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 June 30, 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 August 10, 2023, the registrant had 43,928,666 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

17

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

28

Item 4.

Controls and Procedures

28

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

29

Item 1A.

Risk Factors

29

Item 2.

Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities

34

Item 3.

Defaults Upon Senior Securities

34

Item 4.

Mine Safety Disclosures

34

Item 5.

Other Information

34

Item 6.

Exhibits

35

Signatures

36

 

 

 

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 the expected financial and operational impacts of our recent reduction in force; our intention to request and hold a Type A meeting with the FDA; our plans to evaluate strategic alternatives; 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; 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; our recent reduction in force undertaken to significantly reduce our ongoing operating expenses may not result in our intended outcomes and may yield unintended consequences and additional costs; we may not be able to enter into any desired strategic alternative or partnership on a timely basis, on acceptable terms, or at all; if we are unable to secure additional funding or enter into any desired strategic alternative or partnership, we may need to cease operations; 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)

 

 

 

June 30, 2023

 

 

December 31, 2022

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

24,302

 

 

$

4,266

 

Short-term investments

 

 

14,453

 

 

 

27,331

 

Restricted cash

 

 

50

 

 

 

50

 

Refundable PDUFA fee

 

 

 

 

 

3,242

 

Prepaid expenses and other current assets

 

 

3,198

 

 

 

3,646

 

Total current assets

 

 

42,003

 

 

 

38,535

 

Property and equipment, net

 

 

210

 

 

 

438

 

Acquired intangible asset

 

 

2,258

 

 

 

2,258

 

Goodwill

 

 

881

 

 

 

881

 

Right-of-use lease assets

 

 

1,286

 

 

 

43

 

Other assets

 

 

1,638

 

 

 

1,881

 

Total assets

 

$

48,276

 

 

$

44,036

 

Liabilities and stockholders’ deficit

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

5,516

 

 

$

3,581

 

Accrued expenses

 

 

7,978

 

 

 

9,754

 

Lease liabilities

 

 

128

 

 

 

44

 

Total current liabilities

 

 

13,622

 

 

 

13,379

 

Royalty purchase liability

 

 

148,257

 

 

 

139,635

 

Lease liabilities, net of current portion

 

 

1,193

 

 

 

 

Deferred tax liability

 

 

203

 

 

 

203

 

Total liabilities

 

 

163,275

 

 

 

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;
 
43,826,833 and 28,510,066 shares issued and outstanding at
  June 30, 2023 and December 31, 2022, respectively

 

 

44

 

 

 

28

 

Additional paid-in capital

 

 

301,698

 

 

 

269,137

 

Accumulated other comprehensive gain (loss)

 

 

5

 

 

 

(22

)

Accumulated deficit

 

 

(416,746

)

 

 

(378,324

)

Total stockholders’ deficit

 

 

(114,999

)

 

 

(109,181

)

Total liabilities and stockholders’ deficit

 

$

48,276

 

 

$

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
June 30,

 

 

Six months ended
June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

7,561

 

 

$

6,636

 

 

$

14,833

 

 

$

14,743

 

General and administrative

 

 

9,246

 

 

 

5,293

 

 

 

15,855

 

 

 

10,340

 

Loss from operations

 

 

(16,807

)

 

 

(11,929

)

 

 

(30,688

)

 

 

(25,083

)

Other income (expenses):

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

494

 

 

 

71

 

 

 

889

 

 

 

85

 

Interest expense

 

 

(4,399

)

 

 

(2,699

)

 

 

(8,622

)

 

 

(5,002

)

Foreign currency loss

 

 

 

 

 

(1

)

 

 

(1

)

 

 

(1

)

Net loss

 

 

(20,712

)

 

 

(14,558

)

 

 

(38,422

)

 

 

(30,001

)

Net loss per share of common stock, basic and diluted

 

$

(0.48

)

 

$

(0.54

)

 

$

(0.98

)

 

$

(1.12

)

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

 

 

42,916,962

 

 

 

26,821,303

 

 

 

39,077,876

 

 

 

26,785,540

 

 

See accompanying notes to unaudited interim consolidated financial statements.

2


 

GALERA THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(IN THOUSANDS)

(unaudited)

 

 

 

Three months ended
June 30,

 

 

Six months ended
June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net loss

 

$

(20,712

)

 

$

(14,558

)

 

$

(38,422

)

 

$

(30,001

)

Unrealized gain (loss) on short-term investments

 

 

(11

)

 

 

(49

)

 

 

27

 

 

 

(96

)

Comprehensive loss

 

$

(20,723

)

 

$

(14,607

)

 

$

(38,395

)

 

$

(30,097

)

 

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

)

 Share-based compensation expense

 

 

 

 

 

 

 

 

1,525

 

 

 

 

 

 

 

 

 

1,525

 

 Exercise of common stock warrants

 

 

920,000

 

 

 

1

 

 

 

1,811

 

 

 

 

 

 

 

 

 

1,812

 

 Unrealized loss on short-term
   investments

 

 

 

 

 

 

 

 

 

 

 

(11

)

 

 

 

 

 

(11

)

 Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(20,712

)

 

 

(20,712

)

 Balance at June 30, 2023

 

 

43,826,833

 

 

$

44

 

 

$

301,698

 

 

$

5

 

 

$

(416,746

)

 

$

(114,999

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

)

 Share-based compensation expense

 

 

 

 

 

 

 

 

1,830

 

 

 

 

 

 

 

 

 

1,830

 

 Exercise of stock options

 

 

2,168

 

 

 

 

 

 

2

 

 

 

 

 

 

 

 

 

2

 

 Unrealized loss on short-term
   investments

 

 

 

 

 

 

 

 

 

 

 

(49

)

 

 

 

 

 

(49

)

 Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(14,558

)

 

 

(14,558

)

 Balance at June 30, 2022

 

 

26,821,589

 

 

$

27

 

 

$

262,940

 

 

$

(110

)

 

$

(346,103

)

 

$

(83,246

)

 

See accompanying notes to unaudited interim consolidated financial statements.

4


 

GALERA THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

(unaudited)

 

 

 

Six months ended
June 30,

 

 

 

2023

 

 

2022

 

Operating activities:

 

 

 

 

 

 

Net loss

 

$

(38,422

)

 

$

(30,001

)

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

 

 

 

 

 

 

Depreciation and amortization

 

 

32

 

 

 

61

 

Noncash interest expense

 

 

8,622

 

 

 

5,002

 

Share-based compensation expense

 

 

2,983

 

 

 

3,678

 

Gain on disposal of property and equipment

 

 

(72

)

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Refundable PDUFA fee

 

 

3,242

 

 

 

 

Prepaid expenses and other current assets

 

 

768

 

 

 

2,994

 

Other assets

 

 

309

 

 

 

(12

)

Accounts payable

 

 

1,935

 

 

 

(1,456

)

Accrued expenses

 

 

(1,777

)

 

 

(407

)

Other liabilities

 

 

(32

)

 

 

(130

)

Cash used in operating activities

 

 

(22,412

)

 

 

(20,271

)

Investing activities:

 

 

 

 

 

 

Purchases of short-term investments

 

 

(18,596

)

 

 

(34,529

)

Proceeds from sales of short-term investments

 

 

31,500

 

 

 

51,160

 

Purchase of property and equipment

 

 

(50

)

 

 

(20

)

Cash provided by investing activities

 

 

12,854

 

 

 

16,611

 

Financing activities:

 

 

 

 

 

 

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

 

 

27,598

 

 

 

1,117

 

Proceeds from the exercise of common stock warrants

 

 

1,812

 

 

 

 

Proceeds from exercise of stock options

 

 

184

 

