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. Its lead candidate is belapectin, primarily being evaluated in NASH cirrhosis. This report covers the three and nine months ended September 30, 2021, with comparative periods ended September 30, 2020. The company has no significant revenue and has operated at a loss since inception.
Financial condition and key metrics
| Metric | Three months ended September 30 | Nine months ended September 30 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $6.6 million | $18.0 million |
| General and administrative expense | $1.6 million | $4.8 million |
| Total operating loss | $8.2 million | $22.8 million |
| Net loss | $8.5 million | $23.3 million |
| Net loss applicable to common stockholders | $8.6 million | $23.4 million |
| Basic and diluted loss per share | $0.14 | $0.40 |
| Net cash used in operating activities | Not separately provided | $17.4 million |
Because the company has no revenue, gross and operating margins are not meaningful. Cash and cash equivalents were $36.6 million at September 30, 2021, compared with $27.1 million at December 31, 2020. Total assets were $38.0 million and total liabilities were $28.8 million. Stockholders’ equity was $7.5 million, down from $22.5 million at year-end 2020.
Financing activities generated $26.8 million during the first nine months, including $20.0 million of related-party convertible notes, $3.9 million from the at-the-market common-stock program, and $3.0 million from warrant exercises. The balance sheet included $19.3 million of related-party convertible notes and accrued interest, net of debt discounts, plus $1.2 million of derivative liabilities.
Material changes versus the prior comparable period
- Research and development expense increased 38% in the third quarter and 55% for the first nine months, primarily because of higher NAVIGATE clinical-trial costs.
- General and administrative expense increased 42% in the third quarter and 20% for the first nine months, driven mainly by higher insurance, investor-relations and business-development costs, and stock-based compensation.
- Net loss increased from $5.9 million to $8.5 million for the quarter and from $15.6 million to $23.3 million for the first nine months.
- Operating cash use increased to $17.4 million from $15.2 million in the prior-year period.
- Common shares outstanding increased to 59.3 million from 57.1 million at December 31, 2020, reflecting equity issuance and warrant and option exercises.
- The company issued a $10.0 million April 2021 convertible note and a $10.0 million September 2021 convertible note to a related party. Both bear 2% annual interest and mature in 2025, subject to optional conversion by the noteholder.
Guidance, outlook, risks and unusual items
Management expects current cash, together with a further $10.0 million convertible note expected to close in December 2021, to fund currently planned operations through at least March 31, 2023. Management estimates an additional $30 million to $35 million will be needed to reach the planned NAVIGATE interim analysis around the end of the first quarter of 2024. There is no assurance that additional financing will be available on favorable terms; failure to raise capital before March 31, 2023 could require the company to cease operations.
The NAVIGATE adaptive Phase 2b/3 trial is evaluating belapectin for prevention of esophageal varices in patients with NASH cirrhosis. Management estimated enrollment completion around June 30, 2022, while noting that COVID-19 continued to delay site recruitment and enrollment, particularly outside the United States. The trial’s interim analysis may be used to select a dose, re-estimate sample size, modify eligibility or stop the study for efficacy or futility.
Unusual items included $338,000 of expense from changes in the fair value of contingent-interest derivatives and $217,000 of interest expense for the first nine months. Stock-based compensation was $1.4 million for the first nine months. The company reported no significant pending legal proceedings and no off-balance-sheet arrangements.
Key risks include continued operating losses and dependence on external capital; clinical-trial delays, enrollment challenges, safety or efficacy failures; regulatory uncertainty; COVID-19 effects; competition; intellectual-property risks; potential litigation; and dilution or repayment obligations associated with convertible notes, warrants, options and preferred stock.
Important facts for investors to verify
- Whether the expected December 2021 $10.0 million related-party convertible note closed and on what terms.
- Actual NAVIGATE enrollment progress, interim-analysis timing, dose selection and any FDA or regulatory updates.
- Cash burn and remaining runway relative to the March 31, 2023 funding estimate.
- The company’s ability to raise the estimated additional $30 million to $35 million needed for the NAVIGATE program.
- Potential dilution from $20.0 million of convertible notes, 11.4 million outstanding warrants, 4.7 million options and preferred-stock conversion rights.
- Whether clinical-trial accrual estimates, derivative valuations and related-party financing obligations change materially in subsequent filings.