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 March 31, 2020

OR

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.    

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 May 7, 2020, the registrant had 66,358,439 shares of common stock ($0.0001 par value) outstanding.

 

 

 

 


TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION

 

Item 1

 

Condensed Consolidated Financial Statements (unaudited)

3

 

 

Condensed Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019

3

 

 

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months ended March 31, 2020 and 2019

4

 

 

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity for the Three Months ended March 31, 2020 and 2019

5

 

 

Condensed Consolidated Statements of Cash Flows for the Three Months ended March 31, 2020 and 2019

6

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

7

Item 2

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

18

Item 3

 

Quantitative and Qualitative Disclosures About Market Risk

26

Item 4

 

Controls and Procedures

26

 

PART II. OTHER INFORMATION

 

Item 1

 

Legal Proceedings

28

Item 1A

 

Risk Factors

28

Item 2

 

Unregistered Sales of Equity Securities and Use of Proceeds

31

Item 3

 

Defaults Upon Senior Securities

31

Item 4

 

Mine Safety Disclosures

31

Item 5

 

Other Information

32

Item 6

 

Exhibits

32

 

 

Exhibit Index

33

 

 

Signatures

34


2


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)

 

 

 

March 31, 2020

 

 

December 31, 2019

 

ASSETS

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

111,353

 

 

$

135,089

 

Marketable securities

 

 

234,812

 

 

 

266,740

 

Prepaid expenses and other current assets

 

 

9,273

 

 

 

7,488

 

Total current assets

 

 

355,438

 

 

 

409,317

 

Property and equipment, net

 

 

5,669

 

 

 

5,425

 

Operating lease right-of-use assets

 

 

9,737

 

 

 

10,303

 

Other assets

 

 

634

 

 

 

1,559

 

Total assets

 

$

371,478

 

 

$

426,604

 

LIABILITIES, CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS' EQUITY

   (DEFICIT)

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

2,602

 

 

$

956

 

Accrued research and development expenses

 

 

16,797

 

 

 

19,258

 

Accrued expenses and other current liabilities

 

 

8,963

 

 

 

16,709

 

Total current liabilities

 

 

28,362

 

 

 

36,923

 

Long-term debt

 

 

28,548

 

 

 

28,459

 

Operating lease liabilities - long-term

 

 

8,105

 

 

 

8,737

 

Total liabilities

 

 

65,015

 

 

 

74,119

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

 

 

Common stock, $0.0001 par value; 700,000,000 shares authorized as of March 31, 2020 and

   December 31, 2019; 66,338,201 shares issued and

   62,094,312 shares outstanding as of March 31, 2020, and 66,284,003 shares issued and

   61,635,477 shares outstanding as of December 31, 2019

 

 

7

 

 

 

7

 

Additional paid-in capital

 

 

695,205

 

 

 

686,390

 

Accumulated deficit

 

 

(388,244

)

 

 

(334,170

)

Accumulated other comprehensive income (loss)

 

 

(505

)

 

 

258

 

Total stockholders' equity

 

 

306,463

 

 

 

352,485

 

Total liabilities and stockholders' equity

 

$

371,478

 

 

$

426,604

 

 

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

3


GOSSAMER BIO, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

(in thousands, except share and per share amounts)

 

 

 

Three months ended March 31,

 

 

 

2020

 

 

2019

 

Operating expenses:

 

 

 

 

 

 

 

 

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

)

Other income, net

 

 

893

 

 

 

1,406

 

Net loss

 

$

(54,074

)

 

$

(32,611

)

Other comprehensive income:

 

 

 

 

 

 

 

 

Foreign currency translation, net of tax

 

 

(87

)

 

 

 

Unrealized gain (loss) on marketable securities, net of tax

 

 

(676

)

 

 

140

 

Other comprehensive income (loss)

 

 

(763

)

 

 

140

 

Comprehensive loss

 

 

(54,837

)

 

 

(32,471

)

Net loss per share, basic and diluted

 

$

(0.87

)

 

$

(0.90

)

Weighted average common shares outstanding, basic and diluted

 

 

61,890,323

 

 

 

36,317,230

 

 

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

 

4


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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

convertible

preferred stock

 

convertible

preferred stock

 

convertible

preferred stock

 

 

 

Common stock

 

Additional

paid-in

 

Accumulated

 

other

comprehensive

 

Total

stockholders'

 

 

Shares

 

Amount

 

Shares

 

Amount

 

Shares

 

Amount

 

 

 

Shares

 

Amount

 

capital

 

deficit

 

income (loss)

 

equity

 

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

 

 

$

 

 

 

$

 

 

 

$

 

 

 

 

62,094,312

 

$

7

 

$

695,205

 

$

(388,244

)

$

(505

)

$

306,463

 

 

 

Series Seed

 

Series A

 

Series B

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

convertible

preferred stock

 

convertible

preferred stock

 

convertible

preferred stock

 

 

 

Common stock

 

Additional

paid-in

 

Accumulated

 

other

comprehensive

 

Total

stockholders'

 

 

Shares

 

Amount

 

Shares

 

Amount

 

Shares

 

Amount

 

 

 

Shares

 

Amount

 

capital

 

deficit

 

income (loss)

 

equity

 

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

 

 

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

5


GOSSAMER BIO, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

 

 

 

Three months ended March 31,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(54,074

)

 

$

(32,611

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

329

 

 

 

169

 

Stock-based compensation expense

 

 

8,244

 

 

 

3,089

 

In process research and development expenses

 

 

2,805

 

 

 

1,000

 

Amortization of operating lease right-of-use assets

 

 

566

 

 

 

565

 

Amortization of long-term debt discount and issuance costs

 

 

89

 

 

 

 

Amortization of premium on investments, net of accretion of discounts

 

 

(65

)

 

 

 

Net realized gain on investments

 

 

(39

)

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

(1,785

)

 

 

(3,472

)

Other assets

 

 

925

 

 

 

2,144

 

Operating lease liabilities

 

 

(566

)

 

 

(504

)

Accounts payable

 

 

1,609

 

 

 

2,132

 

Accrued expenses

 

 

(2,239

)

 

 

(789

)

Accrued research and development expenses

 

 

(2,461

)

 

 

2,072

 

Accrued compensation and benefits

 

 

(5,633

)

 

 

(1,569

)

Net cash used in operating activities

 

 

(52,295

)

 

 

(27,774

)

Cash flows from investing activities

 

 

 

 

 

 

 

 

Research and development asset acquisitions, net of cash acquired

 

 

(2,805

)

 

 

(1,000

)

Purchase of marketable securities

 

 

(73,778

)

 

 

(222,295

)

Maturities of marketable securities

 

 

89,083

 

 

 

20,000

 

Sales of marketable securities

 

 

16,051

 

 

 

5,500

 

Purchase of property and equipment

 

 

(513

)

 

 

(347

)

Net cash provided by (used in) investing activities

 

 

28,038

 

 

 

(198,142

)

Cash flows from financing activities

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock in a public offering, net

 

 

 

 

 

291,273

 

Purchase of shares pursuant to Employee Stock Purchase Plan

 

 

556

 

 

 

 

Proceeds from the exercise of stock options

 

 

15

 

 

 

71

 

Net cash provided by financing activities

 

 

571

 

 

 

291,344

 

Effect of exchange rate changes on cash and cash equivalents

 

 

(50

)

 

 

 

Net increase (decrease) in cash and cash equivalents

 

 

(23,686

)

 

 

65,428

 

Cash and cash equivalents, at the beginning of the period

 

 

135,089

 

 

 

105,419

 

Cash and cash equivalents, at the end of the period

 

$

111,353

 

 

$

170,847

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

618

 

 

$

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of noncash investing and financing activities:

 

 

 

 

 

 

 

 

Right-of-use assets obtained in exchange for lease liabilities

 

$

 

 

$

12,458

 

Change in unrealized gain (loss) on marketable securities, net of tax

 

$

(676

)

 

$

140

 

Unpaid property and equipment

 

$

60

 

 

$

739

 

Conversion of convertible preferred stock to common stock

 

$

 

 

$

338,367

 

 

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

6


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 March 31, 2020, the Company had an accumulated deficit of $388.2 million. From the Company’s inception through March 31, 2020, the Company has funded its operations primarily through equity financings, including the Company’s IPO which closed on February 12, 2019. The Company raised $601.3 million from October 2017 through February 2019 through Series A and Series B Convertible Preferred Stock financings, a convertible note financing, and the IPO, after deducting underwriting discounts, commissions, and offering expenses. In addition, the Company received $12.8 million in cash in connection with the January 2018 acquisition of AA Biopharma Inc. On May 2, 2019 the Company, as guarantor, and its wholly-owned subsidiary GB001, Inc., as borrower, entered into a credit, guaranty and security agreement, as amended on September 18, 2019 (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 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. Under the Credit Facility, the Company has the ability to access the remaining $120.0 million in three additional tranches (of $40.0 million, $30.0 million and $50.0 million, respectively), subject to specified availability periods, the achievement of certain clinical development milestones, minimum cash requirements and other customary conditions. As of March 31, 2020, no other tranches under the Credit Facility have been drawn. See Note 5 for additional information regarding the Credit Facility.

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 outbreak 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 outbreak 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 outbreak could have a material and adverse impact on financial results and business operations of the Company, including the timing and ability of Company to complete certain clinical trials and other efforts required to advance the development of its product candidates and raise additional capital. For example, due to the challenges of enrolling patients posed by the COVID-19 pandemic, the Company may experience delays in the commencement of and enrollment of patients in its planned Phase 2 clinical trial of GB002 in pulmonary arterial hypertension and planned Phase 2 clinical trial of GB004 in ulcerative colitis, as well as delays in reporting data results from its ongoing trials.

7


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 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.

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.

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. Diluted net loss per share excludes the potential impact of the Company’s common stock options and unvested shares of restricted stock 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 March 31,

 

 

2020

 

2019

 

Shares issuable upon exercise of stock options

 

10,192,073

 

 

7,469,973

 

Non-vested shares under restricted stock grants

 

5,395,550

 

 

5,862,440

 

 

8


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)

 

March 31,

2020

 

 

December 31,

2019

 

Office equipment

 

3-7

 

$

1,097

 

 

$

1,097

 

Computer equipment

 

5

 

 

131

 

 

 

124

 

Software

 

3

 

 

87

 

 

 

87

 

Lab equipment

 

2-5

 

 

3,614

 

 

 

3,054

 

Leasehold improvements

 

6-7

 

 

2,267

 

 

 

2,229

 

Construction in process

 

N/A

 

 

16

 

 

 

48

 

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 consisted of the following (in thousands):

 

 

 

As of

 

 

 

March 31,

2020

 

 

December 31,

2019

 

Accrued compensation

 

$

4,205

 

 

$

9,282

 

Operating lease liabilities, current

 

 

2,418

 

 

 

2,354

 

Accrued in process research and development

 

 

 

 

 

1,600

 

Accrued professional service fees

 

 

1,800

 

 

 

2,347

 

Accrued other

 

 

540

 

 

 

1,126

 

Total accrued expenses

 

$

8,963

 

 

$

16,709

 

 

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.

9


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 March 31, 2020 and December 31, 2019 (in thousands):

 

 

Fair Value Measurements at End of Period Using:

 

 

 

 

 

 

 

Quoted Market

 

 

Significant

 

 

Significant

 

 

 

 

 

 

 

Prices for

 

 

Other Observable

 

 

Unobservable

 

 

 

Total

 

 

Identical Assets

 

 

Inputs

 

 

Inputs

 

 

 

Fair Value

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

As of March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

31,488

 

 

$

31,488

 

 

$

 

 

$

 

U.S. Treasury and agency securities

 

 

25,700

 

 

 

25,700

 

 

 

 

 

 

 

Commercial paper

 

 

71,961

 

 

 

 

 

 

71,961

 

 

 

 

Corporate debt securities

 

 

153,121

 

 

 

 

 

 

153,121

 

 

 

 

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 March 31, 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 March 31, 2020 and December 31, 2019, was $1.3 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 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.

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 above.  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 March 31, 2020 are as follows (in thousands):

 

 

 

 

 

 

 

Gross

 

 

Gross

 

 

 

 

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Total

 

 

 

Cost

 

 

Gains

 

 

Losses

 

 

Fair Value

 

Marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and agency securities

 

$

25,629

 

 

$

71

 

 

$

 

 

$

25,700

 

Commercial paper

 

 

55,991

 

 

 

 

 

 

 

 

 

55,991

 

Corporate debt securities

 

 

153,592

 

 

 

103

 

 

 

(574

)

 

 

153,121

 

Total marketable securities

 

$

235,212

 

 

$

174

 

 

$

(574

)

 

$

234,812

 

 

As of March 31, 2020, the Company classified $16.0 million of assets with original maturities of 90 days or less as cash equivalents. At each reporting date, the Company performs an evaluation of impairment to determine if any unrealized losses are due

10


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 March 31, 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 March 31, 2020, were as follows (in thousands):

 

 

 

 

 

 

 

 

 

Estimated

 

 

 

 

 

 

 

 

 

Fair Value

 

Due within one year

 

 

 

 

 

 

 

$

203,072

 

One to two years

 

 

 

 

 

 

 

 

31,740

 

Total

 

 

 

 

 

 

 

$

234,812

 

 

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. Long-term Debt

 

On May 2, 2019, the Company entered into the Credit Facility described in Note 1, pursuant to which the Lenders agreed to make term loans available to the Company for working capital and 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 three additional tranches (of $40.0 million, $30.0 million and $50.0 million, respectively), subject to specified availability periods, the achievement of certain clinical development milestones, minimum cash requirements and other customary conditions. The second tranche is available no earlier than February 1, 2020 and no later than July 31, 2020.  The third tranche is available no earlier than May 1, 2020 and no later than October 31, 2020.  The fourth tranche is available no earlier than February 1, 2021 and no later than July 31, 2021. The Credit Facility is secured by substantially all of the Company’s and its domestic subsidiaries’ personal property, including intellectual property, and includes affirmative and negative covenants applicable to the Company.

 

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) 6.15%, 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 June 1, 2021.  The term loans under the Credit Facility will begin amortizing on June 1, 2021, 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 for 36 months or, for any funding of the fourth tranche occurring after June 1, 2021, the number of months until the Credit Facility matures on May 1, 2024.  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 3.0% of any amount prepaid if the prepayment occurs through and including the first anniversary of the closing date, 2.0% of the amount prepaid if the prepayment occurs after the first anniversary of the closing date through and including the second anniversary of the closing date, and 1.0% of any amount prepaid after the second anniversary of the closing date and prior to May 1, 2024.

 

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 March 31, 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 3.0% 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

11


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 $2,500,000 and the occurrence of certain defaults under subordinated indebtedness and convertible indebtedness.

 

Long-term debt as of March 31, 2020 consisted of the following (in thousands):

 

 

 

March 31, 2020

 

Term loan

 

$

30,000

 

Debt discount and issuance costs

 

 

(1,452

)

Long-term debt

 

$

28,548

 

 

The scheduled future minimum principal payments are as follows (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 following purchased assets were accounted for as asset acquisitions as substantially all of the fair value of the assets acquired were concentrated in a group of similar assets and/or the acquired assets were not capable of producing outputs due to the lack of employees and early stage of development. Because the assets had not yet received regulatory approval, the fair value attributable to these assets was recorded as in process research and development (“IPR&D”) expenses in the Company’s condensed consolidated statement of operations for the three months ended March 31, 2020.

The Company accounts for contingent consideration payable upon achievement of certain regulatory, development or sales milestones in such asset acquisitions when the underlying contingency is met.

License from Pulmokine, Inc. (GB002)

On October 2, 2017, the Company, entered into a license agreement with Pulmokine, Inc. under which it was granted an exclusive worldwide license and sublicense to certain intellectual property rights owned or controlled by Pulmokine to develop and commercialize GB002 and certain backup compounds for the treatment, prevention and diagnosis of any and all disease or conditions. The Company also has the right to sublicense its rights under the license agreement, subject to certain conditions. The assets acquired are in the early stages of the FDA approval process, and the Company intends to further develop the assets acquired through potential FDA approval as evidenced by the milestone arrangement in the contract. The development activities cannot be performed without significant cost and effort by the Company. The agreement will remain in effect from the effective date, unless terminated earlier, until, on a licensed product-by-licensed product and country-by-country basis, the later of ten years from the date of first commercial sale or when there is no longer a valid patent claim covering such licensed product or specified regulatory exclusivity for the licensed product in such country. The Company is obligated to make future development and regulatory milestone payments of up to $63.0 million, commercial milestone payments of up to $45.0 million, and sales milestone payments of up to $190.0 million. The Company is also obligated to pay tiered royalties on sales for each licensed product, at percentages ranging from the mid-single digits to the high single-digits. The Company made an upfront payment of $5.5 million in October 2017. As of March 31, 2020, no milestones had been accrued as the underlying contingencies had not yet been met.

12


AA Biopharma Inc. Acquisition (GB001)

On January 4, 2018, the Company acquired AA Biopharma Inc. pursuant to a merger agreement, and with the acquisition acquired the rights to GB001 and certain backup compounds. In connection with the merger agreement, the Company issued an aggregate of 20,000,000 shares of Series Seed Convertible Preferred Stock and 1,101,278 shares of Common Stock to the AA Biopharma shareholders. The Company recorded IPR&D of $19.3 million in January 2018 in connection with the acquisition of AA Biopharma.

License from Aerpio Pharmaceuticals, Inc. (GB004)

On June 24, 2018, the Company entered into a license agreement with Aerpio Pharmaceuticals, Inc. (“Aerpio”) under which the Company was granted an exclusive worldwide license and sublicense to certain intellectual property rights owned or controlled by Aerpio to develop and commercialize GB004, and certain other related compounds for all applications. On May 11, 2020, the Company entered into an amendment to the license agreement with Aerpio pursuant to which the Company made an upfront payment of $15.0 million to Aerpio for a reduction in future milestone payments and royalties. Under the amended license agreement, the Company is obligated to make future approval milestone payments of up to $40.0 million and a sales milestone payment of $50.0 million. The Company also has the right to sublicense its rights under the license agreement, subject to certain conditions. The Company is also obligated to pay tiered royalties on sales for each licensed product, at percentages ranging from low- to mid-single digits, subject to certain customary reductions. Aerpio retains its twenty percent (20.0%) participation right on a disposition of GB004. The Company made an upfront payment of $20.0 million in June 2018, which represented the purchase consideration for an asset acquisition. As of March 31, 2020, no milestones had been accrued as the underlying contingencies had not yet been met.

Adhaere Pharmaceuticals, Inc. Acquisition (GB1275)

On September 21, 2018, the Company acquired Adhaere Pharmaceuticals, Inc. (“Adhaere”) pursuant to a merger agreement for an upfront payment of $7.5 million in cash, and with the acquisition acquired the rights to GB1275 and certain backup compounds. The Company is obligated to make regulatory, development and sales milestone payments of up to $62.0 million and pay tiered royalties on worldwide net sales, at percentages ranging from low to mid-single digits, subject to customary reductions. In September 2018, the Company recorded IPR&D of $7.5 million in connection with the acquisition of Adhaere. In May 2019, the Company made a milestone payment of $1.0 million in connection with the filing of the Investigational New Drug application for the GB1275 program. As of March 31, 2020, no other milestones had been accrued as the underlying contingencies had not yet been met.

The Company recorded the following IPR&D expense on the condensed consolidated statements of operations (in thousands):

 

 

 

Three months ended March 31,

 

 

 

2020

 

 

2019

 

GB001

 

$

 

 

$

 

GB004

 

 

 

 

 

 

GB1275

 

 

 

 

 

 

Other Programs

 

 

2,805

 

 

 

1,000

 

Total in process research and development

 

$

2,805

 

 

$

1,000

 

 

7. Stockholders’ Equity

 

In connection with the Company’s IPO, the outstanding shares of the Company’s Series Seed, Series A, and Series B Convertible Preferred Stock automatically converted into 30,493,460 shares of common stock.

 

Common Stock

 

On December 3, 2015, the Company issued 9,160,888 shares of common stock as founder shares for services rendered to the Company, valued at $0.0001 par value per share, for a total of approximately $4,100. On January 4, 2018, incremental vesting conditions were placed on the previously issued founder shares. Fifty percent of the previously issued founder shares vested on January 4, 2018, and the remaining founder shares are subject to vesting restrictions over a period of five years.

 

Pursuant to the employment agreements with the Company’s founders executed January 4, 2018, the Company provided for certain potential additional issuances of common stock (the “anti-dilution shares”) to each of the founders to ensure the total number of shares of common stock held by them and their affiliates (inclusive of any shares subject to equity awards granted by the Company) would represent 15% of the Company’s fully-diluted capitalization until such time as the Company raised $300 million in equity capital, including the capital raised in the Series A financing.

 

In furtherance of this obligation, on May 21, 2018, the Company issued 251,547 shares of common stock to the founders for

13


services rendered to the Company, valued at $2.61 per share with an additional 251,547 shares of restricted stock subject to the same vesting restrictions and vesting period as the founder shares. In addition, on September 6, 2018, the Company issued 1,795,023 shares of common stock to the founders for services rendered to the Company, valued at $9.63 per share, with an additional 1,795,023 shares of restricted stock subject to the same vesting restrictions and vesting period as the founder shares.

 

Each share of common stock is entitled to one vote. Common stock owners are entitled to dividends when funds are legally available and declared by the Board.

 

Shares of Common Stock Subject to Repurchase

 

In November 2017, in connection with the issuance of the Series A Convertible Preferred Stock, certain employees entered into stock restriction agreements, whereby 1,305,427 shares are subject to forfeiture by the Company upon the stockholder’s termination of employment or service to the Company. In January 2018, the Company’s founders entered into stock restriction agreements, whereby 4,580,444 of previously unrestricted shares of common stock were subject to service vesting conditions. These shares are also subject to forfeiture by the Company upon the stockholders’ termination of employment or service to the Company. Any shares subject to repurchase by the Company are not deemed, for accounting purposes, to be outstanding until those shares vest. As such, the Company recognizes the measurement date fair value of the restricted stock over the vesting period as compensation expense. As of March 31, 2020 and December 31, 2019, 4,243,889 and 4,648,526 shares of common stock were subject to repurchase by the Company, respectively. The unvested stock liability related to these awards is immaterial to all periods presented.

8. Equity Incentive Plans

Approval of the 2019 Equity Incentive Plan

In January 2019, the Company’s board of directors and stockholders approved and adopted the 2019 Incentive Award Plan (the “2019 Plan”). The 2019 Plan became effective on February 6, 2019, the day prior to the effectiveness of the registration statement filed in connection with the IPO. Under the 2019 Plan, the Company may grant stock options, stock appreciation rights, restricted stock, restricted stock units, and other stock or cash-based awards to individuals who are then employees, officers, directors or consultants of the Company, and employees and consultants of the Company’s subsidiaries. A total of 5,750,000 shares of common stock were approved to be initially reserved for issuance under the 2019 Plan. The number of shares that remained available for issuance under the 2017 Plan (as defined below) as of the effective date of the 2019 Plan were, and shares subject to outstanding awards under the 2017 Plan as of the effective date of the 2019 Plan that are subsequently canceled, forfeited or repurchased by the Company will be added to the shares reserved under the 2019 Plan. In addition, the number of shares of common stock available for issuance under the 2019 Plan will be automatically increased on the first day of each calendar year during the ten-year term of the 2019 Plan, beginning with January 1, 2020 and ending with January 1, 2029, by an amount equal to 5% of the outstanding number of shares of the Company’s common stock on December 31 of the preceding calendar year or such lesser amount as determined by the Company’s board of directors. As of March 31, 2020, an aggregate of 2,232,426 shares of common stock were available for issuance under the 2019 Plan and 6,836,299 shares of common stock were subject to outstanding awards under the 2019 Plan.

Approval of the 2019 Employee Stock Purchase Plan

In January 2019, the Company’s board of directors and stockholders approved and adopted the 2019 Employee Stock Purchase Plan (the “ESPP”). The ESPP became effective as of February 6, 2019, the day prior to the effectiveness of the registration statement filed in connection with the IPO. The ESPP permits participants to purchase common stock through payroll deductions of up to 20% of their eligible compensation. A total of 700,000 shares of common stock were approved to be initially reserved for issuance under the ESPP. In addition, the number of shares of common stock available for issuance under the ESPP will be automatically increased on the first day of each calendar year during the first ten-years of the term of the ESPP, beginning with January 1, 2020 and ending with January 1, 2029, by an amount equal to 1% of the outstanding number of shares of the Company’s common stock on December 31 of the preceding calendar year or such lesser amount as determined by the Company’s board of directors. During the three months ended March 31, 2020, 49,889 shares were issued pursuant to the ESPP. As of March 31, 2020, an aggregate of 1,312,951 shares of common stock were available for issuance under the ESPP.

2017 Equity Incentive Plan

The Company’s 2017 Equity Incentive Plan (the “2017 Plan”) permitted the granting of incentive stock options, non-statutory stock options, restricted stock, restricted stock units and other stock-based awards. Subsequent to the adoption of the 2019 Plan, no additional equity awards can be made under the 2017 Plan. As of March 31, 2020, 4,507,435 shares of common stock were subject to outstanding options under the 2017 Plan, and 488,580 shares of restricted stock awards granted under the 2017 plan were unvested.

Stock Options

The fair value of each employee and non-employee stock option grant is estimated on the date of grant using the Black-Scholes

14


option-pricing model. The Company, prior to the closing of its IPO on February 12, 2019, was a private company and lacked company-specific historical and implied volatility information. Therefore, it estimated its expected volatility based on the historical volatility of a publicly traded set of peer companies. Due to the lack of historical exercise history, the expected term of the Company’s stock options for employees has been determined utilizing the “simplified” method for awards. The expected term of stock options granted to non-employees is equal to the contractual term of the option award. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is zero based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

The following table summarizes stock option activity during the three months ended March 31, 2020:

 

 

 

Shares Subject to

Options Outstanding

 

 

Weighted-

Average

 

 

 

 

 

 

 

 

 

 

 

Weighted-

 

 

Remaining

 

 

 

 

 

 

 

 

 

 

 

Average

Exercise

 

 

Contractual

Life

 

 

Aggregate

 

 

 

Shares

 

 

Price

 

 

(Years)

 

 

Intrinsic Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

Outstanding as of December 31, 2019

 

 

8,538,060

 

 

$

13.67

 

 

 

9.0

 

 

$

35,385

 

Options granted

 

 

1,725,222

 

 

$

14.55

 

 

 

 

 

 

 

 

 

Option exercised

 

 

(4,309

)

 

$

3.38

 

 

 

 

 

 

 

 

 

Options forfeited/cancelled

 

 

(66,900

)

 

$

15.50

 

 

 

 

 

 

 

 

 

Outstanding as of March 31, 2020

 

 

10,192,073

 

 

$

13.81

 

 

 

9.0

 

 

$

12,052

 

Options vested and exercisable as of March 31,

   2020

 

 

2,146,119

 

 

$

11.38

 

 

 

8.6

 

 

$

4,843

 

 

The aggregate intrinsic value in the above table is calculated as the difference between fair value of the Company’s common stock price on March 31, 2020 and the exercise price of the stock options.

The weighted-average grant date fair value per share for the stock option grants during the three months ended March 31, 2020 was $10.42.

The aggregate fair value of stock options that vested during the three months ended March 31, 2020 was $10.3 million.

Restricted Stock

The summary of the Company’s restricted stock activity is as follows:

 

 

 

Number of

 

 

Weighted-

 

 

 

Restricted

 

 

Average

 

 

 

Stock Units

 

 

Grant Date

 

 

 

Outstanding

 

 

Fair Value

 

Nonvested at December 31, 2019

 

 

4,648,526

 

 

$

3.98

 

Granted

 

 

1,151,661

 

 

$

11.98

 

Vested

 

 

(404,637

)

 

$

3.71

 

Forfeited

 

 

 

 

 

 

Nonvested at March 31, 2020

 

 

5,395,550

 

 

$

5.71

 

 

At March 31, 2020, the total unrecognized compensation related to unvested restricted stock awards granted was $25.8 million, which the Company expects to recognize over a weighted-average period of approximately 2.7 years.

15


Stock-Based Compensation Expense

Stock-based compensation expense has been reported in the Company’s condensed consolidated statements of operations as follows (in thousands):

 

 

 

Three months ended

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

Research and development

 

$

4,586

 

 

$

1,293

 

General and administrative

 

 

3,658

 

 

 

1,796

 

Total stock-based compensation

 

$

8,244

 

 

$

3,089

 

 

At March 31, 2020, the total unrecognized compensation related to unvested stock option awards granted was $72.0 million, which the Company expects to recognize over a weighted-average period of approximately 2.9 years.

