10-Q
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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 March 31, 2022

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 Stock Market LLC (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 May 11, 2022, the registrant had 26,821,589 shares of common stock, $0.001 par value per share, outstanding.

 

 


 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements (Unaudited)

1

 

Consolidated Balance Sheets

1

 

Consolidated Statements of Operations

2

 

Consolidated Statements of Comprehensive Loss

3

 

Consolidated Statements of Changes in Stockholders’ Equity (Deficit)

4

 

Consolidated Statements of Cash Flows

5

 

Notes to Unaudited Interim Consolidated Financial Statements

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

15

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

24

Item 4.

Controls and Procedures

24

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

25

Item 1A.

Risk Factors

25

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

25

Item 3.

Defaults Upon Senior Securities

25

Item 4.

Mine Safety Disclosures

25

Item 5.

Other Information

25

Item 6.

Exhibits

26

Signatures

27

 

 

 

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) and our other product candidates; 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, 2021 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)

 

 

 

March 31, 2022

 

 

December 31, 2021

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

19,645

 

 

$

19,859

 

Short-term investments

 

 

41,302

 

 

 

51,358

 

Prepaid expenses and other current assets

 

 

4,329

 

 

 

6,175

 

Total current assets

 

 

65,276

 

 

 

77,392

 

Property and equipment, net

 

 

509

 

 

 

527

 

Acquired intangible asset

 

 

2,258

 

 

 

2,258

 

Goodwill

 

 

881

 

 

 

881

 

Right-of-use lease assets

 

 

229

 

 

 

296

 

Other assets

 

 

1,946

 

 

 

1,957

 

Total assets

 

$

71,099

 

 

$

83,311

 

Liabilities and stockholders’ deficit

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

4,131

 

 

$

5,044

 

Accrued expenses

 

 

6,566

 

 

 

7,633

 

Lease liabilities

 

 

234

 

 

 

258

 

Total current liabilities

 

 

10,931

 

 

 

12,935

 

Royalty purchase liability

 

 

130,366

 

 

 

128,063

 

Lease liabilities, net of current portion

 

 

 

 

 

44

 

Deferred tax liability

 

 

273

 

 

 

273

 

Total liabilities

 

 

141,570

 

 

 

141,315

 

Stockholders’ 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;
  
26,819,421 and 26,458,767 shares issued and outstanding at
   March 31, 2022 and December 31, 2021, respectively

 

 

27

 

 

 

26

 

Additional paid-in capital

 

 

261,108

 

 

 

258,086

 

Accumulated other comprehensive loss

 

 

(61

)

 

 

(14

)

Accumulated deficit

 

 

(331,545

)

 

 

(316,102

)

Total stockholders’ deficit

 

 

(70,471

)

 

 

(58,004

)

Total liabilities and stockholders’ deficit

 

$

71,099

 

 

$

83,311

 

 

See accompanying notes to unaudited interim consolidated financial statements.

1


 

GALERA THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)

(unaudited)

 

 

 

Three months ended
March 31,

 

 

 

2022

 

 

2021

 

Operating expenses:

 

 

 

 

 

 

Research and development

 

$

8,107

 

 

$

12,423

 

General and administrative

 

 

5,047

 

 

 

5,058

 

Loss from operations

 

 

(13,154

)

 

 

(17,481

)

Other income (expenses):

 

 

 

 

 

 

Interest income

 

 

14

 

 

 

19

 

Interest expense

 

 

(2,303

)

 

 

(1,253

)

Net loss

 

 

(15,443

)

 

 

(18,715

)

Net loss per share of common stock, basic and diluted

 

$

(0.58

)

 

$

(0.75

)

Weighted-average shares of common stock outstanding, basic and
   diluted

 

 

26,749,379

 

 

 

24,988,198

 

 

See accompanying notes to unaudited interim consolidated financial statements.

2


 

GALERA THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(IN THOUSANDS)

(unaudited)

 

 

 

Three months ended
March 31,

 

 

 

2022

 

 

2021

 

Net loss

 

$

(15,443

)

 

$

(18,715

)

Unrealized loss on short-term investments

 

 

(47

)

 

 

(2

)

Comprehensive loss

 

$

(15,490

)

 

$

(18,717

)

 

See accompanying notes to unaudited interim consolidated financial statements.

