Galectin Therapeutics Inc. — 2018 Q3 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 disease and cancer. Its lead candidate, GR-MD-02, is primarily being developed for NASH cirrhosis. This unaudited Form 10-Q covers the three and nine months ended September 30, 2018, with comparisons to the same periods in 2017.
Financial performance and liquidity
| Metric | Three months ended September 30 | Nine months ended September 30 |
|---|---|---|
| Revenue | No significant revenue | No significant revenue |
| Research and development expense | $1.5 million vs. $3.5 million | $5.3 million vs. $10.7 million |
| General and administrative expense | $1.2 million vs. $0.9 million | $5.3 million vs. $3.2 million |
| Total operating loss | $2.7 million vs. $4.4 million | $10.6 million vs. $13.9 million |
| Net loss | $2.8 million vs. $4.4 million | $10.9 million vs. $13.9 million |
| Net loss applicable to common stockholders | $3.0 million vs. $4.7 million | $11.7 million vs. $14.7 million |
| Basic and diluted loss per share | $0.07 loss vs. $0.13 loss | $0.30 loss vs. $0.42 loss |
| Net cash used in operating activities | Not separately reported | $8.2 million vs. $12.0 million |
| Net proceeds from financing activities | Not separately reported | $15.3 million vs. $3.6 million |
| Cash and cash equivalents at period end | $10.1 million at September 30, 2018 |
Operating margins are not meaningful because the company has no significant revenue and remains loss-making. Stock-based compensation was $3.3 million for the first nine months of 2018, compared with $0.8 million in the prior-year period, making the reported loss materially affected by non-cash expense.
Total assets were $10.6 million at September 30, 2018, compared with $4.2 million at December 31, 2017. Current liabilities were $1.6 million versus $3.0 million. The company had no borrowings under its $10 million related-party line of credit. The facility was available through December 31, 2018, with borrowings and interest due December 31, 2019. Redeemable Series C preferred stock had a redemption value of approximately $8.0 million.
Material changes versus the prior comparable period
- Research and development expense declined 57% in the third quarter and 51% for the nine-month period, primarily because Phase 2 clinical activities were winding down in late 2017.
- General and administrative expense increased 29% in the third quarter and 69% for the nine-month period, driven principally by higher stock-based compensation and increased business development and investor-relations costs.
- Net cash used in operations improved by $3.8 million year over year to $8.2 million for the first nine months.
- Financing proceeds increased to $15.3 million, including proceeds from common-stock and warrant or option exercises and sales under the 2017 at-the-market agreement. The company issued 618,614 shares for approximately $5.2 million net in June and 51,100 shares for approximately $0.4 million net in July.
- Common shares outstanding increased to 41.1 million at September 30, 2018 from 35.8 million at December 31, 2017. Potential dilution remained substantial, including approximately 10.7 million warrants, 3.8 million options and 4.3 million shares issuable upon preferred-stock conversion.
Guidance, outlook, commentary and risks
Management stated that cash and cash equivalents, together with availability under the line of credit, were expected to fund currently planned operations at least through September 30, 2019. Continued operations beyond available resources depend on additional financing or achieving profitable operations, and no assurance was provided.
Following a May 2018 FDA meeting, the company planned a Phase 3 program for GR-MD-02 in NASH cirrhosis patients without esophageal varices. Potential primary endpoints included change in hepatic venous pressure gradient or progression to esophageal varices. Trial design, timing and cost had not yet been finalized. The FDA had not granted Breakthrough Therapy designation, although the program retained Fast Track designation.
The company reported that the Phase 2b NASH-CX trial did not achieve a statistically significant primary endpoint in the total patient population, but post-hoc analyses indicated statistically significant benefits in certain patients without baseline esophageal varices, particularly at the 2 mg/kg dose. These findings remain subject to confirmation in later-stage trials.
In an investigator-sponsored cancer immunotherapy study combining GR-MD-02 with pembrolizumab, the company reported preliminary response data in 14 advanced melanoma patients: a 50% objective response rate and 64% disease control rate. Six head-and-neck cancer patients reportedly had a 33% objective response rate and 67% disease control rate. These early, investigator-sponsored results are not evidence of regulatory approval or commercial efficacy.
Key risks include the company’s early development stage, recurring losses and lack of revenue, dependence on additional capital, clinical-trial execution and enrollment, inability to demonstrate safety or efficacy, regulatory uncertainty, manufacturing and commercialization requirements, intellectual-property risks, potential inability to secure strategic partners, competition, litigation and stock-price volatility. No significant pending legal proceedings were reported.
Important facts for investors to verify
- Whether the company completed and funded the planned Phase 3 NASH-cirrhosis program and which primary endpoint was selected.
- Whether post-hoc NASH-CX findings are replicated in a prospectively designed, adequately powered trial.
- The company’s current cash burn, remaining availability and terms of the related-party line of credit.
- Future financing needs, dilution from equity issuance, and the impact of outstanding options, warrants and convertible preferred stock.
- Whether preliminary cancer-immunotherapy results translate into controlled clinical benefit and regulatory progress.
- The amount and timing of non-cash stock-based compensation and preferred-stock dividends when assessing underlying cash use.