GOSS - NASDAQ

Good afternoon, and welcome to the Gossamer Bio Third Quarter 2019 Earnings Call. Today's call will feature updates from Gossamer Bio's management team followed by a question-and-answer session. I will now turn the call over to Gossamer Bio's Chief Financial Officer, Bryan Giraudo. Bryan?

Thank you, operator, and thank you all for joining us this afternoon. I'm joined on today's call by Gossamer Bio's Co-founder and Chief Executive Officer, Dr. Sheila Gujrathi; as well as Gossamer Bio's Chief Medical Officer, Dr. Jakob Dupont; and Gossamer Bio's Chief Scientific Officer, Dr. Luisa Salter-Cid. Earlier this afternoon, Gossamer Bio issued a press release announcing its financial results for the third quarter ended September 30, 2019 and provided a corporate update. Please note that certain information discussed on the call today 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 and 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 for only a limited period of time. 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 call -- I'd like to turn the call over to Sheila. Sheila?

Thank you, Bryan, and good afternoon to everyone joining us on today's call. Since our initial public offering in February of this year, I emphasized that Gossamer Bio's goal is to be an industry leader in immunology, inflammation and oncology and to enhance and extend the lives of patients suffering from such diseases. On today's call I am excited to further update you on Gossamer's continued progress towards that ambitious goal. I will walk you through the updates and milestones achieved for each of our four clinical-stage product candidates and then Bryan will discuss Gossamer's financial updates following which I will provide a few closing remarks. We will begin with our most advanced clinical-stage product candidate GB001, an oral DP2 antagonist, which we are developing for eosinophilic asthma and other allergic conditions, including chronic rhinosinusitis both with and without nasal polyps; and chronic spontaneous urticaria. Gossamer Bio continues to enroll the LEDA study for the treatment of moderate-to-severe eosinophilic asthma. LEDA is a global Phase 2b study testing GB001 over a 24-week treatment period with patients remaining on background therapy. As a reminder, the LEDA study is enrolling GINA steps four and five patient population all of whom have an eosinophilic count of at least 250 cells per microliter. LEDA uses a reduction in asthma worsening a composite measure at 24 weeks as its primary endpoint. The study is on track to trigger an interim analysis in the first half of 2020 once approximately two-thirds of the patients have completed the trial. In the second half of 2020, we expect to read out full top line Phase 2b result for this 400-patient trial. In September at the European Respiratory Society International Congress in Madrid, we presented and posted further detailing GB001's effect in relation to fractional exhaled nitric oxide or FeNO in mild-to-moderate atopic asthmatics. The data described in the poster suggests that FeNO could serve as a useful prognostic marker for treatment response to GB001. In addition to elevated eosinophil, which is a market we are currently using to enroll the LEDA study. The high FeNO subpopulation for patients with FeNO greater than or equal to 35 parts per billion, showed a FeNO reduction versus placebo of 13.4 parts per billion. The high FeNO subpopulations also showed a mean FEV1 improvement at day 28 versus placebo of 207 millimeter. In our ongoing Phase 2 LEDA study, we continue to evaluate FeNO as a potential biomarker. Late this past week at the American College of Allergy Asthma Immunology Annual Scientific Meeting in Houston, we presented two posters related to asthma and GB001. The first contained detailed results from the previously discussed proof-of-concept Phase 2 study run by our partner Teijin Pharma in a 158 mild-to-moderate Japanese asthmatics. The study met its primary endpoint of change in morning peak expiratory flow from baseline versus placebo. Additionally in the poster, we showed that treatment with 20 milligram of GB001 led to a 71% reduction in the risk of asthma worsening in the overall population and an 84% reduction in the elevated eosinophilic population. These data reinforce our belief that baseline blood eosinophils are a potential useful marker for response to GB001. As part of our ongoing commercial characterization of the asthma market, the second poster from ACAAI details a real-world analysis of the dynamics and prescription trends for biologic usage in asthma. All three of these posters related to GB001 are available on our website at gossamerbio.com in the Posters and Publications section. On the previously quarterly call, we announced the first patient dose for our Phase 2 proof-of-concept study at GB001 in chronic rhinosinusitis known as a TITAN study. We plan to enroll approximately 100 patients with chronic rhinosinusitis, both with and without nasal polyps in the TITAN study, which is designed to measure the effect of GB001 on the Sino-Nasal Outcome Test, or SNOT-22 score, after 16 weeks of treatment in patients who are refractory to intranasal steroids. We remain on track to read out top line data for this proof-of-concept Phase 2 study in the second half of 2020. Moving on to our third-line indication for GB001, chronic spontaneous urticaria or CSU, there is evidence that the TH2 pathway and cell types, such as eosinophil, basophils and mast cells are implicated in the pathogenesis of CSU. But the underlying biology does differ from eosinophilic asthma and CRS. To better understand the effect of the difference in biology, combines with our desire to ensure we are targeting the right patient population, we have decided to initiate a smaller translational Phase 2 trial in CSU in the first half of 2020 prior to initiating a larger study. We also continue to evaluate the potential of GB001 in other allergic and inflammatory diseases, such as eosinophilic esophagitis. To close on GB001, we are very optimistic about the significant