3


 

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

 

 

Deficit

 

 

Deficit

 

 Balance at January 1, 2022

 

 

26,458,767

 

 

$

26

 

 

$

258,086

 

 

$

(14

)

 

$

(316,102

)

 

$

(58,004

)

 Share-based compensation expense

 

 

 

 

 

 

 

 

1,848

 

 

 

 

 

 

 

 

 

1,848

 

 Exercise of stock options

 

 

46,358

 

 

 

 

 

 

58

 

 

 

 

 

 

 

 

 

58

 

 Sale of shares under Open Market Sale
 Agreement, net

 

 

314,296

 

 

 

1

 

 

 

1,116

 

 

 

 

 

 

 

 

 

1,117

 

 Unrealized loss on short-term
   investments

 

 

 

 

 

 

 

 

 

 

 

(47

)

 

 

 

 

 

(47

)

 Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(15,443

)

 

 

(15,443

)

 Balance at March 31, 2022

 

 

26,819,421

 

 

 

27

 

 

 

261,108

 

 

 

(61

)

 

 

(331,545

)

 

 

(70,471

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

 

Additional
paid-in

 

 

Accumulated
other
comprehensive

 

 

Accumulated

 

 

Total
Stockholders’
Equity

 

 

 

Shares

 

 

Amount

 

 

capital

 

 

income (loss)

 

 

Deficit

 

 

(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

)

 

See accompanying notes to unaudited interim consolidated financial statements.

4


 

GALERA THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

(unaudited)

 

 

 

Three months ended
March 31,

 

 

 

2022

 

 

2021

 

Operating activities:

 

 

 

 

 

 

Net loss

 

$

(15,443

)

 

$

(18,715

)

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

 

 

 

 

 

 

Depreciation and amortization

 

 

31

 

 

 

106

 

Noncash interest expense

 

 

2,303

 

 

 

1,253

 

Share-based compensation expense

 

 

1,848

 

 

 

1,791

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

1,846

 

 

 

(1,568

)

Other assets

 

 

78

 

 

 

4

 

Accounts payable

 

 

(913

)

 

 

4,071

 

Accrued expenses

 

 

(1,067

)

 

 

(2,242

)

Other liabilities

 

 

(68

)

 

 

(3

)

Cash used in operating activities

 

 

(11,385

)

 

 

(15,303

)

Investing activities:

 

 

 

 

 

 

Purchases of short-term investments

 

 

(15,651

)

 

 

(6,931

)

Proceeds from sales of short-term investments

 

 

25,660

 

 

 

20,000

 

Purchase of property and equipment

 

 

(13

)

 

 

(186

)

Cash provided by investing activities

 

 

9,996

 

 

 

12,883

 

Financing activities:

 

 

 

 

 

 

Proceeds from the sale of common stock,
   net of issuance costs

 

 

1,117

 

 

 

 

Proceeds from exercise of stock options

 

 

58

 

 

 

235

 

Cash provided by financing activities

 

 

1,175

 

 

 

235

 

Net decrease in cash and cash equivalents

 

 

(214

)

 

 

(2,185

)

Cash and cash equivalents at beginning of period

 

 

19,859

 

 

 

15,872

 

Cash and cash equivalents at end of period

 

$

19,645

 

 

$

13,687

 

Supplemental schedule of non-cash investing activities:

 

 

 

 

 

 

Unrealized loss on marketable securities

 

$

(47

)

 

$

(2

)

 

See accompanying notes to unaudited interim consolidated financial statements.

5


 

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. Galera's technology consists of selective small molecule dismutase mimetics that are in late-stage development in patients with cancer. Avasopasem manganese (GC4419, also referred to as avasopasem) is in development for radiotherapy-induced toxicities, including severe oral mucositis (SOM) in patients with locally advanced head and neck cancer (HNC) and esophagitis in patients with lung cancer. 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. Galera’s second dismutase mimetic product candidate, rucosopasem manganese (GC4711, also referred to as rucosopasem), is in clinical-stage development to augment the anti-cancer efficacy of stereotactic body radiation therapy (SBRT) in patients with non-small cell lung cancer (NSCLC) and locally advanced pancreatic cancer (LAPC).

