Gossamer Bio(GOSS) - 2020 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Condensed Consolidated Financial Statements (unaudited) Unaudited financial statements show total assets increased to $625.1 million, liabilities to $204.8 million, and net loss widened to $120.9 million for H1 2020 Condensed Consolidated Balance Sheets Total assets increased to $625.1 million, liabilities to $204.8 million due to convertible notes, and equity to $420.3 million Condensed Consolidated Balance Sheets (in thousands) | | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Total current assets | $608,400 | $409,317 | | Total assets | $625,076 | $426,604 | | Total current liabilities | $27,544 | $36,923 | | Long-term convertible senior notes | $140,715 | $— | | Total liabilities | $204,752 | $74,119 | | Total stockholders' equity | $420,324 | $352,485 | | Total liabilities and stockholders' equity | $625,076 | $426,604 | - The company's cash and cash equivalents increased significantly to $486.1 million from $135.1 million, largely due to financing activities in the first half of 2020[10] - A new liability of $140.7 million in long-term convertible senior notes was recorded on the balance sheet as of June 30, 2020[10] Condensed Consolidated Statements of Operations and Comprehensive Loss Net loss widened to $66.9 million for Q2 and $120.9 million for H1 2020, driven by increased R&D and IPR&D expenses Operating Results (in thousands, except per share data) | | Three Months Ended June 30, | Six Months Ended June 30, | | :--- | :--- | :--- | | | 2020 | 2019 | 2020 | 2019 | | Research and development | $38,684 | $35,676 | $80,098 | $60,659 | | In process research and development | $15,000 | $1,000 | $17,805 | $2,000 | | General and administrative | $11,655 | $9,673 | $22,403 | $17,707 | | Total operating expenses | $65,339 | $46,349 | $120,306 | $80,366 | | Loss from operations | $(65,339) | $(46,349) | $(120,306) | $(80,366) | | Net loss | $(66,870) | $(44,498) | $(120,944) | $(77,109) | | Net loss per share, basic and diluted | $(1.00) | $(0.74) | $(1.88) | $(1.59) | Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity Stockholders' equity rose to $420.3 million, driven by a $117.1 million stock offering and $53.6 million from convertible notes, offset by net loss - In the six months ended June 30, 2020, the company issued 9,433,963 shares of common stock in a public offering, raising net proceeds of $117.1 million[15] - The issuance of convertible notes resulted in an equity component of $53.6 million being added to additional paid-in capital[15] - The accumulated deficit grew from $334.2 million at the end of 2019 to $455.1 million as of June 30, 2020, due to ongoing net losses[15] Condensed Consolidated Statements of Cash Flows Net cash used in operations was $94.7 million, while financing provided $311.4 million, increasing cash to $486.1 million by period-end Summary of Cash Flows (in thousands) | | Six months ended June 30, | | :--- | :--- | :--- | | | 2020 | 2019 | | Net cash used in operating activities | $(94,694) | $(64,584) | | Net cash provided by (used in) investing activities | $134,283 | $(212,026) | | Net cash provided by financing activities | $311,400 | $319,691 | | Net increase in cash and cash equivalents | $350,989 | $43,081 | | Cash and cash equivalents, at the end of the period | $486,062 | $148,500 | - Financing activities in H1 2020 included $117.1 million in net proceeds from a public stock offering and $193.6 million from the issuance of convertible debt[17] Notes to Unaudited Condensed Consolidated Financial Statements Notes detail the company's biopharmaceutical business, liquidity, COVID-19 risks, recent $200 million convertible note issuance, and a pending lawsuit - The company is a clinical-stage biopharmaceutical company focused on immunology, inflammation, and oncology[20] - Management believes it has sufficient working capital to fund operations for at least the next twelve months from the report's issuance date[25] - The COVID-19 pandemic has caused the company to temporarily pause enrollment in a Phase 1b trial and may cause further delays in other planned trials[26] - On May 21, 2020, the company issued $200.0 million of 5.00% convertible senior notes due 2027, with net proceeds of approximately $193.6 million[51] - A putative class action lawsuit was filed against the company in April 2020, alleging false and misleading statements; the company intends to vigorously defend the matter[93] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses increased R&D expenses, a wider net loss, and strong liquidity of $600.4 million, sufficient into 2024 Overview and Pipeline The company is a clinical-stage biopharmaceutical firm with four product candidates, expecting key trial results in H2 2020, subject to COVID-19 risks - The company