Gossamer Bio Earnings 2020-09-30

Balance Sheet	Income Statement	Cash Flow

goss-20200930

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_________________________

FORM 10-Q

_________________________


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________to_________.

Commission File Number: 001-38796

_________________________

GOSSAMER BIO, INC.

(Exact name of Registrant as specified in its charter).

_________________________


Delaware			47-5461709
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

3013 Science Park Road	San Diego	California	92121
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code: (858) 684-1300

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading
Symbol(s)

Name of each exchange on which registered

Common Stock, $0.0001 par value per share

GOSS

Nasdaq Global Select Market

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☐

Emerging growth company

☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒

As of November 5, 2020, the registrant had 75,927,877 shares of common stock ($0.0001 par value) outstanding.

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TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION

	Item 1	Condensed Consolidated Financial Statements (unaudited)	4
		Condensed Consolidated Balance Sheets as of Se ptember 30, 2020 and December 31, 2019	4
		Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Nine Months ended September 30, 2020 and 2019	5
		Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity for the Nine Months ended September 30, 2020 and 2019	6
		Condensed Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2020 and 2019	9
		Notes to Unaudited Condensed Consolidated Financial Statements	10
	Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
	Item 3	Quantitative and Qualitative Disclosures About Market Risk	33
	Item 4	Controls and Procedures	33

PART II. OTHER INFORMATION

	Item 1	Legal Proceedings	35
	Item 1A	Risk Factors	35
	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	36
	Item 3	Defaults Upon Senior Securities	36
	Item 4	Mine Safety Disclosures	36
	Item 5	Other Information	36
	Item 6	Exhibits	36
		Exhibit Index	37
		Signatures	38

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PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

GOSSAMER BIO, INC.

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands, except share and par value amounts)


	September 30, 2020		December 31, 2019
ASSETS
Current assets
Cash and cash equivalents	$	461,956	$	135,089
Marketable securities	93,422		266,740
Prepaid expenses and other current assets	10,828		7,488
Total current assets	566,206		409,317
Property and equipment, net	5,717		5,425
Operating lease right-of-use assets	11,394		10,303
Other assets	861		1,559
Total assets	$	584,178	$	426,604
LIABILITIES, CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Accounts payable	865		956
Accrued research and development expenses	12,239		19,258
Accrued expenses and other current liabilities	19,503		16,709
Total current liabilities	32,607		36,923
Long-term convertible senior notes	142,158		—
Long-term debt	28,665		28,459
Operating lease liabilities - long-term	8,647		8,737
Total liabilities	212,077		74,119
Commitments and contingencies
Stockholders' equity
Common stock, $0.0001 par value; 700,000,000 shares authorized as of September 30, 2020 and December 31, 2019; 75,907,527 shares issued and 72,475,912 shares outstanding as of September 30, 2020, and 66,284,003 shares issued and 61,635,477 shares outstanding as of December 31, 2019	8		7
Additional paid-in capital	884,677		686,390
Accumulated deficit	(512,926)		(334,170)
Accumulated other comprehensive income	342		258
Total stockholders' equity	372,101		352,485
Total liabilities and stockholders' equity	$	584,178	$	426,604

The accompanying notes are an integral part of these condensed consolidated financial statements.

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GOSSAMER BIO, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

(in thousands, except share and per share amounts)


	Three months ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
Operating expenses:
Research and development	$	41,846	$	40,148	$	121,944	$	100,807
In process research and development	275		—		18,080		2,000
General and administrative	11,448		9,838		33,851		27,544
Total operating expenses	53,569		49,986		173,875		130,351
Loss from operations	(53,569)		(49,986)		(173,875)		(130,351)
Other income (expense), net	(4,243)		1,486		(4,881)		4,742
Net loss	$	(57,812)	$	(48,500)	$	(178,756)	$	(125,609)
Other comprehensive income:
Foreign currency translation, net of tax	68		—		59		—
Unrealized gain (loss) on marketable securities, net of tax	(293)		(168)		25		389
Other comprehensive income (loss)	(225)		(168)		84		389
Comprehensive loss	(58,037)		(48,668)		(178,672)		(125,220)
Net loss per share, basic and diluted	$	(0.80)	$	(0.80)	$	(2.67)	$	(2.39)
Weighted average common shares outstanding, basic and diluted	72,245,897		60,755,872		66,931,512		52,535,569

The accompanying notes are an integral part of these condensed consolidated financial statements.

