10-Q: Passage Bio Narrows Losses, Extends Cash Runway to 2027

Passage Bio, a genetic medicines company, reported reduced net losses and extended its cash runway into the first quarter of 2027, driven by strategic restructuring and workforce reductions, while advancing its lead FTD-GRN gene therapy.

Summary

• Net loss for the three months ended September 30, 2025, was $7.7 million, a significant improvement from $19.3 million in the same period of 2024.
• Net loss for the nine months ended September 30, 2025, was $32.5 million, down from $52.0 million in 2024.
• Research and development (R&D) expenses decreased by $4.4 million (three months) and $12.7 million (nine months) due to workforce reduction, ceased lab operations in Hopewell, NJ, and reduced program expenses.
• General and administrative (G&A) expenses decreased by $3.0 million (three months) and $5.3 million (nine months) primarily due to headcount reductions and lower professional fees.
• Cash and cash equivalents stood at $52.8 million as of September 30, 2025.
• The company expects its existing cash and cash equivalents to fund operations into the first quarter of 2027.
• A 1-for-20 reverse stock split was effected on July 14, 2025, to regain Nasdaq compliance.
• PBFT02, the lead clinical product candidate for FTD-GRN, showed robust and durable increases in CSF PGRN levels in the upliFT-D trial, with Dose 1 increasing mean CSF PGRN to 23.8 ng/mL at 18 months (compared to healthy controls of 3.3-8.2 ng/mL).
• Plasma NfL levels, a biomarker for disease progression, increased by an average of 4% at 12 months post-treatment with Dose 1, contrasting with an expected 28-29% annual increase in untreated patients.
• Three out of eight patients in the upliFT-D trial experienced a total of four serious adverse events (SAEs), including venous sinus thrombosis (VST) and pulmonary embolism, leading to protocol amendments for prophylactic anticoagulation.
• The company is enrolling Cohort 3 (5-10 FTD-GRN patients) and Cohort 4 (FTD-C9orf72 patients) in the upliFT-D study.
• Three pediatric programs (PBGM01, PBKR03, PBML04) were outlicensed to Gemma Biotherapeutics, Inc., with potential for $15.0 million in initial payments (of which $7.5 million collected), $5.0 million contingent on business milestones, up to $114.0 million in development/commercial milestones, and single-digit royalties.
• The company recorded $13.8 million as non-refundable sublicense and transition services payments on the balance sheet, as revenue recognition criteria have not yet been met for the Gemma agreements.
• Completed a Type D Chemistry, Manufacturing, and Controls meeting with the FDA for PBFT02 manufacturing process.

Sentiment

Score: 6

Explanation: The company demonstrated improved financial discipline by significantly reducing net losses and extending its cash runway through strategic restructuring. The lead clinical candidate, PBFT02, shows promising biomarker data and a positive trend in a disease progression marker, which are crucial for a clinical-stage biotech. However, the occurrence of serious adverse events in the trial, the ongoing need for substantial additional capital, and the inherent high risks of gene therapy development temper the overall positive sentiment. The reverse stock split also indicates past challenges.

Positives

• Net loss significantly decreased year-over-year for both the three-month ($7.7 million vs $19.3 million) and nine-month ($32.5 million vs $52.0 million) periods.
• Cash runway extended into Q1 2027, providing more operational flexibility.
• Lead clinical candidate PBFT02 demonstrated robust and durable increases in CSF PGRN levels in FTD-GRN patients, exceeding healthy control levels (mean 23.8 ng/mL at 18 months vs. 3.3-8.2 ng/mL in healthy controls).
• PBFT02 treatment showed a significantly lower increase in plasma NfL (4% at 12 months) compared to expected increases in untreated FTD-GRN patients (28-29% annually), suggesting potential disease modification.
• Positive regulatory feedback received for clinical pathways to treat FTD-C9orf72 and ALS with PBFT02, expanding potential indications.
• Successful outlicensing of three pediatric programs (GM1, Krabbe, MLD) to Gemma, reducing internal R&D burden and providing potential future milestone and royalty payments.
• Completed dosing of Cohorts 1 and 2 in the upliFT-D study and actively enrolling Cohort 3 and Cohort 4 (FTD-C9orf72).
• Aligned with FDA on key elements of the analytical plan for PBFT02 manufacturing process comparability.

Negatives

• Continued recurring losses and negative cash flows from operations since inception, with an accumulated deficit of $691.8 million as of September 30, 2025.
• Substantial additional capital will be needed beyond Q1 2027 to fund operations and develop product candidates, with no committed external sources of funds.
• Three out of eight patients in the upliFT-D trial experienced serious adverse events (SAEs), including venous sinus thrombosis and pulmonary embolism, leading to protocol amendments.
• The company had to implement a 1-for-20 reverse stock split to regain compliance with Nasdaq listing requirements, which can negatively impact stock liquidity and investor perception.
• Workforce reduction of approximately 55% in January 2025, leading to loss of institutional knowledge and expertise.
• Paused development of the Temporal Lobe Epilepsy (TLE) research program to reduce operating expenses.
• Revenue recognition for the $13.8 million in sublicense and transition services payments from Gemma is deferred due to uncertainty regarding collectibility and remaining obligations.
• The company is a defendant in ongoing litigation with a former employee regarding stock compensation, with an appeal filed by the plaintiff after a judgment in the company's favor.

Risks

• The company has a history of operating losses and negative cash flows, with an accumulated deficit of $691.8 million as of September 30, 2025, and anticipates incurring additional losses for the foreseeable future.
• Substantial additional capital will be needed to fund operations and develop product candidates beyond the first quarter of 2027, and financing may not be available on acceptable terms or at all.
• PBFT02 is currently the sole clinical stage product candidate, and failure to successfully develop and commercialize it would have material adverse effects on the business.
• The company is early in its development efforts, and its business is dependent on the ability to advance current and future product candidates through preclinical studies and clinical trials, obtain marketing approval, and ultimately commercialize them.
• Disorders targeted by the company's product candidates have low incidence and prevalence, which may lead to difficulties in patient identification and enrollment for trials or slower commercial revenue if approved.
• Preclinical and clinical development processes are lengthy and expensive with uncertain outcomes, potentially leading to additional expenses or delays.
• Gene therapy is a novel technology with unclear and frequently changing regulatory requirements, making it difficult to predict the time and cost of product candidate development and regulatory approval.
• Product candidates may cause undesirable and unforeseen side effects, which could delay or prevent advancement into clinical trials or regulatory approval, limit commercial potential, or result in significant negative consequences (e.g., VST, pulmonary embolism observed in PBFT02 trial).
• Gene therapies are complex and difficult to manufacture, and the company could experience manufacturing problems, delays, or inability to meet regulatory standards or commercial scale.
• The company faces significant competition in an environment of rapid technological change, and competitors may achieve regulatory approval before the company or develop more advanced or effective therapies.
• Reliance on third-party manufacturers for clinical supply and the lack of binding agreements for commercialization expose the company to risks, including intense competition for gene therapy contract manufacturing services.
• The pricing, insurance coverage, and reimbursement status of newly approved products are uncertain, and failure to obtain or maintain adequate coverage and reimbursement could limit marketability and revenue generation.
• Inability to obtain and maintain broad patent protection or other necessary intellectual property rights, or if licensed rights are not sufficiently broad, could allow competitors to develop and commercialize similar products.
• All current product candidates and research programs are licensed from or based upon licenses from third parties (Penn, Gemma), and termination or narrow interpretation of these agreements could materially adversely affect development.
• Breach of license agreements could lead to the loss of critical license rights.
• Future strategic transactions (e.g., acquisitions, in-licenses) may not be successful, could impact cash position, increase expenses, and distract management.
• Fast Track Designation by the FDA may not lead to a faster development or regulatory review or approval process.
• The company may be unsuccessful in obtaining or maintaining Orphan Drug Designation benefits, including supplemental market exclusivity.
• Any approved product candidates will be subject to extensive post-marketing regulatory requirements, restrictions, or withdrawal from the market, and non-compliance could lead to penalties.
• Product candidates may face competition from biosimilars approved through an abbreviated regulatory pathway.
• Enacted and future legislation (e.g., Inflation Reduction Act) may affect pricing and third-party payment for product candidates, increasing the difficulty and cost of obtaining marketing approval and commercialization.
• Operations and relationships with customers and third-party payors are subject to anti-kickback, fraud and abuse, and other healthcare laws and regulations, which could expose the company to penalties.
• Future success depends on the ability to retain key executives and to attract, retain, and motivate qualified personnel; workforce reductions may exacerbate this risk.
• Expanding manufacturing, development, and regulatory capabilities in the future could lead to difficulties in managing growth and disrupt operations.
• Internal computer systems or those of third-party collaborators/contractors may fail or suffer security breaches and cyber-attacks, resulting in material disruption of development programs or data loss.
• The ability to utilize net operating loss carryforwards may be subject to limitation due to ownership changes under Sections 382 and 383 of the Internal Revenue Code.
• U.S. federal income tax reform and changes in other tax laws could adversely affect the company.
• Employees, principal investigators, CROs, and consultants may engage in misconduct or other improper activities, including non-compliance with regulatory standards and insider trading.
• Product liability lawsuits against the company could result in substantial liabilities and limit commercialization.
• The company is subject to U.S. and certain foreign export and import controls, sanctions, embargoes, anti-corruption laws, and anti-money laundering laws and regulations, with potential for criminal liability and other serious consequences for violations.
• The price of the common stock may be volatile and fluctuate substantially, resulting in substantial losses for holders.
• Executive officers, directors, principal stockholders, and their affiliates exercise significant influence over the company, limiting other stockholders' ability to influence corporate matters.
• The liquidity of the common stock may be adversely affected by the Reverse Stock Split.
• No cash dividends are anticipated in the foreseeable future; capital appreciation, if any, will be the sole source of gain.
• Failure to establish and maintain proper and effective internal control over financial reporting could impair the ability to produce accurate and timely financial statements.
• The company will continue to incur increased costs as a result of operating as a public company, and management will devote substantial time to new compliance initiatives.
• Reduced disclosure requirements applicable to emerging growth companies and smaller reporting companies may make the common stock less attractive to investors.
• Exclusive forum provisions in corporate charter documents may limit stockholders' ability to bring claims in a judicial forum they find favorable.
• Provisions in corporate charter documents and under Delaware law could make an acquisition of the company more difficult and may prevent attempts by stockholders to replace or remove current management.
• The company may be subject to securities litigation, which could result in substantial expenses and divert management attention.
• If securities analysts do not publish research or reports about the business, or if they publish negative evaluations, the stock price could decline.
• The company is subject to a variety of privacy and data security laws, and failure to comply with them could harm the business.
• Unfavorable global economic conditions could adversely affect the business, financial condition, or results of operations.
• The company or third parties upon whom it depends may be adversely affected by natural disasters, and business continuity and disaster recovery plans may not adequately protect from serious disasters.

