Damora Therapeutics, Inc 10-Q for FY2024 Q3
Damora Therapeutics, Inc. (DMRA)
About this 10-Q
Damora Therapeutics, Inc filed this 10-Q on November 1, 2024, covering the quarter ended September 30, 2024 (FY2024 Q3).
Headline figures
Quarter ended September 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net loss
- $3.88M
- compared with a net loss of $8.14M a year earlier
- Diluted EPS
- -$3.39
- compared with -$7.50 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _______________ to _______________
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
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Ole Maaloes Vej 3 DK-2200 Copenhagen N Denmark |
N/A |
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(Address of principal executive offices) |
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Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
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The |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of October 30, 2024, the registrant had
Table of Contents
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Page |
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PART I. FINANCIAL INFORMATION |
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Item 1. |
4 |
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4 |
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Condensed Consolidated Statements of Operations and Comprehensive Loss |
5 |
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Condensed Consolidated Statements of Changes in Stockholders’ Equity |
6 |
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8 |
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Notes to Unaudited Interim Condensed Consolidated Financial Statements |
9 |
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
17 |
Item 3. |
29 |
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Item 4. |
30 |
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PART II. OTHER INFORMATION |
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Item 1. |
31 |
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Item 1A. |
31 |
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Item 2. |
31 |
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Item 3. |
32 |
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Item 4. |
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Item 5. |
32 |
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Item 6. |
33 |
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34 |
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i
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact are “forward-looking statements” for purposes of this Quarterly Report on Form 10-Q. In some cases, you can identify forward-looking statements by terminology such as “may,” “could,” “will,” “would,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “intend,” “predict,” “seek,” “contemplate,” “project,” “continue,” “potential,” “ongoing,” “goal,” or the negative of these terms or other comparable terminology. These forward-looking statements include, but are not limited to, statements regarding:
These statements relate to future events or to our future financial performance and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by these forward-looking statements. Factors that may cause actual results to differ materially from current expectations include, among other things, the reasons described elsewhere in this Quarterly Report on Form 10-Q and those set forth in Part I, Item 1A - “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. Any forward-looking statement in this Quarterly Report on Form 10-Q reflects our current view with respect to future events and is subject to these and other risks, uncertainties, and assumptions relating to our operations, results of operations, industry, and future growth. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.
ii
This Quarterly Report on Form 10-Q also contains estimates, projections, and other information concerning our industry, our business, and the markets for certain drugs, including data regarding the estimated size of those markets, their projected growth rates, and the incidence of certain medical conditions. Information that is based on estimates, forecasts, projections, or similar methodologies is inherently subject to uncertainties, and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained these industry, business, market, and other data from reports, research surveys, studies, and similar data prepared by third parties, industry, medical and general publications, government data, and similar sources. In some cases, we do not expressly refer to the sources from which these data are derived.
Except where the context otherwise requires, in this Quarterly Report on Form 10-Q, “we,” “us,” “our,” “Galecto,” and the “Company” refer to Galecto, Inc. and, where appropriate, its consolidated subsidiaries.
Trademarks
We have applied for various trademarks that we use in connection with the operation of our business. This Quarterly Report on Form 10-Q includes trademarks, service marks, and trade names owned by us or other companies. All trademarks, service marks, and trade names included in this Quarterly Report on Form 10-Q are the property of their respective owners. Solely for convenience, the trademarks and trade names in this report may be referred to without the ® and ™ symbols, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto.
iii
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
GALECTO, INC.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share amounts)
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September 30, |
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December 31, |
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2024 |
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2023 |
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Assets |
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(unaudited) |
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Current assets |
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Cash and cash equivalents |
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$ |
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$ |
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Marketable securities |
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— |
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Prepaid expenses and other current assets |
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Total current assets |
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Operating lease right-of-use asset |
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Equipment, net |
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Other assets, non-current |
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Total assets |
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$ |
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$ |
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Liabilities and stockholders’ equity |
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Current liabilities |
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Accounts payable |
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$ |
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$ |
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Accrued expenses and other current liabilities |
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Total current liabilities |
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Operating lease liabilities, non-current |
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— |
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Total liabilities |
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and contingencies (Note 9) |
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Stockholders’ equity |
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Preferred stock, par value of $ |
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Common stock, par value of $ |
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Additional paid-in capital |
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Accumulated deficit |
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( |
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( |
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Accumulated other comprehensive income |
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Total stockholders’ equity |
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Total liabilities and stockholders' equity |
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$ |
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$ |
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See accompanying notes to the unaudited interim condensed consolidated financial statements.
4
Galecto, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except share and per share amounts)
(Unaudited)
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Three Months Ended |
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Nine Months Ended |
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2024 |
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2023 |
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2024 |
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2023 |
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Operating expenses |
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Research and development |
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$ |
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$ |
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$ |
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$ |
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General and administrative |
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Restructuring costs |
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— |
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Total operating expenses |
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Loss from operations |
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( |
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( |
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( |
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( |
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Other income, net |
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Interest income, net |
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Foreign exchange transaction gain (loss), net |
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( |
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( |
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( |
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Total other income, net |
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( |
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Loss before income tax expense |
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( |
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( |
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( |
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( |
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Income tax expense |
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— |
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— |
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Net loss |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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$ |
( |
) |
Net loss per common share, basic and diluted |
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$ |
( |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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Weighted-average number of shares used in computing net loss |
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Other comprehensive income, net of tax |
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Currency translation gain |
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Unrealized gain on marketable securities |
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— |
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Other comprehensive income, net of tax |
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Total comprehensive loss |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
See accompanying notes to the unaudited interim condensed consolidated financial statements.
5
Galecto, Inc.
Condensed Consolidated Statements of Changes in Stockholders’ Equity
(in thousands, except share amounts)
(Unaudited)
Three Months Ended |
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Common Stock |
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Additional |
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Accumulated |
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Accumulated Other |
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Total |
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September 30, 2024 |
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Shares |
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Amount |
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Capital |
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Deficit |
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Income (Loss) |
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Equity |
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Balance at June 30, 2024 |
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$ |
— |
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$ |
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$ |
( |
) |
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$ |
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$ |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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Issuance of common stock in connection with vesting of restricted stock units |
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— |
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— |
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— |
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Round-up shares from the |
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— |
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— |
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— |
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— |
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— |
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Other comprehensive income, net |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
Balance at September 30, 2024 |
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$ |
— |
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$ |
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$ |
( |
) |
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$ |
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$ |
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Three Months Ended |
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Common Stock |
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Additional |
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Accumulated |
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Accumulated Other |
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Total |
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September 30, 2023 |
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Shares |
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Amount |
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Capital |
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Deficit |
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Income (Loss) |
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Equity |
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Balance at June 30, 2023 |
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$ |
— |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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Issuance of common stock; net of issuance costs |
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— |
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— |
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— |
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Other comprehensive income, net |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
Balance at September 30, 2023 |
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$ |
— |
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$ |
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$ |
( |
) |
|
$ |
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$ |
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||||
See accompanying notes to the unaudited interim condensed consolidated financial statements.
6
Galecto, Inc.
Condensed Consolidated Statements of Changes in Stockholders’ Equity
(in thousands, except share amounts)
(Unaudited)
Nine Months Ended |
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Common Stock |
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Additional |
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Accumulated |
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Accumulated Other |
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Total |
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September 30, 2024 |
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Shares |
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Amount |
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Capital |
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Deficit |
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Income (Loss) |
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Equity |
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Balance at December 31, 2023 |
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$ |
— |
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$ |
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$ |
( |
) |
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$ |
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$ |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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Issuance of common stock in connection with vesting of restricted stock units |
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— |
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— |
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— |
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Round-up shares from the |
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— |
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— |
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— |
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— |
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— |
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Other comprehensive income, net |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
Balance at September 30, 2024 |
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$ |
— |
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$ |
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$ |
( |
) |
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$ |
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$ |
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Nine Months Ended |
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Common Stock |
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Additional |
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Accumulated |
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Accumulated Other |
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Total |
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September 30, 2023 |
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Shares |
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Amount |
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Capital |
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Deficit |
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Income (Loss) |
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Equity |
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Balance at December 31, 2022 |
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$ |
— |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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Issuance of common stock; net of issuance costs of $ |
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— |
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— |
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— |
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Other comprehensive income, net |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
Balance at September 30, 2023 |
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$ |
— |
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$ |
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$ |
( |
) |
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$ |
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$ |
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||||
See accompanying notes to the unaudited interim condensed consolidated financial statements.
7
GALECTO, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
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Nine Months Ended |
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September 30, |
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2024 |
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2023 |
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Cash flows from operating activities: |
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Net loss |
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$ |
( |
) |
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$ |
( |
) |
Adjustment to reconcile net loss to net cash used in operating activities: |
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Depreciation |
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Stock-based compensation |
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Issuance of common stock in connection with vesting of restricted stock units |
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— |
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Amortization of premiums and discounts on marketable securities |
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( |
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Amortization of right of use lease asset |
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Accretion of lease liability |
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Changes in operating assets and liabilities: |
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Prepaid expenses and other current assets |
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Other assets, noncurrent |
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( |
) |
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( |
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Accounts payable |
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( |
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Accrued expenses and other current liabilities |
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( |
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Operating lease liabilities |
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( |
) |
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( |
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Net cash used in operating activities |
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( |
) |
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( |
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Cash flows from investing activities: |
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Purchases of marketable securities |
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— |
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( |
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Proceeds from sale of marketable securities |
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Net cash provided by investing activities |
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Cash flows from financing activities: |
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Proceed from issuance of common stock, net of issuance costs |
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— |
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Net cash provided by financing activities |
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— |
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Net decrease in cash and cash equivalents |
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( |
) |
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( |
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Effect of exchange rate changes on cash and cash equivalents |
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Cash and cash equivalents, beginning of period |
|
|
|
|
|
|
||
Cash and cash equivalents, end of period |
|
$ |
|
|
$ |
|
||
Supplemental disclosures of cash flow information: |
|
|
|
|
|
|
||
Cash paid for taxes |
|
$ |
— |
|
|
$ |
— |
|
Supplemental disclosures of non-cash activities: |
|
|
|
|
|
|
||
Operating lease liabilities arising from obtaining right-of-use assets |
|
$ |
— |
|
|
$ |
— |
|
See accompanying notes to the unaudited interim condensed consolidated financial statements.
8
GALECTO, INC.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
1. DESCRIPTION OF BUSINESS, ORGANIZATION AND LIQUIDITY
Business and Organization
Galecto, Inc., together with its consolidated subsidiaries (the “Company” or “Galecto”), is a clinical-stage biotechnology company developing novel therapeutics that are designed to target the biological processes that lie at the heart of fibrotic diseases and cancer. The Company’s focus is on the development of small molecule inhibitors for the treatment of cancer and severe liver diseases.
As of September 30, 2024, the Company’s wholly owned subsidiaries were PharmAkea, Inc., a Delaware corporation (“PharmAkea”), Galecto Securities Corporation, a Massachusetts corporation, and Galecto Biotech AB, a Swedish company. Galecto Biotech ApS, a Danish operating company, is a wholly-owned subsidiary of Galecto Biotech AB.
Strategic Shift in Business Strategy
In September 2023, the Company undertook an organizational restructuring and determined to conduct a comprehensive exploration of strategic alternatives. In consultation with experienced financial and legal advisors, a comprehensive strategic alternative review process began immediately and evaluated a broad range of options to maximize shareholder value through broad outreach to life sciences companies and a thorough process of evaluation of prospective strategic partners. This review of strategic alternatives resulted in the execution of the Asset Purchase Agreement (as defined below) in October 2024 with Bridge Medicines LLC (“Bridge Medicines”) to acquire the global rights to Bridge Medicines’ BRM-1420 program, a novel dual ENL-YEATS and FLT3 inhibitor for multiple genetic subsets of acute myeloid leukemia (“AML”), and assumed certain of Bridge Medicines’ liabilities associated with the acquired assets (the “Asset Purchase”). For additional details, see Note 14 to the Company’s unaudited interim condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.
As a result of the conclusion of the strategic alternatives review process, the Company’s focus is now on the development of GB1211 and the addition of BRM-1420 from Bridge Medicines. As part of the strategic alternative review process, the Company determined not to further advance GB2064, its LOXL-2 inhibitor candidate, at this time.
Risks and Uncertainties
The Company is subject to risks common to companies in the biotechnology industry, including, but not limited to, new technological innovations, protection of proprietary technology, dependence on key personnel, compliance with government regulations and the need to obtain additional financing. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure and extensive compliance reporting capabilities.
The Company’s product candidates are in development. There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained, that any products developed will obtain necessary government regulatory approval or that any approved products will be commercially viable. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will generate significant revenue from product sales. The Company operates in an environment of rapid change in technology and substantial competition from pharmaceutical and biotechnology companies. In addition, the Company is dependent upon the services of its employees and consultants.
Liquidity and Management Plans
Since inception, the Company has devoted substantially all its efforts to business planning, research and development, recruiting management and technical staff and raising capital, and has financed its operations primarily through the issuance of redeemable convertible preferred shares, debt financings, the Company’s initial public offering and sales of the Company's common stock in "at-the-market" offerings.
As of September 30, 2024, the Company had an accumulated deficit of $
9
Company’s clinical development and corporate general and administrative activities. The Company had negative cash flows from operating activities during the nine months ended September 30, 2024 and 2023 of $
As of September 30, 2024, the Company’s cash and cash equivalents amounted to $
In September 2023, the Company announced the Restructuring Plan (as defined below) to reduce the Company's operations to preserve financial resources, resulting in a reduction of the Company’s workforce by up to
Reverse Stock Split
On August 29, 2024, the Company effected a 1-for- reverse stock split of its issued and outstanding common stock. Accordingly, all share and per share amounts for all periods presented in the accompanying condensed consolidated financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect this reverse stock split. All fractional shares resulting from the reverse stock split were rounded up to the nearest whole number.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying interim condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”).
The accompanying interim condensed consolidated financial statements as of September 30, 2024 and for the three and nine months ended September 30, 2024 and 2023, and related interim information contained within the notes to the interim condensed consolidated financial statements, are unaudited. In management’s opinion, the unaudited interim condensed consolidated financial statements have been prepared on the same basis as the Company’s audited consolidated financial statements and include all adjustments (including normal recurring adjustments) necessary for the fair presentation of the Company’s financial position as of September 30, 2024, results of operations, statement of stockholders’ equity for the three and nine months ended September 30, 2024 and 2023 and its cash flows for the nine months ended September 30, 2024 and 2023. All intercompany balances and transactions have been eliminated. These unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and accompanying notes contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as filed with the Securities and Exchange Commission on March 8, 2024 (the “2023 Consolidated Financial Statements”). The results for the three and nine months ended September 30, 2024 are not necessarily indicative of the results expected for the full fiscal year or any interim period.
For the nine months ended September 30, 2024, there have been no material changes to the significant accounting policies as disclosed in Note 2 to the 2023 Consolidated Financial Statements.
Recently Issued Accounting Standards
3. INVESTMENTS
Cash in excess of the Company’s immediate requirements is invested in accordance with the Company’s investment policy that primarily seeks to maintain adequate liquidity and preserve capital.
10
The Company had
|
|
At December 31, 2023 |
|
|||||||||||||
|
|
Amortized |
|
|
Gross Unrealized |
|
|
Gross Unrealized |
|
|
Fair |
|
||||
Marketable securities: |
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Value |
|
||||
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
|||
Total |
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
4. PROPERTY AND EQUIPMENT, NET
Property and equipment as of September 30, 2024 consisted of the following (in thousands):
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2024 |
|
|
2023 |
|
||
Equipment |
|
$ |
|
|
$ |
|
||
Less: accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
Equipment, net |
|
$ |
|
|
$ |
|
||
Depreciation expense for the three and nine months ended September 30, 2024 was $
5. FAIR VALUE MEASUREMENTS
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value are performed in a manner to maximize the use of observable inputs and minimize the use of unobservable inputs.
The Company classified its money market funds within Level 1 because their fair values are based on their quoted market prices. The Company classified its debt securities within Level 2 because their fair values are determined using alternative pricing sources or models that utilized market observable inputs.
