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Gossamer sells rights to drug it hopes can rival a new Merck therapy

Gossamer Bio has sold rights to an experimental drug that could rival a new medicine from Merck & Co., in a deal at least one analyst believes “bodes well” for the company.

On Monday, Gossamer and the Italy-based Chiesi Farmaceutici announced a collaboration and licensing agreement to develop and eventually sell the drug, which is called seralutinib. Gossamer has been testing seralutinib as a potential treatment for an uncommon disease known, in short, as PAH, and is currently recruiting patients in a late-stage clinical trial meant to serve as the basis for approval applications.

PAH, or pulmonary arterial hypertension, is a form of high blood pressure in the lungs. The pressure makes the heart work harder to pump blood, over time causing the organ to weaken or even fail. The Food and Drug Administration has approved several blood vessel-widening medicines that help alleviate the symptoms of PAH, and more recently cleared a first-of-its-kind therapy from Merck & Co.

Unlike other treatments, Merck’s Winrevair inhibits a protein that thickens the walls of blood vessels. The therapy is injected every three weeks, and is seen as a valuable product by both Wall Street and Merck, which acquired it through an $11.5 billion buyout of Acceleron Pharma in 2021. Analysts have predicted Winrevair could generate annual sales anywhere between $1 billion to $8 billion at its peak.

Gossamer believes there’s still room in the market for its drug, as it also works differently than available treatment options and comes as an inhaled powder. Results from a smaller PAH study encouraged the company to advance seralutinib into that late-stage trial, titled “Prosera,” which will enroll 350 participants and complete by late 2025.

While Gossamer remains confident in its drug, company investors have questioned the strength of those earlier trial results and whether seralutinib can truly compete with Winrevair. Shares of Gossamer lost three-quarters of their value in late 2022, when findings from the smaller study were announced. As of Monday morning, they traded at about 75 cents apiece.

Joseph Schwartz, an analyst at investment firm Leerink Partners, wrote in a note to clients that the new deal with Chiesi “could address many of the concerns investors have” with Gossamer. Chief among those concerns, according to Schwartz, is the company’s ability to enroll and fund Prosera.

The collaboration “bodes well” for Gossamer “based on the amount of diligence that typically precedes a collaboration,” the analyst wrote.

Per deal terms, Gossamer will continue leading the development of seralutinib in PAH as well as another, related indication the companies are interested in: pulmonary hypertension associated with interstitial lung disease. Though Gossamer and Chiesi will evenly split development costs, the former is responsible for financing Prosera.

In the U.S., the partners plan to evenly share commercial profits and losses. Gossamer will helm commercialization efforts for those two diseases, while Chiesi will take the lead for any additional indications.

Chiesi will also have the exclusive right to commercialize seralutinib outside of the U.S. Gossamer will get mid-to-high teens royalties on net sales. Chiesi has agreed to pay Gossamer $160 million as a development reimbursement, and may shell out up to $326 million more, provided certain regulatory and sales milestones are achieved.