SEC Form 10-Q filed by Galera Therapeutics Inc.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices) |
(Zip Code) |
(
(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 |
$0.001 par value per share |
OTC Pink 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.
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).
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 |
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Smaller reporting company |
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Emerging growth company |
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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 12, 2024, the registrant had
Table of Contents
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PART I. |
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Item 1. |
1 |
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1 |
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2 |
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3 |
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4 |
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5 |
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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. |
25 |
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Item 4. |
25 |
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PART II. |
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Item 1. |
26 |
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Item 1A. |
26 |
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Item 2. |
30 |
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Item 3. |
30 |
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Item 4. |
30 |
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Item 5. |
30 |
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Item 6. |
31 |
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32 |
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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 and expectations regarding the Dissolution and Plan of Dissolution (each as defined herein) and seeking stockholder approval of the Plan of Dissolution; the impact of our discontinuation of the development of our product candidates; the amount of proceeds, if any, that might be realized from the sale or other disposition of any of our remaining assets; cash, cash runway and future cash position, including the availability, timing and amount of liquidating distributions, the amounts that will need to be set aside by us, and the adequacy of such reserves to satisfy our obligations; the pursuit of strategic alternatives that are not currently contemplated; 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; the listing of our common stock on the OTC Pink Market; 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; 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 ability to receive stockholder approval of the Plan of Dissolution; our ability to sell or otherwise dispose of any of our remaining assets in Dissolution; our ability to make liquidating distributions and the timing thereof; the impact of general economic conditions on our business and operations; and those described under the sections in our Annual Report on Form 10-K for the year ended December 31, 2023 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)
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June 30, 2024 |
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December 31, 2023 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Acquired intangible asset |
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Goodwill |
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Right-of-use lease assets |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities and stockholders’ deficit |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses |
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Lease liabilities |
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Total current liabilities |
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Royalty purchase liability |
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Lease liabilities, net of current portion |
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Deferred tax liability |
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Total liabilities |
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Stockholders’ deficit: |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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( |
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( |
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Total stockholders’ deficit |
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( |
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( |
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Total liabilities and stockholders’ deficit |
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$ |
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$ |
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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)
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Three months ended |
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Six months ended |
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2024 |
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2023 |
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2024 |
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2023 |
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Operating expenses: |
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Research and development |
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$ |
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$ |
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$ |
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$ |
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General and administrative |
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Loss from operations |
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( |
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( |
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( |
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( |
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Other income (expenses): |
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Interest income |
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Interest expense |
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( |
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( |
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Foreign currency loss |
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( |
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( |
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( |
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Net loss |
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( |
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( |
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( |
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( |
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Net loss per share of common stock, basic and diluted |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Weighted-average shares of common stock outstanding, basic and diluted |
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See accompanying notes to unaudited interim consolidated financial statements.
2
GALERA THERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(IN THOUSANDS)
(unaudited)
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Three months ended |
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Six months ended |
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2024 |
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2023 |
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2024 |
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2023 |
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Net loss |
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$ |
( |
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$ |
( |
) |
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$ |
( |
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$ |
( |
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Unrealized gain (loss) on short-term investments |
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( |
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Comprehensive loss |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
) |
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)
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Common stock |
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Additional |
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Accumulated |
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Accumulated |
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Total |
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Shares |
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Amount |
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capital |
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gain (loss) |
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Deficit |
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Deficit |
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Balance at January 1, 2024 |
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$ |
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$ |
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$ |
— |
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$ |
( |
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$ |
( |
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Share-based compensation expense |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Balance at March 31, 2024 |
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— |
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( |
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( |
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Share-based compensation expense |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Balance at June 30, 2024 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
( |
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Common stock |
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Additional |
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Accumulated |
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Accumulated |
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Total |
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Shares |
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Amount |
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capital |
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gain (loss) |
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Deficit |
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Deficit |
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Balance at January 1, 2023 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
( |
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Share-based compensation expense |
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— |
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— |
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— |
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— |
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Exercise of stock options |
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— |
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— |
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Sale of common stock and common stock warrants |
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— |
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— |
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Unrealized gain on short-term |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Balance at March 31, 2023 |
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( |
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( |
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Share-based compensation expense |
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— |
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— |
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— |
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— |
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Exercise of common stock warrants |
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— |
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— |
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Unrealized loss on short-term |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Net loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Balance at June 30, 2023 |
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$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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See accompanying notes to unaudited interim consolidated financial statements.
4
GALERA THERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(unaudited)
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Six months ended |
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2024 |
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2023 |
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Operating activities: |
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Net loss |
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$ |
( |
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$ |
( |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation and amortization |
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Noncash interest expense |
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Share-based compensation expense |
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Gain on disposal of property and equipment |
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( |
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Changes in operating assets and liabilities: |
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Refundable PDUFA fee |
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Prepaid expenses and other current assets |
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Other assets |
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Accounts payable |
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( |
) |
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Accrued expenses |
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( |
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( |
) |
Other liabilities |
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( |
) |
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( |
) |
Cash used in operating activities |
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( |
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( |
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Investing activities: |
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Purchases of short-term investments |
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( |
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Proceeds from sales of short-term investments |
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Purchase of property and equipment |
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( |
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Cash provided by investing activities |
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Financing activities: |
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Proceeds from the sale of common stock and common stock warrants in registered direct offering, net of issuance costs |
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Proceeds from the exercise of common stock warrants |
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Proceeds from exercise of stock options |
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Cash provided by financing activities |
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Net increase (decrease) in cash, cash equivalents and restricted cash |
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( |
) |
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Cash, cash equivalents and restricted cash at beginning of period |
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Cash, cash equivalents and restricted cash at end of period |
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$ |
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$ |
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Supplemental schedule of non-cash investing and financing activities: |
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Right-of-use asset obtained in exchange for lease obligation |
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$ |
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$ |
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Sale of property and equipment in exchange for prepaid future services |
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$ |
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$ |
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See accompanying notes to unaudited interim consolidated financial statements.
5
GALERA THERAPEUTICS, INC.
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
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 biopharmaceutical company that was historically focused on developing a pipeline of novel, proprietary therapeutics that have the potential to transform radiotherapy in cancer. The Company's lead product candidate, avasopasem manganese (avasopasem), was being developed for the reduction of severe oral mucositis (SOM) in patients with head and neck cancer (HNC), the reduction of esophagitis in patients with lung cancer, and the reduction of cisplatin-induced kidney damage in patients with cancer. The Company’s second product candidate, rucosopasem manganese (rucosopasem), was in 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 U.S. Food and Drug Administration (FDA) and European Medicines Agency (EMA) have granted orphan drug designation and orphan medicinal product designation, respectively, to rucosopasem for the treatment of pancreatic cancer.
In August 2023, the Company announced that it had received a Complete Response Letter (CRL) from the FDA regarding the Company’s New Drug Application (NDA) for avasopasem for radiotherapy-induced SOM in patients with HNC undergoing standard-of-care treatment. In the CRL, the FDA communicated that results from an additional clinical trial will be required for resubmission. During the Type A meeting held in September 2023, and in the subsequently received meeting minutes, the FDA reiterated the need for a second Phase 3 trial to support resubmission of the NDA. It is not feasible to conduct an additional trial with the Company’s current resources.
In connection with the CRL, the Company wound down its commercial readiness efforts for avasopasem, reduced headcount across several departments and began to pursue strategic alternatives. The reduction in force, which was approved by the Company’s board of directors, reduced the Company’s workforce by
In October 2023, the Company halted its Phase 2b GRECO-2 trial of rucosopasem in patients with LAPC, following a futility analysis of the trial, which indicated that the trial was unlikely to succeed as designed. At the same time, the Company also halted its Phase 1/2 GRECO-1 trial of rucosopasem in patients with NCSLC.