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GOSSAMER BIO, INC.

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity

(Unaudited)

(in thousands, except share amounts)


	Series Seed			Series A			Series B
	convertible preferred stock			convertible preferred stock			convertible preferred stock			Common stock			Additional paid-in capital		Accumulated deficit		Accumulated other comprehensive income (loss)		Total stockholders' equity
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount
Balance as of December 31, 2019	—	$	—	—	$	—	—	$	—	61,635,477	$	7	$	686,390	$	(334,170)	$	258	$	352,485
Vesting of restricted stock	—	—		—	—		—	—		404,637	—		—		—		—		—
Exercise of stock options	—	—		—	—		—	—		4,309	—		15		—		—		15
Stock-based compensation	—	—		—	—		—	—		—	—		8,244		—		—		8,244
Issuance of common stock pursuant to Employee Stock Purchase Plan	—	—		—	—		—	—		49,889	—		556		—		—		556
Net loss	—	—		—	—		—	—		—	—		—		(54,074)		—		(54,074)
Other comprehensive loss	—	—		—	—		—	—		—	—		—		—		(763)		(763)
Balance as of March 31, 2020	—	$	—	—	$	—	—	$	—	62,094	$	7	$	695,205	$	(388,244)	$	(505)	$	306,463
Issuance of common stock in connection with public offering, net of underwriting discounts, commissions, and offering costs	—	—		—	—		—	—		9,433,963	1		117,093		—		—		117,094
Equity component of convertible note issuance	—	—		—	—		—	—		—	—		53,635		—		—		53,635
Debt issuance costs attributable to convertible feature	—	—		—	—		—	—		—	—		(109)		—		—		(109)
Vesting of restricted stock	—	—		—	—		—	—		404,637	—		—		—		—		—
Exercise of stock options	—	—		—	—		—	—		39,698	—		139		—		—		139
Stock-based compensation	—	—		—	—		—	—		—	—		8,900		—		—		8,900
Net loss	—	—		—	—		—	—		—	—		—		(66,870)		—		(66,870)
Other comprehensive income	—	—		—	—		—	—		—	—		—		—		1,072		1,072
Balance as of June 30, 2020	—	$	—	—	$	—	—	$	—	71,972,610	$	8	$	874,863	$	(455,114)	$	567	$	420,324
Vesting of restricted stock	—	—		—	—		—	—		404,637	—		—		—		—		—
Exercise of stock options	—	—		—	—		—	—		32,268	—		131		—		—		131
Stock-based compensation	—	—		—	—		—	—		—	—		8,923		—		—		8,923

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Issuance of common stock pursuant to Employee Stock Purchase Plan	—	—		—	—		—	—		63,397	—		744		—		—		744
Other additional paid-in capital	—	—		—	—		—	—		—	—		16		—		—		16
Net loss	—	—		—	—		—	—		—	—		—		(57,812)		—		(57,812)
Other comprehensive loss	—	—		—	—		—	—		—	—		—		—		(225)		(225)
Balance as of September 30, 2020	—	$	—	—	$	—	—	$	—	72,472,912	$	8	$	884,677	$	(512,926)	$	342	$	372,101