Future Outlook

The company expects to continue incurring significant expenses and operating losses for the foreseeable future as product candidates advance through development and clinical trials, and regulatory approval is sought. If marketing approval is obtained, significant commercialization expenses related to product manufacturing, marketing, sales, and distribution are expected. Net losses may fluctuate significantly depending on the timing of clinical trials and R&D expenditures. Existing cash and cash equivalents are expected to fund operating expenses and capital expenditure requirements into the first quarter of 2027. The company plans to seek additional funding through public or private equity offerings, debt financings, collaborations, strategic alliances, and licensing arrangements. R&D and G&A expenses are expected to remain consistent in the near future, with potential increases if the product candidate portfolio progresses into later-stage clinical trials to support pre-commercialization efforts and additional personnel. The company expects to report updated interim safety and biomarker data from Dose 2 of the upliFT-D trial and seek regulatory feedback on registrational trial design in FTD-GRN in the first half of 2026. Additional opportunities to sublease laboratory space are being pursued to offset financial obligations.

Management Comments

• We expect that our existing cash and cash equivalents will be sufficient to fund our forecasted operating expenses and capital expenditure requirements for at least the next 12 months from the issuance date of these financial statements.
• We expect our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements into the first quarter of 2027.
• We expect to continue to incur significant expenses and operating losses for the foreseeable future as we advance our product candidates through all stages of development and clinical trials and, ultimately, seek regulatory approval.
• We expect that the reduction of expenses related to the Outlicensed Programs pursuant to the Outlicense Transaction Agreements will offset the increased expenses of advancing our remaining product candidates. As such, we expect our research and development expenses to remain consistent in the near future.
• If our product candidate portfolio progresses into later-stage clinical trials, we expect that our research and development expenses will increase in the future to support continued research and development activities and production of clinical supply.
• We expect our general and administrative expenses to remain consistent in the near future.
• If our product candidate portfolio progresses into later-stage clinical trials, we expect that our general and administrative expenses will increase in the future to support our continued research and development activities and potential commercialization efforts.

