Gain Therapeutics(GANX) - 2021 Q4 - Annual Report

Part I Business Gain Therapeutics is a preclinical biotech developing novel STARs for protein misfolding diseases via its SEE-Tx® platform, with lead programs in Parkinson's and Gaucher disease Overview Gain Therapeutics uses its SEE-Tx® platform to discover STARs for LSDs and CNS disorders, with lead programs for Parkinson's and Gaucher disease in preclinical development - The company uses its Site-Directed Enzyme Enhancement Therapy (SEE-Tx®) platform to discover novel allosteric binding sites on proteins and identify proprietary small molecules (STARs) to treat diseases like LSDs and CNS disorders[14] - Lead compounds for Parkinson's disease and Gaucher disease are in preclinical studies, with positive in vitro data showing increased GCase protein levels and reduction of toxic substrates[16] - The company plans to submit a regulatory dossier to initiate a first-in-human Phase 1 clinical trial for its Parkinson's disease program in the second half of 2022[17] - Completed its Initial Public Offering (IPO) on March 17, 2021, raising net proceeds of approximately $40.5 million[19][20] Our Platform for Computational Target and Drug Discovery The SEE-Tx® platform discovers novel allosteric binding sites, identifying STARs to modulate protein function with high specificity and a 14% validated compound hit rate - The SEE-Tx® platform uses computational methods to identify novel allosteric binding sites on proteins, which are distinct from the active site[22][23] - Targeting allosteric sites allows for improved specificity and multiple mechanisms of action, including protein stabilization, destabilization, and targeted degradation[25][29] - The platform's validated-target approach is faster and more efficient than traditional high-throughput screening, with an average hit rate for validated compounds of 14%, a significant improvement over traditional methods[28] Our Pipeline of STARs The company's STARs pipeline targets LSDs, CNS disorders, metabolic diseases, and oncology, with lead preclinical programs GT-02287 for Parkinson's and GT-02329 for Gaucher Disease - The pipeline is built on the SEE-Tx® platform and is disease-agnostic, with an initial focus on LSDs and CNS disorders[37] - The lead compound for Parkinson's Disease, GT-02287, has demonstrated the ability to increase GCase activity, improve lysosomal delivery, and reduce toxic alpha-synuclein in preclinical models, showing high brain exposure with a brain-to-plasma ratio greater than one[48][50][55] - The lead compound for Gaucher Disease, GT-02329, has been shown to increase GCase levels, reduce toxic glucosylsphingosine, and enhance GCase activity in the brain and plasma in preclinical studies[63][66][68] - Research-stage programs are targeting enzymes related to GM1 Gangliosidosis (GLB), MPS1 (IDUA), Krabbe Disease (GALC), and Metachromatic Leukodystrophy (MLD)[69][70][77][87][95] Competition The company faces intense competition from gene therapy developers and other firms like Axovant, Lysogene, Prevail, and Apollo, many with superior resources - The company faces competition from firms developing gene therapy approaches and other treatments for its target indications, including Axovant, Lysogene, Prevail Therapeutics, and Apollo Therapeutics[108] - Many competitors have greater financial, R&D, and manufacturing resources, which could allow them to establish a strong market position before Gain Therapeutics can enter the market[109] Strategic Transactions; Collaboration and Licensing Arrangements The company's strategy includes collaborations and licensing, notably an exclusive SEE-Tx® platform license from Minoryx and a multi-target oncology collaboration with Zentalis Pharmaceuticals - The company has an exclusive, worldwide license from Minoryx Therapeutics, S.L. to use the SEE-Tx® discovery platform, which requires royalty payments on net revenues and a 1.25% milestone payment on any consideration received from a sale of the company[117][118][119] - In April 2021, entered into a multi-target collaboration with Zentalis Pharmaceuticals to discover new cancer treatments, with the agreement including initiation fees, R&D cost reimbursement, and potential milestone payments up to $41.5 million plus royalties[112][116] - A strategic research collaboration with Sumitomo Dainippon Pharma was terminated, with a formal notice expected after March 22, 2022[111] Intellectual Property The company protects its technology through patents and trade secrets, with five pending European patent applications and key in-licensed patents for SEE-Tx® (expiring 2032) and GLB/GBA programs (expiring 2037) - The company's patent portfolio consists of five pending European patent applications and related national stage applications as of February 2022[122] - Key in-licensed patents include one for the SEE-Tx® Technology (expiring 2032) and patent families for the GLB and GBA programs (applications, if issued, expiring 2037)[122][123][124] - The company also relies on trade secrets, know-how, and confidentiality agreements with employees and collaborators to protect its proprietary information[126] Government Regulation The company's products face extensive FDA regulation, involving