Item 2.
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Managements Discussion and Analysis of Financial Condition and Results of Operations
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In addition to historical information, the following Managements Discussion and Analysis of Financial Condition and Results of Operations
contains forward-looking statements as defined under Section 21E of the Securities Exchange Act of 1934, as amended, and is subject to the safe harbor created therein for forward-looking statements. Such statements include, but are not limited
to, statements concerning our anticipated operating results, research and development, clinical trials, regulatory proceedings, and financial resources, and can be identified by use of words such as, for example, anticipate,
estimate, expect, project, intend, plan, believe and would, should, could or may. All statements, other than statements of
historical facts, included herein that address activities, events, or developments that the Company expects or anticipates will or may occur in the future, are forward-looking statements, including statements regarding: plans and expectations
regarding clinical trials; plans and expectations regarding regulatory approvals; our strategy and expectations for clinical development and commercialization of our products; potential strategic partnerships; expectations regarding the
effectiveness of our products; plans for research and development and related costs; statements about accounting assumptions and estimates; expectations regarding liquidity and the sufficiency of cash to fund currently planned operations through
December 31, 2017; our commitments and contingencies; and our market risk exposure. Forward-looking statements are based on current expectations, estimates and projections about the industry and markets in which Galectin Therapeutics operates,
and managements beliefs and assumptions. These statements are not guarantees of future performance and involve certain known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or
implied by such statements. Such risks and uncertainties are related to and include, without limitation,
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our early stage of development,
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we have incurred significant operating losses since our inception and cannot assure you that we will generate revenue or profit,
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our dependence on additional outside capital,
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we may be unable to enter into strategic partnerships for the development, commercialization, manufacturing and distribution of our proposed product candidates,
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uncertainties related to any litigation, including shareholder class actions and derivative lawsuits filed,
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uncertainties related to our technology and clinical trials, including expected dates of availability of clinical data,
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we may be unable to demonstrate the efficacy and safety of our developmental product candidates in human trials,
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we may be unable to improve upon, protect and/or enforce our intellectual property,
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we are subject to extensive and costly regulation by the U.S. Food and Drug Administration (FDA) and by foreign regulatory authorities, which must approve our product candidates in development and could restrict the
sales and marketing and pricing of such products,
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competition and stock price volatility in the biotechnology industry,
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limited trading volume for our stock, concentration of ownership of our stock, and other risks detailed herein and from time to time in our SEC reports
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The following discussion should be read in conjunction with the accompanying consolidated financial statements and notes thereto of Galectin
Therapeutics appearing elsewhere herein.
Overview
We are a clinical stage biopharmaceutical company engaged in drug research and development to create new therapies for fibrotic disease,
certain severe skin diseases, and cancer. Our drug candidates are based on our method of targeting galectin proteins, which are key mediators of biologic and pathologic functions. We use naturally occurring, readily-available plant products as
starting material in manufacturing processes to create proprietary complex carbohydrates with specific molecular weights and other pharmaceutical properties. These complex carbohydrate molecules are appropriately formulated into acceptable
pharmaceutical formulations. Using these unique carbohydrate-based candidate compounds that largely bind and inhibit galectin proteins, particularly galectin-3, we are undertaking the focused pursuit of therapies for indications where galectins have
a demonstrated role in the pathogenesis of a given disease. We focus on diseases with serious, life-threatening consequences to patients and those where current treatment options are limited. Our strategy is to establish and implement clinical
development programs that add value to our business in the shortest period of time possible and to seek strategic partners when a program becomes advanced and requires significant additional resources.
