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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
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☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2024
OR
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☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _______________ to _______________
Commission File Number: 001-39655
GALECTO, INC.
(Exact Name of Registrant as Specified in its Charter)
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Delaware |
37-1957007 |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer
Identification No.) |
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Ole Maaloes Vej 3 DK-2200 Copenhagen N Denmark |
N/A |
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75 State Street, Suite 100 Boston, MA 02109 |
02109 |
(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (+45) 70 70 52 10
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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Common Stock, par value $0.00001 per share |
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GLTO |
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The Nasdaq Capital Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.
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Large accelerated filer |
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Accelerated filer |
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Non-accelerated filer |
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☒ |
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Smaller reporting company |
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☒ |
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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 7, 2024, the registrant had 27,130,196 shares of common stock, $0.00001 par value per share, outstanding.
Table of Contents
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning 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 fact are “forward-looking statements” for purposes of this Quarterly Report on Form 10-Q. In some cases, you can identify forward-looking statements by terminology such as “may,” “could,” “will,” “would,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “intend,” “predict,” “seek,” “contemplate,” “project,” “continue,” “potential,” “ongoing,” “goal,” or the negative of these terms or other comparable terminology. These forward-looking statements include, but are not limited to, statements regarding:
•our plans and expectations regarding our strategic alternative review process that we announced in September 2023 and the timing and success of such process, including the completion of a potential transaction;
•our ability to retain the continued service of our directors, officers, key employees and consultants;
•our ability to maintain the listing of our common stock on the Nasdaq Stock Market;
•the success, cost and timing of our product development activities and planned initiation and completion of clinical trials of our current fibrosis and oncology product candidates, including GB2064 and GB1211, and any future product candidates;
•our need to raise additional funding;
•our ability to obtain regulatory approval for our current or future product candidates that we may identify or develop;
•our ability to ensure adequate supply of our current or future product candidates;
•our ability to maintain third-party relationships necessary to conduct our business;
•our heavy dependence upon the success of our research to generate and advance additional product candidates;
•our ability to establish an adequate safety or efficacy profile for our current or future product candidates that we may pursue;
•the implementation of our strategic plans for our business, our current or future product candidates we may develop and our technology;
•our intellectual property position, including the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates and technology;
•the rate and degree of market acceptance and clinical utility for our current or future product candidates we may develop;
•our estimates about the size of our market opportunity;
•our estimates of our expenses, future revenues, capital requirements and our needs for additional financing;
•our ability to maintain and establish collaborations;
•our financial performance and liquidity;
•our ability to effectively manage our potential growth;
•developments relating to our competitors and our industry, including the impact of government regulation;
•our ability to retain the continued service of our key professionals and consultants and to identify, hire and retain additional qualified professionals;
•our ability to maintain adequate internal controls over financial reporting;
•the effects of global economic uncertainty and financial market volatility caused by economic effects of rising inflation and interest rates, geopolitical instability, changes in international trade relationships and conflicts, such as the ongoing conflict between Russia and Ukraine and the current armed conflict in Israel and the Gaza Strip, on any of the foregoing or other aspects of our business or operations; and
•other risks and uncertainties, including those listed under the section titled “Risk Factors.”
These statements relate to future events or to our future financial performance and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by these forward-looking statements. Factors that may cause actual results to differ materially from current expectations include, among other things, the reasons described elsewhere in this Quarterly Report on Form 10-Q and those set forth in Part I, Item 1A - “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. Any forward-looking statement in this Quarterly Report on Form 10-Q reflects our current view with respect to future events and is subject to these and other risks, uncertainties, and assumptions relating to our operations, results of operations, industry, and future growth. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.
This Quarterly Report on Form 10-Q also contains estimates, projections, and other information concerning our industry, our business, and the markets for certain drugs, including data regarding the estimated size of those markets, their projected growth rates, and the incidence of certain medical conditions. Information that is based on estimates, forecasts, projections, or similar methodologies is inherently subject to uncertainties, and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained these industry, business, market, and other data from reports, research surveys, studies, and similar data prepared by third parties, industry, medical and general publications, government data, and similar sources. In some cases, we do not expressly refer to the sources from which these data are derived.
Except where the context otherwise requires, in this Quarterly Report on Form 10-Q, “we,” “us,” “our,” “Galecto,” and the “Company” refer to Galecto, Inc. and, where appropriate, its consolidated subsidiaries.
