Gossamer Bio, Inc. Q4 FY2021 Earnings Call

Good day, and thank you for being here. Welcome to the Gossamer Bio Q4 Earnings Call. I would like to introduce your speaker for today, Mr. Bryan Giraudo. The floor is yours, sir.

Thank you, operator, and thank you all for joining us this afternoon. I am joined on today's call by Gossamer's Co-Founder, Chairman and Chief Executive Officer, Faheem Hasnain; Gossamer's Chief Medical Officer, Dr. Richard Aranda; and Gossamer's Chief Scientific Officer, Dr. Laura Carter. Earlier today, Gossamer issued a press release announcing its year-end 2021 financial results and providing a corporate update. Please note that certain information discussed on the call is covered under the safe harbor provision of the Private Securities Litigation Reform Act. We caution listeners that during this call, Gossamer management will be making forward-looking statements. Actual results may differ materially from those stated or implied by these forward-looking statements due to risks and uncertainties associated with the company's business. These forward-looking statements are qualified by the statements contained in Gossamer's news releases, SEC filings, including in the annual report on Form 10-K and subsequent filings. This conference call also contains time-sensitive information that may be accurate only for a limited period of time. Our ability to meet our guidance, especially that related to the timely initiation and completion of clinical studies, in addition to our ability to release results from our clinical trials in a timely manner, may be adversely affected by the ongoing COVID-19 pandemic. Gossamer Bio undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call. Now I'd like to turn the call over to Faheem. Faheem?

Thank you, Bryan, and thanks to everyone for joining us on this afternoon's call. 2021 was the year of execution for the Gossamer team, despite the challenges that the preceding two years have provided. We at Gossamer are excited and energized to enter 2022 with two upcoming proof-of-concept Phase II readouts in ulcerative colitis and Pulmonary Arterial Hypertension. Now while these product candidates, seralutinib and GB004 target different indications utilizing different approaches, we view them both alike in the sense that they're using novel mechanisms to target populations that continue to be underserved. And if approved, we believe both molecules hold treatment paradigm-shifting potential. First, let's start with GB004. The Phase II SHIFT-UC study is on track to read out week 12 primary endpoint top-line results early in the second quarter of this year. And as a quick reminder, the SHIFT-UC study is a randomized, double-blind, placebo-controlled global clinical trial studying GB004 in patients with active mild-to-moderate UC despite treatment with 5-ASA therapy. Patients were randomized in a 1:1:1 ratio between two doses of GB004 in tablet form and placebo. The 12-week primary endpoint of this trial is clinical remission, and secondary endpoints include clinical response, histological remission, endoscopic improvement, and mucosal healing. Relevance safety and exploratory endpoints are also being assessed during the clinical trial. The GB004 is distinct and may have a differentiated profile from the immunomodulatory or immunosuppressive mechanisms of approved IBD medications and those in late-stage development. GB004 is designed to be gut-targeted with higher intestinal exposure than systemic exposure, and clinical and preclinical data generated to date support this thesis. By reducing local inflammation and potentially restoring intestinal epithelial barrier function and restitution through GB004's gut-targeted nature and preferential stabilization of HIF-1 alpha. We believe GB004 could improve outcomes for IBD patients. We believe this mechanism has potential as a stand-alone therapeutic as well as a combination therapy with other therapeutic mechanisms in IBD. Now in addition to the week 12 primary endpoint coming early in the second quarter, in the fourth quarter of this year, the SHIFT-UC trial is also expected to read out week 36 treat-through endpoints in the fourth quarter. Now as some of you may know, we had a number of our sites and patients within the ongoing Phase II SHIFT-UC study in Ukraine and Russia. First, and most importantly, our hearts go out to our Ukrainian patients, caregivers, investigators, study coordinators and, of course, the Ukrainian people as a whole. Above all else, we hope for their health and safety in this horrific situation. In terms of impact to our ongoing trials, Gossamer Bio's clinical operations team has been vigilant and proactive throughout the escalation of tensions and the tragic breakout of hostilities. We anticipate no impact on data to our 12-week primary endpoint. Understandably, communication into Ukraine has been challenging, and we're continuing to monitor for impacts to our 36-week data set. Moving on to seralutinib, also known as GB002. Gossamer continues to enroll patients in its ongoing Phase II's TORREY study in patients with functional Class II and III PAH patients. As you may recall, the wave of COVID-19 related to the Delta variant in the late summer and fall of 2021 raised barriers to enrollment. But we're pleased to say that, at this point, the wave of COVID-19 related to the Omicron variant has not significantly impacted patient enrollment. Today, we're able to reiterate our current guidance that we expect to read out top-line data from the ongoing TORREY study in the second half of this year, of course, barring any further developments in the ongoing COVID-19 viral pandemic. Now once patients complete the blinded 24-week study period as part of the TORREY study, they are granted the option of enrolling into an open-label extension trial. This extension trial should allow us to generate valuable and elucidating long-term data in patients. To date, we continue to see a very high percentage of patients who have completed the 24-week study period elect to continue on to the open-label extension, similar to the IMPRESS study of imatinib and the PULSAR study of sotatercept. If you recall, the IMPRESS study was hindered by a very high discontinuation rate due to adverse events with roughly one-third of patients in the imatinib arm dropping out prior to the 24-week primary endpoint. The majority of these dropouts in the IMPRESS study occurred in the first eight weeks. And we've been pleased to see that, to date, the blinded discontinuation rate in the TORREY study has been more comparable to the more manageable discontinuation rate observed in the PULSAR study of sotatercept. Now moving on from seralutinib. Our CNS-penetrant BTK inhibitor, GB5121, is expected to enter a global Phase Ib/II clinical study in PCNSL in CNS lymphoma patients in the first half of this year. We previously announced on our prior earnings call that GB5121 had entered a clinical trial in healthy volunteers outside of the U.S. Since then, in the fourth quarter of 2021, we're happy to announce today that our IND application has been submitted and accepted by the U.S. FDA. Now with that, I'll hand it over to our CFO and COO, Bryan Giraudo, for a final update.

