Galectin Therapeutics Inc. — Q1 2019 Form 10-Q Summary
Business context and reporting period
Galectin Therapeutics is a clinical-stage biopharmaceutical company developing galectin-targeting therapies for fibrotic disease, severe skin disease, and cancer. The filing covers the three months ended March 31, 2019, and was filed May 10, 2019. The company has no significant revenue and has incurred losses since inception.
Financial position and operating results
| Metric | Q1 2019 | Q1 2018 / Prior period |
|---|---|---|
| Revenue | No significant revenue | No significant revenue |
| Research and development expense | $0.6 million | $2.3 million |
| General and administrative expense | $1.7 million | $1.9 million |
| Total operating expenses | $2.4 million | $4.2 million |
| Net loss | $2.4 million | $4.3 million |
| Net loss applicable to common stockholders | $9.1 million | $4.5 million |
| Loss per common share | $0.20 | $0.12 |
| Net cash used in operations | $3.3 million | $3.5 million |
| Cash and cash equivalents at period end | $7.0 million | $4.0 million at March 31, 2018 |
Gross margin and operating margin are not meaningful because the company reported no significant revenue. At March 31, 2019, total assets were $7.8 million, total liabilities were $1.0 million, and stockholders’ equity was $5.1 million. The company had no borrowings under its $10 million unsecured line of credit; the facility was extended to permit borrowings through December 31, 2021, with repayment due December 31, 2022.
Financing activities generated $2.0 million in Q1 2019, consisting primarily of $1.865 million in net proceeds from the at-the-market offering and $0.138 million from option and warrant exercises. Common shares outstanding increased to 45.6 million from 41.2 million at December 31, 2018.
Material changes versus the prior comparable period
- Research and development expense decreased 72% to $0.6 million, primarily because the Phase 2 clinical programs were winding down and stock-based compensation declined.
- General and administrative expense decreased 8% to $1.7 million; lower stock-based compensation was partly offset by approximately $0.26 million of additional legal expense.
- Net loss applicable to common stockholders increased to $9.1 million because of a one-time, non-cash $6.622 million warrant-modification charge.
- On January 11, 2019, all Series B convertible preferred stock was converted into 3.789 million common shares. Related voting and protective rights were extinguished, while the expiration dates of warrants covering 3.580 million shares were extended by five years.
- Series B-1, B-2, and B-3 preferred stock were no longer outstanding at March 31, 2019. Series C redeemable convertible preferred stock remained outstanding with a $8.731 million redemption value.
- Cash decreased by $1.281 million during the quarter, reflecting $3.284 million of operating cash use partially offset by $2.003 million of financing proceeds.
Guidance, outlook, risks, contingencies, and unusual items
Management expects continuing operating losses and believes existing cash, together with availability under the line of credit, is sufficient to fund currently planned operations through at least June 30, 2020. This assessment excludes the planned Phase 3 NASH-RX trial. Management estimates the Phase 3 trial and related general overhead could cost approximately $100 million, although timing and cost estimates were not finalized.
The company commenced a rights offering targeting $50 million to $70 million, expected to conclude May 23, 2019. There is no assurance that the offering or other financing will be completed on favorable terms. Additional funding will be required after June 30, 2020 and for the Phase 3 program.
Following a February 2019 Type C meeting, the FDA expressed support for progression to esophageal varices as a potential surrogate endpoint and progression to large varices as part of a composite clinical benefit endpoint, subject to additional information and regulatory considerations. The company expected first patient enrollment in the Phase 3 trial in fall 2019 and top-line data in the fourth quarter of 2022, but stated that these dates and trial design elements could change.
The principal unusual item was the $6.622 million non-cash warrant-modification charge. Other notable matters include the conversion of Series B preferred stock, equity dilution from financing and exercises, and adoption of the new lease accounting standard, which resulted in recognition of a right-of-use asset and lease liabilities.
Key risks include dependence on additional capital, continued operating losses, clinical and regulatory uncertainty, potential failure to demonstrate safety or efficacy, trial delays or cost increases, manufacturing and intellectual-property risks, competition, stock-price volatility, and the need for strategic partners for certain programs. No significant legal proceedings were pending, and management reported effective disclosure controls as of March 31, 2019.
Important facts for investors to verify
- Whether the rights offering raised the targeted $50 million to $70 million and on what terms.
- Actual cash burn, financing activity, and liquidity runway after March 31, 2019.
- Final design, regulatory status, budget, and enrollment timing for the NASH-RX Phase 3 trial.
- The economic and dilution impact of the Series B conversion and extended warrants.
- Whether the company obtained sufficient financing to fund the estimated approximately $100 million Phase 3 program.
- Subsequent clinical, regulatory, and safety data for GR-MD-02 in NASH cirrhosis and cancer immunotherapy.