10-Q
falseus-gaap:CorporateDebtSecuritiesMember0001800315Aug. 31, 2022 Q1http://fasb.org/us-gaap/2021-01-31#AccruedLiabilitiesAndOtherLiabilitiesus-gaap:CorporateDebtSecuritiesMemberhttp://fasb.org/us-gaap/2021-01-31#AccruedLiabilitiesAndOtherLiabilities--12-31May 31, 2023 Jan. 31, 2024 2022Jan. 31, 2025 00018003152022-01-012022-03-310001800315us-gaap:RetainedEarningsMember2021-01-012021-03-310001800315us-gaap:GeneralAndAdministrativeExpenseMember2022-01-012022-03-310001800315us-gaap:AdditionalPaidInCapitalMember2022-03-310001800315us-gaap:StockOptionMemberglto:TwoThousandTwentyEquityIncentivePlanMember2020-10-012020-10-310001800315us-gaap:DebtSecuritiesMember2022-03-3100018003152020-12-3100018003152021-03-310001800315us-gaap:FairValueInputsLevel1Member2022-03-310001800315us-gaap:AdditionalPaidInCapitalMember2020-12-310001800315us-gaap:CommonStockMember2021-03-3100018003152022-04-270001800315us-gaap:MoneyMarketFundsMember2022-03-3100018003152021-12-310001800315us-gaap:RetainedEarningsMember2022-03-3100018003152021-01-012021-12-310001800315us-gaap:ResearchAndDevelopmentExpenseMember2022-01-012022-03-310001800315glto:LongTermInvestmentsMember2021-12-310001800315us-gaap:FairValueInputsLevel2Member2021-12-310001800315us-gaap:CommonStockMember2020-12-310001800315glto:StevenageMember2022-01-012022-03-310001800315us-gaap:AdditionalPaidInCapitalMember2021-01-012021-03-310001800315us-gaap:RetainedEarningsMember2020-12-310001800315us-gaap:ShortTermInvestmentsMember2021-12-310001800315us-gaap:ShortTermInvestmentsMember2022-03-310001800315us-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel1Member2021-12-310001800315us-gaap:DebtSecuritiesMember2021-12-310001800315us-gaap:CommonStockMember2022-03-310001800315us-gaap:StockOptionMemberglto:TwoThousandTwentyEquityIncentivePlanMember2022-03-310001800315us-gaap:EmployeeStockOptionMemberglto:TwoThousandTwentyEquityIncentivePlanMember2022-01-012022-03-310001800315us-gaap:FairValueInputsLevel2Memberus-gaap:DebtSecuritiesMember2021-12-310001800315us-gaap:FairValueInputsLevel2Member2022-03-310001800315us-gaap:CommonStockMember2021-12-3100018003152021-01-012021-03-310001800315us-gaap:AdditionalPaidInCapitalMember2022-01-012022-03-310001800315us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-310001800315us-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel1Member2022-03-310001800315us-gaap:RetainedEarningsMember2021-03-310001800315glto:LondonMember2022-01-012022-03-310001800315us-gaap:FairValueInputsLevel2Memberus-gaap:DebtSecuritiesMember2022-03-310001800315us-gaap:AdditionalPaidInCapitalMember2021-12-310001800315us-gaap:MoneyMarketFundsMember2021-12-310001800315us-gaap:StockOptionMember2021-01-012021-03-310001800315us-gaap:StockOptionMemberglto:TwoThousandTwentyStockOptionAndGrantPlanMember2020-10-310001800315us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-01-012022-03-310001800315us-gaap:AdditionalPaidInCapitalMember2021-03-310001800315glto:GothenburgMember2022-01-012022-03-310001800315glto:LongTermInvestmentsMember2022-03-310001800315us-gaap:RetainedEarningsMember2021-12-310001800315us-gaap:ResearchAndDevelopmentExpenseMember2021-01-012021-03-310001800315us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-03-310001800315us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-310001800315us-gaap:EmployeeStockOptionMemberglto:TwoThousandTwentyStockOptionAndGrantPlanMember2022-03-310001800315us-gaap:RetainedEarningsMember2022-01-012022-03-3100018003152022-03-310001800315glto:CopenhagenMember2022-01-012022-03-310001800315us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-03-310001800315us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-03-310001800315glto:StockOptionsToPurchaseCommonStockMember2021-01-012021-03-310001800315us-gaap:GeneralAndAdministrativeExpenseMember2021-01-012021-03-310001800315glto:StockOptionsToPurchaseCommonStockMember2022-01-012022-03-310001800315us-gaap:StockOptionMember2022-01-012022-03-310001800315us-gaap:FairValueInputsLevel1Member2021-12-31xbrli:purexbrli:sharesiso4217:USDxbrli:sharesiso4217:USD

 

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 March 31, 2022

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 April 27, 2022, 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 Stockholders’ Equity

6

 

Condensed Consolidated Statements of Cash Flows

7

 

Notes to Unaudited Interim Condensed Consolidated Financial Statements

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

15

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

24

Item 4.

Controls and Procedures

24

 

 

 

 

PART II. OTHER INFORMATION

 

Item 1.

Legal Proceedings

25

Item 1A.

Risk Factors

25

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

25

Item 3.

Defaults Upon Senior Securities

25

Item 4.

Mine Safety Disclosures

25

Item 5.

Other Information

25

Item 6.

Exhibits

26

Signatures

27

 

 

 

 

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 most advanced product candidate, GB0139;
the success, cost and timing of our product development activities and planned initiation and completion of clinical trials of our other current fibrosis and oncology product candidates, including GB2064 and GB1211, and any future product candidates;
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;
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 estimates of our expenses, future revenues, capital requirements and our needs for additional financing;
our ability to maintain and establish 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, such as any impact on the enrollment for, or timing of, our clinical trials;
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, 2021. 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.

ii


 

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)

 

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Assets

 

(unaudited)

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

45,388

 

 

$

62,563

 

Marketable securities

 

 

48,210

 

 

 

37,628

 

Prepaid expenses and other current assets

 

 

3,434

 

 

 

9,911

 

Total current assets

 

 

97,032

 

 

 

110,102

 

Marketable securities, noncurrent

 

 

8,160

 

 

 

9,048

 

Operating lease right-of-use asset

 

 

702

 

 

 

834

 

Equipment, net

 

 

238

 

 

 

203

 

Other assets, noncurrent

 

 

2,798

 

 

 

2,028

 

Total assets

 

$

108,930

 

 

$

122,215

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable

 

$

3,215

 

 

$

1,531

 

Accrued expenses and other current liabilities

 

 

3,999

 

 

 

3,013

 

Total current liabilities

 

 

7,214

 

 

 

4,544

 

Operating lease liabilities, noncurrent

 

 

402

 

 

 

448

 

Total liabilities

 

 

7,616

 

 

 

4,992

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

Preferred stock, par value of $0.00001 per share; 10,000,000 shares authorized
     at March 31, 2022 and December 31, 2021;
no shares issued or outstanding
    as of March 31, 2022 and December 31, 2021

 

 

 

 

 

 

Common stock, par value of $0.00001 per share; 300,000,000 shares authorized
     at March 31, 2022 and December 31, 2021;
25,261,832 shares issued and
     outstanding at March 31, 2022 and December 31, 2021

 

 

 

 

 

 

Additional paid-in capital

 

 

275,059

 

 

 

273,655

 

Accumulated deficit

 

 

(173,050

)

 

 

(156,112

)

Accumulated other comprehensive loss

 

 

(695

)

 

 

(320

)

Total stockholders’ equity

 

 

101,314

 

 

 

117,223

 

Total liabilities and stockholders' equity

 

$

108,930

 

 

$

122,215

 

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
March 31,

 

 

 

2022

 

 

2021

 

Operating expenses

 

 

 

 

 

 

Research and development

 

$

13,235

 

 

$

9,990

 

General and administrative

 

 

3,704

 

 

 

3,562

 

Total operating expenses

 

 

16,939

 

 

 

13,552

 

Loss from operations

 

 

(16,939

)

 

 

(13,552

)

Other income (expense), net

 

 

 

 

 

 

Interest income, net

 

 

61

 

 

 

39

 

Foreign exchange transaction gain (loss), net

 

 

(60

)

 

 

168

 

Total other income, net

 

 

1

 

 

 

207

 

Net loss

 

$

(16,938

)

 

$

(13,345

)

Net loss per common share, basic and diluted

 

$

(0.67

)

 

$

(0.53

)

Weighted-average number of shares used in computing net loss
   per common share, basic and diluted

