Galera(GRTX) - 2020 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Unaudited Q1 2020 financial statements show an increased net loss and strengthened balance sheet, influenced by higher R&D and royalty proceeds Consolidated Balance Sheets Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Cash and cash equivalents | $21,578 | $18,356 | | Short-term investments | $98,939 | $93,934 | | Total Assets | $130,813 | $123,376 | | Royalty purchase liability | $64,346 | $43,251 | | Total Liabilities | $77,755 | $53,768 | | Total Stockholders' Equity | $53,058 | $69,608 | Consolidated Statements of Operations Consolidated Statement of Operations (in thousands, except per share data) | Metric | Three months ended March 31, 2020 | Three months ended March 31, 2019 | | :--- | :--- | :--- | | Research and development | $14,252 | $8,502 | | General and administrative | $3,566 | $1,894 | | Loss from operations | ($17,818) | ($10,396) | | Net loss | ($18,417) | ($10,349) | | Net loss per share, basic and diluted | ($0.74) | ($41.12) | Consolidated Statements of Cash Flows Consolidated Statement of Cash Flows (in thousands) | Activity | Three months ended March 31, 2020 | Three months ended March 31, 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | ($12,392) | ($8,929) | | Net cash provided by (used in) investing activities | ($4,395) | $2,596 | | Net cash provided by financing activities | $20,009 | $0 | | Net increase (decrease) in cash and cash equivalents | $3,222 | ($6,333) | Notes to Unaudited Interim Consolidated Financial Statements - The company is a clinical-stage biopharmaceutical firm developing therapeutics to transform radiotherapy in cancer, with avasopasem manganese (GC4419) as its lead product candidate[33] - The company anticipates further losses, expecting existing cash, cash equivalents, short-term investments, and Blackstone payments to fund operations into the second half of 2022[34] - In February 2020, the company received a $20.0 million payment from Blackstone Life Sciences, bringing total proceeds under the Royalty Agreement to $60.0 million[51] - Post-quarter, COVID-19 led to a delayed Phase 2a trial in Europe and increased ROMAN trial enrollment to approximately 450 patients, pushing data readout to the second half of 2021[68] - On May 11, 2020, the Royalty Agreement with Blackstone was amended, increasing the total potential Royalty Purchase Price by $37.5 million to $117.5 million and issuing warrants for 550,661 common shares[69][72] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the increased Q1 2020 operating loss due to higher R&D and G&A expenses, strong liquidity, and COVID-19 impacts on clinical trial timelines and funding outlook Overview - The company is a clinical-stage biopharmaceutical firm developing cancer radiotherapy therapeutics, with avasopasem manganese (GC4419) in a Phase 3 ROMAN Trial for severe oral mucositis (SOM)[75] - As of March 31, 2020, the company held $120.5 million in cash, cash equivalents, and short-term investments, with an accumulated deficit of $179.8 million and a net loss of $18.4 million for the quarter[76] Business Update Regarding COVID-19 - The COVID-19 pandemic has directly impacted clinical trial timelines, leading to an indefinite delay of a Phase 2a avasopasem trial in Europe for HNC patients[82] - ROMAN trial target enrollment increased to approximately 450 patients to maintain safety database size, with enrollment completion expected in H1 2021 and top-line data in H2 2021[82] Results of Operations Comparison of Operating Results (in thousands) | Item | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | Change | | :--- | :--- | :--- | :--- | | Research and development | $14,252 | $8,502 | $5,750 | | General and administrative | $3,566 | $1,894 | $1,672 | | Loss from operations | ($17,818) | ($10,396) | ($7,422) | | Net loss | ($18,417) | ($10,349) | ($8,068) | - Research and development expense increased by $5.8 million, primarily due to a $4.2 million rise in avasopasem development costs from increased ROMAN trial enrollment and sites, and a $1.2 million increase in personnel expenses[103] - General and administrative expense increased by $1.7 million, mainly due to higher employee headcount, share-based compensation, and increased insurance and professional fees as a public company[104] Liquidity and Capital Resources - As of March 31, 2020, the company held $120.5 million in cash, cash equivalents, and short-term investments, with operations primarily funded by equity sales and $60.0 million from the Blackstone Royalty Agreement[107] - Net cash used in operating activities was $12.4 million for Q1 2020, up from $8.9 million in Q1 2019, reflecting the increased net loss[108][109] - Financing activities provided $20.0 million in Q1 2020 from proceeds under the Blackstone Royalty Agreement[113] - The company expects existing cash and an additional $57.5 million from Blackstone under an amended agreement to fund operations and capital expenditures into the second half of 2022[116] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, the company is not required to provide quantitative and qualitative disclosures about market risk - As a smaller reporting company under Rule 12b-2 of the Exchange Act, the company is not required to provide the information for this item[131] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2020, with no material changes to internal control over financial reporting - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of the period end[133] - No material changes to internal control over financial reporting occurred during the quarter ended March 31, 2020[134] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not currently subject to any material legal proceedings - The company is not subject to any material legal proceedings[137] Item 1A. Risk Factors The company highlights new risk factors related to the COVID-19 pandemic, including potential adverse impacts on clinical trials, supply chain, and capital raising efforts - A new risk factor details the adverse impacts of the COVID-19 pandemic on business, including preclinical studies and clinical trials[140] - Pandemic-related risks include clinical trial delays, healthcare resource diversion, activity interruptions, and potential operational delays for the FDA and CMOs[141] - High stock price volatility due to the pandemic may hinder raising capital through equity sales on favorable terms[142] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company details the use of approximately $58.0 million in net proceeds from its November 2019 IPO, invested in money market funds and U.S. Treasury obligations - The company completed its IPO on November 12, 2019, and a partial over-allotment exercise on December 9, 2019, generating total net proceeds of approximately $58.0 million[143] - Net proceeds have been invested in money market funds and U.S. Treasury obligations, with no material change in their planned use[144] Other Items (3, 4, 5, 6) The company reports no defaults upon senior securities, no mine safety disclosures, and no other information for the period, with a list of exhibits provided - Item 3, Defaults Upon Senior Securities: None[145] - Item 4, Mine Safety Disclosures: Not applicable[146] - Item 5, Other Information: None[147]