Business Context and Reporting Period
Galectin Therapeutics Inc. is a clinical-stage biopharmaceutical company developing galectin-targeting therapies for fibrotic disease and cancer. Its lead candidate, belapectin, is being evaluated in the global NAVIGATE adaptive Phase 2b/3 trial for prevention of esophageal varices in patients with NASH cirrhosis and portal hypertension. The company has no revenues and has incurred losses since inception.
This unaudited Form 10-Q covers the three months ended March 31, 2022, compared with the three months ended March 31, 2021. The company reported 59.4 million common shares outstanding as of May 9, 2022.
Key Financial Metrics
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Revenue | $0 | $0 | No change |
| Research and development expense | $8.058 million | $4.899 million | Up 64% |
| General and administrative expense | $1.877 million | $1.418 million | Up 32% |
| Total operating expenses | $9.935 million | $6.317 million | Up 57% |
| Net loss | $9.932 million | $6.338 million | Loss increased 57% |
| Net loss applicable to common stockholders | $9.916 million | $6.340 million | Loss increased |
| Basic and diluted loss per share | $0.17 | $0.11 | Loss per share increased |
| Net cash used in operating activities | $8.042 million | $6.382 million | Use increased 26% |
Because the company has no revenue, gross margin and operating margin are not meaningful or clearly provided in the filing. The company’s operating loss was $9.935 million in Q1 2022.
- Cash and cash equivalents were $31.606 million at March 31, 2022, down from $39.648 million at December 31, 2021.
- Total liabilities were $39.808 million, including $29.275 million of related-party convertible notes payable and accrued interest, net of discounts.
- The three related-party convertible notes have aggregate principal of $30 million, bear stated interest of 2% annually, and mature in 2025 unless converted.
- Derivative liabilities related to contingent interest features totaled $901,000 at March 31, 2022.
- Stockholders’ equity was a deficit of $7.916 million at March 31, 2022, compared with equity of $893,000 at December 31, 2021.
- No financing cash flows occurred during the quarter, and no shares were issued under the company’s at-the-market offering.
Material Changes Versus the Prior Comparable Period
- Research and development expense increased by $3.159 million, primarily due to higher NAVIGATE clinical trial costs. Clinical activities represented $6.869 million of Q1 2022 research and development expense, compared with $4.283 million in Q1 2021.
- General and administrative expense increased by $459,000, principally due to a $446,000 increase in non-cash stock-based compensation.
- Total stock-based compensation expense rose to $858,000 from $254,000.
- Net cash used in operating activities increased by $1.660 million, reflecting increased clinical development spending.
- Cash declined by $8.042 million during the quarter, while accrued research and development costs and other accrued expenses increased to $7.225 million from $6.359 million.
- The company granted 745,000 stock options during the quarter. Options outstanding increased to 5.631 million, while warrants outstanding remained 10.858 million.
- The company completed enrollment in its hepatic impairment study in February 2022. NAVIGATE Phase 2b enrollment completion was expected around the end of September 2022.
Guidance, Outlook, Risks, and Unusual Items
Management believes existing unrestricted cash, including availability under its financing arrangements, is sufficient to fund currently planned operations through at least May 16, 2023. The company expects to require approximately $40 million to $45 million in additional capital to fund NAVIGATE through the planned interim analysis, estimated for mid-2024, as well as manufacturing, scientific support, and general and administrative costs.
Management states that additional financing will be required and that there is no assurance it can be obtained on favorable terms. If the company cannot raise capital before May 16, 2023, it may be required to cease operations. The filing states that the financial statements do not include adjustments that might be necessary if the company is unable to continue as a going concern.
- NAVIGATE enrollment and regulatory activity may continue to be affected by COVID-19, particularly in Europe. The company activated sites in Latin America to address slower-than-expected European enrollment.
- The NAVIGATE adaptive design includes interim dose selection, possible sample-size and randomization changes, refinement of eligibility criteria, or termination for efficacy or futility.
- Clinical development depends on demonstrating safety and efficacy, obtaining regulatory approvals, maintaining trial enrollment, and securing manufacturing capacity. The filing does not provide a reliable estimate of the ultimate cost or timing of commercialization.
- Belapectin’s oncology program is in development, including plans for a Phase 2 trial in advanced or metastatic head and neck cancer in combination with a PD-1 inhibitor; no commercialization revenue is reported.
- The company has significant dilution potential from convertible notes, options, warrants, and preferred stock. Potential common shares excluded from diluted loss per share totaled approximately 22.4 million at March 31, 2022.
- The company reported no significant pending legal proceedings and no defaults upon senior securities.
Investor Verification Items
- Verify the company’s ability to raise the estimated $40 million to $45 million required for NAVIGATE and operations beyond May 16, 2023.
- Track NAVIGATE enrollment, the expected Phase 2b completion around September 2022, the interim analysis timing, and any FDA or protocol changes.
- Assess quarterly cash burn against the $31.606 million cash balance and the related-party debt maturities in 2025.
- Review clinical efficacy and safety results for belapectin, including the hepatic impairment study and NAVIGATE interim analysis.
- Evaluate dilution risk from $30 million of convertible notes, 10.858 million warrants, 5.631 million options, and preferred-stock conversion rights.
- Confirm whether COVID-19, site activation, patient recruitment, regulatory delays, or trial execution materially alter the company’s liquidity forecast.