GALERA THERAPEUTICS, INC. The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our consolidated financial
statements and related notes appearing elsewhere in this Quarterly Report on
Form 10-Q. Some of the information contained in this discussion and analysis or
set forth elsewhere in this Quarterly Report on Form 10-Q, including information
with respect to our plans and strategy for our business, includes
forward-looking statements that involve risks and uncertainties. As a result of
many important factors, including those set forth in the "Risk Factors" section
of our Annual Report on Form 10-K, filed with the
Overview
We are a clinical stage biopharmaceutical company focused on developing and
commercializing a pipeline of novel, proprietary therapeutics that have the
potential to transform radiotherapy in cancer. We leverage our expertise in
superoxide dismutase mimetics to design drugs to reduce normal tissue toxicity
from radiotherapy and to increase the anti-cancer efficacy of radiotherapy. Our
lead product candidate, avasopasem manganese (GC4419, also referred to as
avasopasem), is a potent and highly selective small molecule dismutase mimetic
we are initially developing for the reduction of severe oral mucositis, or SOM.
SOM is a common, debilitating complication of radiotherapy in patients with head
and neck cancer, or HNC. In
Since our inception, we have devoted substantially all of our resources to
organizing and staffing our company, business planning, raising capital,
acquiring and developing product and technology rights, and conducting research
and development. We have incurred recurring losses and negative cash flows from
operations and have funded our operations primarily through the sale and
issuance of equity and proceeds received under the Amended and Restated Purchase
and Sale Agreement, which we refer to as the Royalty Agreement, with
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As a result, we will need to raise substantial additional capital to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we plan to finance our operations through the sale of equity, debt financings or other capital sources, which may include collaborations with other companies or other strategic transactions. There is no assurance that we will be successful in obtaining an adequate level of financing as and when needed to finance our operations on terms acceptable to us or at all. If we are unable to secure adequate additional funding as and when needed, we may have to significantly delay, scale back or discontinue the development and commercialization of one or more product candidates or delay our pursuit of potential in-licenses or acquisitions.
Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.
We expect our existing cash, cash equivalents and short-term investments,
together with the expected payments from Blackstone Life Sciences in the amount
of
Business Update Regarding COVID-19
The current COVID-19 pandemic continues to present a substantial public health
and economic challenge around the world and is affecting our employees,
communities, clinical trial sites and business operations, as well as the
While we are currently continuing our ongoing clinical trials, the COVID-19
pandemic and related precautions have directly or indirectly impacted the
timeline for certain of our clinical trials. We delayed the initiation of the
Phase 2a multi-center trial in
We completed enrollment and continue to expect to report top-line data from our pilot, randomized, placebo-controlled Phase 1b/2a trial of avasopasem in combination with SBRT in patients with LAPC in the second half of 2020 and to commence a Phase 1b/2a trial with GC4711 in combination with SBRT in patients with non-small cell lung cancer, in a manner consistent with recent regulatory guidance to maintain the safety of participants and providers, in the second half of 2020, subject to the continuing impact of the COVID-19 pandemic on our business. Mitigation activities to minimize COVID-19-related operation disruptions are ongoing given the severity and evolving nature of the situation, and we are continuing to monitor the impact of the COVID-19 pandemic on our operations and ongoing clinical development activity, generally.
Our third-party contract manufacturing partners continue to operate at or near normal levels. While we currently do not anticipate any material interruptions in our clinical trial supply or manufacturing scale-up activities, it is possible that the COVID-19 pandemic and response efforts may have an impact in the future on our third-party suppliers and contract manufacturing partners' ability to manufacture our clinical trials supply or progress manufacturing scale-up activities.
