Cash Flows
(Unaudited)
Nine Months Ended | ||||||
September 30, | ||||||
(in thousands) |
| 2024 |
| 2023 | ||
Cash flows used in operating activities: |
|
|
|
| ||
Net loss | $ | ( | $ | ( | ||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
|
|
| |||
Depreciation and amortization |
| |
| | ||
Share‑based compensation |
| |
| | ||
Amortization of premium and discount on marketable securities, net | ( | ( | ||||
Loss on disposal of property and equipment |
| — |
| | ||
Impairment of long-lived assets | |
| | |||
Changes in operating assets and liabilities: |
|
|
| |||
Prepaid expenses and other current assets, and other assets |
| ( |
| | ||
Prepaid research and development |
| |
| | ||
Non-refundable sublicense payments received | | — | ||||
Right of use assets and operating lease liabilities | ( | ( | ||||
Accounts payable |
| |
| ( | ||
Accrued expenses and other current liabilities |
| ( |
| | ||
Net cash provided by (used in) operating activities |
| ( |
| ( | ||
Cash flows provided by (used in) investing activities: |
|
|
|
| ||
Purchases of marketable securities |
| ( |
| ( | ||
Sales or maturities of marketable securities |
| |
| | ||
Purchases of property and equipment |
| ( |
| ( | ||
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 | | | ||||
Net cash provided by (used in) financing activities |
| |
| | ||
Net increase (decrease) in cash and cash equivalents |
| |
| ( | ||
Cash and cash equivalents at beginning of period |
| |
| | ||
Cash and cash equivalents at end of period | $ | | $ | | ||
Supplemental disclosure of non‑cash investing and financing activities: |
|
|
|
| ||
Unrealized gain (loss) on marketable securities | $ | | $ | | ||
Right of use assets recognized upon the commencement of sublease | $ | ( | $ | — | ||
Operating lease liabilities recognized upon the commencement of sublease | $ | | $ | — | ||
See accompanying notes to unaudited interim financial statements.
8
1. Nature of Operations
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 critical underlying pathology in 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. On July 31, 2024, the Company entered into a series of agreements in connection with the planned transition of GTP to
2. Risks and Liquidity
The Company has incurred recurring losses and negative cash flows from operations since inception and had an accumulated deficit of $
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. Product candidates currently under development will require significant additional research and development efforts and establishing manufacturing capacity and regulatory approval prior to commercialization. These efforts require significant amounts of additional capital for the Company to complete its research and development, achieve its research and development objectives, defend its intellectual property rights, and recruit and retain skilled personnel, and key members of management. 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 $
The Company plans to seek additional funding through public or private equity offerings, debt financings, other collaborations, strategic alliances and licensing arrangements. The Company may not be able to obtain financing on acceptable terms, or at all, and the Company may not be able to enter into strategic alliances or other arrangements on favorable terms, or at all. The terms of any financing may adversely affect the holdings or the rights of the Company’s stockholders. 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.
9
In accordance with Accounting Standards Update, or ASU, No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, the Company has evaluated whether there are certain conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern 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 12 months from the issuance date of these financial statements.
3. Summary of Significant Accounting Policies
The Company’s complete summary of significant accounting policies can be found in “Note 3. Summary of Significant Accounting Policies” in the audited financial statements included in the Company’s Annual Report filed on Form 10-K for the year ended December 31, 2023.
Basis of Presentation
The accompanying unaudited 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.
Interim Financial Statements
The accompanying unaudited interim financial statements have been prepared from the books and records of the Company in accordance with GAAP for interim financial information and Rule 10-01 of Regulation S-X promulgated by the SEC, which permits reduced disclosures for interim periods. All adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the accompanying balance sheets, statements of operations and comprehensive loss, stockholders’ equity, and cash flows have been made. Although these interim financial statements do not include all of the information and footnotes required for complete annual financial statements, management believes the disclosures are adequate to make the information presented not misleading. Unaudited interim results of operations and cash flows are not necessarily indicative of the results that may be expected for the full year. Unaudited interim financial statements and footnotes should be read in conjunction with the audited financial statements and footnotes included in the Company’s 2023 Annual Report filed on Form 10-K.
