Business Context and Reporting Period
Galectin Therapeutics Inc. is a clinical-stage biopharmaceutical company developing galectin-targeting therapies for fibrotic diseases and cancer. The filing covers the quarter and six months ended June 30, 2016, with comparisons to the corresponding 2015 periods. The company reported no significant revenue and remains focused on development of GR-MD-02, particularly for NASH-related liver fibrosis, psoriasis, and cancer immunotherapy.
Financial Performance and Liquidity
| Metric | Three Months Ended June 30 | Six Months Ended June 30 |
|---|---|---|
| Research and development expense | $4.2 million, versus $2.6 million | $8.6 million, versus $5.7 million |
| General and administrative expense | $1.3 million, versus $2.1 million | $3.7 million, versus $3.8 million |
| Total operating expenses | $5.5 million, versus $4.7 million | $12.3 million, versus $9.5 million |
| Net loss | $5.5 million, versus $4.6 million | $12.3 million, versus $9.5 million |
| Net loss applicable to common stockholders | $5.8 million, versus $4.9 million | $12.8 million, versus $10.0 million |
| Loss per common share | $0.20, versus $0.21 | $0.44, versus $0.43 |
| Net cash used in operating activities | Not separately provided | $8.1 million, versus $7.3 million |
The company had $18.0 million of cash and cash equivalents at June 30, 2016, down from $25.8 million at December 31, 2015. Financing activities provided $257,000 during the first six months, compared with $4.5 million in the prior-year period. The company had no cash used in investing activities.
Current liabilities were $3.6 million, including $2.6 million of accrued expenses. The filing does not report conventional debt; however, the company had redeemable convertible preferred stock with carrying values totaling approximately $7.1 million and stated redemption values totaling approximately $12.4 million. Stockholders’ equity declined to $7.5 million from $18.0 million at year-end 2015.
Because the company has no significant revenue and is incurring operating losses, conventional gross or operating margins are not meaningful. Stock-based compensation was $1.6 million for the first six months of 2016.
Material Changes Versus the Prior Comparable Period
- Research and development expense increased 63% for the quarter and 50% for the six-month period, primarily because of higher Phase 2 clinical-trial costs for GR-MD-02.
- Total operating expenses increased 19% for the quarter and 30% for the six-month period.
- General and administrative expense decreased 37% for the quarter, mainly due to lower stock-based compensation and legal and accounting costs, and was approximately flat for the six-month period.
- Six-month operating cash usage increased by $802,000, reflecting higher clinical-development spending.
- Cash declined by $7.8 million during the first six months of 2016, compared with a $2.8 million decline in the prior-year period.
- Common shares outstanding increased to 29.3 million from 28.8 million at December 31, 2015, primarily reflecting equity issuance and payment of preferred dividends in common stock.
Guidance, Outlook, Risks, Contingencies, and Unusual Items
- Management expected cash on hand at June 30, 2016 to fund currently planned operations through June 30, 2017. Additional financing or profitable operations will be required thereafter, and no assurance is provided.
- Top-line results from the NASH-FX trial were expected around the end of the third quarter of 2016; NASH-CX results were expected around the end of 2017.
- The psoriasis Phase 2a trial was expanded from 12 to 24 weeks after positive interim results in the first four patients. Additional top-line data were expected around the end of the third quarter of 2016.
- Clinical-trial costs are expected to increase and may fluctuate as the Phase 2 programs progress. The company cannot reliably estimate the ultimate cost or timing of commercialization.
- The company remains exposed to clinical, regulatory, manufacturing, intellectual-property, financing, competition, and commercialization risks. Product candidates may fail to demonstrate safety or efficacy or may not receive regulatory approval.
- Shareholder class-action and derivative litigation remained subject to appeal or pending appellate proceedings. The company could not estimate potential losses, although it did not believe reasonably possible losses were material based on information available at the filing date.
- The company owns 80.2% of Galectin Sciences LLC at June 30, 2016 and consolidates it as a less-than-wholly-owned subsidiary.
- Management concluded that disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2016.
Important Facts for Investors to Verify
- Verify the timing, enrollment, safety, and efficacy results of the NASH-FX, NASH-CX, psoriasis, and cancer-immunotherapy programs.
- Assess whether the $18.0 million cash balance and projected spending support operations through June 30, 2017.
- Review expected financing needs, potential dilution, and the terms of the company’s outstanding preferred stock, options, warrants, and conversion rights.
- Monitor clinical, regulatory, manufacturing, and intellectual-property risks affecting GR-MD-02 and other candidates.
- Follow the status and potential exposure of the shareholder litigation appeals.
- Consider dilution from 8.9 million warrants, 3.5 million options, preferred-stock conversion shares, and other potentially issuable shares excluded from diluted loss-per-share calculations.