Industry Context

The genetic medicines field, particularly for neurodegenerative diseases, is characterized by rapid technological change and intense competition. Several companies are developing gene therapies for FTD-GRN, including Prevail Therapeutics (Eli Lilly & Co) and AviadoBio Ltd (partnered with Astellas Pharma Inc.), indicating a competitive landscape. Other therapeutic approaches, including small molecules and programs targeting TDP-43 pathology, are also in preclinical or early clinical development for FTD and related neurodegenerative conditions like ALS and AD. The industry faces significant regulatory hurdles for novel gene therapies, with a limited number of approvals to date, making the development pathway uncertain and costly. There is increasing scrutiny on drug pricing and reimbursement, especially for high-cost gene therapies, which could impact commercial viability. Recent U.S. Supreme Court decisions and the Inflation Reduction Act (IRA) are creating an uncertain regulatory and pricing environment for pharmaceutical companies. The acquisition of Catalent by Novo Holdings A/S highlights ongoing consolidation and changes in the contract manufacturing sector, which could affect supply chain stability for smaller biotech firms.

Comparison to Industry Standards

• PBFT02 Biomarker Data: The robust and durable increases in CSF PGRN levels (mean 23.8 ng/mL at 18 months for Dose 1) significantly exceed the healthy adult control range (3.3 to 8.2 ng/mL), suggesting strong biological activity. The 4% increase in plasma NfL at 12 months contrasts favorably with expected increases of 28-29% per year in untreated FTD-GRN patients (based on ALLFTD natural history data and Saracino 2021), indicating potential disease modification.
• Competition in FTD-GRN: The company faces direct competition from Prevail Therapeutics Inc. (part of Eli Lilly & Co) and AviadoBio Ltd (partnered with Astellas Pharma Inc.), both conducting Phase 1/2 gene therapy trials for FTD-GRN. Other competitors include Denali Therapeutics Inc. (partnered with Takeda Pharmaceutical Company Limited) with a recombinant progranulin protein in Phase 1/2, Vesper Bio ApS with a small molecule sortilin antagonist in Phase 1/2, and Arkuda Therapeutics with a small molecule progranulin enhancer program under an agreement with Johnson & Johnson Innovative Medicine.
• Safety Profile: The occurrence of serious adverse events (VST, pulmonary embolism) in 3 out of 8 patients in the upliFT-D trial, while leading to protocol amendments (prophylactic anticoagulation), highlights the inherent risks in gene therapy development. This is a common challenge in early-stage gene therapy trials, where safety profiles are still being characterized across the industry.
• Cash Runway: Extending the cash runway into Q1 2027 through strategic restructuring and workforce reductions is a common and necessary strategy for clinical-stage biotech companies facing significant R&D costs and no product revenue, aligning with industry practices for managing liquidity in a challenging funding environment.

Corporate Governance

Legal Proceedings

• The company is a defendant in litigation with a former employee 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 contended a binding settlement agreement was reached in February 2020 for 150,000 shares of stock, not subject to the reverse stock split, while the company maintained shares would be subject to the split (1,692 adjusted shares).
• A trial in October 2024 resulted in a jury finding an agreement but agreeing with the company on the reverse split, awarding damages roughly equal to the company's offer.
• On December 12, 2024, the judge delivered a judgment in the company's favor, finding no binding agreement and no entitlement to damages.
• The plaintiff filed an appeal with the Superior Court of Pennsylvania on December 23, 2024.
• On September 25, 2025, the appellate court affirmed the judgment in favor of the company.
• On October 7, 2025, the plaintiff filed an Application for Reargument to the Superior Court of Pennsylvania.
• The company is awaiting a decision on whether the Superior Court of Pennsylvania will review the case and intends to continue to defend against this claim.
• No amounts for loss contingencies have been recorded as of September 30, 2025.