 

 

60

 

Cash provided by financing activities

 

 

29,594

 

 

 

1,177

 

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

 

 

20,036

 

 

 

(2,483

)

Cash, cash equivalents and restricted cash at beginning of period

 

 

4,316

 

 

 

19,859

 

Cash, cash equivalents and restricted cash at end of period

 

$

24,352

 

 

$

17,376

 

Supplemental schedule of non-cash investing and financing activities:

 

 

 

 

 

 

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

 

$

1,310

 

 

$

 

Sale of property and equipment in exchange for prepaid future services

 

$

319

 

 

$

 

 

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. 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). The FDA has granted orphan drug designation to rucosopasem for the treatment of pancreatic cancer.

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.

On August 9, 2023, the Company announced that it had received a Complete Response Letter (CRL) from the FDA regarding the Company’s NDA for avasopasem for radiotherapy-induced SOM in patients with HNC undergoing standard-of-care treatment. In the CRL, the FDA communicated that the results from the Phase 3 ROMAN trial together with the supporting data from the Phase 2b GT-201 trial are not sufficiently persuasive to establish substantial evidence of avasopasem’s effectiveness and safety for reducing SOM in patients with HNC. FDA stated that results from an additional clinical trial will be required for resubmission. The Company intends to request a Type A meeting with the FDA to understand the FDA’s rationale for its decision and discuss next steps to support an NDA resubmission seeking approval of avasopasem.

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.

In connection with the CRL announcement, on August 9, 2023, the Company further announced that it will focus resources on exploring a potential approval path for avasopasem in radiotherapy-induced SOM, progressing its ongoing clinical trials for rucosopasem, and concurrently evaluating strategic alternatives, including partnering, for the continued development of avasopasem and rucosopasem. As a result, the Company is winding down its commercial readiness efforts for avasopasem and reducing headcount across several departments. This reduction in force, which was approved by the Company’s Board of Directors,

6


GALERA THERAPEUTICS, INC.

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 

reduces the Company’s current workforce by 22 employees, or approximately 70%, as of August 9, 2023 (the Workforce Reduction). The decision was based on cost-reduction initiatives intended to reduce operating expenses. The Company currently estimates that it will incur charges of approximately $2.0 to $2.5 million in connection with the Workforce Reduction, primarily consisting of severance payments, employee benefits and related costs. The Company expects that the majority of these charges will be incurred in the third quarter of 2023. The Workforce Reduction and other cost savings actions being implemented are expected to extend the Company’s cash runway into the second quarter of 2024.

Liquidity

The Company has incurred recurring losses and negative cash flows from operations since inception and has an accumulated deficit of $416.7 million as of June 30, 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 June 30, 2023 will enable the Company to fund its operating expenses and capital expenditure requirements into the second quarter of 2024, 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 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. If we continue to have insufficient funds, particularly if we are unable to undertake any strategic alternative, we may be required to cease our operations altogether. 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 six months ended June 30, 2023. As of June 30, 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).

7


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, 2023 and its results of operations for the three and six months ended June 30, 2023 and 2022, and statements of changes in stockholder’s equity (deficit) and cash flows for the six months ended June 30, 2023 and 2022. Operating results for the three and six months ended June 30, 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 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 June 30, 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 June 30, 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 was granted a small business waiver of this PDUFA fee from the FDA. The Company received the refund of the PDUFA fee from the FDA in May 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

8


GALERA THERAPEUTICS, INC.

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 

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

The Company uses the two-class method to compute net income per common share during periods the Company realizes net income and has securities that entitle the holder to participate in dividends and earnings of the Company. The two-class method is not applicable during periods with a net loss, as the participating securities are not obligated to fund losses. 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.

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,

 

 

 

2023

 

 

2022

 

Stock options

 

 

7,773,866

 

 

 

5,814,022

 

Common stock warrants

 

 

13,950,661

 

 

 

550,661