grtx-10q_20200630.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

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: 001-39114

 

Galera Therapeutics, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

46-1454898

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

2 W. Liberty Blvd #100

Malvern, Pennsylvania 

19355

(Address of principal executive offices)

(Zip Code)

 

(610) 725-1500

(Registrant’s telephone number, including area code)

 

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

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,

$0.001 par value per share

GRTX

The Nasdaq Global 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, a 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 August 6, 2020, the registrant had 24,882,097 shares of common stock, $0.001 par value per share, outstanding.

 

 

 


Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements (Unaudited)

3

 

Consolidated Balance Sheets

3

 

Consolidated Statements of Operations

4

 

Consolidated Statements of Comprehensive Loss

5

 

Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

6

 

Consolidated Statements of Cash Flows

7

 

Notes to Unaudited Interim 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

26

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

27

Item 1A.

Risk Factors

27

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 contains forward-looking statements within the meaning of the safe harbor provisions 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 facts contained in this Quarterly Report are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words. All statements other than statements of historical fact contained in this Quarterly Report, including without limitation statements regarding our plans to develop and commercialize our product candidates, the timing of our ongoing or planned clinical trials, the timing of and our ability to obtain and maintain regulatory approvals, the anticipated direct and indirect impact of the COVID-19 pandemic on our business and operations, including manufacturing, research and development costs, clinical trials and employees, the clinical utility of our product candidates, our commercialization, marketing and manufacturing capabilities and strategy, our expectations about the willingness of healthcare professionals to use our product candidates, the sufficiency of our cash, cash equivalents and short-term investments, and the plans and objectives of management for future operations and capital expenditures are forward-looking statements.

The forward-looking statements in this Quarterly Report are only predictions and are based largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report and are subject to a number of known and unknown risks, uncertainties and assumptions that could cause actual results to differ materially from those projected in the forward-looking statements, including, but not limited to, the following: our limited operating history; anticipating continued losses for the foreseeable future; needing substantial funding and the ability to raise capital; our dependence on avasopasem manganese (GC4419); uncertainties inherent in the conduct of clinical trials; difficulties or delays enrolling patients in clinical trials; the FDA’s acceptance of data from clinical trials outside the United States; undesirable side effects from our product candidates; risks relating to the regulatory approval process; failure to capitalize on more profitable product candidates or indications; ability to receive Breakthrough Therapy Designation or Fast Track Designation for product candidates; failure to obtain regulatory approval of product candidates in the United States or other jurisdictions; ongoing regulatory obligations and continued regulatory review; risks related to commercialization; risks related to competition; ability to retain key employees and manage growth; risks related to intellectual property; inability to maintain collaborations or the failure of these collaborations; our reliance on third parties; the possibility of system failures or security breaches; liability related to the privacy of health information obtained from clinical trials and product liability lawsuits; unfavorable pricing regulations, third-party reimbursement practices or healthcare reform initiatives; environmental, health and safety laws and regulations; the impact of the COVID-19 pandemic on our business and operations, including preclinical studies and clinical trials, and general economic conditions; risks related to ownership of our common stock; significant costs as a result of operating as a public company; and those described under the sections in our Annual Report on Form 10-K for the year ended December 31, 2019 and this Quarterly Report entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

 

 

ii


 

 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

GALERA THERAPEUTICS, INC.

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS EXCEPT SHARE AND PER-SHARE AMOUNTS)

(unaudited)

 

 

 

June 30,

2020

 

 

December 31,

2019

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

15,882

 

 

$

18,356

 

Short-term investments

 

 

88,527

 

 

 

93,934

 

Prepaid expenses and other current assets

 

 

3,989

 

 

 

5,280

 

Total current assets

 

 

108,398

 

 

 

117,570

 

Property and equipment, net

 

 

1,165

 

 

 

934

 

Acquired intangible asset

 

 

2,258

 

 

 

2,258

 

Goodwill

 

 

881

 

 

 

881

 

Right-of-use lease asset

 

 

675

 

 

 

815

 

Other assets

 

 

918

 

 

 

918

 

Total assets

 

$

114,295

 

 

$

123,376

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

6,767

 

 

$

3,945

 

Accrued expenses

 

 