A summary of the assets that are measured at fair value as of September 30, 2024 and December 31, 2023 is as follows (in thousands):
|
|
Fair Value Measurement at |
|
|||||||||||||
Assets: |
|
Carrying |
|
|
Quoted Prices in |
|
|
Significant |
|
|
Significant |
|
||||
Money market funds(1) |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
||
Debt securities |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Fair Value Measurement at |
|
|||||||||||||
Assets: |
|
Carrying |
|
|
Quoted Prices in |
|
|
Significant |
|
|
Significant |
|
||||
Money market funds(1) |
|
$ |
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Debt securities |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|||
11
6. PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consist of the following (in thousands):
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2024 |
|
|
2023 |
|
||
Research and development tax credit receivable |
|
$ |
|
|
$ |
|
||
Prepaid insurance costs |
|
|
|
|
|
|
||
Value-added tax refund receivable |
|
|
|
|
|
|
||
Contract research and development costs |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total prepaid expenses and other current assets |
|
$ |
|
|
$ |
|
||
7. LEASES
The Company has the following operating leases:
Location |
|
Primary Use |
|
Lease |
|
Renewal Option |
Copenhagen, Denmark |
|
Corporate headquarters |
|
|
The Company has no finance leases and has elected to apply the short-term lease exception to all leases of one year or less. Rent expense for the three and nine months ended September 30, 2024 was $
Quantitative information regarding the Company’s leases for the three and nine months ended September 30, 2024 and 2023 was as follows:
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
Lease Cost |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Operating lease cost (in thousands) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Other Information |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating cash flows paid for amounts included |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Operating lease liabilities arising from obtaining |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
As of September 30, 2024 and December 31, 2023, the weighted average remaining lease term for operating leases was
As of September 30, 2024 and December 31, 2023, the weighted average discount rate for operating leases was
Operating lease liabilities at September 30, 2024 are as follows (in thousands):
|
|
Operating |
|
|
Future Lease Payments |
|
Leases |
|
|
2024 (excluding the period ended September 30, 2024) |
|
$ |
|
|
2025 |
|
|
— |
|
2026 |
|
|
— |
|
2027 |
|
|
— |
|
2028 |
|
|
— |
|
Total lease payments |
|
|
|
|
Less: imputed interest |
|
|
( |
) |
Total lease liabilities |
|
$ |
|
|
12
8. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consist of the following (in thousands):
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2024 |
|
|
2023 |
|
||
Employee compensation costs |
|
$ |
|
|
$ |
|
||
Contract research and development costs |
|
|
|
|
|
|
||
Restructuring costs |
|
|
|
|
|
|
||
|
|
|
|
|
|
|||
Other liabilities |
|
|
|
|
|
|
||
Total accrued expenses and other current liabilities |
|
$ |
|
|
$ |
|
||
9. COMMITMENTS AND CONTINGENCIES
During the three and nine months ended September 30, 2024, there were no material changes to the Company’s commitments and contingencies as disclosed in Note 9 of the 2023 Consolidated Financial Statements. Further, the Company’s commitments related to lease agreements are disclosed in Note 7 to the Company’s unaudited interim condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.
10. STOCK-BASED COMPENSATION
Employee Equity Plan
In March 2020, the Company's Board of Directors and stockholders approved the 2020 Stock Option and Grant Plan (“2020 Plan”). Holders of stock options under the 2020 Plan shall be entitled to exercise the vested portion of the stock option during the term of the grant. If a qualified exit, as defined in the 2020 Plan, occurs before the stock option vests, then all of the holders' unvested options shall vest immediately.
In October 2020, the Company's Board of Directors and stockholders approved the 2020 Equity Incentive Plan (“2020 Equity Plan”). Following the adoption of the 2020 Equity Plan,
The following table sets forth the activity for the Company’s stock options during the nine months ended September 30, 2024:
|
|
Number of |
|
|
Weighted- |
|
|
Weighted- |
|
|
Aggregate |
|
||||
Outstanding at December 31, 2023 |
|
|
|
|
$ |
|
|
|
|
|
$ |
— |
|
|||
Granted |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Cancelled |
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
|
||
Outstanding at September 30, 2024 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Vested and expected to vest at September 30, 2024 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Vested and exercisable at September 30, 2024 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
The weighted-average grant date fair value of all stock-based awards granted for the nine months ended September 30, 2024 was $
In November 2022, the Company's Board of Directors approved the 2022 Inducement Plan (the “Inducement Plan”), which allows for the grant of equity awards to be made to new employees where the equity award is a material inducement to an employee entering into employment with the Company. The Inducement Plan was adopted by the Company's Board of Directors without stockholder
13
approval pursuant to Nasdaq Listing Rule 5635(c)(4). A total of
Restricted Stock Units
In January 2024, the Company granted
The following table sets forth the activity for the Company’s RSUs during the nine months ended September 30, 2024:
|
|
Restricted |
|
|
Weighted- |
|
||
Total nonvested units at December 31, 2023 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Vested |
|
|
( |
) |
|
|
|
|
Cancelled |
|
|
( |
) |
|
|
|
|
Total nonvested units at September 30, 2024 |
|
|
|
|
$ |
|
||
Stock-Based Compensation
The grant date fair value of stock-based awards vested during the nine months ended September 30, 2024 and 2023 was $
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Research and development |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total stock-based compensation |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The Company uses a Black-Scholes option pricing model to determine fair value of its stock options. The Black-Scholes option pricing model includes various assumptions, including the fair value of common stock, expected life of stock options, the expected volatility based on the historical volatility of a publicly traded set of peer companies and the expected risk-free interest rate based on the implied yield on a U.S. Treasury security.
The fair values of the options granted were estimated using the following assumptions:
|
|
Nine Months Ended |
|
|
|||||
|
|
September 30, |
|
|
|||||
|
|
2024 |
|
|
2023 |
|
|
||
Risk-free interest rate |
|
|
% |
|
|
% |
|
||
Expected term (in years) |
|
|
|
|
|
|
|
||
Expected volatility |
|
|
% |
|
|
% |
|
||
Expected dividend yield |
|
|
|
|
|
|
|
||
14
11. RESTRUCTURING ACTIVITIES
In September 2023, the Company’s Board of Directors approved a restructuring plan (the “Restructuring Plan”) to reduce the Company’s operating costs and better align its workforce with the needs of its business. The Restructuring Plan eliminated approximately
Employees affected by the Restructuring Plan and the May RIF obtained involuntary termination benefits pursuant to a one-time benefit arrangement. For employees who have no requirements to provide future service, the Company recognized the liability for the termination benefits in full at fair value at the time of termination. For employees who are required to render services beyond a minimum retention period to receive their one-time termination benefits, the Company recognized the termination benefits ratably over their future service periods. For the Restructuring Plan, the Company recorded employee termination benefit charges during the year ended December 31, 2023 of $
Restructuring costs pertaining to the Restructuring Plan and the May RIF consist of the following (in thousands):
|
|
Nine |
|
|
Balance at December 31, 2022 |
|
$ |
|
|
Restructuring expenses incurred |
|
|
|
|
Payments |
|
|
( |
) |
Non-cash charges |
|
|
( |
) |
Balance at December 31, 2023 |
|
|
|
|
Restructuring expenses incurred |
|
|
|
|
Payments |
|
|
( |
) |
Balance at September 30, 2024 |
|
$ |
|
|
The Company incurred an impairment charge related to a leased facility of $
In September 2023, the Board of Directors approved arrangements designed to provide that the Company will have the continued dedication and commitment of its remaining employees, including executives, determined to be key to the Company’s planned go-forward operations. The Board of Directors approved, and management implemented, a retention program for employees remaining with the Company which includes cash retention bonuses totaling $
12. INCOME TAXES
As a result of the Company's history of net operating losses ("NOL"), the Company continues to maintain a full valuation allowance against its domestic net deferred tax assets. For the three and nine months ended September 30, 2024, the Company recognized an income tax expense of $
15
13. NET LOSS PER SHARE
Basic and diluted net loss per share is calculated as follows (in thousands except share and per share amounts):
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Weighted-average number of shares used in computing net loss |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss per common share, basic and diluted |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
The following outstanding potentially dilutive securities have been excluded from the calculation of diluted net loss per share, as their effect is anti-dilutive:
|
|
Nine Months Ended |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Stock options to purchase common stock |
|
|
|
|
|
|
||
Restricted stock units |
|
|
|
|
|
— |
|
|
14. SUBSEQUENT EVENTS
On October 7, 2024, the Company entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Bridge Medicines pursuant to which the Company acquired global rights to Bridge Medicines’ BRM-1420 program, a novel dual ENL-YEATS and FLT3 inhibitor for multiple genetic subsets of AML, and assumed certain of Bridge Medicines’ liabilities associated with the acquired assets (the “Asset Purchase”). As consideration to Bridge Medicines for the Asset Purchase, the Company (a) issued to Bridge Medicines (i)
The terms of the Preferred Stock are as set forth in the Certificate of Designation of Preferences, Rights and Limitations of Series A Non-Voting Convertible Preferred Stock. Each share of Preferred Stock is convertible into
Carl Goldfischer, Chairman of the Company’s Board of Directors is also the Executive Chairman of Bridge Medicines.
16
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following information should be read in conjunction with the unaudited interim condensed consolidated financial statements and the notes thereto included in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto for the year ended December 31, 2023, and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the United States Securities and Exchange Commission (the "SEC"), on March 8, 2024. This discussion and analysis and other parts of this Quarterly Report on Form 10-Q contain forward-looking statements based upon current beliefs, plans and expectations that involve risks, uncertainties and assumptions, such as statements regarding our plans, objectives, expectations, intentions and projections. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 and in other SEC filings.
