Business Context and Reporting Period
Galectin Therapeutics Inc. is a clinical-stage biopharmaceutical company developing galectin-targeting therapies for fibrotic disease, severe skin diseases and cancer. This unaudited Form 10-Q covers the three and nine months ended September 30, 2017, with comparative periods ended September 30, 2016.
The lead candidate, GR-MD-02, was being evaluated primarily in the Phase 2b NASH-CX trial for NASH cirrhosis. The company had no significant revenue and had incurred losses since inception.
Financial Results and Liquidity
| Metric | Three Months Ended September 30 | Nine Months Ended September 30 |
|---|---|---|
| Revenue | No significant revenue | No significant revenue |
| Research and development expense | $3.5 million vs. $3.3 million | $10.7 million vs. $11.9 million |
| General and administrative expense | $0.9 million vs. $1.2 million | $3.2 million vs. $5.0 million |
| Total operating loss | $4.4 million vs. $4.5 million | $13.9 million vs. $16.9 million |
| Net loss | $4.4 million vs. $4.5 million | $13.9 million vs. $16.8 million |
| Net loss applicable to common stockholders | $4.7 million vs. $4.6 million | $14.7 million vs. $17.5 million |
| Loss per common share | $0.13 vs. $0.16 | $0.42 vs. $0.60 |
| Net cash used in operating activities | Not separately provided | $12.0 million vs. $11.5 million |
Cash and cash equivalents were $7.0 million at September 30, 2017, down from $15.4 million at December 31, 2016. Financing activities provided $3.6 million during the first nine months, primarily from common-stock and warrant issuances. The filing does not identify outstanding borrowings or debt financing.
Current liabilities were $4.3 million, including $4.2 million of accrued expenses. The company reported substantial doubt about its ability to continue as a going concern and estimated that cash on hand would fund currently planned operations only through February 2018.
Operating margins are not meaningful because the company had no significant revenue and generated operating losses. Stock-based compensation was $0.8 million in the first nine months of 2017, compared with $2.0 million in the prior-year period.
Material Changes Versus the Prior Comparable Period
- First-nine-month operating loss declined by $3.0 million, or approximately 18%, primarily because research and development expense declined 10% and general and administrative expense declined 37%.
- Third-quarter research and development expense increased 7% because of the timing of NASH-CX clinical-trial costs; first-nine-month clinical-program expense decreased primarily because of timing and lower drug-manufacturing and preparation costs.
- General and administrative expense declined due to lower legal, investor-relations and stock-based compensation costs and the absence of the prior-year severance and accelerated compensation charges.
- Despite the lower reported net loss, operating cash use increased by $0.4 million to $12.0 million because of the timing of research and development payments.
- Common shares outstanding increased to 35.6 million at September 30, 2017 from 32.9 million at December 31, 2016. The company also had 12.2 million warrants, 4.7 million options and 4.3 million shares issuable upon preferred-stock conversion, creating potential dilution.
Guidance, Outlook, Risks and Unusual Items
- The company expected to report top-line NASH-CX data in early December 2017 after 151 patients completed the 52-week infusion period and final HVPG and liver-biopsy assessments.
- The NASH-CX trial had a reported approximately 7% dropout rate and was expected to have approximately 151 completing subjects. The filing does not provide efficacy results from the trial.
- The NASH-FX trial did not meet its primary or secondary biomarker endpoints. Management attributed the result in part to the four-month treatment duration and the study's small size; GR-MD-02 was reported as safe and well tolerated in that study.
- Management stated that clinical activity costs could increase and fluctuate as trials progress, but it could not forecast useful estimates of future commercialization costs or timing of material cash inflows.
- Additional financing or profitable operations would be required after available cash is exhausted. No assurance was given that financing or strategic partnerships would be obtained.
- Investor risks include clinical-trial failure or delay, regulatory rejection or suspension, inability to demonstrate safety or efficacy, dependence on outside capital, competition, intellectual-property risks and limited trading volume.
- Shareholder derivative litigation remained pending on appeal in the Nevada Supreme Court. The company could not reasonably estimate potential losses, although it did not believe currently reasonably possible losses would be material based on information available at filing.
- The company had no significant off-balance-sheet arrangements and reported effective disclosure controls as of September 30, 2017.
Important Facts for Investors to Verify
- Whether the December 2017 NASH-CX top-line data supported efficacy and the planned development path for GR-MD-02.
- Actual cash usage after September 30, 2017 and whether new equity, partnership or other financing was secured before the projected February 2018 cash runway expired.
- The terms, pricing and dilution from the company’s at-the-market offering, private placement, outstanding warrants, options and convertible preferred stock.
- Subsequent developments in the Nevada shareholder litigation and any related financial exposure.
- Whether clinical-trial, manufacturing and regulatory costs materially exceeded the company’s stated operating plan.