I had not used Panorama until I read this question, and I loaded two pictures I hand, neither of the same content and pressed for the panorama.
My results were that picture 1 had its right side feathered and blended into the left side of picture two and one seamless image was created. I don't think I have the correct images to create something but the photos themselves did not seem distored.
Can you explain what you mean by distorted and cut off?