Business Context and Reporting Period
Galectin Therapeutics Inc. is a clinical-stage biopharmaceutical company developing galectin inhibitors for fibrotic disease and cancer. Its lead candidate, belapectin, is primarily being developed for NASH cirrhosis and prevention of esophageal varices. This Form 10-K covers the fiscal year ended December 31, 2020, with comparative results for 2019.
- The Phase 2b/3 NAVIGATE trial began enrolling in 2020 and evaluates belapectin in compensated NASH cirrhosis patients without baseline esophageal varices.
- Belapectin and all other proposed products remained in development; the company had no products approved for sale and no revenue.
- The company had six full-time employees as of February 28, 2021 and relies extensively on contractors, contract research organizations and third-party manufacturers.
Financial Performance and Liquidity
| Metric | 2020 | 2019 | Change |
|---|---|---|---|
| Revenue | $0 | $0 | No change |
| Research and development expense | $18.0 million | $7.5 million | +141% |
| General and administrative expense | $5.5 million | $6.0 million | -8% |
| Total operating expenses | $23.4 million | $13.4 million | +74% |
| Net loss | $23.5 million | $13.3 million | Higher loss |
| Net loss applicable to common stockholders | $23.6 million | $20.2 million | Higher loss |
| Basic and diluted loss per share | $0.41 | $0.39 | Higher loss per share |
| Net cash used in operating activities | $20.6 million | $10.8 million | Use increased by $9.8 million |
| Cash and cash equivalents at year-end | $27.1 million | $47.5 million | Down $20.3 million |
Operating margins and other revenue-based margins are not meaningful because the company has no revenue. Interest income was $66,000 and interest expense was $87,000 in 2020. Stock-based compensation was $1.8 million.
Research and development spending increased primarily because of NAVIGATE trial activities, clinical supplies, manufacturing and supporting toxicology and reproductive toxicity work. The company reported no investing cash flows in 2020. Financing activities provided $263,000, consisting principally of $44,000 from at-the-market stock issuance and $219,000 from option exercises.
The company had no borrowings outstanding and reported no significant market risk. It had an undrawn $10 million unsecured line of credit from director and stockholder Richard E. Uihlein. The facility was available for borrowings through December 31, 2021, with repayment due December 31, 2022, subject to the agreement terms.
Material Changes Versus the Prior Comparable Period
- Research and development expense rose by $10.5 million, or 141%, as NAVIGATE moved from planning and start-up activities into active clinical operations.
- Operating cash burn nearly doubled to $20.6 million from $10.8 million.
- Year-end cash declined to $27.1 million from $47.5 million, primarily reflecting operating cash use and limited 2020 financing.
- General and administrative expense decreased by $503,000, driven mainly by lower legal, investor relations and stock-based compensation costs, partly offset by higher insurance expense.
- Common shares outstanding increased to 57.1 million at December 31, 2020 from 56.9 million at December 31, 2019; additional dilution could result from outstanding options, warrants and convertible preferred stock.
- Unlike 2019, when the company raised approximately $44.9 million in a rights offering, 2020 financing proceeds were minimal.
Guidance, Outlook, Risks and Unusual Items
- Management stated that available cash and the undrawn credit facility were expected to fund currently planned operations at least through March 31, 2022.
- The company estimated that an additional approximately $45 million to $50 million would be needed to fund NAVIGATE through the planned interim analysis, currently estimated for the second half of 2023, as well as related manufacturing, scientific support and corporate costs.
- Management expected NAVIGATE enrollment completion by the end of 2022, but acknowledged that COVID-19 had delayed site recruitment and patient enrollment and could cause further disruption.
- The NAVIGATE protocol includes an interim analysis to select a dose, potentially re-estimate sample size and randomization, refine eligibility criteria, or terminate the trial for efficacy or futility. FDA had provided comments, questions and guidance regarding the ongoing trial.
- The company stated that it may need to cease operations if it cannot raise additional capital before its projected funding requirement. Future financing could dilute existing holders or require the company to relinquish rights to technologies or markets.
- Prior NASH studies provide support for NAVIGATE but also include important limitations: NASH-CX did not meet its primary HVPG endpoint in the total population, and NASH-FX did not meet its primary imaging biomarker endpoint.
- COVID-19-related risks include enrollment delays, site and healthcare-resource constraints, supply-chain interruptions, regulatory delays and increased trial costs.
- Manufacturing is outsourced to two primary suppliers on a purchase-order basis. The company reported possible COVID-19-related delays involving components needed to manufacture belapectin.
- The company recorded a $6.6 million non-cash warrant-modification charge in 2019; no comparable charge was recorded in 2020.
- Series C redeemable convertible preferred stock had a redemption value of $8.5 million at December 31, 2020. The company also had 12.5 million outstanding warrants and 4.0 million outstanding stock options at year-end.
- Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2020. The independent auditor identified going concern and valuation of accrued and prepaid clinical trial expenses as critical audit matters.
Most Important Facts for Investors to Verify
- Verify the pace of NAVIGATE enrollment, site activation, COVID-19 impact and the expected timing of enrollment completion and interim analysis.
- Assess whether the company can raise the estimated $45 million to $50 million of additional capital on acceptable terms before projected liquidity becomes inadequate.
- Review the full NAVIGATE protocol, FDA correspondence and interim-analysis criteria, including dose selection, sample-size reassessment and potential futility provisions.
- Evaluate the distinction between positive subgroup findings in NASH-CX and the failure of the overall primary endpoint, and determine how well those findings support NAVIGATE.
- Track cash burn, accrued clinical trial expenses, manufacturing commitments and the undrawn related-party credit facility.
- Review potential dilution from 12.5 million warrants, 4.0 million options, convertible preferred stock and any future equity financing.
- Confirm that no product has received regulatory approval and that the company has no current revenue or established path to profitability.