Thank you, Faheem. We will now review the year-end financial results for the full year 2021. We ended the year with $325 million of cash and cash equivalents. We continue to maintain a robust value and anticipate our cash and cash equivalents, plus the capital available to us in our debt facility will provide us sufficient capital resources in the second half of 2023. For the quarter ended December 31, 2021, R&D expenses were $41 million compared to R&D expenses of $39 million for the same period in 2020. R&D expenses for the full year 2021 were $170 million compared to $161 million for 2020. The increase was primarily due to an increase in clinical trial and preclinical study costs associated with seralutinib, GB004, GB5121 and preclinical programs. This increase was partially offset by decreases in clinical trial and preclinical study costs related to GB001 and 1275. G&A expenses in the fourth quarter were $11 million compared to $16 million for the same period in 2020. G&A expenses for the full year 2021 were $46 million compared to $50 million for the full year 2020. The net loss for the three months ended December 31, 2021, was $56 million or $0.74 per share compared to a net loss of $65 million or $1.05 per share for the same period in 2020. The net loss for the full year ended December 31, 2021, was $234 million or $3.13 per share compared to a net loss of $243 million or $3.55 per share for the full year ended December 31, 2020. With that, I'll turn the call back over to Faheem for some closing comments before we open up for Q&A.

Thanks, Bryan. Operator, please go ahead and open the line to questions.

I have a couple of questions regarding the UC side, as that will be your next significant catalyst. From an efficacy standpoint, we have a clear understanding of the expected placebo rate and the efficacy rates, specifically the clinical remission rates. Can you remind us how the histologic benefits relate to remission? It would be helpful if you could provide more insight into how we can link early histologic benefits to later remission. I have one more question after this.

Yes, thank you, Faheem. It's quite challenging to predict early histologic results in relation to later clinical responses. Recently, several reviews have addressed this issue. For instance, three reviews focused on Stelara, the VARSITY study, and the golimumab and JAK inhibitor programs. They demonstrated that early time points, which varied across the studies, indicated that histologic improvement and mucosal healing observed at weeks 4 and 8 were associated with more significant clinical endpoints later on. For example, Stelara showed results at week 44, while golimumab in the VARSITY trials was assessed at week 52. Although the relationship isn't perfect, it appears that early histologic changes, particularly in mucosal healing, could potentially reflect stronger clinical outcomes later on.