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	Series Seed			Series A			Series B
	convertible preferred stock			convertible preferred stock			convertible preferred stock			Common stock			Additional paid-in capital		Accumulated deficit		Accumulated other comprehensive income (loss)		Total stockholders' equity
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount
Balance as of December 31, 2018	20,000,000	$	29,200	45,714,286	$	79,615	71,506,513	$	229,552	8,051,418	$	2	$	33,853	$	(153,863)	$	(61)	$	(120,069)
Issuance of common stock in connection with a public offering, net of underwriting discounts, commissions, and offering costs	—	—		—	—		—	—		19,837,500	2		291,342		—		—		291,344
Conversion of convertible preferred stock into common stock	(20,000,000)	(29,200)		(45,714,286)	(79,615)		(71,506,513)	(229,552)		30,493,460	3		338,364		—		—		338,367
Vesting of restricted stock	—	—		—	—		—	—		1,619,592	—		—		—		—		—
Stock-based compensation	—	—		—	—		—	—		27,500	—		3,089		—		—		3,089
Net loss	—	—		—	—		—	—		—	—		—		(32,611)		—		(32,611)
Other comprehensive income	—	—		—	—		—	—		—	—		—		—		140		140
Balance as of March 31, 2019	—	$	—	—	$	—	—	$	—	60,029,470	$	7	$	666,648	$	(186,474)	$	79	$	480,260
Vesting of restricted stock	—	—		—	—		—	—		404,637	—		—		—		—		—
Exercise of stock options	—	—		—	—		—	—		33,273	—		86		—		—		86
Stock-based compensation	—	—		—	—		—	—		—	—		5,140		—		—		5,140
Other additional paid-in capital	—	—		—	—		—	—		—	—		39		—		—		39
Net loss	—	—		—	—		—	—		—	—		—		(44,498)		—		(44,498)
Other comprehensive income	—	—		—	—		—	—		—	—		—		—		417		417
Balance as of June 30, 2019	—	$	—	—	$	—	—	$	—	60,467,380	$	7	$	671,913	$	(230,972)	$	496	$	441,444
Vesting of restricted stock	—	—		—	—		—	—		404,639	—		—		—		—		—
Exercise of stock options	—	—		—	—		—	—		112,939	—		369		—		—		369
Stock-based compensation	—	—		—	—		—	—		—	—		5,728		—		—		5,728
Net loss	—	—		—	—		—	—		—	—		—		(48,500)		—		(48,500)
Other comprehensive loss	—	—		—	—		—	—		—	—		—		—		(168)		(168)
Balance as of September 30, 2019	—	$	—	—	$	—	—	$	—	60,984,958	$	7	$	678,010	$	(279,472)	$	328	$	398,873

The accompanying notes are an integral part of these condensed consolidated financial statements.

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GOSSAMER BIO, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)


	Nine months ended September 30,
	2020		2019
Cash flows from operating activities
Net loss	$	(178,756)	$	(125,609)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	1,044		625
Stock-based compensation expense	26,067		13,957
In process research and development expenses	18,080		2,000
Amortization of operating lease right-of-use assets	2,015		1,615
Amortization of debt discount and issuance costs	2,294		148
Amortization of premium on investments, net of accretion of discounts	24		(2,296)
Net realized gain on investments	(256)		(1)
Changes in operating assets and liabilities:
Prepaid expenses and other current assets	(3,340)		(2,807)
Other assets	698		2,886
Operating lease liabilities	(1,294)		(1,566)
Accounts payable	10		333
Accrued expenses	2,768		(760)
Accrued research and development expenses	(7,019)		8,518
Accrued compensation and benefits	(1,959)		2,263
Net cash used in operating activities	(139,624)		(100,694)
Cash flows from investing activities
Research and development asset acquisitions, net of cash acquired	(18,080)		(2,000)
Purchase of marketable securities	(108,969)		(399,393)
Maturities of marketable securities	199,029		205,750
Sales of marketable securities	83,515		4,004
Purchase of property and equipment	(1,253)		(2,438)
Net cash provided by (used in) investing activities	154,242		(194,077)
Cash flows from financing activities
Proceeds from issuance of common stock in a public offering, net	117,110		291,311
Proceeds from issuance of convertible debt, net	193,596		—
Proceeds from the issuance of long-term debt, net of issuance costs of $1,778	—		28,222
Purchase of shares pursuant to Employee Stock Purchase Plan	1,300		—
Proceeds from the exercise of stock options	285		527
Net cash provided by financing activities	312,291		320,060
Effect of exchange rate changes on cash and cash equivalents	(42)		—
Net increase in cash and cash equivalents	326,909		25,289
Cash and cash equivalents, at the beginning of the period	135,089		105,419
Cash and cash equivalents, at the end of the period	$	461,956	$	130,708

