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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, 2023

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.)

45 Liberty Blvd, Suite 230

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 8, 2023, the registrant had 42,906,833 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’ 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

16

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

29

Item 3.

Defaults Upon Senior Securities

29

Item 4.

Mine Safety Disclosures

29

Item 5.

Other Information

29

Item 6.

Exhibits

30

Signatures

31

 

 

 

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 and our plans regarding 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, expected coverage and reimbursement for avasopasem and our other product candidates, the sufficiency of our cash, cash equivalents and short-term investments and our ability to raise additional capital to fund our operations, our plans to mitigate the risk that we are unable to continue as a going concern, the anticipated impact of the COVID-19 pandemic and general economic conditions 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; substantial doubt regarding our ability to continue as a going concern; 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 and general economic conditions on our business and operations, including clinical trials; 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, 2022 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, 2023

 

 

December 31, 2022

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

25,687

 

 

$

4,266

 

Short-term investments

 

 

22,064

 

 

 

27,331

 

Restricted cash

 

 

50

 

 

 

50

 

Refundable PDUFA fee

 

 

3,242

 

 

 

3,242

 

Prepaid expenses and other current assets

 

 

3,200

 

 

 

3,646

 

Total current assets

 

 

54,243

 

 

 

38,535

 

Property and equipment, net

 

 

418

 

 

 

438

 

Acquired intangible asset

 

 

2,258

 

 

 

2,258

 

Goodwill

 

 

881

 

 

 

881

 

Right-of-use lease assets

 

 

 

 

 

43

 

Other assets

 

 

1,914

 

 

 

1,881

 

Total assets

 

$

59,714

 

 

$

44,036

 

Liabilities and stockholders’ deficit

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

5,937

 

 

$

3,581

 

Accrued expenses

 

 

7,329

 

 

 

9,754

 

Lease liabilities

 

 

 

 

 

44

 

Total current liabilities

 

 

13,266

 

 

 

13,379

 

Royalty purchase liability

 

 

143,858

 

 

 

139,635

 

Deferred tax liability

 

 

203

 

 

 

203

 

Total liabilities

 

 

157,327

 

 

 

153,217

 

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;
 
42,906,833 and 28,510,066 shares issued and outstanding at
  March 31, 2023 and December 31, 2022, respectively

 

 

43

 

 

 

28

 

Additional paid-in capital

 

 

298,362

 

 

 

269,137

 

Accumulated other comprehensive gain (loss)

 

 

16

 

 

 

(22

)

Accumulated deficit

 

 

(396,034

)

 

 

(378,324

)

Total stockholders’ deficit

 

 

(97,613

)

 

 

(109,181

)

Total liabilities and stockholders’ deficit

 

$

59,714

 

 

$

44,036

 

 

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,

 

 

 

2023

 

 

2022

 

Operating expenses:

 

 

 

 

 

 

Research and development

 

$

7,272

 

 

$

8,107

 

General and administrative

 

 

6,609

 

 

 

5,047

 

Loss from operations

 

 

(13,881

)

 

 

(13,154

)

Other income (expenses):

 

 

 

 

 

 

Interest income

 

 

395

 

 

 

14

 

Interest expense

 

 

(4,223

)

 

 

(2,303

)

Foreign currency loss

 

 

(1

)

 

 

 

Net loss

 

 

(17,710

)

 

 

(15,443

)

Net loss per share of common stock, basic and diluted

 

$

(0.50

)

 

$

(0.58

)

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

 

 

35,196,134

 

 

 

26,749,379

 

 

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,

 

 

 

2023

 

 

2022

 

Net loss

 

$

(17,710

)

 

$

(15,443

)

Unrealized gain (loss) on short-term investments

 

 

38

 

 

 

(47

)

Comprehensive loss

 

$

(17,672

)

 

$

(15,490

)

 

See accompanying notes to unaudited interim consolidated financial statements.

3


 

GALERA THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

(IN THOUSANDS EXCEPT SHARE AMOUNTS)

(unaudited)

 

 

 

Common stock

 

 

Additional
paid-in

 

 

Accumulated
other
comprehensive

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

capital

 

 

gain (loss)

 

 

Deficit

 

 

Deficit

 

 Balance at January 1, 2023

 

 

28,510,066

 

 

$

28

 

 

$

269,137

 

 

$

(22

)

 

$

(378,324

)

 

$

(109,181

)

 Share-based compensation expense

 

 

 

 

 

 

 

 

1,458

 

 

 

 

 

 

 

 

 

1,458

 

 Exercise of stock options

 

 

76,767

 

 

 

1

 

 

 

183

 

 

 

 

 

 

 

 

 

184

 

 Sale of common stock and common stock warrants
   in registered direct offering, net of issuance costs
   of $
2,403

 

 

14,320,000

 

 

 

14

 

 

 

27,584

 

 

 

 

 

 

 

 

 

27,598

 

 Unrealized gain on short-term
   investments

 

 

 

 

 

 

 

 

 

 

 

38

 

 

 

 

 

 

38

 

 Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(17,710

)

 

 

(17,710

)

 Balance at March 31, 2023

 

 

42,906,833

 

 

$

43

 

 

$

298,362

 

 

$

16

 

 

$

(396,034

)

 

$

(97,613

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

)

 

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,

 

 

 

2023

 

 

2022

 

Operating activities:

 

 

 

 

 

 

Net loss

 

$

(17,710

)

 

$

(15,443

)

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

 

 

 

 

 

 

Depreciation and amortization

 

 

20

 

 

 

31

 

Noncash interest expense

 

 

4,223

 

 

 

2,303

 

Share-based compensation expense

 

 

1,458

 

 

 

1,848

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

446

 

 

 

1,846

 

Other assets

 

 

10

 

 

 

78

 

Accounts payable

 

 

2,356

 

 

 

(913

)

Accrued expenses

 

 

(2,425

)

 

 

(1,067

)

Other liabilities

 

 

(44

)

 

 

(68

)

Cash used in operating activities

 

 

(11,666

)

 

 

(11,385

)

Investing activities:

 

 

 

 

 

 

Purchases of short-term investments

 

 

(12,445

)

 

 

(15,651

)

Proceeds from sales of short-term investments

 

 

17,750

 

 

 

25,660

 

Purchase of property and equipment

 

 

 

 

 

(13

)

Cash provided by investing activities

 

 

5,305

 

 

 

9,996

 

Financing activities:

 

 

 

 

 

 

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

 

 

27,598

 

 

 

1,117

 

Proceeds from exercise of stock options

 

 

184

 

 

 

58

 

Cash provided by financing activities

 

 

27,782

 

 

 

1,175

 

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

21,421

 

 

 

(214

)

Cash, cash equivalents and restricted cash at beginning of period

 

 

4,316

 

 

 

19,859

 

Cash, cash equivalents and restricted cash at end of period

 

$

25,737

 

 

$

19,645

 

 

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 (avasopasem, or GC4419) 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. The Company is also exploring the potential for avasopasem to reduce cisplatin-induced kidney damage. The U.S. Food and Drug Administration (FDA) has granted Fast Track and Breakthrough Therapy designations to avasopasem for the reduction of SOM induced by radiotherapy. In February 2023, the FDA accepted and granted Priority Review designation to the Company's New Drug Application (NDA) for avasopasem for this indication. Galera’s second dismutase mimetic product candidate, rucosopasem manganese (rucosopasem, or GC4711), 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 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 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, with a median of 18 days in the placebo arm versus 8 days in the avasopasem arm. The Company had previously announced topline results from the ROMAN trial in October 2021 that incorrectly stated the reduction on the primary endpoint was not statistically significant. Upon further analysis, an error by the contract research organization was identified in the statistical program. Correction of this error yielded the correct, statistically significant p-values for the primary and a key secondary endpoint. Exploratory analyses, such as time to SOM onset and SOM incidence at various landmarks of radiotherapy delivered, further demonstrated the potential clinical utility of avasopasem in reducing the burden of SOM. Avasopasem appeared to be generally well tolerated compared to placebo.

