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 March 31, 2024

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 Capital 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 24, 2024, 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

7

Notes to Unaudited Interim Condensed Consolidated Financial Statements

8

Item 2.

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

16

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

26

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

28

Item 6.

Exhibits

29

Signatures

30

 

 

 

 

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:

 

our plans and expectations regarding our strategic alternative review process that we announced in September 2023 and the timing and success of such process, including the completion of a potential transaction;
our ability to retain the continued service of our directors, officers, key employees and consultants;
our ability to maintain the listing of our common stock on the Nasdaq Stock Market;
the success, cost and timing of our product development activities and planned initiation and completion of clinical trials of our 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 and the current armed conflict in Israel and the Gaza Strip, 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, 2023. 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)

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Assets

 

(unaudited)

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

21,091

 

 

$

21,465

 

Marketable securities

 

 

6,080

 

 

 

11,686

 

Prepaid expenses and other current assets

 

 

3,370

 

 

 

3,623

 

Total current assets

 

 

30,541

 

 

 

36,774

 

Operating lease right-of-use asset

 

 

152

 

 

 

247

 

Equipment, net

 

 

73

 

 

 

78

 

Other assets, non-current

 

 

1,711

 

 

 

1,128

 

Total assets

 

$

32,477

 

 

$

38,227

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable

 

$

1,665

 

 

$

1,702

 

Accrued expenses and other current liabilities

 

 

2,653

 

 

 

4,128

 

Total current liabilities

 

 

4,318

 

 

 

5,830

 

Operating lease liabilities, non-current

 

 

 

 

 

66

 

Total liabilities

 

 

4,318

 

 

 

5,896

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

Preferred stock, par value of $0.00001 per share; 10,000,000 shares authorized
     at March 31, 2024 and December 31, 2023;
no shares issued or outstanding
    as of March 31, 2024 and December 31, 2023

 

 

 

 

 

 

Common stock, par value of $0.00001 per share; 300,000,000 shares authorized
     at March 31, 2024 and December 31, 2023;
27,112,697 shares issued and
     outstanding at March 31, 2024 and December 31, 2023

 

 

 

 

 

 

Additional paid-in capital

 

 

289,395

 

 

 

288,036

 

Accumulated deficit

 

 

(261,562

)

 

 

(256,085

)

Accumulated other comprehensive gain

 

 

326

 

 

 

380

 

Total stockholders’ equity

 

 

28,159

 

 

 

32,331

 

Total liabilities and stockholders' equity

 

$

32,477

 

 

$

38,227

 

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,

 

 

 

2024

 

 

2023

 

Operating expenses

 

 

 

 

 

 

Research and development

 

$

2,463

 

 

$

10,362

 

General and administrative

 

 

3,278

 

 

 

3,130

 

Total operating expenses

 

 

5,741

 

 

 

13,492

 

Loss from operations

 

 

(5,741

)

 

 

(13,492

)

Other income, net

 

 

 

 

 

 

Interest income, net

 

 

257

 

 

 

434

 

Foreign exchange transaction gain, net

 

 

7

 

 

 

64

 

Total other income, net

 

 

264

 

 

 

498

 

Net loss

 

$

(5,477

)

 

$

(12,994

)

Net loss per common share, basic and diluted

 

$

(0.20

)

 

$

(0.51

)

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

 

 

27,112,697

 

 

 

25,672,902

 

Other comprehensive loss, net of tax

 

 

 

 

 

 

Currency translation gain (loss)

 

 

(86

)

 

 

25

 

Unrealized gain on marketable securities

 

 

32

 

 

 

92

 

Other comprehensive gain (loss), net of tax

 

 

(54

)

 

 

117

 

Total comprehensive loss

 

$

(5,531

)

 

$

(12,877

)

 

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)

 

Three Months Ended

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated

 

 

Accumulated Other
Comprehensive

 

 

Total
Stockholders’

 

March 31, 2024

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Income (Loss)

 

 

Equity

 

Balance at December 31, 2023

 

 

27,112,697

 

 

$

 

 

$

288,036

 

 

$

(256,085

)

 

$

380

 

 

$

32,331

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

1,359

 

 

 

 

 

 

 

 

 

1,359

 

Other comprehensive loss, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(54

)

 

 

(54

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(5,477

)

 

 

 

 

 

(5,477

)

Balance at March 31, 2024

 

 

27,112,697

 

 

$

 

 

$

289,395

 

 

$

(261,562

)

 

$

326

 

 

$

28,159

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated

 

 

Accumulated Other
Comprehensive

 

 

Total
Stockholders’

 

March 31, 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

 

 

 

 

 

 

 

 

1,434

 

 

 

 

 

 

 

 

 

1,434

 

Issuance of common stock; net of issuance costs

 

 

21,082

 

 

 

 

 

 

23

 

 

 

 

 

 

 

 

 

23

 

Other comprehensive gain, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

117

 

 

 

117

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(12,994

)

 

 

 

 

 

(12,994

)

Balance at March 31, 2023

 

 

25,673,474

 

 

$

 

 

$

281,190

 

 

$

(230,730

)

 

$

(127

)

 

$

50,333

 

 

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,

 

 

 

2024

 

 

2023

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(5,477

)

 

$

(12,994

)

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

 

 

 