Supplemental disclosure of cash flow information:
Cash paid for interest	$	1,911	$	854

Supplemental disclosure of noncash investing and financing activities:
Right-of-use assets obtained in exchange for lease liabilities	$	3,106	$	12,458
Change in unrealized gain on marketable securities, net of tax	$	25	$	510
Unpaid property and equipment	$	83	$	127
Conversion of convertible preferred stock to common stock	$	—	$	338,367

The accompanying notes are an integral part of these condensed consolidated financial statements.

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GOSSAMER BIO, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

1. Description of the Business

Gossamer Bio, Inc. (including its subsidiaries, referred to as “we,” “us,” “our,”, or the “Company”) is a clinical-stage biopharmaceutical company focused on discovering, acquiring, developing and commercializing therapeutics in the disease areas of immunology, inflammation and oncology. The Company was incorporated in the state of Delaware on October 25, 2015 (originally as FSG Bio, Inc.) and is based in San Diego, California.

The condensed consolidated financial statements include the accounts of Gossamer Bio, Inc. and its wholly owned subsidiaries. All intercompany balances and transactions among the consolidated entity have been eliminated in consolidation.

Initial Public Offering in February 2019

On February 12, 2019, the Company completed its initial public offering (“IPO”) with the sale of 19,837,500 shares of common stock, including shares of common stock issued upon the exercise in full of the underwriters’ option to purchase additional shares, at a public offering price of $16.00 per share, resulting in net proceeds of $291.3 million, after deducting underwriting discounts, commissions, and offering expenses.

In addition, in connection with the completion of the IPO, all of the Company’s outstanding shares of convertible preferred stock were automatically converted into 30,493,460 shares of common stock.

Liquidity and Capital Resources

The Company has incurred significant operating losses since its inception. As of September 30, 2020, the Company had an accumulated deficit of $512.9 million. From the Company’s inception through September 30, 2020, the Company has funded its operations primarily through equity and debt financings. The Company raised $942.0 million from October 2017 through September 30, 2020 through Series A and Series B convertible preferred stock financings, a convertible note financing, its IPO, its Credit Facility (as defined in Note 5 below), and concurrent underwritten public offerings of its 5.00% convertible senior notes due 2027 (the “2027 Notes”) and common stock in May 2020. See Note 5 for additional information regarding the Credit Facility and the 2027 Notes. In addition, the Company received $12.8 million in cash in connection with the January 2018 acquisition of AA Biopharma Inc.

The Company expects to continue to incur significant operating losses for the foreseeable future and may never become profitable. As a result, the Company will need to raise capital through equity offerings, debt financings and other capital sources, including potential collaborations, licenses and other similar arrangements. Management believes that it has sufficient working capital on hand to fund operations through at least the next twelve months from the date these condensed consolidated financial statements were available to be issued. There can be no assurance that the Company will be successful in acquiring additional funding, that the Company’s projections of its future working capital needs will prove accurate, or that any additional funding would be sufficient to continue operations in future years.

COVID-19

The COVID-19 pandemic has caused significant business disruption around the globe. The extent of the impact of COVID-19 on the Company’s operational and financial performance will depend on certain developments, including the duration and spread of the pandemic and the impact on the Company’s clinical trials, employees and vendors. At this point, the degree to which COVID-19 may impact the Company’s financial condition or results of operations is uncertain. A prolonged pandemic could have a material and adverse impact on financial results and business operations of the Company, including the timing and ability of the Company to complete certain clinical trials and other efforts required to advance the development of its product candidates and raise additional capital. For example, the Company commenced enrolling patients for a Phase 1b clinical trial in pulmonary arterial hypertension ("PAH") in the first quarter of 2020, and because the Company temporarily paused enrollment as a result of the ongoing COVID-19 viral pandemic, the Company now expects to report topline results from this trial in the fourth quarter of 2020. In addition, due to the challenges of enrolling patients posed by the COVID-19 pandemic, the Company may experience delays in the commencement of its Phase 2 clinical trial of GB002 in PAH and enrollment of patients in its Phase 2 clinical trials of GB004 in ulcerative colitis and of GB002 in PAH, as well as delays in reporting data results from its ongoing trials.