5,367

 

 

 

5,452

 

Lease liability

 

 

268

 

 

 

297

 

Total current liabilities

 

 

12,402

 

 

 

9,694

 

Royalty purchase liability

 

 

60,879

 

 

 

43,251

 

Lease liability, net of current portion

 

 

414

 

 

 

534

 

Deferred tax liability

 

 

289

 

 

 

289

 

Other liabilities

 

 

74

 

 

 

 

Total liabilities

 

 

74,058

 

 

 

53,768

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value: 10,000,000 shares authorized; no shares issued and

   outstanding

 

 

 

 

 

 

Common stock, $0.001 par value: 200,000,000 shares authorized; 24,845,798 and

   24,811,567 shares issued and outstanding at June 30, 2020 and December

   31, 2019

 

 

25

 

 

 

25

 

Additional paid-in capital

 

 

238,320

 

 

 

230,895

 

Accumulated other comprehensive income

 

 

316

 

 

 

38

 

Accumulated deficit

 

 

(198,424

)

 

 

(161,350

)

Total stockholders’ equity

 

 

40,237

 

 

 

69,608

 

Total liabilities and stockholders’ equity

 

$

114,295

 

 

$

123,376

 

 

See accompanying notes to unaudited interim consolidated financial statements.

3


 

GALERA THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)

(unaudited)

 

 

 

Three months ended

June 30,

 

 

Six months ended

June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

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 (expenses):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

)

Accretion of redeemable convertible preferred stock to redemption

   value

 

 

 

 

 

(2,060

)

 

 

 

 

 

(4,071

)

Net loss attributable to common stockholders

 

$

(18,657

)

 

$

(13,618

)

 

$

(37,074

)

 

$

(25,978

)

Net loss per share of common stock, basic and diluted

 

$

(0.75

)

 

$

(45.30

)

 

$

(1.49

)

 

$

(86.42

)

Weighted-average shares of common stock outstanding, basic and

   diluted

 

 

24,832,264

 

 

 

300,597

 

 

 

24,823,644

 

 

 

300,597

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to unaudited interim consolidated financial statements.

4


 

GALERA THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(IN THOUSANDS)

(unaudited)

 

 

 

Three months ended

June 30,

 

 

Six months ended

June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net loss

 

$

(18,657

)

 

$

(11,558

)

 

$

(37,074

)

 

$

(21,907

)

Unrealized gain (loss) on short-term investments

 

 

(370

)

 

 

68

 

 

 

278

 

 

 

78

 

Comprehensive loss

 

$

(19,027

)

 

$

(11,490

)

 

$

(36,796

)

 

$

(21,829

)

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to unaudited interim consolidated financial statements.

5


 

GALERA THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE CONVERTIBLE PREFERRED STOCK AND

STOCKHOLDERS’ EQUITY (DEFICIT)

(IN THOUSANDS EXCEPT SHARE AMOUNTS)

(unaudited)

 

 

 

 

 

 

 

Common stock

 

 

Additional

paid-in

 

 

Accumulated

other

comprehensive

 

 

Accumulated

 

 

Total

Stockholders’

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

capital

 

 

income

 

 

Deficit

 

 

Equity

 

Balance at January 1, 2020

 

 

 

 

 

 

 

 

 

 

 

24,811,567

 

 

$

25

 

 

$

230,895

 

 

$

38

 

 

$

(161,350

)

 

$

69,608

 

Share-based compensation

   expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,210

 

 

 

 

 

 

 

 

 

1,210

 

Exercise of stock options

 

 

 

 

 

 

 

 

 

 

 

8,503

 

 

 

 

 

 

9

 

 

 

 

 

 

 

 

 

9

 

Unrealized gain on short-term

   investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

648

 

 

 

 

 

 

648

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(18,417

)

 

 

(18,417

)

Balance at March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

24,820,070

 

 

 

25

 

 

 

232,114

 

 

 

686

 

 

 

(179,767

)

 

 

53,058

 

Issuance of common stock

   warrants

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,712

 

 

 

 

 

 

 

 

 

4,712

 

Share-based compensation

   expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,453

 

 

 

 

 

 

 

 

 

1,453

 

Exercise of stock options

 

