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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended June 30, 2021

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, 2021, the registrant had 26,365,632 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 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

17

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

27

Item 4.

Controls and Procedures

27

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

28

Item 1A.

Risk Factors

28

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

28

Item 3.

Defaults Upon Senior Securities

28

Item 4.

Mine Safety Disclosures

28

Item 5.

Other Information

28

Item 6.

Exhibits

29

Signatures

30

 

 

 

i


 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q 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 clinical utility of our product candidates, our commercialization, 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 our ability to raise additional capital to fund our operations, the anticipated impact of the COVID-19 pandemic on our business, and the plans and objectives of management for future operations, capital needs, 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 and/or maintain 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, 2020 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,

2021

 

 

December 31,

2020

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

38,465

 

 

$

15,872

 

Short-term investments

 

 

28,062

 

 

 

56,904

 

Royalty agreement receivable

 

 

37,500

 

 

 

 

Prepaid expenses and other current assets

 

 

4,837

 

 

 

5,153

 

Total current assets

 

 

108,864

 

 

 

77,929

 

Property and equipment, net

 

 

1,020

 

 

 

1,023

 

Acquired intangible asset

 

 

2,258

 

 

 

2,258

 

Goodwill

 

 

881

 

 

 

881

 

Right-of-use lease assets

 

 

450

 

 

 

530

 

Other assets

 

 

1,796

 

 

 

1,477

 

Total assets

 

$

115,269

 

 

$

84,098

 

Liabilities and stockholders’ equity (deficit)

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

8,272

 

 

$

5,146

 

Accrued expenses

 

 

8,287

 

 

 

8,584

 

Lease liabilities

 

 

284

 

 

 

238

 

Total current liabilities

 

 

16,843

 

 

 

13,968

 

Royalty purchase liability

 

 

123,424

 

 

 

63,369

 

Lease liabilities, net of current portion

 

 

172

 

 

 

296

 

Deferred tax liability

 

 

273

 

 

 

273

 

Other liabilities

 

 

74

 

 

 

74

 

Total liabilities

 

 

140,786

 

 

 

77,980

 

Stockholders’ equity (deficit):

 

 

 

 

 

 

 

 

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; 25,919,411 and

   24,976,142 shares issued and outstanding at June 30, 2021 and December

   31, 2020

 

 

26

 

 

 

25

 

Additional paid-in capital

 

 

251,123

 

 

 

241,649

 

Accumulated other comprehensive income

 

 

3

 

 

 

12

 

Accumulated deficit

 

 

(276,669

)

 

 

(235,568

)

Total stockholders’ equity (deficit)

 

 

(25,517

)

 

 

6,118

 

Total liabilities and stockholders’ equity (deficit)

 

$

115,269

 

 

$

84,098

 

 

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,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

15,966

 

 

$

13,839

 

 

$

28,389

 

 

$

28,092

 

General and administrative

 

 

5,122

 

 

 

3,874

 

 

 

10,180

 

 

 

7,439

 

Loss from operations

 

 

(21,088

)

 

 

(17,713

)

 

 

(38,569

)

 

 

(35,531

)

Other income (expenses):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

6

 

 

 

352

 

 

 

25

 

 

 

820

 

Interest expense

 

 

(1,302

)

 

 

(1,295

)

 

 

(2,555

)

 

 

(2,390

)

Foreign currency gain (loss)

 

 

(2

)

 

 

(1

)

 

 

(2

)

 

 

27

 

Net loss

 

$

(22,386

)

 

$

(18,657

)

 

$

(41,101

)

 

$

(37,074

)

Net loss per share of common stock, basic and diluted

 

$

(0.88

)

 

$

(0.75

)

 

$

(1.63

)

 

$

(1.49

)

Weighted-average shares of common stock outstanding, basic and

   diluted

 

 

25,401,046

 

 

 

24,832,264

 

 

 

25,195,763

 

 

 

24,823,644

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net loss

 

$

(22,386

)

 

$

(18,657

)

 

$

(41,101

)

 

$

(37,074

)

Unrealized gain (loss) on short-term investments

 

 

(7

)

 

 

(370

)

 

 

(9

)

 

 

278

 

Comprehensive loss

 

$

(22,393

)

 

$

(19,027

)

 

$

(41,110

)

 

$

(36,796

)

 

See accompanying notes to unaudited interim consolidated financial statements.