Overview
We are a clinical-stage biotechnology company developing novel small molecule therapeutics that are designed to target the biological processes that lie at the heart of cancer and fibrotic diseases. Our strategy is to focus on diseases without disease-modifying treatment options and where there is a high unmet medical need. We are concentrating on the development of small molecule inhibitors for the treatment of cancer and severe liver diseases.
In September 2023, we announced a corporate restructuring that resulted in a substantial reduction of our workforce and that we had initiated a process to evaluate strategic alternatives. On October 7, 2024, we announced that we had completed our strategic alternative review process and determined to focus on oncology and severe liver diseases. In connection with this announcement, we announced that we had entered into an Asset Purchase Agreement with Bridge Medicines pursuant to which we acquired global rights to Bridge Medicines’ BRM-1420 program, a novel dual ENL-YEATS and FLT3 inhibitor for multiple genetic subsets of acute myeloid leukemia (“AML”), and assumed certain of Bridge Medicines’ liabilities associated with the acquired assets. As a result of the conclusion of the strategic alternatives review process, our focus is now on the development of GB1211 and the addition of BRM-1420 from Bridge Medicines. As part of the strategic alternative review process, we determined not to further advance GB2064, our LOXL-2 inhibitor candidate, at this time.
BRM-1420
We are developing BRM-1420, a preclinical dual inhibitor of ENL-YEATS and FLT3 for multiple molecularly defined subsets of AML, pursuant to a license agreement with Rockefeller University. Preclinical models have demonstrated that BRM1420 is active against MLL-r, NPM1m, cKIT+ and FLT3+ driven AML, and we believe that BRM-1420 has the potential to be further developed to become a treatment option for other tumor types. We anticipate that a small molecule ENL-YEATS/FLT3 inhibitor such as BRM-1420 may have the potential to address a broader AML patient population, including those with high-risk genetic mutations. We plan to submit an investigational new drug application (“IND”) to test BRM-1420 in AML in late 2025 or early 2026.
Background on ENL-YEATS and FLT3
The chromatin reader protein eleven-nineteen leukemia (ENL; encoded by the MLLT1 gene) has been identified as a potential therapeutic target in a subset of leukemias. ENL binds to acetylated histone through a protein domain called the YEATS domain. The human genome encodes four YEATS domain-containing proteins: ENL, AF9, GAS41, and YEATS2. These proteins have been found in nuclear complexes with a variety of molecular functions spanning chromatin remodeling, histone modification, and transcription, and they have been increasingly implicated in cancer. In leukemia, ENL and its paralog, AF9, are frequently fused with the mixed lineage leukemia protein (MLL1, also known as KMT2A) as a result of chromosomal translocations. ENL acts as a “reader” for acetylation on histone H3 lysine residues 9, 18 and 27, epigenetic marks associated with gene activation. Once bound to acetylated histones, ENL can stabilize transcription machinery on target genes, leading to increased gene expression and the growth of leukemia cells. Deletion of ENL or disruption of its binding to acetylated histones has been shown to decrease leukemia burden and increase survival in mouse models of leukemia. In contrast, loss of ENL has shown to have minimal effects on the survival of normal hemopoietic stem cells in culture.
Fms-like tyrosine kinase 3 (FLT3), a member of the receptor tyrosine kinase family, is widely expressed in hematopoietic progenitor cells and is overexpressed on the majority of AML blasts. Upon binding to the FLT3 ligand, FLT3 receptors activate and dimerize, leading to conformational change, cellular proliferation, and inhibition of apoptosis and differentiation. Mutations in FLT3 are the most common genomic alteration in AML, identified in approximately one-third of newly diagnosed adult patients.
17
Background on Target Indication and Subsets
We are targeting multiple molecularly defined subsets of AML, a rare, fast-growing cancer of the blood and bone marrow that occurs when abnormal blood cells, called blasts, rapidly multiply in the bone marrow and blood. AML is a complex and heterogeneous disease characterized by uncontrolled clonal expansion of hematopoietic progenitor cells that involves cytogenetic and epigenetic changes. Patient outcomes in AML have slowly improved over time, though for many patients mortality remains high.
BRM-1420 is designed to target acute leukemias with rearrangements in the KMT2A gene as well as other oncogenic driver mutations, such as NPM1. KMT2A rearrangements are seen in 5-10% of adult leukemias and 70-80% of infant leukemias. The prognosis of KMT2A rearranged leukemias appears to be worse than that of AML patients with normal cytogenetics.
MEN1 Mutations. Acute leukemias driven by rearrangement of the mixed lineage leukemia 1 gene (KMT2Ar) or mutation of the nucleophosmin gene (NPM1) require the chromatin adapter protein menin, encoded by the MEN1 gene, to sustain aberrant leukemogenic gene expression programs. Somatic mutations in MEN1 were identified in patients with acquired resistance to menin inhibition. Consistent with the genetic data in patients, inhibitor–menin interface mutations represent a conserved mechanism of therapeutic resistance in xenograft models and in an unbiased base-editor screen. These mutants attenuate drug-target binding by generating structural perturbations that impact small-molecule binding but not the interaction with the natural ligand MLL1, and prevent inhibitor-induced eviction of menin and MLL1 from chromatin. The MEN1 mutation, or menin-resistant, population within AML represents a potential market for BRM-1420.
Preclinical Data
Bridge Medicines, prior to our acquisition, conducted a number of preclinical in vitro and in vivo studies of BRM-1420 which suggest that it is a potent and selective inhibitor of cell proliferation in MLLr cell lines, with durable anti-tumor activity. BRM-1420 has shown effects on key genetic drivers of leukemogenesis and maintenance, including HOXA9 and MEIS1. Reductions of blasts cells in peripheral blood, bone marrow, and spleen have been demonstrated in animal models, in addition to cell cycle arrest, differentiation of blasts, and apoptosis. Preclinical studies have shown that BRM-1420 is active against several molecular drivers of AML, including MLL-r, NPM1m, cKIT+, FLT3+ and TET2+. In vitro modeling of BRM-1420 in combination with AML standard of care therapies and menin inhibitors in several relevant cell lines showed synergistic or additive effects. BRM-1420 has demonstrated promising tolerability in rat and dog toxicology studies performed to date at encouraging exposure multiples.
GB1211
GB1211 is a selective oral small molecule inhibitor of galectin-3. We believe GB1211 has the potential to treat multiple types of fibrosis and oncology indications.
GALLANT-1 Trial
During the fourth quarter of 2022, we announced topline results from our Phase 1b/2a trial of GB1211 that was focused on safety and effect on liver function and fibrosis biomarkers in patients with decompensated liver cirrhosis. These topline results showed statistically significant reductions in ALT (p<0.0005), AST (p<0.005) and GGT (p<0.05), with encouraging reductions for ALP (p<0.09), after 12 weeks of treatment. In this trial, GB1211 exhibited a favorable safety and tolerability profile in patients with decompensated liver cirrhosis.
During the third quarter of 2023, we completed Part A of the GALLANT-1 trial, which investigated GB1211 in combination with atezolizumab, a PD-L1 checkpoint inhibitor, for the treatment of first-line non-small cell lung cancer (NSCLC). Four patients in Part A of the GALLANT-1 trial (100 mg: three; 200 mg: one) showed a partial response according to RECIST criteria (version 1.1). One patient receiving GB1211 at 200 mg twice daily, alongside atezolizumab, demonstrated a sustained partial response over the course of the trial. At the 12-week mark, tumor shrinkage exceeded 70%, and this reduction was maintained throughout subsequent study visits. In accordance with local treatment guidelines, this patient was recently discontinued from the trial after receiving checkpoint inhibitor therapy for two consecutive years. Additionally, three of the five patients treated for at least six weeks with 100 mg of GB1211 twice daily, combined with atezolizumab, showed a partial response. One patient, currently treated for over 90 weeks, demonstrated tumor shrinkage exceeding 80%, consistently recorded during multiple study visits at weeks 36, 42, 48, 54, 60, 66, 72, 78, and 84. This patient is still being treated in the extension phase of the trial.