As of March 31, 2020, total unrecognized compensation expense related to the ESPP was $2.0 million, which the Company expects to recognize over a weighted-average period of approximately 1.2 years.

9. Commitments and Contingencies

Leases

The Company subleases certain office and laboratory space under a non-cancelable operating lease expiring in January 2025 for the initial leased space and December 2022 for expansion space leased pursuant to an amendment to the lease agreement entered into in August 2018. The sublease agreement included options to extend for the entire premises through October 2028. The options to extend must be exercised prior to the termination of the original lease agreement. The period covered by the options was not included in the non-cancellable lease term as it not was not determined to be reasonably certain to be executed. The lease agreement also includes a one-time termination option for the expansion space only whereby the Company can terminate the lease with advance written notice. The termination option was not determined to be reasonably certain to be executed. The lease is subject to charges for common area maintenance and other costs, and base rent is subject to an annual 3% increase each subsequent year. Costs determined to be variable and not based on an index or rate were not included in the measurement of the operating lease liabilities.

In November 2019, the Company entered into an additional non-cancelable lease agreement for certain office and laboratory space (the “permanent space”) in San Diego, California, commencing on May 1, 2020 and expiring on December 31, 2021. The lease agreement includes a lease for temporary space commencing on January 1, 2020 and expiring on the commencement date of the lease of the permanent space. The monthly base rent for the permanent and temporary space is $63,425 and $28,745, respectively. The lease agreement included an option to extend the term of the permanent space for twelve months. The option to extend must be exercised nine months prior to the termination of the original lease agreement. The period covered by the option was not included in the non-cancellable lease term as it not was not determined to be reasonably certain to be executed. The lease is subject to charges for common area maintenance and other costs, and base rent is subject to an annual 3% increase each subsequent year.

Monthly rent expense is recognized on a straight-line basis over the term of the leases. The operating leases are included in the balance sheet at the present value of the lease payments at a weighted-average discount rate of 7% using the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment as the leases do not provide an implicit rate. The weighted average remaining lease term was 4.0 years.

Lease costs were comprised of the following (in thousands):

 

 

 

Three months

ended

March 31, 2020

 

Operating lease cost

 

$

753

 

Short-term lease cost

 

 

22

 

Total lease cost

 

$

775

 

 

Cash paid for amounts included in the measurement of operating lease liabilities for the three months ended March 31, 2020 was $0.8 million.

16


Gross future minimum annual rental commitments as of March 31, 2020, were as follows (in thousands):

 

 

 

Undiscounted Rent

Payments

 

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

 

 

 

 

 

 

Present value discount

 

 

(1,548

)

Present value

 

$

10,523

 

Current portion of operating lease liability (included as a

   component of accrued expenses)

 

$

2,418

 

Noncurrent operating lease liabilities

 

 

8,105

 

Total operating lease liability

 

$

10,523

 

 

For the three months ended March 31, 2020 the Company recorded approximately $0.8 million, in rent expense.

Litigation

Kuhne vs. Gossamer Bio, Inc., et. al.

On April 3, 2020, Scott Kuhne, individually and on behalf of all others similarly situated, filed a putative class action lawsuit against the Company, certain of its executive officers and directors, and the underwriters of its IPO in the United States District Court for the Southern District of California (Case No. 3:20-cv-00649-DMS-MDD).  The complaint was filed on behalf of all persons who purchased or otherwise acquired the Company’s securities between February 8, 2019 and December 13, 2019.  The complaint alleges that the Company, certain of its executive officers and directors, and the underwriters of its IPO made false and/or misleading statements and failed to disclose material adverse facts about its business, operations and prospects in violation of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933, as amended, and Sections 10(b) (and Rule 10b-5 promulgated thereunder) and 20(a) of the Securities Exchange Act of 1934, as amended. The plaintiff seeks damages, interest, costs, attorneys’ fees, and other unspecified equitable relief.  The Company intends to vigorously defend this matter. Given the uncertainty of litigation, the preliminary stage of the case, and the legal standards that must be met for, among other things, class certification and success on the merits, the Company cannot estimate the reasonably possible loss or range of loss that may result from this action.

10. Subsequent Events

On May 11, 2020, the Company entered into an amendment to the license agreement with Aerpio pursuant to which the Company made an upfront payment of $15.0 million to Aerpio for a reduction in future milestone payments and royalties. Under the amended license agreement, the Company is obligated to make future approval milestone payments of up to $40.0 million and a sales milestone payment of $50.0 million. The royalties on worldwide net sales now range from a low- to mid-single digit percentage of net sales. The Company continues to be responsible for the remaining development, regulatory, and commercialization expenses for GB004, and Aerpio’s 20.0% participation right on a disposition of GB004 remains.

17


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion and analysis and the unaudited interim condensed consolidated financial statements included in this quarterly report on Form 10-Q should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2019 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission, or SEC, on March 24, 2020.

 

Forward-Looking Statements

 

This quarterly report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements other than statements of historical facts contained in this quarterly report, including statements regarding our future results of operations and financial position, business strategy, the impact of the COVID-19 pandemic, prospective products, product approvals, research and development costs, timing and likelihood of success, plans and objectives of management for future operations, clinical developments and future results of product development programs, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

 

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions. The forward-looking statements in this quarterly report are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this quarterly report and are subject to a number of risks, uncertainties and assumptions, including those described in Part II, Item 1A, “Risk Factors” of this report and Part I, Item 1A, “Risk Factors” in our most recent Annual Report on Form 10-K filed with the SEC on March 24, 2020. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

 

Overview

We are a clinical-stage biopharmaceutical company focused on discovering, acquiring, developing and commercializing therapeutics in the disease areas of immunology, inflammation and oncology. Our goal is to be an industry leader in each of these therapeutic areas and enhance and extend the lives of patients suffering from such diseases. To accomplish this goal, we have assembled a deeply experienced and highly skilled group of industry veterans, scientists, clinicians and key opinion leaders from leading biotechnology and pharmaceutical companies, as well as leading academic centers from around the world. Our collective immunology and translational discovery and development expertise serves as the foundation of our company.

 

We are pursuing product candidates with strong scientific rationale to address indications where there is both a high unmet need and an opportunity to develop best-in-class or first-in-class programs. We currently have four clinical-stage product candidates, in addition to multiple preclinical programs. We have completed enrollment for the LEDA Phase 2b clinical trial for our most advanced product candidate, GB001, in moderate-to-severe eosinophilic asthma. In the second quarter of 2020, we completed a pre-specified interim analysis after approximately two thirds of trial participants completed or withdrew from the study, and we commenced preliminary Phase 3 planning and supportive activities. Topline results from the study are expected in the second half of 2020. We have completed enrollment for our TITAN Phase 2 proof-of-concept clinical trial of GB001 in patients with chronic rhinosinusitis, both with and without nasal polyps. Topline results from this trial are expected in the second half of 2020. Additionally, we continue to evaluate the potential of GB001 in other allergic diseases, including chronic spontaneous urticaria and eosinophilic esophagitis. We are developing GB002 for the treatment of pulmonary arterial hypertension, or PAH. We commenced enrolling patients for a Phase 1b clinical trial in PAH in the first quarter of 2020, and because we temporarily paused enrollment as a result of the ongoing COVID-19 viral pandemic, we now expect to report topline results from this trial in the second half of 2020. Subject to developments in the ongoing COVID-19 viral pandemic, we also expect to commence a Phase 2 clinical trial in PAH in the second half of 2020. GB002 has received orphan designation from the FDA and the European Medicines Agency, or EMA, for the treatment of PAH. We are developing GB004 for the treatment of inflammatory bowel disease, including ulcerative colitis, or UC, and Crohn’s disease. In the second quarter of 2020, we announced promising topline Phase 1b clinical trial results in mild-to-moderate UC patients with active disease symptoms and histology. Subject to developments in the ongoing COVID-19 viral pandemic, we expect to commence a Phase 2 trial in UC in the second half of 2020. We are developing GB1275 for the treatment of oncology indications. In the third quarter of

18


2019, we initiated a Phase 1/2 clinical trial for GB1275 in solid tumor indications as a monotherapy and in combination with either pembrolizumab or chemotherapy. Initial results from this trial are expected to be presented at the American Society of Oncology Virtual Program in May of 2020. We expect to release updated results from this trial in the second half of 2020. GB1275 has received orphan designation from the FDA and the EMA for the treatment of pancreatic cancer. Our expectations with respect to reporting of topline data and commencement of clinical trials are subject to risks associated with the ongoing COVID-19 pandemic discussed further below.

 

Recent Developments

 

GB001

 

We recently completed a pre-specified interim analysis of the LEDA Phase 2b clinical trial for GB001 in moderate-to-severe eosinophilic asthma. The interim analysis was based on approximately the first two thirds (~320) of patients who completed or withdrew from the study. The Independent Data Monitoring Committee (IDMC) reviewed results from the interim analysis and recommended continuation of the study to its completion without modification. Based on the results of the interim analysis and the IDMC recommendation, we have commenced initial Phase 3 planning and supportive activities in anticipation of completion of the study and final analysis of the study data. The final decision to proceed to Phase 3 will be made on the totality of the final data from the LEDA study, as well as discussions with global regulatory authorities.

 

GB004

 

On May 12, 2020, we announced topline results from our Phase 1b study of GB004 in patients with active mild-to-moderate UC. The Phase 1b study was designed to evaluate the safety, tolerability, and pharmacokinetics, or PK, of a 120mg once-daily dose of GB004 in a solution formulation over a 28-day treatment period in UC patients with active disease despite treatment with 5-ASA therapy. In addition, pharmacodynamics and certain outcomes related to clinical activity were studied as exploratory measures. Thirty-four patients were randomized 2:1 to receive either GB004 (n=23) or placebo (n=11).

 

GB004 was well tolerated during the study with no effects on systemic erythropoietin or vascular endothelial growth factor observed. The most frequent adverse events experienced by patients in the GB004 arm were nausea (22%) and dysgeusia (13%), all of which were mild in severity aside from one case of moderate nausea. All patients completed the study, except for a single patient in the GB004 arm who experienced a serious adverse event of worsening UC, which was deemed by the investigator to be unrelated to study drug.

 

The gut-targeted PK profile of GB004 was shown with rapid clearance from systemic circulation, minimal systemic accumulation over 28 days of dosing, and multi-fold higher concentrations of drug in the gut as compared to the plasma after eight hours of dosing. Preliminary microarray-based mRNA profiling of epithelial gut biopsies showed increased expression of both TJP1 and CLDN1, genes consistent with enhanced epithelial barrier function, as well as other trends in gene expression associated with HIF-1α stabilization in the GB004 arm relative to the placebo arm. Additionally, initial results from myeloperoxidase staining suggest a reduction in gut epithelial neutrophil activity for GB004 compared to placebo.

 

While this four-week study was not powered to show differences in clinical outcomes, several encouraging trends related to treatment with GB004 were observed at Day 28. Ten of 23 patients (43%) in the GB004 arm achieved histologic remission in either the sigmoid or rectum compared to 2 of 11 (18%) of patients in the placebo arm. Mucosal healing, defined as the achievement of both histologic remission and endoscopic improvement in the sigmoid or rectum, was observed in 4 of 23 patients (17%) in the GB004 arm compared to 0 of 11 patients in the placebo arm. Favorable trends were also observed in clinical response (6/20 [30%] GB004 vs. 2/11 [18%] placebo) and improvement in the rectal bleeding sub-score (13/21 [62%] GB004 vs. 5/11 [45%] placebo). One patient in the GB004 arm achieved clinical remission; no patients in the placebo arm achieved clinical remission.

 

We also recently completed a successful Phase 1 clinical study in healthy volunteers to support the selection of a tablet formulation to be used in future clinical studies of GB004. In the study, the tablet formulation showed improved tolerability compared to solution at higher doses.

 

In May 2020, we entered into an amendment to our license agreement with Aerpio Pharmaceuticals, Inc., or Aerpio, pursuant to which we in-licensed certain rights to GB004.  Under the amendment agreement, we paid Aerpio a $15 million upfront payment, all development milestones were obviated, total remaining milestones were reduced from $400 million to $90 million ($40 million and $50 million of which relate to approval and sales milestones, respectively),  and royalties on worldwide net sales now range from a low- to mid-single digit percentage of net sales. Aerpio retains its 20.0% participation right on a disposition of GB004. We continue to be responsible for the remaining development, regulatory, and commercialization expenses for GB004.

19


We were incorporated in October 2015 and commenced operations in 2017. To date, we have focused primarily on organizing and staffing our company, business planning, raising capital, identifying, acquiring and in-licensing our product candidates and conducting preclinical studies and early clinical trials. We have funded our operations primarily through equity financings. We raised $631.3 million from October 2017 through May 2019 through Series A and B convertible preferred stock financings, a convertible note financing, our IPO completed in February 2019, and proceeds from our credit facility. In addition, we received $12.8 million in cash in connection with the January 2018 acquisition of AA Biopharma Inc., of which Pulmagen Therapeutics (Asthma) Limited is a wholly-owned subsidiary. As of March 31, 2020, we had $346.2 million in cash, cash equivalents and marketable securities.

 

On February 12, 2019, we closed our IPO and the underwriters in the IPO purchased 19,837,500 shares, including the full exercise of their option to purchase additional shares of common stock. The net proceeds were $291.3 million, after deducting underwriting discounts and commissions and estimated offering costs.

 

We have incurred significant operating losses since our inception and expect to continue to incur significant operating losses for the foreseeable future. For the three months ended March 31, 2020 and 2019, our net loss was $54.1 million and $32.6 million, respectively. As of March 31, 2020, we had an accumulated deficit of $388.2 million. We expect our expenses and operating losses will increase substantially as we conduct our ongoing and planned clinical trials, continue our research and development activities and conduct preclinical studies, and seek regulatory approvals for our product candidates, as well as hire additional personnel, protect our intellectual property and incur additional costs associated with being a public company. In addition, as our product candidates progress through development and toward commercialization, we will need to make milestone payments to the licensors and other third parties from whom we have in-licensed or acquired our product candidates, including GB002, GB004 and GB1275. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending in particular on the timing of our clinical trials and preclinical studies and our expenditures on other research and development activities.

 

We do not expect to generate any revenue from product sales unless and until we successfully complete development and obtain regulatory approval for one or more of our product candidates, which we expect will take a number of years. If we obtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. Accordingly, until such time as we can generate substantial product revenues to support our cost structure, if ever, we expect to finance our cash needs through equity offerings, debt financings or other capital sources, including potentially collaborations, licenses and other similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such other arrangements when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies. If we are unable to raise additional capital when needed, we could be forced to delay, limit, reduce or terminate our product candidate development or future commercialization efforts or grant rights to develop and market our product candidates even if we would otherwise prefer to develop and market such product candidates ourselves.

 

COVID-19 pandemic

 

The current COVID-19 worldwide pandemic has presented substantial public health and economic challenges and is affecting our employees, patients, communities and business operations, as well as the U.S. and global economies and financial markets. International and U.S. governmental authorities in impacted regions are taking actions in an effort to slow the spread of COVID-19, including issuing varying forms of “stay-at-home” orders, and restricting business functions outside of one’s home. In response, we have implemented a work-from-home policy for certain of our employees. In addition, for our ongoing trial of GB001, we have implemented virtual study visits, direct-to-patient drug supply and remote monitoring. To date, we have been able to continue to supply our product candidates to our patients currently enrolled in our clinical trials, including for GB001 and GB1275, and do not currently anticipate any interruptions in supply. In addition, while we are continuing the clinical trials we have underway in sites across the globe, COVID-19 precautions have delayed, such as the pause in enrollment in our Phase 1b clinical trial for GB002 in PAH, and may continue to delay completion of these and future trials and may directly or indirectly impact the timeline for data readouts, initiation of, as well as monitoring, data collection and analysis and other related activities for, some of our current and future clinical trials. For example, our current expectations for when we will initiate and how we will enroll our planned Phase 2 clinical trials of GB002 and GB004 are based on an assumption that clinical trial and healthcare activities begin to return to normal and clinical sites reopen by the second half of 2020. In particular with respect to GB002, PAH clinical trial sites are currently closed as PAH patients may be at a higher risk of COVID-19 complications than the general population. Therefore, our assumptions around initiation timing may prove to be incorrect, in particular if COVID-19 continues to spread. In light of recent developments relating to the COVID-19 pandemic, and consistent with the FDA’s updated industry guidance for conducting clinical trials, clinical trials may be deprioritized in favor of treating patients who have contracted the virus or to prevent the spread of the virus. This may lead to clinical trial protocol deviations or to discontinuation of treatment for patients who are currently enrolled in our trials. Any delays in the completion of our clinical trials, data analysis or readouts and any disruption in our supply chain could have a material adverse effect on our business, results of operations and financial condition. The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain or treat it, as well as the economic impact on local, regional, national and international markets.

20


Components of Results of Operations

 

Revenue

 

We have not generated any revenue since our inception and do not expect to generate any revenue from the sale of products for the foreseeable future.

 

Operating expenses

 

Research and development

 

Research and development expenses have related primarily to preclinical and clinical development of our product candidates and discovery efforts. Research and development expenses are recognized as incurred and payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received.

 

Research and development expenses include or could include:

 

salaries, payroll taxes, employee benefits, and stock-based compensation charges for those individuals involved in research and development efforts;

 

external research and development expenses incurred under agreements with contract research organizations, or CROs, investigative sites and consultants to conduct our clinical trials and preclinical and non-clinical studies;

 

laboratory supplies;

 

costs related to manufacturing our product candidates for clinical trials and preclinical studies, including fees paid to third-party manufacturers;

 

costs related to compliance with regulatory requirements; and

 

facilities, depreciation and other allocated expenses, which include direct and allocated expenses for rent, maintenance of facilities, insurance, equipment and other supplies.

 

Our direct research and development expenses consist principally of external costs, such as fees paid to CROs, investigative sites and consultants in connection with our clinical trials, preclinical and non-clinical studies, and costs related to manufacturing clinical trial materials. We deploy our personnel and facility related resources across all of our research and development activities. We track external costs and personnel expense on a program-by-program basis and allocate common expenses, such as facility related resources, to each program based on the personnel resources allocated to such program. Stock-based compensation and personnel and common expenses not attributable to a specific program are considered unallocated research and development expenses.

 

We plan to substantially increase our research and development expenses for the foreseeable future as we continue the development of our product candidates and conduct discovery and research activities for our preclinical programs. We cannot determine with certainty the timing of initiation, the duration or the completion costs of current or future preclinical studies and clinical trials of our product candidates due to the inherently unpredictable nature of preclinical and clinical development. Clinical and preclinical development timelines, the probability of success and development costs can differ materially from expectations. We anticipate that we will make determinations as to which product candidates to pursue and how much funding to direct to each product candidate on an ongoing basis in response to the results of ongoing and future preclinical studies and clinical trials, regulatory developments and our ongoing assessments as to each product candidate’s commercial potential. We will need to raise substantial additional capital in the future.

Our clinical development costs may vary significantly based on factors such as:

 

the costs incurred as a result of the COVID-19 pandemic, including clinical trial delays;

 

per patient trial costs;

 

the number of trials required for approval;

 

the number of sites included in the trials;

 

the countries in which the trials are conducted;

 

the length of time required to enroll eligible patients;

 

the number of patients that participate in the trials;

 

the number of doses that patients receive;

 

the drop-out or discontinuation rates of patients;

21


 

potential additional safety monitoring requested by regulatory agencies;

 

the duration of patient participation in the trials and follow-up;

 

the cost and timing of manufacturing our product candidates;

 

the phase of development of our product candidates; and

 

the efficacy and safety profile of our product candidates.

 

In process research and development

 

In process research and development, or IPR&D, expenses include IPR&D acquired as part of an asset acquisition or in-license for which there is no alternative future use, are expensed as incurred.

 

IPR&D expenses consist of our upfront payments made to Pulmokine, Inc., in connection with the in-license of GB002, the value of our stock issued to former AA Biopharma Inc. shareholders, in connection with the acquisition of GB001, our upfront payments made to Aerpio Pharmaceuticals, Inc., or Aerpio, in connection with the in-license of GB004, our upfront and milestone payments made to Adhaere Pharmaceuticals, Inc., or Adhaere, in connection with the acquisition of GB1275, and upfront and milestone payments made in connection with the acquisition of certain preclinical programs.

 

General and administrative

 

General and administrative expenses consist primarily of salaries and employee-related costs, including stock-based compensation, for personnel in executive, finance and other administrative functions. Other significant costs include facility-related costs, legal fees relating to intellectual property and corporate matters, professional fees for accounting and consulting services and insurance costs.

 

We expect our general and administrative expenses will increase for the foreseeable future to support our expanded infrastructure and increased costs of operating as a public company. These increases will likely include increased expenses related to audit, legal, regulatory and tax-related services associated with maintaining compliance with exchange listing and SEC requirements, director and officer insurance premiums, and investor relations costs associated with operating as a public company.

 

Other income, net

 

Other income, net consists of (1) interest income on our cash, cash equivalents and marketable securities, (2) interest expense related to our credit facility, and (3) other miscellaneous income (expense).

 

Critical Accounting Policies and Estimates

 

Our management’s discussion and analysis of our financial condition and results of operations are based on our condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States, or GAAP. The preparation of these financial statements requires us to make judgments and estimates that affect the reported amounts of assets, liabilities, revenues, and expenses and the disclosure of contingent assets and liabilities in our condensed consolidated financial statements. We base our estimates on historical experience, known trends and events, and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. On an ongoing basis, we evaluate our judgments and estimates in light of changes in circumstances, facts and experience. During the three months ended March 31, 2020, there have been no significant changes in our critical accounting policies as discussed in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K filed with the SEC on March 24, 2020.

 

22


Results of Operations – Comparison of the Three Months Ended March 31, 2020 and 2019

 

The following table sets forth our selected statements of operations data for the three months ended March 31, 2020 and 2019:

 

 

 

Three months ended March 31,

 

 

2020 vs 2019

 

 

 

2020

 

 

2019

 

 

Change

 

 

 

(in thousands)

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

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

 

Loss from operations

 

 

(54,967

)

 

 

(34,017

)

 

 

(20,950

)

Other income, net

 

 

893

 

 

 

1,406

 

 

 

(513

)

Net loss

 

$

(54,074

)

 

$

(32,611

)

 

$

(21,463

)

 

Operating Expenses

 

Research and development

 

Research and development expenses were $41.4 million for the three months ended March 31, 2020, compared to $25.0 million for the three months ended March 31, 2019, for an increase of $16.4 million, which was primarily attributable to an increase of  $3.3 million of costs associated with preclinical studies and clinical trials for GB001, an increase of $2.0 million of costs associated with preclinical studies and clinical trials for GB1275, and an increase of $8.1 million of costs related to personnel and external consultants.

 

The following table shows our research and development expenses by program for the three months ended March 31, 2020 and 2019:

 

 

 

Three months ended March 31,

 

 

 

2020

 

 

2019

 

 

 

(in thousands)

 

GB001

 

$

11,376

 

 

$

8,114

 

GB002

 

 

7,554

 

 

 

5,449

 

GB004

 

 

3,739

 

 

 

4,438

 

GB1275

 

 

4,345

 

 

 

2,312

 

Other Programs

 

 

3,131

 

 

 

1,473

 

Unallocated expenses

 

 

11,269

 

 

 

3,197

 

Total research and development

 

$

41,414

 

 

$

24,983

 

 

In process research and development

IPR&D expenses for the three months ended March 31, 2020 was $2.8 million, compared to $1.0 million for the three months ended March 31, 2019, for a decrease of $1.8 million, which was primarily attributable to costs associated with the acquisition of a preclinical program.

General and administrative

 

General and administrative expenses were $10.7 million for the three months ended March 31, 2020, compared to $8.0 million for the three months ended March 31, 2019, for an increase of $2.7 million, which was primarily attributable to a $1.9 million increase in stock-based compensation costs.

 

Other income, net

 

Other income, net was $0.9 million for the three months ended March 31, 2020, compared to $1.4 million for the three months ended March 31, 2019, primarily related to a $0.5 million decrease in investment income earned on our cash, cash equivalents and marketable securities during the period.

 

Liquidity and Capital Resources

 

We have incurred substantial operating losses since our inception and expect to continue to incur significant operating losses for

23


the foreseeable future and may never become profitable. As of March 31, 2020, we had an accumulated deficit of $388.2 million.

 

Our primary use of cash is to fund operating expenses, which consist primarily of research and development expenditures, and to a lesser extent, general and administrative expenditures. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses.

 

From our inception through the three months ended March 31, 2020, our operations have been financed primarily by gross proceeds of $631.3 million from the sale of our convertible preferred stock, convertible promissory note, proceeds from our IPO and proceeds from our credit facility. As of March 31, 2020, we had cash, cash equivalents and marketable securities of $346.2 million. Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily with a view to capital preservation and liquidity.

 

On February 12, 2019, we closed our IPO and the underwriters in the IPO purchased 19,837,500 shares, including the full exercise of their option to purchase additional shares of common stock. The net proceeds from the IPO were $291.3 million, after deducting underwriting discounts and commissions and estimated offering costs. In connection with the closing of the IPO, the outstanding shares of our convertible preferred stock were converted into shares of common stock at a ratio of 4.5-to-one.

 

On May 2, 2019, we entered into a credit, guaranty and security agreement, as amended, pursuant to which the lenders party thereto agreed to make term loans available to us for working capital and general business purposes, in a principal amount of up to $150.0 million in term loan commitments, including a $30.0 million term loan which was funded at the closing date, with the ability to access the remaining $120.0 million in three additional tranches (of $40.0 million, $30.0 million and $50.0 million, respectively), subject to specified availability periods, the achievement of certain clinical development milestones, minimum cash requirements and other customary conditions, or the Credit Facility. As of March 31, 2020, no other tranches under the Credit Facility have been drawn. Additional information about the Credit Facility and our long-term borrowings is presented in Note 5 “Long-term Debt” to the Notes to Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1, of this Form 10-Q, which is incorporated herein by this reference.

 

On April 10, 2020, we filed a registration statement on Form S-3, covering the offering from time to time of common stock, preferred stock, debt securities, warrants and units, which registration statement became automatically effective on April 10, 2020.

 

The following table shows a summary of our cash flows for each of the three months ended March 31, 2020 and 2019, respectively:

 

 

 

Three months ended March 31,

 

 

 

2020

 

 

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

 

 

Operating activities

 

During the three months ended March 31, 2020, operating activities used approximately $52.3 million of cash, primarily resulting from a net loss of $54.1 million and changes in operating assets and liabilities of $9.6 million, reduced by stock-based compensation expense of $8.2 million and IPR&D expenses of $2.8 million. Net cash used in changes in operating assets and liabilities consisted primarily of changes in accrued expenses, accrued research and development expenses, and accrued compensation and benefits.

 

During the three months ended March 31, 2019, operating activities used approximately $27.8 million of cash, primarily resulting from a net loss of $32.6 million, reduced by IPR&D expenses of $1.0 million, changes in operating assets and liabilities of $0.5 million and stock-based compensation expense of $3.1 million. Net cash provided by changes in operating assets and liabilities consisted primarily of changes in accounts payable, accrued research and development expenses, and other assets of $6.3 million, offset by changes in prepaid expenses due to prepayments for clinical development activities and security deposits, accrued expenses and accrued compensation and benefits of $16.3 million.

 

Investing activities

 

During the three months ended March 31, 2020, investing activities provided approximately $28.0 million of cash, primarily resulting from the sales and maturities of marketable securities of $105.1 million, offset by the purchases of marketable securities of $73.8 million and upfront payments for other preclinical programs of $2.8 million.

 

During the three months ended March 31, 2019, investing activities used approximately $198.1 million of cash, primarily

24


resulting from the purchase of marketable securities of $222.3 million, offset by sales and maturities of marketable securities of $25.5 million.

 

Financing activities

 

During the three months ended March 31, 2020, financing activities provided $0.6 million of cash, primarily resulting from the purchase of shares pursuant to the ESPP.

 

During the three months ended March 31, 2019, financing activities provided $291.3 million of cash, primarily resulting from the net proceeds from our IPO.

 

Funding requirements

 

Based on our current operating plan, we believe that our existing cash, cash equivalents and marketable securities, and access to our Credit Facility, will be sufficient to fund our operations through at least the middle of 2022. However, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially. We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we expect. Additionally, the process of testing product candidates in clinical trials is costly, and the timing of progress and expenses in these trials is uncertain.

