Gossamer Bio, Inc. — Form 10-Q Summary
Reporting period: Three and six months ended June 30, 2019; filed August 8, 2019. Gossamer Bio is a clinical-stage biopharmaceutical company developing therapeutics for immunology, inflammation and oncology. The company has no product revenue and remains dependent on financing to fund development.
Financial Position and Key Metrics
| Metric | Three months ended June 30 | Six months ended June 30 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $35.7 million | $60.7 million |
| In-process R&D expense | $1.0 million | $2.0 million |
| General and administrative expense | $9.7 million | $17.7 million |
| Total operating expenses | $46.3 million | $80.4 million |
| Net loss | $44.5 million | $77.1 million |
| Net loss per share | $0.74 | $1.59 |
| Operating cash flow | Not separately provided | $(64.6) million |
- Cash and cash equivalents were $148.5 million at June 30, 2019, compared with $105.2 million at December 31, 2018.
- Marketable securities were $315.5 million, resulting in cash, cash equivalents and marketable securities of approximately $464.0 million.
- Total assets were $507.2 million and stockholders’ equity was $441.4 million, compared with a deficit of $120.1 million at year-end 2018, primarily reflecting the February 2019 IPO and preferred-stock conversion.
- Long-term debt was $28.3 million, representing a $30.0 million term loan net of discount and issuance costs. The facility has total commitments of up to $150.0 million, subject to milestones and other conditions.
- The filing does not provide a meaningful operating margin because the company generated no revenue. Net loss equaled total operating expenses, net of other income.
Material Changes Versus the Prior Comparable Period
- Second-quarter R&D expense increased $27.7 million to $35.7 million; first-half R&D expense increased $50.1 million to $60.7 million, reflecting expanded clinical and preclinical activity across GB001, GB002, GB004 and GB1275.
- Second-quarter net loss increased $11.8 million to $44.5 million; first-half net loss increased $18.3 million to $77.1 million.
- General and administrative expense increased $5.1 million in the quarter and $10.5 million year to date due primarily to higher personnel, professional, legal, insurance and stock-based compensation costs.
- IPR&D expense declined substantially from the prior year because 2018 included major acquisition and licensing payments, including the $20.0 million GB004 payment and $19.3 million related to GB001. The 2019 first-half amount included a $1.0 million GB1275 milestone payment.
- On February 12, 2019, the IPO generated $291.3 million of net proceeds. All outstanding convertible preferred stock converted into common stock.
- Operating cash use increased from $10.5 million to $64.6 million for the first six months, while financing cash inflows increased to $319.7 million from $73.5 million.
Business Outlook, Risks and Unusual Items
- GB001 was in a Phase 2b asthma trial, with an interim analysis expected in the first half of 2020. The company initiated a Phase 2 chronic rhinosinusitis trial and expected to begin a chronic spontaneous urticaria trial in the second half of 2019.
- Management expected to begin GB002 Phase 1b enrollment in pulmonary arterial hypertension in the third quarter of 2019 and initiate a Phase 2/3 trial in the second half of 2019.
- GB004 entered a Phase 1b ulcerative colitis trial during the second quarter; a Phase 2 ulcerative colitis trial was planned for the first half of 2020.
- GB1275 had begun patient screening in a Phase 1/2 solid-tumor trial as monotherapy and in combination with anti-PD-1 therapy or chemotherapy.
- Management expects significant operating losses to continue and states that the company may never become profitable. It expects expenses to increase as clinical trials, research, regulatory activities, staffing and public-company costs expand.
- Management believes existing cash, cash equivalents and marketable securities are sufficient to fund operations for at least the next twelve months, but states that actual funding needs may differ materially.
- Future funding may require equity offerings, additional debt, collaborations or licensing transactions, which could dilute shareholders, impose restrictive covenants or require the company to relinquish rights.
- The credit facility is secured by substantially all of the company’s and domestic subsidiaries’ personal property, including intellectual property. It includes a minimum cash covenant equal to at least 25% of outstanding principal; the company reported compliance at June 30, 2019.
- License and acquisition agreements include potential development, regulatory, commercial and sales milestone payments and royalties. The timing and likelihood of these payments were not estimable and no material contingent milestones, other than the disclosed GB1275 payment, had been accrued.
- The company adopted the new lease standard in 2019, recording approximately $12.5 million of right-of-use assets and $13.2 million of lease liabilities. No material legal proceedings or material subsequent events were reported.
Investor Verification Items
- Verify clinical enrollment, interim-analysis timing and trial results for GB001, GB002, GB004 and GB1275 against subsequent filings.
- Reconcile the reported $464.0 million liquidity balance with cash, marketable securities, debt, ongoing quarterly cash burn and investment maturities.
- Review the availability conditions and milestone requirements for the remaining $120.0 million under the credit facility.
- Assess potential dilution from 7.9 million outstanding options, 5.5 million nonvested restricted shares and future equity financing.
- Monitor contractual milestone and royalty obligations under the Pulmokine, Aerpio and Adhaere agreements.
- Confirm that no product revenue, profitability guidance or formal revenue outlook was provided; the filing text does not provide a clear date for achieving profitability.