Investigator-Initiated Phase 2 Trial with Providence Portland Medical Center’s Earle A. Chiles Research Institute
In October 2023, we announced that we did not intend to initiate Part B of the GALLANT-1 trial, which had been designed to evaluate safety and tumor shrinkage and explore tumor response rate based on RECIST criteria (version 1.1), clinical
18
activity and immune biomarkers. While we do not intend to initiate Part B of the GALLANT-1 trial, we will continue to supply GB1211 at the recommended Phase 2 dose level of 100 mg twice daily in an investigator-initiated Phase 2 trial at Providence Portland Medical Center’s Earle A. Chiles Research Institute (EACRI). GB1211 will be administered in combination with the standard therapeutic dose of pembrolizumab (Keytruda®) in patients with unresectable or metastatic melanoma or recurrent or metastatic HNSCC progressing during or after platinum-containing chemotherapy. This trial is designed to evaluate (i) the safety and efficacy of GB1211, our first-in-class, oral small molecule galectin-3 inhibitor candidate, in combination with pembrolizumab, in metastatic melanoma and HNSCC patients and (ii) whether the addition of GB1211 increases the response rate of pembrolizumab in metastatic melanoma and HNSCC patients. This trial was initiated and enrolled its first patient in the second quarter of 2024.
Financial Overview
We will incur significant expenses relating to our development of BRM-1420 and GB1211. Our ability to generate revenue from product sales sufficient to achieve profitability will depend heavily on our advancement of these two assets, as well as partnering and/or funding additional activities in order to achieve the successful development and eventual commercialization of one or more of these product candidates. Our operations to date have been financed primarily from our initial public offering (“IPO”), the issuance of common stock through our Open Market Sale AgreementSM with Jefferies LLC, as sales agent, to provide for the issuance and sale of up to $50.0 million of our common stock from time to time in “at-the-market” offerings under a registration statement on Form S-3 that the SEC declared effective on November 12, 2021 (the “Registration Statement”) and related prospectus (the “ATM Program”), and the issuance of convertible preferred shares and convertible notes. Since inception, we have had significant operating losses. Our net loss was $3.9 million and $14.7 million for the three and nine months ended September 30, 2024, respectively. Our net loss was $8.1 million and $31.9 million for the three and nine months ended September 30, 2023, respectively. As of September 30, 2024, we had an accumulated deficit of $270.8 million and $19.7 million in cash and cash equivalents, respectively.
Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our prepaid expenses, accounts payable and accrued expenses. We anticipate that our expenses will increase substantially if, and as, we:
We expect to continue to incur net losses for the foreseeable future as we implement our development plans for GB1211 and BRM-1420. In particular, we expect our expenses to gradually increase as we further our development of, and seek regulatory approvals for, our product candidates, as well as hire additional personnel, pay fees to outside consultants, lawyers and accountants, and incur other costs associated with being a public company. In addition, if and when we seek and obtain regulatory approval to commercialize any current or future product candidate, we will also incur increased expenses in connection with commercialization and marketing of any such product. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials and our expenditures on other research and development activities.
Based on current estimates of our expenses going forward, we believe that our existing cash and cash equivalents of $19.7 million as of September 30, 2024 will be sufficient to fund our operating expenditures and capital expenditure requirements through at least the next twelve months from the filing date of this Quarterly Report on Form 10-Q. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. We will require substantial
19
additional capital to finance our operations. If we are unable to raise such capital when needed, or on acceptable terms, we may be forced to delay, reduce and/or eliminate one or more of our research and drug development programs or other operations.
To date, we have not had any products approved for sale and, therefore, have not generated any product revenue. We do not expect to generate any revenues from product sales unless and until we successfully complete development and obtain regulatory approval for one or more of our product candidates. As a result, until such time, if ever, that we can generate substantial product revenue, we expect to finance our cash needs through equity offerings, debt financings or other capital sources, including collaborations, licenses or similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed or on favorable terms, if at all. Any failure to raise capital as and when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies, including our research and development activities. If we are unable to raise capital, we will need to further delay, reduce or terminate activities to reduce costs beyond the restructurings implemented in September 2023 and May 2024.
Economic uncertainty in various global markets, including the United States and Europe, caused by political instability and conflict, such as the ongoing conflict in Ukraine and in Israel, have led to market disruptions, including significant volatility in commodity prices, credit and capital market instability and supply chain interruptions, which caused record inflation globally. Our business, financial condition and results of operations could be materially and adversely affected by further negative impact on the global economy and capital markets resulting from these global economic conditions, particularly if such conditions are prolonged or worsen.
Although, to date, our business has not been materially impacted by these global economic and geopolitical conditions, it is impossible to predict the extent to which our operations will be impacted in the short and long term, or the ways in which such instability could impact our business and results of operations. The extent and duration of these market disruptions, whether as a result of the military conflict between Russia and Ukraine and effects of the Russian sanctions, current armed conflict in Israel and the Gaza Strip, geopolitical tensions, record inflation or otherwise, are impossible to predict, but could be substantial. Any such disruptions may also magnify the impact of other risks described in this report.
Components of Operating Results
Operating Expenses
Our operating expenses since inception have consisted primarily of research and development expenses and general and administrative costs.
Research and Development
Our research and development expenses consist primarily of costs incurred for the development of our product candidates and our drug discovery efforts, which include:
We expense all research and development costs in the periods in which they are incurred, including for acquired in-process research and development. Costs for certain research and development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and third-party service providers.
20
We have historically met the requirements to receive a tax credit in Denmark of up to $0.8 million per year for losses resulting from research and development costs of up to approximately $3.6 million per year. The tax credit is reported as a reduction to research and development expense in the condensed consolidated statements of operations. We recorded a tax credit of $0.8 million during both nine-month periods ended September 30, 2024 and 2023. We anticipate that we will be eligible to receive this credit in 2024 and 2025.
We have qualified for the R&D Expenditure Credit (the “RDEC”) in United Kingdom for preclinical laboratory and in-patient clinical trials. The RDEC net tax benefit is reported in the consolidated statements of operations. We recorded an overall reduction for the RDEC, net of the UK corporation tax rate of $0.1 million during the nine months ended September 30, 2024. There was no RDEC recorded during the three and nine months ended September 30, 2023. We anticipate that we will be eligible to receive this credit in 2024.
Our direct research and development expenses are not currently tracked on a program-by-program basis. We use our personnel and infrastructure resources across multiple research and development programs directed toward identifying and developing product candidates.
We expect our research and development expenses to continue for the foreseeable future as we plan to invest in research and development activities related to developing our product candidates, including investments in preclinical development, conducting clinical trials, manufacturing and otherwise advancing our programs. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming, and the successful development of our product candidates is highly uncertain.
Because of the numerous risks and uncertainties associated with product development and the current stage of development of our product candidates and programs, we cannot reasonably estimate or know the nature, timing and estimated costs necessary to complete the remainder of the development of our product candidates or programs. We are also unable to predict if, when, or to what extent we will obtain approval and generate revenues from the commercialization and sale of our product candidates. The duration, costs and timing of preclinical studies and clinical trials and development of our product candidates will depend on a variety of factors, including:
21
We may never succeed in achieving regulatory approval for any of our product candidates. We may obtain unexpected results from our preclinical studies and clinical trials. We may elect to discontinue, delay or modify clinical trials of some product candidates or focus on others. A change in the outcome of any of these factors could mean a significant change in the costs and timing associated with the development of our current and future preclinical and clinical product candidates. For example, if the FDA or another regulatory authority were to require us to conduct clinical trials beyond those that we currently anticipate will be required for the completion of clinical development, or if we experience significant delays in execution of or enrollment in any of our preclinical studies or clinical trials, we could be required to expend significant additional financial resources and time on the completion of preclinical and clinical development.
Research and development activities account for a significant portion of our operating expenses. We expect our research and development expenses to continue for the foreseeable future, but be lower than our research and development expenses prior to announcing the initiation of our strategic alternative review, as we continue to implement our new business strategy. Product candidates in later stages of clinical development generally incur higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. As a result, we expect that if we choose to pursue further development and testing of our product candidates, our research and development expenses will increase as our product candidates advance into later stages of clinical development. However, we do not believe that it is possible at this time to accurately project total program-specific expenses through commercialization. There are numerous factors associated with the successful commercialization of any of our product candidates, including future trial design and various regulatory requirements, many of which cannot be determined with accuracy at this time based on our stage of development.
General and Administrative Expenses
Our general and administrative expenses consist primarily of personnel costs, depreciation expense and other expenses for outside professional services, including legal, human resources, audit and accounting services and facility-related fees not otherwise included in research and development expenses. Personnel costs consist of salaries, benefits and stock-based compensation expense, for our personnel in executive, finance and accounting, business operations and other administrative functions. We expect our general and administrative expenses to continue over the next several years to support our continued research and development activities, manufacturing activities and continued costs of operating as a public company, however we anticipate these expenses will be lower than our general and administrative expenses prior to announcing the initiation of our strategic alternative review. These expenses will likely include continued costs related to the hiring of additional personnel, legal, regulatory and other fees, director and officer insurance premiums and investor relations costs associated with our continued operations.