In October 2023, the Company also announced that it had engaged Stifel, Nicolaus & Company, Inc. (Stifel), as its financial advisor, to assist in reviewing strategic alternatives with the goal of maximizing value for its stockholders.
Following the conclusion of its review of strategic alternatives, on August 8, 2024 the Company’s board of directors approved the Company’s dissolution and liquidation (Dissolution), pursuant to a plan of complete liquidation and dissolution (Plan of Dissolution), subject to stockholder approval. The Company intends to call a meeting of the stockholders to seek approval of the Plan of Dissolution at a special meeting of stockholders and to file a definitive proxy statement with the Securities and Exchange Commission (SEC) relating to the special meeting.
The Plan of Dissolution contemplates an orderly wind down of the Company’s business and operations in accordance with the provisions of Delaware law. If the Company’s stockholders approve the Plan of Dissolution, the Company intends to file a Certificate of Dissolution with the Delaware Secretary of State dissolving the Company, satisfy or resolve the Company’s remaining liabilities and obligations, including but not limited to contingent liabilities and claims and costs associated with the Dissolution, make reasonable provisions for unknown claims and liabilities and attempt to convert all of the Company’s remaining assets into cash or cash equivalents, and, if possible, make distributions to the Company’s stockholders of cash available for distribution based upon their proportionate ownership at the time of the dissolution, subject to applicable legal requirements. The proxy materials that the Company intends to file with the SEC and mail to its stockholders are expected to contain more information regarding the proposed Plan of Dissolution.
The Company expects that pursuant to Delaware law, the Company will continue to exist for three years after the Certificate of Dissolution is filed or for such longer period as the Delaware Court of Chancery shall direct. If the Company’s stockholders approve the Dissolution, the Company will be authorized to cease operations, sell or otherwise dispose of its non-cash assets and dissolve the Company and its subsidiaries without further approval of the stockholders, unless required to obtain such approval under Delaware law.
If the Company’s stockholders do not approve the Dissolution, the Company’s board of directors and management will continue to explore other strategic alternatives. Because the Company’s board of directors and management believe that they have
6
GALERA THERAPEUTICS, INC.
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
exhausted all reasonable and viable strategic alternatives, it is possible that the Company would seek voluntary dissolution at a later time and potentially with diminished assets. In addition, the Company could cease operations, make an assignment for the benefit of creditors, turn the Company over to a third-party management company or liquidator or file for bankruptcy protection.
It is possible that our board of directors may consider or decide to pursue another strategic alternative that is not currently contemplated.
Liquidity
The Company has incurred recurring losses and negative cash flows from operations since inception and has an accumulated deficit of $
The Company's future capital requirements are currently focused on executing the Plan of Dissolution. If the Company does not dissolve, future capital requirements will depend on its strategic alternatives, which may include pursuit of a strategic transaction or the continued operation of product development.
The summary of significant accounting policies disclosed in the Company’s annual consolidated financial statements for the years ended December 31, 2023 and 2022 included in the Company’s annual report on Form 10-K filed with the SEC on March 28, 2024 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). These unaudited interim consolidated financial statements do not include any adjustments relating to the recovery of recorded assets or the classification of the liabilities that might be necessary under the liquidation basis of accounting or should the Company be unable to continue as a going concern.
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, 2024 and its results of operations for the three and six months ended June 30, 2024 and 2023, and statements of changes in stockholders’ deficit and cash flows for the six months ended June 30, 2024 and 2023. Operating results for the three and six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024, 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, 2023, included in the Company’s annual report on Form 10-K and filed with the SEC on March 28, 2024.
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.
7
GALERA THERAPEUTICS, INC.
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
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, 2024 and December 31, 2023 consisted of bank deposits 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.
Goodwill and acquired intangible asset
In November 2012, the Company completed a Series A redeemable convertible preferred stock (Series A) financing with venture capital investors and simultaneously acquired Galera Therapeutics, LLC (LLC), a limited liability company incorporated in Missouri in 2009. LLC was renamed Galera Labs, LLC in January 2013 and operates as a wholly-owned subsidiary of the Company. The Company applied the purchase method of accounting under which the consideration given to the LLC members and noteholders was allocated to the fair value of the net assets assumed from the LLC at the date of the acquisition. The sole intangible asset acquired represented the fair value of in-process research and development (IPR&D) which has been recorded on the accompanying consolidated balance sheets as an indefinite life intangible asset. A deferred tax liability was recorded for the difference between the fair value of the acquired IPR&D and its tax basis of zero which was recognized as goodwill in applying the purchase method of accounting.
Intangible assets related to IPR&D are considered indefinite-lived intangible assets and, along with goodwill, are not amortized, but are assessed for impairment annually or more frequently if impairment indicators exist. For those compounds that reach commercialization, the IPR&D assets will be amortized over their estimated useful lives. If the associated research and development effort related to IPR&D is abandoned, the related assets will be written-off and the Company will record a noncash impairment loss on its consolidated statements of operations. For the six months ended June 30, 2024 and 2023, the Company determined that there was
The Dissolution or any other potential strategic alternative has the potential to result in future goodwill or IPR&D impairments and the Company may perform impairment testing on the carrying value of the acquired intangible asset and goodwill on its balance sheet during the third quarter of 2024.
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.
Restructuring Costs
As a result of the Workforce Reduction, the Company incurred total restructuring-related charges of $
8
GALERA THERAPEUTICS, INC.
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
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, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Stock options |
|
|
|
|
|
|
||
Common stock warrants |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Recent Accounting Pronouncements Not Yet Adopted
In November 2023, FASB issued ASU 2023-07, “Improvements to Reportable Segment Disclosures,” which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The guidance is effective for the Company beginning in the annual reporting period ending December 31, 2024 and interim periods beginning in fiscal year 2025. Early adoption is permitted. The Company is assessing the impact of adopting this guidance on its consolidated financial statements.
In December 2023, FASB issued ASU 2023-09, “Improvements to Income Tax Disclosures,” which enhances the transparency and decision usefulness of income tax disclosures. The guidance is effective for the Company’s annual reporting period ending December 31, 2025. Early adoption is permitted. The Company is assessing the impact of adopting this guidance on its consolidated financial statements.
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:
9
GALERA THERAPEUTICS, INC.
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis (amounts in thousands):
|
|
June 30, 2024 |
|
|||||||||
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
|||
Assets |
|
|
|
|
|
|
|
|
|
|||
Money market funds and U.S. Treasury obligations |
|
$ |
|
|
$ |
|
|
$ |
|
|||
|
|
December 31, 2023 |
|
|||||||||
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
|||
Assets |
|
|
|
|
|
|
|
|
|
|||
Money market funds and U.S. Treasury obligations |
|
$ |
|
|
$ |
|
|
$ |
|
|||
There were
Prepaid expenses and other current assets consist of (amounts in thousands):
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2024 |
|
|
2023 |
|
||
Prepaid clinical expenses |
|
$ |
|
|
$ |
|
||
Prepaid insurance |
|
|
|
|
|
|
||
Other prepaid expenses and other current assets |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
Property and equipment consist of (amounts in thousands):
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2024 |
|
|
2023 |
|
||
Computer hardware and software |
|
$ |
|
|
$ |
|
||
Leasehold improvements |
|
|
|
|
|
|
||
Furniture and fixtures |
|
|
|
|
|
|
||
Property and equipment, gross |
|
|
|
|
|
|
||
Less: Accumulated depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
Property and equipment, net |
|
$ |
|
|
$ |
|
||
Depreciation and amortization expense was $
10
GALERA THERAPEUTICS, INC.
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Accrued expenses consist of (amounts in thousands):
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2024 |
|
|
2023 |
|
||
Compensation and related benefits |
|
$ |
|
|
$ |
|
||
Restructuring costs |
|
|
|
|
|
|
||
Research and development expenses |
|
|
|
|
|
|
||
Professional fees and other expenses |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
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 $
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 $
The Company accounts for the Royalty Agreement as a debt instrument. The $
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.
