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glto-10q_20210630.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

☐	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: 001-39655

GALECTO, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware	37-1957007
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

Ole Maaloes Vej 3 DK-2200 Copenhagen N Denmark	N/A

75 State Street, Suite 100 Boston, MA 02109	02109
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (+45) 70 70 52 10

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.00001 per share

GLTO

The Nasdaq Global Select Market

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. Yes ☒ No ☐

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). Yes ☒ No ☐

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.

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 ☐ No ☒

As of August 2, 2021, the registrant had 25,261,832 shares of common stock, $0.00001 par value per share, outstanding.

Table of Contents

		Page
	PART I. FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	4
	Condensed Consolidated Balance Sheets	4
	Condensed Consolidated Statements of Operations and Comprehensive Loss	5
	Condensed Consolidated Statements of Convertible Preferred Stock and Changes in Stockholders’ Equity	6
	Condensed Consolidated Statements of Cash Flows	8
	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.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	28

	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities	30
Item 3.	Defaults Upon Senior Securities	30
Item 4.	Mine Safety Disclosures	30
Item 5.	Other Information	30
Item 6.	Exhibits	31
Signatures		32

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, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or 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:

•

the success, cost and timing of our product development activities and planned initiation and completion of clinical trials of our lead product candidate, GB0139, including our ability to enroll patients in our ongoing Phase 2b clinical trial of GB0139 at anticipated rates and our ability to complete such trial with fewer dosage groups, as well as our other current product candidates and any future product candidates;

•

the success, cost and timing of our product development activities and planned initiation and completion of our clinical trials;

•

our need to raise additional funding before we can expect to generate any revenues from product sales;

•

our ability to obtain regulatory approval for our current or future product candidates that we may identify or develop, including our expectation that the FDA or other regulatory agencies would agree with our belief that our Phase 2b clinical trial of GB0139 is registrational;

•

our ability to ensure adequate supply of our current or future product candidates;

•

our ability to maintain third-party relationships necessary to conduct our business;

•

our heavy dependence upon the success of our research to generate and advance additional product candidates;

•

our ability to establish an adequate safety or efficacy profile for our current or future product candidates that we may pursue;

•

the implementation of our strategic plans for our business, our current or future product candidates we may develop and our technology;

•

our intellectual property position, including the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates and technology;

•

the rate and degree of market acceptance and clinical utility for our current or future product candidates we may develop;

•

our estimates about the size of our market opportunity;

•

our ability to use the capital we have raised in ways that increase the value of your investment;

•

our expectations related to the use the capital we have raised, and estimates of our expenses, future revenues, capital requirements and our needs for additional financing;

•

our ability to establish and maintain collaborations;

•

our financial performance and liquidity;

•

our ability to effectively manage our potential growth;

•

developments relating to our competitors and our industry, including the impact of government regulation;

•

our ability to retain the continued service of our key professionals and consultants and to identify, hire and retain additional qualified professionals;

•

the effect of the COVID-19 pandemic, including mitigation efforts and economic effects, on any of the foregoing or other aspects of our business operations and those of our collaborators, service providers and other vendors;

•

our ability to maintain adequate internal controls over financial reporting; and

•

other risks and uncertainties, including those listed under the section titled “Risk Factors.”

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, 2020. 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.

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)

	June 30,			December 31,
	2021			2020
Assets	(unaudited)
Current assets
Cash and cash equivalents	$	68,638		$	163,582
Marketable securities		33,176			—
Prepaid expenses and other current assets		5,895			5,713
Total current assets		107,709			169,295
Marketable securities, long-term		35,860			—
Operating lease right-of-use asset		1,075			885
Tax credit receivable, noncurrent		876			—
Property and equipment, net		176			—
Restricted cash		—			254
Other assets, noncurrent		1,126			1,162
Total assets	$	146,822		$	171,596
Liabilities and stockholders’ equity
Current liabilities
Accounts payable	$	1,585		$	2,851
Accrued expenses and other current liabilities		3,170			2,715
Total current liabilities		4,755			5,566
Operating lease liabilities, noncurrent		635			541
Total liabilities		5,390			6,107
Commitments and contingencies (Note 9)
Stockholders’ equity
Preferred stock, par value of $0.00001 per share; 10,000,000 shares authorized at June 30, 2021 and December 31, 2020; no shares issued or outstanding as of June 30, 2021 and December 31, 2020		—			—
Common stock, par value of $0.00001 per share; 300,000,000 shares authorized at June 30, 2021 and December 31, 2020; 25,261,832 shares issued and outstanding at June 30, 2021 and December 31, 2020		—			—
Additional paid-in capital		271,193			269,175
Accumulated deficit		(130,007	)		(104,360	)
Accumulated other comprehensive income		246			674
Total stockholders’ equity		141,432			165,489
Total liabilities and stockholders' equity	$	146,822		$	171,596

See accompanying notes to the unaudited interim condensed consolidated financial statements.

Galecto, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share amounts)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Operating expenses
Research and development	$	8,635		$	4,515		$	18,625		$	9,222
General and administrative		3,633			1,823			7,195			2,946
Total operating expenses		12,268			6,338			25,820			12,168
Loss from operations		(12,268	)		(6,338	)		(25,820	)		(12,168	)
Other income (expense), net
Interest income, net		52			—			91			—
Foreign exchange transaction gain (loss), net		(86	)		403			82			559
Total other income (expense), net		(34	)		403			173			559
Net loss		(12,302	)		(5,935	)		(25,647	)		(11,609	)
Net loss per common share, basic and diluted	$	(0.49	)	$	(22.83	)	$	(1.02	)	$	(44.66	)
Weighted-average number of shares used in computing net loss per common share, basic and diluted		25,261,832			259,966			25,261,832			259,966
Other comprehensive loss, net of tax
Currency translation gain (loss)		153			15			(371	)		(195	)
Unrealized gain (loss) on marketable securities		23			—			(57	)		—
Other comprehensive gain (loss), net of tax		176			15			(428	)		(195	)
Total comprehensive loss	$	(12,126	)	$	(5,920	)	$	(26,075	)	$	(11,804	)

See accompanying notes to the unaudited interim condensed consolidated financial statements.

