Business Context and Reporting Period
Galectin Therapeutics Inc. is a clinical-stage biopharmaceutical company developing galectin-targeting therapies for fibrotic disease and cancer. This unaudited Form 10-Q covers the three and six months ended June 30, 2015, compared with the corresponding 2014 periods.
The company had no significant revenue and reported operating losses since inception. Its primary active candidate was GR-MD-02, with Phase 2 programs advancing for NASH-related liver disease and a Phase 1B cancer-immunotherapy study ongoing.
Financial Highlights
| Metric | Three Months Ended June 30 | Six Months Ended June 30 |
|---|---|---|
| Revenue | No significant revenue | No significant revenue |
| Research and development expense | $2.6 million | $5.7 million |
| General and administrative expense | $2.1 million | $3.8 million |
| Total operating expenses | $4.7 million | $9.5 million |
| Net loss | $4.6 million | $9.5 million |
| Net loss applicable to common stockholders | $4.9 million | $10.0 million |
| Net loss per common share | $0.21 | $0.43 |
| Net cash used in operating activities | Not separately reported | $7.3 million |
| Cash and cash equivalents at period-end | $26.4 million |
Six-month operating expenses increased 16% year over year, primarily due to higher clinical-program spending. The filing does not provide a meaningful revenue or operating-margin percentage because revenue was insignificant and the company remained unprofitable.
At June 30, 2015, total assets were $26.7 million and total liabilities were $1.9 million. The company reported no debt balance; however, it had redeemable convertible preferred stock with carrying values totaling approximately $6.9 million and stated redemption values of approximately $11.7 million. Preferred-stock dividends and accretion reduced net loss available to common stockholders by $0.5 million for the first six months.
Material Changes Versus Prior Comparable Period
- Second-quarter R&D expense rose 63% to $2.6 million; six-month R&D expense rose 31% to $5.7 million, reflecting Phase 2 clinical-trial activity.
- Second-quarter G&A expense increased 15% to $2.1 million, while six-month G&A expense decreased 2% to $3.8 million, principally because of lower stock-based compensation.
- Six-month net loss increased from $8.5 million to $9.5 million, while net loss applicable to common stockholders increased from $9.1 million to $10.0 million.
- Six-month operating cash use increased from $6.0 million to $7.3 million.
- Financing proceeds declined substantially to $4.5 million from $30.4 million in the prior-year period. The 2015 proceeds came from an at-the-market common-stock offering; no ATM transactions occurred in the second quarter.
- Cash declined from $29.1 million at December 31, 2014 to $26.4 million at June 30, 2015.
- Common shares outstanding increased from 22.3 million at December 31, 2014 to 23.8 million at June 30, 2015, before considering additional dilution from options, warrants, restricted stock and preferred-stock conversion.
Guidance, Outlook, Risks and Unusual Items
- Management estimated that available cash would fund currently planned operations through September 30, 2016. Continued operations thereafter depend on additional financing or achieving profitable operations, with no assurance of either.
- The NASH-CX Phase 2 trial began enrolling in June 2015. It planned to enroll 156 patients with NASH cirrhosis, with top-line data expected in the fourth quarter of 2017.
- The 30-patient NASH-FX Phase 2 study was expected to begin enrollment in August 2015, with top-line data expected in mid-2016.
- An open-label GR-MD-02 drug-interaction study with midazolam reported no drug interaction, serious adverse events or drug-related adverse events. A Phase 1B melanoma study combining GR-MD-02 with Yervoy remained in process, and a Keytruda combination study was being planned.
- Clinical development, regulatory approval, patient enrollment, product safety and efficacy, manufacturing, intellectual property, competition and dependence on outside capital remain significant risks.
- The company disclosed shareholder class-action and derivative litigation alleging misleading disclosures, fiduciary-duty violations and related claims. Damages were unspecified, no loss estimate was reasonably determinable, and the company stated that an adverse outcome could materially affect a particular period.
- Stock-based compensation was $1.7 million for the first six months, and $3.5 million of unrecognized compensation remained related to unvested options.
- Galectin Sciences LLC was consolidated as a less-than-wholly-owned subsidiary after the company funded additional expenses; its ownership increased to 67.3% at June 30, 2015.
Investor Verification Points
- Verify the cash runway assumptions, projected Phase 2 spending and the company’s need for future equity financing.
- Assess enrollment progress, endpoint selection and eventual results for the NASH-CX and NASH-FX trials.
- Review the full preferred-stock terms, redemption provisions and potential conversion dilution.
- Quantify dilution from approximately 5.4 million warrants, 3.2 million options, restricted shares and approximately 2.5 million shares issuable upon preferred-stock conversion.
- Monitor the status and potential financial impact of the shareholder class-action and derivative lawsuits.
- Reconcile the reported common-share counts, including the August 7, 2015 outstanding-share figure, with the June 30 balance-sheet amount and subsequent equity activity.