Ladies and gentlemen, thank you for holding. Good morning and welcome to the Passage Bio first-quarter 2020 financial and operating results conference call. [Operator Instructions]. At this time, I would like to turn it over to Zoe Mita. Zoe, please proceed..

Thank you, Operator. This morning we issued a press release that outlines the topics we plan to discuss today. This release is available on the Passage Bio website at investors.passagebio.com under the news and events section.

On today's call, Bruce Goldsmith, President and Chief Executive Officer, and Rich Morris, Chief Financial Officer, will review our first-quarter 2020 financial results and discuss recent business highlights. Gary Romano, our Chief Medical Officer, and Jill Quigley, our Chief Operating Officer, will also be available for the Q&A portion of the call.

Before we begin, please note that today's call may include a number of forward-looking statements, including, but not limited to, comments on our expectations about timing and execution of anticipated milestones, including initiation of clinical trials and the availability of clinical data from such trials; our expectations about our collaborators' and partners' ability to execute key initiatives; the ability of our lead product candidates to treat the underlying causes of their respective target monogenetic CNS disorder; manufacturing plans and strategies; trends with respect to financial performance in cash flows; the Company's ability to fund research and development programs; impacts of the COVID-19 pandemic on the Company's operations; and its ability to manage costs along with uses of cash and other matters.

These forward-looking statements are based on assumptions that are subject to risks and uncertainties that could cause the Company's actual results to differ significantly from those suggested by these statements. Given these risks and uncertainties, you should not place undue reliance on these forward-looking statements.

Please refer to the Company's filings with the SEC for information concerning risk factors that could cause its actual results to differ materially from expectations, including any forward-looking statements made on this call.

Except as required by law, the Company disclaims any obligation to publicly update or revise any forward-looking statement to account for or reflect events or circumstances that occur after this call. It is now my pleasure to pass the call over to Bruce Goldsmith.

Bruce?.

PBML04 for MLD, PBLA05 for ALS with a C9orf72 gain of function mutation, and PBCM06 for CMT2A. We are currently coordinating with GTP to conduct discovery stage preclinical studies for these programs and look forward to progressing these into IND-enabling studies.

Lastly, I want to take a moment to discuss manufacturing, which is a key aspect of our business. Earlier this quarter, we finalized a development services and clinical supply agreement with Catalant to secure clinical scale manufacturing capacity for our gene therapy programs.

This agreement formalizes the supply terms for the previously announced collaboration with Catalant for Passage Bio's dedicated manufacturing suite, which we expect to be functional by year-end.

Once it is up and running, the cGMP suite will be capable of meeting production requirements for our current lead product candidates for any clinical needs through early commercialization.

Having our own dedicated suite is an important step toward our goal of having expanded control of the supply chain, which we believe will set us up for both clinical and commercial success by allowing for greater flexibility and control in terms of scalability and prioritization as we move products through development.

And with that, I will turn the call over to Rich to give a financial and operations update..

Thank you, Bruce. As we reported in our press release this morning, we ended the quarter with cash and cash equivalents of approximately $367 million as compared to approximately $159 million as of December 31, 2019. In the first quarter of 2020, we raised approximately $228 million in net proceeds from our IPO.

We expect our current cash balance to fund our operations and clinical expenses into 2023. R&D expenses were approximately $13 million for the quarter ended March 31 compared to approximately $3 million for the same quarter in 2019.

The increase was primarily due to an increase of approximately $5 million in R&D costs incurred with Penn in connection with the preparation of several IND filings as well as an increase in other research costs of approximately $3 million as we prepare for our clinical trials to begin in the second half of 2020 and early 2021.

We also had an approximately $2 million increase in personnel-related costs and approximately $200,000 increase in facility and other costs due to increases in employee headcount in the R&D function. G&A expenses were approximately $5 million for the quarter ended March 31 compared to approximately $1 million for the same quarter in 2019.

The increase was primarily due to an approximately $2 million increase in personnel-related and share-based compensation expense due to increases in employee headcount.

Our professional fees and facility costs also increased by approximately $600,000 and approximately $800,000, respectively, as we expanded our operations to explore our research and development efforts. Net loss was approximately $18 million for the first quarter of 2020 compared to approximately $8 million in the same quarter of 2019.

Net loss per basic and diluted share was $1 in the first quarter of 2020 compared to $1.83 net loss per basic and diluted share in the first quarter of 2019. As part of ongoing efforts to continue to grow our organization, we have signed an agreement for new office space, which we will move into in early 2021.