Trademarks
We have applied for various trademarks that we use in connection with the operation of our business. This Quarterly Report on Form 10-Q includes trademarks, service marks, and trade names owned by us or other companies. All trademarks, service marks, and trade names included in this Quarterly Report on Form 10-Q are the property of their respective owners. Solely for convenience, the trademarks and trade names in this report may be referred to without the ® and ™ symbols, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto.
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
GALECTO, INC.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share amounts)
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June 30, |
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December 31, |
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2024 |
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2023 |
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Assets |
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(unaudited) |
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Current assets |
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Cash and cash equivalents |
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$ |
22,862 |
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$ |
21,465 |
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Marketable securities |
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— |
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11,686 |
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Prepaid expenses and other current assets |
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2,306 |
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3,623 |
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Total current assets |
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25,168 |
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36,774 |
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Operating lease right-of-use asset |
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76 |
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247 |
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Equipment, net |
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67 |
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78 |
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Other assets, non-current |
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1,986 |
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1,128 |
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Total assets |
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$ |
27,297 |
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$ |
38,227 |
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Liabilities and stockholders’ equity |
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Current liabilities |
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Accounts payable |
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$ |
724 |
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$ |
1,702 |
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Accrued expenses and other current liabilities |
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2,985 |
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4,128 |
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Total current liabilities |
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3,709 |
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5,830 |
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Operating lease liabilities, non-current |
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— |
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66 |
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Total liabilities |
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3,709 |
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5,896 |
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Commitments and contingencies (Note 9) |
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Stockholders’ equity |
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Preferred stock, par value of $0.00001 per share; 10,000,000 shares authorized
at June 30, 2024 and December 31, 2023; no shares issued or outstanding
as of June 30, 2024 and December 31, 2023 |
|
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— |
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— |
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Common stock, par value of $0.00001 per share; 300,000,000 shares authorized
at June 30, 2024 and December 31, 2023; 27,121,030 and 27,112,697 shares
issued and outstanding at June 30, 2024 and December 31, 2023, respectively |
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— |
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— |
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Additional paid-in capital |
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290,291 |
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288,036 |
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Accumulated deficit |
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(266,900 |
) |
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(256,085 |
) |
Accumulated other comprehensive gain |
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197 |
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380 |
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Total stockholders’ equity |
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23,588 |
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32,331 |
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Total liabilities and stockholders' equity |
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$ |
27,297 |
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$ |
38,227 |
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See accompanying notes to the unaudited interim condensed consolidated financial statements.
Galecto, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except share and per share amounts)
(Unaudited)
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Three Months Ended
June 30, |
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Six Months Ended
June 30, |
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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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$ |
1,834 |
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$ |
8,089 |
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$ |
4,297 |
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$ |
18,451 |
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General and administrative |
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2,775 |
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3,070 |
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6,053 |
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6,200 |
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Restructuring costs |
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968 |
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— |
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968 |
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— |
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Total operating expenses |
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5,577 |
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11,159 |
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11,318 |
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24,651 |
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Loss from operations |
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(5,577 |
) |
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(11,159 |
) |
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(11,318 |
) |
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(24,651 |
) |
Other income, net |
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Interest income, net |
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213 |
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442 |
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470 |
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876 |
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Foreign exchange transaction gain, net |
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68 |
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(27 |
) |
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75 |
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37 |
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Total other income, net |
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281 |
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415 |
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545 |
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913 |
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Loss before income tax expense |
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(5,296 |
) |
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(10,744 |
) |
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(10,773 |
) |
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(23,738 |
) |
Income tax expense |
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42 |
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— |
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42 |
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— |
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Net loss |
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$ |
(5,338 |
) |
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$ |
(10,744 |
) |
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$ |
(10,815 |
) |
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$ |
(23,738 |
) |
Net loss per common share, basic and diluted |
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$ |
(0.20 |
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$ |
(0.41 |
) |
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$ |
(0.40 |
) |
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$ |
(0.91 |
) |
Weighted-average number of shares used in computing net loss
per common share, basic and diluted |
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27,115,536 |
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26,375,076 |
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27,114,116 |
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26,025,929 |
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Other comprehensive loss, net of tax |
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Currency translation loss |
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(131 |
) |
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(35 |
) |
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(217 |
) |
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(10 |
) |
Unrealized gain on marketable securities |
|
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2 |
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25 |
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|
34 |
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|
117 |
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Other comprehensive gain (loss), net of tax |
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(129 |
) |
|
|
(10 |
) |
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(183 |
) |
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|
107 |
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Total comprehensive loss |
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$ |
(5,467 |
) |
|
$ |
(10,754 |
) |
|
$ |
(10,998 |
) |
|
$ |
(23,631 |
) |
See accompanying notes to the unaudited interim condensed consolidated financial statements.
Galecto, Inc.
Condensed Consolidated Statements of Changes in Stockholders’ Equity
(in thousands, except share amounts)
(Unaudited)
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Three Months Ended |
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Common Stock |
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Additional
Paid-In |
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Accumulated |
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Accumulated Other
Comprehensive |
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Total
Stockholders’ |
|
June 30, 2024 |
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Shares |
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Amount |
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Capital |
|
|
Deficit |
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Income (Loss) |
|
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Equity |
|
Balance at March 31, 2024 |
|
|
27,112,697 |
|
|
$ |
— |
|
|
$ |
289,395 |
|
|
$ |
(261,562 |
) |
|
$ |
326 |
|
|
$ |
28,159 |
|
Stock-based compensation expense |
|
|
— |
|
|
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— |
|
|
|
891 |
|
|
|
— |
|
|
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— |
|
|
|
891 |
|
Issuance of common stock in connection with vesting of restricted stock units |
|
|
8,333 |
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|
|
— |
|
|
|
5 |
|
|
|
— |
|
|
|
— |
|
|
|
5 |
|
Other comprehensive loss, net |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(129 |
) |
|
|
(129 |
) |
Net loss |
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— |
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|
— |
|
|
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— |
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|
(5,338 |
) |
|
|
— |
|
|
|
(5,338 |
) |
Balance at June 30, 2024 |
|
|
27,121,030 |
|
|
$ |
— |
|
|
$ |
290,291 |
|
|
$ |
(266,900 |
) |
|
$ |
197 |
|
|
$ |
23,588 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Common Stock |
|
|
Additional
Paid-In |
|
|
Accumulated |
|
|
Accumulated Other
Comprehensive |
|
|
Total
Stockholders’ |
|
June 30, 2023 |
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Income (Loss) |
|
|
Equity |
|
Balance at March 31, 2023 |
|
|
25,673,474 |
|
|
$ |
— |
|
|
$ |
281,190 |
|
|
$ |
(230,730 |
) |
|
$ |
(127 |
) |
|
$ |
50,333 |
|
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
1,439 |
|
|
|
— |
|
|
|
— |
|
|
|
1,439 |
|
Issuance of common stock; net of issuance costs |
|
|
1,348,425 |
|
|
|
— |
|
|
|
2,682 |
|
|
|
— |
|
|
|
— |
|
|
|
2,682 |
|
Other comprehensive loss, net |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(10 |
) |
|
|
(10 |
) |
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(10,744 |
) |
|
|
— |
|
|
|
(10,744 |
) |
Balance at June 30, 2023 |
|
|
27,021,899 |
|
|
$ |
— |
|
|
$ |
285,311 |
|
|
$ |
(241,474 |
) |
|
$ |
(137 |
) |
|
$ |
43,700 |
|
See accompanying notes to the unaudited interim condensed consolidated financial statements.
Galecto, Inc.