 

 

 

 

 

 

 

 

 

 

25,728

 

 

 

 

 

 

41

 

 

 

 

 

 

 

 

 

41

 

Unrealized loss on short-term

   investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(370

)

 

 

 

 

 

(370

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(18,657

)

 

 

(18,657

)

Balance at June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

24,845,798

 

 

$

25

 

 

$

238,320

 

 

$

316

 

 

$

(198,424

)

 

$

40,237

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Redeemable convertible

preferred stock

 

 

 

Common stock

 

 

Additional

paid-in

 

 

Accumulated

other

comprehensive

 

 

Accumulated

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

capital

 

 

income

 

 

Deficit

 

 

Deficit

 

Balance at January 1, 2019

 

 

96,385,795

 

 

$

165,902

 

 

 

 

300,597

 

 

$

 

 

$

 

 

$

3

 

 

$

(104,823

)

 

$

(104,820

)

Share-based compensation

   expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

499

 

 

 

 

 

 

 

 

 

499

 

Accretion of redeemable

   convertible preferred stock

   to redemption value

 

 

 

 

 

2,011

 

 

 

 

 

 

 

 

 

 

(499

)

 

 

 

 

 

(1,512

)

 

 

(2,011

)

Unrealized gain on short-term

   investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10

 

 

 

 

 

 

10

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(10,349

)

 

 

(10,349

)

Balance at March 31, 2019

 

 

96,385,795

 

 

 

167,913

 

 

 

 

300,597

 

 

 

 

 

 

 

 

 

13

 

 

 

(116,684

)

 

 

(116,671

)

Share-based compensation

   expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

565

 

 

 

 

 

 

 

 

 

565

 

Accretion of redeemable

   convertible preferred stock

   to redemption value

 

 

 

 

 

2,060

 

 

 

 

 

 

 

 

 

 

(565

)

 

 

 

 

 

(1,495

)

 

 

(2,060

)

Unrealized gain on short-term

   investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

68

 

 

 

 

 

 

68

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11,558

)

 

 

(11,558

)

Balance at June 30, 2019

 

 

96,385,795

 

 

$

169,973

 

 

 

 

300,597

 

 

$

 

 

$

 

 

$

81

 

 

$

(129,737

)

 

$

(129,656

)

 

 

 

 

 

 

 

 

See accompanying notes to unaudited interim consolidated financial statements.

6


 

GALERA THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

(unaudited)

 

 

 

Six months ended

June 30,

 

 

 

2020

 

 

2019

 

Operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(37,074

)

 

$

(21,907

)

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

 

 

 

 

 

 

 

 

Depreciation

 

 

175

 

 

 

113

 

Noncash interest expense

 

 

2,390

 

 

 

1,175

 

Share-based compensation expense

 

 

2,663

 

 

 

1,064

 

Reserve for tax incentive receivable

 

 

 

 

 

241

 

Deferred rent

 

 

 

 

 

10

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Tax incentive receivable

 

 

 

 

 

629

 

Prepaid expenses and other current assets

 

 

1,291

 

 

 

(1,209

)

Other assets

 

 

140

 

 

 

181

 

Accounts payable

 

 

2,822

 

 

 

1,352

 

Accrued expense and other liabilities

 

 

(210

)

 

 

(133

)

Cash used in operating activities

 

 

(27,803

)

 

 

(18,484

)

Investing activities:

 

 

 

 

 

 

 

 

Purchases of short-term investments

 

 

(42,065

)

 

 

(49,798

)

Proceeds from sales of short-term investments

 

 

47,750

 

 

 

51,500

 

Purchase of property and equipment

 

 

(406

)

 

 

(507

)

Cash provided by investing activities

 

 

5,279

 

 

 

1,195

 

Financing activities:

 

 

 

 

 

 

 

 

Proceeds from royalty purchase agreement

 

 

20,000

 

 

 

20,000

 

Payment of deferred offering costs

 

 

 

 

 

(1,327

)

Proceeds from exercise of stock options

 

 

50

 

 

 

 

Cash provided by financing activities

 

 

20,050

 

 

 

18,673

 

Net increase (decrease) in cash and cash equivalents

 

 

(2,474

)

 

 

1,384

 

Cash and cash equivalents at beginning of period

 

 

18,356

 

 

 

14,811

 

Cash and cash equivalents at end of period

 

$

15,882

 

 

$

16,195

 

Supplemental schedule of non-cash financing activities:

 

 

 

 

 

 

 

 

Issuance of warrants in conjunction with amendment to the royalty

     purchase agreement

 

$

4,712

 

 

$

 

Accretion of redeemable convertible preferred stock to redemption value

 

$

 

 

$

4,071

 

Deferred offering costs included in accounts payable and accrued expenses

 

$

 

 

$

420

 

Purchase of property and equipment included in accounts payable and accrued expenses

 

$

36

 

 

$

 

Initial recognition of operating lease right-of-use asset and operating lease liability

 

$

 

 

$

1,084

 

 

 

 

 

 

 

 

 

See accompanying notes to unaudited interim consolidated financial statements.

 

7


 

GALERA THERAPEUTICS, INC.

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

1.

Organization and description of business

Galera Therapeutics, Inc. was incorporated as a Delaware corporation on November 19, 2012 (inception) and together with its subsidiaries, (the Company, or Galera) is 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. The Company’s lead product candidate, avasopasem manganese (GC4419, also referred to as avasopasem), is a potent and highly selective small molecule dismutase mimetic being developed for the reduction of severe oral mucositis (SOM). In February 2018, the U.S. Food and Drug Administration (FDA) granted Breakthrough Therapy Designation to avasopasem for the reduction of SOM induced by radiotherapy with or without systemic therapy. The Company is currently evaluating avasopasem in a Phase 3 registrational trial (referred to as the ROMAN trial) for its ability to reduce the incidence and severity of SOM induced by radiotherapy in patients with locally advanced head and neck cancer (HNC), its lead indication. It is also being studied in a Phase 2a multi-center trial in Europe assessing the safety of avasopasem in patients with head and neck cancer undergoing standard-of-care radiotherapy and in a Phase 2a trial for its ability to reduce the incidence of esophagitis induced by radiotherapy in patients with lung cancer. In addition to developing avasopasem for the reduction of normal tissue toxicity from radiotherapy, the Company is developing its dismutase mimetics to increase the anti-cancer efficacy of higher daily doses of radiotherapy, including stereotactic body radiation therapy (SBRT). The Company’s second dismutase mimetic product candidate, GC4711, is being developed to increase the anti-cancer efficacy of SBRT and has successfully completed Phase 1 trials of intravenous GC4711 in healthy volunteers. The Company plans to leverage its observations from the ongoing avasopasem SBRT pilot Phase 1b/2a trial in locally advanced pancreatic cancer (LAPC) to prepare a GC4711 SBRT combination Phase 1b/2a safety and anti-cancer efficacy trial in non-small cell lung cancer (NSCLC).

Liquidity

The Company has incurred recurring losses and negative cash flows from operations since inception and has an accumulated deficit of $198.4 million as of June 30, 2020. The Company anticipates incurring additional losses until such time, if ever, that it can generate significant sales of its product candidates currently in development. The Company expects its existing cash, cash equivalents and short-term investments, together with the expected payments from Blackstone Life Sciences (formerly known as Clarus Ventures) in the amount of $57.5 million upon the achievement of certain clinical enrollment milestones in the ROMAN trial and the anti-cancer program in combination with SBRT under the Royalty Agreement and the Amendment (each as defined below), will enable the Company to fund its operating expenses and capital expenditure requirements into the second half of 2022. See Notes 6 and 10.

On November 12, 2019, the Company completed an initial public offering (IPO) of its common stock, which resulted in the issuance and sale of 5,000,000 shares of its common stock at a public offering price of $12.00 per share, generating net proceeds of $53.0 million after deducting underwriting discounts and other offering costs. On December 9, 2019, in connection with the partial exercise of the over-allotment option granted to the underwriters of the Company's IPO, 445,690 additional shares of common stock were sold at the IPO price of $12.00 per share, generating net proceeds of approximately $5.0 million after deducting underwriting discounts and other offering costs. Upon the closing of the IPO, all outstanding shares of the Company’s Series A, Series B and Series C redeemable convertible preferred stock were automatically converted into 19,061,502 shares of the Company’s common stock.

2.

Basis of presentation and significant accounting policies

The summary of significant accounting policies disclosed in the Company’s annual consolidated financial statements for the years ended December 31, 2019 and 2018 included in the Company’s annual report on Form 10-K filed with the Securities and Exchange Commission (SEC) on March 10, 2020 have not materially changed, except as set forth below.

Basis of presentation and consolidation

The accompanying unaudited interim consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (U.S. GAAP) for interim financial information. Any reference in these notes to applicable guidance is meant to refer to U.S. GAAP as found in the Accounting Standards Codification (ASC) and Accounting Standards Updates (ASU) of the Financial Accounting Standards Board (FASB).

8


GALERA THERAPEUTICS, INC.

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

In the opinion of management, the accompanying interim consolidated financial statements include all normal and recurring adjustments (which consist primarily of accruals, estimates and assumptions that impact the financial statements) considered necessary to present fairly the Company’s financial position as of June 30, 2020 and its results of operations for the three and six months ended June 30, 2020 and 2019, and statements of changes in redeemable convertible preferred stock and stockholder’s equity (deficit) and cash flows for the six months ended June 30, 2020 and 2019. Operating results for the three and six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020, or for any future period. The interim consolidated financial statements, presented herein, do not contain the required disclosures under U.S. GAAP for annual financial statements. Therefore, these interim consolidated financial statements should be read in conjunction with the annual audited consolidated financial statements and related notes as of and for the year ended December 31, 2019, included in the Company’s annual report on Form 10-K and filed with the SEC on March 10, 2020.

Use of estimates

The preparation of unaudited interim consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the unaudited interim consolidated financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

Estimates and assumptions are periodically reviewed and the effects of revisions are reflected in the unaudited interim consolidated financial statements in the period they are determined to be necessary. Significant areas that require management’s estimates include the fair value of common stock, prior to the IPO, share-based compensation assumptions, royalty purchase liability assumptions and accrued research and development expenses.

The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition, including manufacturing, clinical trials, research and development costs and employee-related amounts, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain or treat COVID-19, as well as the economic impact on local, regional, national and international customers and markets. Management has made estimates regarding the impact of COVID-19 within the Company’s financial disclosures and there may be changes to those estimates in future periods. Actual results may differ from these estimates.

Net loss per share

Basic loss per share of common stock is computed by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during each period. Diluted loss per share of common stock includes the effect, if any, from the potential exercise or conversion of securities, such as redeemable convertible preferred stock and stock options, which would result in the issuance of incremental shares of common stock. For diluted net loss per share, the weighted-average number of shares of common stock is the same for basic net loss per share due to the fact that when a net loss exists, dilutive securities are not included in the calculation as the impact is anti-dilutive.

The following potentially dilutive securities have been excluded from the computation of diluted weighted-average shares of common stock outstanding, as they would be anti-dilutive:

 

 

 

June 30,

 

 

 

2020

 

 

2019

 

Stock options

 

 

4,596,357

 

 

 

3,129,537

 

Common stock warrants

 

 

550,661

 

 

 

 

Redeemable convertible preferred stock

 

 

 

 

 

19,061,502

 

 

 

 

5,147,018

 

 

 

22,191,039

 

 

Amounts in the above table reflect the common stock equivalents for the redeemable convertible preferred stock.

9


GALERA THERAPEUTICS, INC.

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

COVID-19

The COVID-19 pandemic and related precautions have directly or indirectly impacted the timeline for some of the Company’s clinical trials. In April 2020, the Company delayed the initiation of the Phase 2a multi-center trial in Europe assessing the safety of avasopasem in patients with HNC undergoing standard-of-care radiotherapy, due to concerns with patient enrollment. In June 2020, the Company dosed the first patient in the trial. This trial was originally expected to enroll up to 70 patients and contribute to the safety database for avasopasem in patients with HNC receiving radiotherapy. The Company continues to monitor the COVID-19 pandemic in Europe regarding the enrollment prospects for this trial. As a result of the delay in initiating the trial in Europe, the target enrollment for the ROMAN trial was increased to approximately 450 patients in order to ensure the Company is positioned to maintain the planned size of the safety database in a timely manner, with completion of enrollment expected in the first half of 2021 and data expected in the second half of 2021, subject to the continuing impact of the COVID-19 pandemic on the Company’s business. With this change in the ROMAN trial, the assumptions underlying the Company’s calculation of interest expense on its royalty purchase liability have changed. The Company imputes interest expense on its royalty purchase obligations by estimating risk adjusted future royalty payments over the term of the Royalty Agreement which takes into consideration the probability and timing of obtaining FDA approval and the potential future revenue from commercializing its product candidates.