11
GALERA THERAPEUTICS, INC.
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
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. Pursuant to the terms of the Royalty Agreement and the Amendment, upon Dissolution, the Royalty Agreement and the Amendment remain in effect and any future purchaser or licensor of the Products will be bound by the terms of the Royalty Agreement and the Amendment, unless otherwise agreed by Blackstone.
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
|
|
Shares |
|
|
Exercise Price |
|
|
Initial Exercise Date |
|
Expiration Date |
||
New Milestone Warrant |
|
|
|
|
$ |
|
|
|
||||
Fourth Milestone Warrant |
|
|
|
|
$ |
|
|
|
||||
The warrants are equity-classified and were valued at $
The Company suspended amortizing the debt discount to interest expense after October 2023, as the result of the uncertainty of any future royalties following its decision to discontinue the rucosopasem GRECO trials and that it is not feasible with its current resources for the Company to conduct another Phase 3 trial of avasopasem.
The Company has a non-cancelable operating lease for office space in Malvern, Pennsylvania which, as of June 30, 2024, has a remaining lease term of approximately
Supplemental balance sheet information related to leases was as follows:
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2024 |
|
|
2023 |
|
||
Operating Leases |
|
|
|
|
|
|
||
Right-of-use lease assets |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Lease liabilities, current |
|
|
|
|
|
|
||
Lease liabilities, net of current portion |
|
|
|
|
|
|
||
Total operating lease liabilities |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Lease cost, as presented below, includes costs associated with leases for which right-of-use (ROU) assets have been recognized as well as short-term leases.
|
|
Three months ended |
|
|
Six months ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Operating lease costs |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating lease rental expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Total operating lease expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
12
GALERA THERAPEUTICS, INC.
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Supplemental cash flow information related to leases was as follows:
|
|
Six months ended |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Cash paid for amounts included in the measurement of lease liabilities |
|
|
|
|
|
|
||
Operating cash flows for operating leases |
|
$ |
|
|
$ |
|
||
Right-of-use assets obtained in exchange for lease obligation |
|
|
|
|
|
|
||
Operating leases |
|
|
|
|
|
|
||
Future minimum rental payments under the Company’s non-cancelable operating lease liabilities as of June 30, 2024 (amounts in thousands):
Remainder of 2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 and after |
|
|
|
|
Total |
|
|
|
|
Less: imputed interest |
|
|
( |
) |
|
|
$ |
|
Shareholder Rights Agreement
On May 3, 2024, the Company entered into a Stockholder Rights Agreement with Equiniti Trust Company, LLC, as rights agent (the Rights Agreement). Pursuant to the Rights Agreement, the board of directors declared a dividend of one preferred share purchase right (each a Right) for each outstanding share of Company common stock to stockholders of record at the close of business on May 20, 2024. Each Right entitles its holder, subject to the terms of the Rights Agreement, to purchase from the Company one one-thousandth of a share of Series A Junior Participating Preferred Stock, par value $
Equity offerings
In February 2023, the Company completed a registered direct offering, which resulted in the issuance and sale of
In December 2020, the Company entered into an Open Market Sale Agreement (the Sales Agreement) with Jefferies LLC (Jefferies) as sales agent, pursuant to which it could, from time to time, issue and sell common stock with an aggregate value of up to $
13
GALERA THERAPEUTICS, INC.
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Share-based compensation
Equity Incentive Plan
In November 2012, the Company adopted the Galera Therapeutics, Inc. Equity Incentive Plan (the Prior Plan). The Prior Plan provided for the grant of incentive stock options, nonstatutory stock options, restricted stock awards, and stock appreciation rights. In connection with the adoption of the 2019 Plan (as defined below), the Company ceased issuing awards under the Prior Plan. As a result, no shares remain available for issuance under the Prior Plan; however, the Prior Plan continues to govern awards that are outstanding under it. The total number of shares subject to outstanding awards under the Prior Plan as of June 30, 2024 was
2019 Incentive Award Plan
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.
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
In November 2019, the Company’s board of directors adopted and the Company’s stockholders approved the Galera Therapeutics, Inc. 2019 Employee Stock Purchase Plan (the ESPP). The ESPP allows employees to buy Company stock through after-tax payroll deductions at a discount from market value. The number of shares of common stock initially available for issuance under the ESPP was
2023 Employment Inducement Award Plan
On April 28, 2023, the Board of Directors adopted the Galera Therapeutics, Inc. 2023 Employment Inducement Award Plan (Inducement Plan), which became effective on such date without stockholder approval pursuant to Rule 5635(c)(4) of The Nasdaq Stock Market LLC listing rules (Rule 5635(c)(4)). The Inducement Plan provides for the grant of nonstatutory stock options, stock appreciation rights, restricted stock, restricted stock units, and other stock-based awards. In accordance with Rule 5635(c)(4), awards under the Inducement Plan may only be granted to persons who (a) were not previously an employee or director of the Company, or (b) are commencing employment with the Company following a bona fide period of non-employment, in either case as an inducement material to the individual’s entering into employment with the Company. A total of
14
GALERA THERAPEUTICS, INC.
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Share-based Compensation
Share-based compensation expense was as follows for the three and six months ended June 30, 2024 and 2023 (in thousands):
|
|
Three months ended |
|
|
Six months ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Research and development |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The following table summarizes the activity related to stock option grants for the six months ended June 30, 2024:
|
|
Shares |
|
|
Weighted |
|
|
Weighted- |
|
|||
Outstanding at January 1, 2024 |
|
|
|
|
$ |
|
|
|
|
|||
Forfeited |
|
|
( |
) |
|
|
|
|
|
|
||
Outstanding at June 30, 2024 |
|
|
|
|
$ |
|
|
|
|
|||
Vested and exercisable at June 30, 2024 |
|
|
|
|
$ |
|
|
|
|
|||
Vested and expected to vest at June 30, 2024 |
|
|
|
|
$ |
|
|
|
|
|||
The Company’s stock option awards vest based on the terms in the governing agreements and generally vest over
As of June 30, 2024, the unrecognized compensation cost was $
The fair value of options is estimated using the Black-Scholes option pricing model, which takes into account inputs such as the exercise price, the estimated fair value of the underlying common stock at the grant date, expected term, expected stock price volatility, risk-free interest rate and dividend yield. The fair value of stock options granted during the six months ended June 30, 2023 was determined using the methods and assumptions discussed below.
15
GALERA THERAPEUTICS, INC.
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
The grant date fair value of each option grant was estimated throughout the six months ended June 30, 2023 using the Black-Scholes option-pricing model using the following weighted-average assumptions. There were no options granted during the six months ended June 30, 2024.
|
|
Six months ended |
|
|
|
|
2023 |
|
|
Expected term (in years) |
|
|
|
|
Expected stock price volatility |
|
|
% |
|
Risk-free interest rate |
|
|
% |
|
Expected dividend yield |
|
|
% |
|
IntellectMap provides information technology advisory services to the Company. The chief executive officer of IntellectMap is the brother of the Company’s chief executive officer. Fees incurred by the Company with respect to IntellectMap during both of the six months ended June 30, 2024 and 2023 were $
11. Restructuring charges
On August 9, 2023, the Company announced a plan to reduce expenses and extend its cash runway. In connection with this plan, the Company's board of directors approved the Workforce Reduction. The decision was based on cost-reduction initiatives intended to reduce operating expenses. The Company incurred a $
The following table summarizes the restructuring balances at June 30, 2024 (in thousands):
|
|
2024 |
|
|
Balance, January 1, 2024 |
|
$ |
|
|
Current year restructuring costs |
|
|
|
|
Payment of employee severance and related costs |
|
|
( |
) |
Balance, June 30, 2024 |
|
$ |
|
|
12. Subsequent events
On May 30, 2023, the Company filed a lawsuit in the Court of Common Pleas in Chester County, Pennsylvania, or the Court, against Alira Health Clinical, LLC and IQVIA Biotech, LLC (the CROs), seeking damages and alleging breach of contract, professional negligence, and negligence related to an error by the defendants in 2021 in their statistical program for the Phase 3 ROMAN trial of avasopasem for the reduction of SOM induced by radiotherapy in patients with locally advanced HNC (the Phase 3 ROMAN trial) (the Litigation). On August 2, 2024, the Company and the CROs entered into an agreement to settle the Litigation, pursuant to which, in exchange for mutual releases, the CROs paid to the Company the amount of $
On August 8, 2024, the Company entered into a Lease Termination Agreement with the landlord of its office in Malvern, Pennsylvania. In return for an early termination fee of $
16
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many important factors, including those set forth in the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on March 28, 2024, or the 2023 Form 10-K, and this Quarterly Report on Form 10-Q, our actual results could differ materially from the results described in, or implied, by these forward-looking statements.