 

 

 

Depreciation

 

 

5

 

 

 

18

 

Stock-based compensation

 

 

1,359

 

 

 

1,434

 

Amortization of premiums and discounts on marketable securities

 

 

(12

)

 

 

(154

)

Amortization of right of use lease asset

 

 

93

 

 

 

121

 

Accretion of lease liability

 

 

4

 

 

 

16

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

252

 

 

 

(194

)

Other assets, noncurrent

 

 

(582

)

 

 

(212

)

Accounts payable

 

 

(37

)

 

 

200

 

Accrued expenses and other current liabilities

 

 

(1,449

)

 

 

2,779

 

Operating lease liabilities

 

 

(92

)

 

 

(148

)

Net cash used in operating activities

 

 

(5,936

)

 

 

(9,134

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of marketable securities

 

 

 

 

 

(12,751

)

Proceeds from sale of marketable securities

 

 

5,650

 

 

 

14,125

 

Net cash provided by investing activities

 

 

5,650

 

 

 

1,374

 

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from issuance of common stock, net of issuance costs

 

 

 

 

 

23

 

Net cash provided by financing activities

 

 

 

 

 

23

 

Net decrease in cash and cash equivalents

 

 

(286

)

 

 

(7,737

)

Effect of exchange rate changes on cash and cash equivalents

 

 

(88

)

 

 

19

 

Cash and cash equivalents, beginning of period

 

 

21,465

 

 

 

32,786

 

Cash and cash equivalents, end of period

 

$

21,091

 

 

$

25,068

 

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.

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 (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 ("LOXL2”), which play key roles in regulating fibrosis and cancer.

As of March 31, 2024, 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.

In September 2023, the Company undertook an organizational restructuring and determined to conduct a comprehensive exploration of strategic alternatives. The restructuring and pursuit of strategic alternatives involves risks. There can be no assurance that the Company’s significantly reduced workforce will be sufficient to pursue the strategic alternatives and the development of the Company’s product candidates. Additionally, availability of suitable third parties with which to conduct contemplated strategic transactions may be limited and whether the Company will be able to pursue a strategic transaction, or whether any transaction, if pursued, will be completed on attractive terms or at all is uncertain.

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, the Company’s initial public offering (“IPO”) and sales of the Company's common stock in "at-the-market" offerings.

As of March 31, 2024, the Company had an accumulated deficit of $261.6 million, from recurring losses since inception in 2011. The Company has incurred recurring losses and has not generated revenue as no products have obtained the necessary regulatory approval in order to market 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, 2024 and 2023 of $5.9 million and $9.1 million, respectively, and current projections indicate that the Company will have continued negative cash flows for the foreseeable future as it continues to fund operating expenses. Net losses incurred for the three months ended March 31, 2024 and 2023 were $5.5 million and $13.0 million, respectively.

As of March 31, 2024, the Company’s cash, cash equivalents and marketable securities amounted to $27.2 million and current assets amounted to $30.5 million and current liabilities amounted to $4.3 million. At December 31, 2023, the Company’s cash, cash

8


 

equivalents and marketable securities amounted to $33.2 million, current assets amounted to $36.8 million and current liabilities amounted to $5.8 million.

On September 26, 2023, the Company announced a restructuring plan to reduce the Company's operations to preserve financial resources, resulting in a reduction of the Company’s workforce by up to 29 people, or approximately 70% of the Company's then existing headcount. As of March 31, 2024, the Company has incurred $3.4 million in restructuring charges in connection with the restructuring, consisting primarily of cash-based expenses related to employee severance and notice period payments, benefits and related costs and believes that the execution of the restructuring plan has been substantially completed.

 

Additionally, the Company has initiated a process to evaluate strategic alternatives in order to maximize stockholder value. As part of the strategic review process, the Company is exploring potential strategic alternatives that include, without limitation, an acquisition, merger, business combination or other transactions. The Company is also exploring strategic alternatives related to its product candidates and related assets, including, without limitation, licensing transactions and asset sales. There can be no assurance that the strategic review process will result in the Company pursuing a transaction, or that any transaction, if pursued, will be completed on terms favorable to the Company and its stockholders.

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, 2024 and for the three months ended March 31, 2024 and 2023, 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, 2024, results of operations, statement of stockholders’ equity for the three months ended March 31, 2024 and 2023 and its cash flows for the three months ended March 31, 2024 and 2023. 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, 2023, as filed with the Securities and Exchange Commission (“SEC”) on March 8, 2024 ("2023 Consolidated Financial Statements"). The results for the three months ended March 31, 2024 are not necessarily indicative of the results expected for the full fiscal year or any interim period.

For the three months ended March 31, 2024, there have been no material changes to the significant accounting policies as disclosed in Note 2 to the 2023 Consolidated Financial Statements.

Recently issued accounting standards

The Company periodically reviews new accounting standards that are issued and has not identified any new standards that it believes merit further discussion or would have a significant impact on its financial statements.

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.

