Business Overview and Company History
Galecto, Inc. (GLTO) is a clinical-stage biotechnology company dedicated to developing novel therapeutics that target the underlying biological processes at the heart of cancer and fibrotic diseases. In a pivotal move, the company has recently completed a strategic review to refocus its efforts on oncology and severe liver diseases, solidifying its commitment to address unmet medical needs in these crucial therapeutic areas.
Galecto was founded in 2011 with the vision of leveraging its expertise in fibrosis and oncology to advance groundbreaking treatments. The company was incorporated in Delaware and initially operated out of Copenhagen, Denmark. In 2020, Galecto completed its initial public offering, raising $86.3 million in net proceeds, which provided the capital needed to advance its lead product candidates, including GB1211, a selective oral small molecule inhibitor of galectin-3. Prior to the IPO, Galecto had been financed through the issuance of convertible preferred shares and convertible notes.
In 2022 and 2023, Galecto faced several challenges as it worked to develop its pipeline. The company encountered delays and increased costs in its clinical trials, which led to a significant increase in operating expenses. This, coupled with a lack of revenue as Galecto did not have any approved products, resulted in the company incurring substantial net losses during this period.
To address these financial pressures, in September 2023 Galecto announced a major restructuring plan that included a 70% reduction in its workforce. This was part of a broader strategic review process that the company undertook to evaluate various options to maximize shareholder value. The restructuring allowed Galecto to preserve its financial resources as it continued to advance its research and development activities.
Financial Snapshot
As of September 30, 2024, Galecto reported $19.68 million in cash and cash equivalents, compared to $21.46 million as of December 31, 2023. The company’s net loss for the three and nine months ended September 30, 2024, was $3.88 million and $14.70 million, respectively, compared to $8.14 million and $31.87 million for the same periods in 2023.
For the three months ended September 30, 2024, Galecto reported no revenue, consistent with its status as a clinical-stage company without approved products. The net loss of $3.88 million for this period represents a significant improvement from the $8.14 million net loss in the prior year period. This reduction in net loss was primarily driven by decreased research and development expenses, which fell from $2.55 million in Q3 2023 to $1.09 million in Q3 2024. The decrease was attributed to reductions in preclinical, manufacturing, and consulting costs as the company focused its efforts on BRM-1420 and GB1211.
General and administrative expenses also saw a decline, dropping from $3.30 million to $2.75 million year-over-year. The company’s operating cash flow for the quarter was negative $3.65 million, which was also its free cash flow given the absence of capital expenditures reported for the period.
Liquidity
Galecto’s current ratio, a measure of its ability to meet short-term obligations, stood at 8.68 as of September 30, 2024, indicating a strong liquidity position. The company’s quick ratio, which excludes inventories, was also a robust 8.68, further underscoring its financial flexibility. With $19.68 million in cash and cash equivalents, Galecto believes it has sufficient funds to support its operations through at least the next twelve months. However, the company acknowledges that substantial additional capital will be required to continue advancing its product candidates and execute on its strategic plans.
Operational Highlights and Strategic Shift
The completion of Galecto’s strategic review process marked a significant milestone for the company. By prioritizing oncology and severe liver diseases, the company has positioned itself to capitalize on the significant unmet medical needs in these therapeutic areas. The acquisition of the global rights to BRM-1420, a promising AML candidate, is a testament to Galecto’s commitment to its new strategic focus.
BRM-1420 is a preclinical dual inhibitor of ENL-YEATS and FLT3 for the treatment of multiple molecularly defined subsets of acute myeloid leukemia (AML). Preclinical studies have demonstrated that BRM-1420 is active against MLL-r, NPM1m, cKIT and FLT3 driven AML. Galecto believes BRM-1420 has the potential to address a broader AML patient population, including those with high-risk genetic mutations. The company plans to submit an investigational new drug (IND) application to test BRM-1420 in AML in late 2025 or early 2026.
In addition to the BRM-1420 acquisition, Galecto has continued to advance its lead asset, GB1211, in ongoing clinical trials. GB1211 is a selective oral small molecule inhibitor of galectin-3 that Galecto is developing to treat multiple types of fibrosis and oncology indications. The positive results from the Phase 1b/2a trial in decompensated liver cirrhosis and the combination study with atezolizumab in NSCLC have bolstered the company’s confidence in the potential of this drug.
In the fourth quarter of 2022, Galecto announced topline results from a Phase 1b/2a trial of GB1211 in patients with decompensated liver cirrhosis. The results showed statistically significant reductions in key liver function biomarkers after 12 weeks of treatment, and GB1211 exhibited a favorable safety and tolerability profile.
Furthermore, in the third quarter of 2023, Galecto completed Part A of the GALLANT-1 trial, which investigated GB1211 in combination with the PD-L1 checkpoint inhibitor atezolizumab as a first-line treatment for non-small cell lung cancer (NSCLC). Four patients in Part A demonstrated partial responses, including one patient who showed a sustained partial response with tumor shrinkage exceeding 70% that was maintained over the course of the trial.
While Galecto does not intend to initiate Part B of the GALLANT-1 trial, the company will continue to supply GB1211 at the recommended Phase 2 dose level of 100 mg twice daily in an investigator-initiated Phase 2 trial at Providence Portland Medical Center’s Earle A. Chiles Research Institute. This trial will evaluate the safety and efficacy of GB1211 in combination with pembrolizumab in patients with metastatic melanoma or recurrent/metastatic head and neck squamous cell carcinoma.
Galecto has also strengthened its leadership team, appointing Dr. Amy Wechsler to its Board of Directors and Matthew Kronmiller as Executive Vice President of Strategy and Chief Business Officer. These strategic hires underscore the company’s dedication to executing its new strategic plan and expanding its capabilities in oncology and liver disease development.
Risks and Challenges
Despite the promising developments, Galecto faces several risks and challenges that investors should consider. The company’s reliance on the successful development and commercialization of its product candidates, BRM-1420 and GB1211, poses inherent risks common to the biotechnology industry. Unforeseen delays or setbacks in clinical trials, regulatory approvals, or manufacturing could significantly impact the company’s trajectory.
Furthermore, Galecto operates in a highly competitive landscape, with numerous pharmaceutical and biotechnology companies vying for market share in the oncology and liver disease spaces. The company’s ability to differentiate its products and maintain a competitive edge will be crucial to its long-term success.
Ongoing global economic uncertainty, fluctuating interest rates, and geopolitical instability may also pose challenges to Galecto’s operations and financial performance. The company’s ability to navigate these external factors and secure additional funding, if necessary, will be paramount.
Conclusion
Galecto’s strategic shift to focus on oncology and severe liver diseases represents a pivotal moment in the company’s evolution. By acquiring the rights to BRM-1420 and continuing to advance its lead candidate, GB1211, Galecto is poised to make significant strides in addressing unmet medical needs in these critical therapeutic areas.
The company’s strong liquidity position, as evidenced by its current and quick ratios, provides a solid foundation for its future endeavors. However, Galecto must navigate the inherent risks and challenges of the biotechnology industry, including the successful development and commercialization of its product candidates, competition, and external economic factors.
As Galecto executes its new strategic plan, investors will closely monitor the company’s progress in advancing its pipeline, securing necessary funding, and ultimately delivering innovative treatments to patients in need. The company’s ability to capitalize on its newfound focus and leverage its expertise in fibrosis and oncology will be crucial in determining its long-term success.
Disclaimer: This article is for informational purposes only. It does not constitute financial, legal, or other types of advice. While every effort has been made to ensure the accuracy of the information presented here, the author and the publisher do not make any guarantees about the completeness, reliability, and accuracy of this information.