has four clinical-stage product candidates: GB001, GB002, GB004, and GB1275[100] - Topline results for the GB001 Phase 2b LEDA trial in asthma and the TITAN Phase 2 trial in chronic rhinosinusitis are expected in the second half of 2020[100] - Development of GB002 for PAH and GB004 for ulcerative colitis is progressing, with plans to initiate Phase 2 trials in the second half of 2020, subject to COVID-19 developments[100] COVID-19 Pandemic COVID-19 paused GB002 trial enrollment and may delay future trials, with full impact on operations remaining uncertain - The company temporarily paused enrollment in its Phase 1b clinical trial for GB002 in PAH due to the COVID-19 pandemic[105] - Timelines for initiating planned Phase 2 trials of GB002 and GB004 in H2 2020 are based on the assumption that clinical trial activities normalize, which may not occur if the pandemic continues to spread[105] Results of Operations Operating expenses increased, leading to a net loss of $66.9 million for Q2 and $120.9 million for H1 2020, driven by R&D and IPR&D Comparison of Operating Expenses (in thousands) | | Three Months Ended June 30, | Six Months Ended June 30, | | :--- | :--- | :--- | | | 2020 | 2019 | 2020 | 2019 | | Research and development | $38,684 | $35,676 | $80,098 | $60,659 | | In process research and development | $15,000 | $1,000 | $17,805 | $2,000 | | General and administrative | $11,655 | $9,673 | $22,403 | $17,707 | | Net loss | $(66,870) | $(44,498) | $(120,944) | $(77,109) | - The $14.0 million increase in IPR&D expense for Q2 2020 was primarily due to a $15.0 million upfront payment to Aerpio for the amendment to the GB004 in-license agreement[124] - The increase in G&A expenses was primarily driven by higher stock-based compensation and personnel costs[126][127] Liquidity and Capital Resources The company holds $600.4 million in liquidity, raised $310.7 million in May 2020, and expects funds to last into at least 2024 - As of June 30, 2020, the company had cash, cash equivalents, and marketable securities of $600.4 million[132] - In May 2020, the company raised a total of approximately $310.7 million in net proceeds from concurrent offerings of convertible senior notes and common stock[136] - Based on the current operating plan, management believes existing cash resources are sufficient to fund operations into at least 2024[145] Quantitative and Qualitative Disclosures About Market Risk No material changes to market risk disclosures, including interest rate, foreign currency, and inflation risks, were reported - There have been no material changes surrounding the company's market risk from the disclosures in the 2019 Annual Report on Form 10-K[154] Controls and Procedures Disclosure controls and procedures were effective as of June 30, 2020, with no material changes to internal controls - Management concluded that as of June 30, 2020, the company's disclosure controls and procedures were effective at the reasonable assurance level[156] - No changes in internal control over financial reporting occurred during the three months ended June 30, 2020, that materially affected or are likely to materially affect internal controls[157] PART II. OTHER INFORMATION Legal Proceedings A putative class action lawsuit filed in April 2020 is detailed in Note 9, which the company intends to defend vigorously - The company is subject to a putative class action lawsuit filed on April 3, 2020; further details are provided in Note 9 of the financial statements[93][160] Risk Factors New risks emerged from $200.0 million convertible senior notes, potentially limiting cash flow and diluting stockholder interests - A new risk factor has been added related to the company's indebtedness, including the $200.0 million in convertible senior notes issued in May 2020[161] - The indebtedness could increase vulnerability to adverse conditions, limit the ability to obtain additional financing, and require a substantial portion of cash flow for debt service[163] Unregistered Sales of Equity Securities and Use of Proceeds No unregistered equity sales occurred; $291.3 million IPO proceeds remain unused with no material change in planned use - As of June 30, 2020, the company has not used any of the net proceeds from its February 2019 IPO[166] - There has been no material change in the planned use of proceeds from the IPO as described in the final prospectus[166] Defaults Upon Senior Securities Not applicable - Not Applicable[168] Mine Safety Disclosures Not applicable - Not Applicable[169] Other Information None - None[170] Exhibits This section lists exhibits filed with the Form 10-Q, including corporate governance documents and certifications - The Exhibit Index lists all documents filed with the Form 10-Q, including amendments to credit agreements and CEO/CFO certifications[171][173]