Gossamer Bio, Inc. 10-Q Summary
Business Context and Reporting Period
Gossamer Bio is a clinical-stage biopharmaceutical company developing therapies for immunology, inflammation and oncology. This unaudited Form 10-Q covers the three and six months ended June 30, 2022, compared with the corresponding 2021 periods.
Key programs included seralutinib for pulmonary arterial hypertension, GB5121 for relapsed/refractory primary CNS lymphoma and GB7208 for multiple sclerosis. The company has not generated product revenue since inception.
Financial Position and Key Metrics
| Metric | Three Months Ended June 30 | Six Months Ended June 30 |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $42.6 million | $84.9 million |
| General and administrative expense | $11.3 million | $23.3 million |
| Total operating expenses | $53.9 million | $108.2 million |
| Net loss | $56.5 million | $114.3 million |
| Net loss per share | $0.74 | $1.50 |
| Net cash used in operating activities | Not separately provided | $102.3 million |
At June 30, 2022, cash and cash equivalents were $94.3 million and marketable securities were $127.8 million, for total cash, cash equivalents and marketable securities of $222.2 million. The company had an accumulated deficit of $917.1 million and total stockholders’ deficit of $16.5 million.
Total debt consisted of $30.0 million of Credit Facility borrowings, net of discount and issuance costs, and $195.3 million of 5.00% convertible senior notes due 2027. The Credit Facility began principal amortization on July 1, 2022 and matures January 1, 2025. No additional Credit Facility tranches were available to be drawn at June 30, 2022.
Operating cash burn declined from $106.3 million in the first six months of 2021 to $102.3 million in the first six months of 2022. Investing activities provided $13.1 million, primarily reflecting $86.0 million of marketable-security maturities offset by $72.6 million of purchases. Financing activities provided $0.7 million.
Material Changes Versus the Prior Comparable Period
- Second-quarter net loss improved by $3.4 million, to $56.5 million from $59.8 million; six-month net loss improved by $3.2 million, to $114.3 million from $117.5 million.
- Research and development expense declined $1.7 million in the quarter and $1.2 million year to date. Seralutinib and GB5121 spending increased, while GB004, terminated programs and other programs declined.
- GB5121 research and development expense increased to $14.0 million in the quarter from $6.7 million and to $23.5 million year to date from $10.8 million.
- Seralutinib research and development expense increased to $13.3 million in the quarter from $11.6 million and to $25.5 million year to date from $22.3 million.
- Interest expense declined $1.4 million in the quarter and $2.7 million year to date, primarily due to adoption of ASU 2020-06, which changed the accounting for the convertible notes.
- Stock-based compensation increased to $21.0 million year to date from $16.8 million.
- Cash, cash equivalents and marketable securities declined from $325.2 million at December 31, 2021 to $222.2 million at June 30, 2022.
Guidance, Outlook, Risks and Unusual Items
- The company completed enrollment in the Phase 2 TORREY study of seralutinib during the second quarter and expected topline results in the fourth quarter of 2022. Subject to the results, management expected to initiate a registrational Phase 3 program in the third quarter of 2023.
- GB5121’s Phase 1b/2 STAR CNS study commenced in the second quarter of 2022. GB7208 remained in preclinical testing, with a potential Phase 1 healthy-volunteer study targeted for the first half of 2023, subject to ongoing work and seralutinib results.
- Management stated that existing cash, cash equivalents, marketable securities and access to the Credit Facility were expected to fund operations into the second quarter of 2024. The company expects continuing substantial operating losses and may never become profitable.
- Future financing may require equity offerings, debt, collaborations, licenses or other arrangements. Additional equity or convertible-debt financing could dilute existing stockholders, while collaborations could require relinquishing rights to programs or future revenues.
- COVID-19-related site staffing shortages and operational disruptions previously delayed enrollment and could continue to affect clinical-trial timelines, costs, data readouts and capital needs.
- On July 15, 2022, after the reporting date, the company completed a private placement of 16,649,365 shares at $7.21 per share for approximately $120.0 million of gross proceeds before offering expenses.
- On July 24, 2022, after the reporting date, the GB004 license agreement was terminated.
- The company adopted ASU 2020-06 on January 1, 2022. The adoption increased the carrying value of convertible senior notes by $44.8 million, reduced additional paid-in capital by $53.5 million and increased beginning accumulated deficit by $8.7 million.
- The company had settled a securities class action for approximately $2.4 million; final settlement approval was scheduled for September 30, 2022. The related charge had been recorded in 2021.
- Management reported effective disclosure controls and no material changes to internal control over financial reporting. The filing reported no material changes to previously disclosed risk factors.
Important Facts for Investors to Verify
- Verify the timing and results of the seralutinib TORREY topline readout and any subsequent Phase 3 initiation.
- Assess whether the July 2022 private placement proceeds materially extend the company’s stated runway and evaluate the resulting share dilution.
- Review the status, enrollment, safety and efficacy data for GB5121 and the development plans for GB7208.
- Confirm the company’s ability to meet Credit Facility amortization requirements beginning July 2022 and its compliance with minimum-cash and other covenants.
- Evaluate additional financing needs given the $102.3 million six-month operating cash burn, continuing losses and absence of product revenue.
- Review the consequences of the GB004 license termination, including any remaining obligations or effects on the development portfolio.