Recent accounting pronouncements

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, which removes and modifies some existing disclosure requirements and adds others. This ASU is effective for all entities for fiscal years beginning after December 15, 2019, including interim periods therein. The Company adopted this ASU on January 1, 2020 and it did not have an impact on the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-15, Intangibles – Goodwill and Other- Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Service Arrangement that is a Service Contract, which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This guidance is effective for fiscal years beginning after December 15, 2019, including interim periods therein, The Company adopted this guidance on January 1, 2020 and it did not have a material impact on the Company’s consolidated financial statements.

3.

Fair value measurements

The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

 

Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.

 

Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

 

Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.

10


GALERA THERAPEUTICS, INC.

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis (amounts in thousands):

 

 

 

June 30, 2020

 

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds and U.S. Treasury obligations (included

   in cash equivalents)

 

$

15,093

 

 

$

 

 

$

 

Short-term investments

 

$

88,527

 

 

$

 

 

$

 

 

 

 

December 31, 2019

 

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds and U.S. Treasury obligations (included

   in cash equivalents)

 

$

17,447

 

 

$

 

 

$

 

Short-term investments

 

$

93,934

 

 

$

 

 

$

 

 

There were no changes in valuation techniques during the six months ended June 30, 2020. The Company’s short-term investment instruments are classified using Level 1 inputs within the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency.

4.

Property and equipment

Property and equipment consist of (amounts in thousands):

 

 

 

June 30,

2020

 

 

December 31,

2019

 

Laboratory equipment

 

$

1,114

 

 

$

748

 

Computer hardware and software

 

 

229

 

 

 

218

 

Leasehold improvements

 

 

264

 

 

 

262

 

Furniture and fixtures

 

 

173

 

 

 

147

 

Property and equipment, gross

 

 

1,780

 

 

 

1,375

 

Less: Accumulated depreciation

 

 

(615

)

 

 

(441

)

Property and equipment, net

 

$

1,165

 

 

$

934

 

 

Depreciation expense was $0.2 million and $0.1 million for the six months ended June 30, 2020 and 2019, respectively.

5.

Accrued expenses

Accrued expenses consist of (amounts in thousands):

 

 

 

June 30,

2020

 

 

December 31,

2019

 

Compensation and related benefits

 

$

1,408

 

 

$

1,160

 

Research and development expenses

 

 

3,661

 

 

 

3,882

 

Professional fees and other expenses

 

 

298

 

 

 

410

 

 

 

$

5,367

 

 

$

5,452

 

 

11


GALERA THERAPEUTICS, INC.

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

6.

Royalty purchase liability

In November 2018, the Company entered into an Amended and Restated Purchase and Sale Agreement (the Royalty Agreement), with Clarus IV Galera Royalty AIV, L.P., Clarus IV-A, L.P., Clarus IV-B, L.P., Clarus IV-C, L.P. and Clarus IV-D, L.P. (collectively, Blackstone or Blackstone Life Sciences). Pursuant to the Royalty Agreement, Blackstone agreed to pay up to $80.0 million (the Royalty Purchase Price) in four tranches of $20.0 million each upon the achievement of specific Phase 3 clinical trial patient enrollment milestones. The Company received the first tranche of the Royalty Purchase Price in November 2018. In April 2019, the Company received $20.0 million in connection with the achievement of the second milestone under the Royalty Agreement. In February 2020, the Company received a $20.0 million payment in connection with the achievement of the third milestone under the Royalty Agreement.

