Gossamer Bio, Inc. — Q1 2020 Form 10-Q Summary
Business Context and Reporting Period
Gossamer Bio is a clinical-stage biopharmaceutical company developing therapies for immunology, inflammation and oncology. The filing reports unaudited results for the three months ended March 31, 2020, compared with the three months ended March 31, 2019. The company had four clinical-stage product candidates: GB001, GB002, GB004 and GB1275. It had not generated product revenue.
Key Financial Metrics
| Metric | Q1 2020 | Q1 2019 | Change |
|---|---|---|---|
| Revenue | $0 | $0 | No change |
| Research and development expense | $41.4 million | $25.0 million | +$16.4 million |
| In-process R&D expense | $2.8 million | $1.0 million | +$1.8 million |
| General and administrative expense | $10.7 million | $8.0 million | +$2.7 million |
| Total operating expenses | $55.0 million | $34.0 million | +$21.0 million |
| Other income, net | $0.9 million | $1.4 million | -$0.5 million |
| Net loss | $54.1 million | $32.6 million | Loss increased $21.5 million |
| Basic and diluted loss per share | $0.87 | $0.90 | Improved due to higher share count |
| Net cash used in operating activities | $52.3 million | $27.8 million | Use increased $24.5 million |
There is no meaningful operating margin because the company had no revenue. Stock-based compensation was $8.2 million, compared with $3.1 million in the prior-year quarter.
Cash, Liquidity and Debt
- Cash and cash equivalents were $111.4 million at March 31, 2020, compared with $135.1 million at December 31, 2019.
- Marketable securities were $234.8 million, resulting in total cash, cash equivalents and marketable securities of approximately $346.2 million.
- Cash and cash equivalents decreased by $23.7 million during the quarter. Investing activities provided $28.0 million, primarily from maturities and sales of marketable securities, while financing activities provided $0.6 million.
- Long-term debt was $28.5 million, representing a $30.0 million term loan net of discount and issuance costs. The company had access to an additional $120.0 million under its credit facility, subject to milestones, availability periods and other conditions.
- The credit facility is secured by substantially all of the company’s and domestic subsidiaries’ personal property, including intellectual property. The company was in compliance with its covenants at March 31, 2020.
- Management stated that existing resources and access to the credit facility were expected to fund operations through at least the middle of 2022, although this estimate is subject to clinical, financing and COVID-19-related uncertainty.
Material Changes Versus the Prior Comparable Period
- Research and development expense increased 66%, primarily from higher GB001 and GB1275 development costs and increased personnel and consulting expenses.
- General and administrative expense increased 34%, primarily due to a $1.9 million increase in stock-based compensation.
- Net loss increased from $32.6 million to $54.1 million, while loss per share decreased from $0.90 to $0.87 because weighted-average shares increased from 36.3 million to 61.9 million.
- Operating cash use increased substantially as development activity expanded and working-capital changes reduced cash flow.
- Unlike Q1 2019, when the IPO generated $291.3 million of financing cash, Q1 2020 had no material equity or debt financing proceeds.
- In January 2020, the company adopted the current expected credit loss standard; adoption did not materially affect the financial statements.
Outlook, Commentary, Risks and Unusual Items
- The company expects significant operating losses and increasing research and development expenses for the foreseeable future and may never become profitable.
- COVID-19 caused a pause in enrollment for the GB002 Phase 1b PAH trial and could delay clinical-site initiation, patient enrollment, trial completion, data readouts, regulatory interactions and supply-chain activities. The company’s planned Phase 2 trials for GB002 and GB004 depended on clinical operations returning toward normal in the second half of 2020.
- GB001 enrollment was complete for the LEDA Phase 2b asthma trial. A subsequent interim analysis, disclosed after quarter-end, led to continued study execution and preliminary Phase 3 planning; topline results were expected in the second half of 2020. Final Phase 3 plans remained subject to final data and regulatory discussions.
- The company commenced enrollment in a GB002 Phase 1b PAH trial during Q1 2020 but temporarily paused enrollment because of COVID-19.
- On May 11, 2020, the company paid Aerpio $15.0 million to amend the GB004 license. Remaining approval and sales milestones were reduced to up to $40.0 million and $50.0 million, respectively, and royalties were revised to low- to mid-single-digit percentages. This payment occurred after the quarter-end.
- Contingent development, regulatory and commercial milestone obligations and royalties under licensing and acquisition agreements were not accrued because the triggering conditions had not been met.
- On April 3, 2020, a putative securities class action was filed against the company, certain officers and directors, and IPO underwriters. The company could not estimate a reasonably possible loss.
- The company reported no material changes in internal control over financial reporting, and management concluded that disclosure controls were effective at a reasonable assurance level.
Most Important Facts to Verify
- Whether cash burn and clinical spending remain consistent with the stated funding runway through at least mid-2022.
- The timing and final results of the GB001 LEDA Phase 2b trial and whether the company advances to Phase 3.
- The effect of COVID-19 on GB002 and GB004 trial initiation, enrollment and data timelines.
- The availability and milestone conditions for the remaining $120.0 million under the credit facility.
- The financial and regulatory consequences of the Aerpio license amendment and the remaining GB004 milestone and royalty obligations.
- The development and potential resolution of the securities class action and any resulting loss exposure.
- Future dilution risk from additional equity financing, outstanding options and unvested equity awards.