Galectin Therapeutics Inc. — Q2 2021 Form 10-Q Summary
Business Context and Reporting Period
Galectin Therapeutics is a clinical-stage biopharmaceutical company developing galectin-targeting therapies for fibrotic disease and cancer. Its primary program is belapectin (GR-MD-02), including the NAVIGATE adaptive Phase 2b/3 trial for prevention of esophageal varices in patients with NASH cirrhosis. The filing covers the quarter and six months ended June 30, 2021; financial statements are unaudited.
Key Financial Metrics
| Metric | Three Months Ended June 30 | Six Months Ended June 30 |
|---|---|---|
| Revenue | $0; the company has had no revenues | $0; the company has had no revenues |
| Research and development expense | $6.450 million | $11.349 million |
| General and administrative expense | $1.743 million | $3.161 million |
| Total operating expenses | $8.193 million | $14.510 million |
| Net loss | $8.449 million | $14.787 million |
| Net loss applicable to common stockholders | $8.514 million | $14.854 million |
| Net loss per share | $0.15 | $0.26 |
| Net cash used in operating activities | Not separately provided | $12.359 million |
Because the company has no revenue, gross profit and operating margins are not meaningful. The company reported a cumulative retained deficit of $254.850 million at June 30, 2021.
- Cash and cash equivalents were $31.598 million, compared with $27.142 million at December 31, 2020.
- Total assets were $33.405 million and total liabilities were $16.289 million.
- Debt included a $10.0 million related-party convertible note issued April 16, 2021. The note bears 2% annual interest, matures April 16, 2025, and is convertible at the holder’s option at $5.00 per share. The balance sheet reported $9.643 million of convertible note payable and accrued interest, net of debt discount.
- A $0.592 million derivative liability related to the note’s contingent interest feature was recorded at June 30, 2021.
- The company also had an undrawn $10.0 million unsecured related-party line of credit, available for borrowings through December 31, 2021, with repayment due December 31, 2022.
- Net financing proceeds during the first six months were $16.815 million, consisting of $10.0 million from the convertible note, $3.864 million from the ATM equity offering, and $2.951 million from warrant exercises.
Material Changes Versus the Prior Comparable Period
- Second-quarter R&D expense increased 38% to $6.450 million from $4.681 million; six-month R&D expense increased 66% to $11.349 million from $6.825 million. The increase primarily reflected NAVIGATE clinical trial activity.
- Second-quarter G&A expense increased 23% to $1.743 million from $1.421 million; six-month G&A expense increased 10% to $3.161 million from $2.861 million. Drivers included higher insurance, investor relations and business development costs, and stock-based compensation.
- Six-month net loss increased to $14.787 million from $9.670 million, while operating cash burn increased to $12.359 million from $6.975 million.
- Cash increased by $4.456 million during the first six months of 2021, compared with a $6.712 million decrease in the prior-year period, primarily because of the related-party note, ATM issuance and warrant exercises.
- Common shares outstanding increased to 59.275 million at June 30, 2021 from 57.077 million at December 31, 2020. Additional potential dilution included 11.358 million warrants, 4.920 million options, 2.049 million shares issuable upon note conversion and 0.510 million shares issuable upon preferred-stock conversion.
- The change in fair value of the contingent-interest derivative produced $0.172 million of additional expense in the second quarter and first six months of 2021.
Guidance, Outlook, Risks and Unusual Items
- Management expects losses to continue for the foreseeable future and stated that the company has sufficient cash, including the available credit line, to fund currently planned operations through at least September 30, 2022.
- The company expects to require approximately $30 million to $35 million of additional capital to fund NAVIGATE through the planned interim analysis in the second half of 2023, including trial, manufacturing, scientific-support and corporate costs.
- Management stated that failure to raise additional capital before September 30, 2022 could require the company to cease operations. The financial statements do not include adjustments for a potential inability to continue as a going concern.
- NAVIGATE enrollment was affected by COVID-19, including site restrictions, patient health risks and pressure on medical resources. Management estimated enrollment completion around the end of 2021, but acknowledged substantial uncertainty.
- Clinical, regulatory and financing risks include failure to demonstrate safety or efficacy, trial delays or suspension, difficulty obtaining FDA approval, inability to secure strategic partnerships or additional financing, and unfavorable financing terms.
- Clinical-trial accruals are estimated based on enrollment, active sites and treatment duration and may be adjusted when additional information becomes available.
- The company reported no significant pending legal proceedings and no material off-balance-sheet arrangements. Disclosure controls were concluded to be effective as of June 30, 2021.
Important Facts for Investors to Verify
- Actual NAVIGATE enrollment progress, timing of the interim analysis and the effect of COVID-19 or other operating delays.
- Cash burn relative to the stated September 2022 funding runway and the timing, size and terms of required $30 million to $35 million financing.
- Terms, conversion consequences and potential dilution from the $10 million related-party convertible note and outstanding options, warrants and preferred securities.
- Whether clinical data validate the proposed prevention-of-varices endpoint and support continuation, dose selection or regulatory advancement of NAVIGATE.
- Changes in accrued clinical-trial costs, manufacturing commitments and other obligations as the trial progresses.
- The company’s ability to obtain regulatory approval or strategic partnerships, given that all proposed products remain in development and the company has no commercial revenue.