potential that this once-daily oral DP2 antagonist holds across multiple allergic disease areas with high unmet need. And we look forward to reporting multiple Phase 2 top line readouts in 2020. We will now move on to GB002, our inhaled PDGF receptor inhibitor, the treatment of Pulmonary Arterial Hypertension, also known as PAH. GB002 has the potential to be the first drug in a new therapeutic class for the destructive and crippling rare disease with high unmet need and limited practice of approved therapies. GB002 has completed Phase 1 safety studies in normal healthy volunteers with no serious adverse events observed, and has been granted orphan drug designation from the FDA and the EMA for the treatment of PAH. We have commenced an exploratory transitional Phase 1b with the goal of assessing the initial safety and tolerability profile of GB002 in PAH patients and generating target engagement and biomarker data. While we originally expected to begin patient enrollment in the third quarter of 2019, following the receipt of long-term toxicology data, we amended the trial protocol to include a six month open-label extension, following the original two-week study period. We have been working closely with our Phase 1b study site and investigators to identify appropriate study participants for our Phase 1b study. We expect to begin enrollment in the fourth quarter of 2019, and we expect the initial readout from the Phase 1b trial in the first half of 2020. As a reminder, this coming Sunday and Monday at the American Heart Association Scientific Sessions in Philadelphia, we are excited to present further GB002 preclinical data in two distinct animal models of PAH. The first presentation demonstrates that entailed delivery of GB002 is efficacious in preventing PAH progression in the Rat Monocrotaline and Pneumonectomy Model of PAH, and furthermore, the GB002 maybe disease-modifying through its effect on lung remodelling in treated model. The second presentation details results from GB002 and the Su5416 Hypoxia Rat Model of PAH. In this model, two ways of treatment with GB002 significantly reduced right ventricular diastolic pressure and mean plus pulmonary arterial pressure. Additionally, decreased plasma levels of NT-proBNP a biomarker for heart failure were observed. Review of the data presented in these presentations, are very promising for the future of the GB00 program in PAH. And if you are at the AHA sessions in Philadelphia, we welcome you to stop by. The abstract of both presentations are currently on our website and both posters will become available on our website after the presentation. Additionally, based upon conversations with regulatory authorities and KOLs, we are in the final stages of designing our GB002 Phase 2 study. While this Phase 2 study may not support registration, we believe that the data generated from this study will be incredibly valuable for future registrational study by assessing PVR, cardiac function measured by echo, and six-minute walk test. We plan to initiate the Phase 2 study in the first half of next year. Next we will discuss GB004, an oral HIF-1α stabilizer for the treatment of inflammatory bowel disease including ulcerative colitis or UC. GB004 is a gut-targeted prolyl hydroxylase inhibitor designed to preferentially stabilize HIF-1α, a transcription factor involved in the body's protective response of low oxygen levels. We are very excited to see that in October, it was announced that this biology was subject of a work underlying the 2019 Nobel Prize in medicine and physiology. GB004 is currently in a Phase 1b decided to demonstrate proof-of-mechanism in UC patients. We are enrolling patients with active mild-to-moderate UC in this four-week study, which is testing one dose of GB004 versus placebo. Patients enrolling in the trial must have active UC as confirmed by Mayo Score assessment and evidence of colonic inflammation as confirmed by endoscopy. The primary outcome is safety and tolerability and we plan to evaluate PK/PD and hope to see evidence of target engagement, changes in gene expression and epithelial barrier restoration. We also closed information on clinical effects in the study including Mayo Score. And after the treatment period patients will undergo either flexible sigmoidoscopy or colonoscopy. We are pleased to say that we are on track to report initial top-line results from the Phase 1b in the first half of 2020. Finally, we will touch on our new clinical asset GB1275, which is an oral CD11b modulator being developed as an immuno-oncology product candidate. GB1275 is focused on addressing the immunosuppressive mileage population present within tumor tissue. These tumor types include pancreatic, colorectal, prostate and other significant tumor indications. And GB1275 has received orphan drug designation from the FDA for the treatment of pancreatic cancer. This morning we announced that we entered into a clinical trial collaboration and supply agreement with Merck, in which they have agreed to supply their anti PD-1 antibody KEYTRUDA or pembrolizumab for our ongoing Phase 1/2 study of GB1275 in selected solid tumors. The study now known as KEYNOTE-A36 is actively enrolling patients with pancreatic, gastric, colorectal, esophageal and triple-negative breast cancer. The Phase 1 portion of the study consists of dose escalation of GB1275 monotherapy. And after clearing several monotherapy dose levels, we will initiate dose escalation combination of KEYTRUDA or chemotherapy. We are very excited to collaborate with Merck, an established leader in cancer immunotherapy as we work to improve the lives of cancer patients. Our team presented a poster detailing the study design as last week Society for Immunotherapy of Cancer Meeting, which can now also be found on our website. We expect to disclose initial data from the study in the second half of 2020 and we will provide updates as the study progresses. Gossamer Bio retains worldwide rights to GB1275. With that, I will hand it over to Gossamer Bio's, Chief Financial Officer, Bryan Giraudo for a financial update. Bryan?

