glto-10q_20210930.htm
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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 September 30, 2021

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: 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.

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

 

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

 

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 November 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

 

 

 


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, 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 U.S. Food and Drug Administration, or the FDA, or other regulatory agencies would agree with our belief that our Phase 2b clinical trial of GB0139 may be 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

ii


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)

 

 

September 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Assets

 

(unaudited)

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

66,157

 

 

$

163,582

 

Marketable securities

 

 

35,987

 

 

 

 

Prepaid expenses and other current assets

 

 

4,864

 

 

 

5,713

 

Total current assets

 

 

107,008

 

 

 

169,295

 

Marketable securities, long-term

 

 

25,492

 

 

 

 

Operating lease right-of-use asset

 

 

940

 

 

 

885

 

Tax credit receivable, noncurrent

 

 

856

 

 

 

 

Property and equipment, net

 

 

214

 

 

 

 

Restricted cash

 

 

 

 

 

254

 

Other assets, noncurrent

 

 

1,364

 

 

 

1,162

 

Total assets

 

$

135,874

 

 

$

171,596

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,981

 

 

$

2,851

 

Accrued expenses and other current liabilities

 

 

3,762

 

 

 

2,715

 

Total current liabilities

 

 

5,743

 

 

 

5,566

 

Operating lease liabilities, noncurrent

 

 

511

 

 

 

541

 

Total liabilities

 

 

6,254

 

 

 

6,107

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

 

 

Preferred stock, par value of $0.00001 per share; 10,000,000 shares authorized

     at September 30, 2021 and December 31, 2020; no shares issued or outstanding

    as of September 30, 2021 and December 31, 2020

 

 

 

 

 

 

Common stock, par value of $0.00001 per share; 300,000,000 shares authorized

     at September 30, 2021 and December 31, 2020; 25,261,832 shares issued and

     outstanding at September 30, 2021 and December 31, 2020

 

 

 

 

 

 

Additional paid-in capital

 

 

272,412

 

 

 

269,175

 

Accumulated deficit

 

 

(142,703

)

 

 

(104,360

)

Accumulated other comprehensive income

 

 

(89

)

 

 

674

 

Total stockholders’ equity

 

 

129,620

 

 

 

165,489

 

Total liabilities and stockholders' equity

 

$

135,874

 

 

$

171,596

 

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)

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

9,748

 

 

$

7,651

 

 

$

28,373

 

 

$

16,874

 

General and administrative

 

 

3,191

 

 

 

2,515

 

 

 

10,386

 

 

 

5,461

 

Total operating expenses

 

 

12,939

 

 

 

10,166

 

 

 

38,759

 

 

 

22,335

 

Loss from operations

 

 

(12,939

)

 

 

(10,166

)

 

 

(38,759

)

 

 

(22,335

)

Other income (expense), net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income, net

 

 

35

 

 

 

 

 

 

126

 

 

 

 

Foreign exchange transaction gain (loss), net

 

 

208

 

 

 

(1,485

)

 

 

290

 

 

 

(925

)

Total other income (expense), net

 

 

243

 

 

 

(1,485

)

 

 

416

 

 

 

(925

)

Net loss

 

 

(12,696

)

 

 

(11,651

)

 

 

(38,343

)

 

 

(23,260

)

Dividends on convertible preferred stock

 

 

 

 

 

(2,713

)

 

 

 

 

 

(7,648

)

Net loss attributable to common shareholders

 

 

(12,696

)

 

 

(14,364

)

 

 

(38,343

)

 

 

(30,908

)

Net loss per common share, basic and diluted

 

$

(0.50

)

 

$

(55.25

)

 

$

(1.52

)

 

$

(118.89

)

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)

 

 

(369

)

 

 

2,331

 

 

 

(740

)

 

 

2,136

 

Unrealized gain (loss) on marketable securities

 

 

34

 

 

 

 

 

 

(23

)

 

 

 

Other comprehensive gain (loss), net of tax

 

 

(335

)

 

 

2,331

 

 

 

(763

)