 

 

25,261,832

 

 

 

25,261,832

 

Other comprehensive loss, net of tax

 

 

 

 

 

 

Currency translation loss

 

 

(170

)

 

 

(524

)

Unrealized loss on marketable securities

 

 

(205

)

 

 

(80

)

Other comprehensive loss, net of tax

 

 

(375

)

 

 

(604

)

Total comprehensive loss

 

$

(17,313

)

 

$

(13,949

)

 

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

5


Galecto, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share amounts)

(Unaudited)

 

For the Three Months Ended

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated

 

 

Accumulated Other
Comprehensive

 

 

Total
Stockholders’

 

March 31, 2022

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Income (Loss)

 

 

Equity

 

Balance at December 31, 2021

 

 

25,261,832

 

 

$

 

 

$

273,655

 

 

$

(156,112

)

 

$

(320

)

 

$

117,223

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

1,404

 

 

 

 

 

 

 

 

 

1,404

 

Currency translation loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(170

)

 

 

(170

)

Net unrealized loss on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(205

)

 

 

(205

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(16,938

)

 

 

 

 

 

(16,938

)

Balance at March 31, 2022

 

 

25,261,832

 

 

$

 

 

$

275,059

 

 

$

(173,050

)

 

$

(695

)

 

$

101,314

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated

 

 

Accumulated Other
Comprehensive

 

 

Total
Stockholders’

 

March 31, 2021

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Income (Loss)

 

 

Equity

 

Balance at December 31, 2020

 

 

25,261,832

 

 

$

 

 

$

269,175

 

 

$

(104,360

)

 

$

674

 

 

$

165,489

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

1,031

 

 

 

 

 

 

 

 

 

1,031

 

Currency translation loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(524

)

 

 

(524

)

Net unrealized loss on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(80

)

 

 

(80

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(13,345

)

 

 

 

 

 

(13,345

)

Balance at March 31, 2021

 

 

25,261,832

 

 

$

 

 

$

270,206

 

 

$

(117,705

)

 

$

70

 

 

$

152,571

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

6


GALECTO, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(16,938

)

 

$

(13,345

)

Adjustment to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Depreciation

 

 

8

 

 

 

2

 

Stock-based compensation

 

 

1,404

 

 

 

1,031

 

Amortization of premiums and discounts on marketable securities

 

 

264

 

 

 

(92

)

Amortization of right of use lease asset

 

 

110

 

 

 

97

 

Accretion of lease liability

 

 

16

 

 

 

19

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

6,478

 

 

 

(855

)

Other assets, noncurrent

 

 

(770

)

 

 

(822

)

Accounts payable

 

 

1,684

 

 

 

(1,069

)

Accrued expenses and other current liabilities

 

 

1,061

 

 

 

1,002

 

Operating lease liabilities

 

 

(114

)

 

 

(119

)

Net cash used in operating activities

 

 

(6,797

)

 

 

(14,151

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of marketable securities

 

 

(26,385

)

 

 

(74,566

)

Proceeds from sale of marketable securities

 

 

16,221

 

 

 

 

Purchases of property and equipment

 

 

(43

)

 

 

(65

)

Net cash used in investing activities

 

 

(10,207

)

 

 

(74,631

)

Cash flows from financing activities:

 

 

 

 

 

 

Net cash provided by financing activities

 

 

 

 

 

 

Net decrease in cash, cash equivalents and restricted cash

 

 

(17,004

)

 

 

(88,782

)

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

 

(171

)

 

 

(604

)

Cash, cash equivalents and restricted cash, beginning of period

 

 

62,563

 

 

 

163,836

 

Cash, cash equivalents and restricted cash, end of period

 

$

45,388

 

 

$

74,450

 

Components of cash, cash equivalents and restricted cash

 

 

 

 

 

 

Cash and cash equivalents

 

 

45,388

 

 

 

74,253

 

Restricted cash

 

 

 

 

 

197

 

Total cash, cash equivalents and restricted cash

 

$

45,388

 

 

$

74,450

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

Cash paid for taxes

 

$

 

 

$

38

 

Supplemental disclosures of noncash activities:

 

 

 

 

 

 

Operating lease liabilities arising from obtaining right-of-use assets

 

$

 

 

$

161

 

 

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

7


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, or 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 initial focus is on the development of small molecule inhibitors of galectin-3 and lysyl oxidase-like 2, or LOXL2, which play key roles in regulating fibrosis and cancer.