Okay. And then one quick follow-up. So in terms of the background therapies that patients are allowed to be on during the SHIFT-UC study, how should we think about the level of background uses of 5-ASA and also, I assume intermittent use of steroids in these mild-to-moderate patients? And what guidance do you give to physicians on the steroid use during the 12-week induction period?

So Brian, all patients will be on background 5-ASAs as they enter the trial. We anticipate anywhere from 20% to 40% could be on concomitant background corticosteroids. That seems to be the range if you look throughout the various studies. During the first 12 weeks of the trial, patients are instructed not to change any of the background medications. Once they go beyond the 12 weeks, we do have a provision that they're able to taper the background steroids at the discretion of the patient and the investigator.

Faheem, I really appreciate your commentary on that. In the current TORREY study, there's a high interest of patients rolling over into the open-label. Is there an opportunity to maybe comment a little bit beyond that, like quantify it, like what percentage of patients are rolling over? And then in regards to the lower discontinuation rate, what discontinuation rates did you guys assume into the study? What type of discontinuation do you see at this junction? And then the third component is how many safety data monitoring committees has TORREY gone through? And that's basically it.

Yes. Thanks for your questions. As it relates to the first question, we're not going to be disclosing anything around enrollment or any specifics on that. That's kind of been our approach thus far. So we'll kind of just reiterate the fact that we're really pleased with the level of continued engagement that patients have into the OLE, and it's at a rate that we think is consistent, as we said, with basically what we saw in the PULSAR study, and I think that kind of set a really good framework of reference for us. Richard, do you want to add anything else to that?

Yes. I believe, Yasmeen, we're experiencing strong retention. As Faheem mentioned, the IMPRESS trial had a high retention rate, while our PULSAR study had a very low rate, and we're much closer to the PULSAR results. This is very encouraging for us.

And then the DSMB, I think we've had a couple.

Two meetings.

Yes, that's it.

Congrats on all the progress. I was wondering on GB004 if you'd be able to disclose the two doses that you're studying in the SHIFT-UC study. I know you've said that both are higher than the 120 milligrams once a day. I was just wondering what they are and what the rationale was for using higher doses versus the Phase Ib?

Joe, we'll let Rich speak to the rationale, but we have not disclosed it. We won't disclose it. But we are in the middle of enhancing our intellectual property position. And so I would like to get that done before we come forth with those dose levels, which will be around the time of our data disclosure. But Rich, rationale?

Yes. I think the way I would frame it is we were very encouraged with the 120-milligram 28-day study in our Phase Ib that I'd like to call it provided us the floor of exposure, if you will. And within that floor of exposure within the gut mucosa as well as our plasma PK, we saw good signs of, obviously, biomarkers, histologic activity and hints of clinical activity. So if you consider that as a foundation, our idea is perhaps we would amplify the signal that we saw there by dosing higher to increase the exposure within the gut and also treating longer and, hence, our Phase II trial was designed with those two aspirations.

Okay. And then kind of a similar question on GB5121. I was wondering if you could talk about the range of doses that you're studying in the Phase I healthy volunteer study and how they relate to the dose range that you're anticipating could be efficacious? And are you looking for a strong safety profile with every dose you're assessing? Or are you doing, as is often done in some oncology studies, where you push the higher end of the dose range in order to find the maximum tolerated dose?

Joe, you're talking about our normal healthy volunteer study?

Yes.

Yes. The advantage of BTKs is that we have the opportunity to utilize a strong target of receptor occupancy assay to guide us, which has been done historically. Our profile indicates that we believe our CNS penetrants are superior compared to our systemic exposure. By using a BTK receptor occupancy model, we can effectively guide ourselves toward a lower dose. We plan to increase the dose to achieve maximal receptor occupancy, typically aiming for over 99% in systemic circulation, and then assess safety within that framework. Our approach will be to start with a dose that provides an assumed mid-range receptor occupancy and then escalate quickly with guidance from that initial data.

Maybe to start, in terms of the SHIFT-UC top line, can you just comment about what you expect to disclose in the press release? Are you committing to sharing any quantitative disclosures around clinical remission? And then, separately, as I understand, the open-label extension shift you see is only 24 weeks. So my understanding is 36 weeks and then an additional 24 weeks. Has there been any consideration around maybe expanding that or lengthening it just to get some longer-term follow-up? Any thoughts there would be helpful.