Restructuring Costs
Our restructuring costs consist primarily of expenses related to employee severance and notice period payments, benefits and related costs and other expenses including non-cash stock-based compensation expense related to the accelerated vesting of certain share-based awards, lease commitments and legal expenses. We anticipate that our restructuring costs will decrease in the near future compared to prior periods due to the restructuring costs being incurred in the periods ended June 30, 2024 and December 31, 2023 and that the execution of the Restructuring Plan is substantially complete. We did not incur any restructuring costs in the three month period ended September 30, 2024.
Other Income (Expense), Net
Our other income (expense), net is comprised of:
22
Results of Operations
Comparison of the Three Months Ended September 30, 2024 and 2023
The following sets forth our results of operations for the three months ended September 30, 2024 and 2023:
|
|
Three Months Ended |
|
|
|
|
||||||||||
|
|
September 30, |
|
|
Change |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
Percent |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development |
|
$ |
1,093 |
|
|
$ |
2,551 |
|
|
$ |
(1,458 |
) |
|
|
-57.2 |
% |
General and administrative |
|
|
2,747 |
|
|
|
3,304 |
|
|
|
(557 |
) |
|
|
-16.9 |
% |
Restructuring costs |
|
|
- |
|
|
|
2,728 |
|
|
|
(2,728 |
) |
|
|
-100.0 |
% |
Total operating expenses |
|
$ |
3,840 |
|
|
$ |
8,583 |
|
|
$ |
(4,743 |
) |
|
|
-55.3 |
% |
Loss from operations |
|
|
(3,840 |
) |
|
|
(8,583 |
) |
|
|
4,743 |
|
|
|
-55.3 |
% |
Other income, net |
|
|
(36 |
) |
|
|
447 |
|
|
|
(483 |
) |
|
|
-108.1 |
% |
Loss before income tax expense |
|
|
(3,876 |
) |
|
|
(8,136 |
) |
|
|
4,260 |
|
|
|
-52.4 |
% |
Income tax expense |
|
|
7 |
|
|
|
— |
|
|
|
7 |
|
|
|
0.0 |
% |
Net loss |
|
$ |
(3,883 |
) |
|
$ |
(8,136 |
) |
|
$ |
4,253 |
|
|
|
-52.3 |
% |
Research and development expenses
Research and development expenses were comprised of:
|
|
Three Months Ended |
|
|
|
|
|
|
|
|||||||
|
|
September 30, |
|
|
Change |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
Percent |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Preclinical studies and clinical trial-related activities |
|
$ |
472 |
|
|
$ |
(971 |
) |
|
$ |
1,443 |
|
|
|
-148.6 |
% |
Personnel |
|
|
248 |
|
|
|
1,280 |
|
|
|
(1,032 |
) |
|
|
-80.6 |
% |
Chemistry, manufacturing and control |
|
|
88 |
|
|
|
496 |
|
|
|
(408 |
) |
|
|
-82.3 |
% |
Consultants and other costs |
|
|
285 |
|
|
|
1,746 |
|
|
|
(1,461 |
) |
|
|
-83.7 |
% |
Total research and development expenses |
|
$ |
1,093 |
|
|
$ |
2,551 |
|
|
$ |
(1,458 |
) |
|
|
-57.2 |
% |
Research and development expenses were $1.1 million for the three months ended September 30, 2024, compared to $2.6 million for the three months ended September 30, 2023. The decrease of $1.5 million was primarily related to decreased chemistry, manufacturing and control costs of $0.4 million, decreased personnel costs of $1.0 million and decreased consulting related costs and other research and development costs of $1.5 million, offset by increased clinical trial-related expenses of $1.4 million.
General and administrative expenses
General and administrative expenses were $2.7 million for the three months ended September 30, 2024, compared to $3.3 million for the three months ended September 30, 2023. The decrease of $0.6 million was primarily related to decreased personnel costs of $0.5 million and decreased net other general administrative costs of $0.1 million.
Restructuring costs
There were no restructuring costs for the three months ended September 30, 2024. Restructuring costs were $2.7 million for the three months ended September 30, 2023. The restructuring costs in 2023 were related to the Restructuring Plan.
Other income (expense), net
Other income (expense), net for the three months ended September 30, 2024 was $(0.04) million, compared to $0.5 million for the three months ended September 30, 2023. The decrease of $0.5 million was primarily due to decreased interest income, net resulting from lower investable balances, offset by increased foreign exchange transaction loss, net.
23
Comparison of the Nine Months Ended September 30, 2024 and 2023
The following sets forth our results of operations for the nine months ended September 30, 2024 and 2023:
|
|
Nine Months Ended |
|
|
Change |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
Percent |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development |
|
$ |
5,390 |
|
|
$ |
21,002 |
|
|
$ |
(15,612 |
) |
|
|
-74.3 |
% |
General and administrative |
|
|
8,800 |
|
|
|
9,504 |
|
|
|
(704 |
) |
|
|
-7.4 |
% |
Restructuring costs |
|
|
968 |
|
|
|
2,728 |
|
|
|
(1,760 |
) |
|
|
-64.5 |
% |
Total operating expenses |
|
$ |
15,158 |
|
|
$ |
33,234 |
|
|
$ |
(18,076 |
) |
|
|
-54.4 |
% |
Loss from operations |
|
|
(15,158 |
) |
|
|
(33,234 |
) |
|
|
18,076 |
|
|
|
-54.4 |
% |
Other income, net |
|
|
509 |
|
|
|
1,360 |
|
|
|
(851 |
) |
|
|
-62.6 |
% |
Loss before income tax expense |
|
|
(14,649 |
) |
|
|
(31,874 |
) |
|
|
17,225 |
|
|
|
-54.0 |
% |
Income tax expense |
|
|
49 |
|
|
|
- |
|
|
|
49 |
|
|
|
0.0 |
% |
Net loss |
|
$ |
(14,698 |
) |
|
$ |
(31,874 |
) |
|
$ |
17,176 |
|
|
|
-53.9 |
% |
Research and development expenses
Research and development expenses were comprised of:
|
|
Nine Months Ended |
|
|
Change |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
Amount |
|
|
Percent |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Personnel |
|
$ |
2,233 |
|
|
$ |
6,346 |
|
|
$ |
(4,113 |
) |
|
|
-64.8 |
% |
Preclinical studies and clinical trial-related activities |
|
|
1,358 |
|
|
|
7,320 |
|
|
|
(5,962 |
) |
|
|
-81.4 |
% |
Chemistry, manufacturing and control |
|
|
378 |
|
|
|
2,059 |
|
|
|
(1,681 |
) |
|
|
-81.6 |
% |
Consultants and other costs |
|
|
1,421 |
|
|
|
5,277 |
|
|
|
(3,856 |
) |
|
|
-73.1 |
% |
Total research and development expenses |
|
$ |
5,390 |
|
|
$ |
21,002 |
|
|
$ |
(15,612 |
) |
|
|
-74.3 |
% |
Research and development expenses were $5.4 million for the nine months ended September 30, 2024, compared to $21.0 million for the nine months ended September 30, 2023. The decrease of $15.6 million was primarily related to decreased clinical trial-related expenses of $6.0 million due to discontinued clinical trial activities and decreased chemistry, manufacturing and control costs of $1.7 million, decreased personnel costs of $4.1 million and decreased consulting related costs and other research and development costs of $3.9 million.
General and administrative expenses
General and administrative expenses were $8.8 million for the nine months ended September 30, 2024, compared to $9.5 million for the nine months ended September 30, 2023. The decrease of $0.7 million was primarily related to decreased personnel costs of $1.1 million and decreased net other general administrative costs of $0.3 million, offset by increased legal increased legal costs relating to our exploration of strategic alternatives of $0.7 million.
Restructuring costs
Restructuring costs were $1.0 million for the nine months ended September 30, 2024, compared to $2.7 million for the nine months ended September 30, 2023. The decrease of $1.7 million was primarily related to the May RIF costs incurred in 2024 compared to the Restructuring Plan costs incurred in 2023.
Other income (expense), net
Other income (expense), net for the nine months ended September 30, 2024 was $0.5 million, compared to $1.4 million for the nine months ended September 30, 2023. The decrease of $0.9 million was primarily due to decreased interest income, net resulting from lower investable balances and increased foreign exchange transaction loss, net.
