Galectin Therapeutics Inc. — Form 10-K Summary
Business context and reporting period
Annual report for the fiscal year ended December 31, 2019. Galectin Therapeutics is a clinical-stage biopharmaceutical company with no commercial products or revenue. Its primary candidate is belapectin (GR-MD-02), a galectin-3 inhibitor being developed mainly for NASH-related liver fibrosis and compensated cirrhosis. Additional programs target cancer immunotherapy, skin disease, and other fibrotic conditions.
The company’s principal 2019 development activity was preparation of the adaptive NASH-RX Phase 2b/3 program following FDA feedback. The company expected first-patient enrollment in the second quarter of 2020, subject to further protocol and regulatory work.
Financial and operating metrics
| Metric | 2019 | 2018 | Change |
|---|---|---|---|
| Revenue | $0 | $0 | No change |
| Research and development expense | $7.467 million | $6.471 million | +15% |
| General and administrative expense | $5.971 million | $7.131 million | -16% |
| Total operating expense | $13.438 million | $13.602 million | -1% |
| Net loss | $13.294 million | $13.900 million | Improved by $0.606 million |
| Net loss applicable to common stockholders | $20.179 million | $15.047 million | Increased by $5.132 million |
| Basic and diluted loss per share | $0.39 | $0.38 | Higher loss per share |
| Cash and cash equivalents at year-end | $47.480 million | $8.253 million | + $39.227 million |
| Net cash used in operating activities | $10.848 million | $10.179 million | +$0.669 million |
Margins are not meaningful because the company has no revenue. The accumulated deficit was $216.4 million at December 31, 2019. Total assets were $48.467 million and total liabilities were $2.872 million. The company reported no borrowings and no significant market-risk exposure related to debt.
Financing activities generated $50.075 million in 2019, primarily from a $44.889 million rights offering, $2.930 million of at-the-market common-stock issuances, and $2.650 million from option and warrant exercises. The company paid $394,000 of preferred-stock dividends.
The company had access to an undrawn $10 million unsecured line of credit with director and stockholder Richard E. Uihlein. The facility was extended to permit borrowings through December 31, 2021, with repayment due December 31, 2022.
Material changes versus the prior comparable period
- Research and development spending increased as the company incurred NASH-RX planning, global site-startup and qualification costs, clinical-supply costs, and supporting toxicology work.
- General and administrative expense declined primarily because stock-based compensation decreased by approximately $1.136 million.
- Operating cash use increased modestly despite lower total operating expense.
- Cash improved substantially because of the 2019 rights offering and other equity-related financings, but common shares outstanding increased from approximately 41.2 million at year-end 2018 to 56.9 million at year-end 2019.
- 10X Fund converted all 5.508 million shares of Series B preferred stock into 3.789 million common shares in January 2019. Related warrant expirations were extended, producing a one-time non-cash warrant-modification charge of $6.622 million.
- NASH-CX did not meet its primary endpoint in the total patient population because the HVPG difference versus placebo was not statistically significant. Management highlighted statistically significant effects in selected patients without baseline esophageal varices, including reduced HVPG and fewer new varices.
Guidance, outlook, risks and unusual items
- Management stated that existing cash, together with the available credit facility, should fund currently planned operations through at least September 30, 2021.
- The planned adaptive NASH-RX Phase 2b/3 program and related overhead were estimated at approximately $125 million through the first-stage interim analysis, although costs and timing were not finalized. Additional financing will be required to complete the program.
- A hepatic-impairment study was planned in parallel with NASH-RX, with an estimated cost of $2 million and approximately 40 participants. Results could support inclusion of more advanced CTP-B patients; initially, the trial was expected to enroll CTP-A patients.
- The company is dependent on the success and regulatory approval of belapectin. All product candidates remain investigational, and no product has FDA approval or commercial sales.
- Key risks include failure to reproduce or confirm NASH-CX findings, clinical-trial delays or unfavorable results, FDA or foreign regulatory requirements, dependence on contract research organizations and manufacturers, need for substantial additional capital, potential shareholder dilution, competition, intellectual-property challenges, and limited trading liquidity.
- The company relies on third-party manufacturers and has no long-term supplier commitments. Contractual operating-lease obligations totaled $103,000, including $47,000 due within one year.
- The independent auditor reported that the financial statements were fairly presented under U.S. GAAP and that internal control over financial reporting was effective as of December 31, 2019.
Most important facts for investors to verify
- Whether the final NASH-RX protocol received FDA acceptance and whether first-patient enrollment occurred as planned in the second quarter of 2020.
- The final design, enrollment requirements, endpoint strategy, timing, and total cost of the adaptive Phase 2b/3 program.
- Cash burn, remaining cash runway, use of the $10 million credit facility, and the timing and terms of future financing.
- Whether later-stage clinical data confirm the selected belapectin dose and the reported benefits in patients without baseline varices.
- The potential dilution from 12.538 million outstanding warrants, 3.000 million outstanding options, and future equity financings.
- The economic effect of the one-time $6.622 million warrant-modification charge and the continuing obligations associated with preferred stock and warrants.