 

Our future capital requirements will depend on many factors, including:

 

the type, number, scope, progress, expansions, results, costs and timing of, our preclinical studies and clinical trials of our product candidates which we are pursuing or may choose to pursue in the future;

 

the costs and timing of manufacturing for our product candidates;

 

the costs, timing and outcome of regulatory review of our product candidates;

 

the costs of obtaining, maintaining and enforcing our patents and other intellectual property rights;

 

our efforts to enhance operational systems and hire additional personnel to satisfy our obligations as a public company, including enhanced internal controls over financial reporting;

 

the costs associated with hiring additional personnel and consultants as our preclinical and clinical activities increase;

 

the timing and amount of the milestone or other payments we must make to the licensors and other third parties from whom we have in-licensed our acquired our product candidates;

 

the costs and timing of establishing or securing sales and marketing capabilities if any product candidate is approved;

 

our ability to achieve sufficient market acceptance, coverage and adequate reimbursement from third-party payors and adequate market share and revenue for any approved products;

 

the terms and timing of establishing and maintaining collaborations, licenses and other similar arrangements;

 

costs associated with any products or technologies that we may in-license or acquire; and

 

any delays and cost increases that result from the COVID-19 pandemic.

 

Until such time as we can generate substantial product revenues to support our cost structure, if ever, we expect to finance our cash needs through equity offerings, our Credit Facility, debt financings or other capital sources, including potentially collaborations, licenses and other similar arrangements.

 

However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through collaborations, licenses and other similar arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us and/or may reduce the value of our common stock. Our failure to raise capital or enter into such other arrangements when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies. If we are unable to raise additional capital when needed, we could be forced to delay, limit, reduce or terminate our product candidate development or future commercialization efforts or grant rights to develop and market our product candidates even if we would otherwise prefer to develop and market such product candidates ourselves.

 

25


Contractual Obligations and Commitments

 

Under our license agreements with Pulmokine and Aerpio and our merger agreement with Adhaere, as well as our other license and acquisition agreements, we have payment obligations that are contingent upon future events such as our achievement of specified development, regulatory and commercial milestones and are required to make royalty payments in connection with the sale of products developed under those agreements. For more information related to the recent amendment of our license agreement with Aerpio, see Part I of this Quarterly Report on Form 10-Q under the caption "Item 1. Consolidated Financial Statements," in Note 10 to our Condensed Consolidated Financial Statements, which is captioned "Subsequent Events,". As of March 31, 2020, we were unable to estimate the timing or likelihood of achieving the outstanding milestones or making future product sales and, therefore, any related payments had not been accrued as the underlying contingencies had not yet been met.

 

We enter into contracts in the normal course of business with clinical trial sites and clinical supply manufacturers and with vendors for preclinical studies, research supplies and other services and products for operating purposes. These contracts generally provide for termination after a notice period, and, therefore, are cancelable contracts. During the three months ended March 31, 2020, there have been no material changes outside of the ordinary course of business in the composition of these contractual obligations or commitments from the information discussed in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Contractual Obligations and Commitments” in our Annual Report on Form 10-K filed with the SEC on March 24, 2020.

 

Off-Balance Sheet Arrangements

 

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under the rules and regulations of the SEC.

 

JOBS Act

 

As an emerging growth company under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, we can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this exemption and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. We intend to rely on other exemptions provided by the JOBS Act, including without limitation, not being required to comply with the auditor attestation requirements of Section 404(b) of Sarbanes-Oxley.

 

We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year following the fifth anniversary of the consummation of our IPO, (ii) the last day of the fiscal year in which we have total annual gross revenue of at least $1.07 billion, (iii) the last day of the fiscal year in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock held by non-affiliates exceeded $700.0 million as of the last business day of the second fiscal quarter of such year, or (iv) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

As of March 31, 2020, there have been no material changes surrounding our market risk, including interest rate risk, foreign currency exchange risk, and inflation risk, from the discussion provided in Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 filed with the SEC on March 24, 2020.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our periodic and current reports that we file with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable and not absolute assurance of achieving the desired control objectives. In reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. In addition, the design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, control may become inadequate because of changes in

26


conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

 

Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by this quarterly report. Based on such evaluation, our principal executive officer and principal financial officer have concluded that as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

 

Changes in Internal Control Over Financial Reporting

 

There have been no changes in our internal control over financial reporting during the three months ended March 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

27


PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

 

We discuss certain legal proceedings in Part I of this Quarterly Report on Form 10-Q under the caption “Item 1. Consolidated Financial Statements,” in Note 9 to our Condensed Consolidated Financial Statements, which is captioned “Commitments and Contingencies,” under the sub-caption “Litigation,” and refer you to that discussion, which is incorporated herein by reference to that Note 9, for important information concerning those legal proceedings, including the basis for such actions and, where known, the relief sought. 

 

ITEM 1A. RISK FACTORS

 

There have been no material changes to the risk factors previously disclosed by us in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 filed with the SEC on March 24, 2020, except as follows:

 

Our business is subject to risks arising from epidemic diseases, such as the recent COVID-19 pandemic.

 

The current COVID-19 worldwide pandemic has presented substantial public health and economic challenges and is affecting our employees, patients, communities and business operations, as well as the U.S. and global economy and financial markets. International and U.S. governmental authorities in impacted regions are taking actions in an effort to slow the spread of COVID-19, including issuing varying forms of “stay-at-home” orders, and restricting business functions outside of one’s home. In response, we have implemented a work-from-home policy for certain of our employees, following the guidelines or directives issued by federal, state and local government agencies in the U.S. To date, we have been able to continue to supply our product candidates to our patients currently enrolled in our clinical trials, including our Phase 2 clinical trials of GB001 and Phase 1/2 clinical trial of GB1275, and do not currently anticipate any interruptions in supply. For our ongoing trials of GB001, we have implemented virtual study visits, direct-to-patient drug supply and remote monitoring. We cannot predict the impact, if any, that such changes to the GB001 trials will have on our planned discussions with global regulatory authorities and potential Phase 3 clinical development. In addition, while we are continuing the clinical trials we have underway in sites across the globe, COVID-19 precautions have delayed, such as the pause in enrollment in our Phase 1b clinical trial for GB002 in PAH, and may continue to delay completion of our current and future trials and may directly or indirectly impact the timeline for data readouts, initiation of, as well as monitoring, data collection and analysis and other related activities for, some of our current and future clinical trials. For example, our current expectations for when we will initiate and how we will enroll our planned Phase 2 clinical trials of GB002 and GB004 are based on an assumption that clinical trial and healthcare activities begin to return to normal and clinical sites reopen by the second half of 2020. In particular with respect to GB002, PAH clinical trial sites are currently closed as PAH patients may be at a higher risk of COVID-19 complications than the general population. Therefore, our assumptions around initiation timing may prove to be incorrect, in particular if COVID-19 continues to spread. As the COVID-19 pandemic continues to spread around the globe, we may experience disruptions that could severely impact our business, clinical trials and manufacturing and supply chains, including:

 

 

delays or difficulties in clinical site initiation, including difficulties in recruiting clinical site investigators and clinical site staff for our planned Phase 2 clinical trials of GB002 and GB004;

 

 

delays or difficulties in enrolling patients in our clinical trials, including our Phase 1b clinical trial of GB002 and our planned Phase 2 clinical trials of GB002 and GB004, especially if sites do not reopen to screen and enroll PAH patients;

 

 

diversion of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials;

 

 

interruption of key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel imposed or recommended by federal or state governments, employers and others or interruption of clinical trial subject visits and study procedures, which may impact the integrity of subject data and clinical study endpoints;

 

 

interruption of, or delays in receiving, supplies of our product candidates from our contract manufacturing organizations due to staffing shortages, production slowdowns or stoppages and disruptions in delivery systems, including;

 

 

delays in clinical sites receiving the supplies and materials needed to conduct our clinical trials and interruption in global shipping that may affect the transport of clinical trial materials;

 

 

limitations on employee resources that would otherwise be focused on the conduct of our clinical trials, including because of sickness of employees or their families or the desire of employees to avoid contact with large groups of people;

 

 

interruptions or delays in the operations of the FDA, EMA or other regulatory authorities, including in receiving feedback or approvals from the FDA, EMA or other regulatory authorities with respect to future clinical trials or regulatory submissions;

 

28


 

changes in local regulations as part of a response to COVID-19 which may require us to change the ways in which our clinical trials are conducted, which may result in unexpected costs, or to discontinue the clinical trials altogether;

 

 

delays in necessary interactions with local regulators, ethics committees and other important agencies and contractors due to limitations in employee resources or forced furlough of government employees;

 

 

refusal of the FDA or EMA to accept data from clinical trials in affected geographies; and

 

 

difficulties launching or commercializing products, including due to reduced access to doctors as a result of social distancing protocols.

 

In addition, the spread of COVID-19 has had and may continue to severely impact the trading price of shares of our common stock and could impact our ability to raise additional capital on a timely basis or at all. The COVID-19 pandemic continues to rapidly evolve. The extent to which the COVID-19 may impact our business, including our clinical trials, preclinical research, manufacturing and supply chains and financial condition will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the geographic spread of the disease, the duration of the pandemic, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the disease. To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in this section and in the “Risk Factors” section of our 2019 Annual Report on Form 10-K.

Interim, topline and preliminary data from our clinical trials that we announce or publish from time to time, including our interim analysis for our LEDA Phase 2b clinical trial for GB001, may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data, or cause us not to proceed into Phase 3 clinical development for GB001.  

From time to time, we may publicly disclose preliminary or topline or data from our clinical studies, including our interim analysis for our LEDA Phase 2b clinical trial for GB001 and topline data from our Phase 1b study of GB004, which is based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data related to the particular study or trial. We also make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the topline results that we report may differ from future results of the same studies, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Topline data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, topline data should be viewed with caution until the final data are available. From time to time, we may also disclose interim data from our clinical studies. Interim data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. Adverse differences between preliminary or interim data and final data could significantly harm our business prospects. In May 2020 we completed a pre-specified interim analysis for our LEDA Phase 2b clinical trial for GB001 in moderate-to-severe eosinophilic asthma, after approximately two thirds of trial participants completed the study. The IDMC reviewed data from the interim analysis of the study and recommended continuation of the study to its completion without modification.  Based on the results of the interim analysis and the IDMC recommendation, we plan to commence initial Phase 3 planning and supportive activities in anticipation of completion of the study and final analysis of the study data. We expect to report topline data from the trial in the second half of 2020. Our final decision to proceed to Phase 3 will be determined based on the totality of the final data from the trial, as well as discussions with global regulatory authorities. If the final data from LEDA trial materially differs in an adverse manner from the interim analysis, we may later determine not to proceed into Phase 3 clinical development for this reason or based on final data not warranting continued development or based on other development and commercial assessments of GB001 at that time. In addition, in May 2020 we reported promising topline results from our Phase 1b study of GB004 in patients with active mild-to-moderate UC, and further analysis of such data could result in material changes to the data and our conclusions about this product candidate.

 

Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability or commercialization of the particular product candidate or product and our company in general. In addition, the information we choose to publicly disclose regarding a particular study or clinical trial is based on what is typically extensive information, and others may not agree with what we determine is the material or otherwise appropriate information to include in our disclosure, and any information we determine not to disclose may ultimately be deemed significant with respect to future decisions, conclusions, views, activities or otherwise regarding a particular drug, drug candidate or our business. If the topline data that we report differ from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for, and commercialize, our product candidates may be harmed, which could harm our business, results of operations, prospects or financial condition.

29


Clinical drug development involves a lengthy and expensive process with an uncertain outcome, and the results of preclinical studies and early clinical trials are not necessarily predictive of future results. In addition, our assumptions about why our product candidates are worthy of future development and potential approval are based on data primarily collected by other companies. Our product candidates may not have favorable results in later clinical trials, if any, or receive regulatory approval on a timely basis, if at all.

 

Clinical drug development is expensive and can take many years to complete, and its outcome is inherently uncertain. We cannot guarantee that any clinical trials will be conducted as planned or completed on schedule, if at all, and failure can occur at any time during the preclinical study or clinical trial process. Despite promising preclinical or clinical results, any product candidate can unexpectedly fail at any stage of preclinical or clinical development. The historical failure rate for product candidates in our industry is high.

 

The results from preclinical studies or clinical trials of a product candidate or a competitor’s product candidate in the same class may not predict the results of later clinical trials of our product candidates, and interim results of a clinical trial are not necessarily indicative of final results. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy characteristics despite having progressed through preclinical studies and initial clinical trials. In particular, while two Phase 2 clinical trials of GB001 had been conducted prior to our acquisition of GB001 and the IDMC recommended continuation of our LEDA Phase 2b clinical trial, we do not know how GB001 will perform in future clinical trials, including as a result of any differences from targeting a population of more severe asthma subjects with elevated eosinophil counts, as well as other differences in our trial design. Further, GB001 did not meet its primary efficacy endpoint of improvement in FEV1 over 10 weeks in the first Phase 2 clinical trial conducted by Pulmagen Therapeutics (Asthma) Limited, or Pulmagen, and the second Phase 2 clinical trial conducted by Pulmagen and its partner, Teijin, was limited to only Japanese patients. While we have designed our ongoing LEDA Phase 2b trial in a manner intended to address what we believe to be the shortcomings of the first Pulmagen Phase 2 clinical trial, we cannot be certain that such failure was not due to GB001 itself or that the results of our ongoing Phase 2b trial will otherwise be successful in a broader patient population, or that the final results of the LEDA trial will differ from the interim analysis, or not warrant proceeding into Phase 3 development. In addition, in October 2019, Novartis announced that its oral DP2 antagonist, fevipiprant, failed to improve lung function in a pair of Phase 3 clinical trials of patients with moderate asthma, and in December 2019, Novartis announced that the pooled analysis from a pair of pivotal Phase 3 clinical trials of patients with moderate-to-severe asthma did not meet the clinically relevant threshold for reduction in rate of moderate-to-severe exacerbation and that the results did not support further development of fevipiprant in asthma. It is not uncommon to observe results in clinical trials that are unexpected based on preclinical studies and early clinical trials, and many product candidates fail in clinical trials despite very promising early results. For example, our decision to advance GB002 as a potential treatment for PAH is based in part on the efficacy of imatinib (Gleevec), a tyrosine kinase inhibitor with known activity against PDGF and marketed for oncology indications, observed by Novartis in a Phase 3 clinical trial; however, we may not observe similar efficacy in our clinical trials of GB002. Moreover, this and any future preclinical and clinical data may be susceptible to varying interpretations and analyses. A number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in clinical development even after achieving promising results in earlier studies. Furthermore, we cannot assure you that our preclinical programs will be able to progress from candidate identification to Phase 1 clinical development.

In addition, Teijin, a third party over which we have no control, has the right to develop and commercialize GB001 in Japan. If serious adverse events or other problems occur during any clinical trials of GB001 conducted by Teijin, the FDA or other regulatory authorities may delay, limit or deny approval of GB001 or require us to conduct additional clinical trials as a condition to marketing approval, which would increase our costs. If we receive FDA approval for GB001 and a new and serious safety issue is identified in clinical trials conducted by Teijin, regulatory authorities may withdraw their approval of the product or otherwise restrict our ability to market and sell GB001. In addition, treating physicians may be less willing to prescribe our product due to concerns over such adverse events, which would limit our ability to commercialize GB001.

 

In addition, in May 2020 we reported promising topline results from our Phase 1b study of GB004 in patients with active mild-to-moderate UC, and we plan to initiate a Phase 2 trial of GB004 in UC in the second half of 2020. However, the Phase 1b study was not powered to show differences in clinical outcomes, and we may not observe positive efficacy data or safety results in our planned Phase 2 trial, including as a result of using a new oral tablet formulation versus the solution used in the Phase 1b study or different dosage strengths versus the doses used in the Phase 1b study.

 

For the foregoing reasons, we cannot be certain that our ongoing and planned clinical trials and preclinical studies will be successful. Any safety concerns observed in any one of our clinical trials in our targeted indications could limit the prospects for regulatory approval of our product candidates in those and other indications, which could have a material adverse effect on our business, financial condition and results of operations.

 

30


We are involved in securities class action litigation and could be subject in the future to securities class action litigation.

 

In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. This risk is especially relevant for us, because biotechnology and pharmaceutical companies have experienced significant stock price volatility in recent years. On April 3, 2020, we, certain of our executive officers and directors, and the underwriters of our IPO were named as defendants in a purported securities class action lawsuit on behalf of all persons who purchased or otherwise acquired our securities between February 8, 2019 and December 13, 2020. The complaint generally alleges that we, and such executive officers and directors and the underwriters of our IPO, made false and/or misleading statements and failed to disclose material adverse facts about our business, operations and prospects. This lawsuit and any future lawsuits to which we may become a party are subject to inherent uncertainties and will likely be expensive and time-consuming to investigate, defend and resolve, and will divert our management’s attention and financial and other resources. The outcome of litigation is necessarily uncertain, and we could be forced to expend significant resources in the defense of this and other suits, and we may not prevail. Any litigation to which we are a party may result in an onerous or unfavorable judgment that may not be reversed upon appeal, or in payments of substantial monetary damages or fines, or we may decide to settle this or other lawsuits on similarly unfavorable terms, which could adversely affect our business, financial condition, results of operations or stock price.  See Item 1. “Legal Proceedings” above for additional information regarding the class action.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

Unregistered Sales of Equity Securities

 

None.

 

Use of Proceeds

 

On February 7, 2019, our registration statement on Form S-1 (File No. 333-228984) was declared effective by the SEC for our initial public offering. At the closing of the offering on February 12, 2019, we sold 19,837,500 shares of common stock, which included the exercise in full by the underwriters of their option to purchase 2,587,500 additional shares, at an initial public offering price of $16.00 per share and received gross proceeds of $317.4 million, which resulted in net proceeds to us of approximately $291.3 million, after deducting underwriting discounts and commissions of approximately $22.2 million and offering-related transaction costs of approximately $3.9 million. None of the expenses associated with the initial public offering were paid to directors, officers, persons owning ten percent or more of any class of equity securities, or to their associates, or to our affiliates. Merrill Lynch, Pierce, Fenner & Smith Incorporated, SVB Leerink LLC, Barclays Capital Inc. and Evercore Group L.L.C. acted as joint book-running managers for the offering.

 

As of March 31, 2020, we have not used any of the proceeds from our initial public offering. There has been no material change in the planned use of proceeds from our initial public offering from that described in the final prospectus filed by us with the SEC on February 8, 2019.

 

Issuer Repurchases of Equity Securities

 

None.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

Not Applicable.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not Applicable.

31


 

ITEM 5. OTHER INFORMATION

 

 

(a)

On May 8, 2020, Jakob Dupont M.D. resigned from his position as the Chief Medical Officer of the Company effective as of May 14, 2020.

 

 

(b)

Effective as of May 11, 2020, the Board of Directors of the Company adopted an amendment and restatement of the Company’s bylaws (the “Amended and Restated Bylaws”) pursuant to which a new Article XI was added, which provides that, unless the Company consents in writing to the selection of an alternative forum, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended. The foregoing description of the amendments made in the Amended and Restated Bylaws is qualified by reference to the Amended and Restated Bylaws, a copy of which is attached hereto as Exhibit 3.2 and is incorporated herein by reference.

 

 

(c)

On May 11, 2020, the Company entered into an amendment to the license agreement with Aerpio. For more information related to the amendment see Part I of this Quarterly Report on Form 10-Q under the caption "Item 1. Consolidated Financial Statements," in Note 10 to our Condensed Consolidated Financial Statements, which is captioned "Subsequent Events," which is incorporated herein by reference.

 

ITEM 6. EXHIBITS

 

The exhibits filed or furnished as part of this Quarterly Report on Form 10-Q are set forth on the Exhibit Index, which Exhibit Index is incorporated herein by reference.

32


EXHIBIT INDEX

 

Exhibit

Number

 

Exhibit Description

 

Incorporated by Reference

 

Filed Herewith

 

 

 

 

Form

 

Date

 

Number

 

 

  3.1

 

Amended and Restated Certificate of Incorporation.

 

8-K

 

2-12-2019

 

3.1

 

 

  3.2

 

Amended and Restated Bylaws.

 

 

 

 

 

 

 

X

  4.1

 

Form of Common Stock Certificate.

 

S-1/A

 

1-23-2019

 

4.1

 

 

  4.2

 

Amended and Restated Investors’ Rights Agreement, dated July 20, 2018, by and among the Registrant and certain of its stockholders.

 

S-1

 

1-21-2018

 

4.2

 

 

10.1

 

Gossamer Bio, Inc. Restricted Stock Unit Agreement under the 2019 Equity Incentive Plan.

 

 

 

 

 

 

 

X

31.1

  

Certification of Chief Executive Officer of Gossamer Bio, Inc., as required by Rule 13a-14(a) or Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

 

 

 

 

X

31.2

  

Certification of Chief Financial Officer of Gossamer Bio, Inc., as required by Rule 13a-14(a) or Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 

 

 

 

 

 

 

X

 32.1*

  

Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

 

 

 

 

X

 32.2*

  

Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

 

 

 

 

X

  101.INS

 

XBRL Report Instance Document

 

 

 

 

 

 

 

X

  101.SCH

 

XBRL Taxonomy Extension Schema Document

 

 

 

 

 

 

 

X

  101.CAL

 

XBRL Taxonomy Calculation Linkbase Document

 

 

 

 

 

 

 

X

  101.LAB

 

XBRL Taxonomy Label Linkbase Document

 

 

 

 

 

 

 

X

  101.PRE

 

XBRL Presentation Linkbase Document

 

 

 

 

 

 

 

X

  101.DEF

 

XBRL Taxonomy Extension Definition Linkbase Document

 

 

 

 

 

 

 

X

 

*

This certification is deemed not filed for purpose of section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act.

33


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

GOSSAMER BIO, INC.

 

 

 

 

Date:

May 12, 2020

By:

/s/ Sheila Gujrathi

 

 

 

Sheila Gujrathi

 

 

 

President and Chief Executive Officer

 

 

 

(Principal Executive Officer)

 

 

 

 

Date:

May 12, 2020

By:

/s/ Bryan Giraudo

 

 

 

Bryan Giraudo

 

 

 

Chief Financial Officer

 

 

 

(Principal Financial and Accounting Officer)

 

34

goss-ex32_408.htm

Exhibit 3.2

 

AMENDED AND RESTATED

BYLAWS

OF

GOSSAMER BIO, INC.

(a Delaware corporation)

 

 

 


 

TABLE OF CONTENTS

 

 

Page

 

 

ARTICLE I - CORPORATE OFFICES

1

1.1

REGISTERED OFFICE

1

1.2

OTHER OFFICES

1

ARTICLE II - MEETINGS OF STOCKHOLDERS

1

2.1

PLACE OF MEETINGS

1

2.2

ANNUAL MEETING

1

2.3

SPECIAL MEETING

2

2.4

ADVANCE NOTICE PROCEDURES FOR BUSINESS BROUGHT BEFORE A MEETING

2

2.5

ADVANCE NOTICE PROCEDURES FOR NOMINATIONS OF DIRECTORS

8

2.6

NOTICE OF STOCKHOLDERS’ MEETINGS

13

2.7

MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE

13

2.8

QUORUM

13

2.9

ADJOURNED MEETING; NOTICE

14

2.10

CONDUCT OF BUSINESS

14

2.11

VOTING

15

2.12

STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING

15

2.13

RECORD DATE FOR STOCKHOLDER NOTICE; VOTING

16

2.14

PROXIES

16

2.15

LIST OF STOCKHOLDERS ENTITLED TO VOTE

17

2.16

POSTPONEMENT, ADJOURNMENT AND CANCELLATION OF MEETING.

17

2.17

INSPECTORS OF ELECTION

18

ARTICLE III - DIRECTORS

18

3.1

POWERS

18

3.2

NUMBER OF DIRECTORS

18

3.3

ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS

18

3.4

RESIGNATION AND VACANCIES

19

3.5

PLACE OF MEETINGS; MEETINGS BY TELEPHONE

19

3.6

REGULAR MEETINGS

19

3.7

SPECIAL MEETINGS; NOTICE

19

3.8

QUORUM

20

3.9

BOARD ACTION BY CONSENT WITHOUT A MEETING

20

-i-


TABLE OF CONTENTS

(continued)

 

 

 

Page

 

 

3.10

FEES AND COMPENSATION OF DIRECTORS

21

3.11

REMOVAL OF DIRECTORS

21

ARTICLE IV - COMMITTEES

21

4.1

COMMITTEES OF DIRECTORS

21

4.2

COMMITTEE MINUTES

21

4.3

MEETINGS AND ACTION OF COMMITTEES

21

ARTICLE V - OFFICERS

22

5.1

OFFICERS

22

5.2

APPOINTMENT OF OFFICERS

22

5.3

SUBORDINATE OFFICERS

22

5.4

REMOVAL AND RESIGNATION OF OFFICERS

23

5.5

VACANCIES IN OFFICES

23

5.6

REPRESENTATION OF SHARES OF OTHER ENTITIES

23

5.7

AUTHORITY AND DUTIES OF OFFICERS

23

ARTICLE VI - RECORDS AND REPORTS

24

6.1

MAINTENANCE OF RECORDS

24

ARTICLE VII - GENERAL MATTERS

24

7.1

EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS

24

7.2

STOCK CERTIFICATES; PARTLY PAID SHARES

24

7.3

MULTIPLES CLASSES OR SERIES OF STOCK

25

7.4

LOST CERTIFICATES

25

7.5

CONSTRUCTION; DEFINITIONS

25

7.6

DIVIDENDS

25

7.7

FISCAL YEAR

26

7.8

SEAL

26

7.9

TRANSFER OF STOCK

26

7.10

STOCK TRANSFER AGREEMENTS

26

7.11

REGISTERED STOCKHOLDERS

26

7.12

WAIVER OF NOTICE

27

ARTICLE VIII - NOTICE BY ELECTRONIC TRANSMISSION

27

8.1

NOTICE BY ELECTRONIC TRANSMISSION

27

8.2

DEFINITION OF ELECTRONIC TRANSMISSION

28

-ii-


TABLE OF CONTENTS

(continued)

 

 

 

Page

 

 

ARTICLE IX - INDEMNIFICATION AND ADVANCEMENT

28

9.1

ACTIONS, SUITS AND PROCEEDINGS OTHER THAN BY OR IN THE RIGHT OF THE CORPORATION

28

9.2

ACTIONS OR SUITS BY OR IN THE RIGHT OF THE CORPORATION.

29

9.3

INDEMNIFICATION FOR EXPENSES OF SUCCESSFUL PARTY

29

9.4

NOTIFICATION AND DEFENSE OF CLAIM.

30

9.5

ADVANCE OF EXPENSES

30

9.6

PROCEDURE FOR INDEMNIFICATION AND ADVANCEMENT OF EXPENSES.

31

9.7

REMEDIES

31

9.8

LIMITATIONS.

32

9.9

SUBSEQUENT AMENDMENT

32

9.10

OTHER RIGHTS

32

9.11

PARTIAL INDEMNIFICATION.

33

9.12

INSURANCE

33

9.13

SAVINGS CLAUSE

33

9.14

DEFINITIONS

33

ARTICLE X - AMENDMENTS

34

ARTICLE XI - EXCLUSIVE FORUM

34

 

 

-iii-


 

AMENDED AND RESTATED BYLAWS

OF

GOSSAMER BIO, INC.

 

ARTICLE I - CORPORATE OFFICES

1.1REGISTERED OFFICE.

The registered office of Gossamer Bio, Inc. (the “Corporation”) shall be fixed in the Corporation’s certificate of incorporation, as the same may be amended and/or restated from time to time (the “certificate of incorporation”).

1.2OTHER OFFICES.

The Corporation may have other offices at any place or places, either within or outside the State of Delaware, as the Corporation’s board of directors (the “Board”) shall from time to time determine or the business of the Corporation may from time to time require.

ARTICLE II - MEETINGS OF STOCKHOLDERS

2.1PLACE OF MEETINGS.

Meetings of stockholders shall be held at any place, within or outside the State of Delaware, designated by the Board.  The Board may, in its sole discretion, determine that a meeting of stockholders shall not be held at any place, but may instead be held solely by means of remote communication as authorized by Section 211(a) of the General Corporation Law of the State of Delaware (the “DGCL”).  In the absence of any such designation or determination, stockholders’ meetings shall be held at the Corporation’s principal executive office.

2.2ANNUAL MEETING.

The Board shall designate the date and time of the annual meeting.  At the annual meeting, directors shall be elected and other proper business properly brought before the meeting in accordance with Section 2.4 of these bylaws may be transacted.