5


 

GALERA THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

(IN THOUSANDS EXCEPT SHARE AMOUNTS)

(unaudited)

 

 

 

Common stock

 

 

Additional

paid-in

 

 

Accumulated

other

comprehensive

 

 

Accumulated

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

capital

 

 

(loss) income

 

 

Deficit

 

 

Equity (Deficit)

 

Balance at January 1, 2021

 

 

24,976,142

 

 

$

25

 

 

$

241,649

 

 

$

12

 

 

$

(235,568

)

 

$

6,118

 

Share-based compensation

   expense

 

 

 

 

 

 

 

 

1,791

 

 

 

 

 

 

 

 

 

1,791

 

Exercise of stock options

 

 

217,015

 

 

 

 

 

 

235

 

 

 

 

 

 

 

 

 

235

 

Unrealized loss on short-term

   investments

 

 

 

 

 

 

 

 

 

 

 

(2

)

 

 

 

 

 

(2

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(18,715

)

 

 

(18,715

)

Balance at March 31, 2021

 

 

25,193,157

 

 

 

25

 

 

 

243,675

 

 

 

10

 

 

 

(254,283

)

 

 

(10,573

)

Share-based compensation

   expense

 

 

 

 

 

 

 

 

1,611

 

 

 

 

 

 

 

 

 

1,611

 

Exercise of stock options

 

 

60,975

 

 

 

 

 

 

120

 

 

 

 

 

 

 

 

 

120

 

Sale of shares under Open Market

      Sale Agreement with Jefferies LLC, net

 

 

665,279

 

 

 

1

 

 

 

5,717

 

 

 

 

 

 

 

 

 

5,718

 

Unrealized loss on short-term

   investments

 

 

 

 

 

 

 

 

 

 

 

(7

)

 

 

 

 

 

(7

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(22,386

)

 

 

(22,386

)

Balance at June 30, 2021

 

 

25,919,411

 

 

$

26

 

 

$

251,123

 

 

$

3

 

 

$

(276,669

)

 

$

(25,517

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

 

Additional

paid-in

 

 

Accumulated

other

comprehensive

 

 

Accumulated

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

capital

 

 

(loss) 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

 

 

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,

 

 

 

2021

 

 

2020

 

Operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(41,101

)

 

$

(37,074

)

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

 

 

 

 

 

 

 

 

Depreciation

 

 

208

 

 

 

175

 

Noncash interest expense

 

 

2,555

 

 

 

2,390

 

Share-based compensation expense

 

 

3,402

 

 

 

2,663

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

316

 

 

 

1,291

 

Other assets

 

 

(240

)

 

 

140

 

Accounts payable

 

 

3,126

 

 

 

2,822

 

Accrued expense and other liabilities

 

 

(374

)

 

 

(210

)

Cash used in operating activities

 

 

(32,108

)

 

 

(27,803

)

Investing activities:

 

 

 

 

 

 

 

 

Purchases of short-term investments

 

 

(7,167

)

 

 

(42,065

)

Proceeds from sales of short-term investments

 

 

36,000

 

 

 

47,750

 

Purchase of property and equipment

 

 

(205

)

 

 

(406

)

Cash provided by investing activities

 

 

28,628

 

 

 

5,279

 

Financing activities:

 

 

 

 

 

 

 

 

Proceeds from royalty purchase agreement

 

 

20,000

 

 

 

20,000

 

Proceeds from Open Market Sale Agreement with Jefferies LLC, net

 

 

5,718

 

 

 

 

Proceeds from exercise of stock options

 

 

355

 

 

 

50

 

Cash provided by financing activities

 