Condensed Consolidated Statements of Changes in Stockholders’ Equity
(in thousands, except share amounts)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
Common Stock |
|
|
Additional
Paid-In |
|
|
Accumulated |
|
|
Accumulated Other
Comprehensive |
|
|
Total
Stockholders’ |
|
June 30, 2024 |
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Income (Loss) |
|
|
Equity |
|
Balance at December 31, 2023 |
|
|
27,112,697 |
|
|
$ |
— |
|
|
$ |
288,036 |
|
|
$ |
(256,085 |
) |
|
$ |
380 |
|
|
$ |
32,331 |
|
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
2,250 |
|
|
|
— |
|
|
|
— |
|
|
|
2,250 |
|
Issuance of common stock in connection with vesting of restricted stock units |
|
|
8,333 |
|
|
|
— |
|
|
|
5 |
|
|
|
— |
|
|
|
— |
|
|
|
5 |
|
Other comprehensive loss, net |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(183 |
) |
|
|
(183 |
) |
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(10,815 |
) |
|
|
— |
|
|
|
(10,815 |
) |
Balance at June 30, 2024 |
|
|
27,121,030 |
|
|
$ |
— |
|
|
$ |
290,291 |
|
|
$ |
(266,900 |
) |
|
$ |
197 |
|
|
$ |
23,588 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
Common Stock |
|
|
Additional
Paid-In |
|
|
Accumulated |
|
|
Accumulated Other
Comprehensive |
|
|
Total
Stockholders’ |
|
June 30, 2023 |
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Loss |
|
|
Equity |
|
Balance at December 31, 2022 |
|
|
25,652,392 |
|
|
$ |
— |
|
|
$ |
279,733 |
|
|
$ |
(217,736 |
) |
|
$ |
(244 |
) |
|
$ |
61,753 |
|
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
2,873 |
|
|
|
— |
|
|
|
— |
|
|
|
2,873 |
|
Issuance of common stock; net of issuance costs of $0.2 million |
|
|
1,369,507 |
|
|
|
— |
|
|
|
2,705 |
|
|
|
— |
|
|
|
— |
|
|
|
2,705 |
|
Other comprehensive gain, net |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
107 |
|
|
|
107 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(23,738 |
) |
|
|
— |
|
|
|
(23,738 |
) |
Balance at June 30, 2023 |
|
|
27,021,899 |
|
|
$ |
— |
|
|
$ |
285,311 |
|
|
$ |
(241,474 |
) |
|
$ |
(137 |
) |
|
$ |
43,700 |
|
See accompanying notes to the unaudited interim condensed consolidated financial statements.
GALECTO, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
|
2024 |
|
|
2023 |
|
Cash flows from operating activities: |
|
|
|
|
|
|
Net loss |
|
$ |
(10,815 |
) |
|
$ |
(23,738 |
) |
Adjustment to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
Depreciation |
|
|
10 |
|
|
|
35 |
|
Stock-based compensation |
|
|
2,250 |
|
|
|
2,873 |
|
Issuance of common stock in connection with vesting of restricted stock units |
|
|
5 |
|
|
|
— |
|
Amortization of premiums and discounts on marketable securities |
|
|
70 |
|
|
|
(248 |
) |
Amortization of right of use lease asset |
|
|
165 |
|
|
|
199 |
|
Accretion of lease liability |
|
|
6 |
|
|
|
30 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
Prepaid expenses and other current assets |
|
|
1,317 |
|
|
|
450 |
|
Other assets, noncurrent |
|
|
(857 |
) |
|
|
(203 |
) |
Accounts payable |
|
|
(978 |
) |
|
|
2,207 |
|
Accrued expenses and other current liabilities |
|
|
(1,038 |
) |
|
|
1,639 |
|
Operating lease liabilities |
|
|
(171 |
) |
|
|
(227 |
) |
Net cash used in operating activities |
|
|
(10,036 |
) |
|
|
(16,983 |
) |
Cash flows from investing activities: |
|
|
|
|
|
|
Purchases of marketable securities |
|
|
— |
|
|
|
(21,994 |
) |
Proceeds from sale of marketable securities |
|
|
11,650 |
|
|
|
26,459 |
|
Net cash provided by investing activities |
|
|
11,650 |
|
|
|
4,465 |
|
Cash flows from financing activities: |
|
|
|
|
|
|
Proceed from issuance of common stock, net of issuance costs |
|
|
— |
|
|
|
2,705 |
|
Net cash provided by financing activities |
|
|
— |
|
|
|
2,705 |
|
Net increase (decrease) in cash and cash equivalents |
|
|
1,614 |
|
|
|
(9,813 |
) |
Effect of exchange rate changes on cash and cash equivalents |
|
|
(217 |
) |
|
|
(17 |
) |
Cash and cash equivalents, beginning of period |
|
|
21,465 |
|
|
|
32,786 |
|
Cash and cash equivalents, end of period |
|
$ |
22,862 |
|
|
$ |
22,956 |
|
Supplemental disclosures of cash flow information: |
|
|
|
|
|
|
Cash paid for taxes |
|
$ |
— |
|
|
$ |
— |
|
Supplemental disclosures of noncash activities: |
|
|
|
|
|
|
Operating lease liabilities arising from obtaining right-of-use assets |
|
$ |
— |
|
|
$ |
— |
|
See accompanying notes to the unaudited interim condensed consolidated financial statements.
