Video Summary:
Gossamer Bio (GOSS) will be reporting open label extension data in the coming weeks which could demonstrate that their inhaled seralutinib is a disease modifying drug in pulmonary arterial hypertension (PAH). This readout could be an early sign in validating GOSS’ patient selection in Phase 3, and act as the inflection point for the stock. The situation is similar to Bellus (BLU) which reported underwhelming Phase 2 efficacy in summer 2020, refined the patient selection to a sicker population, showed efficacy in this population and was ultimately acquired by GSK for $2B less than 3 years later. GOSS seems to be on a similar path.
GOSS Comp Was Acquired for $11.5B
In December 2022, GOSS fell from $9 to $2 after reporting Phase 2 data that met its primary endpoint but did not stack up against PAH competitor sotatercept.
Keep in mind that Merck acquired the rights to sotatercept from Acceleron for $11.5B in late 2021. When it was acquired, sotatercept had reported promising Phase 2, shared open label extension data and was enrolling for Phase 3. Merck saw Acceleron’s sotatercept as a non-vasodilator PAH therapy which could act as add-on to standard of care (vasodilators) in market where patients rapidly move to double or triple therapy. Merck expects multi-billion dollars in sotatercept sales upon approval sometime in mid-2024.
GOSS’ reported its own Phase 2, which was not as convincing, is about to share some open label extension data and is planning Phase 3. As a result of the ambiguity, GOSS is trading at an EV of sub-$200M, a fraction of the $11.5B price tag Acceleron got acquired at.
Understanding PAH Disease Classification
PAH is a form of high blood pressure that affects the arteries in the lungs and right side of the heart. The damage slows blood flow through the lungs, and blood pressure in the lung arteries rises. The heart must work harder to pump blood through the lungs. The extra effort eventually causes the heart muscle to become weak and fail.
PAH patients are classified from Class I – IV, depending on disease severity. Class is predictive of survival, so Class I patients are the least “sick”, while Class IV are most sick.
Phase 2 Flopped in All Comer Patients. Reasons include:
GOSS’ Patients Were Less Sick & Not Comparable to Acceleron’s Sotatercept
GOSS Phase 2 patients were classified as 68% Class 2 and 32% Class 3. So, more than 2/3rd of the seralutinib arm was less sick PAH patients. To compare, Acceleron’s sotatercept were about 50/50 between Class 2 and Class 3. This, in part, played to GOSS’ data underperformance, especially when compared to sotatercept.
Additionally, PAH baseline measures were also representative of a milder patient population in GOSS, compared to sotatercept.
- Pulmonary vascular resistance (PVR): the resistance that blood must overcome to pass through the pulmonary vasculature. The higher the PVR, the more resistance and thus “sicker” the patient.
- GOSS had PVR patients with baselines of 670 range, vs sotatercept in 770-780.
- 6-minute walk distance (6MWD): how far patients can walk in 6 minutes. The further the distance, in meters, the better the patient’s condition.
- GOSS’ 6MWD was 408.6meters, with patients in Class 2 walking an average of 437.5meters at baseline. Sotatercept 6MWD at baseline was sub-400meters.
GOSS Drug Demonstrated Activity, But Not Enough
At 24 weeks, PVR significantly decreased with seralutinib with a mean reduction of 14.3% versus placebo (P=0.031). This was the study’s primary endpoint.
However, the -96.1 PVR (-14.3%) placebo adjusted improvement was not up to par when compared to sotatercept, which has reported -25.6% and -34.4%, respectively in Phase 2 and 3 studies.
For the key secondary endpoint of change in 6-minute walking distance (6MWD) from baseline to week 24, the observed mean difference of 6.5 m numerically favored the seralutinib arm, but it was not statistically significant. Sotatercept here had greater effects of at least 25meters.
It’s difficult to make direct comparisons of the GOSS seralutinib vs Acceleron sotatercept data due to there being three different studies and patient populations were slightly different.
The question to ask then is: how would GOSS data look in sicker patient populations?
GOSS Had Enhanced Effects in Patients with Severe Baseline Disease
Both PVR and 6MWD measurements demonstrated enhanced effects in patients with more severe baseline disease. In WHO Functional Class III patients, a 21% reduction in PVR (P=0.0427) and 37 m improvement in 6MWD (P=0.0476) were observed for the seralutinib-treated group versus the placebo group.
Why Is This Important?
GOSS’ Phase 2 showed that they ultimately underperformed in “less sick” Class II PAH patients, but were showing efficacy in “sicker” Class III PAH population. The issue seemed to be patient selection more so than an ineffective drug. It can be argued that seralutinib may not be as good as Acceleron’s sotatercept. It doesn’t necessarily need to be. PAH is a progressive disease, a $6B market and most patients end up moving to triple therapy.
Bottom Line: GOSS’ Phase 2 flopped because it did not hold up to Acceleron’s sotatercept data in PAH. GOSS showed that they ultimately underperformed in “less sick” Class II PAH patients, but were showing efficacy in “sicker” Class III PAH population. The issue seemed to be patient selection more so than an ineffective drug. Acceleron received a $11.5B takeout. GOSS is trading at an enterprise value of sub-$200M. 1/50th of Acceleron takeout price.
The open label extension (OLE) data can support this notion that seralutinib is an effective drug for PAH. GOSS management believes that their drug works at a slower pace than sotatercept, so with more time, seralutinib will report similar data to sotatercept.
GOSS Is Presenting Open Label Extension Data in a Few Weeks
GOSS’ Phase 2 study (called TORREY) was a 24-week study (6-months). After the 24-weeks, patients moved into the OLE, which looks at patients out to 72 weeks (18-months). Seralutinib arm patients continued on seralutinib. Placebo patients cross-over onto seralutinib.
In the next few weeks, GOSS’ OLE will report on the first third of patients in TORREY. This is estimated to be about 25 patients in total. So approximately 12 patients that have been on seralutinib for 18-months. And 12 patients that were on placebo for the first 6-months and seralutinib for the second 12-months.
Importantly, the Company has disclosed that the first third of the patients in the TORREY study were “the least sick of the least sick”. So, if the OLE data is able to show durable disease modification in this mild population, the effect should be magnified in the remaining sicker patients.
Expectations for Seralutinib OLE:
- Report on 25 patients in total, each arm approx. 12 patients
- Placebo-cross patients: PVR declines and directional 6MWD improvements out to 72 weeks. In other words, OLE results in alignment with the initial results in the placebo controlled 24-week treatment period.
- Continued seralutinib patients: continued improvement in PVR out to week 72. This would be a differentiating factor for seralutinib vs sotatercept. Preventing progression in the form of a stable PVR out to Week 72 would be in line with sotatercept.
- Improvement on right heart metrics (right atrial area, right ventricular free wall strain, pulmonary arterial compliance)
- Clean AE profile
Full OLE data on all patients will be shared at medical meeting in either Q4 2023 or Q1 2024.
What Did Sotatercept’s OLE Data Show?
Acceleron’s sotatercept OLE demonstrated that the improvements during the initial 24-week treatment were maintained throughout the extension study, but there was a plateau.
Placebo-crossed patients saw statistically significant PVR declines and 6MWD improvements out to 24-mos (left side of chart below). These results were in alignment with the initial results in the placebo controlled 24-week treatment period.
Patients that continued sotatercept did not see continued improvement after the Phase 2 treatment period to 24-month. Rather their benefits were maintained. This is actually a good trend because PAH is a progressive disease, and sotatercept is able to halt it over a period of 24-months.
The plateau in the data shows that sotatercept does not provide further continued benefit out to 24-months. This is where GOSS believes their OLE data can differ – the longer a patient stays on a drug, the greater their improvement.
Note: GOSS’ OLE data will look out to 18mos vs sotatercept which went out to 24mos.
Bottom Line: GOSS’ open label extension (OLE) data could provide early indication that patients on seralutinib can have similar results to sotatercept, over the long run. Importantly, GOSS management believe that patients can also experience deepening of response beyond the 6-month endpoint. This is important because:
- PAH is a progressive disease. Existing PAH drugs are not cures. 5-year survival rates for Class 3 PAH patients is 60%.
- Existing treatments are not durable. They are able to show improvement during initial treatment periods, but plateau afterwards.
GOSS OLE can show disease modification up to 18-months, which would make it the only durable PAH option.
GOSS Management Confidence
Gossamer’s management has sounded very upbeat about the upcoming OLE data, comparing their drug’s efficacy as a tortoise, while sotatercept was the hare. Over a longer treatment period duration (18-mos OLE data), GOSS management believes data could be inline with sotatercept. To support this confidence, Chairman and CEO Faheem Hasnain bought $1M worth of stock in the open market during late March in the $1.20/share range.
OLE Data Could Narrow Valuation Gap
GOSS has about 96M shares outstanding, 200M in cash and $215M in debt. At an enterprise value of $160M, GOSS is trading at fraction of the $11.5B that Acceleron got from Merck. GOSS is initiating their Phase 3 PAH study in July, which they will need an additional $150M-$175M to fully fund to study completion. Positive OLE data could bring a subsequent financing announcement that may place a lid on a run in GOSS shares. However, it can be argued that a PAH treatment with potential reverse remodeling is worth far greater than a $300M post-money valuation.
PropThink contributors hold no positions in any of the names mentioned
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