Our lead galectin-3 inhibitor is GR-MD-02, which has been demonstrated in preclinical models to reverse liver fibrosis and cirrhosis. GR-MD-02
has the potential to treat many diseases due to galectin-3s involvement in multiple key biological pathways such as immune cell function and immunity, cell differentiation, cell growth, and apoptosis (cell death). Galectin Therapeutics Inc. is
11
using this inhibitor to treat advanced liver fibrosis and liver cirrhosis in NASH (non-alcoholic steatohepatitis)
patients. We have completed two Phase 1 clinical studies, one Phase 2 clinical study in NASH patients with advanced fibrosis (NASH-FX) and have one ongoing Phase 2 clinical study in NASH patients with cirrhosis (NASH-CX). NASH cirrhosis is a
progressive disease, currently not treatable and ultimately may result in liver failure that has poor prognosis and no effective, approved medical therapies other than liver transplant. Galectin-3 expression is highly increased in the liver of
patients with liver fibrosis and liver cirrhosis. We believe that our galectin-3 inhibitor, by reducing galectin-3 at the extra-cellular level, ultimately showing a strong anti-fibrotic potential may provide a novel treatment for various forms of
liver fibrosis.
We endeavor to leverage our scientific and product development expertise as well as established relationships with
outside sources to achieve cost-effective and efficient drug development. These outside sources, amongst others, provide us with expertise in preclinical models, pharmaceutical development, toxicology, clinical trial operations, pharmaceutical
manufacturing, sophisticated physical and chemical characterization, and commercial development. We also have established several collaborative scientific discovery programs with leading experts in carbohydrate chemistry and characterization. These
discovery programs are generally aimed at the targeted development of new carbohydrate molecules that bind galectin proteins and offer alternative options to larger market segments in our primary disease indications. We also have established a
discovery program aimed at the targeted development of small molecules (non-carbohydrate) that bind galectin proteins and may afford options for alternative means of drug delivery (e.g., oral) and as a result expand the potential uses of our
compounds. We are pursuing a development pathway to clinical enhancement and commercialization for our lead compounds in immune enhancement for cancer therapy and certain severe skin diseases including moderate to severe plaque psoriasis and severe
atopic dermatitis. Our clinical development efforts are focused on both liver fibrosis and fatty liver disease as represented by a Phase 2 clinical trial in NASH-cirrhosis which will report top line data in December 2017. All of our proposed
products are presently in development, including pre-clinical and clinical trials.
Our Drug Development Programs
Galectins are a class of proteins that are made by many cells in the body, but predominantly in cells of the immune system. As a group, these
proteins are able to bind to sugar molecules that are part of other proteins, glycoproteins, in and on the cells of our body. Galectin proteins act as a kind of molecular glue, bringing together molecules that have sugars on them. Galectin proteins,
in particular galectin-3, are known to be markedly increased in a number of important diseases including inflammatory diseases, scarring of organs (e.g. liver, lung, kidney, and heart) and cancers of many kinds. The increase in galectin protein
promotes the disease and is detrimental to the patient. Published data show that mice lacking the galectin-3 gene, and thus unable to produce galectin-3, are incapable of developing liver fibrosis in response to toxic insult to the liver and in
fatty liver disease.
We have one new proprietary chemical entity (NCE) in development, GR-MD-02, which has shown promise in preclinical
and early clinical studies in treatment of fibrosis, certain severe skin diseases, and in cancer therapy. Currently we are focusing on development of GR-MD-02 intended to be used in the treatment of liver fibrosis associated with fatty liver disease
(NASH) and more specifically on NASH cirrhosis. We have also leveraged our relationships with well-known investigators to demonstrate clinical effects of GR-MD-02 in treating moderate to severe plaque psoriasis, severe atopic dermatitis, and in
cancer therapy in combination with immune-system modifying agent(s). GR-MD-02 is a proprietary, patented compound derived from natural, readily available, plant-based starting materials, which, following chemical processing, exhibits the properties
of binding to and inhibiting galectin-3 proteins. A second NCE, GM-CT-01 is a proprietary, patented compound that is made from a completely different starting source plant material and also binds and inhibits galectin proteins. Previously in
clinical development for cancer indications, this compound continues to be explored in preclinical studies.
Our product pipeline is shown
below:
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Indication
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Drug
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Status
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Fibrosis
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NASH with Advanced Fibrosis: NASH-CX trial and
NASH-FX trial
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GR-MD-02
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IND submitted January 2013. Results from the Phase 1 clinical trial were reported in 2014, with final results reported in January 2015. End of Phase 1 meeting held with FDA in 2014. Two Phase 2 clinical trials were
designed. The NASH CX trial, was designed for patients with cirrhosis, and the NASH FX trial was designed for patients with advanced fibrosis but not cirrhosis. The NASH FX trial top line data was reported in September 2016 and the
NASH CX trial top line data is expected in December 2017.
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Lung Fibrosis
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GR-MD-02
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In pre-clinical development
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Kidney Fibrosis
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GR-MD-02
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In pre-clinical development
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Cardiac and Vascular Fibrosis
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GR-MD-02 and GM-CT-01
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In pre-clinical development
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12
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Indication
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Drug
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Status
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Cancer Immunotherapy
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Melanoma
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GR-MD-02
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Investigator IND submitted in December 2013. Phase 1B study in process. A second Phase 1B study began in Q-1 2016. Investigator IND for that study submitted in September 2015. Early data was reported in February 2017 and
studies will continue.
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Psoriasis
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Moderate to Severe Plaque Psoriasis
Severe Atopic Dermatitis
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GR-MD-02
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IND submitted March 2015. A phase 2a trial in moderate to severe plaque psoriasis patients began in January 2016. Interim data on the first four patients were positive and were reported in May 2016. Further positive data was
reported in September 2016. Investigator initiated IND submitted for treatment of three patients with severe atopic dermatitis, with positive preliminary data presented in February 2017. Studies are now completed.
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Fibrosis.
GR-MD-02 is our lead product candidate for treatment of fibrotic disease. Our
preclinical data show that GR-MD-02 has a significant therapeutic effect on liver fibrosis as shown in several relevant animal models. In addition, in NASH animal models GR-MD-02 has been shown to reduce liver fat, inflammation, and ballooning
degeneration or death of liver cells. Therefore, we chose GR-MD-02 as the lead candidate in a development program targeted initially at fibrotic liver disease associated with non-alcoholic steatohepatitis (NASH, or fatty liver disease). In January
2013, an Investigational New Drug (IND) was submitted to the FDA with the goal of initiating a Phase 1 study in patients with NASH and advanced liver fibrosis to evaluate the human safety of GR-MD-02 and pharmacodynamics biomarkers of
disease. On March 1, 2013, the FDA indicated we could proceed with a US Phase 1 clinical trial for GR-MD-02 with a development program aimed at obtaining support for a proposed indication of GR-MD-02 for treatment of NASH with advanced
fibrosis. The Phase 1 trial was completed and demonstrated that GR-MD-02 up to 8 mg/kg, i.v. was safe and well tolerated and the human pharmacokinetic data defined a drug dose for use in the planned Phase 2 trials. Additionally, there was evidence
of a pharmacodynamic effect of GR-MD-02 at the 8 mg/kg dose with a decrease in alpha 2 macroglobulin, a serum marker of fibrotic activity, and a reduction in liver stiffness as determined by
FibroScan
®
. An End of Phase 1 Meeting was held with FDA which, amongst other items, provided guidance on the primary endpoint for the Phase 2 clinical trial.
Additionally, an open label drug-drug interaction study was completed in healthy volunteers during the second quarter of 2015 with GR-MD-02
and it showed that with 8 mg/kg dose of GR-MD-02 and 2 mg/kg dose of midazolam there was no drug-drug interaction and no serious adverse events or drug-related adverse events were observed. This study was required by the U.S. Food and Drug
Administration (FDA) and the primary objective was to determine if single or multiple intravenous (IV) doses of GR-MD-02 affect the pharmacokinetics (PK) of midazolam. The secondary objective was to assess the safety and tolerability of
GR-MD-02 when administered concomitantly with midazolam. The lack of a drug interaction in this study enabled Galectin to expand the number of patients eligible for its Phase 2 clinical trial. In addition, should GR-MD-02 be approved for marketing,
the success of this study supports a broader patient population for the drug label.
