Gossamer Bio, Inc. — FY2021 Form 10-K Summary
Business context and reporting period
Gossamer Bio is a clinical-stage biopharmaceutical company focused on immunology, inflammation and oncology. The filing covers the fiscal year ended December 31, 2021, and was filed March 3, 2022. The company had three clinical-stage candidates: seralutinib (PAH), GB004 (ulcerative colitis) and GB5121 (primary CNS lymphoma), plus GB7208 and other preclinical programs. It had 185 full-time employees as of February 25, 2022.
Financial performance, liquidity and capital structure
| Metric | FY2021 | FY2020 | Change |
|---|---|---|---|
| Revenue | No product revenue reported | No product revenue reported | Not applicable |
| Research and development expense | $170.3 million | $160.9 million | +$9.4 million |
| In-process R&D expense | $0.1 million | $23.4 million | -$23.3 million |
| General and administrative expense | $45.8 million | $49.7 million | -$3.9 million |
| Total operating expenses | $216.1 million | $234.0 million | -$17.8 million |
| Loss from operations | $(216.1) million | $(234.0) million | Improved by $17.8 million |
| Net loss | $(234.0) million | $(243.4) million | Improved by $9.4 million |
| Basic and diluted loss per share | $(3.13) | $(3.55) | Improved by $0.42 |
| Net cash used in operating activities | $(188.9) million | $(176.4) million | Use increased by $12.5 million |
Because the company had no product revenue, revenue-based margins are not meaningful. Net loss was approximately 97% of operating expenses, and the company expects continued significant losses.
- Cash, cash equivalents and marketable securities totaled $325.2 million at December 31, 2021, including $183.4 million of cash and cash equivalents and $141.8 million of marketable securities.
- Total assets were $343.7 million and stockholders’ equity was $121.5 million at year-end.
- Accumulated deficit was $811.5 million, compared with $577.5 million at December 31, 2020.
- The company held $200.0 million principal amount of 5.00% convertible senior notes due 2027, recorded at a $150.0 million net carrying value. The notes had a fair value of $190.5 million at year-end and an initial conversion price of approximately $16.23 per share.
- Credit Facility borrowings had a $30.0 million principal balance and $29.1 million carrying value. No additional tranches were available as of December 31, 2021; the facility was subject to clinical milestones, minimum cash requirements and other conditions.
- Financing activities provided $3.3 million in 2021, primarily from employee stock option exercises and the employee stock purchase plan.
- Management stated that existing cash, cash equivalents, marketable securities and access to the Credit Facility were expected to fund operations into the second half of 2023, subject to significant assumptions and risks.
Material changes versus the prior comparable period
- R&D spending increased primarily because of higher development costs for GB004, seralutinib, GB5121 and other programs. Spending on discontinued or deprioritized programs, including GB001 and GB1275, declined.
- IPR&D expense fell sharply because 2020 included a $15.0 million GB004 license amendment payment and a $5.0 million seralutinib milestone payment; 2021 had no significant comparable payments.
- G&A expense declined despite a $2.4 million accrual for the settlement of securities litigation, primarily because stock-based compensation decreased by $6.7 million.
- Interest expense increased to $19.4 million from $12.7 million, largely due to the convertible notes and amortization of debt discounts and issuance costs.
- Operating cash burn increased despite the lower net loss, while cash and marketable securities declined from $512.6 million at December 31, 2020 to $325.2 million at December 31, 2021.
- The company adopted a hybrid work model and continued to experience COVID-19-related trial and site risks. Its Phase 2 SHIFT-UC trial completed enrollment in the fourth quarter of 2021.
Guidance, outlook, risks and unusual items
- Seralutinib Phase 2 TORREY topline results were expected in the second half of 2022. COVID-19 could affect enrollment and timing.
- GB004 Phase 2 SHIFT-UC topline results were expected in the second quarter of 2022 for the week-12 endpoint and the fourth quarter of 2022 for the week-36 treat-through endpoint.
- GB5121 was in a Phase 1 healthy-volunteer study, with a global Phase 1b/2 PCNSL trial planned for the first half of 2022. GB7208 Phase 1 initiation was expected in the second half of 2022, subject to preclinical results.
- The company expects additional financing will be required. Future equity or convertible-debt financings could dilute shareholders; debt or collaboration financing could impose restrictive covenants or require surrendering valuable rights.
- The Credit Facility requires interest-only payments through June 30, 2022, followed by scheduled principal amortization beginning July 1, 2022, with maturity on January 1, 2025. It is secured by substantially all domestic assets, including intellectual property, and includes a minimum unrestricted-cash covenant.
- COVID-19-related staffing, enrollment, supply-chain and regulatory disruptions remain material risks. The filing also identifies Russia’s invasion of Ukraine and related sanctions as potential threats to the GB004 trial, particularly collection and interpretation of week-36 data.
- The company recorded a $2.4 million litigation charge in 2021 related to a securities class action. A settlement agreement was entered in February 2022, subject to court approval.
- Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2021. The independent auditor was not required to provide an internal-control attestation because the company was a smaller reporting company and non-accelerated filer.
- The company planned to adopt ASU 2020-06 on January 1, 2022, which was expected to increase the carrying value of convertible notes by approximately $44.8 million, reduce additional paid-in capital by approximately $53.5 million and increase beginning retained earnings by approximately $8.7 million, with no expected effect on net loss per share.
Most important facts for an investor to verify
- Whether the reported cash runway remains adequate after trial costs, debt amortization and any delays or cost increases.
- Availability and covenant conditions for the remaining $120.0 million of Credit Facility commitments.
- TORREY and SHIFT-UC enrollment, topline results, data quality and the effect of COVID-19 and geopolitical disruptions on trial timelines.
- GB5121’s Phase 1 safety and pharmacokinetic results and the timing of the planned PCNSL trial.
- The company’s ability to raise additional capital without excessive dilution or unfavorable financing terms.
- Terms and final court approval of the approximately $2.4 million securities-litigation settlement.
- Potential dilution from the 2027 convertible notes, which represented approximately 12.3 million potentially issuable shares at year-end.
- License milestones, royalties, termination provisions and continued compliance with the Pulmokine and Aadi agreements.