 


 

2.3SPECIAL MEETING.

A special meeting of the stockholders may be called at any time by the Board, chairperson of the Board, chief executive officer or president (in the absence of a chief executive officer) of the Corporation, but such special meetings may not be called by any other person or persons.

No business may be transacted at such special meeting other than the business specified in such notice to stockholders.  Nothing contained in this paragraph of this Section 2.3 shall be construed as limiting, fixing, or affecting the time when a meeting of stockholders called by action of the Board may be held.

2.4ADVANCE NOTICE PROCEDURES FOR BUSINESS BROUGHT BEFORE A MEETING.

(a)At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be (i) brought before the meeting by the Corporation and specified in a notice of meeting given by or at the direction of the Board, (ii) brought before the meeting by or at the direction of the Board (or a committee thereof) or (iii) otherwise properly brought before the meeting by a stockholder who (A) was a stockholder of record of the Corporation (and, with respect to any beneficial owner, if different, on whose behalf such business is proposed, only if such beneficial owner was the beneficial owner of shares of the Corporation) both at the time of giving the notice provided for in this Section 2.4 and at the time of the meeting, (B) is entitled to vote at the meeting and (C) has complied with this Section 2.4 as to such business.  Except for proposals properly made in accordance with Rule 14a-8 under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (as so amended and inclusive of such rules and regulations, the “Exchange Act”), and included in the notice of meeting given by or at the direction of the Board, the foregoing clause (iii) shall be the exclusive means for a stockholder to propose business to be brought before an annual meeting of the stockholders.  Stockholders shall not be permitted to propose business to be brought before a special meeting of the stockholders, and the only matters that may be brought before a special meeting are the matters specified in the notice of meeting given by or at the direction of the person calling the meeting pursuant to Section 2.3 of these bylaws.  Stockholders seeking to nominate persons for election to the Board must comply with Section 2.5 of these bylaws, and this Section 2.4 shall not be applicable to nominations except as expressly provided in Section 2.5 of these bylaws.

(b)Without qualification, for business to be properly brought before an annual meeting by a stockholder pursuant to clause (iii) of the second sentence of Section 2.4(a) of these bylaws, the stockholder must (i) provide Timely Notice (as defined below) thereof in writing and in proper form to the secretary of the Corporation and (ii) provide any updates or supplements to such notice at the times and in the forms required by this Section 2.4. To be timely, a stockholder’s notice must be delivered to, or mailed and received by the secretary at, the principal executive offices of the Corporation not less than ninety (90) days nor more than one hundred twenty (120)

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days prior to the first anniversary of the preceding year’s annual meeting; provided, however, that (x) if the date of the annual meeting is more than thirty (30) days before or more than sixty (60) days after such anniversary date or (y) with respect to the first annual meeting held after the Company’s initial public offering of its shares pursuant to a registration statement on Form S-1, notice by the stockholder to be timely must be so delivered, or mailed and received, not earlier than the close of business on the one hundred twentieth (120th) day prior to such annual meeting and not later than the later of the close of business on the ninetieth (90th) day prior to such annual meeting and the close of business on the tenth (10th) day following the day on which public disclosure of the date of such annual meeting was first made (such notice within such time periods, “Timely Notice”).  In no event shall any adjournment or postponement of an annual meeting or the announcement thereof commence a new time period (or extend any time period) for the giving of Timely Notice as described above.

(c)To be in proper form for purposes of this Section 2.4, a stockholder’s notice to the secretary of the Corporation shall set forth:

(i)As to each Proposing Person (as defined below), (A) the name and address of such Proposing Person (including, without limitation, if applicable, the name and address that appear on the Corporation’s books and records) and (B) the class or series and number of shares of the Corporation that are, directly or indirectly, owned of record or beneficially owned (within the meaning of Rule 13d-3 under the Exchange Act) by such Proposing Person, except that such Proposing Person shall in all events be deemed to beneficially own any shares of any class or series of the Corporation as to which such Proposing Person has a right to acquire beneficial ownership at any time in the future (the disclosures to be made pursuant to the foregoing clauses (A) and (B) are referred to as “Stockholder Information”);

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(ii)As to each Proposing Person, (A) any derivative, swap or other transaction or series of transactions engaged in, directly or indirectly, by such Proposing Person, the purpose or effect of which is to give such Proposing Person economic risk similar to ownership of shares of any class or series of the Corporation, including, without limitation,  due to the fact that the value of such derivative, swap or other transactions are determined by reference to the price, value or volatility of any shares of any class or series of the Corporation, or which derivative, swap or other transactions provide, directly or indirectly, the opportunity to profit from any increase in the price or value of shares of any class or series of the Corporation (“Synthetic Equity Interests”), which Synthetic Equity Interests shall be disclosed without regard to whether (x) the derivative, swap or other transactions convey any voting rights in such shares to such Proposing Person, (y) the derivative, swap or other transactions are required to be, or are capable of being, settled through delivery of such shares or (z) such Proposing Person may have entered into other transactions that hedge or mitigate the economic effect of such derivative, swap or other transactions, (B) any proxy (other than a revocable proxy or consent given in response to a solicitation made pursuant to, and in accordance with, Section 14(a) of the Exchange Act by way of a solicitation statement filed on Schedule 14A), agreement, arrangement, understanding or relationship pursuant to which such Proposing Person has or shares a right to vote any shares of any class or series of the Corporation, (C) any agreement, arrangement, understanding or relationship, including, without limitation, any repurchase or similar so-called “stock borrowing” agreement or arrangement, engaged in, directly or indirectly, by such Proposing Person, the purpose or effect of which is to mitigate loss to, reduce the economic risk (of ownership or otherwise) of shares of any class or series of the Corporation by, manage the risk of share price changes for, or increase or decrease the voting power of, such Proposing Person with respect to the shares of any class or series of the Corporation, or which provides, directly or indirectly, the opportunity to profit from any decrease in the price or value of the shares of any class or series of the Corporation (“Short Interests”), (D) any rights to dividends on the shares of any class or series of the Corporation owned beneficially by such Proposing Person that are separated or separable from the underlying shares of the Corporation, (E) any performance related fees (other than an asset based fee) that such Proposing Person is entitled to based on any increase or decrease in the price or value of shares of any class or series of the Corporation, or any Synthetic Equity Interests or Short Interests, if any, (F)(x) if such Proposing Person is not a natural person, the identity of the natural person or persons associated with such Proposing Person responsible for the formulation of and decision to propose the business to be brought before the meeting (such person or persons, the “Responsible Person”), the manner in which such Responsible Person was selected, any fiduciary duties owed by such Responsible Person to the equity holders or other beneficiaries of such Proposing Person, the qualifications and background of such Responsible Person and any material interests or relationships of such Responsible Person that are not shared

-4-


 

generally by any other record or beneficial holder of the shares of any class or series of the Corporation and that reasonably could have influenced the decision of such Proposing Person to propose such business to be brought before the meeting, and (y) if such Proposing Person is a natural person, the qualifications and background of such natural person and any material interests or relationships of such natural person that are not shared generally by any other record or beneficial holder of the shares of any class or series of the Corporation and that reasonably could have influenced the decision of such Proposing Person to propose such business to be brought before the meeting, (G) any significant equity interests or any Synthetic Equity Interests or Short Interests in any principal competitor of the Corporation held by such Proposing Persons, (H) any direct or indirect interest of such Proposing Person in any contract with the Corporation, any affiliate of the Corporation or any principal competitor of the Corporation (including, without limitation, in any such case, any employment agreement, collective bargaining agreement or consulting agreement), (I) any pending or threatened litigation in which such Proposing Person is a party or material participant involving the Corporation or any of its officers or directors, or any affiliate of the Corporation, (J) any material transaction occurring during the prior twelve months between such Proposing Person, on the one hand, and the Corporation, any affiliate of the Corporation or any principal competitor of the Corporation, on the other hand, (K) a summary of any material discussions regarding the business proposed to be brought before the meeting (x) between or among any of the Proposing Persons or (y) between or among any Proposing Person and any other record or beneficial holder of the shares of any class or series of the Corporation (including, without limitation, their names) and (L) any other information relating to such Proposing Person that would be required to be disclosed in a proxy statement or other filing required to be made in connection with solicitations of proxies or consents by such Proposing Person in support of the business proposed to be brought before the meeting pursuant to Section 14(a) of the Exchange Act (the disclosures to be made pursuant to the foregoing clauses (A) through (L) are referred to as “Disclosable Interests”); provided, however, that Disclosable Interests shall not include any such disclosures with respect to the ordinary course business activities of any broker, dealer, commercial bank, trust company or other nominee who is a Proposing Person solely as a result of being the stockholder directed to prepare and submit the notice required by these bylaws on behalf of a beneficial owner; and

-5-


 

(iii)As to each item of business that the stockholder proposes to bring before the annual meeting, (A) a reasonably brief description of the business desired to be brought before the annual meeting, the reasons for conducting such business at the annual meeting and any material interest in such business of each Proposing Person, (B) the text of the proposal or business (including, without limitation, the text of any resolutions proposed for consideration and in the event that such business includes a proposal to amend the bylaws of the Corporation, the language of the proposed amendment), (C) a reasonably detailed description of all agreements, arrangements and understandings between or among any of the Proposing Persons or between or among any Proposing Person and any other person or entity (including, without limitation, their names) in connection with the proposal of such business by such stockholder, (D) a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such business, (E) a representation whether the Proposing Person intends or is part of a group which intends (1) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation’s outstanding capital stock required to approve or adopt the proposal and/or (2) otherwise to solicit proxies or votes from stockholders in support of such proposal and (F) any other information relating to such item of business that would be required to be disclosed in a proxy statement or other filing required to be made in connection with solicitations of proxies in support of the business proposed to be brought before the meeting pursuant to Section 14(a) of the Exchange Act; provided, however, that the disclosures required by this paragraph (c)(iii) shall not include any disclosures with respect to any broker, dealer, commercial bank, trust company or other nominee who is a Proposing Person solely as a result of being the stockholder directed to prepare and submit the notice required by these bylaws on behalf of a beneficial owner.

(d)For purposes of this Section 2.4, the term “Proposing Person shall mean (i) the stockholder providing the notice of business proposed to be brought before an annual meeting, (ii) the beneficial owner or beneficial owners, if different, on whose behalf the notice of the business proposed to be brought before the annual meeting is made, (iii) any affiliate or associate (each within the meaning of Rule 12b-2 under the Exchange Act for the purposes of these bylaws) of such stockholder or beneficial owner and (iv) any other person with whom such stockholder or beneficial owner (or any of their respective affiliates or associates) is Acting in Concert (as defined below).

(e)A person shall be deemed to be “Acting in Concert” with another person for purposes of these bylaws if such person knowingly acts (whether or not pursuant to an express agreement, arrangement or understanding) in concert with, or towards a common goal relating to the management, governance or control of the Corporation in parallel with, such other person where (i) each person is conscious of the other person’s conduct or intent and this awareness is an element in their decision-making processes and (ii) at least one additional factor suggests that such

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persons intend to act in concert or in parallel, which such additional factors may include, without limitation, exchanging information (whether publicly or privately), attending meetings, conducting discussions, or making or soliciting invitations to act in concert or in parallel; provided, that a person shall not be deemed to be Acting in Concert with any other person solely as a result of the solicitation or receipt of revocable proxies or consents from such other person in response to a solicitation made pursuant to, and in accordance with, Section 14(a) of the Exchange Act by way of a proxy or consent solicitation statement filed on Schedule 14A.  A person Acting in Concert with another person shall be deemed to be Acting in Concert with any third party who is also Acting in Concert with such other person.

(f)A stockholder providing notice of business proposed to be brought before an annual meeting shall further update and supplement such notice, if necessary, so that the information provided or required to be provided in such notice pursuant to this Section 2.4 shall be true and correct as of the record date for determining stockholders entitled to notice of the annual meeting and as of the date that is ten (10) business days prior to the meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to, or mailed and received by, the secretary of the Corporation at the principal executive offices of the Corporation not later than five (5) business days after the record date for determining stockholders entitled to notice of the annual meeting (in the case of the update and supplement required to be made as of the record date), and not later than eight (8) business days prior to the date for the meeting or, if practicable, any adjournment or postponement thereof (and, if not practicable, on the first practicable date prior to the date to which the meeting has been adjourned or postponed) (in the case of the update and supplement required to be made as of ten (10) business days prior to the meeting or any adjournment or postponement thereof).

(g)Notwithstanding anything in these bylaws to the contrary and except as otherwise expressly provided in any applicable rule or regulation promulgated under the Exchange Act, no business shall be conducted at an annual meeting except in accordance with this Section 2.4.  The presiding officer of an annual meeting of stockholders shall have the power and duty (a) to determine that any business was not properly brought before the meeting in accordance with this Section 2.4 (including whether the stockholder or beneficial owner, if any, on whose behalf the business proposed to be brought before the annual meeting is made, solicited (or is part of a group which solicited) or did not so solicit, as the case may be, proxies or votes in support of such stockholder’s business in compliance with such stockholder’s representation as required by clause (c)(iii)(E) of this Section 2.4); and (b) if any proposed business was not proposed in compliance with this Section 2.4 to declare to the meeting that any such business not properly brought before the meeting shall not be transacted.

-7-


 

(h)The foregoing notice requirements of this Section 2.4 shall be deemed satisfied by a stockholder with respect to business other than a nomination if the stockholder has notified the Corporation of his, her or its intention to present a proposal at an annual meeting in compliance with applicable rules and regulations promulgated under the Exchange Act and such stockholder’s proposal has been included in a proxy statement that has been prepared by the Corporation to solicit proxies for such annual meeting.  Nothing in this Section 2.4 shall be deemed to affect the rights of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act.

(i)For purposes of these bylaws, “public disclosure” shall mean disclosure in a press release reported by a national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Exchange Act.

(j)Notwithstanding the foregoing provisions of this Section 2.4, unless otherwise required by law, if the stockholder (or a qualified representative of the stockholder) does not appear at the annual meeting to present proposed business, such proposed business shall not be transacted, notwithstanding that proxies in respect of such vote may have been received by the Corporation.  For purposes of this Section 2.4, except as provided under Rule 14a-8 under the Exchange Act, to be considered a qualified representative of the stockholder, a person must be a duly authorized officer, manager or partner of such stockholder or must be authorized by a writing executed by such stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as proxy at the annual meeting and such person must produce such writing or electronic transmission, or a reliable reproduction of the writing or electronic transmission, at the annual meeting.

(k)Notwithstanding the foregoing provisions of this Section 2.4, a stockholder shall also comply with all applicable requirements of the Exchange Act with respect to the matters set forth in this Section 2.4; provided however, that any references in these bylaws to the Exchange Act are not intended to and shall not limit any requirements applicable to proposals as to any business to be considered pursuant to this Section 2.4 (including paragraph (a)(iii) hereof), and compliance with paragraph (a)(iii) of this Section 2.4 shall be the exclusive means for a stockholder to submit business (other than, as provided in the first sentence of paragraph (h) of this Section 2.4, business brought properly under and in compliance with Rule 14a-8 of the Exchange Act, as may be amended from time to time).

2.5ADVANCE NOTICE PROCEDURES FOR NOMINATIONS OF DIRECTORS.

(a)Nominations of any person for election to the Board at an annual meeting or at a special meeting (but, in the case of a special meeting, only if the election of directors is a matter specified in the notice of meeting given by or at the direction of the person calling such special meeting) may be made at such meeting only (i) by or at the direction of the Board or any committee thereof, or (ii) by a stockholder who (A) was a stockholder of record of the Corporation (and, with respect to any beneficial owner, if different, on whose behalf such nomination is

-8-


 

proposed to be made, only if such beneficial owner was the beneficial owner of shares of the Corporation) both at the time of giving the notice provided for in this Section 2.5 and at the time of the meeting, (B) is entitled to vote at the meeting and (C) has complied with this Section 2.5 as to such nomination.  The foregoing clause (ii) shall be the exclusive means for a stockholder to make any nomination of a person or persons for election to the Board to be considered by the stockholders at an annual meeting or special meeting.

(b)Without qualification, for a stockholder to make any nomination of a person or persons for election to the Board at an annual meeting, the stockholder must (i) provide Timely Notice (as defined in Section 2.4(b) of these bylaws) thereof in writing and in proper form to the secretary of the Corporation and (ii) provide any updates or supplements to such notice at the times and in the forms required by this Section 2.5.  Notwithstanding anything in this paragraph to the contrary, in the event that the number of directors to be elected to the Board at an annual meeting is increased effective after the time period for which nominations would otherwise by due under this paragraph (b) and there is no public announcement by the Corporation naming the nominees for the additional directorships at least one hundred (100) days prior to the first anniversary of the preceding year’s annual meeting, a stockholder’s notice required by paragraph (b) of this Section 2.5 shall also be considered timely, but only with respect to nominees for the additional directorships, if it shall be delivered to the secretary at the principal executive offices of the Corporation not later than the close of business on the tenth (10th) day following the day on which such public announcement is first made by the Corporation.  Without qualification, if the election of directors is a matter specified in the notice of meeting given by or at the direction of the person calling such special meeting, then for a stockholder to make any nomination of a person or persons for election to such position(s) as specified in the notice of the special meeting, the stockholder must (i) provide timely notice thereof in writing and in proper form to the secretary of the Corporation at the principal executive offices of the Corporation and (ii) provide any updates or supplements to such notice at the times and in the forms required by this Section 2.5.  To be timely, a stockholder’s notice for nominations to be made at a special meeting must be delivered to, or mailed and received at, the principal executive offices of the Corporation not earlier than the close of business on the one hundred twentieth (120th) day prior to such special meeting and not later than the later of the close of business on the ninetieth (90th) day prior to such special meeting and the close of business on the tenth (10th) day following the day on which public disclosure (as defined in Section 2.4(i) of these bylaws) of the date of such special meeting was first made.  In no event shall any adjournment or postponement of an annual meeting or special meeting or the announcement thereof commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described above.

(c)To be in proper form for purposes of this Section 2.5, a stockholder’s notice to the secretary of the Corporation shall set forth:

(i)As to each Nominating Person (as defined below), the Stockholder Information (as defined in Section 2.4(c)(i) of these bylaws) except that for purposes of this Section 2.5, the term “Nominating Person” shall be substituted for the term “Proposing Person” in all places it appears in Section 2.4(c)(i);

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(ii)As to each Nominating Person, any Disclosable Interests (as defined in Section 2.4(c)(ii), except that for purposes of this Section 2.5 the term “Nominating Person” shall be substituted for the term “Proposing Person” in all places it appears in Section 2.4(c)(ii) and the disclosure in clause (L) of Section 2.4(c)(ii) shall be made with respect to the election of directors at the meeting) provided, however, that Disclosable Interests shall not include any such disclosures with respect to the ordinary course business activities of any broker, dealer, commercial bank, trust company or other nominee who is a Nominating Person solely as a result of being the stockholder directed to prepare and submit the notice required by these bylaws on behalf of a beneficial owner; and;

(iii)As to each person whom a Nominating Person proposes to nominate for election as a director, (A) all information with respect to such proposed nominee that would be required to be set forth in a stockholder’s notice pursuant to this Section 2.5 if such proposed nominee were a Nominating Person, (B) all information relating to such proposed nominee that is required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors in a contested election pursuant to Section 14(a) under the Exchange Act (including, without limitation, such proposed nominee’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected), (C) a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three (3) years, and any other material relationships, between or among any Nominating Person, on the one hand, and each proposed nominee, his or her respective affiliates and associates and any other persons with whom such proposed nominee (or any of his or her respective affiliates and associates) is Acting in Concert (as defined in Section 2.4(e) of these bylaws), on the other hand, including, without limitation, all information that would be required to be disclosed pursuant to Item 404 under Regulation S-K if such Nominating Person were the “registrant” for purposes of such rule and the proposed nominee were a director or executive officer of such registrant (the disclosures to be made pursuant to the foregoing clauses (A) through (C) are referred to as “Nominee Information”), (D) a representation that the Nominating Person is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such nomination, (E) a representation whether the Nominating Person intends or is part of a group which intends (1) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation’s outstanding capital stock required to elect the nominee and/or (2) otherwise to solicit proxies or votes from stockholders in support of such nomination and (F) a completed and signed questionnaire, representation and agreement as provided in Section 2.5(g); and

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(iv)The Corporation may require any proposed nominee to furnish such other information (A) as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as an independent director of the Corporation in accordance with the Corporation’s Corporate Governance Guidelines or (B) that could be material to a reasonable stockholder’s understanding of the independence or lack of independence of such proposed nominee.

(d)For purposes of this Section 2.5, the term “Nominating Person shall mean (i) the stockholder providing the notice of the nomination proposed to be made at the meeting, (ii) the beneficial owner or beneficial owners, if different, on whose behalf the notice of the nomination proposed to be made at the meeting is made, (iii) any affiliate or associate of such stockholder or beneficial owner and (iv) any other person with whom such stockholder or such beneficial owner (or any of their respective affiliates or associates) is Acting in Concert.

(e)A stockholder providing notice of any nomination proposed to be made at a meeting shall further update and supplement such notice, if necessary, so that the information provided or required to be provided in such notice pursuant to this Section 2.5 shall be true and correct as of the record date for determining stockholders entitled to notice of the meeting and as of the date that is ten (10) business days prior to the meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to, or mailed and received by, the secretary of the Corporation at the principal executive offices of the Corporation not later than five (5) business days after the record date for determining stockholders entitled to notice of the meeting (in the case of the update and supplement required to be made as of the record date), and not later than eight (8) business days prior to the date for the meeting or, if practicable, any adjournment or postponement thereof (and, if not practicable, on the first practicable date prior to the date to which the meeting has been adjourned or postponed) (in the case of the update and supplement required to be made as of ten (10) business days prior to the meeting or any adjournment or postponement thereof).

(f)Notwithstanding anything in these bylaws to the contrary, no person shall be eligible for election as a director of the Corporation unless nominated in accordance with this Section 2.5, except as otherwise expressly provided in any applicable rule or regulation promulgated under the Exchange Act.  The presiding officer at any meeting of stockholders shall have the power and duty to (a) determine that a nomination was not properly made in accordance with this Section 2.5 (including whether the stockholder or beneficial owner, if any, on whose behalf the nomination was made, solicited or is part of a group which solicited) or did not so solicit, as the case may be, proxies or votes in support of such stockholder’s nomination in compliance with such stockholder’s representation as required by clause (c)(iii)(E) of this Section 2.5); and (b) if any proposed nomination was not made in compliance with this Section 2.5 to declare such determination to the meeting that the defective nomination shall be disregarded.

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(g)To be eligible to be a nominee for election as a director of the Corporation, the proposed nominee must deliver (in accordance with the time periods prescribed for delivery of notice under this Section 2.5) to the secretary of the Corporation at the principal executive offices of the Corporation a written questionnaire with respect to the background and qualification of such proposed nominee (which questionnaire shall be provided by the secretary upon written request) and a written representation and agreement (in form provided by the secretary upon written request) that such proposed nominee (i) is not and will not become a party to (A) any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how such proposed nominee, if elected as a director of the Corporation, will act or vote on any issue or question (a “Voting Commitment”) that has not been disclosed to the Corporation or (B) any Voting Commitment that could limit or interfere with such proposed nominee’s ability to comply, if elected as a director of the Corporation, with such proposed nominee’s fiduciary duties under applicable law, (ii) is not, and will not become a party to, any agreement, arrangement or understanding with any person or entity other than the Corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with candidacy, service or action as a director that has not been disclosed to the Corporation and (iii) in such proposed nominee’s individual capacity and on behalf of the stockholder (and the beneficial owner, if different, on whose behalf the nomination is made) would be in compliance, if elected as a director of the Corporation, and will comply with applicable publicly disclosed corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines of the Corporation.

(h)In addition to the requirements of this Section 2.5 with respect to any nomination proposed to be made at a meeting, each Nominating Person shall comply with all applicable requirements of the Exchange Act with respect to any such nominations.

(i)Notwithstanding the foregoing provisions of this Section 2.5, unless otherwise required by law, if the stockholder (or a qualified representative of the stockholder) does not appear at the meeting to present the proposed nomination, such proposed nomination shall not be considered, notwithstanding that proxies in respect of such vote may have been received by the Corporation.  For purposes of this Section 2.5, to be considered a qualified representative of the stockholder, a person must be a duly authorized officer, manager or partner of such stockholder or must be authorized by a writing executed by such stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as proxy at the meeting of stockholders and such person must produce such writing or electronic transmission, or a reliable reproduction of the writing or electronic transmission, at the meeting.

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2.6NOTICE OF STOCKHOLDERS’ MEETINGS.

Unless otherwise provided by law, the certificate of incorporation or these bylaws, the notice of any meeting of stockholders shall be given in accordance with either Section 2.7 or Section 8.1 of these bylaws not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting as of the record date for determining the stockholders entitled to notice of the meeting.  The notice shall specify the place, if any, date and hour of the meeting, the record date for determining the stockholders entitled to vote at the meeting (if such date is different from the record date for stockholders entitled to notice of the meeting), the means of remote communication, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called.

2.7MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE.

Notice of any meeting of stockholders shall be deemed given:

(a)if mailed, when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder’s address as it appears on the Corporation’s records; or

(b)if electronically transmitted, as provided in Section 8.1 of these bylaws.

An affidavit of the secretary or an assistant secretary of the Corporation or of the transfer agent or any other agent of the Corporation that the notice has been given by mail or by a form of electronic transmission, as applicable, shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

2.8QUORUM.

Unless otherwise provided by law, the certificate of incorporation or these bylaws, the holders of a majority in voting power of the capital stock issued and outstanding and entitled to vote, present in person, or by remote communication, if applicable, or represented by proxy, shall constitute a quorum for the transaction of business at all meetings of the stockholders.  A quorum, once established at a meeting, shall not be broken by the withdrawal of enough votes to leave less than a quorum.  If, however, a quorum is not present or represented at any meeting of the stockholders, then either (a) the chairperson of the meeting or (b) a majority in voting power of the stockholders entitled to vote thereon, present in person, or by remote communication, if applicable, or represented by proxy, shall have power to adjourn the meeting from time to time in the manner provided in Section 2.9 of these bylaws until a quorum is present or represented.  At such adjourned meeting at which a quorum is present or represented, any business may be transacted that might have been transacted at the meeting as originally noticed.

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2.9ADJOURNED MEETING; NOTICE.

When a meeting is adjourned to another time or place, unless these bylaws otherwise require, notice need not be given of the adjourned meeting if the time, place, if any, thereof, and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken.  At the adjourned meeting, the Corporation may transact any business which might have been transacted at the original meeting.  If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date for determining the stockholders entitled to vote is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the adjourned meeting as of the record date for determining the stockholders entitled to notice of the adjourned meeting.

2.10CONDUCT OF BUSINESS.

The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced at the meeting by the person presiding over the meeting.  The Board may adopt by resolution such rules and regulations for the conduct of the meeting of stockholders as it shall deem appropriate.  Except to the extent inconsistent with such rules and regulations as adopted by the Board, the person presiding over any meeting of stockholders shall have the right and authority to convene and (for any or no reason) to recess and/or adjourn the meeting, to prescribe such rules, regulations and procedures (which need not be in writing) and to do all such acts as, in the judgment of such presiding person, are appropriate for the proper conduct of the meeting.  Such rules, regulations or procedures, whether adopted by the Board or prescribed by the presiding person of the meeting, may include, without limitation, the following: (a) the establishment of an agenda or order of business for the meeting; (b) rules and procedures for maintaining order at the meeting and the safety of those present (including, without limitation, rules and procedures for removal of disruptive persons from the meeting); (c) limitations on attendance at or participation in the meeting to stockholders entitled to vote at the meeting, their duly authorized and constituted proxies or such other persons as the presiding person of the meeting shall determine; (d) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (e) limitations on the time allotted to questions or comments by participants.  The presiding person at any meeting of stockholders, in addition to making any other determinations that may be appropriate to the conduct of the meeting (including, without limitation, determinations with respect to the administration and/or interpretation of any of the rules, regulations or procedures of the meeting, whether adopted by the Board or prescribed by the person presiding over the meeting), shall, if the facts warrant, determine and declare to the meeting that a matter or business was not properly brought before the meeting and if such presiding person should so determine, such presiding person shall so declare to the meeting and any such matter or business not properly brought before the meeting shall not be transacted or considered.  Unless and to the extent determined by the Board or the person presiding over the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.

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2.11VOTING.

The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of Section 2.13 of these bylaws, subject to Section 217 (relating to voting rights of fiduciaries, pledgors and joint owners of stock) and Section 218 (relating to voting trusts and other voting agreements) of the DGCL.

