Business Context and Reporting Period
Gossamer Bio, Inc. is a clinical-stage biopharmaceutical company developing therapies in immunology, inflammation and oncology. The Form 10-Q covers the three months ended March 31, 2021, with unaudited interim financial statements. The company had four clinical-stage candidates and six preclinical programs and generated no product revenue.
Financial Results and Liquidity
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Revenue | $0 | $0 | No change |
| Research and development expense | $41.8 million | $41.4 million | Up $0.4 million |
| General and administrative expense | $11.3 million | $10.7 million | Up $0.6 million |
| Total operating expenses | $53.2 million | $55.0 million | Down $1.8 million |
| Loss from operations | $53.2 million | $55.0 million | Improved by $1.8 million |
| Other income (expense), net | $(4.4) million | $0.9 million | Down $5.3 million |
| Net loss | $57.6 million | $54.1 million | Loss increased $3.6 million |
| Basic and diluted loss per share | $0.78 | $0.87 | Per-share loss improved |
| Net cash used in operating activities | $58.9 million | $52.3 million | Use increased $6.6 million |
There is no meaningful revenue or operating margin because the company remains pre-commercial. Research and development spending was concentrated in seralutinib ($10.7 million), GB004 ($8.9 million), GB1275 ($2.8 million), GB001 ($1.3 million) and other programs ($18.2 million). Stock-based compensation was $8.7 million.
At March 31, 2021, cash and cash equivalents were $439.7 million, marketable securities were $13.6 million, and cash, cash equivalents and marketable securities totaled $453.3 million. Total assets were $482.5 million and the accumulated deficit was $635.2 million.
Debt included $200.0 million principal amount of 5.00% convertible senior notes due 2027, carried at $145.2 million, and a $30.0 million term loan under the Credit Facility, carried at $28.8 million. The Credit Facility had a 25% minimum unrestricted-cash covenant, and the company reported compliance with its debt covenants.
Material Changes Versus the Prior Comparable Period
- Net loss increased by $3.6 million, primarily because interest expense increased by $4.1 million following issuance of the 2027 Notes and interest income decreased by $1.4 million.
- Research and development expense was broadly stable, but spending shifted materially: seralutinib and GB004 increased by $3.1 million and $5.1 million, respectively, while GB001 declined by $10.1 million following disappointing Phase 2 asthma results.
- In-process research and development expense declined by $2.8 million to $0.03 million.
- Operating cash use increased to $58.9 million from $52.3 million, while investing cash inflows declined to $12.0 million from $28.0 million.
- Cash, cash equivalents and restricted cash decreased by approximately $46.2 million during the quarter. The MD&A separately reports a $46.4 million decrease; the filing does not clearly reconcile this presentation difference.
- Common shares outstanding increased to approximately 74.5 million at March 31, 2021 from 73.9 million at December 31, 2020. Potentially dilutive securities were excluded from diluted loss per share because their effect was anti-dilutive.
Guidance, Outlook, Risks and Unusual Items
- Management expected existing cash, cash equivalents, marketable securities and access to the Credit Facility to fund operations into the second half of 2023. The company also stated that it would need substantial additional capital and may never become profitable.
- Topline results were expected in the first half of 2022 for the Phase 2 TORREY seralutinib trial in pulmonary arterial hypertension and the Phase 2 SHIFT-UC GB004 trial in ulcerative colitis. Further GB1275 Phase 1/2 data were expected in 2021.
- Following negative primary-endpoint results for GB001 in asthma, the company did not plan to advance GB001 or its backup molecule without a partner.
- COVID-19 caused clinical-site closures and enrollment delays and could further affect trial execution, data readouts, supply, operating costs and access to capital. The company stated that product supply to enrolled patients had continued and no interruption was then anticipated.
- The company has contingent development, regulatory, commercial and sales milestone obligations and future royalties under licenses for seralutinib, GB004 and GB1275. The timing and likelihood of these payments could not be estimated.
- The company disclosed a putative securities class action related to its 2019 IPO. On April 19, 2021, after the quarter-end, the court dismissed the case in substantial part without leave to amend but allowed one claim to proceed. The company could not estimate any potential loss.
- Sublease income was $0.3 million in the quarter. Interest expense included $4.0 million related to the 2027 Notes, including contractual interest and noncash amortization of the debt discount and issuance costs.
Important Facts for Investors to Verify
- Whether clinical enrollment and data-readout timing for TORREY, SHIFT-UC and GB1275 remained consistent with management’s stated expectations.
- The company’s cash-burn rate, remaining runway and need for additional equity, debt or collaboration financing.
- Compliance with the Credit Facility’s minimum-cash covenant and other secured-debt restrictions.
- The potential dilution from the 2027 Notes, stock options, restricted stock and future capital raises.
- The financial impact and eventual resolution of the remaining securities-litigation claim.
- The timing and amount of contingent milestone payments, royalties and other obligations under product-license agreements.
- The effects of COVID-19 or other operational disruptions on clinical trials, vendors, manufacturing and regulatory timelines.