Business Context and Reporting Period
Galectin Therapeutics Inc. is a clinical-stage biopharmaceutical company developing galectin-targeting therapies for fibrotic disease and cancer. This unaudited Form 10-Q covers the quarter and six months ended June 30, 2020, with comparisons to the corresponding 2019 periods.
The company had no revenues and has operated at a loss since inception. Its primary development focus is belapectin for NASH cirrhosis, including the adaptively designed NASH-RX Phase 2b/3 trial. The first NASH-RX patient was consented in June 2020, and a hepatic impairment study began enrolling during the second quarter.
Key Financial Metrics
| Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $4.681 million | $1.522 million | $6.825 million | $2.168 million |
| General and administrative expense | $1.421 million | $1.498 million | $2.861 million | $3.219 million |
| Total operating expenses | $6.102 million | $3.020 million | $9.686 million | $5.387 million |
| Net loss | $6.114 million | $2.998 million | $9.670 million | $5.373 million |
| Net loss applicable to common stockholders | $6.180 million | $3.065 million | $9.730 million | $12.158 million |
| Basic and diluted loss per share | $0.11 | $0.06 | $0.17 | $0.26 |
All dollar amounts in the table are presented in millions except per-share data. Operating and profit margins are not meaningful because the company had no revenue.
- Cash and cash equivalents were $40.768 million at June 30, 2020, compared with $47.480 million at December 31, 2019.
- Total assets were $41.317 million; total liabilities were $4.306 million; and stockholders' equity was $35.288 million at June 30, 2020.
- Net cash used in operating activities was $6.975 million for the six months ended June 30, 2020, compared with $5.614 million in the prior-year period.
- Financing activities provided $263,000 in the first six months of 2020, primarily from option exercises and $44,000 of net proceeds under the 2020 at-the-market offering.
- The company had not borrowed under its $10 million unsecured line of credit with a director and shareholder.
- Accrued expenses increased to $4.003 million from $1.093 million at December 31, 2019, primarily because of accrued research and development costs.
- There were 57,043,661 common shares outstanding as of August 6, 2020. Outstanding options and warrants represented potential additional dilution of approximately 16.8 million shares, excluding other anti-dilutive effects.
Material Changes Versus the Prior Comparable Period
- Second-quarter research and development expense increased $3.159 million, or 208%, and first-half expense increased $4.657 million, or 215%, primarily because of NASH-RX clinical program costs and increased personnel costs.
- Second-quarter general and administrative expense decreased $77,000, or 5%; first-half expense decreased $358,000, or 11%, due mainly to lower stock-based compensation and legal expenses, partly offset by higher insurance expense.
- Second-quarter net loss more than doubled year over year, while first-half net loss increased by $4.297 million. The 2019 first-half loss included a $6.622 million non-cash warrant modification charge, which was not repeated in 2020.
- Cash declined $6.712 million during the first six months of 2020, compared with a $43.790 million increase in the 2019 period, when the company completed a substantial rights offering.
- Common shares outstanding increased from 56,894,642 at December 31, 2019 to 57,043,661 at June 30, 2020, reflecting equity issuance, dividend payments in common stock, and option exercises.
Guidance, Outlook, Risks and Unusual Items
- Management believes existing cash and the available line of credit are sufficient to fund currently planned operations through at least September 30, 2021.
- The company expects to require additional financing after September 30, 2021. Planned NASH-RX trial costs, drug manufacturing, scientific support, and overhead during the first stage are estimated at approximately $90 million.
- Management states that additional financing will be required to complete the trial and that failure to obtain funding before the projected liquidity period could require the company to cease operations. The filing states that the financial statements do not include adjustments for a potential inability to continue as a going concern.
- NASH-RX enrollment began in June 2020. Management expects Phase 2b enrollment to require approximately 12 to 14 months, but site delays remain possible because of COVID-19.
- COVID-19 may delay patient enrollment, clinical-site operations, monitoring, regulatory review, manufacturing, supply chains, and employee activities. It may also make future equity financing more difficult or less favorable.
- Clinical success, regulatory approval, commercialization, and partnership prospects remain uncertain. The company cannot reliably forecast the ultimate cost or timing of product development or future revenue.
- The filing reports no significant pending legal proceedings and no material off-balance-sheet arrangements.
- The company maintains a $40 million 2020 at-the-market equity facility; only approximately $44,000 of net proceeds had been generated under it through June 30, 2020.
Important Facts for Investors to Verify
- Progress, enrollment, costs, and COVID-19-related delays in the NASH-RX Phase 2b/3 trial.
- Cash burn and the remaining availability and terms of the $10 million related-party line of credit.
- The timing, terms, and dilution implications of future equity or other financing needed to fund the estimated $90 million development program.
- Regulatory feedback, hepatic impairment study results, and the design, dose selection, and interim analysis of NASH-RX.
- Whether belapectin can demonstrate safety and efficacy in later-stage trials despite mixed or subgroup-specific results from prior NASH studies.
- The potential dilution from 12.538 million outstanding warrants, 3.738 million options, and approximately 515,000 shares issuable upon preferred-stock conversion.