As of March 31, 2022, the Company’s wholly owned subsidiaries were PharmAkea, Inc. or PharmAkea, Galecto Securities Corporation, and Galecto Biotech AB, a Swedish company. Galecto Biotech ApS, a Danish operating company, is a wholly-owned subsidiary of Galecto Biotech AB.

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 and the Company’s initial public offering, or IPO.

As of March 31, 2022, the Company had an accumulated deficit of $173.1 million, from recurring losses since inception in 2011. The Company has incurred recurring losses and has no sales as none of its product candidates have obtained the necessary regulatory approval for commercialization and to be marketed as approved products. The Company expects to continue to incur losses as a result of costs and expenses related to the Company’s clinical development and corporate general and administrative activities. The Company had negative cash flows from operating activities during the three months ended March 31, 2022 and 2021 of $6.8 million and $14.2 million, respectively, and current projections indicate that the Company will have continued negative cash flows for the foreseeable future as it continues to develop its product candidates. Net losses incurred for the three months ended March 31, 2022 and 2021 were $16.9 million and $13.3 million, respectively.

At March 31, 2022, the Company’s cash, cash equivalents and marketable securities amounted to $101.8 million and current assets amounted to $97.0 million and current liabilities amounted to $7.2 million. At December 31, 2021, the Company’s cash, cash equivalents and marketable securities amounted to $109.2 million, current assets amounted to $110.1 million and current liabilities amounted to $4.5 million.

In the future, the Company will consider the following ways to fund its operations including: (1) raising additional capital through equity and/or debt financings; (2) new commercial relationships to help fund future clinical trial costs (i.e. licensing and partnerships); (3) reducing spending on one or more research and development programs by discontinuing development; and/or (4) restructuring operations to change its overhead structure. The Company’s future liquidity needs, and ability to address those needs, will largely be determined by the success of its product candidates and key development and regulatory events and its decisions in the future.

8


Coronavirus pandemic

The outbreak of the novel coronavirus, or COVID-19, and ensuing pandemic, has spread worldwide, causing many governments to implement measures to slow the spread of the outbreak. COVID-19 has had a significant impact, both directly and indirectly, on businesses and commerce, as worker shortages have occurred; supply chains have been disrupted; facilities and production have been suspended; and demand for certain goods and services, such as medical services and supplies, has spiked, while demand for other goods and services has fallen. The Company continues to monitor the impact of COVID-19 and assess its strategy accordingly. However, there can be no assurance that the Company will not experience additional negative impacts associated with COVID-19, which could decrease or delay enrollment of patients in the Company’s clinical trials or otherwise causing interruptions or delays in the Company’s clinical trials, programs and services, and negatively impact the Company’s business, financial condition and results of operations.

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 March 31, 2022 and for the three months ended March 31, 2022 and 2021, 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 March 31, 2022, results of operations, statement of stockholders’ equity and its cash flows for the three months ended March 31, 2022 and 2021. 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, 2021, as filed with the Securities and Exchange Commission (“SEC”) on February 17, 2022 ("2021 Consolidated Financial Statements"). The results for the three months ended March 31, 2022 are not necessarily indicative of the results expected for the full fiscal year or any interim period.

For the three months ended March 31, 2022, there have been no changes to the significant accounting policies as disclosed in Note 2 to the Company’s annual consolidated financial statements for the year ended December 31, 2021.

Recently issued accounting standards

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments, or ASU 2016-13. ASU 2016-13 requires measurement and recognition of expected credit losses for financial assets. In April 2019, the FASB issued clarification to ASU 2016-13 within ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. The ASU 2016-13 guidance became effective as of January 1, 2020, and must be adopted using a modified retrospective approach, with certain exceptions. This guidance is effective for public business entities that meet the definition of a Securities and Exchange Commission filer, excluding eligible smaller reporting companies for fiscal years beginning after December 15, 2019. For all other entities, including emerging growth companies, it is effective for fiscal years beginning after December 15, 2022. The Company has not yet adopted ASU 2016-13 and is currently assessing the potential impact of adopting ASU 2016-13 on its financial statements and financial statement disclosures.

 

9


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.

