Gossamer Bio is dropping its plan to pursue a little-used path to the public markets and will instead return to a conventional IPO that is reviewed by securities regulators.
The company initially filed for an IPO as activity at the SEC ground to a halt during the partial federal government shutdown. The San Diego startup, which made it public debut about a year ago with $100 million in backing and has since raised $230 million more, used a regulation that would allow it to go public at a fixed share price and without the SEC’s review of its prospectus.
Gossamer first indicated it planned to go public in a Dec. 21 filing—the day before most of the government shut down. In a subsequent filing on Jan. 23, Gossamer set the terms of its offering under the alternative IPO path, proposing to sell about 16.5 million shares, including about 2.2 million shares to its underwriters, at $16 apiece. The path locked in that price for 20 days, at which time shares would begin trading. Two days after that filing, however, as the shutdown stretched to a record length, President Donald Trump signed a bill to reopen the government for three weeks.
Now, in prepared remarks issued Wednesday, Gossamer said that it intends, once again, to take the traditional path to the public markets. It says the IPO terms are unchanged, but it is asking the regulator to accelerate its review of the paperwork to allow it to go public before the date its stock offering would have automatically become effective under the fixed-price path.
A company that decides to take the fixed-price route is likely very comfortable with its valuation—and with its disclosures to investors, said Vasilios Kofitsas, a managing director at Boston, MA-based Back Bay Life Science Advisors. That’s because it opens up the company to additional risk.
“There’s certainly risk from a company perspective should you go this route and price successfully (and) and the SEC comes back and notices it has issues with lack of disclosures, for example,” Kofitsas said. “Also, there is market risk: Investors have to be really comfortable with your disclosures as well. This is a risk you don’t take in a traditional IPO, since it has been cleared by the SEC, for all intents and purposes.”
Gossamer, which has applied for a Nasdaq listing under the stock symbol “GOSS,” previously said that the government shutdown prompted it to take the alternative path to raising money from the public markets. It acknowledged the potential consequences, including a possible hit to its stock price if the SEC, once reopened, found any problems with the offering.
The company plans to use the IPO proceeds to fund clinical trials, including tests of its lead drug candidate, GB001. The oral drug is an experimental treatment for a hard-to-manage form of asthma, a chronic lung condition that affects one in 13 people in the U.S, according to the Centers for Disease Control and Prevention.
The biotech was founded by former Receptos executives in 2015 following that company’s acquisition by Summit, NJ-based Celgene (NASDAQ: CELG) for about $7.2 billion. Its CEO, co-founder Sheila Gujrathi, formerly Receptos’s chief medical officer, was promoted from chief operating officer in July. During 2018, Gossamer increased its headcount from 11 to 104 full-time employees, according to documents filed with regulators.