GALECTO, INC.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
1. DESCRIPTION OF BUSINESS, ORGANIZATION AND LIQUIDITY
Business and Organization
Galecto, Inc., together with its consolidated subsidiaries (the “Company” or “Galecto”), is a clinical-stage biotechnology company developing novel therapeutics that are designed to target the biological processes that lie at the heart of fibrotic diseases and cancer. The Company’s initial focus is on the development of small molecule inhibitors of galectin-3 and lysyl oxidase-like 2 ("LOXL2”), which play key roles in regulating fibrosis and cancer.
As of June 30, 2024, the Company’s wholly owned subsidiaries were PharmAkea, Inc. or PharmAkea, Galecto Securities Corporation, and Galecto Biotech AB, a Swedish company. Galecto Biotech ApS, a Danish operating company, is a wholly-owned subsidiary of Galecto Biotech AB.
Risks and uncertainties
The Company is subject to risks common to companies in the biotechnology industry, including, but not limited to, new technological innovations, protection of proprietary technology, dependence on key personnel, compliance with government regulations and the need to obtain additional financing. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure and extensive compliance reporting capabilities.
The Company’s product candidates are in development. There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained, that any products developed will obtain necessary government regulatory approval or that any approved products will be commercially viable. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will generate significant revenue from product sales. The Company operates in an environment of rapid change in technology and substantial competition from pharmaceutical and biotechnology companies. In addition, the Company is dependent upon the services of its employees and consultants.
In September 2023, the Company undertook an organizational restructuring and determined to conduct a comprehensive exploration of strategic alternatives. The restructuring and pursuit of strategic alternatives involves risks. There can be no assurance that the Company’s significantly reduced workforce will be sufficient to pursue the strategic alternatives and the development of the Company’s product candidates. Additionally, availability of suitable third parties with which to conduct contemplated strategic transactions may be limited and whether the Company will be able to pursue a strategic transaction, or whether any transaction, if pursued, will be completed on attractive terms or at all is uncertain.
Liquidity and management plans
Since inception, the Company has devoted substantially all its efforts to business planning, research and development, recruiting management and technical staff and raising capital, and has financed its operations primarily through the issuance of redeemable convertible preferred shares, debt financings, the Company’s initial public offering (“IPO”) and sales of the Company's common stock in "at-the-market" offerings.
As of June 30, 2024, the Company had an accumulated deficit of $266.9 million, from recurring losses since inception in 2011. The Company has incurred recurring losses and has not generated revenue as no products have obtained the necessary regulatory approval in order to market products. The Company expects to continue to incur losses as a result of costs and expenses related to the Company’s clinical development and corporate general and administrative activities. The Company had negative cash flows from operating activities during the six months ended June 30, 2024 and 2023 of $10.0 million and $17.0 million, respectively, and current projections indicate that the Company will have continued negative cash flows for the foreseeable future as it continues to fund operating expenses. Net losses incurred for the three and six months ended June 30, 2024 were $5.3 million and $10.8 million, respectively. Net losses incurred for the three and six months ended June 30, 2023 were $10.7 million and $23.7 million, respectively.
As of June 30, 2024, the Company’s cash and cash equivalents amounted to $22.9 million and current assets amounted to $25.2 million and current liabilities amounted to $3.7 million. At December 31, 2023, the Company’s cash, cash equivalents and marketable securities amounted to $33.2 million, current assets amounted to $36.8 million and current liabilities amounted to $5.8 million.
In September 2023, the Company announced a restructuring plan to reduce the Company's operations to preserve financial resources, resulting in a reduction of the Company’s workforce by up to 29 people, or approximately 70% of the Company's then existing headcount. In May 2024, the Company's Board of Directors approved an additional reduction of eight employees in an effort to conserve cash resources. As of June 30, 2024, the Company has incurred $4.5 million in charges relating to these reductions in workforce, consisting primarily of cash-based expenses related to employee severance and notice period payments, benefits and related costs.
Additionally, in September 2023, the Company initiated a process to evaluate strategic alternatives in order to maximize stockholder value. As part of the strategic review process, the Company continues to explore potential strategic alternatives that include, without limitation, a stock or asset acquisition, merger, business combination, liquidation, dissolution or other transaction. The Company is also exploring strategic alternatives related to its product candidates and related assets, including, without limitation, licensing transactions and asset sales. There can be no assurance that the strategic review process will result in the Company pursuing a transaction, or that any transaction, if pursued, will be completed on terms favorable to the Company and its stockholders.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying interim condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”).
The accompanying interim condensed consolidated financial statements as of June 30, 2024 and for the three and six months ended June 30, 2024 and 2023, and related interim information contained within the notes to the interim condensed consolidated financial statements, are unaudited. In management’s opinion, the unaudited interim condensed consolidated financial statements have been prepared on the same basis as the Company’s audited consolidated financial statements and include all adjustments (including normal recurring adjustments) necessary for the fair presentation of the Company’s financial position as of June 30, 2024, results of operations, statement of stockholders’ equity for the three and six months ended June 30, 2024 and 2023 and its cash flows for the six months ended June 30, 2024 and 2023. All intercompany balances and transactions have been eliminated. These unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and accompanying notes contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as filed with the Securities and Exchange Commission (“SEC”) on March 8, 2024 ("2023 Consolidated Financial Statements"). The results for the three and six months ended June 30, 2024 are not necessarily indicative of the results expected for the full fiscal year or any interim period.
For the six months ended June 30, 2024, there have been no material changes to the significant accounting policies as disclosed in Note 2 to the 2023 Consolidated Financial Statements.
Recently issued accounting standards
The Company periodically reviews new accounting standards that are issued and has not identified any new standards that it believes merit further discussion or would have a significant impact on its financial statements.
3. INVESTMENTS
Cash in excess of the Company’s immediate requirements is invested in accordance with the Company’s investment policy that primarily seeks to maintain adequate liquidity and preserve capital.
The Company had no available-for-sale investments as of June 30, 2024. A summary of the Company’s available-for-sale investments as of December 31, 2023 consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2023 |
|
|
|
Amortized |
|
|
Gross Unrealized |
|
|
Gross Unrealized |
|
|
Fair |
|
Marketable securities: |
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Value |
|
Corporate bonds |
|
$ |
11,720 |
|
|
$ |
— |
|
|
$ |
(34 |
) |
|
$ |
11,686 |
|
Total |
|
$ |
11,720 |
|
|
$ |
— |
|
|
$ |
(34 |
) |
|
$ |
11,686 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4. PROPERTY AND EQUIPMENT, NET
Property and equipment as of June 30, 2024 consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2024 |
|
|
2023 |
|
Equipment |
|
$ |
106 |
|
|
$ |
107 |
|
Less: accumulated depreciation |
|
|
(39 |
) |
|
|
(29 |
) |
Equipment, net |
|
$ |
67 |
|
|
$ |
78 |
|
Depreciation expense for the three and six months ended June 30, 2024 was $5,000 and $10,000, respectively. Depreciation expense for the three and six months ended June 30, 2023 was $17,000 and $35,000, respectively.
5. FAIR VALUE MEASUREMENTS
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value are performed in a manner to maximize the use of observable inputs and minimize the use of unobservable inputs.
The Company classified its money market funds within Level 1 because their fair values are based on their quoted market prices. The Company classified its debt securities within Level 2 because their fair values are determined using alternative pricing sources or models that utilized market observable inputs.
A summary of the assets that are measured at fair value as of June 30, 2024 and December 31, 2023 is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurement at
June 30, 2024 |
|
Assets: |
|
Carrying
Value |
|
|
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1) |
|
|
Significant
other
Observable
Inputs
(Level 2) |
|
|
Significant
Unobservable
Inputs
(Level 3) |
|
Money market funds(1) |
|
$ |
12,734 |
|
|
$ |
12,734 |
|
|
$ |
— |
|
|
$ |
— |
|
Debt securities |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total |
|
$ |
12,734 |
|
|
$ |
12,734 |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurement at
December 31, 2023 |
|
Assets: |
|
Carrying
Value |
|
|
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1) |
|
|
Significant
other
Observable
Inputs
(Level 2) |
|
|
Significant
Unobservable
Inputs
(Level 3) |
|
Money market funds(1) |
|
$ |
13,610 |
|
|
|
13,610 |
|
|
|
— |
|
|
|
— |
|
Debt securities |
|
|
11,686 |
|
|
|
— |
|
|
|
11,686 |
|
|
|
— |
|
Total |
|
$ |
25,296 |
|
|
$ |
13,610 |
|
|
$ |
11,686 |
|
|
$ |
— |
|
(1)Money market funds with maturities of 90 days or less at the date of purchase are included within cash and cash equivalents in the accompanying condensed consolidated balance sheets and are recognized at fair value.
6. PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2024 |
|
|
2023 |
|
Research and development tax credit receivable |
|
$ |
1,442 |
|
|
$ |
1,438 |
|
Prepaid insurance costs |
|
|
301 |
|
|
|
774 |
|
Value-added tax refund receivable |
|
|
279 |
|
|
|
280 |
|
Contract research and development costs |
|
|
121 |
|
|
|
1,046 |
|
Other |
|
|
163 |
|
|
|
85 |
|
Total prepaid expenses and other current assets |
|
$ |
2,306 |
|
|
$ |
3,623 |
|
7. LEASES
The Company has the following operating leases:
|
|
|
|
|
|
|
Location |
|
Primary Use |
|
Lease
Expiration Date |
|
Renewal Option |
Copenhagen, Denmark |
|
Corporate headquarters |
|
November 2024 |
|
None |
The Company has no finance leases and has elected to apply the short-term lease exception to all leases of one year or less. Rent expense for the three and six months ended June 30, 2024 was $0.1 million and $0.2 million, respectively. Rent expense for the three and six months ended June 30, 2023 was $0.1 million and $0.3 million, respectively.
Quantitative information regarding the Company’s leases for the three and six months ended June 30, 2024 and 2023 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30, |
|
|
Six Months Ended
June 30, |
|
Lease Cost |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
Operating lease cost (in thousands) |
|
$ |
47 |
|
|
$ |
139 |
|
|
$ |
143 |
|
|
$ |
276 |
|
Other Information |
|
|
|
|
|
|
|
|
|
|
|
|
Operating cash flows paid for amounts included
in the measurement of lease liabilities (in thousands) |
|
$ |
48 |
|
|
$ |
125 |
|
|
$ |
140 |
|
|
$ |
273 |
|
Operating lease liabilities arising from obtaining
right-of-use assets (in thousands) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
409 |
|
As of June 30, 2024 and December 31, 2023, the weighted average remaining lease term for operating leases was 0.4 years and 0.9 years, respectively.
As of June 30, 2024 and December 31, 2023, the weighted average discount rate for operating leases was 8% for both periods.
Operating lease liabilities at June 30, 2024 are as follows (in thousands):
|
|
|
|
|
|
|
Operating |
|
Future Lease Payments |
|
Leases |
|
2024 (excluding the period ended June 30, 2024) |
|
$ |
80 |
|
2025 |
|
|
— |
|
2026 |
|
|
— |
|
2027 |
|
|
— |
|
2028 |
|
|
— |
|
Total lease payments |
|
|
80 |
|
Less: imputed interest |
|
|
(3 |
) |
Total lease liabilities |
|
$ |
77 |
|
8. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2024 |
|
|
2023 |
|
Employee compensation costs |
|
$ |
1,264 |
|
|
$ |
987 |
|
Restructuring costs |
|
|
820 |
|
|
|
1,734 |
|
Contract research and development costs |
|
|
118 |
|
|
|
685 |
|
Operating lease liabilities, current |
|
|
77 |
|
|
|
183 |
|
Other liabilities |
|
|
706 |
|
|
|
539 |
|
Total accrued expenses and other current liabilities |
|
$ |
2,985 |
|
|
$ |
4,128 |
|
9. COMMITMENTS AND CONTINGENCIES
During the three and six months ended June 30, 2024, there were no material changes to the Company’s commitments and contingencies as disclosed in Note 9 of the 2023 Consolidated Financial Statements. Further, the Company’s commitments related to lease agreements are disclosed in Note 7 to the Company’s unaudited interim condensed consolidated financial statements.
10. STOCK-BASED COMPENSATION
Employee equity plan
In March 2020, the Company's Board of Directors and stockholders approved the 2020 Stock Option and Grant Plan (“2020 Plan”). Holders of stock options under the 2020 Plan shall be entitled to exercise the vested portion of the stock option during the term of the grant. If a qualified exit, as defined in the 2020 Plan, occurs before the stock option vests, then all of the holders' unvested options shall vest immediately.
In October 2020, the Company's Board of Directors and stockholders approved the 2020 Equity Incentive Plan (“2020 Equity Plan”). Following the adoption of the 2020 Equity Plan, no further options are available to be issued under the 2020 Plan. Stock-based awards granted under the 2020 Equity Plan generally vest over a four-year period and expire ten years from the grant date. Shares available for grant under the 2020 Equity Plan will cumulatively increase by 5 percent of the number of shares of common stock issued and outstanding on January 1st each year until 2030. At June 30, 2024, the Company had 3,024,020 shares available for future grant under the 2020 Equity Plan.
