Gossamer Bio, Inc. — Form 10-Q Summary
Business context and reporting period
Gossamer Bio is a clinical-stage biopharmaceutical company developing therapeutics for immunology, inflammation and oncology. The filing covers the quarter and nine months ended September 30, 2019. The company had four clinical-stage candidates: GB001, GB002, GB004 and GB1275, plus preclinical programs. It had not generated product revenue since inception.
Financial condition and key metrics
| Metric | Three months ended September 30 | Nine months ended September 30 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $40.1 million | $100.8 million |
| In-process R&D expense | $0 | $2.0 million |
| General and administrative expense | $9.8 million | $27.5 million |
| Total operating expenses | $50.0 million | $130.4 million |
| Loss from operations | $(50.0) million | $(130.4) million |
| Other income, net | $1.5 million | $4.7 million |
| Net loss | $(48.5) million | $(125.6) million |
| Net loss per share | $(0.80) | $(2.39) |
Operating and net profit margins were not meaningful because the company had no revenue and incurred operating losses. Cash used in operating activities was $100.7 million for the nine months, compared with $26.0 million in the prior-year period. Investing activities used $194.1 million, primarily reflecting purchases of marketable securities. Financing activities provided $320.1 million, including $291.3 million of net IPO proceeds and $28.2 million of net debt proceeds.
At September 30, 2019, cash and cash equivalents were $130.7 million, marketable securities were $315.8 million, and total cash, cash equivalents and marketable securities were approximately $446.5 million. Total assets were $469.8 million, compared with $239.4 million at December 31, 2018. Long-term debt was $28.4 million, representing a $30.0 million term loan net of debt discount and issuance costs. Total liabilities were $70.9 million, and stockholders’ equity was $398.9 million.
Material changes versus the prior comparable period
- Third-quarter R&D expense increased $21.3 million, or approximately 113%, to $40.1 million, driven by higher clinical and preclinical spending across GB1275, GB001, GB004, GB002 and other programs, as well as personnel costs.
- Nine-month R&D expense increased $71.4 million, or approximately 243%, to $100.8 million, reflecting substantial expansion of development activities across all four lead programs.
- IPR&D expense declined $8.3 million in the quarter and $47.7 million for the nine months because the 2018 periods included significant upfront acquisition and licensing costs.
- G&A expense declined $13.1 million in the quarter and $2.6 million for the nine months, primarily due to lower stock-based compensation, partly offset by higher personnel, professional, legal and insurance costs.
- Nine-month net loss increased $17.4 million to $125.6 million, despite higher investment income of $4.7 million.
- The company completed its February 2019 IPO, issuing 19,837,500 shares at $16.00 per share and receiving $291.3 million in net proceeds. Outstanding preferred stock automatically converted into common stock.
- Cash resources increased materially, while the share count also increased. As of September 30, 2019, 60,984,958 common shares were outstanding; 66,038,122 shares had been issued.
Guidance, outlook, risks and unusual items
- Management expected an interim analysis of the GB001 LEDA Phase 2b asthma trial in the first half of 2020 and full results in the second half of 2020. Topline data for GB001 in chronic rhinosinusitis and GB004 in ulcerative colitis were also expected in the second half of 2020 and first half of 2020, respectively.
- The company planned to initiate or continue additional trials for GB001, GB002, GB004 and GB1275 during late 2019 and 2020, including a GB1275 Phase 1/2 oncology trial initiated in the third quarter of 2019.
- Management believed existing cash, cash equivalents and marketable securities were sufficient to fund operations for at least the next twelve months. The company nevertheless expected significant future losses and stated that additional equity, debt, collaboration, licensing or other financing may be required.
- The credit facility permits up to $150.0 million of term loans, of which $30.0 million had been drawn. The remaining $120.0 million was subject to clinical milestones, availability periods, minimum cash requirements and other conditions. The facility is secured by substantially all of the company’s and domestic subsidiaries’ personal property, including intellectual property.
- The debt facility requires unrestricted cash of at least 25% of outstanding principal and contains restrictive covenants and events of default. The company reported compliance as of September 30, 2019.
- Potential contingent obligations included development, regulatory, commercial and sales milestones and royalties under license and acquisition agreements. No additional milestones had been accrued because the applicable contingencies had not been met. Known potential milestone obligations included up to $63.0 million for GB002, $55.0 million for GB004, and $62.0 million for GB1275, in each case excluding other commercial or sales milestones where applicable.
- The company adopted the new lease standard on January 1, 2019, recording approximately $12.5 million of right-of-use assets and $13.2 million of lease liabilities. Total operating lease liability at September 30, 2019 was $11.6 million.
- Stock-based compensation was $5.7 million for the quarter and $14.0 million for the nine months. Unrecognized compensation expense totaled $57.8 million for stock options and $14.6 million for restricted stock at September 30, 2019.
- The filing reported no material legal proceedings, no material changes to previously disclosed risk factors, no off-balance-sheet arrangements and no material subsequent events through November 12, 2019.
Most important facts for investors to verify
- Whether clinical milestones and expected 2020 readouts for GB001, GB002, GB004 and GB1275 occur on schedule and produce supportive results.
- The company’s cash-burn rate relative to its approximately $446.5 million liquidity position and the timing of any additional financing.
- Availability and conditions for the remaining $120.0 million under the credit facility, including clinical milestones and minimum-cash requirements.
- Future dilution from stock options, restricted stock, equity offerings and potential financing transactions.
- Potential milestone, royalty and other contingent payment obligations under the company’s licensing and acquisition agreements.
- Whether rising R&D costs and continued operating losses remain consistent with management’s stated funding outlook.