Gossamer Bio, Inc. annual report, FY2023

Gossamer Bio, Inc. — Form 10-K Summary

Reporting period: Fiscal year ended December 31, 2023; filed March 5, 2024. This is an annual filing rather than a quarterly report, although the request identifies 2023 Q4. Gossamer Bio is a clinical-stage biopharmaceutical company focused primarily on seralutinib, an investigational inhaled kinase inhibitor for pulmonary arterial hypertension (PAH), with potential expansion into pulmonary hypertension associated with interstitial lung disease (PH-ILD).

Key Financial Metrics

Metric	FY 2023	FY 2022	Change
Revenue	$0	$0	No product revenue
Research and development expense	$135.3 million	$170.9 million	Down $35.6 million
In-process R&D expense	$10.0 million	$0.1 million	Up $9.9 million
General and administrative expense	$38.5 million	$47.6 million	Down $9.2 million
Total operating expenses	$183.8 million	$218.6 million	Down $34.8 million
Net loss	$179.8 million	$229.4 million	Loss narrowed $49.6 million
Basic and diluted loss per share	$1.18	$2.71	Improved, partly reflecting higher share count
Net cash used in operating activities	$159.2 million	$187.0 million	Use decreased $27.9 million
Cash, cash equivalents and marketable securities	$296.4 million	$255.7 million	Up $40.7 million

Seralutinib research and development spending increased to $93.2 million from $63.0 million as the company advanced the program, while spending on terminated programs declined to $42.1 million from $107.9 million. The $10.0 million in-process R&D charge represented a milestone obligation triggered by initiation of the Phase 3 trial and was paid in January 2024.

Cash, cash equivalents and marketable securities totaled $296.4 million at year-end, consisting of $32.1 million of cash and cash equivalents and $264.3 million of marketable securities. The company reported total assets of $311.9 million, total liabilities of $249.1 million and stockholders’ equity of $62.8 million.

Debt and Liquidity

Credit Facility debt totaled $12.6 million principal, or $12.4 million net of discounts, at December 31, 2023. The facility matures January 1, 2025 and is secured by substantially all of the company’s and domestic subsidiaries’ personal property, including intellectual property.
The company had $200.0 million principal amount of 5.00% convertible senior notes due 2027, carried at $196.6 million net of discounts and issuance costs. The notes’ initial conversion price was approximately $16.23 per share.
The company was in compliance with Credit Facility and convertible-note covenants at year-end. The Credit Facility includes minimum cash requirements and restrictions on additional debt, liens, asset sales, dividends and specified corporate actions.
Management believes existing liquidity will fund operations for at least 12 months from the date the financial statements were available for issuance, but the company expects to require substantial additional capital and may raise equity or debt, enter collaborations, or license rights.
FY 2023 financing activities provided $190.2 million, principally from the July 2023 private placement, partially offset by $11.6 million of debt principal repayments.

Material Changes Versus the Prior Comparable Period

Operating expenses declined primarily because terminated-program spending fell by $65.8 million; this was partly offset by $30.2 million higher seralutinib development costs and the $10.0 million Phase 3 milestone.
General and administrative expense declined $9.2 million, including lower stock-based compensation, professional services and insurance costs.
Other income, net improved to $3.9 million from $10.8 million of other expense, driven by higher investment accretion, a $2.8 million employee retention credit, a $2.1 million Ireland corporate R&D tax credit and lower interest expense.
On July 24, 2023, the company issued 129.9 million common shares and warrants to purchase 32.5 million additional shares for gross proceeds of approximately $212.1 million. The financing materially increased liquidity but substantially diluted existing holders.
Shares outstanding increased from 94.4 million at December 31, 2022 to 225.4 million at December 31, 2023. Potentially dilutive securities totaled 68.8 million shares at year-end, including the 2023 warrants, options and shares underlying the convertible notes.
Net cash used in investing activities increased to $111.0 million, largely reflecting purchases of marketable securities.

Clinical Development, Outlook and Commentary

The Phase 3 PROSERA study in PAH began in the fourth quarter of 2023. The global, randomized, placebo-controlled study is expected to enroll approximately 350 Functional Class II and III patients on stable background therapy.
The primary endpoint is change from baseline in six-minute walk distance at Week 24; a key secondary endpoint is time to first clinical worsening through 48 weeks.
Management expects to report topline PROSERA data in the fourth quarter of 2025. The filing does not provide revenue guidance or a specific cash runway date beyond at least 12 months.
In the Phase 2 TORREY study, seralutinib produced a statistically significant placebo-adjusted PVR improvement of 14.3% over 24 weeks. The study was not powered for statistical significance on six-minute walk distance.
Interim open-label extension results reported in December 2023 showed continued PVR and six-minute walk distance improvements, but these results are uncontrolled and remain subject to limitations associated with interim clinical data.
Seralutinib has received U.S. and EU orphan drug designation for PAH. It remains investigational and has not received marketing approval.
The company is pursuing development plans for PH-ILD, where Tyvaso is the only approved U.S. therapy identified in the filing.

Principal Risks, Contingencies and Unusual Items

The company has no approved products, has generated no product revenue, has accumulated a deficit of $1.212 billion and expects continuing losses.
Success depends heavily on the single lead program, seralutinib. Phase 3 results may not confirm Phase 2 findings, and regulatory approval is not assured.
Clinical-trial enrollment, trial execution, safety findings, regulatory requirements, manufacturing, third-party CRO performance and foreign-site risks could delay development or increase costs.
Seralutinib is regulated as a drug-device combination product, creating additional manufacturing, device and regulatory requirements.
The company relies on third-party manufacturers and does not have redundant supply sources for all required materials.
Future financing may be dilutive or unavailable on acceptable terms. The Credit Facility matures before the convertible notes and is secured by company assets, including intellectual property and cash.
The Pulmokine license requires future development, regulatory and commercial milestone payments of up to $58.0 million, commercial milestones of up to $45.0 million, sales milestones of up to $190.0 million, and tiered royalties generally ranging from the mid-single digits to high-single digits. The timing and likelihood of most contingent payments cannot be estimated.
The company has federal, state and foreign net operating losses and tax credits, but maintains a full valuation allowance because realization is uncertain. Potential ownership changes could further limit their use.
The company disclosed no material ongoing legal proceedings and no known cybersecurity incident that had materially affected, or was reasonably likely to materially affect, operations or financial condition.
Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2023; the independent auditor was not required to provide an attestation opinion because the company is a smaller reporting company and non-accelerated filer.

Investor Verification Items

Verify current cash burn, forecast assumptions and the duration of the stated liquidity runway as PROSERA enrollment and costs progress.
Track PROSERA enrollment, protocol execution, safety data and the expected fourth-quarter 2025 topline readout.
Assess dilution from the 32.5 million outstanding warrants, 23.6 million options, convertible notes and any future financing.
Review the January 2024 $10.0 million Pulmokine milestone payment and remaining contingent obligations.
Monitor the $12.6 million Credit Facility, its January 2025 maturity, minimum-cash covenant and refinancing or repayment plans.
Evaluate whether Phase 2 TORREY and open-label extension results translate into clinically meaningful and statistically persuasive Phase 3 outcomes.
Confirm the status of PH-ILD development, orphan-drug benefits, patent coverage and competitive developments, including sotatercept and other PAH programs.