Galectin Therapeutics Inc. — 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 lead candidate is belapectin (GR-MD-02), primarily being developed for NASH cirrhosis. This Form 10-Q covers the three and nine months ended September 30, 2020, and was filed November 9, 2020. The company had 57,077,055 common shares outstanding as of November 5, 2020.
Financial Metrics
| Metric | Three Months Ended September 30 | Nine Months Ended September 30 |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $4.8 million | $11.6 million |
| General and administrative expense | $1.1 million | $4.0 million |
| Total operating expense | $5.9 million | $15.6 million |
| Net loss | $5.9 million | $15.6 million |
| Net loss applicable to common stockholders | $6.0 million | $15.7 million |
| Basic and diluted net loss per share | $0.10 | $0.28 |
| Net cash used in operating activities | Not provided for the quarter | $15.2 million |
| Cash and cash equivalents at period end | $32.6 million |
The company has no revenues and has operated at a loss since inception; therefore, meaningful revenue or operating margins are not available. Interest expense was $65,000 for the first nine months of 2020. The company had total liabilities of $2.5 million and no borrowings under its $10 million unsecured line of credit. The line is available through December 31, 2021, with repayment due December 31, 2022.
Material Changes Versus the Prior Comparable Period
- Research and development expense increased 218% to $4.8 million in the third quarter and 216% to $11.6 million for the nine-month period, primarily due to the NASH-RX clinical trial.
- General and administrative expense decreased 16% to $1.1 million in the quarter and 12% to $4.0 million for the nine months. Lower stock-based compensation, travel, investor relations and legal expenses were partly offset by higher insurance expense.
- Net loss increased from $2.8 million to $5.9 million for the quarter and from $8.2 million to $15.6 million for the nine months.
- Net cash used in operations increased from $7.1 million to $15.2 million for the nine months, reflecting higher clinical development spending.
- Cash declined from $47.5 million at December 31, 2019 to $32.6 million at September 30, 2020. Financing activities provided only $263,000 in the first nine months of 2020, compared with $49.2 million in the prior-year period, which included a substantial rights offering.
- Shares outstanding increased modestly from 56.9 million at year-end 2019 to 57.1 million at September 30, 2020.
Guidance, Outlook, Risks and Unusual Items
- Management expects available cash, including the undrawn line of credit, to fund currently planned operations through at least December 31, 2021.
- The company expects to require approximately $40 million of additional financing to fund the NASH-RX trial through the planned interim analysis in the second quarter of 2023, as well as manufacturing, scientific support and general administrative costs.
- Management states that failure to raise additional capital before December 31, 2021 could require the company to cease operations. There is no assurance that financing will be available on favorable terms.
- The NASH-RX adaptive Phase 2b/3 trial began enrolling patients in June 2020. Enrollment and timelines may be affected by the COVID-19 pandemic. The company also began a hepatic impairment study in the second quarter of 2020.
- The FDA provided comments, questions and guidance regarding the ongoing NASH-RX trial. Regulatory feedback, clinical enrollment, safety, efficacy, manufacturing and approval remain significant uncertainties.
- The company recognized no warrant-modification charge in 2020. The prior-year nine-month period included a $6.6 million noncash charge related to extending certain warrant exercise periods.
- The company had $12.5 million of outstanding warrants, $4.0 million of outstanding stock options and 510,424 shares issuable upon conversion of preferred stock at September 30, 2020. These instruments were excluded from diluted loss per share because they were anti-dilutive.
- There were no significant pending legal proceedings. Management reported effective disclosure controls and no material changes in internal control over financial reporting.
Most Important Facts to Verify
- Progress, enrollment pace, interim-analysis timing and FDA interactions for the NASH-RX trial.
- Actual cash burn and whether the $32.6 million cash balance and $10 million credit facility remain sufficient through December 31, 2021.
- Timing, amount, dilution and terms of the anticipated approximately $40 million financing requirement.
- Clinical safety and efficacy results for belapectin, including confirmation of findings from the earlier NASH-CX study.
- Potential effects of COVID-19 on clinical sites, patient enrollment, supply chains and trial costs.
- Future dilution from outstanding warrants, options, preferred-stock conversions and potential at-the-market equity sales.