Galectin Therapeutics Inc. — Q3 2023 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, being evaluated primarily in NASH cirrhosis and, subject to financing, in head and neck cancer. The filing covers the three and nine months ended September 30, 2023, with comparisons to the corresponding 2022 periods.
Financial condition and key metrics
| Metric | Three months ended September 30 | Nine months ended September 30 |
|---|---|---|
| Revenue | No revenue | No revenue |
| Research and development expense | $7.7 million | $23.9 million |
| General and administrative expense | $1.4 million | $4.6 million |
| Total operating loss | $9.2 million | $28.5 million |
| Net loss | $10.4 million | $31.1 million |
| Net loss applicable to common stockholders | $14.0 million | $34.7 million |
| Loss per common share | $0.24 | $0.58 |
| Net cash used in operating activities | Not separately presented | $28.3 million |
Cash and cash equivalents were $20.4 million at September 30, 2023, compared with $18.6 million at December 31, 2022. Total assets were $22.2 million and total liabilities were $73.0 million, resulting in stockholders’ equity deficit of $52.6 million. The company had $30.0 million of remaining availability under a $60.0 million related-party convertible line of credit provided by its chairman.
Debt included approximately $30.7 million of convertible notes payable and accrued interest, net of discounts, and $30.5 million outstanding under the related-party convertible line of credit. The line of credit is available through July 31, 2024, and principal and interest are generally due by January 31, 2026. The existing convertible notes mature in 2025 unless converted.
Material changes versus the prior comparable period
- Research and development expense increased 17% to $7.7 million in the quarter and 5% to $23.9 million for the nine-month period, primarily reflecting non-clinical activities, additional personnel, and NAVIGATE-related development costs. Clinical program spending decreased year to date because of the timing of NAVIGATE activities and lower drug-manufacturing costs.
- General and administrative expense decreased 6% in the quarter and 8% year to date, primarily because of lower non-cash stock-based compensation.
- Net loss increased from $8.6 million to $10.4 million for the quarter and from $28.1 million to $31.1 million year to date. Higher interest expense and unfavorable derivative fair-value changes contributed to the increase.
- Net loss applicable to common stockholders included a $3.6 million non-cash deemed dividend related to the modification and extension of 5.7 million warrants.
- Operating cash use increased from $23.8 million to $28.3 million year to date. Financing inflows included $20.0 million of additional related-party line-of-credit borrowings and $10.0 million from warrant exercises.
- Common shares outstanding increased to 61.85 million at September 30, 2023 from 59.43 million at December 31, 2022, primarily from warrant exercises and other equity-related issuances.
Guidance, outlook, risks, and unusual items
Management expects the available cash and remaining line-of-credit capacity to fund currently planned operations through at least December 31, 2024. The company expects to require additional capital thereafter and intends to pursue debt or equity financings, collaborations, partnerships, or other strategic transactions. There is no assurance that additional financing will be available on acceptable terms.
The NAVIGATE Phase 2b/3 trial completed randomization of 357 patients in February 2023. Management expects topline results from the interim analysis in fall 2024. More than 150 sites in 14 countries were activated. The proposed Phase 2 oncology trial remains dependent on financing.
The company has incurred losses since inception, has no revenue, and expects losses to continue for the foreseeable future. Principal risks include clinical-trial delays or unfavorable results, regulatory approval uncertainty, dependence on additional capital and strategic partners, intellectual-property risks, competition, stock-price volatility, and possible disruptions affecting clinical development.
Unusual or potentially dilutive items include $9.7 million of outstanding warrants, $6.4 million of options, approximately $6.3 million of potential shares from convertible notes, approximately $10.3 million of potential shares from the convertible line of credit, and approximately 503,000 shares issuable upon preferred-stock conversion. These instruments were excluded from diluted loss-per-share calculations because they were anti-dilutive.
There were no significant pending legal proceedings. Management concluded that disclosure controls and procedures were effective as of September 30, 2023, and reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Confirm the timing, design, enrollment status, and interim-analysis expectations for the NAVIGATE trial, including the anticipated fall 2024 topline results.
- Assess the company’s cash runway against the $28.3 million nine-month operating cash burn and the stated need for financing after December 31, 2024.
- Review the terms, maturity dates, conversion prices, interest rates, and related-party nature of the approximately $61.1 million of convertible debt and line-of-credit borrowings.
- Quantify potential dilution from outstanding warrants, options, preferred stock, and convertible debt, including the modified 10X warrants.
- Evaluate the clinical, regulatory, manufacturing, and financing risks associated with belapectin and the proposed oncology program.