Gossamer Bio, Inc. — Q3 2021 Form 10-Q Summary
Business Context and Reporting Period
Gossamer Bio is a clinical-stage biopharmaceutical company developing therapeutics for immunology, inflammation and oncology. The filing covers the three and nine months ended September 30, 2021. The company had no commercial product revenue and continued to fund operations through equity and debt financing.
Key programs included seralutinib for pulmonary arterial hypertension, GB004 for inflammatory bowel disease, GB1275, GB5121 for relapsed/refractory primary CNS lymphoma, and several preclinical programs.
Financial Performance and Liquidity
| Metric | Q3 2021 | Q3 2020 | Change |
|---|---|---|---|
| Revenue | $0 | $0 | No change |
| Research and development expense | $43.2 million | $41.8 million | Up $1.3 million |
| General and administrative expense | $12.5 million | $11.4 million | Up $1.0 million |
| Total operating expenses | $55.7 million | $53.6 million | Up $2.1 million |
| Net loss | $60.2 million | $57.8 million | Loss increased $2.4 million |
| Basic and diluted loss per share | $0.80 | $0.80 | Unchanged |
For the nine months ended September 30, 2021, research and development expense was $129.3 million versus $121.9 million in the prior-year period. Total operating expenses were $164.5 million versus $173.9 million, primarily because 2020 included $18.1 million of in-process research and development expense. Net loss was $177.7 million versus $178.8 million.
- Cash, cash equivalents and marketable securities totaled $366.0 million at September 30, 2021, including $213.5 million of cash and cash equivalents and $152.5 million of marketable securities.
- Net cash used in operating activities was $148.4 million for the nine months, compared with $139.6 million in the prior-year period.
- Investing activities used $127.9 million, principally reflecting $143.9 million of purchases of marketable securities.
- Financing activities provided $3.0 million, compared with $312.3 million in 2020 when the company issued convertible notes and common stock.
- Accumulated deficit was $755.3 million at September 30, 2021. Profitability has not been achieved, and meaningful operating margins are not applicable because the company has no revenue.
Debt, Obligations and Balance Sheet
- Carrying value of the 5.00% convertible senior notes due 2027 was $148.4 million; principal outstanding was $200.0 million. The notes had a fair value of approximately $213.0 million.
- Long-term debt under the Credit Facility was $29.0 million, representing a $30.0 million term loan net of discount and issuance costs.
- The Credit Facility bears interest at one-month LIBOR plus 7.00%, subject to a 2.00% LIBOR floor, and requires interest-only payments before July 1, 2022. It matures January 1, 2025.
- No additional Credit Facility tranches were available to be drawn at September 30, 2021. The company was in compliance with its debt covenants, including the minimum unrestricted cash covenant.
- Current assets were $374.0 million and total liabilities were $217.2 million at September 30, 2021.
Material Changes, Outlook and Risks
- Research and development spending increased as investment shifted toward GB004, seralutinib, GB002 and other programs, partially offset by lower spending on GB001 and GB1275.
- Management expected topline results from the Phase 2 TORREY seralutinib trial in the second half of 2022 and from the Phase 2 SHIFT-UC trial of GB004 in the second quarter of 2022. The filing also stated plans to initiate a GB5121 Phase 1b/2 trial in the first half of 2022 and advance GB7208 into human trials in the second half of 2022.
- Based on its operating plan, management believed existing cash, cash equivalents, marketable securities and Credit Facility access would fund operations into the second half of 2023. Management also stated that working capital was sufficient for at least the next twelve months from issuance of the financial statements.
- The company expects significant operating losses and increasing expenses for the foreseeable future and may never become profitable. It expects to require additional equity, debt, collaboration, licensing or other financing.
- COVID-19 caused clinical-site closures, staffing shortages, enrollment delays and potential delays in trial data readouts. Further disruptions could affect clinical development, supply chains, financial results and capital needs.
- A $2.4 million litigation charge was recorded in general and administrative expense for a proposed settlement of the Kuhne securities class action. The parties reported a settlement in principle on October 29, 2021, after the quarter-end.
- Licensing arrangements could require future development, regulatory and commercial milestone payments, as well as royalties. The filing did not provide a clear estimate of the timing or likelihood of these payments.
- Disclosure controls and procedures were evaluated as effective at the reasonable assurance level, with no material changes in internal control over financial reporting during the quarter.
Most Important Facts for Investors to Verify
- Whether clinical enrollment, trial execution and data-readout timelines remain on track, particularly for seralutinib and GB004.
- The pace of quarterly cash burn and whether liquidity continues to support management’s projected runway into the second half of 2023.
- Future financing requirements, potential equity dilution and availability of additional Credit Facility tranches.
- Terms and finalization of the approximately $2.4 million litigation settlement and any other legal contingencies.
- Progress, safety, efficacy and regulatory status of the company’s clinical and preclinical candidates.
- Potential milestone, royalty and other contingent payment obligations under license and acquisition agreements.
- Ongoing effects of COVID-19, including clinical-site access, patient enrollment, vendor capacity and supply continuity.