Galera(GRTX) - 2020 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) The unaudited interim consolidated financial statements reflect the company's ongoing losses driven by clinical development and financing activities Consolidated Balance Sheets Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2020 | December 31, 2019 | Change (2020 vs 2019) | | :-------------------------------- | :------------ | :---------------- | :-------------------- | | Cash and cash equivalents | $15,882 | $18,356 | $(2,474) | | Short-term investments | $88,527 | $93,934 | $(5,407) | | Total current assets | $108,398 | $117,570 | $(9,172) | | Total assets | $114,295 | $123,376 | $(9,081) | | Accounts payable | $6,767 | $3,945 | $2,822 | | Accrued expenses | $5,367 | $5,452 | $(85) | | Total current liabilities | $12,402 | $9,694 | $2,708 | | Royalty purchase liability | $60,879 | $43,251 | $17,628 | | Total liabilities | $74,058 | $53,768 | $20,290 | | Total stockholders' equity | $40,237 | $69,608 | $(29,371) | | Accumulated deficit | $(198,424) | $(161,350) | $(37,074) | Consolidated Statements of Operations Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Three months ended June 30, 2020 | Three months ended June 30, 2019 | Six months ended June 30, 2020 | Six months ended June 30, 2019 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Research and development | $13,839 | $9,515 | $28,092 | $18,017 | | General and administrative | $3,874 | $1,756 | $7,439 | $3,650 | | Loss from operations | $(17,713) | $(11,271) | $(35,531) | $(21,667) | | Net loss | $(18,657) | $(11,558) | $(37,074) | $(21,907) | | Net loss per share, basic and diluted | $(0.75) | $(45.30) | $(1.49) | $(86.42) | | Weighted-average shares outstanding | 24,832,264 | 300,597 | 24,823,644 | 300,597 | Consolidated Statements of Comprehensive Loss Consolidated Statements of Comprehensive Loss (in thousands) | Metric | Three months ended June 30, 2020 | Three months ended June 30, 2019 | Six months ended June 30, 2020 | Six months ended June 30, 2019 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(18,657) | $(11,558) | $(37,074) | $(21,907) | | Unrealized gain (loss) on short-term investments | $(370) | $68 | $278 | $78 | | Comprehensive loss | $(19,027) | $(11,490) | $(36,796) | $(21,829) | Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit) - The accumulated deficit increased from $(161,350) thousand at January 1, 2020, to $(198,424) thousand at June 30, 2020, primarily due to net losses incurred during the period[27] - Total stockholders' equity decreased from $69,608 thousand at January 1, 2020, to $40,237 thousand at June 30, 2020, driven by the net loss[27] - The company issued common stock warrants valued at $4,712 thousand during the six months ended June 30, 2020[27] Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows (in thousands) | Metric | Six months ended June 30, 2020 | Six months ended June 30, 2019 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(27,803) | $(18,484) | | Net cash provided by investing activities | $5,279 | $1,195 | | Net cash provided by financing activities | $20,050 | $18,673 | | Net increase (decrease) in cash and cash equivalents | $(2,474) | $1,384 | | Cash and cash equivalents at end of period | $15,882 | $16,195 | Notes to Unaudited Interim Consolidated Financial Statements 1. Organization and description of business - Galera Therapeutics, Inc is a clinical-stage biopharmaceutical company focused on developing therapeutics to transform radiotherapy in cancer[31] - The lead product candidate, avasopasem manganese (GC4419), has received FDA Breakthrough Therapy Designation for the reduction of severe oral mucositis (SOM)[31] - The company's second product candidate, GC4711, is being developed to increase the anti-cancer efficacy of stereotactic body radiation therapy (SBRT)[31] - The company had an accumulated deficit of $198.4 million as of June 30, 2020, and expects existing capital to fund operations into the second half of 2022[32] 2. Basis of presentation and significant accounting policies - The unaudited interim consolidated financial statements are prepared in conformity with U.S. GAAP and include all normal and recurring adjustments[35][36] - The COVID-19 pandemic has impacted clinical trial timelines, leading to a delay in a European trial and an increase in the ROMAN trial target enrollment to approximately 450 patients[42] - The company adopted ASU No 2018-13 and ASU No 2018-15 on January 1, 2020, with no material impact on its consolidated financial statements[43][44] 3. Fair value measurements - The company classifies its short-term investment instruments using Level 1 inputs, valuing them with quoted market prices or equivalent transparent sources[47] Fair Value Measurements of Assets (in thousands) | Asset Category | June 30, 2020 (Level 1) | December 31, 2019 (Level 1) | | :---------------------------------------------------------------- | :---------------------- | :-------------------------- | | Money market funds and U.S. Treasury obligations (cash equivalents) | $15,093 | $17,447 | | Short-term investments | $88,527 | $93,934 | 4. Property and equipment - Depreciation expense for the six months ended June 30, 2020, was $0.2 million, an increase from $0.1 million in the prior year period[48] Property and Equipment, Net (in thousands) | Category | June 30, 2020 | December 31, 2019 | | :-------------------------- | :------------ | :---------------- | | Laboratory equipment | $1,114 | $748 | | Computer hardware and software | $229 | $218 | | Leasehold improvements | $264 | $262 | | Furniture and fixtures | $173 | $147 | | Property and equipment, gross | $1,780 | $1,375 | | Less: Accumulated depreciation | $(615) | $(441) | | Property and equipment, net | $1,165 | $934 | 5. Accrued expenses Accrued Expenses (in thousands) | Category | June 30, 2020 | December 31, 2019 | | :-------------------------------- | :------------ | :---------------- | | Compensation and related benefits | $1,408 | $1,160 | | Research and development expenses | $3,661 | $3,882 | | Professional fees and other expenses | $298 | $410 | | Total Accrued Expenses | $5,367 | $5,452 | 6. Royalty purchase liability - The company received a $20.0 million payment in February 2020, representing the third tranche under the Royalty Agreement with Blackstone Life Sciences[50] - In May 2020, an amendment increased the total Royalty Purchase Price by $37.5 million to $117.5 million[52] - The company issued common stock warrants to Blackstone Purchaser valued at $4.7 million, recorded as a discount to the royalty purchase liability[55] - Noncash interest expense recognized was $2.4 million and $1.2 million for the six months ended June 30, 2020 and 2019, respectively[51] 7. Leases - The company has non-cancelable operating leases for office and laboratory space with remaining terms of approximately 3.0 and 0.9 years, respectively[56] Operating Lease Information (in thousands) | Metric | June 30, 2020 | December 31, 2019 | | :-------------------------------- | :------------ | :---------------- | | Operating lease right-of-use assets | $675 | $815 | | Total operating lease liabilities | $682 | $831 | Lease Expense (in thousands) | Metric | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :-------------------------- | :----------------------------- | :----------------------------- | | Operating lease rental expense | $149 | $121 | | Interest on lease liabilities | $19 | $27 | | Total operating lease liabilities | $168 | $148 | 8. Share-based compensation - The 2019 Incentive Award Plan became effective upon the IPO, with 1,948,970 shares initially available[58][59] - The 2019 Employee Stock Purchase Plan (ESPP) was also approved, with 243,621 shares initially available[60] - As of June 30, 2020, unrecognized compensation cost was $18.0 million, to be amortized over an estimated weighted-average period of 3.2 years[63] Share-based Compensation Expense (in thousands) | Category | Three months ended June 30, 2020 | Three months ended June 30, 2019 | Six months ended June 30, 2020 | Six months ended June 30, 2019 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Research and development | $668 | $275 | $1,262 | $513 | | General and administrative | $785 | $290 | $1,401 | $551 | | Total | $1,453 | $565 | $2,663 | $1,064 | 9. Related party transactions - Fees incurred with IntellectMap, a company whose CEO is the brother of Galera's CEO, were $0.2 million for the six months ended June 30, 2020[66] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's clinical-stage development, financial performance, liquidity, and the impact of the COVID-19 pandemic Overview - Galera Therapeutics is a clinical-stage biopharmaceutical company developing superoxide dismutase mimetics for radiotherapy applications[69] - The lead product candidate, avasopasem manganese, is in a Phase 3 registrational trial with top-line data expected in the second half of 2021[69] - The second product candidate, GC4711, is being developed to increase the efficacy of SBRT, with a Phase 1b/2a trial anticipated in the second half of 2020[69] - Net loss was $37.1 million for the six months ended June 30, 2020, with an accumulated deficit of $198.4 million[70] Business Update Regarding COVID-19 - The COVID-19 pandemic has impacted clinical trial timelines, delaying a Phase 2a trial in Europe and increasing the ROMAN trial enrollment target[75] - Top-line data from the avasopasem SBRT pilot trial is still expected in the second half of 2020, subject to COVID-19 impacts[76] - The company has implemented remote work for administrative employees and restricted on-site staff to minimize COVID-19 spread[78] Critical Accounting Policies - Management's discussion and analysis relies on estimates and judgments, particularly for accrued expenses and stock-based compensation[79] - There were no material changes to critical accounting policies during the six months ended June 30, 2020[80] Components of Results of Operations Research and Development Expense - Research and development expenses are expensed as incurred and include costs for preclinical studies, clinical trials, and personnel[81] - The company expects R&D expenses to increase significantly due to advancing clinical trials, increasing personnel, and preparing regulatory filings[82] Research and Development Expenses by Program (in thousands) | Program | Three months ended June 30, 2020 | Three months ended June 30, 2019 | Six months ended June 30, 2020 | Six months ended June 30, 2019 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Avasopasem manganese (GC4419) | $8,572 | $6,010 | $17,909 | $11,202 | | GC4711 | $1,479 | $1,466 | $2,969 | $2,796 | | Other research and development expense | $1,244 | $681 | $2,282 | $1,440 | | Personnel related and share-based compensation expense | $2,544 | $1,358 | $4,932 | $2,579 | | Total | $13,839 | $9,515 | $28,092 | $18,017 | General and Administrative Expense - General and administrative expenses primarily include personnel costs, corporate facility costs, legal fees, and accounting/consulting services[86] - These expenses are expected to increase to support R&D, potential commercialization, and public company operations[87] Interest Income - Interest income is earned on cash, cash equivalents, and short-term investments, including U.S. Treasury obligations and money market funds[88] Interest Expense - Interest expense consists of non-cash interest on proceeds from the Royalty Agreement with Blackstone Life Sciences[89] Foreign Currency Gains (Losses) - Foreign currency gains and losses result from exchange rate fluctuations on transactions denominated in non-U.S. dollar currencies[90] Net Operating Loss and Research and Development Tax Credit Carryforwards - As of December 31, 2019, the company had federal and state net operating loss carryforwards of $91.5 million and $113.6 million, respectively[91] - A valuation allowance has been recorded on substantially all deferred tax assets[92] Results of Operations Comparison of the Three and Six Months Ended June 30, 2020 and 2019 Results of Operations (in thousands) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Research and development | $13,839 | $9,515 | $28,092 | $18,017 | | General and administrative | $3,874 | $1,756 | $7,439 | $3,650 | | Loss from operations | $(17,713) | $(11,271) | $(35,531) | $(21,667) | | Interest income | $352 | $513 | $820 | $970 | | Interest expense | $(1,295) | $(736) | $(2,390) | $(1,175) | | Foreign currency gain (loss) | $(1) | $(64) | $27 | $(35) | | Net loss | $(18,657) | $(11,558) | $(37,074) | $(21,907) | Research and Development Expense - R&D expense increased by $4.3 million (45.2%) for the three months ended June 30, 2020, due to avasopasem development and personnel costs[94] - R&D expense increased by $10.1 million (56.1%) for the six months ended June 30, 2020, driven by higher clinical trial and personnel costs[95] General and Administrative Expense - G&A expense increased by $2.1 million (119.6%) for the three months ended June 30, 2020, due to increased headcount and public company costs[96] - G&A expense increased by $3.7 million (100%) for the six months ended June 30, 2020, for similar reasons[97] Interest Income - Interest income decreased for the three and six months ended June 30, 2020, primarily due to lower average interest rates[98] Interest Expense - Non-cash interest expense increased to $2.4 million for the six months ended June 30, 2020, related to the Royalty Agreement[99] Liquidity and Capital Resources - As of June 30, 2020, the company had $104.4 million in cash, cash equivalents, and short-term investments, and an accumulated deficit of $198.4 million[100] - The company expects existing capital to fund operations into the second half of 2022[109] - The company will need substantial additional funding to support ongoing R&D, clinical trials, and potential commercialization[108] Cash Flows - Net cash used in operating activities increased to $27.8 million for the six months ended June 30, 2020, reflecting higher net losses[102][103] - Net cash provided by investing activities increased to $5.3 million for the six months ended June 30, 2020, due to net sales of short-term investments[104][105] - Net cash provided by financing activities was $20.1 million for the six months ended June 30, 2020, from the Royalty Agreement proceeds[106][107] Summary of Cash Flows (in thousands) | Activity | Six months ended June 30, 2020 | Six months ended June 30, 2019 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(27,803) | $(18,484) | | Net cash provided by investing activities | $5,279 | $1,195 | | Net cash provided by financing activities | $20,050 | $18,673 | | Net increase (decrease) in cash and cash equivalents | $(2,474) | $1,384 | Funding Requirements - Expenses are expected to increase substantially as the company completes clinical development and builds commercialization infrastructure[109][110] - Future funding requirements are highly uncertain and depend on clinical trial scope, regulatory review, and manufacturing arrangements[110] - The COVID-19 pandemic has introduced volatility in stock prices, potentially making it difficult to raise capital on favorable terms[112] Royalty Agreement with Blackstone Life Sciences (Formerly Known as Clarus Ventures) - The Royalty Agreement provides up to $117.5 million in total funding, with $60.0 million received through June 30, 2020[115][116] - The company agreed to sell a high single-digit percentage of worldwide net sales of its products to Blackstone during the Royalty Period[117] - The company issued two warrants to Blackstone Purchaser to buy 550,661 shares of common stock at $13.62 per share[119] Off-Balance Sheet Arrangements - The company does not have any relationships with unconsolidated entities or financial partnerships for off-balance sheet arrangements[120] Effect of Inflation - Inflation did not have a significant impact on the company's net loss for the periods ended June 30, 2020 or 2019[121] Recent Accounting Pronouncements - Refer to Note 2 of the interim consolidated financial statements for a description of recent accounting pronouncements[122] JOBS Act Transition Period - As an emerging growth company, Galera Therapeutics has opted out of the extended transition period for new accounting standards[123] - The company can still rely on other exemptions available to emerging growth companies, such as not requiring an auditor's attestation on internal controls[125] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Galera Therapeutics is not required to provide these disclosures - The company is a smaller reporting company and is not required to provide disclosures under this item[126] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2020 - Management concluded that disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2020[128] - No material changes in internal control over financial reporting were identified during the quarter ended June 30, 2020[129] PART II. OTHER INFORMATION Item 1. Legal Proceedings Galera Therapeutics is not currently subject to any material legal proceedings - The company is not subject to any material legal proceedings[131] Item 1A. Risk Factors The company highlights the adverse impact of the COVID-19 pandemic on business operations and clinical trials - The COVID-19 pandemic has adversely impacted and could continue to impact the company's business, clinical trials, and financial condition[134] - Specific impacts of COVID-19 include delays in clinical trial initiation and enrollment, and potential interruptions in manufacturing and regulatory approvals[134][135][143] - The pandemic has also led to high volatility in stock prices, potentially creating difficulties in raising capital on favorable terms[136] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company completed its IPO in late 2019, raising total net proceeds of approximately $58.0 million - The company completed its IPO on November 12, 2019, selling 5,000,000 shares for net proceeds of approximately $53.0 million[137] - An additional 445,690 shares were sold on December 9, 2019, generating approximately $5.0 million in net proceeds[137] - Total net proceeds of approximately $58.0 million have been invested in money market funds and U.S. Treasury obligations[138] Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities reported by the company - No defaults upon senior securities were reported[139] Item 4. Mine Safety Disclosures This item is not applicable to Galera Therapeutics - This item is not applicable[141] Item 5. Other Information No other information was reported under this item - No other information was reported[142] Item 6. Exhibits This section lists all exhibits filed with the report, including organizational documents and certifications - The exhibits include the Restated Certificate of Incorporation, Amended and Restated Bylaws, warrant agreements, and various certifications[145] SIGNATURES The report is duly signed by the Chief Executive Officer and Chief Financial Officer on August 10, 2020 - The report was signed by J. Mel Sorensen, M.D., Chief Executive Officer and President, and Christopher Degnan, Chief Financial Officer, on August 10, 2020[150]