Gossamer Bio, Inc. annual report, FY2019

Gossamer Bio, Inc. 2019 Form 10-K Summary

Business context and reporting period

Gossamer Bio is a clinical-stage biopharmaceutical company focused on immunology, inflammation and oncology. The filing covers the fiscal year ended December 31, 2019, with unaudited quarterly information for the fourth quarter ended December 31, 2019. The company had four clinical-stage product candidates and multiple preclinical programs, but no approved products or product revenue.

GB001: Oral DP2 antagonist for eosinophilic asthma and other allergic conditions.
GB002: Inhaled PDGF receptor kinase inhibitor for pulmonary arterial hypertension.
GB004: Gut-targeted HIF-1α stabilizer for inflammatory bowel disease.
GB1275: Oral CD11b modulator for selected solid tumors.

Financial performance and key metrics

Metric	2019	2018	Change
Revenue	$0	$0	No product revenue
Research and development expense	$143.4 million	$55.3 million	+$88.1 million
In-process research and development	$3.6 million	$49.7 million	-$46.1 million
General and administrative expense	$39.1 million	$44.1 million	-$4.9 million
Total operating expenses	$186.1 million	$149.0 million	+$37.1 million
Loss from operations	$(186.1) million	$(149.0) million	Loss increased
Other income, net	$5.8 million	$2.0 million	+$3.8 million
Net loss	$(180.3) million	$(147.0) million	Loss increased by $33.3 million
Net loss per share	$(3.29)	$(22.59)	Per-share loss improved due to increased share count
Net cash used in operating activities	$(144.8) million	$(51.0) million	Cash use increased
Cash, cash equivalents and marketable securities	$401.8 million	$228.9 million	+$173.0 million

Fourth-quarter 2019 operating loss was $55.8 million and net loss was $54.7 million, compared with a $49.4 million net loss in the fourth quarter of 2018. Fourth-quarter basic and diluted loss per share was $0.89.

Research and development spending increased primarily because of higher clinical and preclinical activity for GB002, GB001, GB004 and GB1275, as well as increased personnel and related costs. The 2018 results included significant nonrecurring or acquisition-related in-process research and development charges, including the $20.0 million GB004 upfront payment and amounts related to the GB001 and GB1275 transactions.

Liquidity, debt and capital resources

Year-end cash and cash equivalents were $135.1 million, and marketable securities were $266.7 million.
Working capital was $372.4 million; total assets were $426.6 million and total liabilities were $74.1 million.
Financing activities provided $321.6 million in 2019, including approximately $291.3 million of net IPO proceeds and $28.2 million of net proceeds from debt financing.
The May 2019 credit facility provides up to $150.0 million of term-loan commitments. The company had drawn $30.0 million at year-end, with $120.0 million available in additional tranches subject to milestones, cash requirements and other conditions.
Long-term debt was $28.5 million net of debt discount and issuance costs. Interest-only payments are required before June 2021, with scheduled principal amortization beginning in June 2021 and maturity in May 2024.
The credit facility is secured by substantially all of the company’s and domestic subsidiaries’ personal property, including intellectual property, and includes a minimum cash covenant and other restrictive covenants.
Management stated that existing cash, cash equivalents and marketable securities should fund operations for at least 12 months from the filing date, although additional financing will be required to continue development over the longer term.

Material changes versus the prior comparable period

R&D expense rose 159% to $143.4 million as the pipeline advanced and clinical activity expanded.
Total operating expenses increased 25% to $186.1 million, driving a larger operating loss.
Net loss increased from $147.0 million to $180.3 million, while net loss per share declined substantially because 2019 included the IPO and conversion of preferred stock into common stock.
Operating cash burn increased from $51.0 million to $144.8 million.
Liquidity strengthened materially following the February 2019 IPO, which generated approximately $291.3 million in net proceeds.
Preferred stock converted into common stock upon the IPO; year-end stockholders’ equity was $352.5 million versus a $120.1 million deficit at December 31, 2018.
The company adopted new lease accounting guidance in 2019, recording operating lease right-of-use assets and liabilities.
GB1275 entered a Phase 1/2 oncology study in the third quarter of 2019, and the company entered a clinical trial collaboration and supply agreement with Merck for combination treatment with pembrolizumab.

Guidance, outlook, commentary and risks

Management expected an interim analysis of the 481-patient GB001 LEDA Phase 2b asthma trial in the second quarter of 2020 and full results in the second half of 2020. A positive interim result would support preparation for Phase 3.
Topline results from the 97-patient GB001 TITAN chronic rhinosinusitis trial were expected in the second half of 2020.
Management planned a GB002 Phase 2 PAH trial in the second half of 2020 and expected preliminary Phase 1b data in the second quarter of 2020.
Topline results from the 34-patient GB004 Phase 1b ulcerative colitis trial were expected in the second quarter of 2020.
Initial GB1275 Phase 1/2 oncology data were expected in the second half of 2020.
The company expects substantial additional operating losses and does not expect product revenue for several years, if ever.
Key development risks include clinical-trial failure or delay, patient enrollment challenges, adverse events, regulatory uncertainty, reliance on contract research organizations and third-party manufacturers, competition, intellectual-property disputes, and the need for additional capital.
The filing specifically identified COVID-19 as a potential source of disruption to clinical trials, manufacturing, vendors, regulators and capital markets. The filing was signed March 24, 2020, so the ultimate financial impact was not clear.
GB001 previously failed to meet the primary FEV₁ endpoint in one Phase 2 trial, although another Japanese Phase 2 study showed improvement in asthma worsening measures. A serious adverse event of intrahepatic cholestasis was reported at a high GB001 dose in a Phase 1 study.
There were no material legal proceedings reported. The company’s internal control over financial reporting was assessed as effective, and no auditor attestation was required because Gossamer Bio remained an emerging growth company.

Most important facts for investors to verify

Whether GB001’s Phase 2b LEDA interim and final results support advancement to Phase 3, including efficacy, safety and liver-related findings.
Whether the company’s cash runway remains consistent with management’s stated forecast after incorporating ongoing clinical spending, COVID-19 effects and any additional financing.
Availability and conditions for the remaining $120.0 million under the credit facility, including clinical milestones, minimum cash requirements and covenant compliance.
Clinical-trial enrollment, timing and data quality for GB002, GB004 and GB1275.
Potential milestone, royalty and sublicensing obligations under the Pulmokine, Aerpio and other license agreements.
Changes in cash burn, R&D spending, stock-based compensation and dilution from equity awards or future capital raises.
Whether competing therapies or failed programs in the same mechanisms, particularly DP2 antagonists and PAH therapies, alter the commercial prospects of the pipeline.
Any subsequent developments related to COVID-19, regulatory delays, manufacturing interruptions or clinical-trial modifications.