In December 2021, the Company announced corrected topline efficacy results from a Phase 3 trial (referred to as the ROMAN trial) evaluating avasopasem for the reduction of radiotherapy-induced SOM in patients with locally advanced HNC. The Company had previously announced topline results from the ROMAN trial in October 2021. Upon further analysis following the October topline data announcement, an error by the contract research organization was identified in the statistical program. Correction of this error resulted in improved p-values for the primary and secondary endpoints. The corrected results demonstrated efficacy across multiple SOM endpoints with a statistically significant reduction on the primary endpoint of reduction in the incidence of SOM and a statistically significant reduction on the secondary endpoint of number of days of SOM. The ROMAN trial is the Company’s second randomized trial conducted in patients with HNC to achieve statistical significance and demonstrate improved clinical benefit in reducing SOM. Based on these data, the Company plans to submit to the FDA a New Drug Application, or NDA, of avasopasem for radiotherapy-induced SOM by the end of 2022.

In addition to developing avasopasem for the reduction of normal tissue toxicity from radiotherapy, the Company is developing its second dismutase mimetic product candidate, rucosopasem, to increase the anti-cancer efficacy of higher daily doses of radiotherapy, or SBRT. In September 2021, in support of rucosopasem, the Company announced final results from its Phase 1/2 pilot trial of avasopasem in combination with SBRT in patients with unresectable or borderline resectable LAPC. In this proof-of-concept trial, survival and tumor outcome benefits were observed. The Company used its observations from this pilot trial to inform the design of rucosopasem clinical trials in combination with SBRT. The Company has successfully completed Phase 1 trials of intravenous rucosopasem in healthy volunteers and is currently evaluating rucosopasem in combination with SBRT in a Phase 1/2 safety and anti-cancer efficacy trial in NSCLC, and a Phase 2b trial of rucosopasem in combination with SBRT in patients with LAPC.

Liquidity

The Company has incurred recurring losses and negative cash flows from operations since inception and has an accumulated deficit of $331.5 million as of March 31, 2022. 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 March 31, 2022 will enable the Company to fund its operating expenses and capital expenditure requirements into the second half of 2023. In the future, if the Company is not able to continue to raise sufficient capital to fund its operations, the Company may decide to delay or discontinue certain activities, including planned research and development activities, hiring plans, manufacturing activities and commercial preparation efforts. In December 2020, the Company filed a registration statement with the Securities and Exchange Commission (SEC) which covers the offering, issuance and sale of up to $200.0 million in Company 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 three months ended March 31, 2022, the Company sold approximately 0.3 million shares of common stock and received net proceeds of $1.1 million pursuant to the Sales Agreement. As of March 31, 2022, there remained approximately $40.6 million available under the Sales Agreement.

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, 2021 and 2020 included in the Company’s annual report on Form 10-K filed with the SEC on March 10, 2022 have not materially changed, except as set forth below.

6


GALERA THERAPEUTICS, INC.

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 

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).

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 March 31, 2022 and its results of operations for the three months ended March 31, 2022 and 2021, and statements of changes in stockholder’s equity (deficit) and cash flows for the three months ended March 31, 2022 and 2021. Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022, 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, 2021, included in the Company’s annual report on Form 10-K and filed with the SEC on March 10, 2022.

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 three months ended March 31, 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. The Company has fully

7


GALERA THERAPEUTICS, INC.

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 

utilized the $1.1 million of available funding under the Grant and did not receive any reimbursement during the three months ended March 31, 2022.

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.

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:

 

 

 

March 31,

 

 

 

2022

 

 

2021

 

Stock options

 

 

5,976,403

 

 

 

5,173,716

 

Common stock warrants

 

 

550,661

 

 

 

550,661

 

 

 

 

6,527,064

 

 

 

5,724,377

 

 

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.

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

 

 

 

March 31, 2022

 

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

Assets

 

 

 

 

 

 

 

 

 

Money market funds and U.S. Treasury obligations
   (included in cash equivalents)

 

$

13,362

 

 

$

 

 

$

 

 

 

 

 

 

 

 

 

 

 

Short-term investments

 

 

 

 

 

 

 

 

 

U.S. Treasury obligations

 

$

41,302

 

 

 

 

 

 

 

 

8


GALERA THERAPEUTICS, INC.

