Gossamer Bio(GOSS) - 2020 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) This section presents the unaudited condensed consolidated financial statements and accompanying notes for the period Condensed Consolidated Balance Sheets The balance sheets show the company's financial position, indicating a decrease in total assets and equity Condensed Consolidated Balance Sheets | Metric | March 31, 2020 (in thousands) | December 31, 2019 (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------ | | Cash and cash equivalents | $111,353 | $135,089 | | Marketable securities | $234,812 | $266,740 | | Total current assets | $355,438 | $409,317 | | Total assets | $371,478 | $426,604 | | Total current liabilities | $28,362 | $36,923 | | Total liabilities | $65,015 | $74,119 | | Total stockholders' equity | $306,463 | $352,485 | Condensed Consolidated Statements of Operations and Comprehensive Loss The statements of operations reveal a significant increase in net loss for Q1 2020 compared to Q1 2019 Condensed Consolidated Statements of Operations and Comprehensive Loss | Metric | Three months ended March 31, 2020 (in thousands) | Three months ended March 31, 2019 (in thousands) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Research and development | $41,414 | $24,983 | | In process research and development | $2,805 | $1,000 | | General and administrative | $10,748 | $8,034 | | Total operating expenses | $54,967 | $34,017 | | Loss from operations | $(54,967) | $(34,017) | | Net loss | $(54,074) | $(32,611) | | Net loss per share, basic and diluted | $(0.87) | $(0.90) | Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity This statement details changes in stockholders' equity, highlighting the impact of net loss and stock-based compensation Changes in Stockholders' Equity | Metric | Balance as of Dec 31, 2019 (in thousands) | Balance as of Mar 31, 2020 (in thousands) | | :-------------------------------- | :-------------------------------------- | :------------------------------------- | | Common stock (shares) | 61,635,477 | 62,094,312 | | Additional paid-in capital | $686,390 | $695,205 | | Accumulated deficit | $(334,170) | $(388,244) | | Total stockholders' equity | $352,485 | $306,463 | - Net loss for the three months ended March 31, 2020, was $(54,074)k, contributing to the accumulated deficit[14] - Stock-based compensation added $8,244k to additional paid-in capital during the three months ended March 31, 2020[14] Condensed Consolidated Statements of Cash Flows The cash flow statements illustrate cash usage across operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows | Cash Flow Activity | Three months ended March 31, 2020 (in thousands) | Three months ended March 31, 2019 (in thousands) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Net cash used in operating activities | $(52,295) | $(27,774) | | Net cash provided by (used in) investing activities | $28,038 | $(198,142) | | Net cash provided by financing activities | $571 | $291,344 | | Net increase (decrease) in cash and cash equivalents | $(23,686) | $65,428 | | Cash and cash equivalents, at the end of the period | $111,353 | $170,847 | Notes to Unaudited Condensed Consolidated Financial Statements These notes provide essential details and explanations for the unaudited condensed consolidated financial statements 1. Description of the Business The company is a clinical-stage biopharmaceutical firm focused on immunology, inflammation, and oncology - Gossamer Bio, Inc is a clinical-stage biopharmaceutical company focused on discovering, acquiring, developing, and commercializing therapeutics in immunology, inflammation, and oncology[20] - As of March 31, 2020, the Company had an accumulated deficit of $388.2 million, having funded operations primarily through equity financings and a credit facility[24][22] - The COVID-19 outbreak poses an uncertain, potentially material and adverse impact on the Company's operational and financial performance, including delays in clinical trials[26] 2. Summary of Significant Accounting Policies The financial statements are prepared in accordance with GAAP and require significant management estimates - The unaudited condensed consolidated financial statements are prepared in accordance with GAAP for interim financial information and SEC Form 10-Q instructions[27] - Management makes significant estimates and assumptions, particularly for accrued research and development expenses and stock valuations[28] - The Company adopted ASU 2016-13 (Financial Instruments-Credit Losses) as of January 1, 2020, which did not have a material impact on the financial statements[29] 3. Balance Sheet Accounts and Supplemental Disclosures This note provides detailed breakdowns of property and equipment and accrued expenses Property and Equipment, Net | Property and Equipment, Net (in thousands) | March 