Thank you, Sheila. We will now review the financial results for the second quarter of 2019 -- I'm sorry, the third quarter of 2019. We ended the quarter with $446 million of cash and cash equivalents. We continue to anticipate our cash and cash equivalents plus the capital available to us under our debt facility. It will provide us sufficient capital resources into the fourth quarter of 2021. Research and development expenses in the quarter were approximately $40.1 million, which reflects a continued ramp-up of expenses for GB001, 002, 004, and 1275. G&A expenses were $9.8 million in the quarter with $3 million of that in total stock-based compensation. Our net loss for the quarter was $48.5 million equating to $0.80 per share. With that, I'll turn it back over to Sheila to offer some closing comments before we open the line for Q&A. Sheila?

Thank you, Bryan. As we draw the call to a close, we at Gossamer Bio would like to thank all our employees, shareholders, clinical trial principles and investigators who have invested the time and resources for the betterment of patients. While we continually strive to advance our product candidates through the clinic, we know that our successes in the areas of immunology inflammation and oncology are not possible without your faith and commitment in our shared journey. Thank you for taking the time to join us today, and thank you for your continued interest and support. With that, I will now turn the call over to the operator to begin the question-and-answer session. Operator?

[Operator Instructions] We have a question or comment from the line of Joseph Schwartz from SVB Leerink. Your line is open.

Great. Thanks very much. My only comment is congrats on the progress. And then for my first question I was wondering on GB001. What is the baseline rate of asthma worsening that you expect to see in the patients you've enrolled in the LEDA study? What degree of improvement do you hope to show in this trial? And what kinds of events do you think GB001 has the best opportunity to reduce the rate of – based on your understanding of the biology as well as the endpoint?

