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, severe skin disease, and cancer. Its lead candidate, GR-MD-02 (belapectin), is being developed primarily for NASH cirrhosis. The filing covers the quarter and six months ended June 30, 2019; financial statements are unaudited.
Key Financial Metrics
| Metric | Three Months Ended June 30 | Six Months Ended June 30 |
|---|---|---|
| Revenue | No significant revenue | No significant revenue |
| Research and development expense | $1.5 million, versus $1.5 million | $2.2 million, versus $3.8 million |
| General and administrative expense | $1.5 million, versus $2.3 million | $3.2 million, versus $4.2 million |
| Total operating loss | $3.0 million, versus $3.8 million | $5.4 million, versus $7.9 million |
| Net loss | $3.0 million, versus $3.8 million | $5.4 million, versus $8.1 million |
| Net loss applicable to common stockholders | $3.1 million, or $0.06 per share | $12.2 million, or $0.26 per share |
| Cash flow from operations | Not separately provided | $(5.6) million, versus $(6.6) million |
| Cash and cash equivalents | $52.0 million at June 30, 2019, versus $8.3 million at December 31, 2018 |
The six-month net loss applicable to common stockholders includes a $6.6 million non-cash warrant-modification charge recognized in January 2019. The company had no material debt borrowings; a related-party $10 million line of credit remained undrawn and was extended through December 31, 2021, with repayment due December 31, 2022.
Material Changes Versus the Prior Comparable Period
- Operating expenses declined 32% for the six-month period, primarily because 2018 included higher Phase 2 trial close-out costs and higher stock-based compensation.
- Research and development expense increased slightly in the second quarter as Phase 3 NASH-RX planning and preparation costs increased, but declined substantially for the six-month period.
- General and administrative expense decreased 34% in the quarter and 23% year to date, mainly from lower non-cash stock-based compensation and lower business development and legal expenses.
- Cash increased by $43.8 million during the first six months, primarily from $49.4 million of financing proceeds, including a $44.9 million rights offering, $1.9 million from the ATM program, and $2.7 million from option and warrant exercises.
- On January 11, 2019, all Series B convertible preferred stock was converted into 3.8 million common shares. Common shares outstanding increased to 56.6 million at June 30, 2019 from 41.2 million at December 31, 2018, creating dilution risk.
Guidance, Outlook, Risks, and Unusual Items
- Management expects continued operating losses and no significant revenue for the foreseeable future.
- The company believes available cash and line-of-credit availability can fund currently planned operations through at least December 31, 2020. Management expects additional funding will be required thereafter.
- Planned Phase 3 NASH-RX trial and related overhead costs are estimated at approximately $100 million through December 31, 2020, although timing and costs were not finalized.
- NASH-RX was planned for approximately 500 patients at up to 130 sites, with first-patient activity targeted for fall 2019, last-patient enrollment targeted for the fourth quarter of 2020, and top-line data targeted around the end of 2022. These dates were subject to change and FDA acceptance of the proposed protocol.
- On July 17, 2019, after the reporting date, the company submitted a Type C written response package to the FDA addressing requested information on the proposed Phase 3 protocol. FDA acceptance and endorsement of the final design remained uncertain.
- The company’s principal risks include clinical-trial failure or delay, uncertain regulatory approval, manufacturing and technology risks, dependence on additional capital, inability to secure strategic partners, intellectual-property risks, competition, and stock-price volatility.
- The company has operated at a loss since inception and disclosed that there is no assurance it can obtain financing beyond December 31, 2020 on acceptable terms. The financial statements were prepared based on current plans and did not include potential adjustments if the company cannot continue as a going concern.
- Other unusual items include the $6.6 million non-cash warrant-modification charge, the $44.9 million rights offering, the Series B preferred-stock conversion, and the issuance of 2.6 million warrants exercisable at $7.00 per share through May 2026.
- No significant pending legal proceedings were reported, and management concluded disclosure controls were effective as of June 30, 2019.
Important Facts for Investors to Verify
- FDA acceptance of the revised NASH-RX Phase 3 protocol, final endpoints, trial timing, and estimated cost.
- Whether the $52.0 million cash balance and undrawn line of credit are sufficient relative to projected Phase 3 spending and operating losses.
- Future financing requirements, potential dilution from additional equity issuance, and the effect of outstanding options and 12.5 million warrants.
- Confirmatory clinical evidence for belapectin, particularly whether NASH-CX findings translate into statistically significant and clinically meaningful Phase 3 outcomes.
- Regulatory, manufacturing, enrollment, site-startup, and data-readout risks affecting the planned NASH-RX milestones.
- The impact of the January 2019 warrant modification and other non-cash charges when assessing recurring operating performance.