GALECTIN THERAPEUTICS INC quarterly report, Q2 FY2013

Galectin Therapeutics Inc. Form 10-Q Summary

Business Context and Reporting Period

Galectin Therapeutics Inc. is a development-stage biotechnology company focused on therapies targeting galectin proteins in fibrotic disease and cancer. The filing covers the quarter and six months ended June 30, 2013. The company had no significant revenue and remained dependent on external financing.

GR-MD-02: Phase I trial for NASH with advanced hepatic fibrosis began enrolling patients in July 2013.
GM-CT-01: Phase I/II melanoma immunotherapy study was ongoing in Europe.
Common shares outstanding at August 13, 2013: 16,878,180.

Financial Performance and Position

Metric	Three Months Ended June 30	Six Months Ended June 30
Revenue	No significant revenue	No significant revenue
Research and development expense	$1.349 million	$3.101 million
General and administrative expense	$1.198 million	$2.654 million
Total operating expenses	$2.547 million	$5.755 million
Net loss	$2.544 million	$5.747 million
Net loss applicable to common stockholders	$11.641 million	$15.113 million
Net loss per common share	$0.72	$0.94
Net cash used in operating activities	Not separately presented	$4.355 million

Cash and cash equivalents were $5.099 million at June 30, 2013, compared with $9.364 million at December 31, 2012.
Total assets were $5.225 million; total liabilities were $1.498 million.
Redeemable convertible preferred stock totaled $6.816 million, including Series B-1, Series B-2 and Series C securities.
Stockholders’ equity changed from $1.165 million at year-end 2012 to a deficit of $3.089 million at June 30, 2013.
The company had no conventional debt balance reported at June 30, 2013, but had preferred-stock redemption obligations and accrued dividends.
Operating cash use increased from $3.670 million in the first six months of 2012 to $4.355 million in the comparable 2013 period.

Material Changes Versus the Prior Comparable Period

Six-month research and development expense increased 47% to $3.101 million, primarily because of higher clinical-program and fibrosis-related preclinical costs.
Six-month general and administrative expense increased 6% to $2.654 million, mainly due to higher legal expenses and investor-relations costs, partly offset by lower rent.
Six-month net loss increased to $5.747 million from $4.610 million. Net loss applicable to common stockholders increased to $15.113 million from $5.188 million.
The significant increase in common-stockholder loss included an $8.763 million non-cash charge for modification of warrants.
Financing cash inflows fell to $90,000 from $10.403 million, as the prior-year period benefited from a public offering.
During the first six months of 2013, common shares outstanding increased to 16.300 million from 16.061 million, primarily through option exercises and conversion of Series C preferred stock.

Guidance, Outlook, Risks, Contingencies and Unusual Items

Management expected available cash at June 30, 2013, together with $2.430 million received after quarter-end from warrant exercises, to fund operations through the first quarter of 2014.
Future operations beyond that period depended on additional financing or profitable operations; management provided no assurance that financing would be available on favorable terms or at all.
The company had cumulative net losses applicable to common stockholders of $95.4 million from inception through June 30, 2013 and expected additional losses and cash usage for the foreseeable future.
Management had developed cost-containment measures and potential strategic alternatives if additional financing could not be obtained. The filing stated that the financial statements did not include adjustments for a possible inability to continue as a going concern.
The CTI Phase I clinical-trial work order had an estimated budget of $2.155 million through March 2014; $1.090 million was recognized as expense during the first six months of 2013.
The University of Georgia drug-discovery collaboration required funding of $154,000 through December 2013; $135,000 had been paid by June 30, 2013.
A $1.0 million severance obligation to former CEO David Platt remained accrued. Related litigation and arbitration were ongoing, and the ultimate outcome was uncertain. The accrual could be reversed depending on the outcome of the company’s arbitration seeking rescission or reformation of the separation agreement.
On August 1, 2013, after the reporting date, the company’s market capitalization exceeded $100 million, a milestone potentially relevant to the separation agreement.
The company recorded no liability for Series C post-conversion dividend rights, although their stated redemption value was $241,000, because payment was considered improbable.
Clinical development, regulatory approval, patient enrollment, trial results, intellectual-property protection, competition, stock-price volatility and continued access to capital were identified as significant risks.
On August 7, 2013, after quarter-end, the FDA granted Fast Track designation to GR-MD-02 for NASH with hepatic fibrosis.

Important Facts for Investors to Verify

Whether post-quarter-end warrant exercises and the resulting $2.430 million proceeds were sufficient to extend the company’s funding runway beyond the first quarter of 2014.
Progress, enrollment, safety findings and top-line results from the GR-MD-02 Phase I trial.
Whether the GM-CT-01 European trial achieved the response threshold required to proceed beyond its initial stage and whether the company would fund later-stage enrollment.
The status and potential financial effect of the David Platt litigation and arbitration, including the $1.0 million accrued obligation and possible additional damages or reversal.
The potential dilution from 7.396 million outstanding warrants, 3.553 million options and approximately 2.619 million shares issuable upon preferred-stock conversion at June 30, 2013.
The company’s ability to secure additional financing before existing cash resources are exhausted.