Business Context and Reporting Period
Gossamer Bio, Inc. is a clinical-stage biopharmaceutical company developing therapeutics in immunology, inflammation and oncology. This unaudited Form 10-Q covers the three and nine months ended September 30, 2022.
- Lead program: seralutinib for pulmonary arterial hypertension (PAH); Phase 2 TORREY enrollment was completed in the second quarter of 2022.
- Other key programs: GB5121 for relapsed/refractory primary CNS lymphoma and GB7208 for multiple sclerosis.
- The company has not generated product revenue and expects significant operating losses for the foreseeable future.
Financial Highlights
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $44.5 million | $43.2 million | $129.4 million | $129.3 million |
| General and administrative expense | $11.5 million | $12.5 million | $34.8 million | $35.1 million |
| Total operating expenses | $56.0 million | $55.7 million | $164.2 million | $164.5 million |
| Net loss | $59.4 million | $60.2 million | $173.6 million | $177.7 million |
| Net loss per share | $0.65 | $0.80 | $2.14 | $2.38 |
- Gross profit and operating margin are not meaningful because the company has no revenue; operating loss was $56.0 million in the third quarter and $164.2 million for the nine-month period.
- Cash, cash equivalents and marketable securities totaled $304.4 million at September 30, 2022, consisting of $153.5 million of cash and cash equivalents and $150.9 million of marketable securities.
- Net cash used in operating activities was $139.3 million for the first nine months of 2022, compared with $148.4 million in the prior-year period.
- Net cash used in investing activities was $9.5 million, while financing activities provided $120.0 million, principally from the July 2022 private placement.
- Cash, cash equivalents and restricted cash declined by $30.0 million during the first nine months, ending at $153.5 million.
- Stock-based compensation expense was $31.1 million for the first nine months, compared with $24.3 million in 2021.
- Total debt was $26.4 million net of discount and issuance costs, including $11.6 million classified as current, and the carrying value of the 5.00% convertible senior notes due 2027 was $195.5 million.
- Total liabilities were $267.2 million and stockholders’ equity was $56.4 million at September 30, 2022. Accumulated deficit was $976.5 million.
Material Changes Versus the Prior Comparable Period
- Third-quarter net loss improved by $0.9 million, and nine-month net loss improved by $4.1 million, primarily because of lower interest expense following adoption of ASU 2020-06.
- Third-quarter research and development expense increased $1.3 million. Seralutinib and GB5121 spending increased, partially offset by lower GB004 and discontinued-program costs.
- Nine-month research and development expense was essentially flat. Seralutinib spending increased $8.6 million and GB5121 spending increased $19.4 million, offset by lower GB004, other-program and terminated-program spending.
- General and administrative expense declined $1.0 million in the quarter and $0.3 million for the nine-month period, primarily because 2021 included securities class-action settlement accrual costs.
- On July 15, 2022, the company issued 16.6 million common shares in a private placement for approximately $119.9 million net proceeds. Shares outstanding increased to approximately 93.9 million at September 30, 2022 from 75.8 million at December 31, 2021.
- Adoption of ASU 2020-06 increased the carrying value of convertible senior notes by $44.8 million, reduced additional paid-in capital by $53.5 million and increased beginning accumulated deficit by $8.7 million.
- The GB004 license agreement was terminated on July 24, 2022.
Guidance, Outlook, Risks and Unusual Items
- Management expected topline results from the Phase 2 TORREY study of seralutinib in the fourth quarter of 2022 and, subject to those results, expected to initiate a registrational Phase 3 PAH program in the third quarter of 2023.
- Subject to preclinical results and the seralutinib Phase 2 outcome, management expected to file a GB7208 Investigational New Drug application in the second half of 2023.
- Based on its operating plan, management believed existing cash, cash equivalents, marketable securities and access to the Credit Facility would fund operations into the second quarter of 2024. The filing cautions that actual cash usage could be materially higher and the estimate is subject to uncertainty.
- No Credit Facility tranches were available to be drawn at September 30, 2022. The company was required to begin principal amortization in July 2022 and was in compliance with its debt covenants and minimum-cash covenant.
- The company expects to require additional capital through equity, debt, collaborations, licenses or other arrangements. Additional equity or convertible-debt financing could dilute existing stockholders, while debt financing could impose restrictive covenants.
- COVID-19-related staffing shortages and site disruptions have previously delayed clinical-trial enrollment and could continue to affect trial timing, data readouts, manufacturing, costs and capital needs.
- The company remains exposed to clinical, regulatory, manufacturing, intellectual-property and commercialization risks and may never achieve profitability or generate product revenue.
- A securities class-action settlement was approved on September 30, 2022. The company paid approximately $2.4 million; the related charge had been recorded in 2021.
- Potential future obligations include up to $58.0 million of development and regulatory milestones, $45.0 million of commercial milestones and $190.0 million of sales milestones under the seralutinib license, plus tiered royalties. Timing and likelihood were not estimable.
Important Facts for Investors to Verify
- Actual timing and results of the seralutinib TORREY Phase 2 study and any Phase 3 initiation.
- Whether the company can maintain its stated funding runway into the second quarter of 2024 without additional financing.
- Availability and conditions of the remaining Credit Facility tranche, including clinical milestones and minimum-cash requirements.
- Clinical progress, safety, enrollment and financing needs for GB5121 and GB7208.
- Potential dilution from the July 2022 equity financing, outstanding options, restricted shares and convertible notes; the filing identified approximately 27.0 million potentially dilutive securities at September 30, 2022.
- Future milestone, royalty, lease, debt-service and other contractual obligations, including the 2027 Notes and secured Credit Facility.
- Continuing effects of COVID-19 and other clinical-site or vendor disruptions on development timelines and cash requirements.