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 

 

 

 

December 31, 2021

 

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

Assets

 

 

 

 

 

 

 

 

 

Money market funds and U.S. Treasury obligations
   (included in cash equivalents)

 

$

12,346

 

 

$

 

 

$

 

 

 

 

 

 

 

 

 

 

 

Short-term investments

 

 

 

 

 

 

 

 

 

U.S. government agency securities

 

$

 

 

$

5,413

 

 

$

 

U.S. Treasury obligations

 

 

45,945

 

 

 

 

 

 

 

Total short-term investments

 

$

45,945

 

 

$

5,413

 

 

$

 

 

There were no changes in valuation techniques during the three months ended March 31, 2022. The Company’s short-term investment instruments classified using Level 1 inputs within the fair value hierarchy are classified as such 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):

 

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Laboratory equipment

 

$

1,393

 

 

$

1,379

 

Computer hardware and software

 

 

292

 

 

 

292

 

Leasehold improvements

 

 

264

 

 

 

264

 

Furniture and fixtures

 

 

179

 

 

 

179

 

Property and equipment, gross

 

 

2,128

 

 

 

2,114

 

Less: Accumulated depreciation and amortization

 

 

(1,619

)

 

 

(1,587

)

Property and equipment, net

 

$

509

 

 

$

527

 

 

Depreciation and amortization expense was $31,000 and $0.1 million for the three months ended March 31, 2022 and 2021, respectively.

5.
Accrued expenses

Accrued expenses consist of (amounts in thousands):

 

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Compensation and related benefits

 

$

945

 

 

$

2,038

 

Research and development expenses

 

 

5,330

 

 

 

5,360

 

Professional fees and other expenses

 

 

291

 

 

 

235

 

 

 

$

6,566

 

 

$

7,633

 

 

9


GALERA THERAPEUTICS, INC.

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 

6.
Royalty purchase liability

Pursuant to our 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), 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, the second tranche of the Royalty Purchase Price in April 2019, and the third tranche of the Royalty Purchase Price in February 2020, in each case in connection with the achievement of the first three milestones, respectively.

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. In June 2021, the Company received the new tranche ($20.0 million) under the Amendment in connection with the enrollment of the first patient in a Phase 2b trial of rucosopasem in combination with SBRT in patients with locally advanced pancreatic cancer, which the Company refers to as the GRECO-2 trial. Also in June 2021, the Company completed enrollment in the ROMAN trial, thereby achieving the milestone associated with the fourth tranche ($37.5 million) under the Amendment, which was received in July 2021.

The Company accounts for the Royalty Agreement as a debt instrument. The $117.5 million in proceeds received as of March 31, 2022 have been recorded as a liability on the accompanying consolidated balance sheets. Interest expense is imputed based on the estimated royalty repayment period described below, which takes into consideration the probability and timing of obtaining FDA approval and the potential future revenue from commercializing its product candidates, and which results in a corresponding increase in the liability balance. As the Company continues to evaluate the next steps for its programs focused on the reduction of radiotherapy-induced toxicity, planned or possible next steps may have a material impact on the royalty purchase liability. The Company recognized $2.3 million and $1.3 million in noncash interest expense during the three months ended March 31, 2022 and 2021, respectively. As of March 31, 2022, the effective interest rate was 7.2%.

Pursuant to the Royalty Agreement and the Amendment, 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 rucosopasem (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 Royalty Agreement and the Amendment 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. If no Products are commercialized, the Company would not have an obligation to make Product Payments to Blackstone, which is the sole mechanism for repaying the liability.

Upon execution of the Amendment, the Company issued common stock warrants to the Blackstone Purchaser, each of which became exercisable upon the receipt by the Company of the applicable specified milestone payment. The issued warrants expire six years after the initial exercise dates, as follows:
 

 

 

Shares

 

 

Exercise Price

 

 

Initial Exercise Date

 

Expiration Date

New Milestone Warrant

 

 

293,686

 

 

$

13.62

 

 

6/7/2021

 

6/6/2027

Fourth Milestone Warrant

 

 

256,975

 

 

$

13.62

 

 

7/19/2021

 

7/18/2027

 

10


GALERA THERAPEUTICS, INC.