Overview
Until recently, we have operated as a biopharmaceutical company that has historically focused on developing a pipeline of novel, proprietary therapeutics that have the potential to transform radiotherapy in cancer. Our lead product candidate, avasopasem manganese (avasopasem), is a highly selective small molecule dismutase mimetic that we have been developing for the reduction of severe oral mucositis (SOM) in patients with head and neck cancer (HNC), the reduction of esophagitis in patients with lung cancer, and the reduction of cisplatin-induced kidney damage in patients with cancer. 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. Our second product candidate, rucosopasem manganese (rucosopasem), has been in 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 and European Medicines Agency (EMA) have granted orphan drug designation and orphan medicinal product designation, respectively, to rucosopasem for the treatment of pancreatic cancer.
In August 2023, we announced receipt of a Complete Response Letter (CRL) from the FDA regarding our New Drug Application (NDA) for avasopasem for radiotherapy-induced SOM in patients with HNC undergoing standard-of-care treatment. In the CRL, the FDA communicated that results from an additional clinical trial will be required for resubmission. During the Type A meeting held in September 2023, and in the subsequently received meeting minutes, the FDA reiterated the need for a second Phase 3 trial to support resubmission of the NDA. With our current resources it is not feasible to conduct this additional trial. We continue to explore appropriate development paths for avasopasem, including in radiotherapy-induced SOM.
In connection with the avasopasem CRL, we wound down our commercial readiness efforts for avasopasem, reduced headcount across several departments and began to pursue strategic alternatives. The reduction in force, which was approved by our Board of Directors, reduced our workforce by 22 employees, or approximately 70%, as of August 9, 2023. The decision was based on cost-reduction initiatives intended to reduce operating expenses.
In October 2023, we halted our Phase 2b GRECO-2 trial of rucosopasem in patients with LAPC, following a futility analysis of the trial, which indicated that the trial was unlikely to succeed as designed. At the same time, we also halted our Phase 1/2 GRECO-1 trial of rucosopasem in patients with NCSLC.
In October 2023, we also announced that we had engaged Stifel, Nicolaus & Company, Inc., as our financial advisor, to assist in reviewing strategic alternatives with the goal of maximizing value for our stockholders.
Following the conclusion of our review of strategic alternatives, on August 8, 2024 our board of directors approved our dissolution and liquidation (Dissolution), pursuant to a plan of complete liquidation and dissolution (Plan of Dissolution), subject to stockholder approval. As such, the discussion and analysis of our business, financial condition and results of operations in this Quarterly Report on Form 10-Q should be read in conjunction with our unaudited consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and should also take into account our planned Dissolution. We intend to call a special meeting of the stockholders to seek approval of the Plan of Dissolution and to file a definitive proxy statement with the Securities and Exchange Commission (SEC) relating to the special meeting.
The Plan of Dissolution contemplates an orderly wind down of our business and operations in accordance with the provisions of Delaware law. If our stockholders approve the Plan of Dissolution, we intend to file a Certificate of Dissolution with the Delaware Secretary of State dissolving the Company, satisfy or resolve our remaining liabilities and obligations, including but not limited to contingent liabilities and claims and costs associated with the dissolution and liquidation, make reasonable provisions for unknown claims and liabilities and attempt to convert all of our remaining assets into cash or cash equivalents, and, if possible, make distributions to our stockholders of cash available for distribution based upon their proportionate ownership at
17
the time of the dissolution, subject to applicable legal requirements. The proxy materials that we intend to file with the SEC and mail to our stockholders are expected to contain more information regarding the proposed Plan of Dissolution.
We expect that pursuant to Delaware law, the Company will continue to exist for three years after the Certificate of Dissolution is filed or for such longer period as the Delaware Court of Chancery shall direct. If our stockholders approve the Dissolution, we will be authorized to cease operations, sell or otherwise dispose of our non-cash assets and dissolve the Company and its subsidiaries without further approval of the stockholders, unless required to obtain such approval under Delaware law.
If our stockholders do not approve the Dissolution, our board of directors and management will continue to explore other strategic alternatives. Because our board of directors and management believe that they have exhausted all reasonable and viable strategic alternatives, it is possible that we would seek voluntary dissolution at a later time and potentially with diminished assets. In addition, we could cease operations, make an assignment for the benefit of creditors, turn the Company over to a third-party management company or liquidator or file for bankruptcy protection.
We caution that trading in the Company’s securities is highly speculative and poses substantial risks. Trading prices for the Company’s securities may bear little or no relationship to the actual value realized, if any, by holders of the Company’s securities. Accordingly, the Company urges extreme caution with respect to existing and future investments in its securities.
Nasdaq Delisting Notification
On May 31, 2024, we received written notice (the Notice) from the Office of General Counsel of The Nasdaq Stock Market (Nasdaq) indicating that the Nasdaq Hearings Panel had determined to delist our shares from Nasdaq due to our failure to meet Nasdaq’s continued listing standards. As previously disclosed, we were in violation of the requirements to maintain a minimum average market value of listed securities, as set forth in Nasdaq Listing Rule 5450(b)(2)(A), the minimum bid price requirement, as set forth in Nasdaq Listing Rule 5450(a)(1), and the minimum market value of publicly held shares, as set forth in Listing Rule 5450(b)(2)(C). The Notice indicated that trading in our shares of common stock (the Common Stock) on Nasdaq was to be suspended effective at the open of trading on June 4, 2024. Our Common Stock is now quoted under its existing symbol “GRTX” on the Pink Market operated by OTC Markets Group Inc.
Critical Accounting Policies and Estimates
Our management’s discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those described below. We base our estimates on historical experience, known trends and events, and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Our critical accounting policies are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies” in the 2023 Form 10-K and the notes to the unaudited interim consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q. During the six months ended June 30, 2024 there were no material changes to our critical accounting policies from those discussed in the 2023 Form 10-K.
Components of Results of Operations
Research and Development Expense
Research and development expenses consist primarily of costs incurred in connection with the discovery and development of our product candidates. We expense research and development costs as incurred. These expenses include:
18
We track our external research and development expenses on a program-by-program basis, such as fees paid to CROs, CMOs and research laboratories in connection with our preclinical development, process development, manufacturing and clinical development activities. However, we do not track our internal research and development expenses on a program-by-program basis as they primarily relate to personnel-related and share-based compensation expense, early-stage research expenses and other costs that are deployed across multiple projects under development.