Except as may be otherwise provided in the certificate of incorporation or these bylaws, each stockholder shall be entitled to one (1) vote for each share of capital stock held by such stockholder.

At all duly called or convened meetings of stockholders, at which a quorum is present, for the election of directors, a plurality of the votes cast shall be sufficient to elect a director.  All other elections and questions presented to the stockholders at a duly called or convened meeting, at which a quorum is present, shall, unless a different or minimum vote is required by the certificate of incorporation, these bylaws, the rules or regulations of any stock exchange applicable to the Corporation, or any law or regulation applicable to the Corporation or its securities, in which case such different or minimum vote shall be the applicable vote on the matter, be decided by the affirmative vote of the holders of a majority in voting power of the votes cast affirmatively or negatively (excluding abstentions) at the meeting by the holders entitled to vote thereon.  

2.12STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING.

Any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders of the Corporation and may not be effected by any consent in writing by such stockholders.

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2.13RECORD DATE FOR STOCKHOLDER NOTICE; VOTING.

In order that the Corporation may determine the stockholders entitled to notice of any meeting of stockholders or any adjournment thereof, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which record date shall, unless otherwise required by law, not be more than sixty (60) nor less than ten (10) days before the date of such meeting.  If the Board so fixes a date, such date shall also be the record date for determining the stockholders entitled to vote at such meeting unless the Board determines, at the time it fixes such record date, that a later date on or before the date of the meeting shall be the date for making such determination.  If no record date is fixed by the Board, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held.  A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for determination of stockholders entitled to vote at the adjourned meeting, and in such case shall also fix as the record date for stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote in accordance herewith at the adjourned meeting.

In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board may fix a record date, which shall not be more than sixty (60) days prior to such other action.  If no such record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto.

2.14PROXIES.

Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for such stockholder by proxy, but no such proxy shall be voted or acted upon after three (3) years from its date, unless the proxy provides for a longer period.  The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212 of the DGCL.  A proxy may be in the form of a telegram, cablegram or other means of electronic transmission which sets forth or is submitted with information from which it can be determined that the telegram, cablegram or other means of electronic transmission was authorized by the stockholder.

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2.15LIST OF STOCKHOLDERS ENTITLED TO VOTE.

The Corporation shall prepare, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting (provided, however, if the record date for determining the stockholders entitled to vote is less than ten (10) days before the date of the meeting, the list shall reflect the stockholders entitled to vote as of the tenth day before the date of the meeting), arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder.  The Corporation shall not be required to include electronic mail addresses or other electronic contact information on such list.  Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting for a period of at least ten (10) days prior to the meeting: (a) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (b) during ordinary business hours, at the Corporation’s principal executive office.  In the event that the Corporation determines to make the list available on an electronic network, the Corporation may take reasonable steps to ensure that such information is available only to stockholders of the Corporation.  If the meeting is to be held at a place, then the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.  If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting.  Except as otherwise provided by law, the stock ledger shall be the only evidence as to the identity of the stockholders entitled to vote in person or by proxy and the number of shares held by each of them, and as to the stockholders entitled to examine the list of stockholders.

2.16POSTPONEMENT, ADJOURNMENT AND CANCELLATION OF MEETING.

Any previously scheduled annual or special meeting of the stockholders may be postponed or adjourned, and any previously scheduled annual or special meeting of the stockholders may be canceled, by resolution of the Board.

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2.17INSPECTORS OF ELECTION.

Before any meeting of stockholders, the Board shall appoint an inspector or inspectors of election to act at the meeting or its adjournment or postponement and make a written report thereof.  The number of inspectors shall be either one (1) or three (3).  If any person appointed as inspector fails to appear or fails or refuses to act, then the chairperson of the meeting may, and upon the request of any stockholder or a stockholder’s proxy shall, appoint a person to fill that vacancy.  Unless otherwise required by law, inspectors may be officers, employees or agents of the Corporation.  Such inspectors shall have the duties prescribed by law.  Each inspector, before entering upon the discharge of his or her duties, shall take and sign an oath to execute faithfully the duties of inspector with strict impartiality and according to the best of his or her ability.  If there are three (3) inspectors of election, the decision, act or certificate of a majority is effective in all respects as the decision, act or certificate of all.  Any report or certificate made by the inspectors of election is prima facie evidence of the facts stated therein.

ARTICLE III - DIRECTORS

3.1POWERS.

Subject to the provisions of the DGCL and any limitations in the certificate of incorporation, the business and affairs of the Corporation shall be managed and all corporate powers shall be exercised by or under the direction of the Board.

3.2NUMBER OF DIRECTORS.

The authorized number of directors shall be determined from time to time by resolution of the Board, provided the Board shall consist of at least one (1) member.  No reduction of the authorized number of directors shall have the effect of removing any director before that director’s term of office expires.

3.3ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS.

Except as provided in Section 3.4 of these bylaws, each director, including, without limitation, a director elected to fill a vacancy, shall hold office until the expiration of the term for which elected and until such director’s successor is elected and qualified or until such director’s earlier death, resignation or removal.  Directors need not be stockholders unless so required by the certificate of incorporation or these bylaws.  The Corporation may also have, at the discretion of the Board, a chairperson of the Board and a vice chairperson of the Board. The certificate of incorporation or these bylaws may prescribe other qualifications for directors.

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3.4RESIGNATION AND VACANCIES.

Any director may resign at any time upon notice given in writing or by electronic transmission to the chairperson of the Board or the Corporation’s chief executive officer, president or secretary.  When one or more directors so resigns and the resignation is effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office as provided in this section in the filling of other vacancies.

Unless otherwise provided in the certificate of incorporation or these bylaws, vacancies and newly created directorships resulting from any increase in the authorized number of directors shall, unless the Board determines by resolution that any such vacancies or newly created directorships shall be filled by stockholders, be filled only by a majority of the directors then in office, although less than a quorum, or by a sole remaining director.  Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the director for which the vacancy was created or occurred and until such director’s successor shall have been elected and qualified. A vacancy in the Board shall be deemed to exist under these bylaws in the case of the death, removal or resignation of any director.

3.5PLACE OF MEETINGS; MEETINGS BY TELEPHONE.

The Board may hold meetings, both regular and special, either within or outside the State of Delaware.

Unless otherwise restricted by the certificate of incorporation or these bylaws, members of the Board, or any committee designated by the Board, may participate in a meeting of the Board, or any committee, by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting pursuant to this bylaw shall constitute presence in person at the meeting.

3.6REGULAR MEETINGS.

Regular meetings of the Board may be held without notice at such time and at such place as shall from time to time be determined by the Board; provided that any director who is absent when such determination is made shall be given notice of the determination.  A regular meeting of the Board may be held without notice immediately after and at the same place as the annual meeting of stockholders.

3.7SPECIAL MEETINGS; NOTICE.

Special meetings of the Board for any purpose or purposes may be called at any time by the chairperson of the Board, the chief executive officer, the president, the secretary or a majority of the authorized number of directors.

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Notice of the time and place of special meetings shall be:

(a)delivered personally by hand, by courier or by telephone;

(b)sent by United States first-class mail, postage prepaid;

(c)sent by facsimile; or

(d)sent by electronic mail, electronic transmission or other similar means,

directed to each director at that director’s address, telephone number, facsimile number or electronic mail or other electronic address, as the case may be, as shown on the Corporation’s records.  

If the notice is (a) delivered personally by hand, by courier or by telephone, (b) sent by facsimile or (c) sent by electronic mail or electronic transmission, it shall be delivered or sent at least twenty-four (24) hours before the time of the holding of the meeting.  If the notice is sent by United States mail, it shall be deposited in the United States mail at least four (4) days before the time of the holding of the meeting.  Any oral notice may be communicated to the director.  The notice need not specify the place of the meeting (if the meeting is to be held at the Corporation’s principal executive office) nor the purpose of the meeting.

3.8QUORUM.

The greater of (a) a majority of the directors at any time in office and (b) one-third of the number of directors established by the Board pursuant to Section 3.2 of these bylaws shall constitute a quorum of the Board for the transaction of business.  The vote of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board, except as may be otherwise specifically provided by statute, the certificate of incorporation or these bylaws.  If a quorum is not present at any meeting of the Board, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present.

3.9BOARD ACTION BY CONSENT WITHOUT A MEETING.

Unless otherwise restricted by the certificate of incorporation or these bylaws, any action required or permitted to be taken at any meeting of the Board, or of any committee thereof, may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing or by electronic transmission and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the Board or committee.  Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

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3.10FEES AND COMPENSATION OF DIRECTORS.

Unless otherwise restricted by the certificate of incorporation or these bylaws, the Board shall have the authority to fix the compensation of directors.

3.11REMOVAL OF DIRECTORS. 

Subject to the rights of the holders of the shares of any series of preferred stock of the Corporation, the Board or any individual director may be removed from office only for cause and only by the affirmative vote of the holders of at least two-thirds in voting power of the outstanding shares of capital stock of the Corporation entitled to vote thereon.

ARTICLE IV - COMMITTEES

4.1COMMITTEES OF DIRECTORS.

The Board may designate one (1) or more committees, each committee to consist of one (1) or more of the directors of the Corporation.  The Board may designate one (1) or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee.  In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member.  Any such committee, to the extent provided in the resolution of the Board or in these bylaws, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers that may require it; but no such committee shall have the power or authority to (a) approve or adopt, or recommend to the stockholders, any action or matter (other than the election or removal of directors) expressly required by the DGCL to be submitted to stockholders for approval, or (b) adopt, amend or repeal any bylaw of the Corporation.

4.2COMMITTEE MINUTES.

Each committee shall keep regular minutes of its meetings and report the same to the Board when required.

4.3MEETINGS AND ACTION OF COMMITTEES.

Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of:

(a)Section 3.5 of these bylaws (place of meetings and meetings by telephone);

(b)Section 3.6 of these bylaws (regular meetings);

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(c)Section 3.7 of these bylaws (special meetings and notice);

(d)Section 3.8 of these bylaws (quorum);

(e)Section 7.12 of these bylaws (waiver of notice); and

(f)Section 3.9 of these bylaws (action without a meeting),

with such changes in the context of those bylaws as are necessary to substitute the committee and its members for the Board and its members.  However:

(i)the time of regular meetings of committees may be determined either by resolution of the Board or by resolution of the committee;

(ii)special meetings of committees may also be called by resolution of the Board; and

(iii)notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee.  The Board may adopt rules for the governance of any committee not inconsistent with the provisions (or any part thereof) of these bylaws.

ARTICLE V - OFFICERS

5.1OFFICERS.

The officers of the Corporation shall be a president and a secretary.  The Corporation may also have, at the discretion of the Board, a chief executive officer, a chief financial officer or treasurer, one (1) or more vice presidents, one (1) or more assistant vice presidents, one (1) or more assistant treasurers, one (1) or more assistant secretaries, and any such other officers as may be appointed in accordance with the provisions of these bylaws.  Any number of offices may be held by the same person.

5.2APPOINTMENT OF OFFICERS.

The Board shall appoint the officers of the Corporation, except such officers as may be appointed in accordance with the provisions of Section 5.3 of these bylaws, subject to the rights, if any, of an officer under any contract of employment.

5.3SUBORDINATE OFFICERS.

The Board may appoint, or empower the chief executive officer or, in the absence of a chief executive officer, the president, to appoint, such other officers and agents as the business of the Corporation may require.  Each of such officers shall hold office for such period, as is provided in these bylaws or as the Board may from time to time determine.

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5.4REMOVAL AND RESIGNATION OF OFFICERS.

Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by the Board at any regular or special meeting of the Board or, except in the case of an officer chosen by the Board, by any officer upon whom such power of removal may be conferred by the Board.

Any officer may resign at any time by giving written notice to the Corporation.  Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice.  Unless otherwise specified in the notice of resignation, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the Corporation under any contract to which the officer is a party.

5.5VACANCIES IN OFFICES.

Any vacancy occurring in any office of the Corporation shall be filled by the Board or as provided in Section 5.3 of these bylaws.

5.6REPRESENTATION OF SHARES OF OTHER ENTITIES.

The chairperson of the Board, the president, any vice president, the treasurer, the secretary or assistant secretary of this Corporation, or any other person authorized by the Board or the president or a vice president, is authorized to vote, represent and exercise on behalf of this Corporation all rights incident to any and all securities of any other entity or entities standing in the name of this Corporation.  The authority granted herein may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority.

5.7AUTHORITY AND DUTIES OF OFFICERS.

All officers of the Corporation shall respectively have such authority and perform such duties in the management of the business of the Corporation as may be designated from time to time by the Board and, to the extent not so provided, as generally pertain to their respective offices, subject to the control of the Board.

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ARTICLE VI - RECORDS AND REPORTS

6.1MAINTENANCE OF RECORDS.

Subject to applicable law, the Corporation shall, either at its principal executive office or at such place or places as designated by the Board, keep a record of its stockholders listing their names and addresses and the number and class of shares held by each stockholder, a copy of these bylaws as amended to date, accounting books and other records.

ARTICLE VII - GENERAL MATTERS

7.1EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS.

The Board, except as otherwise provided in these bylaws, may authorize any officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the Corporation; such authority may be general or confined to specific instances.  Unless so authorized or ratified by the Board or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.

7.2STOCK CERTIFICATES; PARTLY PAID SHARES.

The shares of the Corporation shall be represented by certificates provided that the Board may provide by resolution or resolutions that some or all of any or all classes or series of stock shall be uncertificated shares.  Certificates for the shares of stock, if any, shall be in such form as is consistent with the certificate of incorporation and applicable law. Every holder of stock represented by a certificate shall be entitled to have a certificate signed by, or in the name of the Corporation by any two authorized officers of the Corporation representing the number of shares registered in certificate form.  Any or all of the signatures on the certificate may be a facsimile.  In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue.

The Corporation may issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor.  Upon the face or back of each stock certificate issued to represent any such partly paid shares, or upon the books and records of the Corporation in the case of uncertificated partly paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated.  Upon the declaration of any dividend on fully paid shares, the Corporation shall declare a dividend upon partly paid shares of the same class, but only upon the basis of the percentage of the consideration actually paid thereon.

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7.3MULTIPLES CLASSES OR SERIES OF STOCK.

If the Corporation is authorized to issue more than one class of stock or more than one series of any class, then the powers, the designations, the preferences and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate that the Corporation shall issue to represent such class or series of stock; provided, however, that, except as otherwise provided in Section 202 of the DGCL, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate that the Corporation shall issue to represent such class or series of stock a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, the designations, the preferences and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.  Within a reasonable time after the issuance or transfer of uncertificated stock, the Corporation shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates pursuant to the DGCL or a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.

7.4LOST CERTIFICATES.

Except as provided in this Section 7.4, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the Corporation in accordance with applicable law.  The Corporation may issue a new certificate of stock or uncertificated shares in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or such owner’s legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.

7.5CONSTRUCTION; DEFINITIONS.

Unless the context requires otherwise, the general provisions, rules of construction and definitions in the DGCL shall govern the construction of these bylaws.  Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term “person” includes both a corporation and a natural person.

7.6DIVIDENDS.

The Board, subject to any restrictions contained in either (a) the DGCL or (b) the certificate of incorporation, may declare and pay dividends upon the shares of its capital stock.  Dividends may be paid in cash, in property or in shares of the Corporation’s capital stock.

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The Board may set apart out of any of the funds of the Corporation available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve. Such purposes shall include but not be limited to equalizing dividends, repairing or maintaining any property of the Corporation, and meeting contingencies.

7.7FISCAL YEAR.

The fiscal year of the Corporation shall be fixed by resolution of the Board and may be changed by the Board.

7.8SEAL.

The Corporation may adopt a corporate seal, which shall be adopted and which may be altered by the Board.  The Corporation may use the corporate seal by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced.

7.9TRANSFER OF STOCK.

Shares of the Corporation shall be transferable in the manner prescribed by law and in these bylaws.  Shares of stock of the Corporation shall be transferred on the books of the Corporation only by the holder of record thereof or by such holder’s attorney duly authorized in writing, upon surrender to the Corporation of the certificate or certificates representing such shares endorsed by the appropriate person or persons (or by delivery of duly executed instructions with respect to uncertificated shares), with such evidence of the authenticity of such endorsement or execution, transfer, authorization and other matters as the Corporation may reasonably require, and accompanied by all necessary stock transfer stamps.  To the fullest extent permitted by law, no transfer of stock shall be valid as against the Corporation for any purpose until it shall have been entered in the stock records of the Corporation by an entry showing the names of the persons from and to whom it was transferred.

7.10STOCK TRANSFER AGREEMENTS.

The Corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the Corporation to restrict the transfer of shares of stock of the Corporation of any one or more classes owned by such stockholders in any manner not prohibited by the DGCL.

7.11REGISTERED STOCKHOLDERS.

The Corporation, to the fullest extent permitted by law,:

(a) shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and to vote as such owner;

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(b)shall be entitled to hold liable for calls and assessments the person registered on its books as the owner of shares; and

(c)shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of another person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.

7.12WAIVER OF NOTICE.

Whenever notice is required to be given under any provision of the DGCL, the certificate of incorporation or these bylaws, a written waiver, signed by the person entitled to notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time of the event for which notice is to be given, shall be deemed equivalent to notice.  Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.  Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice or any waiver by electronic transmission unless so required by the certificate of incorporation or these bylaws.

ARTICLE VIII - NOTICE BY ELECTRONIC TRANSMISSION

8.1NOTICE BY ELECTRONIC TRANSMISSION.

Without limiting the manner by which notice otherwise may be given effectively to stockholders pursuant to the DGCL, the certificate of incorporation or these bylaws, any notice to stockholders given by the Corporation under any provision of the DGCL, the certificate of incorporation or these bylaws shall be effective if given by a form of electronic transmission consented to by the stockholder to whom the notice is given.  Any such consent shall be revocable by the stockholder by written notice to the Corporation.  Any such consent shall be deemed revoked if:

(a)the Corporation is unable to deliver by electronic transmission two (2) consecutive notices given by the Corporation in accordance with such consent; and

(b)such inability becomes known to the secretary or an assistant secretary of the Corporation or to the transfer agent, or other person responsible for the giving of notice.  

However, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action.

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Any notice given pursuant to the preceding paragraph shall be deemed given:  

 

(a)

if by facsimile telecommunication, when directed to a number at which the stockholder has consented to receive notice;

 

(b)

if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice;

 

(c)

if by a posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of (i) such posting and (ii) the giving of such separate notice; and

 

(d)

if by any other form of electronic transmission, when directed to the stockholder.  

An affidavit of the secretary or an assistant secretary of the Corporation or of the transfer agent or other agent of the Corporation that the notice has been given by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

8.2DEFINITION OF ELECTRONIC TRANSMISSION.

For the purposes of these bylaws, an “electronic transmission” means any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process.

ARTICLE IX - INDEMNIFICATION AND ADVANCEMENT

9.1ACTIONS, SUITS AND PROCEEDINGS OTHER THAN BY OR IN THE RIGHT OF THE CORPORATION.

The Corporation shall indemnify each person who was or is a party or threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he or she is or was, or has agreed to become, a director or officer of the Corporation, or, while a director or officer of the Corporation, is or was serving, or has agreed to serve, at the request of the Corporation, as a director, officer, partner, employee or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise (including, without limitation, any employee benefit plan) (all such persons being referred to hereafter as an “Indemnitee”), or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including, without limitation, attorneys’ fees), liabilities, losses, judgments, fines (including, without limitation, excise taxes and penalties arising under the Employee Retirement Income Security Act of 1974), and amounts paid in settlement actually and reasonably incurred by or on behalf of Indemnitee in connection with such action, suit or

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proceeding and any appeal therefrom, if Indemnitee acted in good faith and in a manner which Indemnitee reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful.  The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that Indemnitee did not act in good faith and in a manner which Indemnitee reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful.

9.2ACTIONS OR SUITS BY OR IN THE RIGHT OF THE CORPORATION. 

The Corporation shall indemnify any Indemnitee who was or is a party to or threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that Indemnitee is or was, or has agreed to become, a director or officer of the Corporation, or, while a director or officer of the Corporation, is or was serving, or has agreed to serve, at the request of the Corporation, as a director, officer, partner, employee or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise (including, without limitation, any employee benefit plan), or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including, without limitation, attorneys’ fees) actually and reasonably incurred by or on behalf of Indemnitee in connection with such action, suit or proceeding and any appeal therefrom, if Indemnitee acted in good faith and in a manner which Indemnitee reasonably believed to be in, or not opposed to, the best interests of the Corporation, except that no indemnification shall be made under this Section 9.2 in respect of any claim, issue or matter as to which Indemnitee shall have been adjudged to be liable to the Corporation, unless, and only to the extent, that the Court of Chancery of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of such liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnity for such expenses (including, without limitation, attorneys’ fees) which the Court of Chancery of Delaware or such other court shall deem proper.

9.3INDEMNIFICATION FOR EXPENSES OF SUCCESSFUL PARTY. 

Notwithstanding any other provisions of this Article IX, to the extent that an Indemnitee has been successful, on the merits or otherwise, in defense of any action, suit or proceeding referred to in Sections 9.1 and 9.2 of these bylaws, or in defense of any claim, issue or matter therein, or on appeal from any such action, suit or proceeding, Indemnitee shall be indemnified to the fullest extent permitted by law against all expenses (including, without limitation, attorneys’ fees) actually and reasonably incurred by or on behalf of Indemnitee in connection therewith. 

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9.4NOTIFICATION AND DEFENSE OF CLAIM. 

As a condition precedent to an Indemnitee’s right to be indemnified, such Indemnitee must notify the Corporation in writing as soon as practicable of any action, suit, proceeding or investigation involving such Indemnitee for which indemnity will or could be sought.  With respect to any action, suit, proceeding or investigation of which the Corporation is so notified, the Corporation will be entitled to participate therein at its own expense and/or to assume the defense thereof at its own expense, with legal counsel reasonably acceptable to Indemnitee.  After notice from the Corporation to Indemnitee of its election so to assume such defense, the Corporation shall not be liable to Indemnitee for any legal or other expenses subsequently incurred by Indemnitee in connection with such action, suit, proceeding or investigation, other than as provided below in this Section 9.4.  Indemnitee shall have the right to employ his or her own counsel in connection with such action, suit, proceeding or investigation, but the fees and expenses of such counsel incurred after notice from the Corporation of its assumption of the defense thereof shall be at the expense of Indemnitee unless (a) the employment of counsel by Indemnitee has been authorized by the Corporation, (b) counsel to Indemnitee shall have reasonably concluded that there may be a conflict of interest or position on any significant issue between the Corporation and Indemnitee in the conduct of the defense of such action, suit, proceeding or investigation or (c) the Corporation shall not in fact have employed counsel to assume the defense of such action, suit, proceeding or investigation, in each of which cases the fees and expenses of counsel for Indemnitee shall be at the expense of the Corporation, except as otherwise expressly provided by this Article IX.  The Corporation shall not be entitled, without the consent of Indemnitee, to assume the defense of any claim brought by or in the right of the Corporation or as to which counsel for Indemnitee shall have reasonably made the conclusion provided for in clause (b) above.  The Corporation shall not be required to indemnify Indemnitee under this Article IX for any amounts paid in settlement of any action, suit, proceeding or investigation effected without its written consent.  The Corporation shall not settle any action, suit, proceeding or investigation in any manner which would impose any penalty or limitation on Indemnitee without Indemnitee’s written consent.  Neither the Corporation nor Indemnitee will unreasonably withhold or delay its consent to any proposed settlement.

9.5ADVANCE OF EXPENSES. 

Subject to the provisions of Sections 9.4 and 9.6 of these bylaws, in the event of any threatened or pending action, suit, proceeding or investigation of which the Corporation receives notice under this Article IX, any expenses (including, without limitation, attorneys’ fees) incurred by or on behalf of Indemnitee in defending an action, suit, proceeding or investigation or any appeal therefrom shall be paid by the Corporation in advance of the final disposition of such matter to the fullest extent permitted by law; provided, however, that, to the extent required by law, the payment of such expenses incurred by or on behalf of Indemnitee in advance of the final disposition of such matter shall be made only upon receipt of an undertaking by or on behalf of Indemnitee to repay all amounts so advanced in the event that it shall ultimately be determined by final judicial decision from which there is no further right to appeal that Indemnitee is not entitled to be indemnified by the Corporation as authorized in this Article IX or otherwise; and provided

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further that no such advancement of expenses shall be made under this Article IX if it is determined (in the manner described in Section 9.6 of these bylaws) that (a) Indemnitee did not act in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the Corporation, or (b) with respect to any criminal action or proceeding, Indemnitee had reasonable cause to believe his or her conduct was unlawful.  Such undertaking shall be accepted without reference to the financial ability of Indemnitee to make such repayment.

9.6PROCEDURE FOR INDEMNIFICATION AND ADVANCEMENT OF EXPENSES. 

In order to obtain indemnification or advancement of expenses pursuant to Section 9.1, 9.2, 9.3 or 9.5 of these bylaws, an Indemnitee shall submit to the Corporation a written request.  Any such advancement of expenses shall be made promptly, and in any event within 60 days after receipt by the Corporation of the written request of Indemnitee, unless (a) the Corporation has assumed the defense pursuant to Section 9.4 of these bylaws (and none of the circumstances described in Section 9.4 of these bylaws that would nonetheless entitle the Indemnitee to indemnification for the fees and expenses of separate counsel have occurred) or (b) the Corporation determines within such 60-day period that Indemnitee did not meet the applicable standard of conduct set forth in Section 9.1, 9.2 or 9.5 of these bylaws, as the case may be.  Any such indemnification, unless ordered by a court, shall be made with respect to requests under Section 9.1 or 9.2 of these bylaws only as authorized in the specific case upon a determination by the Corporation that the indemnification of Indemnitee is proper because Indemnitee has met the applicable standard of conduct set forth in Section 9.1 or 9.2 of these bylaws, as the case may be.  Such determination shall be made in each instance (a) by a majority vote of the directors of the Corporation consisting of persons who are not at that time parties to the action, suit or proceeding in question (“disinterested directors”), whether or not a quorum, (b) by a committee of disinterested directors designated by majority vote of disinterested directors, whether or not a quorum, (c) if there are no disinterested directors, or if the disinterested directors so direct, by independent legal counsel (who may, to the extent permitted by law, be regular legal counsel to the Corporation) in a written opinion or (d) by the stockholders of the Corporation.

9.7REMEDIES. 

To the fullest extent permitted by law, the right to indemnification or advancement of expenses as granted by this Article IX shall be enforceable by Indemnitee in any court of competent jurisdiction. Neither the failure of the Corporation to have made a determination prior to the commencement of such action that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by the Corporation pursuant to Section 9.6 of these bylaws that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.  In any suit brought by Indemnitee to enforce a right to indemnification or advancement, or brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Corporation shall have the burden of proving that Indemnitee is not entitled to be indemnified, or to such advancement of expenses, under this

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Article IX.  Indemnitee’s expenses (including, without limitation, attorneys’ fees) reasonably incurred in connection with successfully establishing Indemnitee’s right to indemnification or advancement, in whole or in part, in any such proceeding shall also be indemnified by the Corporation to the fullest extent permitted by law.  Notwithstanding the foregoing, in any suit brought by Indemnitee to enforce a right to indemnification hereunder it shall be a defense that the Indemnitee has not met any applicable standard for indemnification set forth in the DGCL.

9.8LIMITATIONS. 

Notwithstanding anything to the contrary in this Article IX, except as set forth in Section 9.7 of these bylaws, the Corporation shall not indemnify an Indemnitee pursuant to this Article IX in connection with a proceeding (or part thereof) initiated by such Indemnitee unless the initiation thereof was approved by the Board.  Notwithstanding anything to the contrary in this Article IX, the Corporation shall not indemnify (or advance expenses to) an Indemnitee to the extent such Indemnitee is reimbursed (or advanced expenses) from the proceeds of insurance, and in the event the Corporation makes any indemnification (or advancement) payments to an Indemnitee and such Indemnitee is subsequently reimbursed from the proceeds of insurance, such Indemnitee shall promptly refund indemnification (or advancement) payments to the Corporation to the extent of such insurance reimbursement.

9.9SUBSEQUENT AMENDMENT. 

No amendment, termination or repeal of this Article IX or of the relevant provisions of the DGCL or any other applicable laws shall adversely affect or diminish in any way the rights of any Indemnitee to indemnification or advancement of expenses under the provisions hereof with respect to any action, suit, proceeding or investigation arising out of or relating to any actions, transactions or facts occurring prior to the final adoption of such amendment, termination or repeal.  