Galecto, Inc.

Condensed Consolidated Statements of Convertible Preferred Stock and Changes in Stockholders’ Equity

(in thousands, except share amounts)

(Unaudited)

For the Three Months Ended	Series B Convertible Preferred Stock				Series C Convertible Preferred Stock				Common Stock				Additional Paid-In		Accumulated			Accumulated Other Comprehensive			Total Stockholders’
June 30, 2021	Shares		Amount		Shares		Amount		Shares		Amount		Capital		Deficit			Income			Equity
Balance at March 31, 2021		—	$	—		—	$	—		25,261,832	$	—	$	270,206	$	(117,705	)	$	70		$	152,571
Stock-based compensation expense		—		—		—		—		—		—		987		—			—			987
Currency translation gain		—		—		—		—		—		—		—		—			153			153
Net unrealized gain on marketable securities		—		—		—		—		—		—		—		—			23			23
Net loss		—		—		—		—		—		—		—		(12,302	)		—			(12,302	)
Balance at June 30, 2021		—	$	—		—	$	—		25,261,832	$	—	$	271,193	$	(130,007	)	$	246		$	141,432

For the Three Months Ended	Series B Convertible Preferred Stock				Series C Convertible Preferred Stock				Common Stock				Additional Paid-In		Accumulated			Accumulated Other Comprehensive			Total Stockholders’
June 30, 2020	Shares		Amount		Shares		Amount		Shares		Amount		Capital		Deficit			Loss			Equity
Balance at March 31, 2020		648,068	$	13,414		4,125,056	$	106,205		259,966	$	—	$	826	$	(75,197	)	$	(2,661	)	$	(77,032	)
Stock-based compensation expense		—		—		—		—		—		—		401		—			—			401
Currency translation gain		—		—		—		—		—		—		—		—			15			15
Net loss		—		—		—		—		—		—		—		(5,935	)		—			(5,935	)
Balance at June 30, 2020		648,068	$	13,414		4,125,056	$	106,205		259,966	$	—	$	1,227	$	(81,132	)	$	(2,646	)	$	(82,551	)

See accompanying notes to the unaudited interim condensed consolidated financial statements.

Galecto, Inc.

Condensed Consolidated Statements of Convertible Preferred Stock and Changes in Stockholders’ Equity

(in thousands, except share amounts)

(Unaudited)

For the Six Months Ended	Series B Convertible Preferred Stock				Series C Convertible Preferred Stock				Common Stock				Additional Paid-In		Accumulated			Accumulated Other Comprehensive			Total Stockholders’
June 30, 2021	Shares		Amount		Shares		Amount		Shares		Amount		Capital		Deficit			Income			Equity
Balance at December 31, 2020		—	$	—		—	$	—		25,261,832	$	—	$	269,175	$	(104,360	)	$	674		$	165,489
Stock-based compensation expense		—		—		—		—		—		—		2,018		—			—			2,018
Currency translation loss		—		—		—		—		—		—		—		—			(371	)		(371	)
Net unrealized loss on marketable securities		—		—		—		—		—		—		—		—			(57	)		(57	)
Net loss		—		—		—		—		—		—		—		(25,647	)		—			(25,647	)
Balance at June 30, 2021		—	$	—		—	$	—		25,261,832	$	—	$	271,193	$	(130,007	)	$	246		$	141,432

For the Six Months Ended	Series B Convertible Preferred Stock				Series C Convertible Preferred Stock				Common Stock				Additional Paid-In		Accumulated			Accumulated Other Comprehensive			Total Stockholders’
June 30, 2020	Shares		Amount		Shares		Amount		Shares		Amount		Capital		Deficit			Loss			Equity
Balance at December 31, 2019		648,068	$	13,414		4,125,056	$	106,205		259,966	$	—	$	826	$	(69,523	)	$	(2,451	)	$	(71,148	)
Stock-based compensation expense		—		—		—		—		—		—		401		—			—			401
Currency translation loss		—		—		—		—		—		—		—		—			(195	)		(195	)
Net loss		—		—		—		—		—		—		—		(11,609	)		—			(11,609	)
Balance at June 30, 2020		648,068	$	13,414		4,125,056	$	106,205		259,966	$	—	$	1,227	$	(81,132	)	$	(2,646	)	$	(82,551	)

See accompanying notes to the unaudited interim condensed consolidated financial statements.

GALECTO, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

	Six Months Ended
	June 30,
	2021			2020
Cash flows from operating activities:
Net loss	$	(25,647	)	$	(11,609	)
Adjustment to reconcile net loss to net cash used in operating activities:
Depreciation		5			—
Stock-based compensation		2,018			374
Amortization of premiums and discounts on marketable securities		234			—
Amortization of right of use lease asset		207			54
Accretion of lease liability		37			—
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		(182	)		1,555
Tax credit receivable, noncurrent		—			(829	)
Other assets, noncurrent		(841	)		—
Accounts payable		(1,266	)		(1,581	)
Accrued expenses and other current liabilities		376			(3,019	)
Operating lease liabilities		(261	)		(54	)
Net cash used in operating activities		(25,320	)		(15,109	)
Cash flows from investing activities: