Gossamer’s Faheem Hasnain defends a round of positive PAH data as a clear win. But can these PhII results stand up to scrutiny?

Bioregnum Opinion Column by John Carroll

Gossamer Bio $GOSS posted a statistically significant improvement for its primary endpoint in the key Phase II TORREY trial for lead drug seralutinib on Tuesday morning. But CEO Faheem Hasnain has some explaining to do on the important secondary of the crucial six-minute walk distance test — which will be the primary endpoint in Phase III — as the data on both endpoints fell short of expectations, missing one analyst’s bar on even modest success.

Investors wasted no time registering their dissatisfaction, with shares tumbling 70% after the data dropped.

That no doubt will keep the odds makers busy reassessing the biotech’s prospects going into a pivotal showdown as Merck pushes ahead with its own PAH drug — sotatercept — that has demonstrated some impressive Phase III results, including a win on the 6MWD test. (Merck has yet to post the data, though). But before writing them off as a weak rival, Hasnain wants you to hear his side of the story — with caveats on patient recruitment and the pandemic that he feels set the stage for a strong comeback in Phase III.

In a preview of the data release and investor call to come, Hasnain tells me that their inhaled tyrosine kinase inhibitor hit a p-value of 0.0310 at week 24 in pulmonary vascular resistance, or PVR. So rack up a positive score on the key test in the study. Looking at the comparative difference in the six-minute walk test, though, researchers found a numerical improvement of only 6.5 meters favoring the drug arm, where p = 0.5972, unlikely to excite any analysts.

Bottom line for Hasnain:

We’re going to run right to Phase III like hell.

The Phase II data raise questions about just how good this drug can be. But Hasnain feels they can explain the numbers and why they should improve greatly in the late-stage test to come, which he feels can be recruited in about 18 months, just as Merck was able to do.

Hasnain and the analysts knew going into Phase II that a six-minute walk distance test in a small mid-stage study can be enormously problematic — just ask BridgeBio how that worked for them. The 6MWD results are often problematic in small patient groups, something that’s been noted by a variety of biotech execs — including some who have scored against the odds. And Hasnain was careful to point out that the study was not powered on that score.

Some of the analysts, though, have noted Gossamer execs’ increased coolness on the 6MWD, indicating a growing likelihood of underwhelming investors on that score.

And here we are.

Hasnain, who’s been running the gamut of a market meltdown for biotech on one hand and some aggressive shorts on the other, isn’t making any concessions on an endpoint that now looms much larger in Phase III. He notes a significantly enhanced improvement in the 6MWD for more severely afflicted patients.

From the biotech’s statement:

In FC III patients, a 21% reduction in PVR (p =0.0427) and 37m improvement in 6MWD (p = 0.0476) were observed for the seralutinib arm vs. placebo. In patients with a baseline REVEAL 2.0 Risk Score of 6 or greater, a 23% reduction in PVR (p = 0.0134) and 22m improvement in 6MWD (p = 0.2482) were observed for the seralutinib arm vs. placebo.

He’s also gung-ho on some other positive endpoints to point to.

“We hit on statistical significance on right heart function,” Hasnain tells me. “That’s what people die from — right heart failure.”

SVB’s Joseph Schwartz did his own assessment going into the Phase II data countdown, concluding recently that Gossamer would likely post a 20% to 30% improvement on PVR compared to placebo and a modest improvement in the 6MWD test.

The bear case: Less than a 20% improvement in PVR and less than 15 meters on the 6MWD.

But there are reasons why the data aren’t as good as some may have expected or prayed for, says the CEO. Chief among them, says Hasnain, is that they were forced by the Merck study, as well as the general conditions created by the pandemic, to recruit a less-sick group of patients for the Phase II. Now that they are steering into Phase III in a post-pandemic environment, he says, they can raise the criteria for recruitment and set the stage for demonstrating greater efficacy in Phase III.

And as for any unfortunate comparisons with sotatercept, Hasnain sees a shot at highlighting synergies in a field where the five-year survival rate remains poor for PAH.

Another factor to be considered in the PAH race is United Therapeutics, an established player which has been angling ahead with its own contenders in the clinic.

Hasnain complains that the company has been plagued by shorts, but all biotechs are feeling a bit put upon these days, as the economy has ended the industry’s darling status on Nasdaq and made it difficult to raise funds. For Gossamer, the response was a $120 million raise in July and a stock price that has been on something of a roller coaster ride, but without the sickening plunges of 70% or more that have scuttled many stocks.

Now we’ll see how the market reacts to Phase II, as Gossamer and its chief plot a course for the final showdown.

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