Gossamer Bio, Inc. — Form 10-Q Summary
Reporting period: Three and nine months ended September 30, 2023; filed November 9, 2023. Gossamer Bio is a clinical-stage biopharmaceutical company focused on immunology, inflammation and oncology, with current development centered on seralutinib for pulmonary arterial hypertension.
Financial position and operating results
| Metric | Q3 2023 | Q3 2022 | 9M 2023 | 9M 2022 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $31.2 million | $44.5 million | $105.3 million | $129.4 million |
| General and administrative expense | $9.3 million | $11.5 million | $29.4 million | $34.8 million |
| Total operating expenses | $40.5 million | $56.0 million | $134.7 million | $164.2 million |
| Net loss | $40.0 million | $59.4 million | $131.7 million | $173.6 million |
| Basic and diluted loss per share | $0.21 | $0.65 | $1.03 | $2.14 |
| Cash used in operating activities | Not separately provided | Not separately provided | $125.7 million | $139.3 million |
The company remains pre-revenue and does not expect product revenue for the foreseeable future unless seralutinib is successfully developed and approved. Gross profit and operating margin are not meaningful because there is no revenue.
- Cash and cash equivalents were $82.6 million at September 30, 2023, compared with $112.0 million at December 31, 2022.
- Marketable securities were $246.3 million, bringing cash, cash equivalents and marketable securities to $328.9 million.
- Total assets were $347.9 million; total liabilities were $243.3 million; stockholders’ equity was $104.6 million.
- Debt included $15.2 million of net Credit Facility debt and $196.4 million of convertible senior notes due 2027.
- Net cash used in investing activities was $96.6 million, primarily reflecting purchases of marketable securities.
- Net cash provided by financing activities was $193.1 million, principally from a July 2023 equity and warrant financing.
Material changes versus the prior comparable period
- Q3 net loss decreased by $19.4 million, or approximately 32.6%, and nine-month net loss decreased by $41.9 million, or approximately 24.2%.
- Q3 research and development expense decreased by $13.3 million, while seralutinib spending increased by $9.2 million to $27.0 million. Lower spending on GB5121, other programs and terminated programs more than offset the seralutinib increase.
- Nine-month research and development expense decreased by $24.1 million, while seralutinib spending increased by $23.8 million to $67.1 million. Spending on terminated and other programs declined substantially.
- General and administrative expense declined $2.2 million in Q3 and $5.4 million for the nine-month period, primarily due to lower stock-based compensation and professional services costs.
- Other income, net was $3.4 million in Q3 versus other expense of $0.3 million in the prior-year quarter. For nine months, other income, net was $11.6 million versus $0.1 million in 2022, reflecting investment accretion and certain tax-related credits, including a $2.8 million employee retention credit and a $2.1 million Ireland corporate R&D tax credit.
- On July 24, 2023, the company issued 129.9 million common shares and warrants to purchase 32.5 million shares, generating approximately $201.3 million of net proceeds. Shares outstanding increased to 225.4 million at September 30, 2023, materially diluting existing holders.
Guidance, outlook, risks and unusual items
- Management expects expenses and operating losses to remain relatively flat compared with Q3 2023 as seralutinib development continues.
- The company expected to release updated interim results from the seralutinib open-label extension trial in Q4 2023, dose the first patient in the Phase 3 PROSERA study in Q4 2023, and begin development for pulmonary hypertension associated with interstitial lung disease in the first half of 2024.
- Management believes existing cash, cash equivalents and marketable securities are sufficient to fund operations through at least the next 12 months from the financial statement issuance date. The company expects continuing losses and will likely require additional capital through equity, debt, collaborations, licenses or other arrangements.
- The Credit Facility matures January 1, 2025; scheduled principal payments total $15.5 million, and no additional tranches were available to draw as of September 30, 2023. The company was in compliance with its debt covenants.
- The company has potential seralutinib development and regulatory milestone payments of up to $58.0 million, commercial milestone payments of up to $45.0 million and sales milestone payments of up to $190.0 million under the Pulmokine license, plus tiered royalties. Timing and likelihood were not estimable.
- On October 19, 2023, Nasdaq notified the company that its stock had closed below the $1.00 minimum bid-price requirement for 30 consecutive business days. The initial compliance period runs through April 16, 2024, with a possible additional period subject to conditions. Failure to regain compliance could lead to delisting and impair future financing access.
- Stock-based compensation was $22.5 million for the first nine months of 2023. A May 2023 stock-option repricing generated $3.4 million of incremental compensation cost.
- No material legal proceedings were reported, and management concluded that disclosure controls and procedures were effective at the reasonable assurance level.
Important facts for investors to verify
- Progress, safety and efficacy results for seralutinib, including the Phase 3 PROSERA initiation and open-label extension data.
- The company’s cash-burn rate and whether the $328.9 million liquidity balance supports the stated funding runway under updated trial plans.
- Future dilution from the 32.5 million outstanding warrants, stock options and other potentially dilutive securities.
- Nasdaq minimum-bid-price compliance and any reverse stock split or other remedial action.
- Upcoming Credit Facility principal payments, the 2027 convertible notes and the company’s ability to refinance or repay obligations.
- Potential license milestones, royalties and other contingent obligations as seralutinib advances.