The following table summarizes our research and development expenses by program for the three and six months ended June 30, 2024 and 2023 (in thousands):
|
|
Three months ended |
|
|
Six months ended |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Avasopasem manganese |
|
$ |
(2 |
) |
|
$ |
1,517 |
|
|
$ |
(149 |
) |
|
$ |
3,383 |
|
Rucosopasem manganese |
|
|
17 |
|
|
|
3,328 |
|
|
|
660 |
|
|
|
6,253 |
|
Other research and development expense |
|
|
127 |
|
|
|
780 |
|
|
|
447 |
|
|
|
1,352 |
|
Personnel related and share-based compensation |
|
|
1,288 |
|
|
|
1,936 |
|
|
|
1,960 |
|
|
|
3,845 |
|
|
|
$ |
1,430 |
|
|
$ |
7,561 |
|
|
$ |
2,918 |
|
|
$ |
14,833 |
|
We have ceased all clinical trial activity and have suspended the clinical development of our product candidates.
If we decide to resume product candidate development, the successful development of any future product candidates would be highly uncertain. We are unable to predict when, if ever, material net cash inflows would commence from sales of any future product candidates that we may develop due to the numerous risks and uncertainties associated with clinical development, including:
19
We may never succeed in achieving regulatory approval for any future product candidates we may develop.
General and Administrative Expense
General and administrative expense consists primarily of personnel expenses, including salaries, benefits and share-based compensation expense for employees in executive, finance, accounting, legal, information technology, commercial, business development and human resource functions. General and administrative expense also includes corporate facility costs, including rent, utilities, depreciation and maintenance, not otherwise included in research and development expense, as well as legal fees related to intellectual property and corporate matters and fees for accounting and consulting services.
We expect to incur additional costs related to the Dissolution, such as legal and advisory fees and expenses and other related charges.
Interest Income
Interest income consists of amounts earned on our cash and cash equivalents held with large institutional banks, U.S. Treasury obligations and a money market mutual fund invested in U.S. Treasury obligations, and our short-term investments in U.S. Treasury and government agency obligations.
Interest Expense
Interest expense consists of non-cash interest on proceeds received under the Royalty Agreement with Blackstone and non-cash interest expense associated with the amortization of the debt discount recorded for the Blackstone warrants.
Foreign Currency Loss
Foreign currency loss consists primarily of exchange rate fluctuations on transactions denominated in a currency other than the U.S. dollar.
Net Operating Loss and Research and Development Tax Credit Carryforwards
As of December 31, 2023, we had federal and state tax net operating loss carryforwards (NOLs) of $191.3 million and $213.8 million, respectively, which will begin to expire in 2032 unless previously utilized. We also had foreign net operating loss carryforwards of $1.7 million which do not expire. As of December 31, 2023, we also had federal, state and foreign research and development tax credit carryforwards of $10.4 million. The federal and state research and development tax credit carryforwards will begin to expire in 2032 and 2037, respectively, unless previously utilized. The foreign research and development tax credit carryforwards do not have an expiration date.
Utilization of the federal and state net operating losses and credits may be subject to a substantial annual limitation. The annual limitation may result in the expiration of our net operating losses and credits before we can use them. In addition, future changes in our stock ownership, some of which might be beyond our control, could result in an ownership change under Section 382 of the Internal Revenue Code, further limiting our ability to utilize a material portion of the NOLs and credits. We have recorded a valuation allowance on substantially all of our deferred tax assets, including our deferred tax assets related to our NOLs and research and development tax credit carryforwards, given the current uncertainty over our ability to utilize such amounts.
Results of Operations
Comparison of the Three and Six Months Ended June 30, 2024 and 2023
The following table sets forth our results of operations for the three and six months ended June 30, 2024 and 2023 (in thousands):
20
|
|
Three Months Ended |
|
|
|
|
|
Six months ended |
|
|
|
|
||||||||||||
|
|
2024 |
|
|
2023 |
|
|
Change |
|
|
2024 |
|
|
2023 |
|
|
Change |
|
||||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Research and development |
|
$ |
1,430 |
|
|
$ |
7,561 |
|
|
$ |
(6,131 |
) |
|
$ |
2,918 |
|
|
$ |
14,833 |
|
|
$ |
(11,915 |
) |
General and administrative |
|
|
2,779 |
|
|
|
9,246 |
|
|
|
(6,467 |
) |
|
|
5,868 |
|
|
|
15,855 |
|
|
|
(9,987 |
) |
Loss from operations |
|
|
(4,209 |
) |
|
|
(16,807 |
) |
|
|
12,598 |
|
|
|
(8,786 |
) |
|
|
(30,688 |
) |
|
|
21,902 |
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest income |
|
|
149 |
|
|
|
494 |
|
|
|
(345 |
) |
|
|
345 |
|
|
|
889 |
|
|
|
(544 |
) |
Interest expense |
|
|
— |
|
|
|
(4,399 |
) |
|
|
4,399 |
|
|
|
— |
|
|
|
(8,622 |
) |
|
|
8,622 |
|
Foreign currency loss |
|
|
(4 |
) |
|
|
— |
|
|
|
(4 |
) |
|
|
(4 |
) |
|
|
(1 |
) |
|
|
(3 |
) |
Net loss |
|
$ |
(4,064 |
) |
|
$ |
(20,712 |
) |
|
$ |
16,648 |
|
|
$ |
(8,445 |
) |
|
$ |
(38,422 |
) |
|
$ |
29,977 |
|
Research and Development Expense
Research and development expense decreased by $6.1 million from $7.6 million for the three months ended June 30, 2023 to $1.4 million for the three months ended June 30, 2024. Avasopasem development costs decreased by $1.5 million as the ROMAN trial was completed and manufacturing activities ceased. Rucosopasem development costs decreased $3.3 million as we halted the GRECO-1 and GRECO-2 clinical trials. Personnel related and share-based compensation expense decreased $0.6 million, primarily due to the Workforce Reduction, and other research and development expenses decreased $0.6 million. As noted above, we have ceased all clinical trial activity and have suspended the clinical development of our product candidates.
Research and development expense decreased by $11.9 million from $14.8 million for the six months ended June 30, 2023 to $2.9 million for the six months ended June 30, 2024. Avasopasem development costs decreased by $3.5 million as the ROMAN trial was completed, manufacturing activities ceased, and we recorded a $0.4 million credit for the release of an accrual for the ROMAN trial. Rucosopasem development costs decreased $5.6 million as we halted the GRECO-1 and GRECO-2 clinical trials. Personnel related and share-based compensation expense decreased $1.9 million, primarily due to the Workforce Reduction, and other research and development expenses decreased $0.9 million. As noted above, we have ceased all clinical trial activity and have suspended the clinical development of our product candidates.
General and Administrative Expense
General and administrative expense decreased by $6.5 million from $9.2 million for the three months ended June 30, 2023 to $2.8 million for the three months ended June 30, 2024, principally due to the cessation of avasopasem commercial preparations and medical affairs activities and reduced personnel related and share-based compensation expenses due to the Workforce Reduction.
General and administrative expense decreased by $10.0 million from $15.9 million for the six months ended June 30, 2023 to $5.9 million for the six months ended June 30, 2024, principally due to the cessation of avasopasem commercial preparations and medical affairs activities and reduced personnel related and share-based compensation expenses due to the Workforce Reduction.
Interest Income
Interest income decreased from $0.5 million for the three months ended June 30, 2023 to $0.1 million for the three months ended June 30, 2024 and decreased from $0.9 million for the six months ended June 30, 2023 to $0.3 million for the six months ended June 30, 2024, due to the reduction in investable cash and securities.
Interest Expense
We recognized $4.4 million and $8.6 million in non-cash interest expense during the three and six months ended June 30, 2023 in connection with the Royalty Agreement with Blackstone Life Sciences. Given the uncertainty of obtaining future avasopasem revenue based on the FDA reiterating the need for an additional Phase 3 trial for NDA resubmission, our inability to conduct an additional trial with our current resources, and our focus on exploring strategic alternatives for the development of avasopasem, coupled with our decision in October 2023 to discontinue clinical trials of rucosopasem, we suspended accreting interest on the royalty purchase liability at the end of October 2023.