We also continue our active recruitment efforts, focused on leveraging the burgeoning cell and gene therapy epicenter and our unique access to a strong pool of local candidates in Philadelphia.

We have made a number of key hires over the past quarter and are excited to continue to grow our team of talented, dedicated scientists and business personnel. With that, let me turn the call back to Bruce for closing remarks..

Thanks, Rich. In closing, I would like to reiterate our commitment to continue to make 2020 a transformative year for Passage Bio and the patients we serve.

As a newly public company, we believe we are well positioned with internal financial and operational strength, external collaborations, and a continued focus on healthcare providers, patients, and their families.

This is an important time for Passage Bio for the key remaining milestones in 2020, which are initiation of PBGM01 clinical study for the treatment of patients with infantile GM1, with first patient enrollment anticipated in 4Q 2020; advancement of two programs in FTD and Krabbe towards clinical study initiations in first half of 2021; and continued expansion of the clinical, manufacturing, and operations teams to support these programs.

I am absolutely confident in our team's ability to continue to execute and we look forward to updating you on our progress. We would now like to open up the call for your questions.

Operator?.

[Operator Instructions]. Our first question comes from Salveen Richter from Goldman Sachs. Your line is open..

Thanks for taking the question. This is Andrea on for Salveen. I was just hoping you could speak a little bit more on how you are thinking about conducting your trials in a COVID-19 environment. You have mentioned, I guess on this call here, that you are thinking about potentially remote enrolling patients.

And just given how rare the disease is, are there additional hurdles associated with remote versus traditional methods? And then how are you thinking about patient monitoring and data collection?.

Hi, Andrea, this is Bruce. Thanks very much for your question. So there is two aspects of what we would like to highlight for COVID-19. First, the remote monitoring that you highlighted was actually in reference to our natural history study. And after I make some introductory remarks, I will ask Gary Romano, our Chief Medical Officer, to highlight that.

That is part one. And then the second part is that we do realize that COVID-19 -- certainly we are looking at the global impact of potential delays, etc., on the trial start for GM1 -- for PBGM01 for the treatment of patients with infantile GM1.

As of today, we don't anticipate any impact on the IND filing and we are certainly in discussions with our sites as well as the network of other biopharma and clinical teams and CROs. And we certainly think that there are impacts globally around COVID-19 and site openings, etc.

But we also believe that hospitals will continue to prioritize trials with life-threatening and catastrophic illnesses to prioritize opening those. So for the PBGM01 therapeutic treatment for GM1 that we anticipate trial initiation for the back half of this year in the fourth quarter, we don't see any specific impacts on COVID-19 at this time.

What we are focused on is the identification of patients and then the subsequent safe treatment of those patients as they do come into the sites. And Gary, perhaps you can add some additional color commentary around the natural history study and the remote monitoring that we are anticipating..

Yes, thank you, Bruce. I would just add that we are putting into place capability to remotely monitor patients in a natural history study. That includes conducting the assessments of developmental scales over the phone and over video.

We are also exploring how we might use structured video data collection to evaluate patients' progress and treatment and response in the trials. This is going to start in the natural history study and the learnings that we take from that, we will apply as well to the interventional trials for patient follow-up visits as necessary..

Great. And then maybe just one additional question, if I may.

Just as it relates to the expanded collaboration with Penn, could you provide some color maybe on the thinking of what spurred the decision and why now?.

Sure, thanks, Andrea. And what we thought about is in terms of the timing, it really builds on the collaboration that we have and the successes we have had to date with Jim and the GTP team.

And what we thought about was the specific avenues of research that the GTP is conducting in terms of thinking not only of our lead programs but also our future programs.

And when we looked at the ability to not only access thinking about the next-generation capsids that GTP has been discovering and focused on but also the other technologies that they are approaching in terms of toxicity reduction approaches and delivery and formulation improvements, we thought that this was the appropriate time to build on that collaboration.

Because we want to have the ability, first of all, to continue to support innovative research. And the second is to apply that innovative research to our either ongoing programs as appropriate or future programs.

And the way we think about this is certainly the technology access, but the overarching benefit is also that we are adding 5 additional programs for an additional -- for a total of 11 programs that we could access. And the other piece was to have five years now to execute on those programs and to initiate the research.

As opposed to under the initial agreement, we would have only had two years to start that. So there are a number of reasons why we thought that this was the appropriate time to both access technology, expand the collaboration, as well as extend the time..

Great. Thanks so much..

Our next question comes from Yaron Werber from Cowen. Your line is open..