lengthy preclinical and clinical trials, with potential for Orphan Drug Designation and ongoing compliance with cGMP, ACA, and anti-fraud laws - The FDA drug approval process involves extensive preclinical studies, an IND submission, and typically three phases of clinical trials (Phase I, II, III) to establish safety and efficacy[132][138][139][140] - The company may seek Orphan Drug Designation, which is for diseases affecting fewer than 200,000 individuals in the U.S. and provides a seven-year period of marketing exclusivity if the product is the first approved for that indication[154][155] - The company is subject to healthcare laws such as the Affordable Care Act (ACA), which impacts drug pricing and reimbursement, and federal/state anti-kickback and false claims laws[172][179][181] - Marketing products outside the U.S., particularly in the European Economic Area (EEA), requires authorization through centralized or national procedures and compliance with regulations like the GDPR for data privacy[190][191][201] Employees and Human Capital Resources As of December 31, 2021, the company had 29 employees (20 in R&D) across Barcelona, Lugano, and Bethesda - As of December 31, 2021, the company had 29 employees, with 20 in R&D and 9 in general and administrative roles[206] - Employees are located in Barcelona, Spain (12), Lugano, Switzerland (14), and Bethesda, Maryland (3)[206] Risk Factors The company faces significant risks including operating losses, need for additional capital, uncertain clinical trial outcomes, SEE-Tx® platform novelty, Minoryx license dependency, competition, and regulatory complexities - The company has a history of operating losses and expects to incur losses for the foreseeable future, with no guarantee of achieving profitability[213] - The company's success is highly dependent on its ability to raise additional capital; failure to do so could force delays or termination of development programs[221][274] - The company's product candidates are novel and in early development, with success in preclinical studies not being indicative of future clinical trial results, and clinical trials are expensive, time-consuming, and have an uncertain outcome[231][236][242] - The business is significantly dependent on an exclusive license from Minoryx Therapeutics for its core SEE-Tx® platform; termination of this license would have a material adverse effect on operations[290][291] - The ongoing COVID-19 pandemic and global instability, such as the conflict in Ukraine, could adversely affect operations, disrupt supply chains, and impact the ability to access capital[280][344] - The company has identified and is remediating material weaknesses in its internal control over financial reporting, which could affect the accuracy and timeliness of its financial statements[341][342][343] Unresolved Staff Comments The company reports no unresolved staff comments from the Securities and Exchange Commission - None[395] Properties The company leases facilities in Bethesda, Lugano, and Barcelona for its operations, with potential future expansion needs - Leases 1,568 sq ft of office space in Bethesda, Maryland (lease expires Sept 2024)[396] - Leases 2,992 sq ft of office space in Lugano, Switzerland (lease expires May 2026)[397] - Leases a total of 2,819 sq ft of lab and office space in Barcelona, Spain across two agreements (leases expire Dec 2025 and Nov 2026)[397][398] Legal Proceedings The company is not currently involved in any legal proceedings - None[399] Mine Safety Disclosures This item is not applicable to the company's business - Not applicable[400] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on Nasdaq under GANX, with 54 holders as of February 28, 2022, and no plans for dividends - Common Stock trades on the Nasdaq Global Market under the symbol "GANX"[402] - As of February 28, 2022, there were approximately 54 holders of record[402] - The company has no intention to declare or pay a dividend in the foreseeable future[403] Selected Financial Data This section has been reserved and contains no information - Reserved[404] Management's Discussion and Analysis of Financial Condition and Results of Operations For 2021, the company reported a net loss of $13.9 million, driven by increased R&D and G&A expenses, with $36.9 million in cash as of December 31, 2021, expected to fund operations into H2 2023 | Financial Metric | 2021 | 2020 | | :--- | :--- | :--- | | Total Revenues | $164,994 | $28,881 | | Research and Development Expenses | $7,164,229 | $2,259,204 | | General and Administrative Expenses | $6,826,938 | $1,249,126 | | Loss from Operations | $(13,826,173) | $(3,479,449) | | Net Loss | $(13,890,606) | $(3,577,682) | | Net Loss Per Share | $(1.37) | $(1.33) | - The increase in R&D expenses was primarily due to expanded research activities, including external collaborations for chemical synthesis and toxicology studies, and higher personnel costs[436] - The increase in G&A expenses was driven by costs associated with being a public company, including legal, accounting, and investor relations fees, as well as increased personnel and stock-based compensation costs[438] - As of December 31, 2021, the company had cash and cash equivalents of $36.9 million and an accumulated deficit of $20.9 million[412][440] - The company believes its existing cash, including IPO proceeds, will fund operating expenses and capital requirements into the second half of 2023[454] Quantitative and Qualitative Disclosures about Market Risk The company faces interest rate and foreign currency risk, with minimal interest rate risk and foreign currency risk from CHF and EUR operations, where a 10% USD-CHF change would impact 2021 net loss by $587,000 - Primary market risk exposures are interest rate sensitivity and foreign currency exchange risk[471][473] - Interest rate risk is minimal due to the short-term nature of cash equivalents and zero-interest debt[471][472] - Foreign currency risk exists due to operations in Switzerland (CHF) and Spain (EUR), where a hypothetical 10% change in the USD-CHF exchange rate would have changed the 2021 net loss by approximately $587,000[473] Financial Statements and Supplementary Data This section presents the company's audited consolidated financial statements for 2021 and 2020, including balance sheets, statements of operations, and cash flows, with total assets of $39.0 million and total liabilities of $4.2 million as of December 31, 2021 | Balance Sheet Item | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Total Current Assets | $37,722,044 | $8,987,828 | | Total Assets | $38,985,071 | $9,604,358 | | Total Current Liabilities | $2,552,546 | $2,114,831 | | Total Liabilities | $4,167,525 | $3,402,369 | | Total Stockholders' Equity | $34,817,546 | $6,201,989 | | Cash Flow Item | Year Ended Dec 31, 2021 | Year Ended Dec 31, 2020 | | :--- | :--- | :--- | | Cash used in operating activities | $(12,365,670) | $(3,240,237) | | Cash used in investing activities | $(94,212) | $(20,826) | | Cash provided by financing activities | $41,766,775 | $10,486,961 | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes or disagreements with its accountants regarding accounting and financial disclosure - None[634] Controls and Procedures Management concluded disclosure controls were ineffective as of December 31, 2021, due to an unremediated material weakness in procedures for timely financial statement preparation, though personnel issues were remediated - Management concluded that disclosure controls and procedures were not effective as of December 31, 2021, due to a material weakness in internal control over financial reporting[635] - Of the two material weaknesses identified in 2020, the one related to a lack of sufficient accounting and supervisory personnel was remediated as of December 31, 2021[638][640] - The material weakness related to a lack of adequate procedures and controls to ensure accurate and timely financial statement preparation remains unremediated[638][640] Other information Not applicable - Not applicable[643] Part III Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance will be in the 2022 Proxy Statement, filed within 120 days of December 31, 2021, with a code of ethics available online - Information is incorporated by reference to the company's Proxy Statement for the 2022 annual meeting of stockholders[646] - The company has a code of ethics posted on its website[647] Executive Compensation Information on executive compensation is incorporated by reference from the 2022 Proxy Statement, to be filed within 120 days of fiscal year-end - Information is incorporated by reference to the company's Proxy Statement for the 2022 annual meeting of stockholders[649] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information on security ownership is incorporated by reference from the 2022 Proxy Statement, to be filed within 120 days of fiscal year-end - Information is incorporated by reference to the company's Proxy Statement for the 2022 annual meeting of stockholders[650] Certain Relationships and Related Transactions and Director Independence Information on related party transactions and director independence is incorporated by reference from the 2022 Proxy Statement, to be filed within 120 days of fiscal year-end - Information is incorporated by reference to the company's Proxy Statement for the 2022 annual meeting of stockholders[651] Principal Accountant Fees and Services Information on principal accountant fees and services is incorporated by reference from the 2022 Proxy Statement, to be filed within 120 days of fiscal year-end - Information is incorporated by reference to the company's Proxy Statement for the 2022 annual meeting of stockholders[652] Part IV Exhibits and Financial Statement Schedules This section lists exhibits for the Annual Report on Form 10-K, with financial statements under Item 8, omitted schedules, and an exhibit list including organizational documents and material contracts - The financial statements required by this item are filed under Item 8 of this report[654] - All financial statement schedules have been omitted as they are not applicable or the required information is included in the financial statements or notes[654] - A list of exhibits filed with the report is provided, including organizational documents, material contracts, and required certifications[655] Form 10-K Summary The company has not provided a summary for Form 10-K - None[660]