A summary of the Company’s available-for-sale investments as of March 31, 2022 and December 31, 2021 consisted of the following (in thousands):

 

 

At March 31, 2022

 

 

 

Amortized

 

 

Gross Unrealized

 

 

Gross Unrealized

 

 

Fair

 

Marketable securities:

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

Corporate bonds

 

$

48,401

 

 

$

 

 

$

(191

)

 

$

48,210

 

Total

 

$

48,401

 

 

$

 

 

$

(191

)

 

$

48,210

 

Marketable securities, noncurrent:

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

$

8,251

 

 

$

 

 

$

(91

)

 

$

8,160

 

Total

 

$

8,251

 

 

$

 

 

$

(91

)

 

$

8,160

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At December 31, 2021

 

 

 

Amortized

 

 

Gross Unrealized

 

 

Gross Unrealized

 

 

Fair

 

Marketable securities:

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

Corporate bonds

 

$

37,671

 

 

$

 

 

$

(43

)

 

$

37,628

 

Total

 

$

37,671

 

 

$

 

 

$

(43

)

 

$

37,628

 

Marketable securities, noncurrent:

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

$

9,082

 

 

$

 

 

$

(34

)

 

$

9,048

 

Total

 

$

9,082

 

 

$

 

 

$

(34

)

 

$

9,048

 

 

4. PROPERTY AND EQUIPMENT, NET

Property and equipment as of March 31, 2022 consisted of the following (in thousands):

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Equipment

 

$

266

 

 

$

223

 

Less: accumulated depreciation

 

 

(28

)

 

 

(20

)

Equipment, net

 

$

238

 

 

$

203

 

Depreciation expense for the three months ended March 31, 2022 and 2021 was $8,000 and $2,000, respectively.

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.

 

 

10


A summary of the assets that are measured at fair value as of March 31, 2022 and December 31, 2021 is as follows (in thousands):

 

 

Fair Value Measurement at
March 31, 2022

 

Assets:

 

Carrying
Value

 

 

Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)

 

 

Significant
other
Observable
Inputs
(Level 2)

 

 

Significant
Unobservable
Inputs
(Level 3)

 

Money market funds(1)

 

$

30,555

 

 

$

30,555

 

 

$

 

 

$

 

Debt securities

 

 

56,370

 

 

 

 

 

 

56,370

 

 

 

 

Total

 

$

86,925

 

 

$

30,555

 

 

$

56,370

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurement at
December 31, 2021

 

Assets:

 

Carrying
Value

 

 

Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)

 

 

Significant
other
Observable
Inputs
(Level 2)

 

 

Significant
Unobservable
Inputs
(Level 3)

 

Money market funds(1)

 

$

49,626

 

 

 

49,626

 

 

 

 

 

 

 

Debt securities

 

 

46,676

 

 

 

 

 

 

46,676

 

 

 

 

Total

 

$

96,302

 

 

$

49,626

 

 

$

46,676

 

 

$

 

(1)
Money market funds with maturities of 90 days or less at the date of purchase are included within cash and cash equivalents in the accompanying condensed consolidated balance sheets and are recognized at fair value.

6. PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consist of the following (in thousands):

 

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Prepaid insurance costs

 

$

1,228

 

 

$

1,728

 

Research and development tax credit receivable

 

 

820

 

 

 

1,682

 

Contract research and development costs

 

 

785

 

 

 

5,569

 

Value-added tax refund receivable

 

 

350

 

 

 

598

 

Other

 

 

251

 

 

 

334

 

Total prepaid expenses and other current assets

 

$

3,434

 

 

$

9,911

 

 

7. LEASES

The Company has the following operating leases:

 

Location

 

Primary Use

 

Lease
Expiration Date

 

Renewal Option

Copenhagen, Denmark

 

Corporate headquarters

 

January 2025

 

None

London, United Kingdom

 

Office space

 

August 2022

 

None

Gothenburg, Sweden

 

Office space

 

May 2023

 

None

Stevenage, United Kingdom

 

Laboratory space

 

January 2024

 

None

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 months ended March 31, 2022 and 2021 was $0.1 million during both periods.

11


Quantitative information regarding the Company’s leases for the three months ended March 31, 2022 and 2021 was as follows:

 

 

 

Three Months Ended
March 31,

 

Lease Cost

 

2022

 

 

2021

 

Operating lease cost (in thousands)

 

$

126

 

 

$

119

 

Other Information