Galectin Therapeutics Inc. 2018 Q2 Form 10-Q Summary
Business context and reporting period
Galectin Therapeutics is a clinical-stage biopharmaceutical company developing galectin-targeting therapies for fibrotic disease, severe skin disease, and cancer. Its lead candidate, GR-MD-02, is primarily being developed for NASH cirrhosis. The filing covers the three and six months ended June 30, 2018; financial statements are unaudited.
The company has no significant revenue and has operated at a loss since inception. Its products remain in development and are not commercially approved.
Financial condition and key metrics
| Metric | Three months ended June 30 | Six months ended June 30 |
|---|---|---|
| Revenue | No significant revenue | No significant revenue |
| Research and development expense | $1.5 million in 2018 vs. $3.4 million in 2017 | $3.8 million in 2018 vs. $7.2 million in 2017 |
| General and administrative expense | $2.3 million vs. $1.1 million | $4.2 million vs. $2.2 million |
| Total operating loss | $3.8 million vs. $4.5 million | $7.9 million vs. $9.5 million |
| Net loss | $3.8 million vs. $4.5 million | $8.1 million vs. $9.4 million |
| Net loss applicable to common stockholders | $4.1 million vs. $4.8 million | $8.7 million vs. $10.0 million |
| Loss per common share | $0.11 vs. $0.14 | $0.23 vs. $0.29 |
| Operating cash flow | Not separately presented | $(6.6) million vs. $(8.9) million |
Cash and cash equivalents were $10.5 million at June 30, 2018, compared with $3.1 million at December 31, 2017. Total assets were $11.2 million, while current liabilities were $1.4 million. The company had no borrowings under its $10 million related-party line of credit, which is available through December 31, 2018 and matures, together with interest, on December 31, 2019.
Financing activities provided $14.0 million during the first six months of 2018, primarily from exercises of common-stock warrants and options and sales of common stock. In June 2018, the company issued 618,614 common shares for approximately $5.2 million of net proceeds under its 2017 at-market issuance agreement.
Stock-based compensation was $2.6 million for the first six months of 2018, compared with $0.6 million in the prior-year period. The company reported no meaningful operating margins because it has no significant revenue and incurred operating losses.
Material changes versus the prior comparable period
- Research and development expense declined 57% for the second quarter and 48% for the first six months, principally because Phase 2 clinical activities wound down late in 2017.
- General and administrative expense increased 113% for the second quarter and 86% for the first six months, primarily due to higher non-cash stock-based compensation and increased business development and investor-relations costs.
- Net cash used in operating activities improved by $2.3 million year over year, to $6.6 million.
- Cash increased by $7.4 million during the first six months of 2018, compared with a $6.2 million decrease in the prior-year period, primarily because of equity financing proceeds.
- Common shares outstanding increased to 40.6 million at June 30, 2018 from 35.8 million at December 31, 2017. Potential dilution included 10.8 million warrant shares, 4.3 million option shares, and 4.3 million shares issuable upon preferred-stock conversion.
Guidance, outlook, commentary, risks, and unusual items
Management stated that available unrestricted cash, together with availability under the line of credit, should fund currently planned operations at least through June 30, 2019. Funding beyond that point depends on additional financing or achieving profitable operations, neither of which is assured. The company expects continuing losses and has made no assurance that it will generate revenue or profit.
Following a May 2018 FDA meeting, the company announced plans for a Phase 3 program for GR-MD-02 in NASH cirrhosis patients without esophageal varices. Potential primary endpoints include change in hepatic venous pressure gradient or progression to esophageal varices. Trial timing, design, and costs had not yet been finalized in the filing. The FDA had not granted Breakthrough Therapy designation, although the program retained Fast Track designation.
The Phase 2b NASH-CX trial did not achieve statistical significance for the primary endpoint in the total patient population. Management highlighted post-hoc benefits in patients without baseline esophageal varices, but acknowledged that a larger Phase 3 trial may not replicate those results. The company also reported that its NASH-FX trial did not meet its primary or secondary biomarker endpoints.
- Key risks include clinical-trial failure, uncertain efficacy and safety, regulatory delays or rejection, inability to obtain additional capital, dependence on strategic partners, intellectual-property risks, competition, stock-price volatility, and potential litigation.
- The company expects significant costs related to Phase 3 planning, manufacturing clinical supplies, reproductive toxicology studies, and possible foreign regulatory filings.
- The related-party line of credit is available from director and shareholder Richard E. Uihlein; no borrowings had occurred through June 30, 2018.
- Interest expense included $169,000 of non-cash amortization during the first six months of 2018 related to warrants issued in connection with the line of credit.
- No significant pending legal proceedings were disclosed, and management concluded disclosure controls were effective at a reasonable assurance level.
Important facts for investors to verify
- Whether the company can execute and finance the planned Phase 3 NASH-cirrhosis program through completion.
- The final Phase 3 protocol, selected primary endpoint, patient population, timeline, estimated cost, and FDA alignment.
- Whether the post-hoc NASH-CX findings are reproducible in a prospectively designed trial.
- Cash-burn trends, remaining availability and terms of the related-party credit facility, and the timing and terms of future equity financings.
- The effect of outstanding options, warrants, and convertible preferred stock on future dilution.
- The magnitude and sustainability of stock-based compensation and other non-cash expenses.