 

 

2,136

 

Total comprehensive loss

 

$

(13,031

)

 

$

(9,320

)

 

$

(39,106

)

 

$

(21,124

)

 

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

 

5


 

 

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

 

 

Series D

Convertible

Preferred

Stock

 

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Accumulated

 

 

Accumulated Other

Comprehensive

 

 

Total

Stockholders’

 

September 30, 2021

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Income

 

 

Equity

 

Balance at June 30, 2021

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

25,261,832

 

 

$

 

 

$

271,193

 

 

$

(130,007

)

 

$

246

 

 

$

141,432

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,219

 

 

 

 

 

 

 

 

 

1,219

 

Currency translation loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(369

)

 

 

(369

)

Net unrealized gain on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

34

 

 

 

34

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12,696

)

 

 

 

 

 

(12,696

)

Balance at September 30, 2021

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

25,261,832

 

 

$

 

 

$

272,412

 

 

$

(142,703

)

 

$

(89

)

 

$

129,620

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended

 

Series B

Convertible

Preferred

Stock

 

 

Series C

Convertible

Preferred

Stock

 

 

Series D

Convertible

Preferred

Stock

 

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Accumulated

 

 

Accumulated Other

Comprehensive

 

 

Total

Stockholders’

 

September 30, 2020

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Loss

 

 

Equity

 

Balance at June 30, 2020

 

 

684,068

 

 

$

13,414

 

 

 

4,125,056

 

 

$

106,205

 

 

 

 

 

$

 

 

 

 

259,966

 

 

$

 

 

$

1,227

 

 

$

(81,132

)

 

$

(2,646

)

 

$

(82,551

)

Issuance of Series D preferred stock, net of issuance costs of $2,797

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,368,118

 

 

 

61,402

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

134

 

 

 

 

 

 

 

 

 

134

 

Currency translation gain

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,331

 

 

 

2,331

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11,651

)

 

 

 

 

 

(11,651

)

Balance at September 30, 2020

 

 

684,068

 

 

$

13,414

 

 

 

4,125,056

 

 

$

106,205

 

 

 

2,368,118

 

 

$

61,402

 

 

 

 

259,966

 

 

$

 

 

$

1,361

 

 

$

(92,783

)

 

$

(315

)

 

$

(91,737

)

 

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

 

 

 

 

 

 

 

 

6


 

 

 

 

 

 

Galecto, Inc.

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

(in thousands, except share amounts)

(Unaudited)

 

For the Nine Months Ended

 

Series B

Convertible

Preferred

Stock

 

 

Series C

Convertible

Preferred

Stock

 

 

Series D

Convertible

Preferred

Stock

 

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Accumulated

 

 

Accumulated Other

Comprehensive

 

 

Total

Stockholders’

 

September 30, 2021

 

Shares

 

 

Amount

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,237

 

 

 

 

 

 

 

 

 

3,237

 

Currency translation loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(740

)

 

 

(740

)

Net unrealized loss on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(23

)

 

 

(23

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(38,343

)

 

 

 

 

 

(38,343

)

Balance at September 30, 2021

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

25,261,832

 

 

$

 

 

$

272,412

 

 

$

(142,703

)

 

$

(89

)

 

$

129,620

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Nine Months Ended

 

Series B

Convertible

Preferred

Stock

 

 

Series C

Convertible

Preferred

Stock

 

 

Series D

Convertible

Preferred

Stock

 

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Accumulated

 

 

Accumulated Other

Comprehensive

 

 

Total

Stockholders’

 

September 30, 2020

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Loss

 

 

Equity

 

Balance at December 31, 2019

 

 

684,068

 

 

$

13,414

 

 

 

4,125,056

 

 

$

106,205

 

 

 

 

 

$

 

 

 

 

259,966

 

 

$

 

 

$

826

 

 

$

(69,523

)

 

$

(2,451

)

 

$

(71,148

)

Issuance of Series D preferred stock, net of issuance costs of $2,797

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,368,118

 

 

 

61,402

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense