GALECTIN THERAPEUTICS INC. In addition to historical information, the following Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements as defined under Section 21E of the Securities Exchange Act of 1934, as amended, and is subject to the safe harbor created therein for forward-looking statements. Such statements include, but are not limited to, statements concerning our anticipated operating results, research and development, clinical trials, regulatory proceedings, and financial resources, and can be identified by use of words such as, for example, "anticipate," "estimate," "expect," "project," "intend," "plan," "believe" and "would," "should," "could" or "may." All statements, other than statements of historical facts, included herein that address activities, events, or developments that the Company expects or anticipates will or may occur in the future, are forward-looking statements, including statements regarding: plans and expectations regarding clinical trials; plans and expectations regarding regulatory approvals; our strategy and expectations for clinical development and commercialization of our products; potential strategic partnerships; expectations regarding the effectiveness of our products; plans for research and development and related costs; statements about accounting assumptions and estimates; expectations regarding liquidity and the sufficiency of cash to fund currently planned operations through at leastDecember 31, 2024 ; our commitments and contingencies; and our market risk exposure. Forward-looking statements are based on current expectations, estimates and projections about the industry and markets in whichGalectin Therapeutics operates, and management's beliefs and assumptions. These statements are not guarantees of future performance and involve certain known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Such risks and uncertainties are related to and include, without limitation,
• our early stage of development,
• we have incurred significant operating losses since our inception and cannot
assure you that we will generate revenue or profit,
• our dependence on additional outside capital,
• we may be unable to enter into strategic partnerships for the development,
commercialization, manufacturing and distribution of our proposed product
candidates,
• uncertainties related to any litigation, including shareholder class actions
and derivative lawsuits filed,
• uncertainties related to our technology and clinical trials, including expected
dates of availability of clinical data,
• we may be unable to demonstrate the efficacy and safety of our developmental
product candidates in human trials,
• we may be unable to improve upon, protect and/or enforce our intellectual
property,
• we are subject to extensive and costly regulation by the
Administration (FDA) and by foreign regulatory authorities, which must approve
our product candidates in development and could restrict the sales and marketing and pricing of such products,
• competition and stock price volatility in the biotechnology industry,
• limited trading volume for our stock, concentration of ownership of our stock,
and other risks detailed herein and from time to time in our
• the impact resulting from the outbreak of COVID-19, which has delayed and may
continue to delay our clinical trial and development efforts, as well as the
impact that COVID-19 has on the volatility of the capital market and our ability to access the capital market and,
• other risks detailed herein and from time to time in our
our Annual Report on Form 10-K filed with the
The following discussion should be read in conjunction with the accompanying consolidated financial statements and notes thereto ofGalectin Therapeutics appearing elsewhere herein. 17
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Table of Contents Overview We are a clinical stage biopharmaceutical company engaged in drug research and development to create new therapies for fibrotic disease, cancer and selected other diseases. Our drug candidates are based on our method of targeting galectin proteins, which are key mediators of biologic and pathologic functions. We use naturally occurring, readily-available plant products as starting material in manufacturing processes to create proprietary, patented complex carbohydrates with specific molecular weights and other pharmaceutical properties. These complex carbohydrate molecules are appropriately formulated into acceptable pharmaceutical formulations. Using these unique carbohydrate-based candidate compounds that largely bind and inhibit galectin proteins, particularly galectin-3, we are undertaking the focused pursuit of therapies for indications where galectin proteins have a demonstrated role in the pathogenesis of a given disease. We focus on diseases with serious, life-threatening consequences and those where current treatment options are limited specifically in NASH (non-alcoholic steatohepatitis) with cirrhosis and certain cancer indications. Our strategy is to establish and implement clinical development programs that add value to our business in the shortest period of time possible and to seek strategic partners when one of our programs becomes advanced and requires significant additional resources. Our lead galectin-3 inhibitor is belapectin (GR-MD -02), which has been demonstrated in preclinical models to reverse liver fibrosis and cirrhosis and in clinical studies to decrease portal hypertension and prevent its complication: the development of esophageal varices. Belapectin has the potential to treat many diseases due to galectin-3's involvement in multiple key biological pathways such as fibrosis, immune cell function and immunity, cell differentiation, cell growth, and apoptosis (cell death). The importance of galectin-3 in the fibrotic process is supported by experimental evidence. Animals with the galectin-3 gene "knocked-out" can no longer develop fibrosis in response to experimental stimuli compared to animals with an intact galectin-3 gene. We are using our galectin-3 inhibitor to treat advanced liver fibrosis and liver cirrhosis in NASH patients. We have completed two Phase 1 clinical studies, a Phase 2 clinical study in NASH patients with advanced fibrosis (NASH-FX) and a second Phase 2b clinical trial in NASH patients with compensated cirrhosis and portal hypertension (NASH-CX). We are now engaged in a large, global Phase 2b/3 clinical trial. Our study protocol was filed with the FDA onApril 30, 2020 , for a seamless adaptively-designed Phase 2b/3 clinical study, the NAVIGATE trial (formerly called NASH-RX), evaluating the safety and efficacy of our galectin-3 inhibitor, belapectin, for the prevention of esophageal varices in patients with non-alcoholic steatohepatitis (NASH) cirrhosis (Further details are available at www.clinicaltrials.gov under study NCT04365868); this study began enrolling patients in Q2-2020. InSeptember 2020 , the Company received a letter from the FDA providing comments, asking questions and providing guidance on various aspects of the ongoing NAVIGATE trial. These comments were addressed, and the study proceeded accordingly. Additionally, a study protocol entitled "A Single-dose, Open-label, Pharmacokinetic Study of Belapectin (GR-MD -02) in Subjects With Normal Hepatic Function and Subjects With Varying Degrees of Hepatic Impairment" has been filed with the FDA to examine the effects of the drug in subjects with normal hepatic function and subjects with varying degrees of hepatic impairment (study details are listed under study NCT04332432 on www.clinicaltrials.gov); this study became fully enrolled inFebruary 2022 . We endeavor to leverage our scientific and product development expertise as well as established relationships with outside sources to achieve cost-effective and efficient drug development. These outside sources, amongst others, provide us with expertise in preclinical models, pharmaceutical development, toxicology, clinical trial operations, pharmaceutical manufacturing, including physical and chemical drug characterization, and commercial development. We also have established through our majority-owned joint venture subsidiary,Galectin Sciences LLC , a discovery program developing small molecules that inhibit galectin-3 and may afford alternative drug delivery (e.g., oral) and as a result expand the potential uses of galectin-3 inhibitor beyond belapectin. Three chemical series of composition of matter patents have been filed. We are also pursuing a development pathway to clinical enhancement and commercialization for our lead compounds in immuno-oncology following our previous successful collaboration withProvidence Portland Cancer Center . We are now planning a phase 2 trial in advanced or metastatic head and neck cancer using belapectin in combination with a checkpoint (PD-1) inhibitor. All of our proposed products are presently in development, including pre-clinical and clinical trials.
Our Drug Development Programs
Galectins are a class of proteins that are made by many cells in the body, but
predominantly in cells of the immune system. As a group, these proteins are able
to bind to sugar molecules that are attached to other proteins, called
glycoproteins that are responsible for various functions within the body, most
notably inflammation and fibrosis. Galectins, in particular galectin-3,act as a
molecular glue, bringing together molecules that have sugars on them.
Galectin-3, is known to be markedly increased in a number of important diseases
including inflammatory diseases leading to organs scarring (e.g. liver, lung,
kidney, and heart) and cancers. The increase in galectin-3 , by creating the
so-called galectin-3 fibrosome, promotes the progression of multiple diseases.
Published data substantiating the importance of galectin-3 in the fibrotic
process arises from gene knockout experiments in animal studies. For instance,
mice genetically altered to eliminate the galectin-3 gene, and thus unable to
produce galectin-3, do not develop liver fibrosis in response to toxic insult to
the liver.
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We have one new proprietary chemical entity (NCE) in development, belapectin, which has shown promise in preclinical and clinical studies for the treatment of liver fibrosis, severe skin disease, and cancer (melanoma and head and neck squamous cell carcinoma). Currently we are focusing on development of belapectin for the treatment of NASH cirrhosis and Head and neck cancer. Belapectin is a proprietary, patented compound derived from natural, plant-based, starting materials, which, following chemical processing, exhibits the properties of binding to and inhibiting galectin-3. Indication Drug Status
Fibrosis
NASH with Advanced Fibrosis: belapectin IND submittedJanuary 2013 . Results from the NASH-CX trial and Phase 1 clinical trial were reported in NASH-FX trial 2014, with final results reported inJanuary 2015 . The Phase 2 NASH FX trial was designed for patients with advanced fibrosis but not cirrhosis. Its principal purpose was to evaluate various imaging modalities. The NASH FX trial top line data was reported inSeptember 2016 The Phase 2 NASH CX trial, was designed for patients with well compensated cirrhosis. The NASH CX trial top line data was reported inDecember 2017 and was published in Gastroenterology in 2020. NASH NAVIGATE Based on FDA feedback, the NAVIGATE trial is an adaptive Phase 2b/3 trial for the prevention of esophageal varices in NASH patients with compensated cirrhosis. A Phase 2b interim efficacy analysis will be incorporated to confirm previous Phase 2 data, select an optimal dose and reaffirm the risk/benefit of belapectin. The Phase 3 end of study analysis will evaluate the development of esophageal varices as the primary outcome of efficacy and a composite clinical endpoint including progression to varices requiring treatment as a key secondary outcome of efficacy. See www.clinicaltrials.gov NCT04365868. The first patient was randomized in the third quarter of 2020. A hepatic impairment is being conducted in subjects with normal hepatic function and subjects with varying degrees of hepatic impairment (CF: www.clinicaltrials.gov NCT04332432) and began enrolling patients in the second quarter of 2020. Cancer Immunotherapy Melanoma, Head, Neck Investigator IND study in process. A Phase 1B Squamous Cell belapectin study began in Q-1 2016. Early data was reported inFebruary 2017 and additional data Carcinoma (HNSCC) were reported inSeptember 2018 . Data from an extension trial was reported inJuly 2021 for additional melanoma and HNSCC patients which provided a rational basis for additional trials which the Company is exploring. Liver cirrhosis. Belapectin is our lead product candidate for treatment of compensated NASH cirrhosis in patients with portal hypertension. Our preclinical data show that belapectin has a significant therapeutic effect on liver fibrosis as shown in several relevant animal models. In addition, in NASH animal models, belapectin has been shown to reduce liver fat, inflammation, portal pressure, and ballooning degeneration (death of liver cells). Therefore, we chose belapectin as the lead candidate in a development program targeted initially at fibrotic liver disease associated with non-alcoholic steatohepatitis (NASH). InJanuary 2013 , an Investigational New Drug ("IND") was submitted to the FDA with the goal of initiating a Phase 1 study in patients with NASH and advanced liver fibrosis to evaluate the safety of belapectin and pharmacodynamics biomarkers of disease. OnMarch 1, 2013 , the FDA indicated we could proceed with a US Phase 1 clinical trial for belapectin with a development program aimed at obtaining support for a proposed indication of belapectin for treatment of NASH with advanced fibrosis. The Phase 1 trial was completed and demonstrated that belapectin up to 8 mg/kgLean Body Mass (LBM), i.v. was safe and well tolerated. 19
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Additionally, an open label drug-drug phase 1 interaction study was completed in healthy volunteers during the second quarter of 2015 with belapectin and it showed that with 8 mg/kg LBM dose of belapectin and 2 mg/kg LBM dose of midazolam there was no drug-drug interaction, and no serious adverse events or drug-related adverse events were observed. The secondary objective was to assess the safety and tolerability of belapectin when administered concomitantly with midazolam. Our Phase 2 program in fibrotic disease consisted of two separate human clinical trials. The main clinical trial was the Phase 2b NASH-CX study for one year for patients with NASH with compensated cirrhosis and portal hypertension, which began enrolling patients inJune 2015 . This study was a randomized, placebo-controlled, double-blind, parallel-group Phase 2b trial to evaluate the safety and efficacy of belapectin for treatment of liver fibrosis and resultant portal hypertension in NASH patients with compensated cirrhosis. A smaller, exploratory NASH-FX trial was conducted to explore potential use of various non-invasive imaging techniques in NASH patients with advanced fibrosis but not cirrhosis. NASH-FX Trial: The NASH-FX trial was a Phase 2a pilot trial for patients with NASH and advanced fibrosis that explored use of three non-invasive imaging technologies. It was a short, single site, four-month trial in 30 NASH patients with advanced fibrosis (F3) randomized 1:1 to either 9 bi-weekly doses of 8 mg/kg LBM of belapectin or placebo. The trial did not meet its primary endpoint as measured using multi-parametric magnetic resonance imaging (LiverMultiScan(R),Perspectum Diagnostics ). The trial also did not meet secondary endpoints that measure liver stiffness as a surrogate for fibrosis using, magnetic resonance-elastography and FibroScan® score. With a four-month treatment period and a small number of patients per arm the study was not powered to demonstrate efficacy results in established advanced liver fibrosis. In the trial however, belapectin was found to be safe and well tolerated with no serious adverse events and showing evidence of a pharmacodynamic effect. These results provided support for further development in NASH. NASH-CX Trial: The NASH-CX trial was a larger multi-center clinical trial that explored the use of belapectin for the treatment of patients with well-compensated NASH cirrhosis and portal hypertension. Enrollment was completed inSeptember 2016 , and a total of 162 patients at 36 sites inthe United States were randomized to receive either 2 mg/kg LBM of belapectin, 8 mg/kg LBM of belapectin or placebo. Approximately 50% of patients at baseline had esophageal varices (a complication of portal hypertension). The primary endpoint was a reduction in hepatic venous pressure gradient (HVPG), a hemodynamic measure that estimates portal hypertension. Patients received an infusion of belapectin or placebo every other week for one year and were evaluated to determine the change in HVPG as compared with placebo. Secondary or exploratory endpoints included evaluation of fibrosis on liver biopsy, measurement of liver stiffness (FibroScan) and assessment of liver metabolism (13C-methacetin breath test). Top line data readout was reported inDecember 2017 . The study demonstrated a favorable safety profile and clinically meaningful efficacy results in patients without esophageal varices at baseline as demonstrated by a decrease in portal pressure associated with the prevention of development of varices when compared to placebo. In the total patient population, the primary endpoint HVPG showed a trend toward benefit with belapectin treatment, but the difference from placebo was not statistically significant. The mean change in HVPG of placebo from baseline to week 54 was 0.3 mm Hg. The mean change in HVPG from baseline was -0.37 and -0.42 for the 2 mg/kg LBM dose and 8 mg/kg LBM dose of belapectin, respectively. In those NASH cirrhosis patients with portal hypertension who have not yet developed esophageal varices at baseline (about 50% of the total population), there was a statistically significant effect of the 2 mg/kg LBM dose of belapectin on the absolute change in HVPG (-1.08 mm Hg, p<0.01). The effect of the 8 mg/Kg LBM dose of belapectin on absolute or percent change in HVPG from baseline to week 54 was not significant. Also because of the clinical relevance of this population, a responder analysis was performed on those patients without esophageal varices at baseline. Analysis was performed looking at two groups: those with an equal to or greater than 2 mm Hg decrease in HVPG from baseline or those with an equal to or greater than 2 mm Hg and a greater than or equal to 20% decrease in HVPG from baseline. In both cases, the change observed in the belapectin 2 mg/kg LBM group was statistically significant (p<0.01) while that of the 8 mg/kg LBM group was not. Over the 54-week treatment period, in patients without varices at baseline there were also a statistically significantly fewer new varices that developed in the belapectin treatment groups (0% and 4% in the 2 mg/kg LBM and the 8 mg/kg LBM, respectively) vs placebo (18%). This meant that the decrease seen in portal pressure was associated with a decreased incidence of esophageal varices. The results were noticeable in the belapectin 2 mg/Kg LBM group as statistical significance against placebo was achieved for both parameters. As esophageal varices can lead to hemorrhagic complication, which can be fatal, and are a severe complication of liver cirrhosis, we believe the prevention of esophageal varices may represent a clinically relevant measure of clinical efficacy in patients with NASH cirrhosis. 20
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The major conclusions from the NASH-CX trial results were that: (i) belapectin had a statistically significant and clinically meaningful effect in improving HVPG vs placebo in patients with NASH cirrhosis who did not have esophageal varices at baseline, (ii) Belapectin in the total patient population was associated with a statistically significant improvement in hepatocyte ballooning (ie cell death), (iii) There was a statistically significant reduction (p=0.02) in the development of new esophageal varices in drug-treated patients compared to placebo. We believe that the prevention of esophageal varices is a clinically relevant endpoint related to patient outcomes, (iv) While there was a drug effect in both the 2 mg/kg LBM and 8 mg/kg LBM groups on the development of varices and liver biopsy there was a consistently greater and statistically significant effect of the 2 mg/kg LBM dose of belapectin, (v) belapectin appears to be safe and well tolerated in this one year clinical trial, a feature that is of prime importance for a cirrhotic population and (vi) This is the first large, randomized clinical trial to demonstrate a clinically meaningful improvement in portal hypertension in patients with compensated NASH cirrhosis who have not yet developed esophageal varices.
Further information and details on the NASH-CX results is available in public
presentations posted to our website and filed with the
NASH NAVIGATE Trial: Building on the experience of the NASH-CX trial, the
NAVIGATE Trial is a seamless adaptively-designed Phase 2b/3 clinical study
evaluating the safety and efficacy of our galectin-3 inhibitor, belapectin, for
the prevention of esophageal varices in patient with non-alcoholic
steatohepatitis (NASH) cirrhosis. The major features of this innovative Phase
2b/3 study design are: i) In patients with NASH cirrhosis and clinical signs of
portal hypertension but without esophageal varices at baseline, this trial will
assess the effect of belapectin on the incidence of new varices (the primary
endpoint) - as well as assessing the effect of belapectin on the incidence of
additional clinically significant cirrhosis-related outcomes (a key secondary
efficacy endpoint), (ii) The study targets NASH patients with a clearly
identified unmet medical need: patients with compensated cirrhosis who have
clinical signs of portal hypertension and, thus, are at risk of developing
esophageal varices, a potentially life-threatening complication of cirrhosis
(bleeding varices are a cause of death in about one-third of cirrhotic
patients). There is currently no approved treatment for preventing varices in
these patients. In addition, the development of esophageal varices reflects the
progression of hepatic cirrhosis and thus portends the development of other
cirrhosis complications such as ascites, hepatic encephalopathy, and liver
failure, and (iii) During the first 18 months, two belapectin dose levels (2
mg/kg LBM and 4 mg/kg LBM) will be compared to placebo (phase 2b). Then, at the
interim analysis (IA), the best belapectin dose will be selected, based on
efficacy and safety, for continued evaluation (Phase 3). The belapectin dose
selected for the phase 2b/3 were based on the analysis of the NASH-CX trial.
Prior belapectin clinical studies have also indicated the good tolerance and
safety profile of belapectin with doses of up to 8 mg/kg LBM for up to 52 weeks,
an important feature to inform the future risk benefit analysis in patients with
NASH cirrhosis.
The study design provides for a pre-specified interim analysis (IA). The IA of
efficacy and safety data will be conducted after all planned subjects in Phase
2b component have completed at least 78 weeks (18 months) of treatment and a
second esophago-gastro-duodeno endoscopic assessment. The purpose of the IA is
to allow potential seamless adaptive modifications of the study, including: (1)
the selection of the optimal dose of belapectin for Phase 3, (2) the
re-estimation of the study sample size for Phase 3 portion of the trial, (3) the
re-evaluation of the randomization ratio for the Phase 3 portion of the trial,
(4) the refinement of the inclusion and exclusion criteria for the Phase 3
portion of the trial, including the cirrhosis status, (5) and/or termination of
the study for overwhelming efficacy or for futility.
The trial design also includes a blinded sample size re-estimation ("SSR")
during the Phase 2b, prior to the IA, to allow for potential sample size
readjustment. The SSR will be conducted when 50% of the patients have completed
18 months of therapy. This will allow us to confirm the underlying assumption
regarding the rate of varices development, currently estimated from our prior
Phase 2b trial (NASH-CX). The study design also minimizes invasive testing
requirements, such as the measurement of HVPG or repeated liver biopsies, which
we believe are particularly risky in patients with portal hypertension and will
facilitate enrollment and retention of patients. It also provides for a seamless
transition of patients from the Phase 2b component into the phase 3 stage,
including the potential addition of new patients. The trial design preserves the
surrogate end-point concepts (development of new varices versus variceal
hemorrhage) previously discussed with FDA.
We believe that these adaptations taken together are innovative and optimize
conduct of the NAVIGATE trial with a clinically relevant primary outcome giving
belapectin the best opportunity to show a positive therapeutic effect to address
an unmet medical need. As a testimony of this innovation, the NAVIGATE trial
design was presented to the hepatology community and featured during the last
meeting of the American Association for the Study of Liver Diseases , in November
2021 . If the IA results of the NAVIGATE trial are compelling, there could be the
potential for accelerated FDA approval and/or partnership opportunity with a
pharmaceutical company.
In the Phase 3 component of this trial, as proposed in the protocol, the primary
endpoint remain the development of varices. Secondary endpoints include a
composite clinical outcomes endpoint, including varices requiring treatment
(development of large varices or varices with a red wale), decompensating
events, all-cause mortality, MELD score increase, liver transplant. Also, NASH
non-invasive biomarkers will be evaluated. To target a population at risk of
developing esophageal varices, patient selection will be based on clinical signs
of portal hypertension, including, but not limited to, a low platelet count, an
increased spleen size and/or evidence of abdominal collaterals circulation.
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The focus and goal of the therapeutic program is to stop the progression of and/or reverse portal hypertension and thereby prevent the development of varices, potentially one of the most immediately life-threatening complication of cirrhosis. Based on the results of the NASH-CX trial and subject to confirmation in later stage clinical trials, we believe that this goal is achievable in a significant portion of the NASH cirrhosis patient population i.e. those NASH cirrhosis patients with clinical signs of portal hypertension for whom, currently no specific, liver targeted, treatment are available. The COVID-19 pandemic has delayed and may continue to delay our regulatory and ethics approvals, recruitment of sites, and enrollment of patients for our Phase 2b/3 NAVIGATE trial despite a recent uptick in screening activities. Many investigational centers inthe United States andEurope have experienced shut-downs, and while some have loosened or removed restrictions, there may be a risk of experiencing new shut-downs and restrictions. In some countries, shutdown orders have also affected the regulatory process to authorize study starts. Governments and medical facilities have focused their resources for battling the COVID-19 pandemic. For several reasons, the pandemic makes enrolling patients for the NAVIGATE trial more challenging, including because patients eligible for the NAVIGATE trial have liver cirrhosis and, as such, are at a greater health risk of complications from COVID-19. It is also important to consider the safety of our candidate participants first, as cirrhotic patients with portal hypertension are immune compromised. We believe that as we continue to emerge from the COVID-19 pandemic, site recruitment and patient enrollment will accelerate and we have experienced increases in enrollment, particularly in theU.S. However, we have not seen the enrollment inEurope that we anticipated, and conditions there remain uncertain. Consequently, we have activated multiple sites inLatin America . At this time, enrollment completion of the Phase 2b portion of the trial is expected in the fourth quarter of 2022.
We have identified and activated approximately 140 clinical trial sites in 15 countries for the NAVIGATE trial.
Further details on the NAVIGATE trial can be found on www.clinicaltrials.gov under study NCT04365868 and on our NAVIGATE website (navigatenash.com).
The Company also has commenced a Hepatic Impairment Study, which will run in parallel with the phase 2b/3 trial as part of the development program. The Hepatic Impairment Study is being conducted at three sites and involves approximately 40 patients (divided amongst normal healthy volunteers, and patients with hepatic impairment categorized as Child-Turcotte-Pugh (CTP) classes A (mild), B (moderate), and C (severe). Each subject will receive a single infusion of belapectin (4 mg/kg LBM) and their serum belapectin levels will be monitored for up to approximately two weeks to define the effects of various stages of cirrhosis on serum belapectin levels. The tolerance and safety of belapectin will be evaluated. Enrollment in this study was completed inFebruary 2022 , and the results will be announced when available. Based on the results from this hepatic impairment study, the Company may consider including patients with more advanced cirrhosis in the Phase 3 portion of its NAVIGATE trial. Until dosing and safety profile is further informed in CTP Class B and/or Class C patients, the NAVIGATE trial will enroll only CTP Class A patients. Further details on this hepatic impairment study can be found on www.clinicaltrials.gov study NCT04332432. Cancer Immunotherapy. We believe there is potential for galectin inhibition to play a key role in the innovative area of cancer immunotherapy. For example, there have been several recent approvals of drugs that enhance a patient's immune system to fight cancer. It is our goal to use ourgalectin-3 inhibitor to further enhance the immune system function to help the body to fight cancer in a way that complements other approaches to this type of therapy. This hypothesis is supported by the fact that galectin-3 is expressed at high levels in multiple types of tumors and their micro-environment, where it fosters the malignant nature of the tumors, and protects the tumors from immune attack by the patient's own defense mechanism. Our drug candidates provide a promising new therapeutic approach to enhance the activity of the immune system against cancer cells. Preclinical studies have indicated that belapectin enhances the immune response to cancer cells, increased tumor shrinkage and enhanced survival in immune competent mice with prostate, breast, melanoma and sarcoma cancers when combined with one of the immune checkpoint inhibitors, anti-CTLA-4 or anti-PD-1, or with the immune cell activator anti-OX40. These preclinical data led to the filing of two Investigator-sponsored INDs and the initiation of Phase 1B studies of belapectin in combination with Yervoy® (ipilimumab) in metastatic melanoma and another phase 1B study in combination with KEYTRUDA (pembrolizumab) in patients with metastatic melanoma and head and neck squamous cell carcinoma. These studies were conducted under the sponsorship ofProvidence Portland Medical Center's Earle A. Chiles Research Institute (EACRI). The phase IB study in combination with Yervoy was rapidly discontinued after the first patients were recruited because of the availability on new treatment in the selected population. Promising results were reported in the Phase 1b trial combining belapectin with pembrolizumab (KEYTRUDA®). When aggregated cohorts are combined, in advanced melanoma, a 50% objective response rate with belapectin in combination with KEYTRUDA, was documented. In addition, a 33% response rate was documented in patients with head and neck cancer The results have been published in 2021 in a highly rated peer reviewed journal (Curti et al.Journal of Immunotherapy of cancer 2021;9:e002371). There was also a suggestion that the combination of belapectin with pembrolizumab could decrease the auto-immune side-effect induced by pembrolizumab. These side-effects, which are directly linked to the mechanism of action of pembrolizumab, can be poorly tolerated and even severe enough to lead to treatment interruption, even if the effect on the cancer was encouraging. This is of course, a very frustrating situation for patients who have to discontinue an active treatment but have no other options available to them. We believe these data, taken together with the observed favorable safety and tolerability of the combination, provide a rationale to move the belapectin program in oncology forward. 22
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Table of Contents Results of Operations
Three and Six Months Ended
Research and Development Expense.
Three Months Ended Six Months Ended 2022 as Compared to 2021
June 30, June 30, Three Months Six Months
2022 2021 2022 2021 $ Change % Change $ Change % Change
(In thousands, except %)
Research and development $ 8,074 $ 6,450 $ 16,132 $ 11,349 $ 1,624 25 % $ 4,783 42 %
We generally categorize research and development expenses as either direct
external expenses, comprised of amounts paid to third party vendors for
services, or all other research and development expenses, comprised of employee
payroll and general overhead allocable to research and development. We consider
a clinical program to have begun upon acceptance by the FDA, or similar agency
outside of the United States , to commence a clinical trial in humans, at which
time we begin tracking expenditures by the product candidate. Clinical program
expenses comprise payments to vendors related to preparation for, and conduct
of, all phases of the clinical trial, including costs for drug manufacture,
patient dosing and monitoring, data collection and management, oversight of the
trials and reports of results. Pre-clinical expenses comprise all research and
development amounts incurred before human trials begin, including payments to
vendors for services related to product experiments and discovery, toxicology,
pharmacology, metabolism and efficacy studies, as well as manufacturing process
development for a drug candidate.
Our research and development expenses were as follows:
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
(in thousands)
Direct external expenses:
Clinical programs $ 6,791 $ 5,878 $ 13,660 $ 10,161
Pre-clinical activities 368 70 727 181
All other research and
development expenses 915 502 1,745 1,007
$ 8,074 $ 6,450 $ 16,132 $ 11,349 Clinical programs expenses increased primarily due to costs related to our
NAVIGATE trial during the three and six months ended
Both the time required and costs we may incur in order to commercialize a drug
candidate that would result in material net cash inflow are subject to numerous
variables, and therefore we are unable at this stage of our development to
forecast useful estimates. Variables that make estimates difficult include the
number of clinical trials we may undertake, the number of patients needed to
participate in the clinical trial, patient recruitment uncertainties, trial
results as to the safety and efficacy of our product, and uncertainties as to
the regulatory agency response to our trial data prior to receipt of marketing
approval. Moreover, the FDA or other regulatory agencies may suspend clinical
trials if we or an agency believes patients in the trial are subject to
unacceptable risks or find deficiencies in the conduct of the clinical trial.
Delays or rejections may also occur if governmental regulation or policy changes
during our clinical trials or in the course of review of our clinical data. Due
to these uncertainties, accurate and meaningful estimates of the ultimate cost
to bring a product to market, the timing of costs and completion of our program
and the period during which material net cash inflows will commence are
unavailable at this time.
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General and Administrative Expense.
2022 as Compared to 2021
Three Months Six Months
Ended June 30, Ended June 30, Three Months Six Months
2022 2021 2022 2021 $ Change % Change $ Change % Change
(In thousands, except %)
General and administrative $ 1,588 $ 1,743 $ 3,465 $ 3,161 $ (155 ) (9 )% $ 304 10 %
General and administrative expenses consist primarily of salaries including
stock-based compensation, legal and accounting fees, insurance, investor
relations, business development and other office related expenses. The primary
reasons for the decrease in general and administrative expenses for the three
months ended June 30, 2022 as compared to the same period in 2021 are due to
decreases investor relations/business development expense of $212,000 . The
primary reasons for the increase in general and administrative expenses for the
six months ended June 30, 2022 as compared to the same period in 2021 are due to
increases in non-cash stock based compensation expense of $446,000 partially
offset by decrease in investor relations/business development expense of
$187,000 .
Liquidity and Capital Resources
Since our inception onJuly 10, 2000 , we have financed our operations from proceeds of public and private offerings of debt and equity. AtJune 30, 2022 , the Company had$24,178,000 of unrestricted cash and cash equivalents available to fund future operations. InJuly 2022 , the Company entered into a$60 million unsecured line of credit financing with its chairman,Richard E. Uihlein (See Note 12). The Company believes there is sufficient cash, including availability of the line of credit, to fund currently planned operations at least throughDecember 31, 2024 . To meet its future capital needs, the Company intends to raise additional capital through debt or equity financings, collaborations, partnerships or other strategic transactions. However, there can be no assurance that the Company will be able to complete any such transactions on acceptable terms or otherwise. The inability of the Company to obtain sufficient funds on acceptable terms when needed could have a material adverse effect on the Company's business, results of operations and financial condition. The Company has the ability to delay certain research activities and related clinical expenses if necessary due to liquidity concerns until a date when those concerns are relieved. Net cash used in operations increased by$3,111,000 to$15,470,000 for the six months endedJune 30, 2022 , as compared to$12,359,000 for the six months endedJune 30, 2021 . Cash operating expenses increased principally due to the preparations and expenses related to our NAVIGATE clinical trial with belapectin. Net cash provided by financing activities for the six months endedJune 30, 2021 , of$16,815,000 represents proceeds of$10,000,000 from a convertible note payable,$2,951,000 from the exercise of common stock warrants and$3,864,000 in net proceeds from issuance of common shares under our ATM.
Off-Balance Sheet Arrangements
We have not created, and are not a party to, any special-purpose or off-balance sheet entities for the purpose of raising capital, incurring debt or operating parts of our business that are not consolidated into our financial statements. We do not have any arrangements or relationships with entities that are not consolidated into our financial statements that are reasonably likely to materially affect our liquidity or the availability of capital resources.
Application of Critical Accounting Policies and Estimates
The preparation of condensed consolidated financial statements requires us to
make estimates and judgments that affect the reported amounts of assets,
liabilities, expenses, and related disclosure of contingent assets and
liabilities. On an ongoing basis, we evaluate our estimates, including those
related to accrued expenses, stock-based compensation, contingencies and
litigation. We base our estimates on historical experience, terms of existing
contracts, our observance of trends in the industry, information available from
other outside sources and on various other factors that we believe to be
appropriate under the circumstances. Actual results may differ from these
estimates under different assumptions or conditions.
Critical accounting policies are those policies that affect our more significant
judgments and estimates used in preparation of our consolidated financial
statements. We believe our critical accounting policies include our policies
regarding stock-based compensation, accrued expenses, derivatives and income
taxes. For a more detailed discussion of our critical accounting policies,
please refer to our 2021 Annual Report on Form 10-K.
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