Related Party Transactions

• Gemma Biotherapeutics, Inc. (Gemma), co-founded by Dr. James Wilson (a Scientific Advisor to Passage Bio), is a related party.
• Passage Bio outlicensed PBGM01, PBKR03, and PBML04 (Outlicensed Programs) to Gemma via Amended Gemma Sublicenses, entitling Passage Bio to initial payments ($7.5 million collected of $15.0 million total), contingent business milestone payments ($5.0 million), development/commercial milestone payments (up to $114.0 million), and single-digit royalties.
• Gemma is responsible for payments to Penn related to the Outlicensed Programs.
• Passage Bio entered into a Transition Services Agreement and a Research, Collaboration and License Agreement (Gemma Collaboration Agreement) with Gemma, under which Gemma will conduct preclinical and IND-enabling work for Passage Bio's Huntington's disease program and a paused TLE program.
• Passage Bio has options to conduct mutually agreed research programs in four new CNS indications from Gemma, with a non-refundable aggregate fee of $1.0 million per indication if exercised.
• Passage Bio applied $1.5 million owed to Gemma for the Huntington's disease program against amounts due for transition services.
• The Trustees of the University of Pennsylvania (Penn) is a related party through a restructured research, collaboration, and license agreement (Penn License Agreement).
• Passage Bio retained exclusive and non-exclusive licenses to programs in FTD, GM1, Krabbe, and MLD, and certain platform technologies from Penn.
• Passage Bio is obligated to make payments of up to $16.5 million per product candidate for development milestones and up to $55.0 million in sales milestone payments per product to Penn, plus tiered royalties (mid-single digits) on annual worldwide net sales and a percentage of sublicensing income (mid-single digits to low double digits).

Stakeholder Impact

• Shareholders: Positively impacted by reduced net losses, extended cash runway, promising early clinical data for PBFT02, and potential future milestone/royalty payments. Negatively impacted by dilution risk from future capital raises, stock price volatility, impact of 1-for-20 reverse stock split on liquidity and perception, ongoing accumulated deficit, and no anticipated cash dividends.
• Employees: Negatively impacted by a workforce reduction of approximately 55% in January 2025, leading to job losses and potential impact on morale and retention. Continued development of the lead candidate offers future potential, but overall uncertainty remains.
• Customers (Future Patients): Positively impacted by the continued development of PBFT02 for FTD-GRN, FTD-C9orf72, and ALS, offering hope for new treatments for severe neurodegenerative diseases with unmet needs. Negatively impacted by clinical trial risks (SAEs, delays) and the uncertainty of regulatory approval and potential high cost of future therapies.
• Suppliers/Creditors: Neutral to positively impacted by improved cash position and extended runway, which may reduce immediate credit risk. Negatively impacted by reliance on third-party manufacturers and suppliers, which carries risks of supply interruptions or quality issues.
• Regulatory Authorities: Neutral impact from ongoing engagement with the FDA (Type D meeting, regulatory feedback for registrational trial design). SAEs in trials require protocol amendments and close monitoring.

Next Steps

• Report updated interim safety and biomarker data from Dose 2 of the upliFT-D trial in the first half of 2026.
• Seek regulatory feedback on registrational trial design in FTD-GRN in the first half of 2026.
• Continue enrolling Cohort 3 (FTD-GRN patients) and Cohort 4 (FTD-C9orf72 patients) in the upliFT-D study.
• Pursue additional opportunities to sublease laboratory space in Hopewell, New Jersey.
• Continue to defend against the former employee's appeal in the legal proceeding.
• Evaluate the impact of new accounting guidance (ASU 2023-09, ASU 2024-03, ASU 2025-06) on disclosures and financial statements.

Key Dates

Recommendation

Passage Bio has demonstrated improved financial discipline by significantly reducing net losses and extending its cash runway into Q1 2027 through strategic restructuring and workforce reductions. The early clinical data for PBFT02 in FTD-GRN, showing robust PGRN increases and a favorable trend in NfL, is promising and supports continued development into broader indications like FTD-C9orf72 and ALS. The outlicensing of pediatric programs to Gemma also reduces R&D burden and offers future revenue potential. However, the company remains a clinical-stage entity with no commercial products, an accumulated deficit of $691.8 million, and a clear need for substantial additional capital beyond 2027. The occurrence of serious adverse events in the PBFT02 trial, while addressed with protocol amendments, highlights the inherent high risks of gene therapy development. The recent reverse stock split also reflects past challenges in maintaining market value. Given the mix of positive clinical and financial management steps against the backdrop of significant long-term funding needs and high development risks, a 'Hold' recommendation is appropriate. Investors should monitor future clinical trial results, particularly safety data from later cohorts, and the company's ability to secure additional financing on favorable terms.

Keywords

Genetic medicines, Neurodegenerative diseases, Gene therapy, FTD-GRN, PBFT02, Clinical stage, AAV1, Progranulin, UpliFT-D, FTD-C9orf72, ALS, AD, Preclinical, Cash runway, Reverse stock split, SEC filing, 10-Q, Biotechnology, Rare disease, Orphan drug, Gemma Biotherapeutics, University of Pennsylvania, Catalent