8-K: Passage Bio Out-Licenses Three Gene Therapy Programs, Extends Cash Runway to Q2 2026

Passage Bio has out-licensed three of its pediatric gene therapy programs to Gemma Biotherapeutics, securing upfront payments and extending its cash runway to the end of the second quarter of 2026.

Summary

• Passage Bio has entered into a series of agreements with Gemma Biotherapeutics, a new company co-founded by Dr. James Wilson, to out-license three of its gene therapy programs.
• The out-licensed programs include PBGM01 for GM1 gangliosidosis, PBKR03 for Krabbe disease, and PBML04 for metachromatic leukodystrophy.
• Passage Bio will receive an initial payment of $10 million for clinical product supply, with the potential for an additional $10 million upon Gemma achieving certain business milestones.
• The company is also eligible for up to $114 million in development and commercial milestone payments, plus single-digit royalties on net sales.
• Gemma will assume all financial obligations to the University of Pennsylvania related to the out-licensed programs.
• Passage Bio will provide transitional services to Gemma for up to six months, with reimbursement for services retroactive to March 1, 2024.
• A new research collaboration with Gemma will see Gemma conduct preclinical work for Passage Bio's Huntington's disease program and a paused Temporal Lobe Epilepsy program.
• Gemma will also grant Passage Bio options to conduct new research programs in four new central nervous system indications.
• The agreements have resulted in an amendment to Passage Bio's agreement with the University of Pennsylvania, terminating funding for discovery research and other programs.
• Passage Bio's cash, cash equivalents, and marketable securities were approximately $91.8 million as of June 30, 2024.
• The company expects its cash position, along with the initial payments from Gemma, to fund operations through the end of the second quarter of 2026.

Sentiment

Score: 8

Explanation: The document conveys a positive sentiment due to the strategic out-licensing agreement, extended cash runway, and new research collaboration. The company is pivoting to focus on its lead asset and has secured a financial position that should allow it to execute its strategy. The resignation of the Chief Medical Officer is a minor negative, but is not expected to have a significant impact.

Positives

• The out-licensing agreement provides Passage Bio with significant upfront cash and potential future revenue through milestones and royalties.
• The extended cash runway to the end of Q2 2026 provides financial stability and allows the company to focus on its lead asset, PBFT02.
• The new research collaboration with Gemma allows Passage Bio to continue research in key areas without direct funding.
• Gemma assuming financial obligations to the University of Pennsylvania reduces Passage Bio's financial burden.
• The company has secured options to initiate new research programs in four novel central nervous system indications.

Negatives

• Passage Bio is terminating its funding of discovery research and other programs with the University of Pennsylvania.
• The company is no longer directly developing the out-licensed pediatric gene therapy programs.
• The company's Chief Medical Officer has resigned, effective August 2, 2024.

Risks

• The company's ability to achieve future milestone payments is dependent on Gemma's success in developing and commercializing the out-licensed programs.
• The company's financial results are preliminary and unaudited, and may change.
• The company is dependent on third parties for the development and manufacture of product candidates.
• There are risks associated with clinical trials, including the possibility of adverse safety events and regulatory delays.
• The company faces risks related to protecting and enforcing its intellectual property.

Future Outlook

The company expects its current cash position, along with the initial payments from Gemma, to fund operations through the end of the second quarter of 2026. The company will focus on advancing its lead asset, PBFT02, and exploring its potential in additional patient populations.

Management Comments

• Will Chou, M.D., president and chief executive officer of Passage Bio, stated that the out-licensing transaction is a key initiative in fulfilling the company's strategy to focus on advancing PBFT02.
• James M. Wilson, M.D., Ph.D., co-founder of Gemma Biotherapeutics, expressed excitement about advancing the three therapies from Passage Bio and continuing research collaboration efforts.
• Passage Bio has executed a pivot in strategy, focusing on exploring the benefits of elevated progranulin in multiple adult neurodegenerative disorders.

Industry Context

This announcement reflects a trend in the biotech industry where companies are focusing on core assets and out-licensing other programs to extend cash runways and streamline operations. The collaboration with a company co-founded by a prominent figure like Dr. James Wilson also highlights the importance of strategic partnerships in the development of novel therapies.

Comparison to Industry Standards

• Out-licensing agreements are common in the biotech industry, particularly for companies focusing on specific therapeutic areas. For example, companies like BioMarin and Sarepta Therapeutics have similar agreements for their gene therapy programs.
• The milestone payments and royalty structure are typical for such agreements, with the specific amounts varying based on the stage of development and market potential of the assets.
• The cash runway extension to Q2 2026 is a positive development, as many biotech companies face challenges in securing funding for long-term research and development. Companies like Voyager Therapeutics and Audentes Therapeutics have also focused on extending their cash runways through strategic transactions.
• The focus on adult neurodegenerative diseases aligns with the growing interest in therapies for conditions like frontotemporal dementia, where there is a significant unmet medical need. Companies like Denali Therapeutics and Prevail Therapeutics are also working in this space.

Management Changes

Stakeholder Impact

• Shareholders will likely view the out-licensing agreement and extended cash runway positively.
• Employees may experience changes in roles and responsibilities due to the strategic shift.
• Patients with neurodegenerative diseases may benefit from the continued development of PBFT02 and the out-licensed programs.
• The University of Pennsylvania will no longer receive funding for discovery research from Passage Bio related to the out-licensed programs.
• Gemma Biotherapeutics will become a key partner for Passage Bio in the development of genetic medicines.

Next Steps

• Passage Bio will focus on advancing its lead asset, PBFT02, in multiple adult neurodegenerative diseases.
• Gemma Biotherapeutics will advance the development of the out-licensed pediatric gene therapy programs.
• Passage Bio will continue its preclinical research in high-potential CNS indications.
• The company will file its Quarterly Report on Form 10-Q for the quarter ended September 30, 2024, which will include the agreements as exhibits.
• The company will search for a new Chief Medical Officer.

Key Dates

Keywords

gene therapy, out-licensing, biotechnology, neurodegenerative diseases, clinical trials, milestone payments, royalties, research collaboration, CNS, Huntington's disease, lysosomal storage disease, cash runway