Galectin Therapeutics Inc. — 2022 Q3 Form 10-Q Summary
Business Context and Reporting Period
Galectin Therapeutics is a clinical-stage biopharmaceutical company developing galectin-targeting therapies for fibrotic diseases and cancer. The report covers the three and nine months ended September 30, 2022, compared with the corresponding 2021 periods. The company has generated no revenue since inception and remains focused primarily on belapectin, including the global NAVIGATE Phase 2b/3 trial for NASH cirrhosis and a proposed oncology trial.
Financial Performance and Liquidity
| Metric | Three months ended September 30 | Nine months ended September 30 |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $6.6 million | $22.7 million |
| General and administrative expense | $1.5 million | $5.0 million |
| Total operating loss | $(8.1) million | $(27.7) million |
| Net loss | $(8.6) million | $(28.1) million |
| Net loss applicable to common stockholders | $(8.6) million | $(28.2) million |
| Basic and diluted loss per share | $(0.14) | $(0.47) |
- Operating margins are not meaningful because the company has no revenue.
- Cash and cash equivalents were $15.8 million at September 30, 2022, down from $39.6 million at December 31, 2021.
- Net cash used in operating activities was $23.8 million for the first nine months of 2022, compared with $17.4 million in the prior-year period.
- No financing cash inflows were recorded in the first nine months of 2022. Prior-year financing cash inflows were $26.8 million, including convertible notes and equity issuance.
- Total liabilities were $40.2 million, including $29.7 million of related-party convertible notes payable and accrued interest, and an $850,000 derivative liability.
- Stockholders’ equity was $(24.1) million at September 30, 2022, compared with $0.9 million at December 31, 2021.
Material Changes Versus the Prior Comparable Period
- Third-quarter net loss increased modestly to $8.6 million from $8.5 million, while nine-month net loss increased to $28.1 million from $23.3 million.
- Nine-month research and development expense increased 27% to $22.7 million, primarily due to higher NAVIGATE clinical program costs. Third-quarter research and development expense was substantially unchanged.
- Nine-month general and administrative expense increased 4% to $5.0 million, primarily because of higher non-cash stock-based compensation, partly offset by lower investor relations and business development expenses.
- Operating cash use increased $6.5 million year over year, reflecting preparation and execution of the NAVIGATE trial.
- Interest expense increased as the company continued to accrue interest and amortize debt discounts on related-party convertible notes.
- The company issued no shares under its at-the-market program during the first nine months of 2022, versus $3.9 million of net proceeds in the prior-year period.
- Shares outstanding increased modestly to 59.4 million at September 30, 2022 from 59.3 million at December 31, 2021. Potential dilution from options, warrants, preferred stock and convertible notes was excluded from diluted loss per share because it was anti-dilutive.
Guidance, Outlook, Risks, and Unusual Items
- Management stated that available cash and the related-party credit facility are expected to fund currently planned operations through at least December 31, 2024. The company also expects to seek additional debt, equity, collaboration, partnership or strategic financing.
- In July 2022, the company entered into an unsecured related-party line of credit of up to $60.0 million, available through July 31, 2024. Advances bear interest at the applicable federal rate plus 2%, mature by January 31, 2026, and are convertible at the lender’s option subject to a minimum conversion price of $3.00 per share.
- The credit agreement included 500,000 immediately exercisable warrants at a $5.00 exercise price and provides for up to 1.2 million additional warrants upon future borrowings. The filing reports no financing cash proceeds from this facility during the period.
- The NAVIGATE trial had approximately 140 activated sites in 15 countries. Enrollment completion for the Phase 2b portion was expected around the end of 2022, but COVID-19, European enrollment conditions and regulatory or site disruptions remained risks. The company activated sites in Latin America to support enrollment.
- The hepatic impairment study was fully enrolled in February 2022; results were to be announced when available. A proposed Phase 2 oncology trial received an FDA Study May Proceed letter, but its start depends on financing.
- The company has incurred losses since inception and expects losses to continue. It may delay research and clinical activities if liquidity becomes constrained, and there is no assurance that additional capital will be available on acceptable terms.
- The company disclosed a material weakness in internal control over financial reporting related to the precision of research and development cost accrual reviews. A computational accrual error was corrected, and management implemented additional reviews and documentation.
- There were no significant pending legal proceedings reported. The filing continues to identify clinical, regulatory, financing, intellectual-property, competition, stock-price volatility and COVID-19 risks.
Most Important Facts for Investors to Verify
- Current enrollment, timing and interim-analysis plans for the NAVIGATE trial, including whether Phase 2b enrollment was completed as expected.
- Actual draws, remaining availability and conversion or warrant activity under the $60 million related-party credit facility.
- Cash burn and projected liquidity relative to the stated funding horizon through December 31, 2024.
- Results and regulatory implications of the hepatic impairment study and any decision to include more advanced cirrhosis patients.
- Remediation and subsequent evaluation of the disclosed material weakness in research and development accrual controls.
- Potential dilution from $30 million of related-party convertible notes, 11.4 million warrants, 5.6 million options and other convertible securities.