9


 

A summary of the Company’s available-for-sale investments as of March 31, 2024 and December 31, 2023 consisted of the following (in thousands):

 

 

At March 31, 2024

 

 

 

Amortized

 

 

Gross Unrealized

 

 

Gross Unrealized

 

 

Fair

 

Marketable securities:

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

Corporate bonds

 

$

6,081

 

 

$

 

 

$

(1

)

 

$

6,080

 

Total

 

$

6,081

 

 

$

 

 

$

(1

)

 

$

6,080

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At December 31, 2023

 

 

 

Amortized

 

 

Gross Unrealized

 

 

Gross Unrealized

 

 

Fair

 

Marketable securities:

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

Corporate bonds

 

$

11,720

 

 

$

 

 

$

(34

)

 

$

11,686

 

Total

 

$

11,720

 

 

$

 

 

$

(34

)

 

$

11,686

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4. PROPERTY AND EQUIPMENT, NET

Property and equipment as of March 31, 2024 consisted of the following (in thousands):

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Equipment

 

$

107

 

 

$

107

 

Less: accumulated depreciation

 

 

(34

)

 

 

(29

)

Equipment, net

 

$

73

 

 

$

78

 

Depreciation expense for the three months ended March 31, 2024 and 2023 was $5,000 and $18,000, 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, 2024 and December 31, 2023 is as follows (in thousands):

 

 

Fair Value Measurement at
March 31, 2024

 

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)

 

$

11,481

 

 

$

11,481

 

 

$

 

 

$

 

Debt securities

 

 

6,080

 

 

 

 

 

 

6,080

 

 

 

 

Total

 

$

17,561

 

 

$

11,481

 

 

$

6,080

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurement at
December 31, 2023

 

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)

 

$

13,610

 

 

 

13,610

 

 

 

 

 

 

 

Debt securities

 

 

11,686

 

 

 

 

 

 

11,686

 

 

 

 

Total

 

$

25,296

 

 

$

13,610

 

 

$

11,686

 

 

$

 

(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,

 

 

 

2024

 

 

2023

 

Research and development tax credit receivable

 

$

1,420

 

 

$

1,438

 

Contract research and development costs

 

 

944

 

 

 

1,046

 

Prepaid insurance costs

 

 

534

 

 

 

774

 

Value-added tax refund receivable

 

 

283

 

 

 

280

 

Other

 

 

189

 

 

 

85

 

Total prepaid expenses and other current assets

 

$

3,370

 

 

$

3,623

 

 

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

 

February 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, 2024 and 2023 was $0.1 million during both periods.

 

11


 

Quantitative information regarding the Company’s leases for the three months ended March 31, 2024 and 2023 was as follows:

 

 

Three Months Ended
March 31,

 

Lease Cost

 

2024

 

 

2023

 

Operating lease cost (in thousands)

 

$

96

 

 

$

137

 

Other Information

 

 

 

 

 

 

Operating cash flows paid for amounts included
   in the measurement of lease liabilities
(in thousands)

 

$

92

 

 

$

148

 

Operating lease liabilities arising from obtaining
   right-of-use assets
(in thousands)

 

$

 

 

$

 

As of March 31, 2024 and December 31, 2023, the weighted average remaining lease term for operating leases was 0.8 years and 0.9 years, respectively.

As of March 31, 2024 and December 31, 2023, the weighted average discount rate for operating leases was 8% for both periods.

Operating lease liabilities at March 31, 2024 are as follows (in thousands):

 

 

 

Operating

 

Future Lease Payments

 

Leases

 

2024 (excluding the period ended March 31, 2024)

 

$

145

 

2025

 

 

16

 

2026

 

 

 

2027

 

 

 

2028

 

 

 

Total lease payments

 

 

161

 

Less: imputed interest

 

 

(6

)

Total lease liabilities

 

$

155

 

 

8. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consist of the following (in thousands):

 

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Employee compensation costs

 

$

1,166

 

 

$

987

 

Restructuring costs

 

 

485

 

 

 

1,734

 

Contract research and development costs

 

 

420

 

 

 

685

 

Operating lease liabilities, current

 

 

155

 

 

 

183

 

Other liabilities

 

 

427

 

 

 

539

 

Total accrued expenses and other current liabilities

 

$

2,653

 

 

$

4,128

 

 

9. COMMITMENTS AND CONTINGENCIES

During the three months ended March 31, 2024, there were no material changes to the Company’s commitments and contingencies as disclosed in Note 9 of the 2023 Consolidated Financial Statements. Further, the Company’s commitments related to lease agreements are disclosed in Note 7 to the Company’s unaudited interim condensed consolidated financial statements.

10. STOCK-BASED COMPENSATION

 

Employee equity plan

 

In March 2020, the Company's Board of Directors and stockholders approved the 2020 Stock Option and Grant Plan (“2020 Plan”). Holders of stock options under the 2020 Plan shall be entitled to exercise the vested portion of the stock option during the term of the grant. If a qualified exit, as defined in the 2020 Plan, occurs before the stock option vests, then all of the holders' unvested options shall vest immediately.

 

12


 

In October 2020, the Company's Board of Directors and stockholders approved the 2020 Equity Incentive Plan (“2020 Equity Plan”). Following the adoption of the 2020 Equity Plan, no further options are available to be issued under the 2020 Plan. Stock-based awards granted under the 2020 Equity Plan generally vest over a four-year period and expire ten years from the grant date. Shares available for grant under the 2020 Equity Plan will cumulatively increase by 5 percent of the number of shares of common stock issued and outstanding on January 1st each year until 2030. At March 31, 2024, the Company had 2,486,741 shares available for future grant under the 2020 Equity Plan.

The following table sets forth the activity for the Company’s stock options during the three months ended March 31, 2024:

 

 

Number of
Options

 

 

Weighted-
average
exercise
price per
share

 

 

Weighted-
average
remaining
contractual
term
(in years)

 

 

Aggregate
intrinsic
value

 

Outstanding at December 31, 2023

 

 

6,886,889

 

 

$

4.58

 

 

 

6.7

 

 

$

 

Granted

 

 

 

 

 

 

 

 

 

 

 

 

Cancelled

 

 

(891,925

)

 

 

4.38

 

 

 

 

 

 

 

Outstanding at March 31, 2024

 

 

5,994,964

 

 

$

4.60

 

 

 

6.9

 

 

$

 

Vested and expected to vest at March 31, 2024

 

 

5,710,318

 

 

$

4.57

 

 

 

7.0

 

 

$

 

Vested and exercisable at March 31, 2024

 

 

4,435,373

 

 

$

5.07

 

 

 

6.5

 

 

$

 

The weighted-average grant date fair value of all stock-based awards granted for the three months ended March 31, 2024 was $0.71. The intrinsic value at March 31, 2024 and December 31, 2023 was based on the closing price of the Company’s common stock on these dates of $0.78 and $0.72 per share, respectively.

In November 2022, the Company's Board of Directors approved the 2022 Inducement Plan (the “Inducement Plan”), which allows for the grant of equity awards to be made to a new employee where the equity award is a material inducement to an employee entering into employment with the Company. The Inducement Plan was adopted by the Company's Board of Directors without stockholder approval pursuant to Nasdaq Listing Rule 5635(c)(4). A total of 250,000 shares of the Company's common stock have been reserved for issuance under the Inducement Plan. As of March 31, 2024, no shares have been issued under the Inducement Plan.

Restricted stock units

In January 2024, the Company granted 855,000 restricted stock units, or RSUs, to its employees under the 2020 Equity Plan. The weighted average grant date fair value of the time-based RSUs was $0.71 for the three months ended March 31, 2024.The RSUs vest 33% after one-year from the grant date and 17% every six-months thereafter. For the three months ended March 31, 2024, the Company recognized approximately $47,000 expense related to the RSUs.

The following table sets forth the activity for the Company’s RSUs during the three months ended March 31, 2024:

 

 

Restricted
Stock Units

 

 

Weighted-
average
grant date fair value

 

Total nonvested units at December 31, 2023

 

 

 

 

$

 

Granted

 

 

855,000

 

 

 

0.71

 

Cancelled

 

 

(35,000

)

 

 

0.71

 

Total nonvested units at March 31, 2024

 

 

820,000

 

 

$

0.71

 

 

13


 

Stock-based compensation

The grant date fair value of stock-based awards vested during the three months ended March 31, 2024 and 2023 was $1.3 million and $2.2 million, respectively. Total unrecognized compensation expense related to unvested options granted under the Company’s stock-based compensation plan was $4.1 million at March 31, 2024, which is expected to be recognized over a weighted average period of 1.6 years. The Company recorded stock-based compensation expense related to the issuance of stock as follows (in thousands):

 

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Research and development

 

$

629

 

 

$

684

 

General and administrative

 

 

730

 

 

 

750

 

Total stock-based compensation

 

$

1,359

 

 

$

1,434

 

The Company uses a Black-Scholes option pricing model to determine fair value of its stock options. The Black-Scholes option pricing model includes various assumptions, including the fair value of common shares, expected life of stock options, the expected volatility based on the historical volatility of a publicly traded set of peer companies and the expected risk-free interest rate based on the implied yield on a U.S. Treasury security.

The fair values of the options granted were estimated using the following assumptions:

 

 

 

Three Months Ended

 

 

 

 

March 31,

 

 

 

 

2024

 

 

2023

 

 

Risk-free interest rate

 

 

3.9

%

 

 

3.8

%

 

Expected term (in years)

 

 

5.9

 

 

 

6.1

 

 

Expected volatility

 

 

94.6

%

 

 

90.7

%

 

Expected dividend yield

 

 

 

 

 

 

 

 

11. RESTRUCTURING ACTIVITIES

In September 2023, the Company’s Board of Directors approved a restructuring plan (the “Restructuring Plan”) to reduce the Company’s operating costs and better align its workforce with the needs of its business. The Restructuring Plan eliminated approximately 70% of the Company’s workforce.

Employees affected by the Restructuring Plan obtained involuntary termination benefits pursuant to a one-time benefit arrangement. For employees who were notified of their termination in September 2023 and have no requirements to provide future service, the Company recognized the liability for the termination benefits in full at fair value at the time of termination. For employees who are required to render services beyond a minimum retention period to receive their one-time termination benefits, the Company recognized the termination benefits ratably over their future service periods. The service periods began in October 2023 and ended in December 2023. The Company recorded employee termination benefit charges during the year ended December 31, 2023 of $3.4 million and has included them as operating expenses in the Condensed Consolidated Statements of Operations and Comprehensive Loss.

Restructuring costs pertaining to the Restructuring Plan consist of the following (in thousands):

 

 

Three Months Ended
March 31, 2024

 

Balance at December 31, 2022

 

$

 

Restructuring expenses incurred

 

 

3,448

 

Payments

 

 

(1,593

)

Non-cash charges

 

 

(121

)

Balance at December 31, 2023

 

 

1,734

 

Payments

 

 

(1,249

)

Balance at March 31, 2024

 

$

485

 

The Company incurred an impairment charge related to a leased facility of $29,000 during the year ended December 31, 2023 resulting from the Restructuring Plan.

14


 

In September 2023, the Board of Directors approved arrangements designed to provide that the Company will have the continued dedication and commitment of its remaining employees, including executives, determined to be key to the Company’s planned go-forward operations. The Board of Directors approved, and management implemented, a retention program for employees remaining with the Company which includes cash retention bonuses totaling $1.2 million for certain retained employees, provided that they remain within the Company through various requisite service periods. As a result, these cash retention bonuses are being accrued over the requisite service period. With respect to the CEO of the Company, he is only entitled to a cash bonus upon the achievement of certain corporate and strategic milestones for the Company. During the period ended March 31, 2024, the Company's retention accrual was $0.5 million. During the year ended December 31, 2023, the Company's retention accrual was $0.4 million.

12. NET LOSS PER SHARE

Basic and diluted net loss per share is calculated as follows (in thousands except share and per share amounts):

 

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Net loss

 

$

(5,477

)

 

$

(12,994

)

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

 

 

27,112,697

 

 

 

25,672,902

 

Net loss per common share, basic and diluted

 

$

(0.20

)

 

$

(0.51

)

The following outstanding potentially dilutive securities have been excluded from the calculation of diluted net loss per share, as their effect is anti-dilutive:

 

 

 

Three Months Ended
March 31,

 

 

 

2024

 

 

2023

 

Stock options to purchase common stock

 

 

5,994,964

 

 

 

7,550,469

 

Restricted stock units

 

 

820,000

 

 

 

 

 

13. SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the date on which the unaudited interim condensed consolidated financial statements were issued. The Company has concluded that no subsequent events have occurred that require disclosure to the unaudited interim condensed consolidated financial statements.

15


 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following information should be read in conjunction with the unaudited interim condensed consolidated financial statements and the notes thereto included in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto for the year ended December 31, 2023, and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the United States Securities and Exchange Commission, or the SEC, on March 8, 2024. This discussion and analysis and other parts of this Quarterly Report contain forward-looking statements based upon current beliefs, plans and expectations that involve risks, uncertainties and assumptions, such as statements regarding our plans, objectives, expectations, intentions and projections. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 and in other SEC filings.

Overview

We are a clinical-stage biotechnology company developing novel small molecule therapeutics that are designed to target the biological processes that lie at the heart of cancer and fibrotic diseases. Our strategy is to focus on diseases without disease-modifying treatment options and where there is a high unmet medical need. We are concentrating on the development of a new class of medicines: small molecule inhibitors of galectin-3 and lysyl oxidase-like 2, or LOXL2, that target underlying biology for the treatment of multi-factorial diseases like cancer and fibrotic diseases.

In September 2023, we announced a corporate restructuring that resulted in a substantial reduction of our workforce and that we have initiated a process to evaluate strategic alternatives. As part of our ongoing strategic review process, we are exploring potential strategic alternatives that include, without limitation, a stock or asset acquisition, merger, business combination, liquidation, dissolution or other transaction. We are also exploring strategic transactions regarding our product candidates and related assets, including, without limitation, licensing transactions and asset sales. We expect to devote substantial time and resources to exploring strategic alternatives in order to maximize stockholder value. Despite devoting significant efforts to identify and evaluate potential strategic alternatives, there can be no assurance that this strategic review process will result in us pursuing any transaction or that any transaction, if pursued, will be completed on attractive terms or at all. We have not set a timetable for completion of this strategic review process, and our board of directors has not approved a definitive course of action. Additionally, there can be no assurances that any particular course of action, business arrangement or transaction, or series of transactions, will be pursued, successfully consummated or lead to increased stockholder value or that we will make any cash distributions to our stockholders.

Financial Overview

We currently expect our expenses to decrease in the near future due to our decision to stop development of certain of our product candidates and reduce our workforce while we explore strategic alternatives. Our remaining product candidates, GB1211 and GB2064, are in Phase 2 of clinical development. Our ability to generate revenue from product sales sufficient to achieve profitability will depend heavily on the outcome of our exploration of strategic alternatives, as well as partnering and/or funding additional activities in order to achieve the successful development and eventual commercialization of one or more of these product candidates. Our operations to date have been financed primarily from our initial public offering, or IPO, the issuance of common stock through our Open Market Sale AgreementSM with Jefferies LLC, as sales agent, to provide for the issuance and sale of up to $50.0 million of our common stock from time to time in “at-the-market” offerings under the Registration Statement and related prospectus, or the ATM Program, the issuance of convertible preferred shares and convertible notes. Since inception, we have had significant operating losses. Our net loss was $5.5 million and $13.0 million for the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, we had an accumulated deficit of $261.6 million and $27.2 million in cash, cash equivalents and marketable securities.

Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our prepaid expenses, accounts payable and accrued expenses. We expect our research and development expenses, general and administrative expenses, and capital expenditures will decrease in the near future compared to prior periods due to the recent restructuring announced in connection with our exploration of strategic alternatives. We anticipate that our expenses will increase substantially if, and as, we:

negotiate and consummate a strategic business transaction;
advance our fibrosis and oncology product candidates and any future product candidates through clinical development, and, if successful, later-stage clinical trials;
advance our preclinical development programs into clinical development;

16


 

experience delays or interruptions to preclinical studies, clinical trials, our receipt of services from our third-party service providers on whom we rely, or our supply chain, including delays and economic uncertainty in various global markets caused by geopolitical instability and conflict and economic challenges caused by global health crises such as the COVID-19 pandemic;
increase the amount of research and development activities to discover and develop product candidates;
expand our operational, financial and management systems and increase personnel, including personnel to support our clinical development and manufacturing efforts, general and administrative functions and our operations as a public company;
maintain, expand and protect our intellectual property portfolio; and
invest in or in-license other technologies or product candidates.

We expect to continue to incur net losses for the foreseeable future. In particular, we expect our expenses to increase if we determine to further our development of, and seek regulatory approvals for, our product candidates, pay fees to outside consultants, lawyers and accountants, and incur other costs associated with being a public company. In addition, if and when we seek and obtain regulatory approval to commercialize any current or future product candidate, we will also incur increased expenses in connection with commercialization and marketing of any such product. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials and our expenditures on other research and development activities.

We expect to continue to incur costs and expenditures in connection with the process of evaluating our strategic alternatives. There can be no assurance, however, that we will be able to successfully consummate any particular strategic transaction. The process of continuing to evaluate these strategic options may be very costly, time-consuming and complex and we have incurred, and may in the future incur, significant costs related to this continued evaluation, such as legal, accounting and advisory fees and expenses and other related charges. A considerable portion of these costs will be incurred regardless of whether any such course of action is implemented or transaction is completed. Any such expenses will decrease the remaining cash available for use in our business. In addition, any strategic business combination or other transactions that we may consummate in the future could have a variety of negative consequences and we may implement a course of action or consummate a transaction that yields unexpected results that adversely affects our business and decreases the remaining cash available for use in our business or the execution of our strategic plan. There can be no assurances that any particular course of action, business arrangement or transaction, or series of transactions, will be pursued, successfully consummated, lead to increased stockholder value, or achieve the anticipated results. Any failure of such potential transaction to achieve the anticipated results could significantly impair our ability to enter into any future strategic transactions and may significantly diminish or delay any future distributions to our stockholders.

Subject to the outcome of our exploration of strategic alternatives, which may materially change any estimates, and based on current estimates of our expenses going forward, we believe that our existing cash, cash equivalents and marketable securities of $27.2 million as of March 31, 2024 will be sufficient to fund our operating expenditures and capital expenditure requirements through at least the next twelve months from the filing date of this Quarterly Report on Form 10-Q. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. Our estimates do not include any cash, cash equivalents and marketable securities that will be needed to fund a potential strategic transaction nor our financial needs following the consummation of any strategic transaction and our resource requirements could materially change to the extent we identify and enter into any strategic transaction.

To date, we have not had any products approved for sale and, therefore, have not generated any product revenue. We do not expect to generate any revenues from product sales unless and until we successfully complete development and obtain regulatory approval for one or more of our product candidates. As a result, until such time, if ever, that we can generate substantial product revenue, we expect to finance our cash needs through equity offerings, debt financings or other capital sources, including collaborations, licenses or similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed or on favorable terms, if at all. Any failure to raise capital as and when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies, including our research and development activities. If we are unable to raise capital, we will need to further delay, reduce or terminate activities to reduce costs beyond the restructuring announced in September 2023.

Economic uncertainty in various global markets, including the U.S. and Europe, caused by political instability and conflict, such as the ongoing conflict in Ukraine and in Israel, have led to market disruptions, including significant volatility in commodity prices, credit and capital market instability and supply chain interruptions, which have caused record inflation globally. Our business, financial condition and results of operations could be materially and adversely affected by further negative impact on

17


 

the global economy and capital markets resulting from these global economic conditions, particularly if such conditions are prolonged or worsen.

Although, to date, our business has not been materially impacted by these global economic and geopolitical conditions, it is impossible to predict the extent to which our operations will be impacted in the short and long term, or the ways in which such instability could impact our business and results of operations. The extent and duration of these market disruptions, whether as a result of the military conflict between Russia and Ukraine and effects of the Russian sanctions, current armed conflict in Israel and the Gaza Strip, geopolitical tensions, record inflation or otherwise, are impossible to predict, but could be substantial. Any such disruptions may also magnify the impact of other risks described in this report.

Components of Operating Results

Operating Expenses

Our operating expenses since inception have consisted primarily of research and development expenses and general and administrative costs.

Research and Development

Our research and development expenses consist primarily of costs incurred for the development of our product candidates and our drug discovery efforts, which include:

personnel costs, which include salaries, benefits and stock-based compensation expense;
expenses incurred under agreements with consultants, and third-party contract organizations that conduct research and development activities on our behalf;
costs related to sponsored research service agreements;
costs related to production of preclinical and clinical materials, including fees paid to contract manufacturers;
laboratory and vendor expenses related to the execution of preclinical studies and planned clinical trials;
laboratory supplies and equipment used for internal research and development activities; and
acquired in-process research and development programs.

We expense all research and development costs in the periods in which they are incurred, including for acquired in-process research and development. Costs for certain research and development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and third-party service providers.

We have historically met the requirements to receive a tax credit in Denmark of up to $0.8 million per year for losses resulting from research and development costs of up to approximately $3.6 million per year. The tax credit is reported as a reduction to research and development expense in the condensed consolidated statements of operations. We recorded a tax credit of $0.6 million and $0.8 million during the three month periods ended March 31, 2024 and 2023, respectively. We anticipate that we will be eligible to receive this credit in 2024 and 2025.

We have qualified for the R&D Expenditure Credit (RDEC) in United Kingdom for preclinical laboratory and in-patient clinical trials. The RDEC net tax benefit is reported in the consolidated statements of operations. We recorded a overall reduction for the RDEC, net of the UK corporation tax rate of $0.04 million during the three months ended March 31, 2024. There was no RDEC recorded during the three months ended March 31, 2023. We anticipate that we will be eligible to receive this credit in 2024.

Our direct research and development expenses are not currently tracked on a program-by-program basis. We use our personnel and infrastructure resources across multiple research and development programs directed toward identifying and developing product candidates. The majority of our clinical spending in the three month period ended March 31, 2024 and 2023 was on GB2064 and GB0139, respectively.

18


 

We anticipate that our research and development expenses will decrease in the near future compared to prior periods due to our planned reduced clinical efforts and the recent restructuring announced in connection with our exploration of strategic alternatives.

Because of the numerous risks and uncertainties associated with product development and the current stage of development of our product candidates and programs, we cannot reasonably estimate or know the nature, timing and estimated costs necessary to complete the remainder of the development of our product candidates or programs. We are also unable to predict if, when, or to what extent we will obtain approval and generate revenues from the commercialization and sale of our product candidates. The duration, costs and timing of preclinical studies and clinical trials and development of our product candidates will depend on a variety of factors, including:

successful completion of our preclinical studies and our Phase 2 clinical trials for our current fibrosis and oncology product candidates and any clinical trials for future product candidates;
data from our clinical programs that support an acceptable risk-benefit profile of our product candidates in the intended patient populations;
acceptance by the FDA, regulatory authorities in Europe, Medicines and Healthcare products Regulatory Agency, or MHRA, Health Canada or other regulatory agencies of the IND applications, clinical trial applications and/or other regulatory filings for GB2064, GB1211 and any future product candidates;
successful application for and receipt of marketing approvals from applicable regulatory authorities;
obtainment and maintenance of intellectual property protection and regulatory exclusivity for our product candidates;
arrangements with third-party manufacturers for, or establishment of, commercial manufacturing capabilities;
establishment of sales, marketing and distribution capabilities and successful launch of commercial sales of our products, if and when approved, whether alone or in collaboration with others;
acceptance of our products, if and when approved, by patients, the medical community and third-party payors;
effective competition with other therapies; obtainment and maintenance of coverage, adequate pricing and adequate reimbursement from third-party payors, including government payors;
maintenance, enforcement, defense and protection of our rights in our intellectual property portfolio;
avoidance of infringement, misappropriation or other violations with respect to others’ intellectual property or proprietary rights; and
maintenance of a continued acceptable safety profile of our products following receipt of any marketing approvals.

We may never succeed in achieving regulatory approval for any of our product candidates. We may obtain unexpected results from our preclinical studies and clinical trials. We may elect to discontinue, delay or modify clinical trials of some product candidates or focus on others. A change in the outcome of any of these factors could mean a significant change in the costs and timing associated with the development of our current and future preclinical and clinical product candidates. For example, if the FDA or another regulatory authority were to require us to conduct clinical trials beyond those that we currently anticipate will be required for the completion of clinical development, or if we experience significant delays in execution of or enrollment in any of our preclinical studies or clinical trials, we could be required to expend significant additional financial resources and time on the completion of preclinical and clinical development.

Depending on the results of the strategic alternatives being pursued, research and development activities may continue to account for a significant portion of our operating expenses in the future. However, we expect our research and development expenses to decrease in the near future compared to prior periods due to our planned reduced clinical efforts and the recent restructuring announced in connection with our exploration of strategic alternatives. Product candidates in later stages of clinical development generally incur higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. As a result, we expect that if we choose to pursue further development and testing of our product candidates, our research and development expenses will increase as our product candidates advance into later stages of clinical development. However, we do not believe that it is possible at this time to accurately project total program-specific expenses through

19


 

commercialization. There are numerous factors associated with the successful commercialization of any of our product candidates, including future trial design and various regulatory requirements, many of which cannot be determined with accuracy at this time based on our stage of development.

General and Administrative Expenses

Our general and administrative expenses consist primarily of personnel costs, depreciation expense and other expenses for outside professional services, including legal, human resources, audit and accounting services and facility-related fees not otherwise included in research and development expenses. Personnel costs consist of salaries, benefits and stock-based compensation expense, for our personnel in executive, finance and accounting, business operations and other administrative functions. We anticipate that our general and administrative expenses will decrease in the near future compared to prior periods due to the recent restructuring announced in connection with our exploration of strategic alternatives. We do expect to incur significant costs, however, related to our exploration of strategic alternatives, including legal, accounting and advisory expenses and other related charges. These costs cannot be determined with accuracy at this time.

Other Income (Expense), Net

Our other income (expense), net is comprised of:

Interest income: The interest income earned on our cash, cash equivalents and marketable securities is recorded in our statements of operations.
Foreign exchange: The functional currency of our subsidiaries in Denmark and Sweden is the Euro. Transactions denominated in currencies other than the Euro result in exchange gains and losses that are recorded in our consolidated statements of operations.

Results of Operations

Comparison of the Three Months Ended March 31, 2024 and 2023

The following sets forth our results of operations for the three months ended March 31, 2024 and 2023:

 

 

 

Three Months Ended

 

 

 

 

 

 

March 31,

 

 

Change

 

 

 

2024

 

 

2023

 

 

Amount

 

 

Percent

 

 

 

(in thousands)

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

2,463

 

 

$

10,362

 

 

$

(7,899

)

 

 

-76.2

%

General and administrative

 

 

3,278

 

 

 

3,130

 

 

 

148

 

 

 

4.7

%

Total operating expenses

 

$

5,741

 

 

$

13,492

 

 

$

(7,751

)

 

 

-57.4

%

Loss from operations

 

 

(5,741

)

 

 

(13,492

)

 

 

7,751

 

 

 

-57.4

%

Other income, net

 

 

264

 

 

 

498

 

 

 

(234

)

 

 

-47.0

%

Net loss

 

$

(5,477

)

 

$

(12,994

)

 

$

7,517

 

 

 

-57.8

%

Research and development expenses

Research and development expenses were comprised of:

 

 

 

Three Months Ended

 

 

 

 

 

 

 

 

 

March 31,

 

 

Change

 

 

 

2024

 

 

2023

 

 

Amount

 

 

Percent

 

 

 

(in thousands)

 

Preclinical studies and clinical trial-related activities

 

$

428

 

 

$

4,948

 

 

$

(4,520

)

 

 

-91.4

%

Chemistry, manufacturing and control

 

 

185

 

 

 

960

 

 

 

(775

)

 

 

-80.7

%

Personnel

 

 

1,274

 

 

 

2,523

 

 

 

(1,249

)

 

 

-49.5

%

Consultants and other costs

 

 

576

 

 

 

1,931

 

 

 

(1,355

)

 

 

-70.2

%

Total research and development expenses

 

$

2,463

 

 

$

10,362

 

 

$

(7,899

)

 

 

-76.2

%

Research and development expenses were $2.5 million for the three months ended March 31, 2024, compared to $10.4 million for the three months ended March 31, 2023. The decrease of $7.9 million was primarily related to decreased clinical

20


 

trial-related expenses of $4.5 million due to discontinued clinical trial activities and decreased chemistry, manufacturing and control costs of $0.8 million, decreased personnel costs of $1.2 million and decreased consulting related costs and other research and development costs of $1.4 million.

General and administrative expenses

General and administrative expenses were $3.3 million for the three months ended March 31, 2024, compared to $3.1 million for the three months ended March 31, 2023. The increase of $0.2 million was primarily related to increased legal related costs of $0.4 million, offset by decreased personnel costs of $0.2 million.

Other income (expense), net

Other income (expense), net for the three months ended March 31, 2024 was $0.3 million, compared to $0.5 million for the three months ended March 31, 2023. The decrease of $0.2 million was primarily due to decreased interest income, net and decreased foreign exchange transaction gain, net.

Liquidity and Capital Resources

Sources of Liquidity

Our operations to date have been financed primarily through our IPO, the issuance of common stock through our ATM Program, the issuance of convertible preferred shares and convertible notes. Since inception, we have had significant operating losses. On November 2, 2020, we completed our IPO in which we raised $86.3 million in net proceeds. On November 4, 2021, we filed with the SEC, and the SEC declared effective on November 12, 2021, a registration statement on Form S-3, or the Registration Statement, which registers the offering, issuance and sale of up to $200.0 million of our common stock, preferred stock, debt securities, warrants, subscription rights and/or units of any combination thereof. Simultaneous with the filing of the Registration Statement, we entered into the ATM Program. During the three months ended March 31, 2024, we had no sales under the ATM Program. During the three months ended March 31, 2023, we sold an aggregate of 21,082 shares of our common stock under the ATM Program at a weighted average selling price of $1.20 per share.

Our net losses were $5.5 million and $13.0 million for the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, we had an accumulated deficit of $261.6 million and $27.2 million in cash, cash equivalents and marketable securities. Our primary use of cash is to fund operating expenses, which consist primarily of research and development expenditures, and to a lesser extent, general and administrative expenditures. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses.

Cash Flows

The following table summarizes our cash flows for the periods indicated:

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

 

 

(in thousands)

 

Net cash used in operating activities

 

$

(5,936

)

 

$

(9,134

)

Net cash provided by investing activities

 

 

5,650

 

 

 

1,374

 

Net cash provided by financing activities

 

 

 

 

 

23

 

Net decrease in cash and cash equivalents

 

$

(286

)

 

$

(7,737

)

Net Cash Used in Operating Activities

Cash used in operating activities of $5.9 million during the three months ended March 31, 2024 was pr