9.10OTHER RIGHTS. 

The indemnification and advancement of expenses provided by this Article IX shall not be deemed exclusive of any other rights to which an Indemnitee seeking indemnification or advancement of expenses may be entitled under any law (common or statutory), agreement or vote of stockholders or disinterested directors or otherwise, both as to action in Indemnitee’s official capacity and as to action in any other capacity while holding office for the Corporation, and shall continue as to an Indemnitee who has ceased to be a director or officer, and shall inure to the benefit of the estate, heirs, executors and administrators of Indemnitee.  Nothing contained in this Article IX shall be deemed to prohibit, and the Corporation is specifically authorized to enter into, agreements with officers and directors providing indemnification and advancement rights and procedures different from those set forth in this Article IX.  In addition, the Corporation may, to the extent authorized from time to time by the Board, grant indemnification and advancement rights to other employees or agents of the Corporation or other persons serving the Corporation and such rights may be equivalent to, or greater or less than, those set forth in this Article IX.

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9.11PARTIAL INDEMNIFICATION. 

If an Indemnitee is entitled under any provision of this Article IX to indemnification by the Corporation for some or a portion of the expenses (including, without limitation, attorneys’ fees), liabilities, losses, judgments, fines (including, without limitation, excise taxes and penalties arising under the Employee Retirement Income Security Act of 1974, as amended) or amounts paid in settlement actually and reasonably incurred by or on behalf of Indemnitee in connection with any action, suit, proceeding or investigation and any appeal therefrom but not, however, for the total amount thereof, the Corporation shall nevertheless indemnify Indemnitee for the portion of such expenses (including, without limitation, attorneys’ fees), liabilities, losses, judgments, fines (including, without limitation, excise taxes and penalties arising under the Employee Retirement Income Security Act of 1974, as amended) or amounts paid in settlement to which Indemnitee is entitled.

9.12INSURANCE. 

The Corporation may purchase and maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise (including, without limitation, any employee benefit plan) against any expense, liability or loss incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the DGCL.

9.13SAVINGS CLAUSE. 

If this Article IX or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each Indemnitee as to any expenses (including, without limitation, attorneys’ fees), liabilities, losses, judgments, fines (including, without limitation, excise taxes and penalties arising under the Employee Retirement Income Security Act of 1974, as amended) and amounts paid in settlement in connection with any action, suit, proceeding or investigation, whether civil, criminal or administrative, including, without limitation, an action by or in the right of the Corporation, to the fullest extent permitted by any applicable portion of this Article IX that shall not have been invalidated and to the fullest extent permitted by applicable law.

9.14DEFINITIONS. 

Terms used in this Article IX and defined in Section 145(h) and Section 145(i) of the DGCL shall have the respective meanings assigned to such terms in such Section 145(h) and Section 145(i).

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ARTICLE X - AMENDMENTS.

Subject to the limitations set forth in Section 9.9 of these bylaws or the provisions of the certificate of incorporation, the Board is expressly empowered to adopt, amend or repeal the bylaws of the Corporation. The stockholders also shall have power to adopt, amend or repeal the bylaws of the Corporation; provided, however, that, in addition to any vote of the holders of any class or series of stock of the Corporation required by law or by the certificate of incorporation, such action by stockholders shall require the affirmative vote of the holders of at least two-thirds in voting power of the outstanding shares of capital stock of the Corporation entitled to vote thereon.

ARTICLE XI - EXCLUSIVE FORUM

Unless the Corporation consents in writing to the selection of an alternative forum, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended. Any person or entity purchasing or otherwise acquiring any interest in any security of the Corporation shall be deemed to have notice of and consented to this Article XI.

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goss-ex101_13.htm

Exhibit 10.1

 

GOSSAMER BIO, INC. 2019 INCENTIVE AWARD PLAN

RESTRICTED STOCK Unit Grant Notice

Capitalized terms not specifically defined in this Restricted Stock Unit Grant Notice (the “Grant Notice”) have the meanings given to them in the 2019 Incentive Award Plan (as amended from time to time, the “Plan”) of Gossamer Bio, Inc. (the “Company”).

The Company hereby grants to the participant listed below (“Participant”) the Restricted Stock Units described in this Grant Notice (the “RSUs”), subject to the terms and conditions of the Plan and the Restricted Stock Unit Agreement attached hereto as Exhibit A (the “Agreement”), both of which are incorporated into this Grant Notice by reference.  

Participant:

 

Grant Date:

 

Number of RSUs:

 

Vesting Commencement Date:

 

Vesting Schedule:

[To be specified in individual award agreements]

 

 

By electronically accepting this document, Participant agrees to be bound by the terms of this Grant Notice, the Plan and the Agreement.  Participant has reviewed the Plan, this Grant Notice and the Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Grant Notice and fully understands all provisions of the Plan, this Grant Notice and the Agreement.  Participant has been provided with a copy or electronic access to a copy of the prospectus for the Plan.  Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan, this Grant Notice or the Agreement.


 


 

Exhibit A

 

RESTRICTED STOCK UNIT AGREEMENT

Capitalized terms not specifically defined in this Agreement have the meanings specified in the Grant Notice, if not defined in the Grant Notice, in the Plan.

Article I.
general

1.1Award of RSUs.  The Company has granted the Restricted Stock Units (the “RSUs”) to Participant effective as of the grant date set forth in the Grant Notice (the Grant Date”).  Each RSU represents the right to receive one Share, as set forth in this Agreement.  Participant will have no right to the distribution of any Shares until the time (if ever) the RSUs have vested.

1.2Incorporation of Terms of Plan.  The RSUs are subject to the terms and conditions set forth in this Agreement and the Plan, which is incorporated herein by reference.  In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan will control.

1.3Unsecured Promise.  The RSUs will at all times prior to settlement represent an unsecured Company obligation payable only from the Company’s general assets.

Article II.
VESTING; forfeiture AND SETTLEMENT

2.1Vesting; Forfeiture.  The RSUs will vest according to the vesting schedule in the Grant Notice (the "Vesting Schedule"), except that any fraction of an RSU that would otherwise be vested will be accumulated and will vest only when a whole RSU has accumulated.  In the event of Participant’s Termination of Service for any reason, all unvested RSUs will immediately and automatically be cancelled and forfeited, except as otherwise determined by the Administrator or provided in a binding written agreement between Participant and the Company.  Unless and until the RSUs have vested in accordance with the Vesting Schedule set forth in the Grant Notice, Participant will have no right to any distribution with respect to such RSUs.

2.2Settlement.

(a)RSUs will be paid in Shares as soon as administratively practicable after the vesting of the applicable RSU, but in no event more than sixty (60) days after the applicable vesting date.  Notwithstanding the foregoing, the Company may delay any payment under this Agreement that the Company reasonably determines would violate Applicable Law until the earliest date the Company reasonably determines the making of the payment will not cause such a violation (in accordance with Treasury Regulation Section 1.409A-2(b)(7)(ii)), provided the Company reasonably believes the delay will not result in the imposition of excise taxes under Section 409A.

(b)All distributions shall be made by the Company in the form of whole shares of Common Stock.

(c)Neither the time nor form of distribution of Shares with respect to the RSUs may be changed, except as may be permitted by the Administrator in accordance with the Plan and Section 409A of the Code and the Treasury Regulations thereunder.  

 


 

Article III.
TAXATION AND TAX WITHHOLDING

3.1Representation.  Participant represents to the Company that Participant has reviewed with Participant’s own tax advisors the tax consequences of this Award and the transactions contemplated by the Grant Notice and this Agreement.  Participant is relying solely on such advisors and not on any statements or representations of the Company or any of its agents.

3.2Tax Withholding.  

(a)Participant acknowledges that Participant is ultimately liable and responsible for all taxes owed in connection with the RSUs, regardless of any action the Company or any Subsidiary takes with respect to any tax withholding obligations that arise in connection with the RSUs (the Tax Withholding Obligation”).  Neither the Company nor any Subsidiary makes any representation or undertaking regarding the treatment of any tax withholding in connection with the awarding, vesting or payment of the RSUs or the subsequent sale of Shares.  The Company and the Subsidiaries do not commit and are under no obligation to structure the RSUs to reduce or eliminate Participant’s tax liability.

(b)(i)Notwithstanding anything to the contrary contained in the Plan or this Section 3.2, unless Participant has a valid 10b5-1 plan in place directing the sale of Shares to cover such Tax Withholding Obligation, the Tax Withholding Obligation shall automatically, and without further action by Participant, be satisfied by having the Company withhold taxes from the proceeds of the sale of the Shares through a mandatory sale arranged by the Company on Participant’s behalf.  In the event Participant’s Tax Withholding Obligation will be satisfied under this Section 3.2(b), then the Company shall instruct any brokerage firm determined acceptable to the Company for such purpose to sell on Participant’s behalf a whole number of shares from those Shares issuable to Participant upon settlement of the RSUs as is required to generate cash proceeds sufficient to satisfy Participant’s Tax Withholding Obligation (with such Tax Withholding to be calculated based on the minimum statutory withholding rates for federal, state, local and foreign income tax and payroll tax purposes as of the date of delivery).  Participant acknowledges that the instruction to the broker to sell Shares pursuant to this Section 3.2(b) is intended to comply with the requirements of Rule 10b5-1(c)(1)(i)(B) under the Exchange Act and to be interpreted to comply with the requirements of Rule 10b5-1(c)(1) under the Exchange Act (the “10b5-1 Arrangement”). This 10b5-1 Arrangement is being adopted to permit the Company to sell (on Participant’s behalf) a number of Shares issuable to Participant upon the settlement of the RSUs sufficient to pay the Tax Withholding Obligation that arises as a result of the vesting or settlement of the RSUs. Participant hereby acknowledges that the broker is under no obligation to arrange for such sale at any particular price. Participant hereby appoints the Company as Participant’s agent and attorney-in-fact to instruct the broker with respect to the number of Shares to be sold under this 10b5-1 Arrangement. Participant acknowledges that it may not be possible to sell Shares during the term of this 10b5-1 Arrangement due to (A) a legal or contractual restriction applicable to Participant or to the broker, (B) a market disruption, (C) rules governing order execution priority on the stock exchange on which the Shares are traded, (D) a sale effected pursuant to this 10b5-1 Arrangement that fails to comply (or in the reasonable opinion of the broker’s counsel is likely not to comply) with Rule 144 under the Securities Act or would result in a short-swing profit under Section 16 of the Exchange Act, or (E) the Company’s determination that sales may not be effected under this 10b5-1 Arrangement.

(ii)This 10b5-1 Arrangement shall terminate as to the Award on the earliest of: (A) completion of the final sale of Shares withheld pursuant to this Section 3.2(b) following the final vesting date attributable to the Award; (B) termination of the Award; (C) the date of Participant’s death; or (D) as soon as practicable after (but in no event later than the end of the next business day following the announcement of (1) a tender or exchange offer for shares of Common Stock by the Company or any other person, or (2) a merger, acquisition, recapitalization or comparable transaction as a result of which Common Stock is to be exchanged or converted into shares of another company).

 


 

(iii)Participant represents that (A) Participant is not presently aware of any material nonpublic information about the Company or its securities; (B) Participant is entering into this Agreement and the 10b5-1 Arrangement in good faith and not as part of a plan or scheme to evade the prohibitions of Rule 10b5-1 or any other provision of any federal, state or foreign securities laws or regulations; (C) Participant shall have full responsibility for compliance with (1) any reporting requirements under Section 13 or 16 of the Exchange Act, (2) the short-swing profit recovery provisions under Section 16 of the Exchange Act, and (3) any federal, state or foreign securities laws or regulations concerning trading while aware of material nonpublic information; and (D) Participant is aware that in order for this 10b5-1 Arrangement to constitute an instruction pursuant to Rule 10b5-1(c), Participant must not alter or deviate from the terms of the instruction in this Section 3.2(b) (whether by changing the amount, price, or timing of any purchase or sale hereunder), exercise any subsequent discretion over the terms hereof or enter into or alter a corresponding or hedging transaction with respect to the Common Stock to be sold pursuant to this instruction or any securities convertible into or exchangeable for such Common Stock.

(iv)Participant acknowledges that this 10b5-1 Arrangement is subject to the terms of any policy adopted now or hereafter by the Company governing the adoption of 10b5-1 plans. Participant's acceptance of the Award constitutes the Participant's instruction and authorization to the Company and any brokerage firm to complete the transactions described in this Section 3.2(b).

(c)To the extent that the Tax Withholding Obligation is not fully satisfied pursuant to Section 3.2(b) or Section 3.2(b) does not apply, the Company has the right and option, but not the obligation, to treat Participant’s failure to provide timely payment in accordance with the Plan of any withholding tax arising in connection with the RSUs as Participant’s election to satisfy all or any portion of the withholding tax by requesting the Company retain Shares otherwise issuable under the Award (provided, however, that if Participant is subject to Section 16 of the Exchange Act at the time the tax withholding obligation arises, the prior approval of the Administrator shall be required for any election by the Company pursuant to this Section 3.2(c)).

Article IV.
other provisions

4.1Award Not Transferable. Without limiting the generality of any other provision hereof, the Award shall be subject to the restrictions on transferability set forth in Section 9.1 of the Plan.

4.2Adjustments.  Participant acknowledges that the RSUs and the Shares subject to the RSUs are subject to adjustment, modification and termination in certain events as provided in this Agreement and the Plan.

4.3Notices.  Any notice to be given under the terms of this Agreement to the Company must be in writing and addressed to the Company in care of the Company’s Secretary at the Company’s principal office or the Secretary’s then-current email address or facsimile number.  Any notice to be given under the terms of this Agreement to Participant must be in writing and addressed to Participant at Participant’s last known mailing address, email address or facsimile number in the Company’s personnel files.  By a notice given pursuant to this Section, either party may designate a different address for notices to be given to that party.  Any notice will be deemed duly given when actually received, when sent by email, when sent by certified mail (return receipt requested) and deposited with postage prepaid in a post office or branch post office regularly maintained by the United States Postal Service, when delivered by a nationally recognized express shipping company or upon receipt of a facsimile transmission confirmation.

4.4Titles.  Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.

 


 

4.5Conformity to Securities Laws.  Participant acknowledges that the Plan, the Grant Notice and this Agreement are intended to conform to the extent necessary with all Applicable Laws and, to the extent Applicable Laws permit, will be deemed amended as necessary to conform to Applicable Laws.

4.6Successors and Assigns.  The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement will inure to the benefit of the successors and assigns of the Company.  Subject to the restrictions on transfer set forth in the Plan, this Agreement will be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.

4.7Limitations Applicable to Section 16 Persons.  Notwithstanding any other provision of the Plan or this Agreement, if Participant is subject to Section 16 of the Exchange Act, the Plan, the Grant Notice, this Agreement, the RSUs will be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3) that are requirements for the application of such exemptive rule.  To the extent Applicable Laws permit, this Agreement will be deemed amended as necessary to conform to such applicable exemptive rule.

4.8Entire Agreement.  The Plan, the Grant Notice and this Agreement (including any exhibit hereto) constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof.

4.9Agreement Severable.  In the event that any provision of the Grant Notice or this Agreement is held illegal or invalid, the provision will be severable from, and the illegality or invalidity of the provision will not be construed to have any effect on, the remaining provisions of the Grant Notice or this Agreement.

4.10Limitation on Participant’s Rights.  Participation in the Plan confers no rights or interests other than as herein provided.  This Agreement creates only a contractual obligation on the part of the Company as to amounts payable and may not be construed as creating a trust.  Neither the Plan nor any underlying program, in and of itself, has any assets.  Participant will have only the rights of a general unsecured creditor of the Company with respect to amounts credited and benefits payable, if any, with respect to the RSUs, and rights no greater than the right to receive the Shares as a general unsecured creditor with respect to the RSUs, as and when settled pursuant to the terms of this Agreement.

4.11Not a Contract of Employment.  Nothing in the Plan, the Grant Notice or this Agreement confers upon Participant any right to continue in the employ or service of the Company or any Subsidiary or interferes with or restricts in any way the rights of the Company and its Subsidiaries, which rights are hereby expressly reserved, to discharge or terminate the services of Participant at any time for any reason whatsoever, with or without Cause, except to the extent expressly provided otherwise in a written agreement between the Company or a Subsidiary and Participant.

4.12Counterparts.  The Grant Notice may be executed in one or more counterparts, including by way of any electronic signature, subject to Applicable Law, each of which will be deemed an original and all of which together will constitute one instrument.

 


 

4.13Section 409A.

(a)Notwithstanding any other provision of the Plan, this Agreement or the Grant Notice, the Plan, this Agreement and the Grant Notice shall be interpreted in accordance with, and incorporate the terms and conditions required by, Section 409A of the Code (together with any Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the Grant Date, “Section 409A”).  The Administrator may, in its discretion, adopt such amendments to the Plan, this Agreement or the Grant Notice or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, as the Administrator determines are necessary or appropriate to comply with the requirements of Section 409A.

(b)This Agreement is not intended to provide for any deferral of compensation subject to Section 409A of the Code, and, accordingly, the Shares issuable pursuant to the RSUs hereunder shall be distributed to Participant no later than the later of:  (A) the fifteenth (15th) day of the third month following Participant’s first taxable year in which such RSUs are no longer subject to a substantial risk of forfeiture, and (B) the fifteenth (15th) day of the third month following first taxable year of the Company in which such RSUs are no longer subject to substantial risk of forfeiture, as determined in accordance with Section 409A and any Treasury Regulations and other guidance issued thereunder.

4.14Governing Law. The provisions of the Plan and all Awards made thereunder, including the RSUs, shall be governed by and interpreted in accordance with the laws of the State of Delaware, disregarding choice-of-law principles of the law of any state that would require the application of the laws of a jurisdiction other than such state.

* * * * *

 

goss-ex311_8.htm

 

EXHIBIT 31.1

CERTIFICATION OF PERIODIC REPORT UNDER SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Sheila Gujrathi, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Gossamer Bio, Inc.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

 

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 12, 2020

 

/s/ Sheila Gujrathi

Sheila Gujrathi

President and Chief Executive Officer

(Principal Executive Officer)

 

 

goss-ex312_10.htm

 

EXHIBIT 31.2

CERTIFICATION OF PERIODIC REPORT UNDER SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Bryan Giraudo, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Gossamer Bio, Inc.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

 

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 12, 2020

 

/s/ Bryan Giraudo

Bryan Giraudo

Chief Financial Officer

(Principal Financial and Accounting Officer)

 

 

goss-ex321_6.htm

 

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

I, Sheila Gujrathi, President and Chief Executive Officer of Gossamer Bio, Inc. (the “Company”), do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

 

the accompanying Quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2020 (the “Report”), as filed with the Securities and Exchange Commission, fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

 

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the periods presented therein.

Date: May 12, 2020

 

/s/ Sheila Gujrathi

Sheila Gujrathi

President and Chief Executive Officer

(Principal Executive Officer)

 

 

goss-ex322_9.htm

 

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

I, Bryan Giraudo, Chief Financial Officer of Gossamer Bio, Inc. (the “Company”), do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

 

the accompanying Quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2020 (the “Report”), as filed with the Securities and Exchange Commission, fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

 

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the periods presented therein.

Date: May 12, 2020

 

/s/ Bryan Giraudo

Bryan Giraudo

Chief Financial Officer

(Principal Financial and Accounting Officer)

 

 

v3.20.1
Description of the Business - Additional Information (Detail)
17 Months Ended
May 02, 2019
USD ($)
Tranche
Feb. 12, 2019
USD ($)
$ / shares
shares
Jan. 04, 2018
USD ($)
Feb. 28, 2019
USD ($)
Mar. 31, 2020
USD ($)
Tranche
Dec. 31, 2019
USD ($)
Description Of Business [Line Items]            
Accumulated deficit         $ (388,244,000) $ (334,170,000)
Funds raised through Series A and Series B Convertible Preferred Stock, convertible note financings and completed IPO       $ 601,300,000    
Term Loan            
Description Of Business [Line Items]            
Maximum borrowing capacity $ 150,000,000          
Amount funded $ 30,000,000          
Number of additional tranches executed | Tranche 3       0  
Remaining borrowing capacity $ 120,000,000          
Term Loan | Tranche One            
Description Of Business [Line Items]            
Remaining borrowing capacity 40,000,000          
Term Loan | Tranche Two            
Description Of Business [Line Items]            
Remaining borrowing capacity 30,000,000          
Term Loan | Tranche Three            
Description Of Business [Line Items]            
Remaining borrowing capacity $ 50,000,000          
AA Biopharma Inc.            
Description Of Business [Line Items]            
Cash received in connection with acquisition     $ 12,800,000      
Initial Public Offering ("IPO")            
Description Of Business [Line Items]            
Sale of shares of common stock | shares   19,837,500        
Offering price, per share | $ / shares   $ 16.00        
Net proceeds, after deducting underwriting discounts, commissions, and offering expenses   $ 291,300,000        
Initial Public Offering ("IPO") | Conversion of Convertible Preferred Stock into Common Stock            
Description Of Business [Line Items]            
Common stock issued in conversion of convertible preferred stock | shares   30,493,460        
v3.20.1
Long-Term Debt (Tables)
3 Months Ended
Mar. 31, 2020
Debt Disclosure [Abstract]  
Schedule of Long-Term Debt

Long-term debt as of March 31, 2020 consisted of the following (in thousands):

 

 

 

March 31, 2020

 

Term loan

 

$

30,000

 

Debt discount and issuance costs

 

 

(1,452

)

Long-term debt

 

$

28,548

 

Schedule of Future Minimum Principal Payments

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

 

 

 

March 31, 2020

 

2020 (remaining 9 months)

 

 

 

2021

 

 

5,833

 

2022

 

 

10,000

 

2023

 

 

10,000

 

2024

 

 

4,167

 

Total

 

$

30,000

 

v3.20.1
Fair Value Measurements and Available for Sale Investments - Assets Measured at Fair Value on Recurring Basis (Details) - Recurring Basis - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Money Market Funds    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Assets Measured at fair value on recurring basis $ 31,488 $ 82,125
U S Treasury and Agency Securities    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Assets Measured at fair value on recurring basis 25,700 91,717
Commercial Paper    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Assets Measured at fair value on recurring basis 71,961 37,411
Corporate Debt Securities    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Assets Measured at fair value on recurring basis 153,121 156,277
Quoted Market Prices for Identical Assets (Level 1) | Money Market Funds    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Assets Measured at fair value on recurring basis 31,488 82,125
Quoted Market Prices for Identical Assets (Level 1) | U S Treasury and Agency Securities    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Assets Measured at fair value on recurring basis 25,700 91,717
Significant Other Observable Inputs (Level 2) | Commercial Paper    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Assets Measured at fair value on recurring basis 71,961 37,411
Significant Other Observable Inputs (Level 2) | Corporate Debt Securities    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Assets Measured at fair value on recurring basis $ 153,121 $ 156,277
v3.20.1
Equity Incentive Plans - Summary of Stock Option Activity (Details) - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended 12 Months Ended
Mar. 31, 2020
Dec. 31, 2019
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]    
Shares Subject to Options Outstanding, Outstanding as of December 31, 2019 8,538,060  
Shares Subject to Options Outstanding, Options granted 1,725,222  
Shares Subject to Options Outstanding, Option exercised (4,309)  
Shares Subject to Options Outstanding, Options forfeited/cancelled (66,900)  
Shares Subject to Options Outstanding, Outstanding as of March 31,2020 10,192,073 8,538,060
Shares Subject to Options Outstanding, Options vested and exercisable as of March 31, 2020 2,146,119  
Weighted-Average Exercise Price, Outstanding as of December 31, 2019 $ 13.67  
Weighted-Average Exercise Price, Options granted 14.55  
Weighted-Average Exercise Price, Option exercised 3.38  
Weighted-Average Exercise Price, Options forfeited/cancelled 15.50  
Weighted-Average Exercise Price, Outstanding as of March 31, 2020 13.81 $ 13.67
Weighted-Average Exercise Price, Options vested and exercisable as of March 31,2020 $ 11.38  
Weighted-Average Remaining Contractual Life (Years), Outstanding as of December 31, 2019 9 years 9 years
Weighted-Average Remaining Contractual Life (Years), Options vested and exercisable as of March 31, 2020 8 years 7 months 6 days  
Aggregate Intrinsic Value, Outstanding as of 31 Dec, 2019 $ 12,052 $ 35,385
Aggregate Intrinsic Value, Options vested and exercisable $ 4,843  
v3.20.1
Commitments and Contingencies - Schedule of Lease Costs (Details)
$ in Thousands
3 Months Ended
Mar. 31, 2020
USD ($)
Leases [Abstract]  
Operating lease cost $ 753
Short-term lease cost 22
Total lease cost $ 775
v3.20.1
Document And Entity Information - shares
3 Months Ended
Mar. 31, 2020
May 07, 2020
Cover [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Mar. 31, 2020  
Document Fiscal Year Focus 2020  
Document Fiscal Period Focus Q1  
Entity Registrant Name GOSSAMER BIO, INC.  
Trading Symbol GOSS  
Entity Central Index Key 0001728117  
Current Fiscal Year End Date --12-31  
Entity Filer Category Non-accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company true  
Entity Ex Transition Period true  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   66,358,439
Title of 12(b) Security Common Stock, $0.0001 par value per share  
Security Exchange Name NASDAQ  
Entity File Number 001-38796  
Entity Tax Identification Number 47-5461709  
Entity Address, Address Line One 3013 Science Park Road  
Entity Address, City or Town San Diego  
Entity Address, State or Province CA  
Entity Incorporation, State or Country Code DE  
Entity Address, Postal Zip Code 92121  
City Area Code 858  
Local Phone Number 684-1300  
Document Quarterly Report true  
Document Transition Report false  
v3.20.1
Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity (Unaudited) - USD ($)
$ in Thousands
Total
Common Stock
Additional Paid-in-Capital
Accumulated Deficit
Accumulated Other Comprehensive Income (Loss)
Series Seed Convertible Preferred Stock
Series A Convertible Preferred Stock
Series B Convertible Preferred Stock
Beginning balance at Dec. 31, 2018 $ (120,069) $ 2 $ 33,853 $ (153,863) $ (61)      
Temporary equity, beginning balance, shares at Dec. 31, 2018           20,000,000 45,714,286 71,506,513
Temporary equity, beginning balance at Dec. 31, 2018           $ 29,200 $ 79,615 $ 229,552
Beginning balance, shares at Dec. 31, 2018   8,051,418            
Issuance of common stock in connection with a public offering,net of underwriting discounts,commissions,and offering costs 291,344 $ 2 291,342          
Issuance of common stock in connection with a public offering, net of underwriting discounts, commissions, and offering costs, shares   19,837,500            
Conversion of convertible preferred stock into common stock 338,367 $ 3 338,364     $ (29,200) $ (79,615) $ (229,552)
Convertible preferred stock, conversion of convertible preferred stock into common stock           (20,000,000) (45,714,286) (71,506,513)
Conversion of convertible preferred stock into common stock, shares   30,493,460            
Vesting of restricted stock, shares   1,619,592            
Stock-based compensation 3,089   3,089          
Stock-based compensation, shares   27,500            
Net loss (32,611)     (32,611)        
Other comprehensive income (loss) 140       140      
Ending balance at Mar. 31, 2019 480,260 $ 7 666,648 (186,474) 79      
Ending balance, shares at Mar. 31, 2019   60,029,470            
Beginning balance at Dec. 31, 2019 352,485 $ 7 686,390 (334,170) 258      
Beginning balance, shares at Dec. 31, 2019   61,635,477            
Conversion of convertible preferred stock into common stock, shares   30,493,460            
Vesting of restricted stock, shares   404,637            
Exercise of stock options $ 15   15          
Exercise of stock options, shares 4,309 4,309            
Stock-based compensation $ 8,244   8,244 0        
Issuance of common stock pursuant to Employee Stock Purchase Plan 556   556          
Stock Issued During Period, Shares, Employee Stock Purchase Plans   49,889            
Net loss (54,074)     (54,074)        
Other comprehensive income (loss) (763)       (763)      
Ending balance at Mar. 31, 2020 $ 306,463 $ 7 $ 695,205 $ (388,244) $ (505)      
Ending balance, shares at Mar. 31, 2020   62,094,312            
v3.20.1
Summary of Significant Accounting Policies (Policies)
3 Months Ended
Mar. 31, 2020
Accounting Policies [Abstract]  
Basis of Presentation

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

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 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.

Recently Adopted Accounting Pronouncements

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.