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In response to the spread of COVID-19, beginning in
Critical Accounting Policies
Our management's discussion and analysis of our financial condition and results
of operations are based on our consolidated financial statements, which have
been prepared in accordance with
Our critical accounting policies are described under the heading "Management's
Discussion and Analysis of Financial Condition and Results of
Operations-Critical Accounting Policies" in our Annual Report on Form 10-K filed
with the
Components of Results of Operations
Research and Development Expense
Research and development expenses consist primarily of costs incurred in connection with the discovery and development of our product candidates. We expense research and development costs as incurred. These expenses include:
• expenses incurred to conduct the necessary pre-clinical studies and
clinical trials required to obtain regulatory approval;
• personnel expenses, including salaries, benefits and share-based
compensation expense for employees engaged in research and development
functions;
• costs of funding research performed by third parties, including
pursuant to agreements with contract research organizations, or CROs,
as well as investigative sites and consultants that conduct our
pre-clinical studies and clinical trials;
• expenses incurred under agreements with contract manufacturing
organizations, or CMOs, including manufacturing scale-up expenses and
the cost of acquiring and manufacturing pre-clinical study and clinical
trial materials;
• fees paid to consultants who assist with research and development activities;
• expenses related to regulatory activities, including filing fees paid
to regulatory agencies; and
• allocated expenses for facility costs, including rent, utilities,
depreciation and maintenance.
We track our external research and development expenses on a program-by-program basis, such as fees paid to CROs, CMOs and research laboratories in connection with our pre-clinical development, process development, manufacturing and clinical development activities. However, we do not track our internal research and development expenses on a program-by-program basis as they primarily relate to compensation, early research and other costs which are deployed across multiple projects under development.
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The following table summarizes our research and development expenses by program
for the three and six months ended
Three months ended Six months ended
June 30, June 30,
2020 2019 2020 2019
Avasopasem manganese (GC4419) $ 8,572 $ 6,010 $ 17,909 $ 11,202
GC4711 1,479 1,466 2,969 2,796
Other research and development expense 1,244 681 2,282 1,440
Personnel related and share-based
compensation expense 2,544 1,358 4,932 2,579
$ 13,839 $ 9,515 $ 28,092 $ 18,017 Research and development activities are central to our business model. Product candidates in later stages of clinical development, such as avasopasem, generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect our research and development expenses to increase significantly over the next several years as we increase personnel costs, including stock-based compensation, conduct our later-stage clinical trials for avasopasem and GC4711 and conduct other clinical trials for current and future product candidates and prepare regulatory filings for our product candidates.
The successful development of our product candidates is highly uncertain. At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the remainder of the development of our product candidates, or when, if ever, material net cash inflows may commence from our product candidates. This uncertainty is due to the numerous risks and uncertainties associated with the duration and cost of clinical trials, which vary significantly over the life of a project as a result of many factors, including:
• delays in regulators or institutional review boards authorizing us or
our investigators to commence our clinical trials, or in our ability to
negotiate agreements with clinical trial sites or CROs;
• our ability to secure adequate supply of our product candidates for our
trials;
• the number of clinical sites included in the trials;
• the ability and the length of time required to enroll suitable patients;
• the number of patients that ultimately participate in the trials;
• the number of doses patients receive;
• any side effects associated with our product candidates;
• the duration of patient follow-up;
• the results of our clinical trials;
• significant and changing government regulations;
• the impact of unforeseen events, such as the COVID-19 pandemic, on our
preclinical studies, clinical trials and manufacturing scale-up; and
• launching commercial sales of our product candidates, if and when
approved, whether alone or in collaboration with others.
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Our expenditures are subject to additional uncertainties, including the terms and timing of regulatory approvals. We may never succeed in achieving regulatory approval for our product candidates. We may obtain unexpected results from our clinical trials. We may elect to discontinue, delay or modify clinical trials of our product candidates. A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if the FDA or other regulatory authorities were to require us to conduct clinical trials beyond those that we currently anticipate, or if we experience significant delays in enrollment in any of our clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development. Product commercialization will take several years, and we expect to spend a significant amount in development costs.