31, 2020 | December 31, 2019 | | :----------------------------------------- | :------------- | :---------------- | | Total property and equipment | $7,212 | $6,639 | | Less: accumulated depreciation | $1,543 | $1,214 | | Property and equipment, net | $5,669 | $5,425 | Accrued Expenses and Other Current Liabilities | Accrued Expenses and Other Current Liabilities (in thousands) | March 31, 2020 | December 31, 2019 | | :------------------------------------------------------------ | :------------- | :---------------- | | Accrued compensation | $4,205 | $9,282 | | Accrued in process research and development | $— | $1,600 | | Total accrued expenses | $8,963 | $16,709 | 4. Fair Value Measurements and Available for Sale Investments The company classifies its cash equivalents and marketable securities using a three-tier fair value hierarchy - The Company classifies its cash equivalents and available-for-sale investments within Level 1 or Level 2 of the fair value hierarchy[34] Available-for-Sale Investments | Available-for-Sale Investments (Fair Value in thousands) | March 31, 2020 | December 31, 2019 | | :------------------------------------------------------- | :------------- | :---------------- | | Money market funds | $31,488 | $82,125 | | U.S. Treasury and agency securities | $25,700 | $91,717 | | Commercial paper | $71,961 | $37,411 | | Corporate debt securities | $153,121 | $156,277 | | Total marketable securities | $234,812 | $367,530 | Contractual Maturities of Available-for-Sale Debt Securities | Contractual Maturities of Available-for-Sale Debt Securities (in thousands) | March 31, 2020 | | :------------------------------------------------------------------------ | :------------- | | Due within one year | $203,072 | | One to two years | $31,740 | | Total | $234,812 | 5. Long-term Debt The company has a Credit Facility of up to $150.0 million, with $30.0 million drawn as of March 31, 2020 - The Company has a Credit Facility for up to $150.0 million in term loan commitments, with $30.0 million funded as of March 31, 2020[43] - Each term loan bears interest at an annual rate of one-month LIBOR plus 6.15%, subject to a LIBOR floor of 2.00%[44] Scheduled Future Minimum Principal Payments | Scheduled Future Minimum Principal Payments (in thousands) | March 31, 2020 | | :--------------------------------------------------------- | :------------- | | 2020 (remaining 9 months) | $— | | 2021 | $5,833 | | 2022 | $10,000 | | 2023 | $10,000 | | 2024 | $4,167 | | Total | $30,000 | 6. Licenses, Asset Acquisitions and Contingent Consideration The company has acquired rights to several product candidates through licenses and acquisitions - The Company acquired rights to GB002, GB001, GB004, and GB1275 through asset acquisitions and licenses[51][53][54] - The Company is obligated to make future development, regulatory, commercial, and sales milestone payments, as well as tiered royalties, for these licensed products[51][54][55] In Process Research and Development Expense | In Process Research and Development Expense (in thousands) | Three months ended March 31, 2020 | Three months ended March 31, 2019 | | :--------------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Other Programs | $2,805 | $1,000 | | Total in process research and development | $2,805 | $1,000 | 7. Stockholders' Equity This note details the composition and changes in stockholders' equity, including the conversion of preferred stock - In connection with the IPO, all outstanding Series Seed, Series A, and Series B Convertible Preferred Stock automatically converted into 30,493,460 shares of common stock[57] - As of March 31, 2020, 4,243,889 shares of common stock were subject to repurchase by the Company, primarily due to service vesting conditions[63] 8. Equity Incentive Plans The company operates under the 2019 Incentive Award Plan and the 2019 Employee Stock Purchase Plan - The 2019 Incentive Award Plan initially reserved 5,750,000 shares of common stock, with automatic annual increases[64] - The 2019 Employee Stock Purchase Plan (ESPP) initially reserved 700,000 shares, with automatic annual increases[65] - Total unrecognized compensation related to unvested stock awards was $103.8 million as of March 31, 2020[72][71][73] Stock Option Activity | Stock Option Activity | Outstanding as of Dec 31, 2019 | Options granted (Q1 2020) | Outstanding as of Mar 31, 2020 | | :-------------------- | :----------------------------- | :------------------------ | :----------------------------- | | Shares | 8,538,060 | 1,725,222 | 10,192,073 | | Weighted-Average Exercise Price | $13.67 | $14.55 | $13.81 | 9. Commitments and Contingencies The company has non-cancelable operating lease agreements and is involved in a securities class action lawsuit - On April 3, 2020, a putative class action lawsuit was filed against the Company, certain