24
Liquidity and Capital Resources
Sources of Liquidity
Our operations to date have been financed primarily through our IPO, the issuance of common stock through our ATM Program, the issuance of convertible preferred shares and convertible notes. Since inception, we have had significant operating losses. On November 2, 2020, we completed our IPO in which we raised $86.3 million in net proceeds. During the three and nine months ended September 30, 2024, we had no sales under the ATM Program. During the three and nine months ended September 30, 2023, we sold an aggregate of 3,632 shares and 58,412 shares, respectively, of our common stock under the ATM Program at a weighted average selling price of $63.50 per share and $52.50 per share, respectively.
Our net losses were $3.9 million and $14.7 million for the three and nine months ended September 30, 2024, respectively. Our net losses were $8.1 million and $31.9 million for the three and nine months ended September 30, 2023, respectively. As of September 30, 2024, we had an accumulated deficit of $270.8 million and $19.7 million in cash and cash equivalents. Our primary use of cash is to fund operating expenses, which consist primarily of research and development expenditures, and to a lesser extent, general and administrative expenditures. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses.
Cash Flows
The following table summarizes our cash flows for the periods indicated:
|
|
Nine Months Ended |
|
|||||
|
|
September 30, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
|
|
(in thousands) |
|
|||||
Net cash used in operating activities |
|
$ |
(13,687 |
) |
|
$ |
(25,437 |
) |
Net cash provided by investing activities |
|
|
11,650 |
|
|
|
12,750 |
|
Net cash provided by financing activities |
|
|
— |
|
|
|
2,876 |
|
Net decrease in cash and cash equivalents |
|
$ |
(2,037 |
) |
|
$ |
(9,811 |
) |
Net Cash Used in Operating Activities
Cash used in operating activities of $13.7 million during the nine months ended September 30, 2024 was primarily attributable to our net loss of $14.7 million together with non-cash items of $3.3 million principally with respect to stock-based compensation and a net decrease of $2.3 million in components of our working capital.
Cash used in operating activities of $25.4 million during the nine months ended September 30, 2023 was primarily attributable to our net loss of $31.9 million, together with non-cash items of $4.6 million principally with respect to stock-based compensation, and a net increase of $1.9 million in components of our working capital.
Net Cash Provided by Investing Activities
Cash provided by investing activities of $11.7 million during the nine months ended September 30, 2024 was the result of proceeds from the sale of marketable securities.
Cash provided by investing activities of $12.8 million during the nine months ended September 30, 2023 was the result of $38.7 million in proceeds from the sale of marketable securities, offset by $25.9 million for the purchase of marketable securities.
Net Cash Provided by Financing Activities
We had no financing activities for the nine months ended September 30, 2024. Cash provided by financing activities of $2.9 million during nine months ended September 30, 2023 was the result of net proceeds from the issuance of our common stock under the ATM Program.
Funding Requirements
We expect to incur significant costs as we implement our development plans for GB1211 and BRM-1420 and we will require substantial additional capital to finance our operations. Our primary uses of capital are, and we expect will continue to be, costs related to third-party clinical research, manufacturing and development services; laboratory expenses and costs for related supplies; clinical costs; manufacturing costs; compensation-related expenses; legal and other regulatory expenses; and general overhead costs. Based on current estimates of our expenses going forward, we believe that our existing cash and cash equivalents of
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$19.7 million as of September 30, 2024 will be sufficient to fund our operating expenditures and capital expenditure requirements through at least the next twelve months from the filing date of this Quarterly Report on Form 10-Q. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect.
Any product candidates we may develop may never achieve commercialization and we anticipate that we will continue to incur losses for the foreseeable future. Until such time, if ever, as we can generate substantial product revenue, we expect to finance our future operations through our existing cash and cash equivalents and through a combination of equity offerings, debt financings, collaborations, strategic alliances, marketing and distribution arrangements, and/or licensing arrangements. We do not currently have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, our stockholders’ ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders’ rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic alliances, marketing and distribution arrangements, or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit, reduce or terminate our research, product development or future commercialization efforts, or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical products, we are unable to estimate the exact amount of our operating capital requirements. Our future funding requirements, both near-term and long-term, will depend on many factors, including, but not limited to:
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Further, our operating plans may change, and we may need additional funds to meet operational needs and capital requirements for clinical trials and other research and development activities. Because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates, we are unable to estimate the amounts of increased capital outlays and operating expenditures associated with our current and anticipated product development programs.
Critical Accounting Policies and Significant Judgments and Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our unaudited interim condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these unaudited interim condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the related disclosures of assets and liabilities at the date of the unaudited interim condensed consolidated financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, and the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.
Research and Development Costs
We incur substantial expenses associated with clinical trials. Accounting for clinical trials relating to activities performed by contract research organizations (“CROs”), contract manufacturing organizations (“CMOs”) and other external vendors requires management to exercise significant estimates in regard to the timing and accounting for these expenses. We estimate costs of research and development activities conducted by service providers, which include the conduct of sponsored research, preclinical studies and contract manufacturing activities. The diverse nature of services being provided under CRO and other arrangements, the different compensation arrangements that exist for each type of service and the lack of timely information related to certain clinical activities complicates the estimation of accruals for services rendered by CROs, CMOs and other vendors in connection with clinical trials. We record the estimated costs of research and development activities based upon the estimated amount of services provided by CROs, CMOs and other vendors but not yet invoiced and include these costs in the accrued and other current liabilities or prepaid expenses on the balance sheets and within research and development expense on the condensed consolidated statements of operations. In estimating the duration of a clinical study, we evaluate the start-up, treatment and wrap-up periods, compensation arrangements and services received attributable to each clinical trial and fluctuations are regularly tested against payment plans and trial completion assumptions.
We estimate these costs based on factors such as estimates of the work completed and budget provided in accordance with agreements established with our collaboration partners and third-party service providers. We make significant judgments and estimates in determining the accrued liabilities and prepaid expense balances in each reporting period. As actual costs become known, we adjust our accrued liabilities or prepaid expenses. We have not experienced any material differences between accrued costs and actual costs incurred since our inception.
Our expenses related to clinical trials are based on estimates of patient enrollment and related expenses at clinical investigator sites as well as estimates for the services received and efforts expended pursuant to contracts with multiple research institutions and CROs that may be used to conduct and manage clinical trials on our behalf. We generally accrue expenses related to clinical trials based on contracted amounts applied to the level of patient enrollment and activity. If timelines or contracts are modified based upon changes in the clinical trial protocol or scope of work to be performed, we modify our estimates of accrued expenses accordingly on a prospective basis.
Stock-Based Compensation
We have issued stock-based compensation awards through the granting of stock options and restricted stock units, which generally vest over a four-year period. We account for stock-based compensation in accordance with ASC 718, Compensation-Stock Compensation (“ASC 718”). In accordance with ASC 718, compensation cost is measured at estimated fair value and is included as compensation expense over the vesting period during which service is provided in exchange for the award.
We use a Black-Scholes option pricing model to determine fair value of our stock options. The Black-Scholes option pricing model includes various assumptions, including the fair value of common stock, expected life of stock options, the expected volatility based on the historical volatility of a publicly traded set of peer companies and the expected risk-free interest rate based on the implied yield on a U.S. Treasury security. These assumptions reflect our best estimates, but they involve inherent uncertainties based on market conditions generally outside our control. As a result, if other assumptions had been used, stock-based compensation
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cost could have been materially impacted. Furthermore, if we use different assumptions for future grants, share-based compensation cost could be materially impacted in future periods.
The fair value of our awards in the nine months ended September 30, 2024 has been estimated using Black-Scholes based on the following assumptions: expected term of 5.3 years; expected volatility of 99.3%; risk-free interest rate of 4.2%; and no expectation of dividends. The fair value of our awards in the nine months ended September 30, 2023 has been estimated using Black-Scholes based on the following assumptions: expected term of 6.0 years; expected volatility of 91.0%; risk-free interest rate of 3.8%; and no expectation of dividends.
We will continue to use judgment in evaluating the assumptions utilized for our stock-based compensation expense calculations on a prospective basis. In addition to the assumptions used in the Black-Scholes model, the amount of stock-based compensation expense we recognize in our consolidated financial statements includes stock option forfeitures as they occurred. We recognize forfeitures as they occur, and the compensation expense is reversed in the period that the forfeiture occurs.
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and operating losses and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted statutory tax rates expected to apply to taxable income in the jurisdictions and years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
Based on the level of historical operating results and projections for the taxable income for the future, we have determined that it is more likely than not that our net deferred tax assets will not be realized. Accordingly, we have recorded a full valuation allowance to reduce our net deferred tax assets.