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2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions of the Securities and Exchange Commission (“SEC”) on Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by GAAP for complete financial statements. In the opinion of management, the condensed consolidated financial statements include all adjustments necessary, which are of a normal and recurring nature, for the fair presentation of the Company’s financial position and of the results of operations and cash flows for the periods presented. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 24, 2020. The results of operations for the interim period shown in this report are not necessarily indicative of the results that may be expected for any other interim period or for the full year. The balance sheet at December 31, 2019, has been derived from the audited financial statements at that date.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of expenses during the reporting period. The most significant estimates in the Company’s condensed consolidated financial statements relate to the allocation of the 2027 Notes into liability and equity components, accrued research and development expenses, the valuation of preferred and common stock, the valuation of stock options and the valuation allowance of deferred tax assets resulting from net operating losses. These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results could differ from those estimates.

Convertible Senior Notes

In accounting for the issuance of the 2027 Notes, the Company separated the 2027 Notes into liability and equity components. The carrying amount of the liability component was calculated by measuring the fair value of similar debt instruments that do not have associated convertible features. The carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the par value of the 2027 Notes. The equity component is not remeasured as long as it continues to meet the condition for equity classification. The excess of the principal amount of the liability component over its carrying amount (“debt discount”) is amortized to interest expense over the term of the 2027 Notes.

The Company allocated the issuance costs incurred to the liability and equity components of the 2027 Notes based on their relative fair values. Issuance costs attributable to the liability component were recorded as a reduction to the liability portion of the 2027 Notes and are being amortized to interest expense over the term of the 2027 Notes. Issuance costs attributable to the equity component, representing the conversion option, were netted with the equity component in stockholders' equity.

Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which changes the impairment model for most financial assets and certain other instruments. For trade receivables and other instruments, entities will be required to use a new forward-looking expected loss model that generally will result in the earlier recognition of allowances for losses. For available-for-sale debt securities with unrealized losses, the losses will be recognized as allowances rather than as reductions in the amortized cost of the securities. This guidance is effective for annual reporting periods beginning after December 15, 2019, including interim periods within those years, with early adoption permitted only as of annual reporting periods beginning after December 15, 2018. The Company adopted ASU 2016-13 as of January 1, 2020. The adoption of this standard did not have a material impact on the Company’s condensed consolidated financial statements or related financial statement disclosures.

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Net Loss Per Share

Basic net loss per share of common stock is computed by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding for the period. The Company uses the if-converted method for assumed conversion of the 2027 Notes to compute the weighted average shares of common stock outstanding for diluted net loss per share. Diluted net loss per share excludes the potential impact of the Company’s common stock options and unvested shares of restricted stock and the potential shares issuable upon conversion of the 2027 Notes because their effect would be anti-dilutive due to the Company’s net loss. Since the Company had a net loss in each of the periods presented, basic and diluted net loss per common share are the same.

The table below provides potentially dilutive securities not included in the calculation of the diluted net loss per share because to do so would be anti-dilutive:


	As of September 30,
	2020	2019
2027 Notes	12,321,900	—
Shares issuable upon exercise of stock options	10,266,895	8,099,861
Non-vested shares under restricted stock grants	4,530,998	5,053,169

3. Balance Sheet Accounts and Supplemental Disclosures

Property and Equipment

Property and equipment, net consisted of the following (in thousands):


	Estimated Useful Life (in years)	September 30, 2020		December 31, 2019
Office equipment	3-7	$	1,153	$	1,097
Computer equipment	5	143		124
Software	3	114		87
Lab equipment	2-5	4,025		3,054
Leasehold improvements	6-7	2,540		2,229
Construction in process	N/A	—		48
Total property and equipment		7,975		6,639
Less: accumulated depreciation		2,258		1,214
Property and equipment, net		$	5,717	$	5,425

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):


	As of
	September 30, 2020		December 31, 2019
Accrued compensation	$	8,623	$	9,282
Operating lease liabilities, current	3,548		2,354
Accrued professional service fees	2,581		2,347
Accrued interest, current	3,864		—
Accrued other	612		1,126
Accrued in process research and development	275		1,600
Total accrued expenses	$	19,503	$	16,709

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4. Fair Value Measurements and Available for Sale Investments

Fair Value Measurements

The accounting guidance defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1: Observable inputs such as quoted prices in active markets;

Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The Company classifies its cash equivalents and available-for-sale investments within Level 1 or Level 2. The fair value of the Company’s investment grade corporate debt securities and commercial paper is determined using proprietary valuation models and analytical tools, which utilize market pricing or prices for similar instruments that are both objective and publicly available, such as matrix pricing or reported trades, benchmark yields, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, and offers.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents the hierarchy for assets measured at fair value on a recurring basis as of September 30, 2020 and December 31, 2019 (in thousands):


	Fair Value Measurements at End of Period Using:
	Total Fair Value		Quoted Market Prices for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
As of September 30, 2020
Money market funds	$	367,344	$	367,344	$	—	$	—
U.S. Treasury and agency securities	53,772		53,772		—		—
Commercial paper	5,580		—		5,580		—
Corporate debt securities	53,897		—		53,897		—
As of December 31, 2019
Money market funds	$	82,125	$	82,125	$	—	$	—
U.S. Treasury and agency securities	91,717		91,717		—		—
Commercial paper	37,411		—		37,411		—
Corporate debt securities	156,277		—		156,277		—

The Company did not reclassify any investments between levels in the fair value hierarchy during the periods presented.

Fair Value of Other Financial Instruments

As of September 30, 2020 and December 31, 2019, the carrying amounts of the Company’s financial instruments, which include cash, interest receivable, accounts payable and accrued expenses, approximate fair values because of their short maturities.

Interest receivable as of September 30, 2020 and December 31, 2019, was $0.5 million and $1.5 million,respectively, and is recorded as a component of prepaid expenses and other current assets on the condensed consolidated balance sheets.

The Company believes that its Credit Facility bears interest at a rate that approximates prevailing market rates for instruments with similar characteristics and, accordingly, the carrying value of the Credit Facility approximates fair value. The Company estimates the fair value of long-term debt utilizing an income approach. The Company uses a present value calculation to discount principal and interest payments and the final maturity payment on these liabilities using a discounted

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cash flow model based on observable inputs. The debt instrument is then discounted based on what the current market rates would be as of the reporting date. Based on the assumptions used to value these liabilities at fair value, the debt instrument is categorized as Level 2 in the fair value hierarchy.

As of September 30, 2020 the fair value of the Company’s 2027 Notes was $202.0 million. The fair value was determined on the basis of market prices observable for similar instruments and is considered Level 2 in the fair value hierarchy (see Note 5).

Available for Sale Investments

The Company invests its excess cash in U.S. Treasury and agency securities and debt instruments of corporations and commercial obligations, which are classified as available-for-sale investments. These investments are carried at fair value and are included in the tables below. The Company evaluates securities with unrealized losses to determine whether such losses, if any, are due to credit-related factors. Realized gains and losses are calculated using the specific identification method and recorded as interest income or expense. The Company does not generally intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases, which may be at maturity.