 

26,073

 

 

 

20,050

 

Net increase (decrease) in cash and cash equivalents

 

 

22,593

 

 

 

(2,474

)

Cash and cash equivalents at beginning of period

 

 

15,872

 

 

 

18,356

 

Cash and cash equivalents at end of period

 

$

38,465

 

 

$

15,882

 

Supplemental schedule of non-cash financing activities:

 

 

 

 

 

 

 

 

Issuance of warrants in conjunction with amendment to the royalty

     purchase agreement

 

$

 

 

$

4,712

 

Deferred offering costs included in accounts payable and accrued expenses

 

$

98

 

 

$

 

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

 

$

5

 

 

$

36

 

 

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. In June 2021, the Company announced completion of enrollment for the ROMAN trial, with topline data expected in the fourth quarter of 2021. Avasopasem 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 leveraged its observations from the pilot Phase 1/2 safety and anti-cancer efficacy trial of avasopasem in combination with SBRT in patients with locally advanced pancreatic cancer to prepare GC4711 clinical trials in combination with SBRT. The Company is currently evaluating GC4711 in combination with SBRT in a Phase 1/2 safety and anti-cancer efficacy trial in non-small cell lung cancer and a Phase 2b trial of GC4711 in combination with SBRT in patients with locally advanced pancreatic cancer.

Liquidity

The Company has incurred recurring losses and negative cash flows from operations since inception and has an accumulated deficit of $276.7 million as of June 30, 2021. 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 as of June 30, 2021, together with the payment from Blackstone Life Sciences (formerly known as Clarus Ventures) (see Note 6) in the amount of $37.5 million, received in July 2021, will enable the Company to fund its operating expenses and capital expenditure requirements for at least the next twelve months from the issuance of these financial statements. In the future, if the Company is not able to continue to raise sufficient capital to fund its operations, the Company may determine to delay or discontinue certain activities, including planned programs, hiring plans, manufacturing activities and commercial preparation efforts. In December 2020, the Company filed a registration statement with the SEC which covers the offering, issuance and sale of up to $200.0 million of the Company’s securities, which includes an Open Market Sale Agreement with Jefferies LLC (the Sales Agreement) covering the offering, issuance and sale of up to a maximum aggregate offering price of $50.0 million of the Company’s common stock, which could be utilized to raise funding for future operating expenses and capital expenditure requirements. During the six months ended June 30, 2021, we sold approximately 0.7 million shares of common stock and received net proceeds of $5.7 million pursuant to the Sales Agreement. As of June 30, 2021, there remains approximately $44.0 million available under the Sales Agreement. See Note 8.

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, 2020 and 2019 included in the Company’s annual report on Form 10-K filed with the Securities and Exchange Commission (SEC) on March 11, 2021 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, 2021 and its results of operations for the three and six months ended June 30, 2021 and 2020, and statements of changes in stockholder’s equity (deficit) and cash flows for the six months ended June 30, 2021 and 2020. Operating results for the three and six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021, 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, 2020, included in the Company’s annual report on Form 10-K and filed with the SEC on March 11, 2021.

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 share-based compensation assumptions, royalty purchase liability assumptions and accrued research and development expenses.

Research and development expenses

Research and development costs are expensed as incurred and consist primarily of funds paid to third parties for the provision of services for product candidate development, clinical and preclinical development and related supply and manufacturing costs, and regulatory compliance costs. The Company accrues and expenses preclinical studies and clinical trial activities performed by third parties based upon estimates of the proportion of work completed over the term of the individual trial and patient enrollment rates in accordance with agreements with clinical research organizations and clinical trial sites. The Company determines the estimates by reviewing contracts, vendor agreements and purchase orders, and through discussions with internal clinical personnel and external service providers as to the progress or stage of completion of trials or services and the agreed-upon fee to be paid for such services. However, actual costs and timing of clinical trials are highly uncertain, subject to risks and may change depending upon a number of factors, including the Company’s clinical development plan.

