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. The company’s primary program is belapectin (GR-MD-02), focused on NASH cirrhosis and prevention of esophageal varices. This filing covers the three months ended March 31, 2020; financial statements are unaudited.
Key Financial Metrics
| Metric | Q1 2020 | Q1 2019 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $2.144 million | $0.646 million |
| General and administrative expense | $1.440 million | $1.721 million |
| Total operating expenses | $3.584 million | $2.367 million |
| Net loss | $3.556 million | $2.375 million |
| Net loss applicable to common stockholders | $3.550 million | $9.093 million |
| Basic and diluted loss per share | $0.06 | $0.20 |
| Net cash used in operating activities | $4.371 million | $3.284 million |
| Cash and cash equivalents at period-end | $43.328 million | $6.972 million |
Operating and net margins are not meaningful because the company has no revenue. Stock-based compensation was $430,000 in Q1 2020 versus $412,000 in Q1 2019. Interest income was $50,000 and interest expense was $22,000.
Cash decreased by $4.152 million during the quarter, partially offset by $219,000 of proceeds from option exercises. The company has a $10 million unsecured line of credit with a director and shareholder, but no borrowings had been made as of March 31, 2020. Current liabilities were $1.316 million and total liabilities were $1.358 million. Series C preferred stock had a $8.573 million redemption value.
Material Changes Versus the Prior Comparable Period
- Research and development expense increased $1.498 million, or 232%, primarily because of preparation and activity related to the NASH-RX clinical trial and increased payroll following the hiring of a chief medical officer.
- General and administrative expense decreased $281,000, or 16%, primarily because legal expense declined approximately $319,000, partly offset by a $70,000 increase in insurance expense.
- Net loss increased $1.181 million, or approximately 50%, primarily from higher research and development spending.
- Net loss applicable to common stockholders improved substantially from Q1 2019 because Q1 2019 included a $6.622 million non-cash warrant-modification charge. No comparable charge was recorded in Q1 2020.
- Operating cash use increased $1.087 million, reflecting increased clinical-trial spending.
- Common shares outstanding increased to 57.029 million at March 31, 2020 from 56.895 million at December 31, 2019, primarily from option exercises and preferred-stock dividend issuances.
Guidance, Outlook, Risks and Unusual Items
Management expects continuing losses and no near-term revenue. It believes available cash and the undrawn line of credit are sufficient to fund currently planned operations through at least September 30, 2021. Management estimates that the first stage of the planned adaptively designed Phase 2b/3 trial and general overhead could cost approximately $125 million, although the cost and timing are not finalized. Additional financing will be required, and failure to obtain financing could require the company to cease operations.
The company filed the NASH-RX protocol with the FDA on April 30, 2020 and expected to begin enrollment in the second quarter of 2020. A separate hepatic-impairment study was also expected to begin in Q2 2020. Enrollment and trial timing were subject to delays from the COVID-19 pandemic.
- COVID-19 could delay patient enrollment, clinical-site activation, monitoring, regulatory review, manufacturing and supply, and other trial activities.
- Clinical development remains subject to uncertain safety, efficacy, patient recruitment and regulatory outcomes. Belapectin has not been approved for marketing.
- The company depends on additional capital and may be unable to obtain financing on acceptable terms, particularly amid biotechnology-sector and stock-price volatility.
- There were no significant pending legal proceedings, no defaults upon senior securities and no material off-balance-sheet arrangements.
- The company reported effective disclosure controls and procedures as of March 31, 2020.
Important Facts for Investors to Verify
- Confirm current cash usage and whether the stated runway through September 30, 2021 remains achievable.
- Track financing activity, use of the $10 million line of credit and dilution from equity, options, warrants and preferred-stock conversions.
- Verify NASH-RX enrollment, trial execution, interim-analysis plans and any FDA feedback or protocol changes.
- Assess the approximately $125 million projected trial and overhead requirement against available capital and financing capacity.
- Monitor the effects of COVID-19 or other operational disruptions on clinical timelines, sites, vendors and product supply.
- Distinguish recurring operating losses from non-cash or unusual items, including the prior-period $6.622 million warrant-modification charge.