The aggregate market value, cost basis, and gross unrealized gains and losses of available-for-sale investments by security type, classified in marketable securities and long-term investments as of September 30, 2020 are as follows (in thousands):


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Total Fair Value
Marketable securities
U.S. Treasury and agency securities	$	35,194	$	—	$	—	$	35,194
Commercial paper	5,580		—		—		5,580
Corporate debt securities	52,346		302		—		52,648
Total marketable securities	$	93,120	$	302	$	—	$	93,422

At each reporting date, the Company performs an evaluation of impairment to determine if any unrealized losses are due to credit-related factors. The Company records an allowance for credit losses when unrealized losses are due to credit-related factors. Factors considered when evaluating available-for-sale investments for impairment include the severity of the impairment, changes in underlying credit ratings, the financial condition of the issuer, the probability that the scheduled cash payments will continue to be made and the Company’s intent and ability to hold the investment until recovery of the amortized cost basis. The Company intends and has the ability to hold its investments in unrealized loss positions until their amortized cost basis has been recovered. As of September 30, 2020, there were no material declines in the market value of the Company’s available-for-sale investments due to credit-related factors.

Contractual maturities of available-for-sale debt securities, as of September 30, 2020, were as follows (in thousands):


	Estimated Fair Value
Due within one year	$	79,582
One to two years	13,840
Total	$	93,422

The Company has the ability, if necessary, to liquidate any of its cash equivalents and marketable securities to meet its liquidity needs in the next 12 months. Accordingly, those investments with contractual maturities greater than one year from the date of purchase are classified as current assets on the accompanying condensed consolidated balance sheets.

5. Indebtedness

Credit Facility

On May 2, 2019, the Company entered into a credit, guaranty and security agreement, as amended on September 18, 2019 and July 2, 2020 (the “Credit Facility”), with MidCap Financial Trust (“MidCap”), as agent and lender, and the additional lenders party thereto from time to time (together with MidCap, the “Lenders”), pursuant to which the Lenders, including affiliates of MidCap and Silicon Valley Bank, agreed to make term loans available to the Company for working capital and

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general business purposes, in a principal amount of up to $150.0 million in term loan commitments, including a $30.0 million term loan that was funded at the closing date, with the ability to access the remaining $120.0 million in two additional tranches (each $60.0 million), subject to specified availability periods, the achievement of certain clinical development milestones, minimum cash requirements and other customary conditions. The Company, GB001, Inc., GB002, Inc., and GB004, Inc., each wholly-owned subsidiaries of the Company, are designated as co-borrowers to the Credit Facility, whereas GB003, Inc., GB005, Inc., GB006, Inc., GB007, Inc., GB008, Inc. and Gossamer Bio Services, Inc.,each wholly-owned subsidiaries of the Company, are designated as guarantors. The remaining two tranches are available no earlier than the satisfaction of the applicable funding conditions, including the applicable clinical development milestones, and no later than December 31, 2022. As of September 30, 2020, no other tranches under the Credit Facility have been drawn. The Credit Facility is secured by substantially all of the Company’s and its domestic subsidiaries’ personal property, including intellectual property.

Each term loan under the Credit Facility bears interest at an annual rate equal to the sum of (i) one-month LIBOR (customarily defined, with a change to prime rate if LIBOR funding becomes unlawful or impractical) plus (ii) 7.00%, subject to a LIBOR floor of 2.00%. The borrower is required to make interest-only payments on the term loan for all payment dates prior to July 1, 2022. The term loans under the Credit Facility will begin amortizing on July 1, 2022, with equal monthly payments of principal plus interest being made by the Company to the Lenders in consecutive monthly installments following such interest-only period until the Credit Facility matures on January 1, 2025. Upon final repayment of the term loans, the borrower must pay an exit fee of 1.75% of the amount borrowed under the Credit Facility, less any partial exit fees previously paid. Upon partial prepayment of a portion of the term loans, the borrower must pay a partial exit fee of 1.75% of the principal being prepaid. At the borrower’s option, the borrower may prepay the outstanding principal balance of the term loan in whole or in part, subject to a prepayment fee of 3.00% of any amount prepaid if the prepayment occurs through and including the first anniversary of the second amendment effective date, 2.00% of the amount prepaid if the prepayment occurs after the first anniversary of the second amendment effective date through and including the second anniversary of the second amendment effective date, and 1.00% of any amount prepaid after the second anniversary of the second amendment effective date and prior to January 1, 2025.