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 

The warrants are equity-classified and were valued at $4.7 million using the Black-Scholes option pricing model. The warrants were recorded as a discount to the royalty purchase liability. The Company amortizes 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 a non-cancelable operating lease for office space in Malvern, Pennsylvania which, as of March 31, 2022, has a remaining lease term of approximately 0.9 years. The discount rate used to account for the Company’s operating leases under FASB ASU No. 2018-11, Leases (Topic 842), is the Company’s estimated incremental borrowing rate of 5.3%.

Supplemental balance sheet information related to leases was as follows:

 

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Operating Leases

 

 

 

 

 

 

Right-of-use lease assets

 

$

229

 

 

$

296

 

 

 

 

 

 

 

 

Lease liabilities, current

 

 

234

 

 

 

258

 

Lease liabilities, net of current portion

 

 

 

 

 

44

 

Total operating lease liabilities

 

$

234

 

 

$

302

 

 

 

 

 

 

 

 

 

The components of lease expense were as follows:

 

 

 

Three months ended
March 31,

 

 

 

2022

 

 

2021

 

Operating lease costs

 

 

 

 

 

 

Operating lease rental expense

 

$

68

 

 

$

73

 

Interest on lease liabilities

 

 

3

 

 

 

7

 

Total operating lease expense

 

$

71

 

 

$

80

 

 

Supplemental cash flow information related to leases was as follows:

 

 

 

Three months ended
March 31,

 

 

 

2022

 

 

2021

 

Cash paid for amounts included in the measurement of lease liabilities

 

 

 

 

 

 

Operating cash flows for operating leases

 

$

71

 

 

$

81

 

Right-of-use assets obtained in exchange for lease obligation

 

 

 

 

 

 

Operating leases

 

 

 

 

 

70

 

 

Future minimum rental payments under the Company’s non-cancelable operating lease liabilities as of March 31, 2022 (amounts in thousands):

 

Remainder of 2022

 

$

195

 

2023

 

 

44

 

Total

 

 

239

 

Less: imputed interest

 

 

(5

)

 

 

$

234

 

 

11


GALERA THERAPEUTICS, INC.

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 

8.
Equity

 

Equity offerings

In December 2020, the Company entered into the Sales Agreement with Jefferies LLC (Jefferies) as sales agent, pursuant to which it may, from time to time, issue and sell common stock with an aggregate value of up to $50.0 million in “at-the-market” (ATM) offerings under the Company’s Registration Statement on Form S-3 (File No. 333-251061) filed with the SEC on December 1, 2020. Sales of common stock, if any, pursuant to the Sales Agreement, may be made in sales deemed to be an “at the market offering” as defined in Rule 415(a) of the Securities Act, including sales made directly through the Nasdaq Global Market or on any other existing trading market for the Company’s common stock. The Company is required to pay Jefferies a commission equal to three percent of the gross sales proceeds and has provided Jefferies with customary indemnification rights. During the three months ended March 31, 2022, 314,296 shares were sold under the Sales Agreement at a weighted average price per share of $3.70. Net proceeds to the Company after deducting fees, commissions and other expenses related to the offering were approximately $1.1 million for the three months ended March 31, 2022. As of March 31, 2022, there was approximately $40.6 million of available capacity under the Sales Agreement.

Share-based compensation

In connection with the Company’s Initial Public Offering, or IPO, in November 2019, the Company’s board of directors adopted and the Company’s stockholders approved the Galera Therapeutics, Inc. 2019 Incentive Award Plan (the 2019 Plan), which became effective upon the effectiveness of the registration statement on Form S-1 for the IPO. Upon effectiveness of the 2019 Plan, the Company ceased granting new awards under the Prior Plan (as defined herein).

The 2019 Plan provides for the grant of incentive stock options, nonstatutory stock options, restricted stock awards, restricted stock units, stock appreciation rights and other stock-based awards. The number of shares of common stock initially available for issuance under the 2019 Plan was 1,948,970 shares of common stock plus the number of shares subject to awards outstanding under the Prior Plan that expire, terminate or are otherwise surrendered, cancelled, forfeited or repurchased by the Company on or after the effective date of the 2019 Plan. In addition, the number of shares of common stock available for issuance under the 2019 Plan is subject to an annual increase on the first day of each calendar year beginning on January 1, 2020 and ending on and including January 1, 2029 equal to the lesser of (i)