Gossamer Bio, Inc. — Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2022; filed March 17, 2023. The filing is an annual report, not a standalone 2022 fourth-quarter filing. Gossamer Bio is a clinical-stage biopharmaceutical company focused on immunology, inflammation and oncology. It has no approved products and has not generated product revenue.
Business Context and Pipeline
- Seralutinib (GB002): Inhaled kinase inhibitor for pulmonary arterial hypertension (PAH). The Phase 2 TORREY trial enrolled 86 patients and reported statistically significant improvement in pulmonary vascular resistance. The company planned to report open-label extension data in mid-2023 and begin a registrational Phase 3 PAH trial in the second half of 2023.
- GB5121: CNS-penetrant BTK inhibitor for relapsed or refractory primary CNS lymphoma and other rare CNS malignancies. Enrollment in the Phase 1b/2 STAR CNS study was paused because of the benefit/risk profile observed to date and resource prioritization toward seralutinib. Further steps were to be determined with the Data Review Committee.
- GB7208: CNS-penetrant BTK inhibitor for multiple sclerosis, remaining in preclinical development. Other preclinical programs were under evaluation.
Financial Results and Key Metrics
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Revenue | $0 | $0 | No product revenue |
| Research and development expense | $170.9 million | $170.3 million | +$0.7 million |
| General and administrative expense | $47.6 million | $45.8 million | +$1.8 million |
| Total operating expenses | $218.6 million | $216.1 million | +$2.5 million |
| Loss from operations | $218.6 million | $216.1 million | Higher loss |
| Other expense, net | $10.8 million | $17.9 million | Expense decreased $7.1 million |
| Net loss | $229.4 million | $234.0 million | Loss decreased $4.6 million |
| Basic and diluted net loss per share | $2.71 | $3.13 | Improved |
| Net cash used in operating activities | $187.0 million | $188.9 million | Improved $1.9 million |
Research and development spending increased for seralutinib to $63.0 million from $46.5 million and for GB5121 to $50.4 million from $27.4 million. These increases were largely offset by lower spending on the discontinued GB004 program and other programs. Stock-based compensation increased to $42.6 million from $32.0 million.
Liquidity, Debt and Capital Resources
- Cash, cash equivalents and marketable securities totaled $255.7 million at December 31, 2022, consisting of $112.0 million of cash and cash equivalents and $143.7 million of marketable securities.
- Management stated that existing liquidity and access to the Credit Facility were expected to fund operations into the second quarter of 2024, although actual cash usage could be higher than forecast.
- Operating cash burn remained substantial at $187.0 million in 2022.
- The company raised approximately $120.1 million gross in a July 2022 private placement of 16.65 million common shares, with approximately $119.9 million net proceeds.
- The Credit Facility had $24.2 million of principal outstanding at year-end, net carrying value of $23.6 million, and matures January 1, 2025. Principal repayments began in July 2022. No additional tranches were available at year-end.
- The company had $200.0 million principal amount of 5.00% convertible senior notes due June 2027, carried at $195.7 million net. The initial conversion price was approximately $16.23 per share.
- Total liabilities were $260.4 million and stockholders’ equity was $12.1 million at December 31, 2022. The accumulated deficit was $1.032 billion.
Material Changes Versus the Prior Comparable Period
- Net loss improved modestly from $234.0 million to $229.4 million, primarily because interest expense declined by $5.6 million and interest income increased by $0.8 million.
- Operating expenses increased $2.5 million, with higher clinical spending on seralutinib and GB5121 and higher general and administrative expense.
- Cash used in operations was broadly stable, declining from $188.9 million to $187.0 million.
- Cash and marketable securities declined from approximately $325.2 million at December 31, 2021 to $255.7 million at December 31, 2022, despite the July equity financing.
- The company adopted ASU 2020-06 for convertible debt accounting. The adoption increased convertible senior notes by approximately $44.8 million, reduced additional paid-in capital by $53.5 million and increased beginning accumulated deficit by $8.7 million.
- Enrollment in the GB5121 STAR CNS study was paused, while resources were prioritized toward seralutinib.
- The company reported positive topline Phase 2 TORREY results for seralutinib, including a placebo-corrected PVR improvement of 14.3% and a mean 96.1 dynes difference between treatment groups.
Guidance, Outlook, Risks and Unusual Items
- Management expected research and development expense to remain relatively flat in the foreseeable future, while continuing clinical development and discovery work.
- The company expected to initiate Phase 3 PAH development for seralutinib in the second half of 2023, subject to regulatory feedback and final trial design.
- A $10.0 million development milestone payment to Pulmokine was expected upon initiation of the first Phase 3 seralutinib trial. The license also includes additional development, commercial and sales milestones totaling up to $293.0 million, plus tiered royalties.
- Gossamer Bio expects continued operating losses and will require additional financing. Future equity or convertible debt financing could dilute existing stockholders; debt or partnerships could impose restrictive terms or require relinquishing rights.
- Key risks include failure of seralutinib or GB5121 in later-stage trials, clinical enrollment delays, safety findings, regulatory delays, reliance on contract research organizations and manufacturers, competition in PAH and BTK markets, and limited intellectual-property protection.
- Seralutinib is a drug-device combination product, creating additional manufacturing and regulatory requirements. The company relies on third parties for manufacturing and does not have redundant supply arrangements for all materials.
- COVID-19-related staffing, site and supply disruptions, inflation, interest-rate changes, geopolitical events and financial-market instability could affect trial timelines, liquidity and financing access.
- The company settled a securities class action in 2022 for approximately $2.4 million. It was not party to any material legal proceedings as of the filing date.
- Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2022. The independent auditor was not required to provide an internal-control attestation because the company was a smaller reporting company and non-accelerated filer.
Important Facts for Investors to Verify
- Confirm the final, audited TORREY Phase 2 data, including durability, subgroup results, safety and the significance of the 6-minute walk-distance outcome.
- Monitor regulatory feedback, final design, enrollment and funding requirements for the planned seralutinib Phase 3 trial.
- Assess the Data Review Committee’s conclusions and future development plans for GB5121 following the enrollment pause.
- Reconcile projected cash runway with operating cash burn, Phase 3 costs, the $10.0 million Pulmokine milestone and scheduled debt repayments.
- Review the terms and covenants of the Credit Facility, including the 25% minimum unrestricted-cash requirement and collateral rights.
- Evaluate potential dilution from the 2027 convertible notes, outstanding options and future financing needs.
- Verify the company’s ability to maintain manufacturing capacity, clinical supply and intellectual-property rights for seralutinib.