Why did PASG's Q3 2024 earnings shock the market?

The unexpected decline in Passage Bio's (PASG) Q3 2024 earnings, with an EPS of -$0.31 and total revenue yet to be reported, has likely contributed to the market's surprise due to several factors:

1. **Earnings Surprise**: The reported EPS of -$0.31 for Q3 2024 was lower than the expected loss of -$0.23, indicating a larger-than-anticipated financial setback for the company. This negative surprise can lead to concerns among investors about the company's financial health and its ability to meet future obligations.
2. **Revenue Expectations**: The absence of reported revenue for the quarter, coupled with the expectation of zero revenue, suggests that the company did not generate any income during this period. This can be a red flag for investors regarding the company's ability to commercialize its products or services.
3. **Market Challenges**: Passage Bio has been facing a challenging market environment, which could have impacted its financial performance. The biotech sector, in particular, is known for its volatility and sensitivity to market conditions. The company's stock has hit a 52-week low, reflecting broader downturns and investor caution.
4. **Strategic Moves**: While Passage Bio has made strategic moves, such as out-licensing treatments to GEMMA Biotherapeutics, the upfront payment and potential further payments may not immediately impact revenue or earnings positively. These moves may be seen as positive long-term developments, but they can also lead to short-term financial strain.
5. **Projections and Analysts' Views**: Analysts have not anticipated the company to be profitable this year, underscoring the speculative nature of investing in early-stage biotech companies. The company's price-to-book ratio of 0.41 suggests that the stock might be undervalued relative to its assets, potentially offering a silver lining for investors looking at the long-term potential of Passage Bio's genetic medicine pipeline.

In conclusion, the combination of lower-than-expected earnings, lack of revenue, market challenges, and strategic moves can contribute to a significant earnings shock. Investors are likely reacting to these factors, leading to increased volatility in the stock and a broader impact on the company's market perception.