Great. Thank you, Joseph. So just to remind everyone, we are looking to enroll a sicker disease population in terms of disease severity. So in that respect, the patients we're going after typically, we'll have an average of two exacerbations in the preceding year prior to the start – enrolling the study at baseline. So in terms of what we would like to see is for an improvement in that area, again, we're looking at asthma worsening, which is a broader composite endpoint than just the asthma exacerbation rate. So we'll be looking at a number of events. But we are hoping to see a reduction in the range of 30% to 50% reduction. This is similar to what we saw in the Teijin trial, where we saw about a 50% reduction in the proportion of patients who had an asthma-worsening rate. So that's really what we guide patients as what we guide really everyone too when we think about the primary endpoint for looking at the LEDA trial and looking at the primary endpoint for the study. And then of course when – we will take that data to look at the Phase 3 endpoints and we will be looking at exacerbations, which is an individual component of the five composite endpoint score that we'll be looking at and we'll be using that to guide our Phase 3 planning and also to guide the exacerbation rate reduction, we're hoping to see in the Phase 3 trial. And of course, this is all predicated and we are looking at the high eosinophilic population. And that's again been consistent with what we've been saying in terms of our ideal patient population from the beginning.

Okay. Great. That's helpful. Thanks. And then on GB002, I was hoping that you can provide us more color on your current plans for this program. I recall that the Phase 1b has two cohorts. So – and you were previously thinking that you might start a Phase 2b/3 based on the findings from the first cohort, have you seen that data? Or is there any other rationale for what seems like a slightly different strategy now with a Phase 2 to start next year.

Yeah, great question, Joseph. So yeah, I think we are again looking to commence enrollment of patients this quarter. We did want to amend the study to include the open-label extension given the availability of our long-term toxicology data. And so we've done that. Our investigators are very excited to start enrolling patients and actually treat them beyond the two-week treatment period. And so we will be getting data from the 1b really in the first half of next year, and we'll be able to report out on that data set. And that will be very much informing the Phase 2 study design as well. So we will be getting very important safety PK information and biomarker data, and essentially looking at NT-proBnP levels which we're excited to show that data in our preclinical models. We believe that we showed nice reduction in our animal model looking at 002 in the preclinical model setting. So we'll be looking to see what data we can generate clinically as well. In terms of our thinking on the Phase 2 strategy, I think we are – we'll be looking at PVR. Again, cardiac function as measured by echo and proBnP levels and other biomarkers as long as six-minute walk test. So, overall, the study design is similar to what we have been planning all along. I think we are saying now that, it will likely be a Phase 2 study that may not be registration enabling based on a lot of conversations we've had with regulatory authorities as well as KOLs in this space and then compared to a Phase 2b/3 type of approach. However, again we do think the Phase 2 trial will really position us for success for future registration of studies. So it's really more of just understanding again through further interactions and assessing what's been going on in the field for our overall strategy. But basically the study designs and our strategy from what we've been saying is still similar in terms of what we originally laid out.

Great. That makes sense. Thanks for taking my questions.

Thank you. Our next question or comment comes from the line of Patrick Trucchio from Berenberg Capital Markets. Your line is open.

Hi. Good afternoon. This is Iris on for Patrick. So congrats on the progress. I have a few questions. First on GP001. Just a follow-up on the LEDA program. Can you tell us what data should we expect to be released at the interim analysis? And then secondly, can you tell us what you would consider to be a comparable benchmark in terms of a particular study for a particular biologic that we should have in mind for the LEDA trial results. And when should we -- and what should we anticipate in the composite endpoint based on the data generated to-date? Thank you.

Great. Thank you so much. So at the time of the interim analysis that's again with about two-thirds of patients have reached 24 weeks and with the primary endpoint, we will be looking at the primary endpoint, which is a composite. We'll be looking at the five sub-components of the composite to ensure consistency and what we're really looking -- be looking at the rate of worsened events. And so that's really the key endpoint that we'll be looking for at the study. We'll also look of course at lung function and we'll be looking at safety and tolerability as well. Just to be clear, we will not be releasing any of this data since this will be an ongoing study, but we will be indicating whether we think the data's in support of moving forward into Phase III planning and initiation purposes. And so that's what the level of disclosure we'll be providing. But really what we'll be looking for is very robust data on the composite endpoint, consistency across all the subcomponents of the composite and of course consistency with the secondary endpoint. So in that regard for benchmarking purposes, we feel very comfortable looking at the data from the Teijin study. Again, this will be in a different population. But if we're seeing again that improvement of the 30% to 50% type of improvement in the reduction of worsening events, we'll feel really comfortable that we're in that ballpark. And we will have the benefit of course of seeing the Novartis totality of their Phase III program the LUSTER-1 and 2 data, which will help and aid in our Phase III planning including statistical planning for those trials. And again, I will just guide as individuals to look at the biologic studies in their Phase II trials. Again these are looking at different endpoints. And with the FL-5 they look at exacerbations in Phase II as well. And of course that's one component of our overall composite. But again, we'll be looking at consistency across all these events. We can't really look at exacerbations solely in the Phase II as a primary endpoint just because of the event rates and that we won't have the number of events we need in a shorter-term duration study and a smaller sample size. But that again -- these are all very correlated in terms of worsening subcomponents. So it'll be a -- it will give us a very good indication of how we think we will fare in Phase III looking at a primary exacerbations endpoint.

Okay. A follow-up question on Novartis at the Phase III program. So based on your discussions with the FDA and the zero trial failure. Do you think that the FDA would require you to run a similar Phase III trial in moderate asthma patient population with the lung function endpoint? Or is it possible that the study could be avoided in your pivotal program?

Yeah, its great question. We have had conversations with the FDA, where they were very interested in characterizing the efficacy, in a broader population beyond Moderate-to-Severe Eosinophilic Asthma patients. We definitely wanted to have that, as our patient population for the Phase IIb, LEDA study. Because we think that's where the highest scientific rationale lies, in terms of the underlying biology for those patients. And the potential therapeutic effects for DP2 antagonism as well as in Th2-related mechanism. But we do know that they are interested in that, in that characterization. And Novartis has done quite a bit now to generate data, in the moderate, asthmatics in the mild-to-moderate setting as well as looking at to all-comers in the LUSTER trial. So, our plan is to continue to have regulatory dialogue. And to talk about that plan, we're ready to see what the data from, again our own LEDA study. Of course, we will look at the LUSTER-1 and 2, data sets when they become available. And take all that back to the regulatory authorities to discuss and finalize our Phase III plan. I will say that, we're seeing clear benefits in the Moderate-to-Severe Eosinophilic Asthma setting and really not a lot of benefit, in those other patient populations. We will try to streamline our Phase III program. We think that's the right thing to do for patients. And we also think, that's the best use of the adopting our resources as well. So, those will be some of our intention.

Okay, another question on, GB002. So how should we think about the top line data, in the Phase Ib study, from both the safety and the de-risking perspective, particularly at safety in PAH study, is something really difficult to assess?

Yeah. So I think primarily, this is the safety and tolerability trial and getting experience in PAH patients. And so that is the primary outcome measures for this study. We will be looking at these biomarkers that we think can be very helpful, in understanding clinical activity, around the mechanism. And that includes again imaging, parameters and looking at right heart function, as well as NT-proBnP levels which is a measure of right heart stream. And gene-expression signatures, which will really be more direct evidence of us on target engagement in our ability to neutralize the mechanism. So, those will all be very encouraging. And a lot of that will be digging into our exposure-response modeling, to finalize the dose reduction for Phase II. But we don't want to guide that we will be seeing proof of concept in the Phase Ib trial. So really that will be very helpful information for us to do a nice Phase II study.

Thanks for taking all questions.

Thank you. [Operator Instructions] I'm showing no additional questions, in the queue at this time. I'd like to turn the conference back over to, management for any closing remarks.

Thank you very much. Thank you very much, everyone for dialing to the call and for your questions. And we look forward to more dialogue over the next few weeks and quarters. Thank you, again.