Gossamer Bio, Inc. — 2022 Q1 Form 10-Q Summary
Business context and reporting period
Gossamer Bio is a clinical-stage biopharmaceutical company developing therapies in immunology, inflammation and oncology. The filing covers the three months ended March 31, 2022; financial statements are unaudited.
The principal programs were seralutinib for pulmonary arterial hypertension, GB5121 for relapsed/refractory primary CNS lymphoma, and GB7208 for multiple sclerosis. The company has generated no product revenue and does not expect product sales for the foreseeable future.
Financial condition and key metrics
| Metric | Q1 2022 | Q1 2021 / comparison |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $42.3 million | $41.8 million |
| General and administrative expense | $12.0 million | $11.3 million |
| Total operating expenses | $54.3 million | $53.2 million |
| Loss from operations | $(54.3) million | $(53.2) million |
| Net loss | $(57.8) million | $(57.6) million |
| Net loss per share | $(0.76) | $(0.78) |
| Net cash used in operating activities | $(53.5) million | $(58.9) million |
Because the company has no revenue, gross and operating margins are not meaningful. Stock-based compensation was $11.0 million, compared with $8.7 million in the prior-year quarter.
At March 31, 2022, cash and cash equivalents were $138.9 million, marketable securities were $132.7 million, and restricted cash was $0.1 million. Cash, cash equivalents and marketable securities totaled $271.6 million. Total assets were $294.7 million, compared with $343.7 million at year-end 2021. The accumulated deficit was $860.6 million.
Debt included $195.1 million in net carrying value of 5.00% convertible senior notes due 2027 and $29.2 million in net carrying value under the Credit Facility. The Credit Facility had $30.0 million of principal outstanding, was interest-only through June 30, 2022, and begins principal amortization on July 1, 2022. No additional Credit Facility tranches were available as of March 31, 2022.
Material changes versus the prior comparable period
- Research and development expense increased $0.5 million, primarily due to higher spending on GB5121, seralutinib and GB004, partly offset by lower spending on discontinued or reduced-priority programs.
- General and administrative expense increased $0.7 million, principally from higher stock-based compensation.
- Net loss increased modestly by $0.1 million despite a $1.1 million increase in operating expenses.
- Interest expense declined $1.3 million because adoption of ASU 2020-06 reduced amortization of the convertible notes’ former debt discount.
- Operating cash burn improved by $5.4 million year over year, although cash, cash equivalents and restricted cash declined $44.5 million during the quarter.
- On January 1, 2022, 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.
Guidance, outlook, risks and unusual items
- Management expected existing cash, cash equivalents and marketable securities, together with Credit Facility access, to fund operations into the second half of 2023. The filing also states that working capital was sufficient for at least the next 12 months; actual runway may differ materially.
- The company expects continued substantial operating losses and may never become profitable. Additional capital may be required through equity, debt, collaborations, licenses or other arrangements, potentially causing dilution or restricting development plans.
- Management stated that enrollment in the Phase 2 TORREY study of seralutinib was completed in the second quarter of 2022 and expected topline results in the fourth quarter of 2022.
- The company expected to begin the Phase 1b/2 STAR CNS study of GB5121 in the second quarter of 2022 and, subject to preclinical and seralutinib results, expected to initiate a GB7208 Phase 1 study in the first half of 2023.
- Subsequent to quarter-end, the company announced that the GB004 Phase 2 SHIFT-UC study failed to meet its primary and secondary endpoints, discontinued GB004 development, and notified Aadi of its intent to terminate the license effective July 24, 2022.
- COVID-19-related site staffing shortages and operational disruptions previously delayed clinical enrollment and could continue to affect trial completion, data readouts, supply chains and financing needs.
- The company recorded a $2.4 million litigation liability related to a settled IPO-related securities class action; final settlement approval was scheduled for June 24, 2022.
- License agreements may require future development, regulatory, commercial and sales milestone payments, as well as royalties. The filing states that the timing and likelihood of these payments could not be estimated.
- The company was in compliance with the Credit Facility and convertible-note covenants as of March 31, 2022, including the Credit Facility minimum unrestricted cash covenant.
Most important facts for investors to verify
- Timing and results of the seralutinib TORREY topline readout and the clinical development path for GB5121 and GB7208.
- Financial impact of discontinuing GB004, including license termination obligations and any remaining clinical or contractual costs.
- Cash runway relative to the stated second-half-2023 estimate, including the impact of Credit Facility amortization beginning July 2022.
- Future financing requirements, potential equity dilution and availability of additional debt or partnership capital.
- Terms, conversion conditions and potential dilution associated with the $200.0 million convertible notes due 2027.
- COVID-19 and other operational risks affecting clinical trial enrollment, manufacturing, vendors and regulatory timelines.
- Final approval and payment status of the approximately $2.4 million IPO-related litigation settlement.