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 revenues and expenses during the reporting period. Actual results could differ from those estimates.
Estimates and assumptions are periodically reviewed, and the effects of the revisions are reflected in the accompanying financial statements in the period they are determined to be necessary.
Fair Value of Financial Instruments
Management believes that the carrying amounts of the Company’s financial instruments, including cash equivalents, prepaid expenses, and accounts payable, approximate fair value due to the short-term nature of those instruments.
10
Concentration of Credit Risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents, and marketable securities. The Company maintains a deposit account in a federally insured financial institution in excess of federally insured limits. The Company also maintains a money market account in a federally insured financial institution in excess of federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to significant risk on its cash and cash equivalents beyond the normal credit risk associated with commercial banking relationships.
The Company maintains a portfolio of marketable debt securities, which is diversified to limit exposure related to counterparty risk, industry risk, and security type risk. The Company maintains an investment policy which dictates the allocation of funds within its portfolio of marketable debt securities. The Company has not experienced any material losses in such portfolio.
Segment Information
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 September 30, 2024 consisted of various securities as described in Note 4. Cash consists of cash deposits at banking institutions.
Marketable Securities
The Company classifies its marketable securities with original maturities of greater than three months as available-for-sale. Marketable securities as of September 30, 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. Gains or losses on marketable securities sold are recognized as a component of other income (expense), net in the statement of operations and comprehensive loss on the specific identification method. All marketable securities are available for use, as needed, to fund operations and therefore, the Company classifies all marketable securities as current assets within the balance sheet.
Property and Equipment, Net
Property and equipment, 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. Property and equipment are depreciated on a straight-line basis over their estimated useful lives. The Company estimates useful life on an asset-by-asset basis, which generally consists of
When property and equipment are retired or otherwise disposed of, the costs and accumulated depreciation are removed from the respective accounts, with any resulting gain or loss recognized concurrently. The Company did not recognize any losses on disposals of property and equipment for the three and nine months ended September 30, 2024. The
11
Company recognized losses on disposals of property and equipment of $
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. The Company recognized impairment expenses for property and equipment of $
Leasing
The Company evaluates leases at their inception to determine if they are an operating lease or a finance lease. As of September 30, 2024, the Company has classified all leases with terms greater than one year, as operating leases.
The Company recognizes assets and liabilities for operating leases at their inception, based on the present value of all payments due under the lease agreement. The Company uses its incremental borrowing rate to determine the present value of operating leases, which is determined by referencing collateralized borrowing rates for debt instruments with terms similar to the respective lease. The Company utilizes the accounting policy election to not separate lease and non-lease components and the accounting policy election to not apply the recognition requirement to leases with a term of 12 months or less.
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 $
Share-Based Compensation
The Company measures share-based awards at grant-date fair value and records compensation expense on a straight-line basis over the vesting period of the awards. The Company’s share-based compensation consists of restricted stock units, or RSUs, and options to purchase common stock, or stock option awards.
The Company uses the Black-Scholes option pricing model to value its stock option awards.
Estimating the fair value of stock option awards requires the input of assumptions, including, the expected term of stock options, and stock price volatility. The assumptions used in estimating the fair value of share-based awards represent management’s estimate and involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and management uses different assumptions, share-based compensation expense could be materially different for future awards.
The expected term of the stock options is estimated using the “simplified method,” as the Company has limited historical information from which to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior for its stock option grants. The simplified method is the midpoint between the vesting period and the contractual term of the option. For stock price volatility, the Company uses a composite of comparable public company data as a basis for its expected volatility to calculate the fair value of option grants. The selection of comparable public company data requires the application of management’s judgement.