 

The ROMAN trial is the Company’s second randomized, placebo-controlled trial conducted in patients with HNC to achieve statistical significance and demonstrate clinical benefit in reducing SOM. In December 2022, the Company submitted an NDA to the FDA for avasopasem for radiotherapy-induced SOM in patients with HNC undergoing standard-of-care treatment. The NDA is supported by the data from the two randomized, double-blinded, placebo-controlled trials (ROMAN and Phase 2b GT-201), as well as data from other clinical trials of avasopasem in the proposed indication. In February 2023, the FDA accepted the NDA and granted priority review with a Prescription Drug User Fee Act (PDUFA) target date of August 9, 2023. The FDA indicated in its acceptance of filing letter that it is not planning to hold an advisory committee meeting on the application.

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 $396.0 million as of March 31, 2023. 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 follows the provisions of Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 205-40, Presentation of Financial Statements—Going Concern, which requires management to assess the Company’s ability to continue as a going concern for one year after the date the financial statements are issued. The Company expects its existing cash, cash equivalents and short-term investments as of March 31, 2023 will enable the Company to fund its operating expenses and capital expenditure requirements into the fourth quarter of 2023, but not for more than one year after the date of the filing of this Quarterly Report on Form 10-Q, and therefore management has concluded that substantial doubt exists about the Company’s ability to continue as a going concern. Management’s plans to mitigate this risk include raising additional capital through equity or debt financings, or through strategic transactions. Management’s plans may also include the deferral of certain operating expenses unless and until additional capital is received. However, there can be no assurance that the Company will be successful in raising additional capital or that such capital, if

 


GALERA THERAPEUTICS, INC.

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 

available, will be on terms that are acceptable to the Company, or that the Company will be successful in deferring certain operating expenses. If the Company is unable to raise sufficient additional capital or defer sufficient operating expenses, the Company may be compelled to reduce the scope of its operations and planned capital expenditures. 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. The interim consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the continuity of operations, the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.

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. No securities were issued pursuant to the Sales Agreement during the three months ended March 31, 2023. As of March 31, 2023, there remained $37.8 million available under the Sales Agreement.

On February 17, 2023, the Company completed a registered direct offering, which resulted in the issuance and sale of 14,320,000 shares of its common stock and warrants to purchase up to 14,320,000 shares of common stock at a combined offering price of $2.095 per share and accompanying warrant, generating gross proceeds of $30.0 million. The warrants have an exercise price of $1.97 per share of common stock, are exercisable immediately following their issuance and will expire five years from the date of issuance. The Company received net proceeds of $27.6 million from this offering, after deducting placement agent fees and offering expenses.

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, 2022 and 2021 included in the Company’s annual report on Form 10-K filed with the SEC on March 8, 2023 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).

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, 2023 and its results of operations for the three months ended March 31, 2023 and 2022, and statements of changes in stockholder’s equity (deficit) and cash flows for the three months ended March 31, 2023 and 2022. Operating results for the three months ended March 31, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023, 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, 2022, included in the Company’s annual report on Form 10-K and filed with the SEC on March 8, 2023.

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

7


GALERA THERAPEUTICS, INC.

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 

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

 

Cash and cash equivalents

 

The Company considers all highly liquid investments that have maturities of three months or less when acquired to be cash equivalents. Cash and cash equivalents as of March 31, 2023 and December 31, 2022 consisted of bank deposits, U.S. Treasury obligations, U.S. government agency securities, and a money market mutual fund invested in U.S. Treasury obligations. We maintain a portion of our cash and cash equivalents in accounts with major financial institutions, and our deposits at these institutions exceed insured limits.

Restricted cash

Restricted cash represents collateral provided under a commercial credit card agreement entered into with TD Bank, N.A. during July 2022. Restricted cash was $50,000 as of March 31, 2023. The Company has recorded this deposit and accumulated interest thereon as restricted cash on its consolidated balance sheet.