Net Loss Per Share

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. Diluted net loss per share excludes the potential impact of the Company’s common stock options and unvested shares of restricted stock 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 March 31,

 

 

2020

 

2019

 

Shares issuable upon exercise of stock options

 

10,192,073

 

 

7,469,973

 

Non-vested shares under restricted stock grants

 

5,395,550

 

 

5,862,440

 

 

v3.20.1
Balance Sheet Accounts and Supplemental Disclosures
3 Months Ended
Mar. 31, 2020
Balance Sheets Accounts And Supplemental Disclosures [Abstract]  
Balance Sheet Accounts and Supplemental Disclosures

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)

 

March 31,

2020

 

 

December 31,

2019

 

Office equipment

 

3-7

 

$

1,097

 

 

$

1,097

 

Computer equipment

 

5

 

 

131

 

 

 

124

 

Software

 

3

 

 

87

 

 

 

87

 

Lab equipment

 

2-5

 

 

3,614

 

 

 

3,054

 

Leasehold improvements

 

6-7

 

 

2,267

 

 

 

2,229

 

Construction in process

 

N/A

 

 

16

 

 

 

48

 

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 consisted of the following (in thousands):

 

 

 

As of

 

 

 

March 31,

2020

 

 

December 31,

2019

 

Accrued compensation

 

$

4,205

 

 

$

9,282

 

Operating lease liabilities, current

 

 

2,418

 

 

 

2,354

 

Accrued in process research and development

 

 

 

 

 

1,600

 

Accrued professional service fees

 

 

1,800

 

 

 

2,347

 

Accrued other

 

 

540

 

 

 

1,126

 

Total accrued expenses

 

$

8,963

 

 

$

16,709

 

 

v3.20.1
Stockholders' Equity
3 Months Ended
Mar. 31, 2020
Equity [Abstract]  
Stockholders' Equity

7. Stockholders’ Equity

 

In connection with the Company’s IPO, the outstanding shares of the Company’s Series Seed, Series A, and Series B Convertible Preferred Stock automatically converted into 30,493,460 shares of common stock.

 

Common Stock

 

On December 3, 2015, the Company issued 9,160,888 shares of common stock as founder shares for services rendered to the Company, valued at $0.0001 par value per share, for a total of approximately $4,100. On January 4, 2018, incremental vesting conditions were placed on the previously issued founder shares. Fifty percent of the previously issued founder shares vested on January 4, 2018, and the remaining founder shares are subject to vesting restrictions over a period of five years.

 

Pursuant to the employment agreements with the Company’s founders executed January 4, 2018, the Company provided for certain potential additional issuances of common stock (the “anti-dilution shares”) to each of the founders to ensure the total number of shares of common stock held by them and their affiliates (inclusive of any shares subject to equity awards granted by the Company) would represent 15% of the Company’s fully-diluted capitalization until such time as the Company raised $300 million in equity capital, including the capital raised in the Series A financing.

 

In furtherance of this obligation, on May 21, 2018, the Company issued 251,547 shares of common stock to the founders for services rendered to the Company, valued at $2.61 per share with an additional 251,547 shares of restricted stock subject to the same vesting restrictions and vesting period as the founder shares. In addition, on September 6, 2018, the Company issued 1,795,023 shares of common stock to the founders for services rendered to the Company, valued at $9.63 per share, with an additional 1,795,023 shares of restricted stock subject to the same vesting restrictions and vesting period as the founder shares.

 

Each share of common stock is entitled to one vote. Common stock owners are entitled to dividends when funds are legally available and declared by the Board.

 

Shares of Common Stock Subject to Repurchase

 

In November 2017, in connection with the issuance of the Series A Convertible Preferred Stock, certain employees entered into stock restriction agreements, whereby 1,305,427 shares are subject to forfeiture by the Company upon the stockholder’s termination of employment or service to the Company. In January 2018, the Company’s founders entered into stock restriction agreements, whereby 4,580,444 of previously unrestricted shares of common stock were subject to service vesting conditions. These shares are also subject to forfeiture by the Company upon the stockholders’ termination of employment or service to the Company. Any shares subject to repurchase by the Company are not deemed, for accounting purposes, to be outstanding until those shares vest. As such, the Company recognizes the measurement date fair value of the restricted stock over the vesting period as compensation expense. As of March 31, 2020 and December 31, 2019, 4,243,889 and 4,648,526 shares of common stock were subject to repurchase by the Company, respectively. The unvested stock liability related to these awards is immaterial to all periods presented.

v3.20.1
Stockholders' Equity - Additional Information (Details) - USD ($)
1 Months Ended 3 Months Ended 12 Months Ended
Sep. 06, 2018
May 21, 2018
Jan. 04, 2018
Dec. 03, 2015
Jan. 31, 2018
Nov. 30, 2017
Mar. 31, 2020
Mar. 31, 2019
Dec. 31, 2019
Stockholders Equity [Line Items]                  
Common stock, par value             $ 0.0001   $ 0.0001
Issuance of common stock in connection with a public offering net of underwriting discounts, commissions and offering costs               $ 291,344,000  
Common stock, voting right             one    
Shares of common stock, repurchase             4,243,889   4,648,526
Series A Convertible Preferred Stock | Stock Restriction Agreements                  
Stockholders Equity [Line Items]                  
Shares subject to forfeiture           1,305,427      
Founder                  
Stockholders Equity [Line Items]                  
Common stock issued shares 1,795,023 251,547              
Percentage of fully diluted share capital     15.00%            
Increased in equity capital amount     $ 300,000,000            
Common stock issued price per share $ 9.63 $ 2.61              
Additional shares of restricted stock subject to vesting restrictions 1,795,023 251,547              
Common Stock                  
Stockholders Equity [Line Items]                  
Conversion of convertible preferred stock into common stock, shares             30,493,460 30,493,460  
Common stock issued shares               19,837,500  
Issuance of common stock in connection with a public offering net of underwriting discounts, commissions and offering costs               $ 2,000  
Common Stock | Stock Restriction Agreements                  
Stockholders Equity [Line Items]                  
Unrestricted shares of common stock were subject to service vesting conditions         4,580,444        
Founder Shares                  
Stockholders Equity [Line Items]                  
Common stock issued shares       9,160,888          
Common stock, par value       $ 0.0001          
Issuance of common stock in connection with a public offering net of underwriting discounts, commissions and offering costs       $ 4,100          
Common Stock vesting percentage     50.00%            
Common stock vesting period     5 years            
v3.20.1
Fair Value Measurements and Available for Sale Investments - Additional Information (Details) - USD ($)
Mar. 31, 2020
Dec. 31, 2019
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Fair value hierarchy level 1 to level 2 $ 0 $ 0
Fair value hierarchy level 2 to level 1 0 0
Cash Equivalents, at Carrying Value 16,000,000  
Prepaid Expenses and Other Current Assets    
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]    
Interest and securities receivable $ 1,300,000 $ 1,500,000
v3.20.1
Long-Term Debt - Schedule of Long-term Debt (Details)
$ in Thousands
Mar. 31, 2020
USD ($)
Debt Disclosure [Abstract]  
Term loan $ 30,000
Debt discount and issuance costs (1,452)
Long-term debt $ 28,548
v3.20.1
Subsequent Events
3 Months Ended
Mar. 31, 2020
Subsequent Events [Abstract]  
Subsequent Events

10. Subsequent Events

On May 11, 2020, the Company entered into an amendment to the license agreement with Aerpio pursuant to which the Company made an upfront payment of $15.0 million to Aerpio for a reduction in future milestone payments and royalties. Under the amended license agreement, the Company is obligated to make future approval milestone payments of up to $40.0 million and a sales milestone payment of $50.0 million. The royalties on worldwide net sales now range from a low- to mid-single digit percentage of net sales. The Company continues to be responsible for the remaining development, regulatory, and commercialization expenses for GB004, and Aerpio’s 20.0% participation right on a disposition of GB004 remains.

v3.20.1
Summary of Significant Accounting Policies
3 Months Ended
Mar. 31, 2020
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

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 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.

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.

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. Diluted net loss per share excludes the potential impact of the Company’s common stock options and unvested shares of restricted stock 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 March 31,

 

 

2020

 

2019

 

Shares issuable upon exercise of stock options

 

10,192,073

 

 

7,469,973

 

Non-vested shares under restricted stock grants

 

5,395,550

 

 

5,862,440

 

 

v3.20.1
Licenses, Asset Acquisitions and Contingent Consideration
3 Months Ended
Mar. 31, 2020
Business Combinations [Abstract]  
Licenses, Asset Acquisitions and Contingent Consideration

6. Licenses, Asset Acquisitions and Contingent Consideration

The following purchased assets were accounted for as asset acquisitions as substantially all of the fair value of the assets acquired were concentrated in a group of similar assets and/or the acquired assets were not capable of producing outputs due to the lack of employees and early stage of development. Because the assets had not yet received regulatory approval, the fair value attributable to these assets was recorded as in process research and development (“IPR&D”) expenses in the Company’s condensed consolidated statement of operations for the three months ended March 31, 2020.

The Company accounts for contingent consideration payable upon achievement of certain regulatory, development or sales milestones in such asset acquisitions when the underlying contingency is met.

License from Pulmokine, Inc. (GB002)

On October 2, 2017, the Company, entered into a license agreement with Pulmokine, Inc. under which it was granted an exclusive worldwide license and sublicense to certain intellectual property rights owned or controlled by Pulmokine to develop and commercialize GB002 and certain backup compounds for the treatment, prevention and diagnosis of any and all disease or conditions. The Company also has the right to sublicense its rights under the license agreement, subject to certain conditions. The assets acquired are in the early stages of the FDA approval process, and the Company intends to further develop the assets acquired through potential FDA approval as evidenced by the milestone arrangement in the contract. The development activities cannot be performed without significant cost and effort by the Company. The agreement will remain in effect from the effective date, unless terminated earlier, until, on a licensed product-by-licensed product and country-by-country basis, the later of ten years from the date of first commercial sale or when there is no longer a valid patent claim covering such licensed product or specified regulatory exclusivity for the licensed product in such country. The Company is obligated to make future development and regulatory milestone payments of up to $63.0 million, commercial milestone payments of up to $45.0 million, and sales milestone payments of up to $190.0 million. The Company is also obligated to pay tiered royalties on sales for each licensed product, at percentages ranging from the mid-single digits to the high single-digits. The Company made an upfront payment of $5.5 million in October 2017. As of March 31, 2020, no milestones had been accrued as the underlying contingencies had not yet been met.

AA Biopharma Inc. Acquisition (GB001)

On January 4, 2018, the Company acquired AA Biopharma Inc. pursuant to a merger agreement, and with the acquisition acquired the rights to GB001 and certain backup compounds. In connection with the merger agreement, the Company issued an aggregate of 20,000,000 shares of Series Seed Convertible Preferred Stock and 1,101,278 shares of Common Stock to the AA Biopharma shareholders. The Company recorded IPR&D of $19.3 million in January 2018 in connection with the acquisition of AA Biopharma.

License from Aerpio Pharmaceuticals, Inc. (GB004)

On June 24, 2018, the Company entered into a license agreement with Aerpio Pharmaceuticals, Inc. (“Aerpio”) under which the Company was granted an exclusive worldwide license and sublicense to certain intellectual property rights owned or controlled by Aerpio to develop and commercialize GB004, and certain other related compounds for all applications. On May 11, 2020, the Company entered into an amendment to the license agreement with Aerpio pursuant to which the Company made an upfront payment of $15.0 million to Aerpio for a reduction in future milestone payments and royalties. Under the amended license agreement, the Company is obligated to make future approval milestone payments of up to $40.0 million and a sales milestone payment of $50.0 million. The Company also has the right to sublicense its rights under the license agreement, subject to certain conditions. The Company is also obligated to pay tiered royalties on sales for each licensed product, at percentages ranging from low- to mid-single digits, subject to certain customary reductions. Aerpio retains its twenty percent (20.0%) participation right on a disposition of GB004. The Company made an upfront payment of $20.0 million in June 2018, which represented the purchase consideration for an asset acquisition. As of March 31, 2020, no milestones had been accrued as the underlying contingencies had not yet been met.

Adhaere Pharmaceuticals, Inc. Acquisition (GB1275)

On September 21, 2018, the Company acquired Adhaere Pharmaceuticals, Inc. (“Adhaere”) pursuant to a merger agreement for an upfront payment of $7.5 million in cash, and with the acquisition acquired the rights to GB1275 and certain backup compounds. The Company is obligated to make regulatory, development and sales milestone payments of up to $62.0 million and pay tiered royalties on worldwide net sales, at percentages ranging from low to mid-single digits, subject to customary reductions. In September 2018, the Company recorded IPR&D of $7.5 million in connection with the acquisition of Adhaere. In May 2019, the Company made a milestone payment of $1.0 million in connection with the filing of the Investigational New Drug application for the GB1275 program. As of March 31, 2020, no other milestones had been accrued as the underlying contingencies had not yet been met.

The Company recorded the following IPR&D expense on the condensed consolidated statements of operations (in thousands):

 

 

 

Three months ended March 31,

 

 

 

2020

 

 

2019

 

GB001

 

$

 

 

$

 

GB004

 

 

 

 

 

 

GB1275

 

 

 

 

 

 

Other Programs

 

 

2,805

 

 

 

1,000

 

Total in process research and development

 

$

2,805

 

 

$

1,000

 

v3.20.1
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Operating expenses:    
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)
Other income, net 893 1,406
Net loss (54,074) (32,611)
Other comprehensive income:    
Foreign currency translation, net of tax (87)  
Other comprehensive income (loss) (763) 140
Unrealized gain (loss) on marketable securities, net of tax (676) 140
Comprehensive loss $ (54,837) $ (32,471)
Net loss per share, basic and diluted $ (0.87) $ (0.90)
Weighted average common shares outstanding, basic and diluted 61,890,323 36,317,230
v3.20.1
Fair Value Measurements and Available for Sale Investments - Schedule of Available for sale Investments by Security Type (Details)
$ in Thousands
Mar. 31, 2020
USD ($)
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]  
Available-for-sale Investments, Amortized Cost $ 235,212
Available-for-sale Investments, Gross Unrealized Gains 174
Available-for-sale Investments, Gross Unrealized Losses (574)
Available-for-sale Investments, Total Fair Value 234,812
U S Treasury and Agency Securities  
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]  
Available-for-sale Investments, Amortized Cost 25,629
Available-for-sale Investments, Gross Unrealized Gains 71
Available-for-sale Investments, Total Fair Value 25,700
Commercial Paper  
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]  
Available-for-sale Investments, Amortized Cost 55,991
Available-for-sale Investments, Total Fair Value 55,991
Corporate Debt Securities  
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]  
Available-for-sale Investments, Amortized Cost 153,592
Available-for-sale Investments, Gross Unrealized Gains 103
Available-for-sale Investments, Gross Unrealized Losses (574)
Available-for-sale Investments, Total Fair Value $ 153,121
v3.20.1
Long-Term Debt - Schedule of Future Minimum Principal Payments (Details)
$ in Thousands
Mar. 31, 2020
USD ($)
Debt Disclosure [Abstract]  
2021 $ 5,833
2022 10,000
2023 10,000
2024 4,167
Total $ 30,000
v3.20.1
Equity Incentive Plans - Additional Information (Details) - USD ($)
$ / shares in Units, $ in Millions
3 Months Ended
Feb. 06, 2019
Mar. 31, 2020
Dec. 31, 2019
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]      
Shares outstanding awarded   10,192,073 8,538,060
Stock Options      
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]      
Expected dividend yield   0.00%  
Weighted-average grant date fair value per share   $ 10.42  
Aggregate fair value of stock options vested during period   $ 10.3  
Restricted Stock      
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]      
Stock awards granted   1,151,661  
Unrecognized compensation costs   $ 25.8  
Weighted-average period of cost expects to recognize   2 years 8 months 12 days  
Stock-Based Compensation Expense      
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]      
Weighted-average period of cost expects to recognize   2 years 10 months 24 days  
Unrecognized compensation expense related to the ESPP.   $ 72.0  
2019 Equity Incentive Plan      
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]      
Number of share reserved for future issuance 5,750,000    
Term of awards 10 years    
Percentage of amount increase in outstanding shares 5.00%    
Common stock available for issuance   2,232,426  
Shares outstanding awarded   6,836,299  
2019 Employee Stock Purchase Plan      
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]      
Number of share reserved for future issuance 700,000    
Term of awards 10 years    
Percentage of amount increase in outstanding shares 1.00%    
Number of share issued under ESPP   49,889  
Number of share reserved for future issuance   1,312,951  
2019 Employee Stock Purchase Plan | Maximum      
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]      
Purchase of common stock through payroll deductions, percentage 20.00%    
2017 Equity Incentive Plan      
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]      
Shares outstanding awarded   4,507,435  
2017 Equity Incentive Plan | Restricted Stock      
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]      
Stock awards granted   488,580  
Twenty Thousand And Twenty Stock Purchase Plan | Stock-Based Compensation Expense      
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]      
Weighted-average period of cost expects to recognize   1 year 2 months 12 days  
Unrecognized compensation expense related to the ESPP.   $ 2.0  
v3.20.1
Balance Sheet Accounts and Supplemental Disclosures - Schedule of Accrued Expenses (Details) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Payables And Accruals [Abstract]    
Accrued compensation $ 4,205 $ 9,282
Operating lease liabilities, current 2,418 2,354
Accrued in process research and development   1,600
Accrued professional service fees 1,800 2,347
Accrued other 540 1,126
Total accrued expenses $ 8,963 $ 16,709
v3.20.1
Commitments and Contingencies (Tables)
3 Months Ended
Mar. 31, 2020
Commitments And Contingencies Disclosure [Abstract]  
Schedule of Lease Costs

Lease costs were comprised of the following (in thousands):

 

 

 

Three months

ended

March 31, 2020

 

Operating lease cost

 

$

753

 

Short-term lease cost

 

 

22

 

Total lease cost

 

$

775

 

 

Schedule of Gross Future Minimum Annual Rental Commitments

Gross future minimum annual rental commitments as of March 31, 2020, were as follows (in thousands):

 

 

 

Undiscounted Rent

Payments

 

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

 

 

 

 

 

 

Present value discount

 

 

(1,548

)

Present value

 

$

10,523

 

Current portion of operating lease liability (included as a

   component of accrued expenses)

 

$

2,418

 

Noncurrent operating lease liabilities

 

 

8,105

 

Total operating lease liability

 

$

10,523

 

v3.20.1
Fair Value Measurements and Available for Sale Investments (Tables)
3 Months Ended
Mar. 31, 2020
Fair Value Measurements And Available For Sale Investments [Abstract]  
Assets Measured at Fair Value on Recurring Basis

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

 

 

Fair Value Measurements at End of Period Using:

 

 

 

 

 

 

 

Quoted Market

 

 

Significant

 

 

Significant

 

 

 

 

 

 

 

Prices for

 

 

Other Observable

 

 

Unobservable

 

 

 

Total

 

 

Identical Assets

 

 

Inputs

 

 

Inputs

 

 

 

Fair Value

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

As of March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

31,488

 

 

$

31,488

 

 

$

 

 

$

 

U.S. Treasury and agency securities

 

 

25,700

 

 

 

25,700

 

 

 

 

 

 

 

Commercial paper

 

 

71,961

 

 

 

 

 

 

71,961

 

 

 

 

Corporate debt securities

 

 

153,121

 

 

 

 

 

 

153,121

 

 

 

 

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

 

 

 

 

Schedule of Available for Sale Investments by Security Type

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 March 31, 2020 are as follows (in thousands):

 

 

 

 

 

 

 

Gross

 

 

Gross

 

 

 

 

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Total

 

 

 

Cost

 

 

Gains

 

 

Losses

 

 

Fair Value

 

Marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and agency securities

 

$

25,629

 

 

$

71

 

 

$

 

 

$

25,700

 

Commercial paper

 

 

55,991

 

 

 

 

 

 

 

 

 

55,991

 

Corporate debt securities

 

 

153,592

 

 

 

103

 

 

 

(574

)

 

 

153,121

 

Total marketable securities

 

$

235,212

 

 

$

174

 

 

$

(574

)

 

$

234,812

 

Schedule of Contractual Maturities of Available-for-sale Debt Securities

Contractual maturities of available-for-sale debt securities, as of March 31, 2020, were as follows (in thousands):

 

 

 

 

 

 

 

 

 

Estimated

 

 

 

 

 

 

 

 

 

Fair Value

 

Due within one year

 

 

 

 

 

 

 

$

203,072

 

One to two years

 

 

 

 

 

 

 

 

31,740

 

Total

 

 

 

 

 

 

 

$

234,812

 

v3.20.1
Equity Incentive Plans - Summary of Restricted Stock Activity (Details) - Restricted Stock
3 Months Ended
Mar. 31, 2020
$ / shares
shares
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]  
Number of Restricted Stock Units Outstanding, Nonvested | shares 4,648,526
Number of Restricted Stock Units Outstanding, Granted | shares 1,151,661
Number of Restricted Stock Units Outstanding, Vested | shares (404,637)
Number of Restricted Stock Units Outstanding, Forfeited | shares 0
Number of Restricted Stock Units Outstanding, Nonvested | shares 5,395,550
Weighted-Average Grant Date Fair Value, Nonvested | $ / shares $ 3.98
Weighted-Average Grant Date Fair Value, Granted | $ / shares 11.98
Weighted-Average Grant Date Fair Value, Vested | $ / shares 3.71
Weighted-Average Grant Date Fair Value, Forfeited | $ / shares 0
Weighted-Average Grant Date Fair Value, Nonvested | $ / shares $ 5.71
v3.20.1
Commitments and Contingencies - Schedule of Gross Future Minimum Annual Rental Commitments (Details) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Leases [Abstract]    
2020 (remaining 9 months) $ 2,285  
2021 3,127  
2022 3,220  
2023 1,694  
2024 1,745  
Total undiscounted rent payments 12,071  
Present value discount (1,548)  
Present value 10,523  
Current portion of operating lease liability (included as a component of accrued expenses) 2,418 $ 2,354
Noncurrent operating lease liabilities 8,105 $ 8,737
Total operating lease liability $ 10,523  
v3.20.1
Long-Term Debt - Additional Information (Details) - Term Loan
3 Months Ended
May 02, 2019
USD ($)
Tranche
Mar. 31, 2020
USD ($)
Debt Instrument [Line Items]    
Maximum borrowing capacity $ 150,000,000  
Amount funded $ 30,000,000  
Number of additional tranches | Tranche 3  
Remaining borrowing capacity $ 120,000,000  
Interest only payment period 36 months  
Maturity date May 01, 2024  
Percentage of exit fee on amount borrowed on final repayment 1.75%  
Percentage of exit fee on amount borrowed on partial prepayment 1.75%  
Debt covenant minimum unrestricted cash percentage 25.00%  
Minimum indebtedness amount   $ 2,500,000
Prepayment Occurs through First Anniversary of Closing Date    
Debt Instrument [Line Items]    
Percentage of prepayment fee 3.00%  
First Anniversary of Closing Date through Second Anniversary of Closing Date    
Debt Instrument [Line Items]    
Percentage of prepayment fee 2.00%  
Second Anniversary of Closing Date and Prior to May 1, 2024    
Debt Instrument [Line Items]    
Percentage of prepayment fee 1.00%  
LIBOR    
Debt Instrument [Line Items]    
Basis spread on variable rate 6.15%  
Interest rate 2.00%  
Debt instrument, description of variable rate basis 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) 6.15%, subject to a LIBOR floor of 2.00%.  
MidCap Financial Trust    
Debt Instrument [Line Items]    
Basis spread on variable rate   3.00%
Tranche One    
Debt Instrument [Line Items]    
Remaining borrowing capacity $ 40,000,000  
Tranche Two    
Debt Instrument [Line Items]    
Remaining borrowing capacity 30,000,000  
Tranche Three    
Debt Instrument [Line Items]    
Remaining borrowing capacity $ 50,000,000  
v3.20.1
Licenses, Asset Acquisitions and Contingent Consideration - Schedule of IPR&D Expense (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Acquired Finite Lived Intangible Assets [Line Items]    
Total in process research and development $ 2,805 $ 1,000
Other Programs    
Acquired Finite Lived Intangible Assets [Line Items]    
Total in process research and development $ 2,805 $ 1,000
v3.20.1
Equity Incentive Plans
3 Months Ended
Mar. 31, 2020
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]  
Equity Incentive Plans

8. Equity Incentive Plans

Approval of the 2019 Equity Incentive Plan

In January 2019, the Company’s board of directors and stockholders approved and adopted the 2019 Incentive Award Plan (the “2019 Plan”). The 2019 Plan became effective on February 6, 2019, the day prior to the effectiveness of the registration statement filed in connection with the IPO. Under the 2019 Plan, the Company may grant stock options, stock appreciation rights, restricted stock, restricted stock units, and other stock or cash-based awards to individuals who are then employees, officers, directors or consultants of the Company, and employees and consultants of the Company’s subsidiaries. A total of 5,750,000 shares of common stock were approved to be initially reserved for issuance under the 2019 Plan. The number of shares that remained available for issuance under the 2017 Plan (as defined below) as of the effective date of the 2019 Plan were, and shares subject to outstanding awards under the 2017 Plan as of the effective date of the 2019 Plan that are subsequently canceled, forfeited or repurchased by the Company will be added to the shares reserved under the 2019 Plan. In addition, the number of shares of common stock available for issuance under the 2019 Plan will be automatically increased on the first day of each calendar year during the ten-year term of the 2019 Plan, beginning with January 1, 2020 and ending with January 1, 2029, by an amount equal to 5% of the outstanding number of shares of the Company’s common stock on December 31 of the preceding calendar year or such lesser amount as determined by the Company’s board of directors. As of March 31, 2020, an aggregate of 2,232,426 shares of common stock were available for issuance under the 2019 Plan and 6,836,299 shares of common stock were subject to outstanding awards under the 2019 Plan.

Approval of the 2019 Employee Stock Purchase Plan

In January 2019, the Company’s board of directors and stockholders approved and adopted the 2019 Employee Stock Purchase Plan (the “ESPP”). The ESPP became effective as of February 6, 2019, the day prior to the effectiveness of the registration statement filed in connection with the IPO. The ESPP permits participants to purchase common stock through payroll deductions of up to 20% of their eligible compensation. A total of 700,000 shares of common stock were approved to be initially reserved for issuance under the ESPP. In addition, the number of shares of common stock available for issuance under the ESPP will be automatically increased on the first day of each calendar year during the first ten-years of the term of the ESPP, beginning with January 1, 2020 and ending with January 1, 2029, by an amount equal to 1% of the outstanding number of shares of the Company’s common stock on December 31 of the preceding calendar year or such lesser amount as determined by the Company’s board of directors. During the three months ended March 31, 2020, 49,889 shares were issued pursuant to the ESPP. As of March 31, 2020, an aggregate of 1,312,951 shares of common stock were available for issuance under the ESPP.

2017 Equity Incentive Plan

The Company’s 2017 Equity Incentive Plan (the “2017 Plan”) permitted the granting of incentive stock options, non-statutory stock options, restricted stock, restricted stock units and other stock-based awards. Subsequent to the adoption of the 2019 Plan, no additional equity awards can be made under the 2017 Plan. As of March 31, 2020, 4,507,435 shares of common stock were subject to outstanding options under the 2017 Plan, and 488,580 shares of restricted stock awards granted under the 2017 plan were unvested.

Stock Options

The fair value of each employee and non-employee stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The Company, prior to the closing of its IPO on February 12, 2019, was a private company and lacked company-specific historical and implied volatility information. Therefore, it estimated its expected volatility based on the historical volatility of a publicly traded set of peer companies. Due to the lack of historical exercise history, the expected term of the Company’s stock options for employees has been determined utilizing the “simplified” method for awards. The expected term of stock options granted to non-employees is equal to the contractual term of the option award. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is zero based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

The following table summarizes stock option activity during the three months ended March 31, 2020:

 

 

 

Shares Subject to

Options Outstanding

 

 

Weighted-

Average

 

 

 

 

 

 

 

 

 

 

 

Weighted-

 

 

Remaining

 

 

 

 

 

 

 

 

 

 

 

Average

Exercise

 

 

Contractual

Life

 

 

Aggregate

 

 

 

Shares

 

 

Price

 

 

(Years)

 

 

Intrinsic Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

Outstanding as of December 31, 2019

 

 

8,538,060

 

 

$

13.67

 

 

 

9.0

 

 

$

35,385

 

Options granted

 

 

1,725,222

 

 

$

14.55

 

 

 

 

 

 

 

 

 

Option exercised

 

 

(4,309

)

 

$

3.38

 

 

 

 

 

 

 

 

 

Options forfeited/cancelled

 

 

(66,900

)

 

$

15.50

 

 

 

 

 

 

 

 

 

Outstanding as of March 31, 2020

 

 

10,192,073

 

 

$

13.81

 

 

 

9.0

 

 

$

12,052

 

Options vested and exercisable as of March 31,

   2020

 

 

2,146,119

 

 

$

11.38

 

 

 

8.6

 

 

$

4,843

 

 

The aggregate intrinsic value in the above table is calculated as the difference between fair value of the Company’s common stock price on March 31, 2020 and the exercise price of the stock options.