The Company accounts for the Royalty Agreement as a debt instrument. The $60.0 million proceeds from the first three tranches under the Royalty Agreement have been recorded as a liability on the Company’s consolidated balance sheets. Interest expense is imputed based on the estimated royalty repayment period described below which results in a corresponding increase in the liability balance. The Company recognized $2.4 million and $1.2 million in noncash interest expense during the six months ended June 30, 2020 and 2019, respectively. As of June 30, 2020, the effective interest rate was 8.0%.

In May 2020, the Company entered into Amendment No. 1 to the Royalty Agreement (the Amendment) with Clarus IV Galera Royalty AIV, L.P. (the Blackstone Purchaser). The Blackstone Purchaser is affiliated with Blackstone Life Sciences, the successor in interest to Clarus Ventures. The Amendment increased the Royalty Purchase Price by $37.5 million, to $117.5 million by increasing the fourth tranche from $20.0 million to $37.5 million and adding a new $20.0 million tranche upon the achievement of an additional clinical enrollment milestone. The Company accounted for the Amendment as a debt modification and is amortizing fees paid to the Blackstone Purchaser related to the Amendment over the estimated term of the royalty purchase liability utilizing the effective-interest method.

Pursuant to the amended Royalty Agreement, in connection with the payment of each tranche of the Royalty Purchase Price, the Company has agreed to sell, convey, transfer and assign to Blackstone all of its right, title and interest in a high single-digit percentage of (i) worldwide net sales of avasopasem and GC4711 (collectively, the Products) and (ii) all amounts received by the Company or its affiliates, licensees and sublicensees with respect to Product-related damages (collectively, the Product Payments) during the Royalty Period. The Royalty Period means, on a Product-by-Product and country-by-country basis, the period of time commencing on the commercial launch of such Product in such country and ending on the latest to occur of (i) the 12th anniversary of such commercial launch, (ii) the expiration of all valid claims of the Company’s patents covering such Product in such country, and (iii) the expiration of regulatory data protection or market exclusivity or similar regulatory protection afforded by the health authorities in such country, to the extent such protection or exclusivity effectively prevents generic versions of such Product from entering the market in such country.

The amended Royalty Agreement will remain in effect until the date on which the aggregate amount of the Product Payments paid to Blackstone exceeds a fixed single-digit multiple of the actual amount of the Royalty Purchase Price received by the Company, unless earlier terminated pursuant to the mutual written agreement of the Company and Blackstone.

Upon execution of the Amendment, the Company issued common stock warrants to the Blackstone Purchaser to purchase an aggregate of 550,661 shares of the Company’s common stock with an exercise price of $13.62 per share, each of which will become exercisable upon the receipt by Galera of the applicable specified milestone payment. The issued warrants expire six years after the initial exercise dates. The warrants are equity-classified and were valued at $4.7 million using the Black-Scholes valuation technique. The warrants were recorded as a discount to the royalty purchase liability. The Company will amortize the debt discount to interest expense over the estimated term of the royalty purchase liability utilizing the effective-interest method.  

7.

Leases

The Company has non-cancelable operating leases for office and laboratory space in Malvern, Pennsylvania and St. Louis, Missouri which, as of June 30, 2020, have remaining lease terms of approximately 3.0 and 0.9 years, respectively. The Company adopted ASC 842 on January 1, 2019 resulting in the recognition of a current operating lease liability of $0.3 million and a noncurrent operating lease liability of $0.8 million with a corresponding $1.1 million right-of-use (ROU) asset, which was based on the present value of the minimum rental payments of the lease. The discount rate used to account for the Company’s operating lease under ASC 842 is the Company’s estimated incremental borrowing rate of 5.3%.

12


GALERA THERAPEUTICS, INC.

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Supplemental balance sheet information related to leases was as follows:

 

 

 

June 30,

 

 

December 31,

 

 

 

2020

 

 

2019

 

Operating Leases

 

 

 

 

 

 

 

 

Operating lease right-of-use assets

 

$

675

 

 

$

815

 

 

 

 

 

 

 

 

 

 

Other current liabilities

 

 

268

 

 

 

297

 

Operating lease liabilities

 

 

414

 

 

 

534

 

Total operating lease liabilities

 

$

682

 

 

$

831

 

 

The components of lease expense were as follows:

 

 

 

Three months ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Operating lease costs