Gossamer Bio, Inc. — Form 10-Q Summary
Reporting period: Quarter and nine months ended September 30, 2020; filed November 10, 2020. Gossamer Bio is a clinical-stage biopharmaceutical company developing candidates in immunology, inflammation and oncology. The company had no product revenue and remains pre-commercial.
Financial position and key metrics
| Metric | Three months ended September 30 | Nine months ended September 30 |
|---|---|---|
| Research and development expense | $41.8 million, versus $40.1 million | $121.9 million, versus $100.8 million |
| In-process R&D expense | $0.3 million, versus none | $18.1 million, versus $2.0 million |
| General and administrative expense | $11.4 million, versus $9.8 million | $33.9 million, versus $27.5 million |
| Net loss | $57.8 million, versus $48.5 million | $178.8 million, versus $125.6 million |
| Basic and diluted loss per share | $0.80 | $2.67 |
| Net cash used in operating activities | Not separately provided | $139.6 million, versus $100.7 million |
There is no meaningful gross or operating margin because the company has not generated revenue. Operating loss was $53.6 million for the quarter and $173.9 million for the nine-month period. Other expense was $4.2 million for the quarter and $4.9 million for the nine-month period, primarily reflecting higher interest expense and lower investment income.
- Cash and cash equivalents were $462.0 million at September 30, 2020, compared with $135.1 million at December 31, 2019.
- Marketable securities were $93.4 million, resulting in cash, cash equivalents and marketable securities of approximately $555.4 million.
- Total assets were $584.2 million and accumulated deficit was $512.9 million.
- Long-term debt was $28.7 million under the Credit Facility, with $120.0 million of additional committed tranches undrawn and subject to conditions.
- The company issued $200.0 million of 5.00% convertible senior notes due 2027, recorded at a net carrying amount of $142.2 million, and received net proceeds of approximately $193.6 million.
- The company also issued 9.4 million common shares for net proceeds of approximately $117.1 million.
- Net cash provided by financing activities was $312.3 million; net cash provided by investing activities was $154.2 million, primarily from maturities and sales of marketable securities.
Material changes versus the prior comparable period
- Nine-month operating expenses increased $43.5 million, or approximately 33%, to $173.9 million.
- Research and development expense increased $21.1 million, primarily due to higher personnel costs and preclinical study costs.
- In-process R&D increased $16.1 million, primarily due to a $15.0 million upfront payment to Aerpio related to the GB004 license amendment.
- General and administrative expense increased $6.3 million, including a $4.5 million increase in stock-based compensation and higher personnel costs.
- Net loss increased $53.1 million for the nine-month period, while operating cash burn increased $38.9 million.
- Interest expense increased substantially following issuance of the convertible notes and existing debt, causing other income in 2019 to become other expense in 2020.
- Stock-based compensation expense increased to $26.1 million from $14.0 million for the nine-month period.
Guidance, outlook, risks and unusual items
- Management expected existing cash, cash equivalents, marketable securities and Credit Facility access to fund operations into the second half of 2023, while noting that this estimate is subject to substantial uncertainty.
- The company expects significant operating losses and additional capital requirements for the foreseeable future and may never become profitable. Potential funding sources include equity, debt, collaborations and licensing arrangements.
- COVID-19 temporarily paused enrollment in the GB002 Phase 1b PAH trial and could delay clinical-trial initiation, enrollment, monitoring, data readouts and regulatory timelines. At the filing date, the company expected GB002 Phase 1b topline results in the fourth quarter of 2020.
- The company expected to commence the GB002 TORREY Phase 2 trial in the fourth quarter of 2020, with topline results targeted for the first half of 2022, subject to pandemic-related developments.
- The company expected to commence the GB004 SHIFT-UC Phase 2 trial in the fourth quarter of 2020, with topline results targeted for the first half of 2022, also subject to COVID-19 developments.
- The filing reports subsequent October 2020 topline results for GB001. The LEDA Phase 2b trial did not meet its primary endpoint, although two of three drug arms improved a key secondary endpoint. The TITAN Phase 2 trial did not meet its primary or secondary endpoints, and the company stated it would not pursue further GB001 development in chronic rhinosinusitis.
- Potential contingent obligations include development, regulatory and commercial milestones and royalties under licenses for GB002, GB004 and GB1275; no unaccrued milestones were recorded because the contingencies had not been met.
- A putative securities class action alleges misleading statements and omissions relating to the IPO and subsequent disclosures. The company could not estimate a reasonably possible loss or range of loss.
- The company was in compliance with Credit Facility and convertible-note covenants as of September 30, 2020. The Credit Facility requires unrestricted cash of at least 25% of outstanding term-loan principal.
Investor verification checklist
- Verify the cash runway assumptions against actual clinical spending, trial delays and availability conditions for the undrawn Credit Facility tranches.
- Assess the impact of the GB001 LEDA and TITAN results on the company’s pipeline, partnership prospects and future R&D allocation.
- Review conversion, dilution and interest implications of the $200.0 million convertible notes, including the approximately 12.3 million potentially issuable shares disclosed as anti-dilutive.
- Monitor COVID-19-related enrollment and data-readout delays for GB002 and GB004.
- Evaluate contingent milestone, royalty and licensing obligations that are not reflected as liabilities.
- Follow the securities litigation, including any amended complaint, motions to dismiss and potential financial exposure.