21
Liquidity and Capital Resources
We do not currently have any approved products and have never generated any revenue from product sales. Through June 30, 2024, we have funded our operations primarily through the sale and issuance of equity and $117.5 million of proceeds received under the Royalty Agreement with Blackstone Life Sciences, receiving aggregate gross proceeds of $377.0 million. In November 2019, we completed our IPO, which resulted in the issuance and sale of 5,000,000 shares of common stock at a public offering price of $12.00 per share, generating net proceeds of $53.0 million after deducting underwriting discounts and other offering costs. On December 9, 2019, in connection with the partial exercise of the over-allotment option granted to the underwriters of our IPO, 445,690 additional shares of common stock were sold at the IPO price of $12.00 per share, generating net proceeds of approximately $5.0 million after deducting underwriting discounts and other offering costs.
In December 2020, we entered into an Open Market Sale Agreement (Sales Agreement) with Jefferies LLC (Jefferies) as sales agent, pursuant to which we could, 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 our Registration Statement on Form S-3 (File No. 333-251061) filed with the SEC on December 1, 2020. Sales of common stock pursuant to the Sales Agreement were 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 our common stock. The S-3 expired on December 1, 2023, and therefore no further sales are available under the Sales Agreement.
In February 2023, we completed a registered direct offering, which resulted in the issuance and sale of 14,320,000 shares of our 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, and received net proceeds of $27.6 million, after deducting placement agent fees and offering expenses. The warrants are equity-classified, 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. We received net proceeds of approximately $27.6 million from this offering, after deducting placement agent fees and offering expenses.
As of June 30, 2024, we had $10.7 million in cash and cash equivalents and an accumulated deficit of $445.9 million. We expect our existing cash and cash equivalents as of June 30, 2024 will enable us to fund our operating expenses, including in relation to the Dissolution, for at least twelve months from the date of filing of this Quarterly Report on Form 10-Q. If we do not dissolve, future capital requirements will depend on our strategic alternatives, which may include pursuit of a strategic transaction or the continued operation of product development. 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. Market conditions can impact the viability of these institutions. In the event of failure of any of the financial institutions where we maintain our cash and cash equivalents, there can be no assurance that we would be able to access uninsured funds in a timely manner or at all. Any inability to access or delay in accessing these funds could adversely affect our business, financial position and planned Dissolution.
On August 8, 2024, we entered into a Lease Termination Agreement with the landlord of our office in Malvern, Pennsylvania. In return for an early termination fee of $0.4 million, the office lease will be terminated as of August 31, 2024, and we will have no further obligations with regard to the office lease. Our estimated total cost to exit the office lease is $0.5 million, including a broker fee and other costs.
We have no ongoing material financing commitments, such as lines of credit or guarantees, that are expected to affect our liquidity over the next five years.
Cash Flows
The following table shows a summary of our cash flows for the periods indicated (in thousands):
|
|
Six months ended |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Net cash used in operating activities |
|
$ |
(7,508 |
) |
|
$ |
(22,412 |
) |
Net cash provided by investing activities |
|
|
— |
|
|
|
12,854 |
|
Net cash provided by financing activities |
|
|
— |
|
|
|
29,594 |
|
Net increase (decrease) in cash, cash equivalents and restricted cash |
|
$ |
(7,508 |
) |
|
$ |
20,036 |
|
22
Operating Activities
During the six months ended June 30, 2024, we used $7.5 million of net cash in operating activities. Cash used in operating activities reflected our net loss of $8.4 million and $0.7 million from other changes in operating assets and liabilities, partially offset by non-cash charges of $1.6 million related to share-based compensation and depreciation expense. The primary use of cash was to fund our operations as we reviewed strategic alternatives.
During the six months ended June 30, 2023, we used $22.4 million of net cash in operating activities. Cash used in operating activities reflected our net loss of $38.4 million, partially offset by non-cash charges of $11.6 million primarily related to share-based compensation, interest expense on our Royalty Agreement with Blackstone Life Sciences and depreciation expense, $3.2 million from the refund of the Prescription Drug User Fee Act (PDUFA) fee that was paid to the FDA in December 2022 in conjunction with the filing of our NDA for avasopasem, and $1.2 million from other changes in operating assets and liabilities. The primary use of cash was to fund our operations related to the development of our product candidates.
Investing Activities
During the six months ended June 30, 2023, investing activities provided $12.9 million in cash proceeds, primarily from the net sales of our short-term investments.
Financing Activities
During the six months ended June 30, 2023, financing activities provided $29.6 million from the sale of our common stock and common stock warrants in our registered direct offering in February 2023, and from the exercise of common stock warrants and stock options during the period.
Funding Requirements
Our future capital requirements are currently focused on executing the Plan of Dissolution and, if the Dissolution is not executed, will depend on the results of any other strategic alternative we may pursue. Other strategic alternatives may include pursuit of a strategic transaction or the continued operation of product development. In the event we resume product candidate development, our future capital requirements will depend on many factors, including:
Identifying potential product candidates and conducting preclinical studies and clinical trials is a time-consuming, expensive and uncertain process that takes many years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of product candidates, if approved.
If the Dissolution is not executed and, until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, our
23
stockholders’ ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our existing stockholders’ rights. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we are unable to raise additional funds when needed, we may be required to delay, limit, reduce or terminate our assessment of strategic alternatives.
If we raise funds through additional collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Royalty Agreement with Blackstone Life Sciences (Formerly Known as Clarus Ventures)
In November 2018, we entered into the Royalty Agreement with Blackstone Life Sciences. Pursuant to the Royalty Agreement, Blackstone agreed to pay us, in the aggregate, up to $80.0 million, or the Royalty Purchase Price, in four tranches of $20.0 million each upon the achievement of specified clinical milestones in our ROMAN trial. We agreed to apply the proceeds from such payments primarily to support clinical development and regulatory activities for avasopasem, rucosopasem and any pharmaceutical product comprising or containing avasopasem or rucosopasem, or, collectively, the Products, as well as to satisfy working capital obligations and for general corporate expenses. We 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, under the Royalty Agreement.
In May 2020, we entered into Amendment No. 1 to the Royalty Agreement (the Amendment), with Clarus IV Galera Royalty AIV, L.P., or the Blackstone Purchaser. The Blackstone Purchaser is affiliated with Blackstone Life Sciences, 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. We received the new $20.0 million tranche of the Amendment in June 2021, in connection with the enrollment of the first patient in the GRECO-2 trial. Also in June 2021, we completed enrollment in the ROMAN trial, thereby achieving the milestone associated with the fourth tranche, and received the associated $37.5 million in July 2021.
Pursuant to the amended Royalty Agreement, in connection with the payment of each tranche of the Royalty Purchase Price, we have agreed to sell, convey, transfer and assign to Blackstone all of our right, title and interest in a high single-digit percentage of (i) worldwide net sales of the Products and (ii) all amounts received by us or our 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 our patents covering such Product in such country, and (iii) the expiration of regulatory data protection or market exclusivity or similar regulatory protection afforded by the health authorities in such country, to the extent such protection or exclusivity effectively prevents generic versions of such Product from entering the market in such country.
The amended Royalty Agreement will remain in effect until the date on which the aggregate amount of the Product Payments paid to Blackstone exceeds a fixed single-digit multiple of the actual amount of the Royalty Purchase Price received by us, unless earlier terminated pursuant to the mutual written agreement of us and Blackstone. If no Products are commercialized, we would not have an obligation to make Product Payments to Blackstone, which is the sole mechanism for repaying the liability. Pursuant to the terms of the Royalty Agreement and the Amendment, upon Dissolution, the Royalty Agreement and the Amendment remains in effect and any future purchaser or licensor of the Products will be bound by the terms of the Royalty Agreement and the Amendment, unless otherwise agreed by Blackstone.
In May 2020, as partial consideration for the Amendment, we issued two warrants to the Blackstone Purchaser to purchase an aggregate of 550,661 shares of our common stock at an exercise price equal to $13.62 per share, each of which became exercisable upon the receipt by us of the applicable specified milestone payment. The issued warrants expire six years after the initial exercise date of each respective warrant.
24
JOBS Act Transition Period
In April 2012, the JOBS Act was enacted. Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. However, we have chosen to opt out of such extended transition period and, as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable. However, we may take advantage of the other exemptions discussed below.
Subject to certain conditions, as an emerging growth company we may rely on certain exemptions and reduced reporting requirements, including, without limitation, (1) not being required to provide an auditor’s attestation report on our system of internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act and (2) not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis. We will remain an emerging growth company until the earlier to occur of (a) the last day of the fiscal year in which we have total annual gross revenues of $1.235 billion or more, (b) the last day of the fiscal year following the fifth anniversary of the date of the completion of our IPO (December 31, 2024), (c) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years, or (d) the date on which we are deemed to be a large accelerated filer under the rules of the SEC, which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are a smaller reporting company as defined in Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this Item 3.
Item 4. Controls and Procedures.
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2024.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the quarter ended June 30, 2024 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time, we may be involved in claims and proceedings arising in the course of our business. The outcome of any such claim or proceeding, regardless of the merits, is inherently uncertain.
On May 30, 2023, we filed a lawsuit in the Court of Common Pleas in Chester County, Pennsylvania, or the Court, against Alira Health Clinical, LLC and IQVIA Biotech, LLC, or the CROs, seeking damages and alleging breach of contract, professional negligence, and negligence related to an error by the defendants in 2021 in their statistical program for the Phase 3 ROMAN trial of avasopasem for the reduction of severe oral mucositis induced by radiotherapy in patients with locally advanced head and neck cancer (the Phase 3 ROMAN trial), or the Litigation. On August 2, 2024, we and the CROs entered into an agreement to settle the Litigation, pursuant to which, in exchange for mutual releases, the CROs paid to us the amount of $975,000, and the parties terminated the contracts between Galera and the CROs, with no further obligations under the parties’ contracts. On August 8, 2024, we filed a Praecipe to Settle, Discontinue, and End the Litigation.
Item 1A. Risk Factors.
Particularly as a result of the Dissolution, trading in our securities is highly speculative and poses substantial risks. Trading prices for our securities may bear little or no relationship to the actual value realized, if any, by holders of our securities. Accordingly, we urge extreme caution with respect to existing and future investments in our securities.
In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors described in Part I, Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on March 28, 2024. There have been no material changes to the risk factors described in that report, except as noted below. The occurrence of any of the events or developments described in our Risk Factors could adversely affect our business, financial condition, results of operations and growth prospects. In such an event, the market price of our common stock could decline, and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations.
Risks Related to Our Dissolution
We cannot predict the timing of the distributions to stockholders, and we cannot assure you as to the amount of distributions, if any, to be made to our stockholders.
On August 8, 2024, our board of directors approved the Plan of Dissolution, subject to stockholder approval. Our current intention is that, if the Plan of Dissolution is approved by our stockholders, a Certificate of Dissolution would be filed promptly after obtaining such approval; however, the decision of whether or not to proceed with the Dissolution, post-obtaining stockholders’ approval, will be made by our board of directors in its sole discretion. If the Plan of Dissolution is approved by our stockholders, no further stockholder approval would be required to effect the Dissolution. However, if the board of directors determines that the Dissolution is not in our best interest or the best interest of our stockholders, the board of directors may, in its sole discretion, abandon the Dissolution or may amend or modify the Plan of Dissolution to the extent permitted by Delaware law without the necessity of further stockholder approval. After a Certificate of Dissolution has been filed, revocation of the Dissolution would require stockholder approval under Delaware law.
Under Delaware law, before a dissolved corporation may make any distribution to its stockholders, it must pay or make reasonable provision to pay all of its claims and obligations, including all contingent, conditional or unmatured contractual claims known to the corporation. Furthermore, we may be subject to potential liabilities relating to indemnification obligations, if any, to third parties or to our current and former officers and directors. It might take significant time to resolve these matters, and as a result we are unable to predict the timing of distributions, if any are made, to our stockholders.
Additionally, we cannot predict with certainty the amount of distributions, if any, to our stockholders. Any such amounts may be paid in one or more distributions. Such distributions will not occur until after stockholder approval of the Plan of Dissolution and after the Certificate of Dissolution is filed. Even if the Plan of Dissolution is approved by our stockholders and our board of directors subsequently decides to file a Certificate of Dissolution, we cannot predict the timing or amount of any such distributions, as uncertainties as to the ultimate amount of our liabilities, the operating costs and amounts to be set aside for claims, obligations and provisions during the liquidation and winding-up process, and the related timing to complete such transactions make it impossible to predict with certainty the actual net cash amount that will ultimately be available for distribution to stockholders or the timing of any such distributions. Examples of uncertainties that could reduce the value of distributions to our
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stockholders include: unanticipated costs relating to the defense, satisfaction or settlement of lawsuits or other claims threatened against us or our directors or officers; amounts necessary to resolve claims of any creditors or other third parties; and delays in the liquidation and dissolution or other winding up process.
In addition, as we wind down, we will continue to incur expenses from operations, including directors’ and officers’ insurance; payments to service providers and any continuing employees or consultants; taxes; legal, accounting and consulting fees and expenses related to the Dissolution and our filing obligations with the SEC, which will reduce any amounts available for distribution to our stockholders. As a result, we cannot assure you as to any amounts to be distributed to our stockholders if stockholders approve the Plan of Dissolution and if the board of directors proceeds with the Dissolution. If our stockholders do not approve the Plan of Dissolution, we will not be able to proceed with the Dissolution and no liquidating distributions will be made in connection therewith.
It is the current intent of the board of directors, assuming approval of the Plan of Dissolution by our stockholders, that any cash will first be used to pay our outstanding current liabilities and then will be retained to pay ongoing corporate and administrative costs and expenses associated with winding down the Company, liabilities and potential liabilities relating to or arising out of any litigation matters and potential liabilities relating to our indemnification obligations, if any, to our service providers, or to our current and former officers and directors.
The board of directors will determine, in its sole discretion, the timing of the distribution of the remaining amounts, if any, to our stockholders in the Dissolution. We can provide no assurance as to if or when any such distribution will be made, and we cannot provide any assurance as to the amount to be paid to stockholders in any such distribution, if one is made. To the extent funds are available for distribution to stockholders, the board of directors intends to seek to distribute such funds to our stockholders as quickly as possible, as permitted by the Delaware General Corporation Law (DGCL), and intends to take all reasonable actions to optimize the distributable value to our stockholders.
If our stockholders do not approve the Plan of Dissolution, we would not be able to continue our business operations which may lead us to ultimately seek bankruptcy protection.
After an extensive review of strategic alternatives, we have been unable to identify and enter into a viable transaction with a merger partner or purchaser of our company or our assets. If our stockholders do not approve the Plan of Dissolution, the board of directors will continue to explore what, if any, alternatives are available for the future of the Company in light of its discontinued business activities; however, those alternatives are likely limited to seeking voluntary dissolution at a later time with potentially diminished assets or seeking bankruptcy protection (should our net assets decline to levels that would require such action). It is unlikely that these alternatives would result in greater stockholder value than the proposed Plan of Dissolution and the Dissolution.
The board of directors may determine not to proceed with the Dissolution.
Even if the Plan of Dissolution is approved by our stockholders, the board of directors may determine in its sole discretion not to proceed with the Dissolution. Further, the board of directors has not set a deadline to make its decision on whether to proceed with the Dissolution if stockholder approval is obtained. If our board of directors elects to pursue any alternative to the Plan of Dissolution, our stockholders may not receive any of the funds that might otherwise be available for distribution to our stockholders. After the Certificate of Dissolution has been filed, revocation of the Dissolution would require stockholder approval under Delaware law.
