10-Q
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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 June 30, 2023

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 July 31, 2023, the registrant had 27,112,697 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 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

16

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

29

Item 4.

Controls and Procedures

29

 

 

 

 

PART II. OTHER INFORMATION

 

Item 1.

Legal Proceedings

30

Item 1A.

Risk Factors

30

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

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,” “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, and our other current fibrosis and oncology product candidates, including GB2064 and GB1211, and any future product candidates;
our need to raise additional funding;
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;
our ability to maintain adequate internal controls over financial reporting;
the effects of global economic uncertainty and financial market volatility caused by economic effects of rising inflation and interest rates, geopolitical instability, changes in international trade relationships and conflicts, such as the ongoing conflict between Russia and Ukraine, on any of the foregoing or other aspects of our business or operations; 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, 2022. Any forward-looking statement in this Quarterly Report on Form 10-Q reflects our current view with respect to future events and is subject to these and other risks, uncertainties, and assumptions relating to our operations, results of operations, industry, and future growth. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

 

 

ii


 

This Quarterly Report on Form 10-Q also contains estimates, projections, and other information concerning our industry, our business, and the markets for certain drugs, including data regarding the estimated size of those markets, their projected growth rates, and the incidence of certain medical conditions. Information that is based on estimates, forecasts, projections, or similar methodologies is inherently subject to uncertainties, and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained these industry, business, market, and other data from reports, research surveys, studies, and similar data prepared by third parties, industry, medical and general publications, government data, and similar sources. In some cases, we do not expressly refer to the sources from which these data are derived.

 

Except where the context otherwise requires, in this Quarterly Report on Form 10-Q, “we,” “us,” “our,” “Galecto,” and the “Company” refer to Galecto, Inc. and, where appropriate, its consolidated subsidiaries.

 

Trademarks

 

We have applied for various trademarks that we use in connection with the operation of our business. This Quarterly Report on Form 10-Q includes trademarks, service marks, and trade names owned by us or other companies. All trademarks, service marks, and trade names included in this Quarterly Report on Form 10-Q are the property of their respective owners. Solely for convenience, the trademarks and trade names in this report may be referred to without the ® and ™ symbols, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto.

 

 

iii


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

GALECTO, INC.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share amounts)

 

 

 

June 30,

 

 

December 31,

 

 

 

2023

 

 

2022

 

Assets

 

(unaudited)

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

22,956

 

 

$

32,786

 

Marketable securities

 

 

29,168

 

 

 

27,438

 

Prepaid expenses and other current assets

 

 

3,238

 

 

 

3,686

 

Total current assets

 

 

55,362

 

 

 

63,910

 

Marketable securities, non-current

 

 

 

 

 

5,832

 

Operating lease right-of-use asset

 

 

633

 

 

 

810

 

Equipment, net

 

 

328

 

 

 

357

 

Other assets, non-current

 

 

2,480

 

 

 

2,279

 

Total assets

 

$

58,803

 

 

$

73,188

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable

 

$

5,557

 

 

$

3,350

 

Accrued expenses and other current liabilities

 

 

9,340

 

 

 

7,757

 

Total current liabilities

 

 

14,897

 

 

 

11,107

 

Operating lease liabilities, non-current

 

 

206

 

 

 

328

 

Total liabilities

 

 

15,103

 

 

 

11,435

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

Preferred stock, par value of $0.00001 per share; 10,000,000 shares authorized
     at June 30, 2023 and December 31, 2022;
no shares issued or outstanding
    as of June 30, 2023 and December 31, 2022

 

 

 

 

 

 

Common stock, par value of $0.00001 per share; 300,000,000 shares authorized
     at June 30, 2023 and December 31, 2022;
27,021,899 and 25,652,392 shares
     issued and outstanding at June 30, 2023 and December 31, 2022, respectively

 

 

 

 

 

 

Additional paid-in capital

 

 

285,311

 

 

 

279,733

 

Accumulated deficit

 

 

(241,474

)

 

 

(217,736

)

Accumulated other comprehensive loss

 

 

(137

)

 

 

(244

)

Total stockholders’ equity

 

 

43,700

 

 

 

61,753

 

Total liabilities and stockholders' equity

 

$

58,803

 

 

$

73,188

 

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
June 30,

 

 

Six Months Ended
June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

8,089

 

 

$

13,707

 

 

$

18,451

 

 

$

26,942

 

General and administrative

 

 

3,070

 

 

 

3,414

 

 

 

6,200

 

 

 

7,118

 

Total operating expenses

 

 

11,159

 

 

 

17,121

 

 

 

24,651

 

 

 

34,060

 

Loss from operations

 

 

(11,159

)

 

 

(17,121

)

 

 

(24,651

)

 

 

(34,060

)

Other income (expense), net

 

 

 

 

 

 

 

 

 

 

 

 

Interest income, net

 

 

442

 

 

 

156

 

 

 

876

 

 

 

217

 

Loss on sale of marketable securities

 

 

 

 

 

(70

)

 

 

 

 

 

(70

)

Foreign exchange transaction gain (loss), net

 

 

(27

)

 

 

148

 

 

 

37

 

 

 

88

 

Total other income, net

 

 

415

 

 

 

234

 

 

 

913

 

 

 

235

 

Net loss

 

$

(10,744

)

 

$

(16,887

)

 

 

(23,738

)

 

 

(33,825

)

Net loss per common share, basic and diluted

 

$

(0.41

)

 

$

(0.67

)

 

$

(0.91

)

 

$

(1.34

)

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

 

 

26,375,076

 

 

 

25,270,314

 

 

 

26,025,929

 

 

 

25,266,096

 

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

Currency translation loss

 

 

(35

)

 

 

(719

)

 

 

(10

)

 

 

(889

)

Unrealized gain (loss) on marketable securities

 

 

25

 

 

 

(155

)

 

 

117

 

 

 

(360

)

Reclassification adjusment for loss included in net income

 

 

 

 

 

70

 

 

 

 

 

 

70

 

Other comprehensive gain (loss), net of tax

 

 

(10

)

 

 

(804

)

 

 

107

 

 

 

(1,179

)

Total comprehensive loss

 

$

(10,754

)

 

$

(17,691

)

 

$

(23,631

)

 

$

(35,004

)

 

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

5


 

Galecto, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(in thousands, except share amounts)

(Unaudited)

 

For the Three Months Ended

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated

 

 

Accumulated Other
Comprehensive

 

 

Total
Stockholders’

 

June 30, 2023

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Loss

 

 

Equity

 

Balance at March 31, 2023

 

 

25,673,474

 

 

$

 

 

$

281,190

 

 

$

(230,730

)

 

$

(127

)

 

$

50,333

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

1,439

 

 

 

 

 

 

 

 

 

1,439

 

Issuance of common stock; net of issuance costs of $0.1 million

 

 

1,348,425

 

 

 

 

 

 

2,682

 

 

 

 

 

 

 

 

 

2,682

 

Other comprehensive loss, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(10

)

 

 

(10

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(10,744

)

 

 

 

 

 

(10,744

)

Balance at June 30, 2023

 

 

27,021,899

 

 

$

 

 

$

285,311

 

 

$

(241,474

)

 

$

(137

)

 

$

43,700

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated

 

 

Accumulated Other
Comprehensive

 

 

Total
Stockholders’

 

June 30, 2022

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Loss

 

 

Equity

 

Balance at March 31, 2022

 

 

25,261,832

 

 

$

 

 

$

275,059

 

 

$

(173,050

)

 

$

(695

)

 

$

101,314

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

1,419

 

 

 

 

 

 

 

 

 

1,419

 

Issuance of common stock; net of issuance costs of $0.1 million

 

 

80,306

 

 

 

 

 

 

23

 

 

 

 

 

 

 

 

 

23

 

Other comprehensive loss, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(804

)

 

 

(804

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(16,887

)

 

 

 

 

 

(16,887

)

Balance at June 30, 2022

 

 

25,342,138

 

 

$

 

 

$

276,501

 

 

$

(189,937

)

 

$

(1,499

)

 

$

85,065

 

 

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

 

 

 

 

6


 

Galecto, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(in thousands, except share amounts)

(Unaudited)

 

For the Six Months Ended

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated

 

 

Accumulated Other
Comprehensive

 

 

Total
Stockholders’

 

June 30, 2023

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Income (Loss)

 

 

Equity

 

Balance at December 31, 2022

 

 

25,652,392

 

 

$

 

 

$

279,733

 

 

$

(217,736

)

 

$

(244

)

 

$

61,753

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

2,873

 

 

 

 

 

 

 

 

 

2,873

 

Issuance of common stock; net of issuance costs of $0.1 million

 

 

1,369,507

 

 

 

 

 

 

2,705

 

 

 

 

 

 

 

 

 

2,705

 

Other comprehensive gain, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

107

 

 

 

107

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(23,738

)

 

 

 

 

 

(23,738

)

Balance at June 30, 2023

 

 

27,021,899

 

 

$

 

 

$

285,311

 

 

$

(241,474

)

 

$

(137

)

 

$

43,700

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Six Months Ended

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated

 

 

Accumulated Other
Comprehensive

 

 

Total
Stockholders’

 

June 30, 2022

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Loss

 

 

Equity

 

Balance at December 31, 2021

 

 

25,261,832

 

 

$

 

 

$

273,655

 

 

$

(156,112

)

 

$

(320

)

 

$

117,223

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

2,823

 

 

 

 

 

 

 

 

 

2,823

 

Issuance of common stock; net of issuance costs of $0.1 million

 

 

80,306

 

 

 

 

 

 

23

 

 

 

 

 

 

 

 

 

23

 

Other comprehensive loss, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,179

)

 

 

(1,179

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(33,825

)

 

 

 

 

 

(33,825

)

Balance at June 30, 2022

 

 

25,342,138

 

 

$

 

 

$

276,501

 

 

$

(189,937

)

 

$

(1,499

)

 

$

85,065

 

 

 

 

 

 

 

 

 

 

 

7


 

GALECTO, INC.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2023

 

 

2022

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(23,738

)

 

$

(33,825

)

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

 

 

 

 

 

 

Depreciation

 

 

35

 

 

 

15

 

Stock-based compensation

 

 

2,873

 

 

 

2,823

 

Amortization of premiums and discounts on marketable securities

 

 

(248

)

 

 

438

 

Net loss on sale of marketable securities

 

 

 

 

 

70

 

Amortization of right of use lease asset

 

 

199

 

 

 

207

 

Accretion of lease liability

 

 

30

 

 

 

28

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

450

 

 

 

6,740

 

Other assets, noncurrent

 

 

(203

)

 

 

(981

)

Accounts payable

 

 

2,207

 

 

 

1,284

 

Accrued expenses and other current liabilities

 

 

1,639

 

 

 

1,790

 

Operating lease liabilities

 

 

(227

)

 

 

(226

)

Net cash used in operating activities

 

 

(16,983

)

 

 

(21,637

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of marketable securities

 

 

(21,994

)

 

 

(40,656

)

Proceeds from sale of marketable securities

 

 

26,459

 

 

 

30,415

 

Purchases of property and equipment

 

 

 

 

 

(17

)

Net cash provided by (used in) investing activities

 

 

4,465

 

 

 

(10,258

)

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from issuance of common stock, net of issuance costs

 

 

2,705

 

 

 

18

 

Net cash provided by financing activities

 

 

2,705

 

 

 

18

 

Net decrease in cash and cash equivalents

 

 

(9,813

)

 

 

(31,877

)

Effect of exchange rate changes on cash and cash equivalents

 

 

(17

)

 

 

(891

)

Cash and cash equivalents, beginning of period

 

 

32,786

 

 

 

62,563

 

Cash and cash equivalents, end of period

 

$

22,956

 

 

$

29,795

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

Cash paid for taxes

 

$

 

 

$

 

Supplemental disclosures of noncash activities:

 

 

 

 

 

 

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

 

$

 

 

$

 

 

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

8


 

GALECTO, INC.

Notes to the Condensed Consolidated Financial Statements