Hi, guys. This is Brendan on for Yaron. Thanks very much for taking the question and congrats on the progress so far. I actually just really wanted to ask you a little bit more broadly on kind of how you're thinking to prioritize some of the programs a little bit further down the road.

If you are still thinking to kind of really maintain initiation of Krabbe and FTD really simultaneously. And then actually beyond there how you kind of think about which opportunity to pursue first. And then also I was actually hoping to just get a little bit more kind of just your thoughts on if there is any update on the newborn screening progress.

I know this is actually going to come up quite a bit across kind of the industry and in times of COVID, so I was just wondering if there is any kind of updates there. Thanks very much..

Thank you for the question. So I will begin and I think I will make a short comment about newborn screening and maybe turn this over to Jill to expand about just our general efforts there. So in terms of FTD and Krabbe, yes, we are on track for the initiation of clinical studies in the first half of 2021.

And that remains consistent with our previous guidance and our previous statements that we think we can advance both FTD and Krabbe generally in the same quarter -- or sorry, in the same half to start the studies.

And it really depends on all of the progress towards IND filing, manufacturing, clinical site initiations, and obviously patient recruitment that will define the actual timing -- the precise timing of clinical trial initiation.

But we are building the capacity internally in terms of the clinical team and the manufacturing team in order to support the parallel development of those programs. I think that was your first question, and that remains in parallel and on track. The second question you said was how do we continue to prioritize and select new programs.

The way we think about this is we are primarily focused on the patient needs, and thinking about this both internally at Passage Bio with our advisors both at our Board level and externally, and of course, with Jim Wilson and his extensive team at GTP. So we think about patient need.

And then in our ability to derisk those with Jim and his team at GTP, in all of the aspects that we have talked about, whether that is delivery method, whether it is biodistribution, evaluating different capsids, etc., so that we can make sure that we have a differentiated and optimized approach.

So those are the ideas behind the next series of selected programs that we have in mind. And we are thinking that we can continue to diversify our portfolio as we already have accomplished with our first six programs. These are obviously rare monogenic CNS disorders, but some are very, very rare pediatric disorders.

Some are, like FTD and progranulin, a bit more expansive, etc. So we are trying to create a balanced and diversified portfolio in terms of the indications we are selecting as well. And in general, we are just engaging in active and collaboration discussions with Dr. Wilson and his team around indications with these concepts in mind.

And we will continue to do so. That was, I think, the first two questions. And then the third question was on newborn screening. And I will turn it over to Jill in a moment.

I just wanted to say that we are partnering as closely as possible in this era of COVID-19 with both advocacy groups and academic and clinical leaders to think about how to implement this and expand this not only for GM1 but also to continue to collaborate with Krabbe.

Jill, do you want to talk in general about how we think about the necessity and expansion of newborn screening?.

Sure, Bruce. Yes, newborn screening is going to be very important, of course, for early identification of patients eventually when there is a treatment available for various different diseases. We continue to have strong relationships with patient advocacy groups and KOLs.

Both patient advocacy groups and KOLs are absolutely critical as we think about newborn screening and the strategy around that to support the patients that we are serving. So we have identified a few different opportunities to support the advancement of newborn screening, specifically with GM1.

There are already programs, I think as everyone knows, in place for Krabbe. And we will continue to support those opportunities as we work towards newborn screening not only at a pilot state level but continue to try to find a way to move towards rust application..

Thanks, Jill. And putting that in context in COVID-19, which I think was also your question, yes, I think we recognize that all of the aspects of newborn screening, patient identification, patient recruitment are challenging.

So we are partnering with groups that are in touch with patients and looking to, despite COVID-19, initiate some of those programs and partnerships. But you are absolutely right that these remain significant challenges in the era of the pandemic..

Great, thanks very much..

Our next question comes from Anupam Rana from JPMorgan. Your line is open..

Hey, guys, thanks so much for taking the question. A quick one from me, and I'm sorry if you guys already answered this because I have been hopping on a few different calls this morning.

But can you give us an update on the natural history strategy for both GM1 and Krabbe specifically? It's a little bit of a follow-on to the prior question, but any update there would be helpful. Thank you..

Sure. I will make a brief a comment and then turn it over to Gary.

I think for the natural history study, we are still -- maybe Gary can comment on the number of sites we have opened and also the patient enrollment status, which has admittedly been very challenging in the COVID-19 era as well as complementary approaches that we are trying to do, both from remote screening as well as other data sources.

And then Gary, maybe you can comment on where we think we are with Krabbe from external sources..

So let me start with GM1, if you can hear me okay.