12
The Company accounts for forfeitures of RSUs and stock option awards as they occur.
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 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 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.
Research and Development
Research and development costs are expensed as incurred and consist primarily of expenses incurred with GTP, Gemma, contract research organizations, contract manufacturing organizations, internal analytical and testing activities, and
13
employee-related expenses, including salaries, benefits, and share-based compensation. Management makes estimates of the Company’s external accrued research and development expenses, which primarily relates to contract research organizations and contract manufacturing organizations, as of each balance sheet date in the Company’s financial statements based on an estimate of progress to completion of specific tasks using facts and circumstances known to the Company at that time. The Company determines the estimates by reviewing contracts, vendor agreements, 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, and income from subleases. Additionally, in the nine months ended September 30, 2023, the Company recognized other income related to the sale of certain tax credits.
The Company recorded $
The Company recorded $
The Company recorded $
The Company recorded $
Net Loss Per Share
Basic net loss per share of common stock is computed by dividing net loss by the weighted average number of shares of common stock outstanding during each period. Diluted loss per share of common stock includes the effect, if any, from the potential exercise or conversion of securities, such as stock options, which would result in the issuance of incremental shares of common stock. For diluted net loss per share, the weighted-average number of shares of common stock is the same for basic net loss per share due to the fact that when a net loss exists, dilutive securities are not included in the calculation as the impact is anti-dilutive.
The following potentially dilutive securities have been excluded from the computation of diluted weighted-average shares of common stock outstanding, as they would be anti-dilutive:
Nine Months Ended September 30, | ||||
2024 |
| 2023 | ||
Stock options | |
| | |
Unvested restricted stock units | | | ||
Employee stock purchase plan | | | ||
|
| | ||
14
Recently Issued 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 segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. The disclosures required under ASU 2023-07 are also required for public entities with a single reportable segment. ASU 2023-07 is effective for the Company’s first fiscal year beginning after December 15, 2023 and for interim periods within the Company’s first fiscal year beginning after December 15, 2024, with early adoption permitted. The Company does not expect the adoption of ASU 2023-07 to have a material impact on its financial statements or disclosures.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, or ASU 2023-09, which requires that an entity, on an annual basis, disclose additional income tax information, primarily related to the rate reconciliation and income taxes paid. The amendments in ASU 2023-09 are intended to enhance the transparency and decision usefulness of income tax disclosures. The amendments in this ASU are effective for annual periods beginning after December 15, 2024 with early adoption permitted. The Company is currently evaluating the impact of this guidance on its disclosures.
In November 2024, the FASB issued ASU No. 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): 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.
4. Cash, Cash Equivalents and Marketable Securities
The following table provides details regarding the Company’s portfolio of cash and cash equivalents:
Cost or | ||||||||||||
(in thousands) |
| Amortized cost |
| Unrealized gains |
| Unrealized losses |
| Fair value | ||||
September 30, 2024: |
|
|
|
|
|
|
|
| ||||
Cash accounts in banking institutions | $ | | $ | - | $ | - | $ | | ||||
Money market funds | | - | - | | ||||||||
Commercial paper | | - | - | | ||||||||
Certificates of deposit | | - | - | | ||||||||
Total | $ | | $ | - | $ | - | $ | | ||||
December 31, 2023: |
|
|
|
|
|
|
|
| ||||
Cash accounts in banking institutions | $ | | $ | - | $ | - | $ | | ||||
Money market funds | | - | - | | ||||||||
Commercial paper | | - | - | | ||||||||
Corporate debt securities | | - | - | | ||||||||
Total | $ | | $ | - | $ | - | $ | | ||||
15
The following table provides details regarding the Company’s portfolio of marketable securities:
(in thousands) |
| Amortized cost |
| Unrealized gains |
| Unrealized losses |
| Fair value | ||||
September 30, 2024: |
|
|
|
|
|
|
|
| ||||
Certificates of deposit | $ | | $ | | $ | ( | $ | | ||||
Commercial paper | | | - | | ||||||||
Corporate debt securities | | | - | | ||||||||
U.S. government securities | | - | ( | | ||||||||
Total | $ | | $ | | $ | ( | $ | | ||||
December 31, 2023: |
|
|
|
|
|
|
|
| ||||
Certificates of deposit | $ | | $ | | $ | - | $ | | ||||
Commercial paper | | | ( | | ||||||||
Corporate debt securities | | | ( | | ||||||||
U.S. government securities | | | ( | | ||||||||
U.S. government agency securities | | - | ( | | ||||||||
Total | $ | | $ | | $ | ( | $ | | ||||
The contractual maturities of the Company’s marketable securities as of September 30, 2024, are as follows:
(in thousands) | Amortized Cost | Fair Value | ||||
Due within one year | $ | | $ | | ||
Due after one year through five years | - | - | ||||
Total | $ | | $ | | ||
5. Fair Value of Financial Instruments and Non-Financial Instruments
Financial Instruments
Fair value is the price that could be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Fair value determination in accordance with applicable accounting guidance requires that a number of significant judgments be made. Additionally, fair value is used on a nonrecurring basis to evaluate assets for impairment or as required for disclosure purposes by applicable accounting guidance on disclosures about fair value of financial instruments. Depending on the nature of the assets and liabilities, various valuation techniques and assumptions are used when estimating fair value. The carrying amounts of certain of the Company’s financial instruments, including prepaid expense and accounts payable are shown at cost, which approximates fair value due to the short-term nature of these instruments. The Company follows the provisions of ASC Topic 820, Fair Value Measurement, for financial assets and liabilities measured on a recurring basis. The guidance requires fair value measurements be classified and disclosed in one of the following three categories:
| ● | Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. |
| ● | Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liabilities. |
| ● | Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity). |
16
The following fair value hierarchy table presents information about the Company’s assets measured at fair value on a recurring basis. Included within cash and cash equivalents on the balance sheet, but excluded from the fair value hierarchy table, are cash deposits held at financial institutions:
Fair value measurement at | |||||||||
reporting date using | |||||||||
Quoted prices | |||||||||
| in active |
| Significant |
| |||||
| markets for |
| other |
| Significant | ||||
| identical |
| observable |
| unobservable | ||||
| assets |
| inputs | inputs | |||||
(in thousands) |
| (Level 1) |
| (Level 2) |
| (Level 3) | |||
September 30, 2024: |
|
|
|
|
|
| |||
Assets |
|
|
|
|
|
| |||
Cash equivalents: | |||||||||
Money market funds | $ | | $ | - | $ | - | |||
Commercial paper | - | | - | ||||||
Certificates of deposit | - | | - | ||||||
Total cash equivalents | | | - | ||||||
Marketable securities: | |||||||||
Certificates of deposit | - | | - | ||||||
Commercial paper | - | | - | ||||||
Corporate debt securities | - | | - | ||||||
U.S. government securities | - | | - | ||||||
Total marketable securities | - | | - | ||||||
Total financial assets | $ | | $ | | $ | - | |||
December 31, 2023: | |||||||||
Assets |
|
|
|
|
|
| |||
Cash equivalents: | |||||||||
Money market funds | $ | | $ | - | $ | - | |||
Commercial paper | - | | - | ||||||
Corporate debt securities | - | | - | ||||||
Total cash equivalents | | | - | ||||||
Marketable securities: | |||||||||
Certificates of deposit | - | | - | ||||||
Commercial paper | - | | - | ||||||
Corporate debt securities | - | | - | ||||||
U.S. government securities | - | | - | ||||||
U.S. government agency securities | - | | - | ||||||
Total marketable securities | - | | - | ||||||
Total financial assets | $ | | $ | | $ | - | |||
Non-Financial Instruments
Long-lived non-financial assets are measured at fair value on a nonrecurring basis for purposes of calculating impairment using Level 3 inputs as defined in the fair value hierarchy. The fair value of long-lived assets using Level 3 inputs is determined by estimating the amount and timing of net future cash flows (which are unobservable inputs) and discounting them using a risk-adjusted rate of interest. Significant increases or decreases in actual cash flows may result in valuation changes.