General and Administrative Expense
General and administrative expense consists primarily of personnel expenses, including salaries, benefits and share-based compensation expense for employees in executive, finance, accounting, information technology, business development and human resource functions. General and administrative expense also includes corporate facility costs, including rent, utilities, depreciation and maintenance, not otherwise included in research and development expense, as well as legal fees related to intellectual property and corporate matters and fees for accounting and consulting services.
We expect that our general and administrative expense will increase in the
future to support our continued research and development activities, potential
commercialization efforts and to enable us to operate as a public company. These
increases will likely include increased costs related to the hiring of
additional personnel, fees to outside consultants, lawyers and accountants and
expenses related to services associated with maintaining compliance with the
requirements of Nasdaq and the
Interest Income
Interest income consists of amounts earned on our cash, cash equivalents and
short-term investments held with large institutional banks,
Interest Expense
Interest expense consists of non-cash interest on proceeds received under the
Royalty Agreement with Blackstone Life Sciences and non-cash interest expense
associated with the amortization of the debt discount recorded for the
Foreign Currency Gains (Losses)
Foreign currency gains (losses) consist primarily of exchange rate fluctuations
on transactions denominated in a currency other than the
Net Operating Loss and Research and Development Tax Credit Carryforwards
As of
Utilization of the federal and state net operating losses and credits may be subject to a substantial annual limitation. The annual limitation may result in the expiration of our net operating losses and credits before we can use them. We have recorded a valuation allowance on substantially all of our deferred tax assets, including our deferred tax assets related to our net operating loss and research and development tax credit carryforwards.
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Results of Operations
Comparison of the Three and Six Months Ended
The following table sets forth our results of operations for the three and six
months ended
Three Months Ended Six Months Ended
June 30, June 30,
2020 2019 2020 2019
(unaudited) (unaudited)
Operating expenses:
Research and development $ 13,839 $ 9,515 $ 28,092 $ 18,017
General and administrative 3,874 1,756 7,439 3,650
Loss from operations (17,713 ) (11,271 ) (35,531 ) (21,667 )
Other income (expense):
Interest income 352 513 820 970
Interest expense (1,295 ) (736 ) (2,390 ) (1,175 )
Foreign currency gain (loss) (1 ) (64 ) 27 (35 )
Net loss $ (18,657 ) $ (11,558 ) $ (37,074 ) $ (21,907 ) Research and Development Expense
Research and development expense increased by
Research and development expense increased by
General and Administrative Expense
General and administrative expense increased by
General and administrative expense increased by
Interest Income
Interest income decreased from
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Interest Expense
We recognized
Liquidity and Capital Resources
Through
Cash Flows
The following table shows a summary of our cash flows for the periods indicated
(in thousands):
Six months ended
June 30,
2020 2019
Net cash used in operating activities $ (27,803 ) $ (18,484 )
Net cash provided by investing activities 5,279 1,195
Net cash provided by financing activities 20,050 18,673
Net increase (decrease) in cash and cash equivalents $ (2,474 ) $ 1,384
Operating Activities
During the six months ended
During the six months ended
Investing Activities
During the six months ended
During the six months ended
Financing Activities
During the six months ended
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During the six months ended
Funding Requirements
We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the research and development of, continue or initiate clinical trials of, and seek marketing approval for, our product candidates. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. Furthermore, we expect to incur additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts.