The following table sets forth the activity for the Company’s stock options during the six months ended June 30, 2024:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Options |
|
|
Weighted-
average
exercise
price per
share |
|
|
Weighted-
average
remaining
contractual
term
(in years) |
|
|
Aggregate
intrinsic
value |
|
Outstanding at December 31, 2023 |
|
|
6,886,889 |
|
|
$ |
4.58 |
|
|
|
6.7 |
|
|
$ |
— |
|
Granted |
|
|
108,000 |
|
|
|
0.49 |
|
|
|
— |
|
|
|
— |
|
Cancelled |
|
|
(1,439,703 |
) |
|
|
4.22 |
|
|
|
— |
|
|
|
— |
|
Outstanding at June 30, 2024 |
|
|
5,555,186 |
|
|
$ |
4.59 |
|
|
|
6.7 |
|
|
$ |
— |
|
Vested and expected to vest at June 30, 2024 |
|
|
5,270,540 |
|
|
$ |
4.55 |
|
|
|
6.7 |
|
|
$ |
— |
|
Vested and exercisable at June 30, 2024 |
|
|
4,420,549 |
|
|
$ |
5.05 |
|
|
|
6.3 |
|
|
$ |
— |
|
The weighted-average grant date fair value of all stock-based awards granted for the six months ended June 30, 2024 was $0.38 per share. The intrinsic value at June 30, 2024 and December 31, 2023 was based on the closing price of the Company’s common stock on these dates of $0.47 and $0.72 per share, respectively.
In November 2022, the Company's Board of Directors approved the 2022 Inducement Plan (the “Inducement Plan”), which allows for the grant of equity awards to be made to a new employee where the equity award is a material inducement to an employee entering into employment with the Company. The Inducement Plan was adopted by the Company's Board of Directors without stockholder approval pursuant to Nasdaq Listing Rule 5635(c)(4). A total of 250,000 shares of the Company's common stock have been reserved for issuance under the Inducement Plan. As of June 30, 2024, no shares have been issued under the Inducement Plan.
Restricted stock units
In January 2024, the Company granted 855,000 restricted stock units, or RSUs, to its employees under the 2020 Equity Plan. The weighted average grant date fair value of the time-based RSUs was $0.71 for the six months ended June 30, 2024.The RSUs vest 33% after one-year from the grant date and 17% every six-months thereafter. For the three and six months ended June 30, 2024, the Company recognized $47,000 and $94,000 expense related to the RSUs, respectively.
The following table sets forth the activity for the Company’s RSUs during the six months ended June 30, 2024:
|
|
|
|
|
|
|
|
|
|
|
Restricted
Stock Units |
|
|
Weighted-
average
grant date fair value |
|
Total nonvested units at December 31, 2023 |
|
|
— |
|
|
$ |
— |
|
Granted |
|
|
855,000 |
|
|
|
0.71 |
|
Vested |
|
|
(17,499 |
) |
|
|
0.71 |
|
Cancelled |
|
|
(132,501 |
) |
|
|
0.71 |
|
Total nonvested units at June 30, 2024 |
|
|
705,000 |
|
|
$ |
0.71 |
|
Stock-based compensation
The grant date fair value of stock-based awards vested during the six months ended June 30, 2024 and 2023 was $2.2 million and $3.5 million, respectively. Total unrecognized compensation expense related to unvested options granted under the Company’s stock-based compensation plan was $2.6 million at June 30, 2024, which is expected to be recognized over a weighted average period of 1.5 years. The Company recorded stock-based compensation expense related to the issuance of stock as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30, |
|
|
Six Months Ended
June 30, |
|
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
Research and development |
|
$ |
188 |
|
|
$ |
686 |
|
|
$ |
817 |
|
|
$ |
1,370 |
|
General and administrative |
|
|
703 |
|
|
|
753 |
|
|
|
1,433 |
|
|
|
1,503 |
|
Total stock-based compensation |
|
$ |
891 |
|
|
$ |
1,439 |
|
|
$ |
2,250 |
|
|
$ |
2,873 |
|
The Company uses a Black-Scholes option pricing model to determine fair value of its stock options. The Black-Scholes option pricing model includes various assumptions, including the fair value of common shares, expected life of stock options, the expected volatility based on the historical volatility of a publicly traded set of peer companies and the expected risk-free interest rate based on the implied yield on a U.S. Treasury security.
The fair values of the options granted were estimated using the following assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
June 30, |
|
|
|
|
2024 |
|
|
2023 |
|
|
Risk-free interest rate |
|