Refundable PDUFA fee

In December 2022, the Company paid a $3.2 million PDUFA fee to the FDA in conjunction with the filing of its NDA for avasopasem. The Company requested and has been granted a small business waiver of this PDUFA fee from the FDA, and the amount has been recorded as a Refundable PDUFA fee on the Company’s consolidated balance sheet, as a refund is expected in 2023.

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.

Net loss per share

Basic loss per share of common stock is computed by dividing net loss 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.

8


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:

 

 

 

March 31,

 

 

 

2023

 

 

2022

 

Stock options

 

 

7,269,032

 

 

 

5,976,403

 

Common stock warrants

 

 

14,870,661

 

 

 

550,661

 

 

 

22,139,693

 

 

 

6,527,064

 

 

Recent Accounting Pronouncements

In August 2020, FASB issued ASU 2020-06, “Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity,” which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, and it also simplifies the diluted earnings per share calculation in certain areas. This guidance is effective for fiscal years beginning after December 15, 2023, including interim periods therein. Early adoption is permitted. The Company adopted this ASU on January 1, 2023. 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.
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, 2023

 

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

Assets

 

 

 

 

 

 

 

 

 

Cash equivalents

 

 

 

 

 

 

 

 

 

Money market funds and U.S. Treasury obligations

 

$

14,880

 

 

$

 

 

$

 

U.S. government agency securities

 

 

 

 

 

9,732

 

 

 

 

Total cash equivalents

 

$

14,880

 

 

$

9,732

 

 

$

 

 

 

 

 

 

 

 

 

 

Short-term investments

 

 

 

 

 

 

 

 

 

U.S. government agency securities

 

$

 

 

$

17,337

 

 

$

 

U.S. Treasury obligations

 

 

4,727

 

 

 

 

 

 

 

Total short-term investments

 

$

4,727

 

 

$

17,337

 

 

$

 

 

9


GALERA THERAPEUTICS, INC.

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 

 

 

 

December 31, 2022

 

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

Assets

 

 

 

 

 

 

 

 

 

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

 

$

3,467

 

 

$

 

 

$

 

 

 

 

 

 

 

 

 

 

Short-term investments

 

 

 

 

 

 

 

 

 

U.S. government agency securities

 

$

 

 

$

8,172

 

 

$

 

U.S. Treasury obligations

 

 

19,159

 

 

 

 

 

 

 

Total short-term investments

 

$

19,159

 

 

$

8,172

 

 

$

 

 

There were no changes in valuation techniques during the three months ended March 31, 2023. 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,

 

 

 

2023

 

 

2022

 

Laboratory equipment

 

$

1,398

 

 

$

1,398

 

Computer hardware and software

 

 

292

 

 

 

292

 

Leasehold improvements

 

 

 

 

 

270

 

Furniture and fixtures

 

 

179

 

 

 

179

 

Property and equipment, gross

 

 

1,869

 

 

 

2,139

 

Less: Accumulated depreciation and amortization

 

 

(1,451

)

 

 

(1,701

)

Property and equipment, net

 

$

418

 

 

$

438

 

 

Depreciation and amortization expense was $20,000 and $31,000 for the three months ended March 31, 2023 and 2022, respectively.

5.
Accrued expenses

Accrued expenses consist of (amounts in thousands):

 

 

 

March 31,

 

 

December 31,

 

 

 

2023

 

 

2022

 

Compensation and related benefits

 

$

818

 

 

$

2,655

 

Research and development expenses

 

 

6,024

 

 

 

6,764

 

Professional fees and other expenses

 

 

487

 

 

 

335

 

 

 

$

7,329

 

 

$

9,754

 

 

10


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, 2023 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. The Company updated the assumptions underlying the calculation of interest expense on the royalty purchase liability based on the FDA acceptance of the Company's NDA in February 2023 with Priority Review designation. The Company recognized $4.2 million and $2.3 million in noncash interest expense during the three months ended March 31, 2023 and 2022, respectively. As of March 31, 2023, the effective interest rate was 12.3%.

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