We anticipate that our expenses will increase substantially as we:
• complete clinical development of avasopasem for the reduction of SOM in
patients with locally advanced HNC, including our ongoing Phase 3
clinical trial;
• prepare and file for regulatory approval of avasopasem for the
reduction of SOM in patients with HNC;
• advance our ongoing Phase 2a clinical trial of avasopasem for the
reduction in the incidence of radiotherapy-induced esophagitis;
• initiate and advance our planned Phase 1b/2a clinical trial for GC4711
to increase the anti-cancer efficacy of SBRT, in patients with NSCLC;
• seek to discover and develop additional clinical and pre-clinical
product candidates and/or additional indications for our existing
product candidates;
• scale up our clinical and regulatory capabilities;
• adapt our regulatory compliance efforts to incorporate requirements
applicable to marketed products;
• establish a sales, marketing and distribution infrastructure and scale
up external manufacturing capabilities to commercialize any product
candidates for which we may obtain regulatory approval;
• maintain, expand and protect our intellectual property portfolio;
• hire additional internal or external clinical, manufacturing and
scientific personnel or consultants;
• add operational, financial and management information systems and
personnel, including personnel to support our product development
efforts; and
• incur additional legal, accounting, insurance and other expenses in
operating as a public company.
We expect our existing cash, cash equivalents and short-term investments,
together with the expected payments from Blackstone Life Sciences in the amount
of
Because of the numerous risks and uncertainties associated with research, development and commercialization of product candidates, we are unable to estimate the exact amount of our working capital requirements. Our future funding requirements will depend on, and could increase significantly as a result of, many factors, including:
• the direct and indirect impact of COVID-19 on our business and operations;
• the scope, progress, results and costs of pre-clinical studies and
clinical trials;
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• the scope, prioritization and number of our research and development
programs;
• the costs, timing and outcome of regulatory review of our product candidates;
• our ability to establish and maintain collaborations on favorable
terms, if at all;
• the extent to which we are obligated to reimburse, or entitled to
reimbursement of, clinical trial costs under collaboration agreements,
if any;
• the costs of preparing, filing and prosecuting patent applications,
maintaining and enforcing our intellectual property rights and
defending intellectual property-related claims;
• the extent to which we acquire or in-license other product candidates
and technologies;
• the costs of securing manufacturing arrangements for commercial
production; and
• the costs of establishing or contracting for sales and marketing
capabilities if we obtain regulatory approvals to market our product
candidates.
Identifying potential product candidates and conducting pre-clinical studies and clinical trials is a time-consuming, expensive and uncertain process that takes many years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of product candidates that we do not expect to be commercially available for the next couple of years, if at all. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all. For example, the trading prices for our and other biopharmaceutical companies' stock have been highly volatile as a result of the COVID-19 pandemic. As a result, we may face difficulties raising capital through sales of our common stock and any such sales may be on unfavorable terms. See "Risk Factors-Other Risks Related to Our Business-The COVID-19 pandemic caused by the novel strain of coronavirus has adversely impacted and could continue to adversely impact, our business, including our preclinical studies and clinical trials, results of operations and financial condition" in Part II, Item 1A of this Quarterly Report on Form 10-Q.
Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our existing stockholders' rights. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.
If we raise funds through additional collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Royalty Agreement with Blackstone Life Sciences (Formerly Known as
In
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On
Pursuant to the amended Royalty Agreement, in connection with the payment of
each tranche of the Royalty Purchase Price, we have agreed to sell, convey,
transfer and assign to
The amended Royalty Agreement will remain in effect until the date on which the
aggregate amount of the Product Payments paid to
On
Off-Balance Sheet Arrangements
We do not have any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. We do not engage in off-balance sheet financing arrangements. In addition, we do not engage in trading activities involving non-exchange traded contracts. We therefore believe that we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in these relationships.
Effect of Inflation
Inflation did not have a significant impact on our net loss for the three and
six months ended
Recent Accounting Pronouncements
See Note 2 to our interim consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements applicable to our consolidated financial statements.
JOBS Act Transition Period
In
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Subject to certain conditions, as an emerging growth company we may rely on
certain exemptions and reduced reporting requirements, including, without
limitation, (1) not being required to provide an auditor's attestation report on
our system of internal controls over financial reporting pursuant to
Section 404(b) of the Sarbanes-Oxley Act and (2) not being required to comply
with any requirement that may be adopted by the
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