The weighted-average grant date fair value per share for the stock option grants during the three months ended March 31, 2020 was $10.42.

The aggregate fair value of stock options that vested during the three months ended March 31, 2020 was $10.3 million.

Restricted Stock

The summary of the Company’s restricted stock activity is as follows:

 

 

 

Number of

 

 

Weighted-

 

 

 

Restricted

 

 

Average

 

 

 

Stock Units

 

 

Grant Date

 

 

 

Outstanding

 

 

Fair Value

 

Nonvested at December 31, 2019

 

 

4,648,526

 

 

$

3.98

 

Granted

 

 

1,151,661

 

 

$

11.98

 

Vested

 

 

(404,637

)

 

$

3.71

 

Forfeited

 

 

 

 

 

 

Nonvested at March 31, 2020

 

 

5,395,550

 

 

$

5.71

 

 

At March 31, 2020, the total unrecognized compensation related to unvested restricted stock awards granted was $25.8 million, which the Company expects to recognize over a weighted-average period of approximately 2.7 years.

Stock-Based Compensation Expense

Stock-based compensation expense has been reported in the Company’s condensed consolidated statements of operations as follows (in thousands):

 

 

 

Three months ended

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

Research and development

 

$

4,586

 

 

$

1,293

 

General and administrative

 

 

3,658

 

 

 

1,796

 

Total stock-based compensation

 

$

8,244

 

 

$

3,089

 

 

At March 31, 2020, the total unrecognized compensation related to unvested stock option awards granted was $72.0 million, which the Company expects to recognize over a weighted-average period of approximately 2.9 years.

As of March 31, 2020, total unrecognized compensation expense related to the ESPP was $2.0 million, which the Company expects to recognize over a weighted-average period of approximately 1.2 years.

v3.20.1
Fair Value Measurements and Available for Sale Investments
3 Months Ended
Mar. 31, 2020
Fair Value Measurements And Available For Sale Investments [Abstract]  
Fair Value Measurements and Available for Sale Investments

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 March 31, 2020 and December 31, 2019 (in thousands):

 

 

Fair Value Measurements at End of Period Using:

 

 

 

 

 

 

 

Quoted Market

 

 

Significant

 

 

Significant

 

 

 

 

 

 

 

Prices for

 

 

Other Observable

 

 

Unobservable

 

 

 

Total

 

 

Identical Assets

 

 

Inputs

 

 

Inputs

 

 

 

Fair Value

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

As of March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

31,488

 

 

$

31,488

 

 

$

 

 

$

 

U.S. Treasury and agency securities

 

 

25,700

 

 

 

25,700

 

 

 

 

 

 

 

Commercial paper

 

 

71,961

 

 

 

 

 

 

71,961

 

 

 

 

Corporate debt securities

 

 

153,121

 

 

 

 

 

 

153,121

 

 

 

 

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 March 31, 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 March 31, 2020 and December 31, 2019, was $1.3 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 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.

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 above.  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 March 31, 2020 are as follows (in thousands):

 

 

 

 

 

 

 

Gross

 

 

Gross

 

 

 

 

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Total

 

 

 

Cost

 

 

Gains

 

 

Losses

 

 

Fair Value

 

Marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury and agency securities

 

$

25,629

 

 

$

71

 

 

$

 

 

$

25,700

 

Commercial paper

 

 

55,991

 

 

 

 

 

 

 

 

 

55,991

 

Corporate debt securities

 

 

153,592

 

 

 

103

 

 

 

(574

)

 

 

153,121

 

Total marketable securities

 

$

235,212

 

 

$

174

 

 

$

(574

)

 

$

234,812

 

 

As of March 31, 2020, the Company classified $16.0 million of assets with original maturities of 90 days or less as cash equivalents. 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 March 31, 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 March 31, 2020, were as follows (in thousands):

 

 

 

 

 

 

 

 

 

Estimated

 

 

 

 

 

 

 

 

 

Fair Value

 

Due within one year

 

 

 

 

 

 

 

$

203,072

 

One to two years

 

 

 

 

 

 

 

 

31,740

 

Total

 

 

 

 

 

 

 

$

234,812

 

 

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.

 

v3.20.1
Condensed Consolidated Balance Sheets (Unaudited) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Current assets    
Cash and cash equivalents $ 111,353 $ 135,089
Marketable securities 234,812 266,740
Prepaid expenses and other current assets 9,273 7,488
Total current assets 355,438 409,317
Property and equipment, net 5,669 5,425
Operating lease right-of-use assets 9,737 10,303
Other assets 634 1,559
Total assets 371,478 426,604
Current liabilities    
Accounts payable 2,602 956
Accrued research and development expenses 16,797 19,258
Accrued expenses and other current liabilities 8,963 16,709
Total current liabilities 28,362 36,923
Long-term debt 28,548 28,459
Operating lease liabilities - long-term 8,105 8,737
Total liabilities 65,015 74,119
Commitments and contingencies
Stockholders' equity    
Common stock, $0.0001 par value; 700,000,000 shares authorized as of March 31, 2020 and December 31, 2019; 66,338,201 shares issued and 62,094,312 shares outstanding as of March 31, 2020, and 66,284,003 shares issued and 61,635,477 shares outstanding as of December 31, 2019 7 7
Additional paid-in capital 695,205 686,390
Accumulated deficit (388,244) (334,170)
Accumulated other comprehensive income (loss) (505) 258
Total stockholders' equity 306,463 352,485
Total liabilities and stockholders' equity $ 371,478 $ 426,604
v3.20.1
Summary of Significant Accounting Policies (Tables)
3 Months Ended
Mar. 31, 2020
Accounting Policies [Abstract]  
Schedule of Potentially Dilutive Securities not Included in Calculation of Diluted Net Loss Per Share

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 March 31,

 

 

2020

 

2019

 

Shares issuable upon exercise of stock options

 

10,192,073

 

 

7,469,973

 

Non-vested shares under restricted stock grants

 

5,395,550

 

 

5,862,440

 

 

v3.20.1
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Cash flows from operating activities    
Net loss $ (54,074) $ (32,611)
Adjustments to reconcile net loss to net cash used in operating activities:    
Depreciation and amortization 329 169
Stock-based compensation expense 8,244 3,089
In process research and development expenses 2,805 1,000
Amortization of operating lease right-of-use assets 566 565
Amortization of long-term debt discount and issuance costs 89  
Amortization of premium on investments, net of accretion of discounts (65)  
Net realized gain on investments (39)  
Changes in operating assets and liabilities:    
Prepaid expenses and other current assets (1,785) (3,472)
Other assets 925 2,144
Operating lease liabilities (566) (504)
Accounts payable 1,609 2,132
Accrued expenses (2,239) (789)
Accrued research and development expenses (2,461) 2,072
Accrued compensation and benefits (5,633) (1,569)
Net cash used in operating activities (52,295) (27,774)
Cash flows from investing activities    
Research and development asset acquisitions, net of cash acquired (2,805) (1,000)
Purchase of marketable securities (73,778) (222,295)
Maturities of marketable securities 89,083 20,000
Sales of marketable securities 16,051 5,500
Purchase of property and equipment (513) (347)
Net cash provided by (used in) investing activities 28,038 (198,142)
Cash flows from financing activities    
Proceeds from issuance of common stock   291,273
Proceeds from the exercise of stock options 15 71
Net cash provided by financing activities 571 291,344
Effect of exchange rate changes on cash and cash equivalents (50)  
Net increase (decrease) in cash and cash equivalents (23,686) 65,428
Cash and cash equivalents, at the beginning of the period 135,089 105,419
Cash and cash equivalents, at the end of the period 111,353 170,847
Supplemental disclosure of cash flow information:    
Cash paid for interest 618  
Supplemental disclosure of noncash investing and financing activities:    
Right-of-use assets obtained in exchange for lease liabilities   12,458
Change in unrealized gain (loss) on marketable securities, net of tax (676) 140
Unpaid property and equipment 60 739
Conversion of convertible preferred stock to common stock   $ 338,367
Employee Stock Purchase Plan    
Cash flows from financing activities    
Proceeds from issuance of common stock $ 556  
v3.20.1
Summary of Significant Accounting Policies - Schedule of Potentially Dilutive Securities not Included in Calculation of Diluted Net Loss Per Share (Details) - shares
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Shares Issuable upon Exercise of Stock Options    
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]    
Potentially dilutive securities not included from calculation of diluted net loss per share 10,192,073 7,469,973
Non-vested Shares under Restricted Stock Grants    
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]    
Potentially dilutive securities not included from calculation of diluted net loss per share 5,395,550 5,862,440
v3.20.1
Licenses, Asset Acquisitions and Contingent Consideration (Tables)
3 Months Ended
Mar. 31, 2020
Business Combinations [Abstract]  
Schedule of IPR&D Expense

The Company recorded the following IPR&D expense on the condensed consolidated statements of operations (in thousands):

 

 

 

Three months ended March 31,

 

 

 

2020

 

 

2019

 

GB001

 

$

 

 

$

 

GB004

 

 

 

 

 

 

GB1275

 

 

 

 

 

 

Other Programs

 

 

2,805

 

 

 

1,000

 

Total in process research and development

 

$

2,805

 

 

$

1,000

 

v3.20.1
Commitments and Contingencies - Additional Information (Details) - USD ($)
1 Months Ended 3 Months Ended
Nov. 30, 2019
Mar. 31, 2020
Non-cancelable operating sublease, expiration date for initial leased space   2025-01
Non-cancelable operating sublease, expiration date for expansion space leased   2022-12
Lessee, Operating Sublease, Existence of Option to Extend [true false]   true
Lessee, operating sublease, option to extend   options to extend for the entire premises through October 2028
Operating sublease, annual increase percentage for base rent   3.00%
Monthly base rent for permanent space $ 63,425  
Monthly base rent for temporary space $ 28,745  
Option to extend lease term of permanent space 12 months  
Annual increase percentage for lease charges 3.00%  
Lessee, operating lease, discount rate   7.00%
Weighted average remining lease term   4 years
Cash paid for operating lease liabilities   $ 800,000
Rent expense   $ 800,000
San Diego, California    
Lease commencement date for permanent space May 01, 2020  
Lease expiration date for permanent space Dec. 31, 2021  
Lease commencement date for temporary space Jan. 01, 2020  
v3.20.1
Balance Sheet Accounts and Supplemental Disclosures - Schedule of Property and Equipment, Net (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Dec. 31, 2019
Property Plant And Equipment [Line Items]    
Total property and equipment $ 7,212 $ 6,639
Less: accumulated depreciation 1,543 1,214
Property and equipment, net 5,669 5,425
Office Equipment    
Property Plant And Equipment [Line Items]    
Total property and equipment $ 1,097 1,097
Office Equipment | Minimum    
Property Plant And Equipment [Line Items]    
Property and equipment, estimated useful life 3 years  
Office Equipment | Maximum    
Property Plant And Equipment [Line Items]    
Property and equipment, estimated useful life 7 years  
Computer Equipment    
Property Plant And Equipment [Line Items]    
Total property and equipment $ 131 124
Property and equipment, estimated useful life 5 years  
Software    
Property Plant And Equipment [Line Items]    
Total property and equipment $ 87 87
Property and equipment, estimated useful life 3 years  
Lab Equipment    
Property Plant And Equipment [Line Items]    
Total property and equipment $ 3,614 3,054
Lab Equipment | Minimum    
Property Plant And Equipment [Line Items]    
Property and equipment, estimated useful life 2 years  
Lab Equipment | Maximum    
Property Plant And Equipment [Line Items]    
Property and equipment, estimated useful life 5 years  
Leasehold Improvements    
Property Plant And Equipment [Line Items]    
Total property and equipment $ 2,267 2,229
Leasehold Improvements | Minimum    
Property Plant And Equipment [Line Items]    
Property and equipment, estimated useful life 6 years  
Leasehold Improvements | Maximum    
Property Plant And Equipment [Line Items]    
Property and equipment, estimated useful life 7 years  
Construction in Process    
Property Plant And Equipment [Line Items]    
Total property and equipment $ 16 $ 48
v3.20.1
Equity Incentive Plans (Tables)
3 Months Ended
Mar. 31, 2020
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]  
Summary of Stock Option Activity

The following table summarizes stock option activity during the three months ended March 31, 2020:

 

 

 

Shares Subject to

Options Outstanding

 

 

Weighted-

Average

 

 

 

 

 

 

 

 

 

 

 

Weighted-

 

 

Remaining

 

 

 

 

 

 

 

 

 

 

 

Average

Exercise

 

 

Contractual

Life

 

 

Aggregate

 

 

 

Shares

 

 

Price

 

 

(Years)

 

 

Intrinsic Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

Outstanding as of December 31, 2019

 

 

8,538,060

 

 

$

13.67

 

 

 

9.0

 

 

$

35,385

 

Options granted

 

 

1,725,222

 

 

$

14.55

 

 

 

 

 

 

 

 

 

Option exercised

 

 

(4,309

)

 

$

3.38

 

 

 

 

 

 

 

 

 

Options forfeited/cancelled

 

 

(66,900

)

 

$

15.50

 

 

 

 

 

 

 

 

 

Outstanding as of March 31, 2020

 

 

10,192,073

 

 

$

13.81

 

 

 

9.0

 

 

$

12,052

 

Options vested and exercisable as of March 31,

   2020

 

 

2,146,119

 

 

$

11.38

 

 

 

8.6

 

 

$

4,843

 

Summary of Restricted Stock Activity

The summary of the Company’s restricted stock activity is as follows:

 

 

 

Number of

 

 

Weighted-

 

 

 

Restricted

 

 

Average

 

 

 

Stock Units

 

 

Grant Date

 

 

 

Outstanding

 

 

Fair Value

 

Nonvested at December 31, 2019

 

 

4,648,526

 

 

$

3.98

 

Granted

 

 

1,151,661

 

 

$

11.98

 

Vested

 

 

(404,637

)

 

$

3.71

 

Forfeited

 

 

 

 

 

 

Nonvested at March 31, 2020

 

 

5,395,550

 

 

$

5.71

 

Stock-Based Compensation Expense Reported in Condensed Consolidated Statements of Operations

Stock-based compensation expense has been reported in the Company’s condensed consolidated statements of operations as follows (in thousands):

 

 

 

Three months ended

 

 

 

March 31,

 

 

 

2020

 

 

2019

 

Research and development

 

$

4,586

 

 

$

1,293

 

General and administrative

 

 

3,658

 

 

 

1,796

 

Total stock-based compensation

 

$

8,244

 

 

$

3,089

 

v3.20.1
Equity Incentive Plans - Stock-Based Compensation Expense Reported in Condensed Consolidated Statements of Operations (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]    
Total stock-based compensation $ 8,244 $ 3,089
Research and Development    
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]    
Total stock-based compensation 4,586 1,293
General and Administrative    
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]    
Total stock-based compensation $ 3,658 $ 1,796
v3.20.1
Subsequent Events - Additional Information (Details) - Aerpio Pharmaceuticals, Inc. - License Agreement - GB004 - Subsequent Event
May 11, 2020
USD ($)
Business Acquisition [Line Items]  
Upfront payment $ 15,000,000
Participation right on disposition 20.00%
Maximum  
Business Acquisition [Line Items]  
Development and regulatory milestone payments, payable $ 40,000,000
Sales milestone payments, payable $ 50,000,000
v3.20.1
Fair Value Measurements and Available for Sale Investments - Schedule of Contractual Maturities of Available-for-sale Debt Securities (Details)
$ in Thousands
Mar. 31, 2020
USD ($)
Fair Value Measurements And Available For Sale Investments [Abstract]  
Due within one year $ 203,072
One to two years 31,740
Total $ 234,812
v3.20.1
Licenses, Asset Acquisitions and Contingent Consideration - Additional Information (Details) - USD ($)
1 Months Ended 3 Months Ended
May 11, 2020
Sep. 30, 2018
Sep. 21, 2018
Jun. 30, 2018
Jun. 24, 2018
Jan. 31, 2018
Jan. 04, 2018
Oct. 31, 2017
Oct. 02, 2017
May 31, 2019
Mar. 31, 2020
Mar. 31, 2019
Business Acquisition [Line Items]                        
In process research and development                     $ 2,805,000 $ 1,000,000
Pulmokine, Inc. | License Agreement | GB002                        
Business Acquisition [Line Items]                        
Product license term                 10 years      
Upfront payment               $ 5,500,000        
Milestones accrued                     0  
Pulmokine, Inc. | License Agreement | GB002 | Maximum                        
Business Acquisition [Line Items]                        
Development and regulatory milestone payments, payable                 $ 63,000,000      
Commercial milestone payments, payable                 45,000,000      
Sales milestone payments, payable                 $ 190,000,000      
AA Biopharma Inc. | GB001                        
Business Acquisition [Line Items]                        
In process research and development           $ 19,300,000            
AA Biopharma Inc. | GB001 | Common Stock                        
Business Acquisition [Line Items]                        
Business acquisition, aggregate number of shares issued             1,101,278          
AA Biopharma Inc. | GB001 | Series Seed Convertible Preferred Stock                        
Business Acquisition [Line Items]                        
Business acquisition, aggregate number of shares issued             20,000,000          
Aerpio Pharmaceuticals, Inc. | License Agreement | GB004                        
Business Acquisition [Line Items]                        
Milestones accrued                     0  
Upfront payment, purchase consideration paid       $ 20,000,000                
Participation rights         20.00%              
Aerpio Pharmaceuticals, Inc. | License Agreement | GB004 | Subsequent Event                        
Business Acquisition [Line Items]                        
Upfront payment $ 15,000,000                      
Aerpio Pharmaceuticals, Inc. | License Agreement | GB004 | Maximum | Subsequent Event                        
Business Acquisition [Line Items]                        
Development and regulatory milestone payments, payable 40,000,000                      
Sales milestone payments, payable $ 50,000,000                      
Adhaere Pharmaceuticals, Inc. | GB1275                        
Business Acquisition [Line Items]                        
Milestones accrued                     $ 0  
In process research and development   $ 7,500,000                    
Upfront payment, purchase consideration paid     $ 7,500,000                  
Milestones payment                   $ 1,000,000    
Adhaere Pharmaceuticals, Inc. | GB1275 | Maximum                        
Business Acquisition [Line Items]                        
Regulatory, development and sales milestone payments payable     $ 62,000,000                  
v3.20.1
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares
Mar. 31, 2020
Dec. 31, 2019
Statement Of Financial Position [Abstract]    
Common stock, par value $ 0.0001 $ 0.0001
Common stock, shares authorized 700,000,000 700,000,000
Common stock, shares, issued 66,338,201 66,284,003
Common stock, shares, outstanding 62,094,312 61,635,477
v3.20.1
Balance Sheet Accounts and Supplemental Disclosures (Tables)
3 Months Ended
Mar. 31, 2020
Balance Sheets Accounts And Supplemental Disclosures [Abstract]  
Schedule of Property and Equipment, Net

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

 

 

 

Estimated

Useful Life

(in years)

 

March 31,

2020

 

 

December 31,

2019

 

Office equipment

 

3-7

 

$

1,097

 

 

$

1,097

 

Computer equipment

 

5

 

 

131

 

 

 

124

 

Software

 

3

 

 

87

 

 

 

87

 

Lab equipment

 

2-5

 

 

3,614

 

 

 

3,054

 

Leasehold improvements

 

6-7

 

 

2,267

 

 

 

2,229

 

Construction in process

 

N/A

 

 

16

 

 

 

48

 

Total property and equipment

 

 

 

 

7,212

 

 

 

6,639

 

Less: accumulated depreciation

 

 

 

 

1,543

 

 

 

1,214

 

Property and equipment, net

 

 

 

$

5,669

 

 

$

5,425

 

Schedule of Accrued Expenses

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

 

 

 

As of

 

 

 

March 31,

2020

 

 

December 31,

2019

 

Accrued compensation

 

$

4,205

 

 

$

9,282

 

Operating lease liabilities, current

 

 

2,418

 

 

 

2,354

 

Accrued in process research and development

 

 

 

 

 

1,600

 

Accrued professional service fees

 

 

1,800

 

 

 

2,347

 

Accrued other

 

 

540

 

 

 

1,126

 

Total accrued expenses

 

$

8,963

 

 

$

16,709

 

v3.20.1
Description of the Business
3 Months Ended
Mar. 31, 2020
Accounting Policies [Abstract]  
Description of the Business

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 March 31, 2020, the Company had an accumulated deficit of $388.2 million. From the Company’s inception through March 31, 2020, the Company has funded its operations primarily through equity financings, including the Company’s IPO which closed on February 12, 2019. The Company raised $601.3 million from October 2017 through February 2019 through Series A and Series B Convertible Preferred Stock financings, a convertible note financing, and the IPO, after deducting underwriting discounts, commissions, and offering expenses. In addition, the Company received $12.8 million in cash in connection with the January 2018 acquisition of AA Biopharma Inc. On May 2, 2019 the Company, as guarantor, and its wholly-owned subsidiary GB001, Inc., as borrower, entered into a credit, guaranty and security agreement, as amended on September 18, 2019 (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 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. Under the Credit Facility, the Company has the ability to access the remaining $120.0 million in three additional tranches (of $40.0 million, $30.0 million and $50.0 million, respectively), subject to specified availability periods, the achievement of certain clinical development milestones, minimum cash requirements and other customary conditions. As of March 31, 2020, no other tranches under the Credit Facility have been drawn. See Note 5 for additional information regarding the Credit Facility.

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 outbreak 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 outbreak 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 outbreak could have a material and adverse impact on financial results and business operations of the Company, including the timing and ability of Company to complete certain clinical trials and other efforts required to advance the development of its product candidates and raise additional capital. For example, due to the challenges of enrolling patients posed by the COVID-19 pandemic, the Company may experience delays in the commencement of and enrollment of patients in its planned Phase 2 clinical trial of GB002 in pulmonary arterial hypertension and planned Phase 2 clinical trial of GB004 in ulcerative colitis, as well as delays in reporting data results from its ongoing trials.

v3.20.1
Commitments and Contingencies
3 Months Ended
Mar. 31, 2020
Commitments And Contingencies Disclosure [Abstract]  
Commitments and Contingencies

9. Commitments and Contingencies

Leases

The Company subleases certain office and laboratory space under a non-cancelable operating lease expiring in January 2025 for the initial leased space and December 2022 for expansion space leased pursuant to an amendment to the lease agreement entered into in August 2018. The sublease agreement included options to extend for the entire premises through October 2028. The options to extend must be exercised prior to the termination of the original lease agreement. The period covered by the options was not included in the non-cancellable lease term as it not was not determined to be reasonably certain to be executed. The lease agreement also includes a one-time termination option for the expansion space only whereby the Company can terminate the lease with advance written notice. The termination option was not determined to be reasonably certain to be executed. The lease is subject to charges for common area maintenance and other costs, and base rent is subject to an annual 3% increase each subsequent year. Costs determined to be variable and not based on an index or rate were not included in the measurement of the operating lease liabilities.

In November 2019, the Company entered into an additional non-cancelable lease agreement for certain office and laboratory space (the “permanent space”) in San Diego, California, commencing on May 1, 2020 and expiring on December 31, 2021. The lease agreement includes a lease for temporary space commencing on January 1, 2020 and expiring on the commencement date of the lease of the permanent space. The monthly base rent for the permanent and temporary space is $63,425 and $28,745, respectively. The lease agreement included an option to extend the term of the permanent space for twelve months. The option to extend must be exercised nine months prior to the termination of the original lease agreement. The period covered by the option was not included in the non-cancellable lease term as it not was not determined to be reasonably certain to be executed. The lease is subject to charges for common area maintenance and other costs, and base rent is subject to an annual 3% increase each subsequent year.

Monthly rent expense is recognized on a straight-line basis over the term of the leases. The operating leases are included in the balance sheet at the present value of the lease payments at a weighted-average discount rate of 7% using the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment as the leases do not provide an implicit rate. The weighted average remaining lease term was 4.0 years.

Lease costs were comprised of the following (in thousands):

 

 

 

Three months

ended

March 31, 2020

 

Operating lease cost

 

$

753

 

Short-term lease cost

 

 

22

 

Total lease cost

 

$

775

 

 

Cash paid for amounts included in the measurement of operating lease liabilities for the three months ended March 31, 2020 was $0.8 million.

Gross future minimum annual rental commitments as of March 31, 2020, were as follows (in thousands):

 

 

 

Undiscounted Rent

Payments

 

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

 

 

 

 

 

 

Present value discount

 

 

(1,548

)

Present value

 

$

10,523

 

Current portion of operating lease liability (included as a

   component of accrued expenses)

 

$

2,418

 

Noncurrent operating lease liabilities

 

 

8,105

 

Total operating lease liability

 

$

10,523

 

 

For the three months ended March 31, 2020 the Company recorded approximately $0.8 million, in rent expense.

Litigation

Kuhne vs. Gossamer Bio, Inc., et. al.

On April 3, 2020, Scott Kuhne, individually and on behalf of all others similarly situated, filed a putative class action lawsuit against the Company, certain of its executive officers and directors, and the underwriters of its IPO in the United States District Court for the Southern District of California (Case No. 3:20-cv-00649-DMS-MDD).  The complaint was filed on behalf of all persons who purchased or otherwise acquired the Company’s securities between February 8, 2019 and December 13, 2019.  The complaint alleges that the Company, certain of its executive officers and directors, and the underwriters of its IPO made false and/or misleading statements and failed to disclose material adverse facts about its business, operations and prospects in violation of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933, as amended, and Sections 10(b) (and Rule 10b-5 promulgated thereunder) and 20(a) of the Securities Exchange Act of 1934, as amended. The plaintiff seeks damages, interest, costs, attorneys’ fees, and other unspecified equitable relief.  The Company intends to vigorously defend this matter. Given the uncertainty of litigation, the preliminary stage of the case, and the legal standards that must be met for, among other things, class certification and success on the merits, the Company cannot estimate the reasonably possible loss or range of loss that may result from this action.

v3.20.1
Long-Term Debt
3 Months Ended
Mar. 31, 2020
Debt Disclosure [Abstract]  
Long-term Debt

5. Long-term Debt

 

On May 2, 2019, the Company entered into the Credit Facility described in Note 1, pursuant to which the Lenders agreed to make term loans available to the Company for working capital and 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 three additional tranches (of $40.0 million, $30.0 million and $50.0 million, respectively), subject to specified availability periods, the achievement of certain clinical development milestones, minimum cash requirements and other customary conditions. The second tranche is available no earlier than February 1, 2020 and no later than July 31, 2020.  The third tranche is available no earlier than May 1, 2020 and no later than October 31, 2020.  The fourth tranche is available no earlier than February 1, 2021 and no later than July 31, 2021. The Credit Facility is secured by substantially all of the Company’s and its domestic subsidiaries’ personal property, including intellectual property, and includes affirmative and negative covenants applicable to the Company.

 

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) 6.15%, 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 June 1, 2021.  The term loans under the Credit Facility will begin amortizing on June 1, 2021, 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 for 36 months or, for any funding of the fourth tranche occurring after June 1, 2021, the number of months until the Credit Facility matures on May 1, 2024.  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 3.0% of any amount prepaid if the prepayment occurs through and including the first anniversary of the closing date, 2.0% of the amount prepaid if the prepayment occurs after the first anniversary of the closing date through and including the second anniversary of the closing date, and 1.0% of any amount prepaid after the second anniversary of the closing date and prior to May 1, 2024.

 

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 March 31, 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 3.0% 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 $2,500,000 and the occurrence of certain defaults under subordinated indebtedness and convertible indebtedness.

 

Long-term debt as of March 31, 2020 consisted of the following (in thousands):

 

 

 

March 31, 2020

 

Term loan

 

$

30,000

 

Debt discount and issuance costs

 

 

(1,452

)

Long-term debt

 

$

28,548

 

 

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

 

 

 

March 31, 2020

 

2020 (remaining 9 months)

 

 

 

2021

 

 

5,833

 

2022

 

 

10,000

 

2023

 

 

10,000

 

2024

 

 

4,167

 

Total

 

$

30,000