The Credit Facility includes affirmative and negative covenants applicable to the Company and certain of its subsidiaries. The affirmative covenants include, among others, covenants requiring such entities to maintain their legal existence and governmental approvals, deliver certain financial reports, maintain insurance coverage, maintain property, pay taxes, satisfy certain requirements regarding accounts and comply with laws and regulations. The negative covenants include, among others, restrictions on such entities from transferring collateral, incurring additional indebtedness, engaging in mergers or acquisitions, paying dividends or making other distributions, making investments, creating liens, amending material agreements and organizational documents, selling assets and suffering a change in control, in each case subject to certain exceptions. The Company and certain of its subsidiaries are also subject to an ongoing minimum cash financial covenant in which they must maintain unrestricted cash in an amount not less than 25% of the outstanding principal amount of the term loans. As of September 30, 2020, the Company was in compliance with these covenants.

The Credit Facility also includes events of default, the occurrence and continuation of which could cause interest to be charged at the rate that is otherwise applicable plus 3.00% and would provide MidCap, as agent, with the right to exercise remedies against the Company and/or certain of its subsidiaries, and the collateral securing the Credit Facility, including foreclosure against the properties securing the credit facilities, including cash. These events of default include, among other things, failure to pay any amounts due under the Credit Facility, a breach of covenants under the Credit Facility, insolvency or the occurrence of insolvency events, the occurrence of a change in control, the occurrence of certain U.S. Food and Drug Administration (“FDA”) and regulatory events, failure to remain registered with the SEC and listed for trading on Nasdaq, the occurrence of a material adverse change, the occurrence of a default under a material agreement reasonably expected to result in a material adverse change, the occurrence of certain defaults under certain other indebtedness in an amount greater than $2.5 million and the occurrence of certain defaults under subordinated indebtedness and convertible indebtedness.

Long-term debt as of September 30, 2020 consisted of the following (in thousands):


	September 30, 2020
Term loan	$	30,000
Debt discount and issuance costs	(1,335)
Long-term debt	$	28,665

The scheduled future minimum principal payments are as follows (in thousands)

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	September 30, 2020
2020 (remaining 3 months)	$	—
2021	—
2022	5,806
2023

Price	17.19	EPS	-2
Shares	61	P/E	-8
MCap	1,048	P/FCF	-10
Net Debt	-101	EBIT	-126
TEV	948	TEV/EBIT	-8
TTM 2019-09-30, in MM, except price, ratios

10-Q	2020-09-30	Filed 2020-11-10
10-Q	2020-06-30	Filed 2020-08-11
10-Q	2020-03-31	Filed 2020-05-12
10-K	2019-12-31	Filed 2020-03-24
10-Q	2019-09-30	Filed 2019-11-12
10-Q	2019-06-30	Filed 2019-08-08
10-Q	2019-03-31	Filed 2019-05-14
10-K	2018-12-31	Filed 2019-03-22
S-1	2018-12-21	Public Filing

8-K	2020-11-16
8-K	2020-11-10
8-K	2020-10-13
8-K	2020-08-11
8-K	2020-07-02
8-K	2020-06-17
8-K	2020-05-18
8-K	2020-05-12
8-K	2020-03-24
8-K	2020-01-13
8-K	2019-11-12
8-K	2019-09-12
8-K	2019-08-08
8-K	2019-06-10
8-K	2019-05-30
8-K	2019-05-14
8-K	2019-05-02
8-K	2019-03-22
8-K	2019-03-07
8-K	2019-02-12

EX-31.1	goss-20200930xxexx311.htm
EX-31.2	goss-20200930xxexx312.htm
EX-32.1	goss-20200930xxexx321.htm
EX-32.2	goss-20200930xxexx322.htm

GOSS 10Q Quarterly Report

Gossamer Bio Earnings 2020-09-30