17
The following non-financial instruments were measured at fair value, on a nonrecurring basis, during the three and nine months ended September 30, 2024. The significant assumptions utilized, which relate to future net cash flows, are further described in Note 9:
Fair Value Measurements as of September 30, 2024 | Three months ended September 30, 2024 | Nine months ended September 30, 2024 | ||||||||
(in thousands) | Level 1 | Level 2 | Level 3 | Impairment Losses | ||||||
Property and equipment, net | $ | - | $ | - | $ | | $ | | $ | |
Right of use assets | - | - | | | | |||||
Other assets | - | - | | - | | |||||
Total | $ | - | $ | - | $ | | $ | | $ | |
6. Property and Equipment, Net
Property and equipment, net, consists of the following:
(in thousands) | September 30, 2024 | December 31, 2023 | |||
Laboratory equipment | $ | | $ | | |
Office equipment | | | |||
Computer hardware and software | | | |||
Furniture and fixtures | | | |||
Leasehold improvements | | | |||
Construction in progress | - | | |||
Total property and equipment | | | |||
Accumulated depreciation and amortization | ( | ( | |||
$ | | $ | | ||
Depreciation expense was $
Depreciation expense was $
7. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following:
(in thousands) |
| September 30, 2024 |
| December 31, 2023 | ||
Professional fees | $ | | $ | | ||
Compensation and related benefits |
| |
| | ||
Research and development |
| |
| | ||
Litigation accrual | | — | ||||
Amount due to Catalent in connection with Amended Catalent Agreements |
| — |
| | ||
$ | | $ | | |||
18
8. 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 $
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 September 30, 2024, the Company has received an initial payment of $
9. Leases
2005 Market Street Lease Agreement
The Company is party to a lease agreement for office space, or the 2005 Market Street Lease Agreement, in Philadelphia, Pennsylvania. Under the 2005 Market Street Lease Agreement, the Company leased approximately
Sublease Agreement A
On August 7, 2023, the Company entered into a sublease agreement with a counterparty, or Sublessee A, to sublease approximately
19
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 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, 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. The impairment charge was recorded as of the sublease execution date.
Sublease Agreement B
On September 29, 2023, the Company entered into a sublease agreement with a counterparty, or Sublessee B, to sublease approximately
Pursuant to ASC 842, the Company concluded the sublease is a separate lease, as the Company was not relieved of the primary obligation under the 2005 Market Street Lease Agreement. The Company continues to account for the 2005 Market Street Lease Agreement as a lessee and in the same manner as prior to the execution of the Sublease Agreement B. The Company accounted for Sublease Agreement B as the lessor, and concluded the lease qualified as an operating lease, as it did not meet the criteria of a sales-type or direct financing lease.
As a result of Sublease Agreement B, 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 B. The Company concluded the carrying value of the asset group was not recoverable as it exceeded the estimated undiscounted cash flows. The Company calculated the amount of impairment using a discounted cash flow model to calculate the fair value of the asset group which incorporated the net identifiable cash flows for the term of Sublease Agreement B, including an estimate for cash flows in the residual period, and an estimated borrowing rate of a market participant subtenant. 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
20
recognized as part of the Company’s measurement of the ROU asset and operating lease liability as of September 30, 2024.
Laboratory Lease Agreement
The Company is also party to a lease agreement for laboratory space, or the Laboratory Lease Agreement, in Hopewell, New Jersey. The laboratory is focused on state-of-the-art analytical capabilities, assay development and validation, and clinical product testing to support both viral vector ma