SEC Filing | Galecto

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10-Q

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, 2022


☐	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 November 4, 2022, the registrant had 25,581,029 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	8
	Notes to Unaudited Interim Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	27

	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 3.	Defaults Upon Senior Securities	28
Item 4.	Mine Safety Disclosures	28
Item 5.	Other Information	29
Item 6.	Exhibits	30
Signatures		31

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,” “project,” “continue,” “potential,” “ongoing,” 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.

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,
	2022			2021
Assets	(unaudited)
Current assets
Cash and cash equivalents	$	28,336		$	62,563
Marketable securities		40,748			37,628
Prepaid expenses and other current assets		2,115			9,911
Total current assets		71,199			110,102
Marketable securities, non-current		6,829			9,048
Operating lease right-of-use asset		852			834
Equipment, net		338			203
Other assets, non-current		2,807			2,028
Total assets	$	82,025		$	122,215
Liabilities and stockholders’ equity
Current liabilities
Accounts payable	$	1,907		$	1,531
Accrued expenses and other current liabilities		6,951			3,013
Total current liabilities		8,858			4,544
Operating lease liabilities, non-current		440			448
Total liabilities		9,298			4,992
Commitments and contingencies (Note 9)
Stockholders’ equity
Preferred stock, par value of $0.00001 per share; 10,000,000 shares authorized at September 30, 2022 and December 31, 2021; no shares issued or outstanding as of September 30, 2022 and December 31, 2021		—			—
Common stock, par value of $0.00001 per share; 300,000,000 shares authorized at September 30, 2022 and December 31, 2021; 25,581,029 and 25,261,832 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively		—			—
Additional paid-in capital		278,319			273,655
Accumulated deficit		(203,667	)		(156,112	)
Accumulated other comprehensive loss		(1,925	)		(320	)
Total stockholders’ equity		72,727			117,223
Total liabilities and stockholders' equity	$	82,025		$	122,215

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 September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Operating expenses
Research and development	$	10,494		$	9,748		$	37,436		$	28,373
General and administrative		3,128			3,191			10,246			10,386
Total operating expenses		13,622			12,939			47,682			38,759
Loss from operations		(13,622	)		(12,939	)		(47,682	)		(38,759	)
Other income (expense), net
Interest income, net		221			35			438			126
Loss on sale of marketable securities		—			—			(70	)		—
Foreign exchange transaction gain (loss), net		(329	)		208			(241	)		290
Total other income (expense), net		(108	)		243			127			416
Net loss	$	(13,730	)	$	(12,696	)	$	(47,555	)	$	(38,343	)
Net loss per common share, basic and diluted	$	(0.54	)	$	(0.50	)	$	(1.88	)	$	(1.52	)
Weighted-average number of shares used in computing net loss per common share, basic and diluted		25,491,786			25,261,832			25,342,153			25,261,832
Other comprehensive loss, net of tax
Currency translation loss		(344	)		(369	)		(1,233	)		(740	)
Unrealized gain (loss) on marketable securities		(82	)		34			(442	)		(23	)
Reclassification adjustment for loss included in net income		—			—			70			—
Other comprehensive loss, net of tax		(426	)		(335	)		(1,605	)		(763	)
Total comprehensive loss	$	(14,156	)	$	(13,031	)	$	(49,160	)	$	(39,106	)

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

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’
September 30, 2022	Shares		Amount		Capital		Deficit			Income (Loss)			Equity
Balance at June 30, 2022		25,342,138	$	—	$	276,501	$	(189,937	)	$	(1,499	)	$	85,065
Stock-based compensation expense		—		—		1,398		—			—			1,398
Issuance of common stock; net of issuance costs		238,891		—		420		—			—			420
Other comprehensive loss, net		—		—		—		—			(426	)		(426	)
Net loss		—		—		—		(13,730	)		—			(13,730	)
Balance at September 30, 2022		25,581,029	$	—	$	278,319	$	(203,667	)	$	(1,925	)	$	72,727

For the Three Months Ended	Common Stock				Additional Paid-In		Accumulated			Accumulated Other Comprehensive			Total Stockholders’
September 30, 2021	Shares		Amount		Capital		Deficit			Income (Loss)			Equity
Balance at June 30, 2021		25,261,832	$	—	$	271,193	$	(130,007	)	$	246		$	141,432
Stock-based compensation expense		—		—		1,219		—			—			1,219
Other comprehensive loss, net		—		—		—		—			(335	)		(335	)
Net loss		—		—		—		(12,696	)		—			(12,696	)
Balance at September 30, 2021		25,261,832	$	—	$	272,412	$	(142,703	)	$	(89	)	$	129,620

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

Galecto, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share amounts)

(Unaudited)


For the Nine Months Ended	Common Stock				Additional Paid-In		Accumulated			Accumulated Other Comprehensive			Total Stockholders’
September 30, 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		—		—		4,222		—			—			4,222
Issuance of common stock; net of issuance costs of $0.2 million		319,197		—		442		—			—			442
Other comprehensive loss, net		—		—		—		—			(1,605	)		(1,605	)
Net loss		—		—		—		(47,555	)		—			(47,555	)
Balance at September 30, 2022		25,581,029	$	—	$	278,319	$	(203,667	)	$	(1,925	)	$	72,727

For the Nine Months Ended	Common Stock				Additional Paid-In		Accumulated			Accumulated Other Comprehensive			Total Stockholders’
September 30, 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		—		—		3,237		—			—			3,237
Other comprehensive loss, net		—		—		—		—			(763	)		(763	)
Net loss		—		—		—		(38,343	)		—			(38,343	)
Balance at September 30, 2021		25,261,832	$	—	$	272,412	$	(142,703	)	$	(89	)	$	129,620

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

GALECTO, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)


	Nine Months Ended
	September 30,
	2022			2021
Cash flows from operating activities:
Net loss	$	(47,555	)	$	(38,343	)
Adjustment to reconcile net loss to net cash used in operating activities:
Depreciation of equipment		21			13
Stock-based compensation		4,222			3,237
Amortization of premiums and discounts on marketable securities		447			731
Net loss on sale of marketable securities		70			—
Amortization of right of use lease asset		305			317
Accretion of lease liability		36			57
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		7,802			(7	)
Other assets, non-current		(785	)		(203	)
Accounts payable		376			(871	)
Accrued expenses and other current liabilities		3,919			993
Operating lease liabilities		(342	)		(403	)
Net cash used in operating activities		(31,484	)		(34,479	)
Cash flows from investing activities:
Purchases of marketable securities		(40,656	)		(84,209	)
Proceeds from sale of marketable securities		38,865			21,976
Purchases of property and equipment		(155	)		(227	)
Net cash used in investing activities		(1,946	)		(62,460	)
Cash flows from financing activities:
Proceeds from issuance of common stock, net of issuance costs		442			—
Net cash provided by financing activities		442			—
Net decrease in cash, cash equivalents and restricted cash		(32,988	)		(96,939	)
Effect of exchange rate changes on cash and cash equivalents		(1,239	)		(740	)
Cash and cash equivalents, beginning of period		62,563			163,836
Cash and cash equivalents, end of period	$	28,336		$	66,157
Supplemental disclosures of cash flow information:
Cash paid for taxes	$	—		$	40
Supplemental disclosures of noncash activities: