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 for the fiscal year ended
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.
Avasopasem manganese (GC4419, also referred to as avasopasem) is a highly
selective small molecule dismutase mimetic in development for the reduction of
severe oral mucositis, or SOM, in patients with head and neck cancer, or HNC,
and for the reduction of esophagitis in patients with lung cancer. SOM is a
common, debilitating complication of radiotherapy in patients with HNC. In
In
In
In
There are currently no FDA-approved drugs and no established guidelines for the treatment of radiotherapy-induced esophagitis. We may pursue a strategy for avasopasem, if approved for reduction in the incidence of SOM, of presenting the AESOP clinical data to entities like the National Comprehensive Cancer Network, or NCCN, to support the use of avasopasem to reduce
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--------------------------------------------------------------------------------esophagitis as a medically accepted indication in published drug compendia, notwithstanding that this indication may not be approved by the FDA.
In addition to developing avasopasem for the reduction of normal tissue toxicity
from radiotherapy, we are developing our second dismutase mimetic product
candidate, rucosopasem, to increase the anti-cancer efficacy of higher daily
doses of radiotherapy, or SBRT. In
We used our observations from the pilot LAPC trial of avasopasem to inform the
design of our rucosopasem clinical trials in combination with SBRT. We have
successfully completed Phase 1 trials of intravenous rucosopasem in healthy
volunteers and initiated a Phase 1/2 trial in patients with NSCLC 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
Our ability to generate product revenue sufficient to achieve profitability will
depend heavily on the successful development and eventual commercialization of
one or more of our current or future product candidates. Our net loss was
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 as of
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--------------------------------------------------------------------------------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
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.
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.
We have also implemented measures designed to protect the health and safety of our workforce.
Critical Accounting Policies and Estimates
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 the 2021 Form 10-K and the notes to
the unaudited interim consolidated financial statements appearing elsewhere in
this Quarterly Report on Form 10-
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 preclinical 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 preclinical 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 preclinical study and clinical trial materials;
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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 preclinical 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 personnel-related and share-based compensation expense, early-stage research expenses and other costs that are deployed across multiple projects under development.
The following table summarizes our research and development expenses by program
for the three months ended
Three months ended
March 31,
2022 2021
Avasopasem manganese (GC4419) $ 2,396 $ 7,331
Rucosopasem manganese (GC4711) 2,524 920
Other research and development expense 554 1,556
Personnel related and share-based compensation
expense 2,633 2,616
$ 8,107 $ 12,423 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. Our research and development expenses may increase over the next several years as we increase personnel costs, including stock-based compensation, conduct our later-stage clinical trials for avasopasem and rucosopasem, if applicable, 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, including the significant costs associated with our ongoing and planned clinical trials, which likely will vary significantly 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;
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our ability to secure adequate supply of our product candidates for our trials;
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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; and
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the impact of unforeseen events, such as the COVID-19 pandemic, on the initiation and completion of our preclinical studies, clinical trials and manufacturing scale-up.
Our research and development 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 result in a significant change in the costs of 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.
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, legal, information technology, commercial, 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 expand our operations and organizational
capabilities. 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 and cash equivalents held
with large institutional banks,
Interest Expense
Interest expense consists of non-cash interest on proceeds received under the
Royalty Agreement with
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, given the current uncertainty over our ability to utilize such amounts.
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--------------------------------------------------------------------------------Results of Operations
Comparison of the Three Months Ended
The following table sets forth our results of operations for the three months
ended
Three months ended
March 31,
2022 2021 Change
Operating expenses:
Research and development $ 8,107 $ 12,423 $ (4,316 )
General and administrative 5,047 5,058 (11 )
Loss from operations (13,154 ) (17,481 ) 4,327
Other income (expense):
Interest income 14 19 (5 )
Interest expense (2,303 ) (1,253 ) (1,050 )
Net loss $ (15,443 ) $ (18,715 ) $ 3,272 Research and Development Expense
Research and development expense decreased by
General and Administrative Expense
General and administrative expense remained consistent year over year, with a
decrease of
Interest Income
Interest income decreased from
Interest Expense
We recognized
Liquidity and Capital Resources
We do not currently have any approved products and have never generated any
revenue from product sales. Through
In
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As of
Cash Flows
The following table shows a summary of our cash flows for the periods indicated
(in thousands):
Three months ended
March 31,
2022 2021
Net cash used in operating activities
235
Net decrease in cash and cash equivalents
Operating Activities
During the three months ended
During the three months ended
Investing Activities
During the three months ended
During the three months ended
Financing Activities
During the three months ended
During the three months ended
Funding Requirements
Our operating expenses increased substantially in 2020 and 2021, and our expenses may continue to increase in connection with our ongoing activities, particularly as we continue the research and development of, continue or initiate clinical trials
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--------------------------------------------------------------------------------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 continue to incur significant costs associated with operating as a public company. Accordingly, we would 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 expect our existing cash, cash equivalents and short-term investments as 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:
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the direct and indirect impact of COVID-19 on our business and operations;
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the scope, progress, results and costs of preclinical studies and clinical trials;
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the scope, prioritization and number of our research and development programs;
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the costs, timing and outcome of regulatory review of our product candidates;
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our ability to establish and maintain collaborations on favorable terms, if at all;
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the extent to which we are obligated to reimburse, or entitled to reimbursement of, clinical trial costs under collaboration agreements, if any;
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the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;
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the extent to which we acquire or in-license other product candidates and technologies;
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the costs of securing manufacturing arrangements for commercial production; and
•
the costs of scaling-up or contracting for sales and marketing capabilities as we prepare for the potential commercialization of our product candidates.
Identifying potential product candidates and conducting preclinical 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" in Part I, Item 1A of the 2021 Form 10-K.
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, our shareholders' 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,
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--------------------------------------------------------------------------------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
In
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
In
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
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
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control 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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