Our stockholders may be liable to third parties for part or all of the amount received from us in our liquidating distributions if reserves are inadequate.
If the Dissolution becomes effective, we may establish a contingency reserve designed to satisfy any additional claims and obligations that may arise. Any contingency reserve may not be adequate to cover all of our claims and obligations. Under the DGCL, if we fail to create an adequate contingency reserve for payment of our expenses, claims and obligations, each stockholder could be held liable for payment to our creditors up to the lesser of (i) such stockholder’s pro rata share of amounts owed to creditors in excess of the contingency reserve and (ii) the amounts previously received by such stockholder in Dissolution from us and from any liquidating trust or trusts. Accordingly, in such event, a stockholder could be required to return part or all of the distributions previously made to such stockholder, and a stockholder could receive nothing from us under the Plan of Dissolution. Moreover, if a stockholder has paid taxes on amounts previously received, a repayment of all or a portion of such amount could result in a situation in which a stockholder may incur a net tax cost if the repayment of the amount previously distributed does not cause a commensurate reduction in taxes payable in an amount equal to the amount of the taxes paid on amounts previously distributed.
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We plan to initiate steps to exit from certain reporting requirements under the Exchange Act, which may substantially reduce publicly available information about us. If the exit process is protracted, we will continue to bear the expense of being a public reporting company despite having no source of revenue or other meaningful sources of capital inflows.
Our common stock is currently registered under the Exchange Act, which requires that we, and our officers and directors with respect to Section 16 of the Exchange Act, comply with certain public reporting and proxy statement requirements thereunder. Compliance with these requirements is costly and time-consuming. We plan to initiate steps to exit from such reporting requirements in order to curtail expenses; however, such process may be protracted and we may be required to continue to file Current Reports on Form 8-K or other reports to disclose material events, including those related to the Dissolution. Accordingly, we will continue to incur expenses that will reduce the amount available for distribution, including expenses of complying with public company reporting requirements and paying our service providers, among others. If our reporting obligations cease, publicly available information about us will be substantially reduced.
Risks Related to Our Financial Position and Capital Needs
Any financial or strategic option we pursue may not be successful.
In August 2023, in connection with the CRL announcement, we initiated a process to explore potential strategic alternatives. We engaged Stifel, Nicolaus & Company, Inc., as our financial advisor, to assist in reviewing strategic alternatives with the goal of maximizing value for our stockholders. After an extensive review of strategic alternatives, we have been unable to identify and enter into a viable transaction with a merger partner or purchaser of our company or our assets and have determined to seek stockholder approval of the Plan of Dissolution. If our stockholders do not approve the Dissolution, the board of directors will continue to explore what, if any, alternatives are available for the future of the Company in light of its discontinued business activities. Such alternatives may include a merger, sale, divestiture of assets, licensing, or other strategic transaction. The process of continuing to evaluate these strategic options may be costly, time-consuming and complex and we may incur significant costs related to this continued evaluation, such as legal, accounting and advisory fees and expenses and other related charges. There can be no assurance of completion of any particular course of action or a defined timeline for completion, including the Dissolution, and we can provide no assurance that any strategic alternative we pursue will have a positive impact on our results of operations or financial condition.
We have incurred significant operating losses since our inception and anticipate that we will incur continued losses for the foreseeable future.
We have incurred losses in each year since our inception in 2012, related to expenses for research and development and our ongoing operations, and we anticipate incurring losses for the foreseeable future. Historically, we invested substantially all of our efforts and financial resources in identifying, acquiring, in-licensing and developing our product candidates, including commencing and conducting clinical trials and providing general and administrative support for these operations. Our net losses for the years ended December 31, 2023 and 2022 were $59.1 million and $62.2 million, respectively. As of December 31, 2023, we had an accumulated deficit of $437.4 million.
To become and remain profitable, we would have to succeed in developing and eventually commercializing product candidates that generate significant revenue. Given that we are not currently pursuing and have no plans to pursue the clinical development of our product candidates, and given that we intend to seek stockholder approval to dissolve, we do not expect to succeed in the activities required to generate a profit and we expect to continue to incur losses for the foreseeable future. Our prior losses, combined with expected future losses, have had and will continue to have an adverse effect on our stockholders’ equity and working capital.
Risks Related to Our Common Stock
Our common stock is eligible for quotation on the OTC Pink Market, which may have an unfavorable impact on our stock price and liquidity.
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Our common stock is eligible for quotation on the Pink Market operated by OTC Markets Group Inc. The Pink Market is a regulated quotation service that displays real-time quotes, last sale prices and volume information in over-the-counter securities. The Pink Market is not an issuer listing service, market, or exchange. The requirements for quotation on the Pink Market are considerably lower and less regulated than those of an exchange such as The Nasdaq Stock Market LLC, on which we were previously listed. Because of this, it is possible that fewer brokers or dealers will be interested in making a market in our common stock because the market for such securities is more limited, the stocks are more volatile, and the risk to investors is greater, which may impact the liquidity of our common stock. We cannot assure you that an active public market for our common stock will ever develop. Even if an active market begins to develop in our common stock, the quotation of our common stock on the Pink Market may result in a less liquid market available for existing and potential stockholders to trade common stock, could depress the trading price of our common stock and could have a long-term adverse impact on our ability to raise capital in the future. If an active market is never developed for our common stock, it will be difficult or impossible for you to sell any common stock you purchase. Until our common stock is listed on a national securities exchange, regarding which we can provide no assurance, we expect that it will continue to be listed on the OTC Pink Market.
General Risk Factors
The price of our common stock is likely to be volatile and fluctuate substantially, which could result in substantial losses for purchasers of our common stock.
Our share price is likely to be volatile. The stock market in general and the market for biopharmaceutical companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, stockholders may not be able to sell their common stock at a price that they consider reasonable. The market price for our common stock may be influenced by many factors, including:
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
None.
During the three months ended June 30, 2024, no director or officer of the Company
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Item 6. Exhibits.
The exhibits listed on the Exhibit Index are either filed or furnished with this report or incorporated herein by reference.
Exhibit Number |
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Description |
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Form |
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File No. |
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Exhibit |
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Filing Date |
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Filed/ Furnished Herewith |
3.1 |
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Restated Certificate of Incorporation of Galera Therapeutics, Inc. |
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001-39114 |
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11/12/2019 |
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3.2 |
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Certificate of Designation of the Series A Junior Participating Preferred Stock of the Company, dated May 3, 2024 |
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001-39114 |
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5/3/2024 |
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3.3 |
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Amended and Restated Bylaws of Galera Therapeutics, Inc. |
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001-39114 |
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3/28/2024 |
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4.1 |
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Stockholder Rights Agreement, dated as of May 3, 2024 by and between the Company and Equiniti Trust Company, LLC, as rights agent (which includes the Form of Rights Certificate as Exhibit B thereto) |
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001-39114 |
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5/3/2024 |
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10.1 |
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Separation Agreement and General Release by Robert A. Beardsley, dated June 4, 2024 |
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* |
31.1 |
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* |
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31.2 |
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* |
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32.1 |
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** |
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32.2 |
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** |
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101.INS |
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Inline XBRL Instance Document - the Instance Document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document |
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* |
101.SCH |
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Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents |
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* |
104 |
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Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
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* |
* Filed herewith.
** Furnished herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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Galera Therapeutics, Inc. |
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Date: August 14, 2024 |
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By: |
/s/ J. Mel Sorensen, M.D. |
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J. Mel Sorensen, M.D. |
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Chief Executive Officer and President |
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Date: August 14, 2024 |
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By: |
/s/ Christopher Degnan |
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Christopher Degnan |
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Chief Financial Officer |
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