We recognize tax benefits from uncertain tax positions only if (based on the technical merits of the position) it is more likely than not that the tax positions will be sustained on examination by the tax authority. The tax benefits recognized in the financial statements from such positions are measured based on the largest amount that is more than 50% likely to be realized upon ultimate settlement. We do not believe there will be any material changes in our unrecognized tax positions over the next 12 months. We have not incurred any interest or penalties. In the event we are assessed interest or penalties at some point in the future, they will be classified in our financial statements as a component of income tax expense.
We operate in multiple jurisdictions, both within and outside the United States, and may be subject to audits from various tax authorities. Management’s judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities, liabilities for uncertain tax positions, and any valuation allowance recorded against our net deferred tax assets. We will monitor the extent to which our deferred tax assets may be realized and adjust the valuation allowance accordingly.
Recently Adopted Accounting Pronouncements
Refer to Note 2, “Summary of Significant Accounting Policies,” in the accompanying notes to our consolidated financial statements for the nine months ended September 30, 2024 and 2023 appearing elsewhere in this Quarterly Report on Form 10-Q for a discussion of recent accounting pronouncements.
Emerging Growth Company and Smaller Reporting Company Status
As an emerging growth company (“EGC”) under the Jumpstart our Business Startups Act of 2012 (the “JOBS Act”), we may delay the adoption of certain accounting standards until such time as those standards apply to private companies. Other exemptions and reduced reporting requirements under the JOBS Act for EGCs include an exemption from the requirement to provide an auditor’s report on internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act, an exemption from any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation, and less extensive disclosure about our executive compensation arrangements.
In addition, the JOBS Act provides that an EGC can take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an EGC to delay the adoption of some accounting standards until those standards would otherwise apply to private companies. We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in
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the JOBS Act. As a result, our condensed consolidated financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
We may remain classified as an EGC until the end of the fiscal year following the fifth anniversary of the completion of our IPO, although if the market value of our common stock that is held by non-affiliates exceeds $700 million as of June 30 of any year before that time, or if we have annual gross revenues of $1.235 billion or more in any fiscal year, we would cease to be an EGC as of December 31 of the applicable year. We also will cease to be an EGC if we issue more than $1.0 billion of non-convertible debt over a three-year period.
We are also a “smaller reporting company,” meaning that the market value of our shares held by non-affiliates is less than $700 million and our annual revenue was less than $100 million during the most recently completed fiscal year. We may continue to be a smaller reporting company if either (i) the market value of our shares held by non-affiliates is less than $250 million or (ii) our annual revenue was less than $100 million during the most recently completed fiscal year and the market value of our shares held by non-affiliates is less than $700 million. If we are a smaller reporting company at the time, we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company, we may choose to present only the two most recent fiscal years of audited financial statements in our annual reports on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.
Effects of Inflation
Our assets are primarily monetary, consisting of cash and cash equivalents. Because of their liquidity, these assets are not directly affected by inflation. Since we intend to retain and continue to use our equipment, furniture, fixtures and office equipment, computer hardware and software and leasehold improvements, we believe that the incremental inflation related to replacement costs of such items will not materially affect our operations. However, the rate of inflation affects our expense and use of our resources. We continue to monitor the impact of inflation on these costs in order to minimize its effects through productivity improvements and cost reductions. There can be no assurance, however, that our operating results will not be affected by inflation in the future.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are a smaller reporting company as defined by Item 10 of Regulation S-K and are not required to provide the information otherwise required under this item.
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Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and our principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2024. Based on the evaluation of our disclosure controls and procedures as of September 30, 2024, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2024.
The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial and accounting officer, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
We are not party to any material legal matters or claims. We may become party to legal matters and claims arising in the ordinary course of business. We cannot predict the outcome of any such legal matters or claims, and despite the potential outcomes, the existence thereof may have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.
Item 1A. Risk Factors.
In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, which could materially affect our business, financial condition or results of operations. There have been no material changes in or additions to the risk factors referred to in the previous sentence other than the updates to the risk factors set forth below.
Pursuant to our recently announced conclusion of our strategic review process, our focus is now on the development of GB1211 and the addition of BRM-1420 from Bridge Medicines. If we fail to execute successfully on this realigned strategic focus, our business and prospects may be adversely affected.
On October 7, 2024, we announced that we had completed our strategic alternative review process and determined to focus on oncology and severe liver diseases. In connection with this announcement, we announced that we had entered into an Asset Purchase Agreement with Bridge Medicines pursuant to which we acquired global rights to Bridge Medicines’ BRM-1420 program, a novel dual ENL-YEATS and FLT3 inhibitor for multiple genetic subsets of AML, and assumed certain of Bridge Medicines’ liabilities associated with the acquired assets. As a result of the conclusion of the strategic alternatives review process, our focus is now on the development of GB1211 and the addition of BRM-1420 from Bridge Medicines. As part of the strategic alternative review process, we determined not to further advance GB2064, our LOXL-2 inhibitor candidate, at this time.
We believe this realigned strategic focus is the best way to optimize our financial and other resources to advance our business. However, there is no assurance that we will be successful at executing on this strategy. If we are unable to execute successfully on this realigned strategic focus, our business and prospects may be adversely affected.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Use of Proceeds from Registered Securities
On November 2, 2020, we completed our IPO in which we issued and sold 253,688 shares of our common stock, including 27,022 shares of common stock sold pursuant to the underwriters’ exercise of their option to purchase additional shares of common stock. The offer and sale of the shares in the IPO was registered under the Securities Act pursuant to a registration statement on Form S-1 (File No. 333-249369), which was filed with the SEC on October 7, 2020 and subsequently amended and declared effective on October 28, 2020. The underwriters of the IPO were BofA Securities, Inc., SVB Leerink LLC, Credit Suisse Securities (USA) LLC and Kempen & Co U.S.A, Inc.
We raised $86.3 million in net proceeds after deducting underwriting discounts and commissions of $6.7 million and other offering expenses of $2.1 million payable by us. No underwriting discounts and commissions or offering expenses were paid directly or indirectly to any of our directors of officers (or their associates) or persons owning ten percent or more of any class of our equity securities or to any other affiliates.
As of September 30, 2024, $70.0 million of the net proceeds from our IPO have been used for general working capital purposes, including the funding of our clinical development programs. We have invested the unused net proceeds from the offering in money market accounts and marketable debt securities. We expect to use the net proceeds from the offering described in our final prospectus filed pursuant to Rule 424(b)(4) under the Securities Act with the SEC on October 30, 2020, to fund our clinical development programs, including BRM-1420 and GB1211.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
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Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not Applicable.
Item 5. Other Information.
10b5-1 Trading Arrangements
From time to time, our officers (as defined in Rule 16a-1(f) of the Exchange Act) and directors may enter into Rule 10b5-1 or non-Rule 10b5-1 trading arrangements (as each such term is defined in Item 408 of Regulation S-K). During the three and nine months ended September 30, 2024,
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Item 6. Exhibits.
Exhibit Number |
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Description |
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3.1 |
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31.1* |
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31.2* |
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32.1*† |
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101.INS |
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Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
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101.SCH |
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Inline XBRL Taxonomy Extension Schema Document |
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104 |
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Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Filed herewith.
† This certification will not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent specifically incorporated by reference into such filing.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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Galecto, Inc. |
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Date: November 1, 2024 |
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By: |
/s/ Hans T. Schambye |
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Hans T. Schambye, M.D., Ph.D. |
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President, Chief Executive Officer and Director (Principal Executive Officer) |
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Date: November 1, 2024 |
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By: |
/s/ Lori Firmani |
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Lori Firmani |
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Interim Chief Financial Officer (Principal Financial and Accounting Officer) |
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Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO RULES 13a-14(a) AND 15d-14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Hans T. Schambye, certify that:
Date: November 1, 2024 |
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By: |
/s/ Hans T. Schambye |
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Hans T. Schambye, M.D., Ph.D. |
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President, Chief Executive Officer and Director (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO RULES 13a-14(a) AND 15d-14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Lori Firmani, certify that:
Date: November 1, 2024 |
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By: |
/s/ Lori Firmani |
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Lori Firmani |
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Interim Chief Financial Officer (Principal Financial and Accounting Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Hans T. Schambye, the Chief Executive Officer, and Lori Firmani, the Interim Chief Financial Officer, of Galecto, Inc. (the “Company”), hereby certify, that, to their knowledge:
Date: November 1, 2024 |
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By: |
/s/ Hans T. Schambye |
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Hans T. Schambye, M.D., Ph.D. |
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President, Chief Executive Officer and Director (Principal Executive Officer) |
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Date: November 1, 2024 |
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By: |
/s/ Lori Firmani |
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Lori Firmani |
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Interim Chief Financial Officer (Principal Financial and Accounting Officer) |