Our natural history -- our strategy for accessing natural history data for comparisons to our interventional trial data for GM1 includes firstly a prospective collection of that data in a protocol that is sponsored by the Orphan Disease Center at Penn, as you know, which is a protocol that is nearly identical to the GM1 interventional protocol that we are going to be using for our study.

And that study is running at sites around the globe, including the same sites that we are using for our interventional study, which we think will really add to the quality of that data, given that it takes into account site-specific factors. That study is -- we have three open sites as of today with several more sites coming online very soon.

We have yet to enroll a patient in that study, but we are moving to be able to enroll patients remotely and then follow those patients. And that is possible there because many of those patients are very well known and so the baseline assessments can be done remotely. They have already been clearly diagnosed by the sites.

We are going to also supplement that data from the prospective natural history study with retrospective natural history data. And we are working with some of the centers around the globe that have the most longitudinal data on these very same patients and we already have agreements in place to access that data.

So in the end, we will have prospectively collected data and retrospectively collected data for GM1. For Krabbe, our strategy is really to rely on retrospective natural history data. And that is because there is rather abundant natural history data for Krabbe disease.

For example, we are already working closely with universities across the globe who have this data. And in that case, we are writing protocols that will extract from their databases this retrospective data.

And all of this work, by the way, for GM1 and for Krabbe, we will be doing with early and often communications with regulators about our strategy, our statistical analysis strategy, for using natural history study data as comparator controls to our single arm trials..

Great, thanks for taking our question..

[Operator Instructions]. Our next question comes from Gbola Amusa from Chardan. Your line is open. .

It's Gbola Amusa from Chardan. Thanks for taking my call. So just a big picture question on your vision. I think you've mentioned becoming a premier genetic medicines company -- the premier genetic medicines company rather than just a gene therapy company.

And not to get into semantics, but could you discuss whether you have access to non-AAV-based genetic medicines capabilities coming out of UPenn with the collaboration? Or whether you hope to obtain such capabilities from an external source? And then secondly, the first quarter in terms of expenses probably isn't representative going forward.

So could you talk qualitatively or directionally about the expense ramp from 1Q to 2Q to 3Q to 4Q and then from 2020 to 2021 and 2022, given that you have a pretty long runway into 2023. I will pause there..

a goal that we want to achieve over time as those technologies and, quite frankly, the ability to address the same goal of patients with significant unmet medical need with transformative therapies comes to be realized. So I would balance the initial focus with a long-term focus in my answer to your question.

Rich, do you want to talk a little bit about the burn? Or do you have a follow-up? Sorry..

I will, after the burn question..

Great, morning. Thanks for joining the call. So obviously, the first quarter will not be reflective of the balance of the year on a quarterly basis. What you can anticipate is that obviously the quarterly expense and the expense from year-to-year will grow.

We are going to see a significant growth in headcount over the course of the year, which will affect not only the first half -- or the second half of our first-half spend this year, but then will carry forward in next year.

In addition, you will see our clinical trials -- and I will remind you this , there is three that will be ramping up mostly in the back half of this year. So there will be a significant increase in R&D expense as we turn those files on and then we will obviously have a full year worth of expense for those trials in 2021 compared to 2020.

All that has been considered in our guidance and we are pretty excited that we have a strong cash balance and then we will get into early 2023..

Great. And just a quick follow-up. I think there was a paper by Dr. Wilson in April -- it was one that went public -- in molecular therapy methods and clinical development that compared ICM injections to other types of injections for CNS indications.

Do you find that there is anything in that paper that the market underappreciates about your ICM approach?.

So I think the ICM approach as we look at the volume of publications and also our internal data, I think we believe it is a very effective and very safe approach to date. And obviously, we have to show that and demonstrate it in clinical studies as well. But we also are aware that other groups are also using ICM.

The advantage is a very good distribution and transduction that we have seen from -- in nonhuman primate studies. And we have also seen in the partnership with Penn that that study and other studies have supported a very good approach in terms of safety and delivery through the blood-brain barrier that is guided obviously by imaging.

Gary, I don't know if you have any additional comments, but I think that's the general approach. But I don't know if you have additional comments on the kind of proof of safety and efficacy of the delivery method with ICM..

No, only to reiterate that the best -- the greatest biodistribution or most complete biodistribution is seen with ICM approaches versus other intrathecal, such as lumbar puncture. And we also believe that there are important safety and biodistribution advantages over intracerebral ventricular approaches..

Great, thank you..

I am showing no further questions in the queue at this time. Ladies and gentlemen, thank you for participating in today's conference. This does conclude your program and you may now disconnect. Everyone, have a great day..