GALECTIN THERAPEUTICS INC quarterly report, Q2 FY2022

Galectin Therapeutics Inc. — Form 10-Q Summary

Reporting period: Quarter and six months ended June 30, 2022. The company is a clinical-stage biopharmaceutical developer focused on galectin-targeting therapies for fibrotic disease and cancer, led by belapectin (GR-MD-02). The interim financial statements are unaudited.

Financial Condition and Results

Metric	Three months ended June 30	Six months ended June 30
Revenue	None	None
Research and development expense	$8.1 million	$16.1 million
General and administrative expense	$1.6 million	$3.5 million
Total operating expenses	$9.7 million	$19.6 million
Net loss	$9.6 million	$19.5 million
Net loss applicable to common stockholders	$9.7 million	$19.6 million
Basic and diluted loss per share	$0.16	$0.33
Net cash used in operating activities	Not separately provided	$15.5 million

The company has operated at a loss since inception and has generated no revenue. No profitability or revenue guidance was provided. Operating expenses were primarily driven by clinical development activities, including the NAVIGATE trial.

Cash and liquidity: Cash and cash equivalents were $24.2 million at June 30, 2022, down from $39.6 million at December 31, 2021.
Debt: Convertible notes payable to related party totaled $29.5 million, net of debt discount, at June 30, 2022. The notes have stated maturities in 2025 and are convertible at the holder’s option.
Other liabilities: Current liabilities were $10.9 million, including $7.9 million of accrued expenses. Derivative liabilities related to contingent interest on the convertible notes totaled $626,000.
Equity: Stockholders’ equity was negative $16.9 million at June 30, 2022, compared with positive $0.9 million at December 31, 2021. Common shares outstanding were 59.4 million as of August 10, 2022.
Cash burn: Operating cash use increased from $12.4 million in the first six months of 2021 to $15.5 million in the first six months of 2022.

Material Changes Versus Prior Comparable Period

Research and development expense increased 25% for the second quarter and 42% for the first six months, primarily due to higher NAVIGATE clinical program costs.
General and administrative expense decreased 9% in the second quarter but increased 10% for the first six months. The year-to-date increase primarily reflected higher non-cash stock-based compensation.
Six-month net loss increased to $19.5 million from $14.8 million, while loss applicable to common stockholders increased to $19.6 million from $14.9 million.
Interest expense increased to $456,000 from $107,000 for the first six months, reflecting the related-party convertible notes and associated debt discount amortization.
Other income included a $504,000 favorable change in the fair value of derivative liabilities, compared with a $172,000 expense in the prior-year period.
No common stock was issued under the company’s at-the-market offering during the first six months of 2022, compared with $3.9 million of net proceeds in the prior-year period. The company also received no financing proceeds in the first six months of 2022, compared with $16.8 million in 2021.
Stock-based compensation increased to $1.5 million from $835,000 for the first six months.

Guidance, Outlook, Risks, and Unusual Items

Liquidity outlook: In July 2022, after the quarter ended, the company entered into an unsecured line of credit with its chairman for up to $60.0 million. The company stated that available cash and the line of credit should fund currently planned operations through at least December 31, 2024.
The line of credit may be drawn through July 31, 2024. Advances bear interest at the applicable federal rate plus 2%, mature by January 31, 2026, and may be converted into common stock at the lender’s election, subject to a minimum conversion price of $3.00 per share.
The company issued a warrant for 500,000 shares in connection with the line of credit and may issue additional warrants for up to 1.2 million shares as borrowings occur.
Clinical outlook: The company expected enrollment in the Phase 2b portion of the global NAVIGATE trial to be completed in the fourth quarter of 2022. Approximately 140 sites in 15 countries had been activated.
The hepatic impairment study was fully enrolled in February 2022, with results to be announced when available.
The company was planning a Phase 2 trial of belapectin combined with a PD-1 inhibitor in advanced or metastatic head and neck cancer.
COVID-19 had delayed regulatory approvals, site activation, and patient enrollment, particularly in Europe. The company activated sites in Latin America to address slower European enrollment.
Key risks include continued operating losses, dependence on additional capital, clinical and regulatory failure or delay, uncertain patient recruitment, inability to establish strategic partnerships, intellectual-property risks, competition, stock-price volatility, and potential litigation.
The company reported no significant pending legal proceedings and no material changes in internal control over financial reporting. Management concluded that disclosure controls were effective as of June 30, 2022.

Important Facts for Investors to Verify

Enrollment progress, interim-analysis timing, and clinical results for the NAVIGATE trial.
The terms, availability, actual drawdowns, interest expense, conversion features, and warrant issuance under the $60 million related-party line of credit.
Cash runway relative to the company’s stated expectation of funding planned operations through December 31, 2024.
Future financing needs and the potential dilution from convertible notes, options, warrants, preferred stock, and other share-based instruments. The filing identifies approximately 22.5 million anti-dilutive potential common shares at June 30, 2022.
Regulatory feedback, safety and efficacy data, and the potential for accelerated approval or a strategic partnership for belapectin.
Whether clinical trial delays, COVID-19 effects, recruitment challenges, or regulatory developments alter the company’s stated outlook.