Management makes estimates of the Company’s accrued expenses as of each balance sheet date in the Company’s consolidated financial statements based on facts and circumstances known to the Company at that time. If the actual timing of the performance of services or the level of effort varies from the estimate, the Company will adjust the accrual accordingly. Nonrefundable advance payments for goods and services, including fees for process development or manufacturing and distribution of clinical supplies that will be used in future research and development activities, are deferred and recognized as expense in the period that the related goods are consumed or services are performed.

In September 2020, the Company was awarded a Small Business Innovation Research grant from the National Cancer Institute of the National Institutes of Health, which will partially fund its Phase 1/2 safety and anti-cancer efficacy trial in NSCLC (the Grant). Costs entitled to reimbursement under the Grant are accounted for as a reduction to research and development expenses. During the six months ended June 30, 2021, the Company recorded a reduction to research and development expense of $0.3 million for expenses for which it has been reimbursed, or is entitled to reimbursement, under the Grant.

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 stock options and common stock warrants, 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.

9


GALERA THERAPEUTICS, INC.

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

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,

 

 

 

2021

 

 

2020

 

Stock options

 

 

5,009,997

 

 

 

4,596,357

 

Common stock warrants

 

 

550,661

 

 

 

550,661

 

 

 

 

5,560,658

 

 

 

5,147,018

 

 

COVID-19 update

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, or EUSOM trial, due to concerns with patient enrollment. The first patient was dosed in this trial in June 2020, and target enrollment was decreased to approximately 35 patients due to the delay. This trial was expected to contribute to the safety database for avasopasem in patients with HNC receiving radiotherapy. 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 to ensure the Company was positioned to maintain the overall planned size of the safety database in a timely manner. The Company has since completed enrollment in the ROMAN and EUSOM trials and topline data readout from each of these trials is expected in the fourth quarter of 2021.

In September 2020, the Company initiated a pilot Phase 2 clinical trial of avasopasem to evaluate its ability to improve 28-day mortality in hospitalized patients who are critically ill with COVID-19. The trial aimed to enroll up to 50 hospitalized adult patients critically ill with COVID-19 at several sites across the U.S. On June 16, 2021, the Company ceased enrolling subjects in this trial. Enrollment in the trial was limited at the three centers that participated. Due to the overall decline in COVID-related hospitalizations in the U.S. at the time, the Company determined that it was not feasible to complete the trial.

Recent accounting pronouncements

In December 2019, FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in Topic 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill and allocating consolidated income taxes to separate financial statements of entities not subject to income tax. This ASU is effective for fiscal years beginning after December 15, 2020, including interim periods therein. Upon adoption, the Company must apply certain aspects of this standard retrospectively for all periods presented while other aspects are applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. The Company adopted this ASU on January 1, 2021. There is no impact to 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.

10


GALERA THERAPEUTICS, INC.

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 

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.

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, 2021

 

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

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

   in cash equivalents)

 

$

32,194

 

 

$

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Short-term investments

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government agency securities

 

$

 

 

$

415

 

 

$

 

U.S. Treasury obligations

 

 

27,647

 

 

 

 

 

 

 

Total short-term investments

 

$

27,647

 

 

$

415

 

 

$

 

 

 

 

December 31, 2020

 

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

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

   in cash equivalents)

 

$

14,943

 

 

$

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Short-term investments

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government agency securities

 

$

 

 

$

5,062

 

 

$

 

U.S. Treasury obligations

 

 

51,842

 

 

 

 

 

 

 

Total short-term investments

 

$

51,842

 

 

$

5,062

 

 

$

 

 

There were no changes in valuation techniques during the six months ended June 30, 2021. Certain of 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. The fair value of Level 2 securities is estimated based on observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term on the assets or liabilities.

4.

Property and equipment

Property and equipment consist of (amounts in thousands):

 

 

 

June 30,

2021

 

 

December 31,

2020

 

Laboratory equipment

 

$

1,327

 

 

$

1,135

 

Computer hardware and software

 

 

273

 

 

 

260