Galectin Therapeutics Inc. — 2017 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 diseases, and cancer. The filing covers the quarter and six months ended June 30, 2017. The company has no significant revenues and has operated at a loss since inception.
The lead candidate, GR-MD-02, was being evaluated primarily in the Phase 2b NASH-CX trial for NASH cirrhosis. Enrollment of 162 patients was completed in September 2016, and top-line data was expected in early December 2017. The NASH-FX trial in advanced fibrosis was complete but did not meet its primary or secondary biomarker endpoints.
Financial Results and Key Metrics
| Metric | Three Months Ended June 30 | Six Months Ended June 30 |
|---|---|---|
| Revenue | None significant | None significant |
| Research and development expense | $3.444 million, down 19% | $7.216 million, down 16% |
| General and administrative expense | $1.070 million, down 18% | $2.244 million, down 40% |
| Total operating expenses | $4.514 million | $9.460 million |
| Net loss | $4.508 million | $9.445 million |
| Net loss applicable to common stockholders | $4.809 million | $10.018 million |
| Loss per common share | $0.14 | $0.29 |
| Net cash used in operating activities | Not separately presented | $8.865 million |
Cash and cash equivalents were $9.127 million at June 30, 2017, compared with $15.362 million at December 31, 2016. Total assets were $9.329 million, total liabilities were $3.512 million, and stockholders’ equity was $4.094 million. The filing reports no debt; liabilities primarily consisted of accounts payable, accrued expenses, and accrued preferred dividends.
Financing activities provided $2.630 million during the first six months, including proceeds from common stock and warrants. The company issued shares through its at-the-market programs and a February 2017 private placement. Preferred stock dividends of $573,000 were paid in common stock.
Research and development represented approximately 76% of operating expenses for the six-month period. Stock-based compensation was $599,000 for the six months, compared with $1.625 million in the prior-year period.
Material Changes Versus the Prior Comparable Period
- Six-month research and development expense decreased $1.387 million, primarily because of lower clinical, manufacturing, preclinical, and stock-based compensation costs.
- Six-month general and administrative expense decreased $1.498 million. The prior-year period included $300,000 of severance and $578,000 of accelerated stock-based compensation related to the termination of the executive chairman, as well as higher investor-relations costs.
- Six-month net loss improved by $2.874 million, from $12.319 million to $9.445 million, although operating cash use increased by $765,000 because of the timing of research and development payments.
- Cash declined $6.235 million during the first six months of 2017, compared with a $7.843 million decline in the prior-year period.
- Weighted-average shares outstanding increased to 34.312 million from 29.001 million, reflecting equity financing and other share issuances.
- The NASH-FX study failed to meet its primary and secondary biomarker endpoints, while management continued to expect NASH-CX top-line results in early December 2017.
Liquidity, Outlook, Risks, and Unusual Items
Management stated that the $9.1 million of unrestricted cash at June 30, 2017 was sufficient to fund currently planned operations through January 2018. Continued operations after existing cash is exhausted depend on additional financing, strategic partnerships, or profitable operations; no assurance was provided. The company expects losses to continue for the foreseeable future.
Key development milestones included completion of most NASH-CX dosing, an expected approximately 151 trial completers by fall 2017, and planned top-line data in December 2017. Cancer immunotherapy studies with GR-MD-02 remained ongoing, while additional psoriasis development was not expected without a strategic partnership.
Material risks include dependence on additional capital, clinical-trial delays or unfavorable results, regulatory approval uncertainty, inability to establish partnerships, intellectual-property risks, competition, stock-price volatility, and the absence of commercial revenue. The filing also identifies pending appeals related to shareholder derivative litigation. The company could not reasonably estimate potential losses, although it did not believe reasonably possible losses were material based on information then available.
On August 11, 2017, after the reporting period, the company amended its employment agreement with its chief financial officer to correct a severance provision. The filing stated that disclosure controls and procedures were effective at a reasonable assurance level.
Investor Verification Checklist
- Verify the December 2017 NASH-CX top-line results and whether the primary hepatic venous pressure gradient endpoint was achieved.
- Assess the company’s post-quarter financing activity and whether available capital extended beyond the stated January 2018 runway.
- Review dilution from common stock offerings, preferred stock conversion rights, options, and approximately 12.249 million outstanding warrants.
- Evaluate the implications of the unsuccessful NASH-FX biomarker trial for the broader GR-MD-02 development program.
- Monitor regulatory, clinical, manufacturing, and partnership developments for GR-MD-02.
- Review the status and potential financial impact of the pending Nevada shareholder litigation appeal.