Yes. Thanks, Carter. We'll be thorough in our disclosure, particularly regarding the primary and secondary endpoints and key biomarker data available at that time. As in the past, you should expect a transparent conversation. Now, I'll turn it over to Rich.

Yes, I want to clarify that the 36 weeks from week 12 to week 36 remain double blinded. Patients after week 12 will continue with their original randomization unless their condition worsens and they need to transition to the open label. The open label will extend for at least 28 weeks. We will review our top line results and determine the next steps regarding the potential extension of the open label.

The first question is just regarding seralutinib. So on the primary endpoint of change in PVR from baseline at week 24, I think in the past, you've discussed an expectation of an approximate 20% improvement relative to placebo. I'm wondering if that remains the expectation. And secondly, in addition to safety and tolerability, can you discuss what additional data points you'll be looking to hit to give confidence to move the program forward to Phase III?

Yes. To clarify, the guidance we are providing indicates an improvement of 18% to 32% from baseline in PVR, which is not necessarily related to a treatment effect from the placebo. This assessment is based on evaluating all the data from the IMPRESS trial, as well as the recent sotatercept data, where the changes in PVR were significant. Additionally, aside from PVR, we believe that the inhaled administration route offers a strong safety profile, which is another critical aspect we will be assessing. We will monitor the six-minute walk test, although we are not statistically powered for that. However, we hope to observe favorable trends, along with measuring NT-proBNP as an indicator of right heart function.

Yes, that's helpful. And then can you describe for us what the clinical development path for seralutinib could look like if you see the promising data as just described? Or is there an opportunity for an accelerated approval pathway?

I would say that, Pat, first and foremost, we want to get through the TORREY study and, with that data, have the right conversations with regulators. And obviously, we will push as hard as we can for the most efficient Phase III clinical plan. We know that patients are desperate for new options, and we want to be able to push as hard as we can. But really to have any comments before we spend time with regulators would just be premature.

I had two questions, one regarding UC and one regarding PAH. First for UC, can we draw any conclusions about the expectations for the week 36 responses based on what we observed at week 12, and possibly also considering some other molecules and trials that have used the treat-through design?

Yes, there is a possibility that we could observe an improved treatment effect with longer treatment duration. We experienced similar results with ozanimod during that program. Additionally, we have the opportunity to assess maintenance in patients who show a certain response at week 12 and whether they can sustain that response by week 36. Evaluating these two time points will provide insights into 004's ability to maintain a response.

Okay. That's helpful. And then on PAH, just in terms of how you think about the total addressable market for seralutinib? I know that, for example, Merck, when they had their acquisition of Acceleron, they discussed in their presentation some numbers around market sizing and opportunity for sotatercept. I'm just wondering if you think that's comparable or if there are any patients that you would or would not include in the seralutinib opportunity that might not overlap with sotatercept.

Yes, I believe it's appropriate to view it in a similar manner. Our perspective aligns with how sotatercept has been characterized in the addressable market, so I don't believe we have any major differences in that regard.

So I just had one on seralutinib. Could you explain how exactly the dose titration protocol works for TORREY? And thus far, like roughly what proportion of patients are making it on to the 90 mg dose?

Yes. We start patients at 60 milligrams twice a day, and during the first two to three weeks of the trial, they quickly increase the dose to 90 milligrams twice a day. They can reduce the dose in accordance with the investigator's opinion and the patient's tolerability profile once they reach 90 milligrams. What was the second part of your question? Could you please repeat that?

Just roughly what proportion of patients have made it on to your study on the 90 mg dose?

It's as we were alluding to very, very high as patients are rolling over into the open label. So I think that's reassuring since we see high rollover. And the dose there is also 90 milligrams twice a day that it's being very well tolerated.

We have no further questions at this time. I will now turn the call over back to Mr. Bryan Giraudo.

Actually, this is Faheem Hasnain. I just want to thank everyone who joined us today. I also want to give heartfelt thanks to the team here at Gossamer. We have a group of incredibly dedicated and passionate professionals, and the team has made really fantastic progress. So I just would like to thank everybody that's involved with these programs. We're honored to share our progress with you as we move our gaze forward towards an exciting 2022. So thank you again, everybody, for joining us.

Thank you again for your participation. This concludes today's conference call. You may now disconnect.