executive officers, directors, and IPO underwriters, alleging false/misleading statements[80] Undiscounted Rent Payments | Undiscounted Rent Payments (in thousands) | March 31, 2020 | | :---------------------------------------- | :------------- | | Year ending December 31, 2020 (remaining 9 months) | $2,285 | | 2021 | $3,127 | | 2022 | $3,220 | | 2023 | $1,694 | | 2024 | $1,745 | | Total undiscounted rent payments | $12,071 | 10. Subsequent Events The company amended its license agreement with Aerpio for GB004, reducing future milestone payments - On May 11, 2020, the Company amended its license agreement with Aerpio Pharmaceuticals, Inc for GB004[81] - The amendment included a $15.0 million upfront payment to Aerpio for a reduction in future milestone payments and royalties[81] - Total remaining milestones were reduced from $400.0 million to $90.0 million, and royalties on worldwide net sales were also reduced[81] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's perspective on the company's financial condition and results of operations Forward-Looking Statements This section contains forward-looking statements regarding future operations and financial position - This report contains forward-looking statements regarding future results of operations, financial position, business strategy, and the impact of COVID-19[84] - These statements involve known and unknown risks, uncertainties, and other important factors that may cause actual results to differ materially[84] - The company does not plan to publicly update or revise any forward-looking statements unless required by applicable law[85] Overview The company is a clinical-stage biopharmaceutical firm with four clinical-stage product candidates - The Company is a clinical-stage biopharmaceutical company focused on immunology, inflammation, and oncology[86] - The Company currently has four clinical-stage product candidates: GB001, GB002, GB004, and GB1275[87] - Topline results for several Phase 2 trials are expected in the second half of 2020, subject to COVID-19 developments[87][88] Recent Developments Recent developments include positive interim analysis for GB001 and promising topline Phase 1b results for GB004 - An interim analysis of the LEDA Phase 2b clinical trial for GB001 in asthma was completed, with the IDMC recommending continuation of the study[89] - Topline results from the Phase 1b study of GB004 in ulcerative colitis patients showed good tolerability and encouraging trends in histologic remission[90][91][92] - A successful Phase 1 clinical study supported the selection of a tablet formulation for GB004, which showed improved tolerability[94] COVID-19 pandemic The COVID-19 pandemic has caused substantial public health and economic challenges, impacting clinical trials - The Company has implemented a work-from-home policy and virtual study visits for ongoing clinical trials[100] - COVID-19 precautions have delayed clinical trials, including a pause in enrollment for the Phase 1b clinical trial of GB002 in PAH[100] - The full extent of the COVID-19 pandemic's impact on the Company's business and financial condition is highly uncertain[100] Components of Results of Operations This section breaks down the company's financial performance components, including revenue and operating expenses Revenue The company has not generated any revenue from product sales and does not anticipate doing so in the near future - The Company has not generated any revenue from product sales since its inception[101] - The Company does not expect to generate any revenue from product sales for the foreseeable future[101] Operating expenses Operating expenses are categorized into R&D, IPR&D, and G&A, all of which are expected to increase Research and development R&D expenses are recognized as incurred and are expected to increase substantially as development progresses - Research and development expenses include salaries, stock-based compensation, external CRO fees, manufacturing costs, and allocated facility expenses[102][103] - The Company plans to substantially increase R&D expenses for the foreseeable future as it continues the development of product candidates[104] - Clinical development costs can vary significantly based on factors such as trial costs, enrollment length, and COVID-19 pandemic impacts[105][106][113] In process research and development IPR&D expenses are expensed as incurred for acquired assets that have no alternative future use - IPR&D expenses are expensed as incurred for assets acquired as part of an asset acquisition or in-license for which there is no alternative future use[107] - These expenses consist of upfront and milestone payments for product candidates such as GB002, GB001, GB004, and GB1275[108] General and administrative G&A expenses consist of salaries, facility costs, and professional fees, and are projected to increase - General and administrative expenses primarily consist of salaries and employee-related costs for executive, finance, and other administrative functions[109] - Other significant costs include facility-related costs, legal fees, professional fees for accounting and consulting services, and insurance costs[109] - General and administrative expenses are expected to increase to support expanded infrastructure and increased costs of operating as a public company[110] Other income, net Other income, net, comprises interest income earned on investments and interest expense from its credit facility - Other income, net, consists of interest income on cash, cash equivalents, and marketable securities, and interest expense related to the credit facility[111] Critical Accounting Policies and Estimates The company's financial statements are based on management's judgments, with no significant policy changes - The preparation of financial statements requires management to make judgments and estimates that affect reported amounts[112] - Most significant estimates relate to accrued research and development expenses and valuation of stock options[112] - There have been no significant changes in critical accounting policies during the three months ended March 31, 2020[112] Results of Operations – Comparison of the Three Months Ended March 31, 2020 and 2019 The company's net loss increased to $54.1 million in Q1 2020 from $32.6 million in Q1 2019 Comparison of Operating Results | Metric | Three months ended March 31, 2020 (in thousands) | Three months ended March 31, 2019 (in thousands) | Change (in thousands) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | | Research and development | $41,414 | $24,983 | $16,431 | | In process research and development | $2,805 | $1,000 | $1,805 | | General and administrative | $10,748 | $8,034 | $2,714 | | Total operating expenses | $54,967 | $34,017 | $20,950 | | Net loss | $(54,074) | $(32,611) | $(21,463) | - The $16.4 million increase in R&D expenses was primarily due to increased costs for preclinical studies and clinical trials for GB001 and GB1275, and higher personnel costs[115] - The $2.7 million increase in G&A expenses was primarily attributable to a $1.9 million increase in stock-based compensation costs[118] Liquidity and Capital Resources The company has an accumulated deficit of $388.2 million and finances operations through equity and debt - As of March 31, 2020, the Company had an accumulated deficit of $388.2 million due to substantial operating losses since its inception[121] - Operations have been financed primarily by $631.3 million from convertible preferred stock sales, IPO proceeds, and a credit facility[122][123] - As of March 31, 2020, the Company had $346.2 million in cash, cash equivalents, and marketable securities[122] Cash Flow Summary | Cash Flow Summary (in thousands) | Three months ended March 31, 2020 | Three months ended March 31, 2019 | | :------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(52,295) | $(27,774) | | Net cash provided by (used in) investing activities | $28,038 | $(198,142) | | Net cash provided by financing activities | $571 | $291,344 | Funding requirements The company anticipates its existing capital will fund operations through at least mid-2022 - The Company believes its existing capital will be sufficient to fund operations through at least the middle of 2022[132] - Future capital requirements depend on factors such as the scope, progress, results, and costs of clinical trials and manufacturing[133] - The Company expects to finance future cash needs through equity offerings, debt financings, or other capital sources[133][134] Contractual Obligations and Commitments The company has contingent payment obligations under license and acquisition agreements - The Company has payment obligations contingent upon future events, such as achievement of specified development, regulatory, and commercial milestones[135] - As of March 31, 2020, these contingent payments had not been accrued due to the inability to estimate the timing or likelihood of achievement[135] - The Company enters into cancelable contracts in the normal course of business with clinical trial sites and vendors[136] Off-Balance Sheet Arrangements The company did not have any off-balance sheet arrangements during the periods presented - The Company did not have, and does not currently have, any off-balance sheet arrangements as defined under SEC rules and regulations[137] JOBS Act As an emerging growth company, the company intends to rely on certain exemptions under the JOBS Act - The Company is an emerging growth company (EGC) under the Jumpstart Our Business Startups Act of 2012 (JOBS Act)[138] - The Company irrevocably elected not to use the extended transition period for complying with new or revised financial accounting standards[138] - The Company intends to rely on other JOBS Act exemptions, including not being required to comply with auditor attestation requirements of Sarbanes-Oxley[138] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There have been no material changes to the company's market risk disclosures from its previous annual report - As of March 31, 2020, there have been no material changes to the Company's market risk from the discussion in its Annual Report on Form 10-K[140] ITEM 4. CONTROLS AND PROCEDURES This section details the company's disclosure controls and procedures, concluding on their effectiveness Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures Management evaluated the effectiveness of disclosure controls and concluded they were effective - Management evaluated the effectiveness of disclosure controls and procedures as of March 31, 2020[143] - Based on the evaluation, disclosure controls and procedures were concluded to be effective at the reasonable assurance level[143] - Management recognizes that controls provide only reasonable, not absolute, assurance and are subject to inherent limitations[141][142] Changes in Internal Control Over Financial Reporting There have been no material changes in the company's internal control over financial reporting - There have been no changes in internal control over financial reporting during the three months ended March 31, 2020, that have materially affected, or are reasonably likely to materially affect, internal controls[144] PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The company refers to Note 9 for details on a securities class action lawsuit filed in April 2020 - Information on legal proceedings is incorporated by reference from Note 9, 'Commitments and Contingencies'[147] - A putative class action lawsuit was filed on April 3, 2020, against the Company, certain executives, directors, and IPO underwriters[80][147] - The Company intends to vigorously defend this matter, but cannot estimate the reasonably possible loss due to the preliminary stage of litigation[80] ITEM 1A. RISK FACTORS This section updates risk factors, primarily focusing on the significant impact of the COVID-19 pandemic - The COVID-19 pandemic has presented substantial public health and economic challenges, affecting employees, patients, and business operations[148] - COVID-19 precautions have delayed clinical trials, including a pause in enrollment for GB002, and may continue to impact timelines[148] - Interim, topline, and preliminary data from clinical trials are subject to change as more patient data become available and are not necessarily predictive of final results[151] - Clinical drug development is a lengthy and expensive process with an uncertain outcome[153] - The Company is involved in a securities class action litigation, which is expensive, time-consuming, and could result in significant costs[157] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS The company reports no unregistered sales of equity securities and no use of its IPO proceeds as of March 31, 2020 - There were no unregistered sales of equity securities[158] - The Company received net proceeds of approximately $291.3 million from its IPO, which closed on February 12, 2019[159] - As of March 31, 2020, none of the IPO proceeds had been used, and there has been no material change in the planned use of proceeds[160] ITEM 3. DEFAULTS UPON SENIOR SECURITIES This item is marked as Not Applicable, indicating no defaults upon senior securities - Not Applicable[162] ITEM 4. MINE SAFETY DISCLOSURES This item is marked as Not Applicable, indicating no mine safety disclosures are required - Not Applicable[163] ITEM 5. OTHER INFORMATION This section reports subsequent events, including a key executive resignation and an amendment to the bylaws - Jakob Dupont M.D. resigned from his position as Chief Medical Officer, effective May 14, 2020[167] - Effective May 11, 2020, the Board of Directors adopted Amended and Restated Bylaws, adding a new exclusive forum provision for Securities Act claims[167] - On May 11, 2020, the Company entered into an amendment to the license agreement with Aerpio[167] ITEM 6. EXHIBITS This section lists all exhibits filed or furnished as part of the Quarterly Report on Form 10-Q Exhibit Index The Exhibit Index provides a comprehensive list of documents incorporated by reference or filed herewith - Key exhibits include the Amended and Restated Bylaws (3.2), a Restricted Stock Unit Agreement (10.1), and certifications from the CEO and CFO[169] Signatures The report is officially signed by the President and Chief Executive Officer and the Chief Financial Officer - The report is signed by Sheila Gujrathi, President and Chief Executive Officer, and Bryan Giraudo, Chief Financial Officer[172] - The signing date for the report is May 12, 2020[172]