Galectin Therapeutics Inc. — Form 10-Q Summary
Business context and reporting period
Clinical-stage biopharmaceutical company developing galectin-targeting therapies for fibrotic disease and cancer. The filing covers the quarter and nine months ended September 30, 2015, compared with the corresponding 2014 periods. The company reported no significant revenue and has operated at a loss since inception.
The primary development focus is GR-MD-02, including Phase 2 studies for NASH-related fibrosis and cirrhosis and a Phase 1B melanoma immunotherapy study. GM-CT-01 remained in development but was not the active development focus.
Key financial metrics
| Metric | Three months ended September 30 | Nine months ended September 30 |
|---|---|---|
| Revenue | No significant revenue | No significant revenue |
| Research and development expense | $4.5 million in 2015 vs. $2.0 million in 2014 | $10.2 million vs. $6.3 million |
| General and administrative expense | $1.4 million vs. $1.5 million | $5.2 million vs. $5.4 million |
| Total operating expense | $5.9 million vs. $3.5 million | $15.4 million vs. $11.7 million |
| Net loss | $5.9 million vs. $3.5 million | $15.4 million vs. $12.1 million |
| Net loss applicable to common stockholders | $6.2 million vs. $3.9 million | $16.2 million vs. $13.0 million |
| Basic and diluted loss per share | $0.26 loss vs. $0.17 loss | $0.69 loss vs. $0.60 loss |
| Cash used in operating activities | Not separately provided | $12.4 million vs. $9.3 million |
| Cash and cash equivalents | $21.3 million at September 30, 2015, compared with $29.1 million at December 31, 2014 |
There was no debt reported. Current liabilities were $1.7 million, consisting primarily of accounts payable and accrued expenses. Redeemable convertible preferred stock totaled approximately $7.0 million in carrying value, with stated redemption values of approximately $11.6 million across the Series B-1, B-2 and C securities.
Net cash provided by financing activities was $4.6 million for the first nine months of 2015, primarily from common-stock issuance, compared with $30.4 million in the prior-year period. The company had 23.9 million common shares outstanding as of November 5, 2015.
Material changes versus the prior comparable period
- Research and development expense increased 126% in the quarter and 61% year to date, primarily because of Phase 2 clinical-trial costs for GR-MD-02.
- Clinical-program expense increased to $7.2 million year to date from $2.5 million, while preclinical expense declined to $1.2 million from $2.1 million as preclinical preparation neared completion.
- General and administrative expense declined modestly, primarily due to lower stock-based compensation and legal fees.
- Operating cash use increased by $3.1 million year to date, reflecting expanded clinical activity.
- Cash declined by $7.8 million during the first nine months of 2015, compared with a $20.7 million increase in the 2014 period, when the company raised substantially more equity capital.
- The company issued approximately 1.3 million common shares under its at-the-market program during the first quarter for approximately $4.5 million of net proceeds and 17,800 shares during the third quarter for approximately $41,000.
- Stock-based compensation was $2.5 million year to date, down from $3.3 million, but 3.34 million options and 5.37 million warrants remained outstanding at September 30, 2015.
Guidance, outlook, risks and unusual items
Management stated that $21.3 million of unrestricted cash was expected to fund currently planned operations through September 30, 2016. Funding beyond that point depends on additional financing or achieving profitable operations, and no assurance was provided. The company expects continuing losses and cannot presently estimate the timing or cost of commercialization or future material cash inflows.
- The NASH-CX Phase 2 trial began enrolling in June 2015. It planned to enroll 156 patients and target top-line data by the fourth quarter of 2017.
- The NASH-FX Phase 2 study began in the third quarter of 2015, with 30 patients planned and top-line data expected in the third quarter of 2016.
- An open-label drug-interaction study reported no drug interaction, serious adverse events or drug-related adverse events observed with the tested doses, supporting broader Phase 2 eligibility.
- Material risks include clinical-trial delays or failures, inability to demonstrate safety or efficacy, regulatory uncertainty, manufacturing and intellectual-property risks, dependence on outside capital and potential inability to secure strategic partnerships.
- Shareholder class-action and derivative litigation remained pending. The company disputed the allegations, could not estimate potential losses, and stated that an adverse outcome could materially affect a future reporting period despite its assessment that reasonably possible losses were not currently material.
- Galectin Sciences LLC was consolidated as a less-than-wholly-owned subsidiary after the company funded expenses not contributed by its joint-venture partner; the company’s ownership reached 71.1% at September 30, 2015.
- No material off-balance-sheet arrangements or significant market-risk exposure were reported. Management concluded disclosure controls were effective at a reasonable assurance level.
Important facts for investors to verify
- Whether the projected cash runway through September 30, 2016 remains adequate as Phase 2 enrollment and trial costs increase.
- Actual enrollment progress, cost, safety results and eventual efficacy results for the NASH-CX and NASH-FX studies.
- Whether additional equity or other financing will be required and the resulting dilution, including the impact of outstanding options, warrants and convertible preferred stock.
- The status and potential financial exposure of the securities class action and derivative lawsuits.
- Whether GR-MD-02 can obtain regulatory approval and whether the company can establish a commercially viable product before cash resources are exhausted.