Our Phase 2 program in fibrotic disease consists of
two separate human clinical trials. The first clinical trial is the Phase 2b NASH-CX study for patients with NASH with cirrhosis, which began enrolling in June 2015. This study is the primary focus of our program and is a randomized,
placebo-controlled, double-blind, parallel-group Phase 2 trial to evaluate the safety and efficacy of GR-MD-02 for the treatment of liver fibrosis and resultant portal hypertension in patients with NASH cirrhosis. Enrollment in this trial was
completed in September 2016, and a total of 162 patients at 36 sites in the United States were randomized to receive either 2 mg/kg of GR-MD-02, 8 mg/kg of GR-MD-02 or placebo, with approximately 54 patients in each group. The primary endpoint
is a reduction in change in hepatic venous pressure gradient (HVPG). Patients are receiving an infusion every other week for one year, total of 26 infusions, and will be evaluated to determine the change in HVPG as compared with placebo. HVPG will
be correlated with secondary endpoints of fibrosis on liver biopsy as well as with measurement of liver stiffness (FibroScan
(R)
) and assessment of liver metabolism (
13
C-methacetin breath test, Exalenz), which are non-invasive measures of the liver that may be used in future studies. A late-breaking abstract on screening data results correlating clinically
significant portal hypertension and methacetin breath test results was presented at The International Liver Congress in Amsterdam on April 20, 2017. The DSMB concluded its third and final review of the safety and conduct of the in-life
phase of our NASH-CX trial and indicated it concurrence with continuation of the trial and the clean safety profile. As of the time of their evaluation, therapy had been completed in 68% of subjects in the NASH-CX trial. As of
June 30, 2017, 108 patients (71%) have completed all 52 weeks of infusions and 155 patients have completed 26 weeks of infusions in this Phase 2b clinical trial. Over 97% of the doses have already been administered. The dropout rate
remains well below expectations, which may increase the power of the trial. We currently expect approximately 151 subjects will complete the trial
13
by Fall 2017. This trial was designed, and is being conducted, with a primary endpoint that the U.S. Food and Drug Administration views may be a surrogate for outcomes for registration
trials in this patient population. After completion of study endpoints and initial analysis of data, the Company remains on track to report top line data from the NASH-CX trial in early December 2017.
The second trial, our Phase 2a pilot trial NASH-FX for patients with NASH advanced fibrosis that explored use of three non-invasive imaging
technologies, is now complete. It was a shorter, single site, four-month trial in 30 NASH patients with advanced fibrosis, but not cirrhosis, randomized 1:1 to either 9 bi-weekly doses of 8 mg/kg of GR-MD-02 or placebo. The trial did not meet its
primary biomarker endpoint as measured using multi-parametric magnetic resonance imaging (LiverMultiScan
(R)
, Perspectum Diagnostics). The trial also did not meet secondary endpoints that measure
liver stiffness as a surrogate for fibrosis using, magnetic resonance-elastography and FibroScan score. After analysis of the data, we do not believe that a four-month treatment period was likely long enough in the NASH population to show efficacy
results. This small study was not powered for the secondary endpoints and thus, not surprisingly did not meet the secondary endpoints. In the trial, GR-MD-02 was found to be safe and well tolerated among the patient population with no serious
adverse events.
Although there was no apparent improvement in the three non-invasive tests for assessment of liver fibrosis in the
four-month NASH-FX trial, the principal investigator of the NASH-FX trial has stated that the inhibition of galectin-3 with GR-MD-02 remains promising for the treatment of NASH fibrosis. Of note is that GR-MD-02 has demonstrated an improved clinical
effect in moderate-to-severe psoriasis and in moderate-to-severe atopic dermatitis patients, suggesting the compound has activity in an immune-mediated inflammatory human disease that can occur in association with NASH and in which galectin-3 is
believed to play a role. We believe our drug candidate provides a promising new approach for the therapy of fibrotic diseases, and liver fibrosis in particular. Fibrosis is the formation of excess connective tissue (collagen and other proteins plus
cellular elements such as myofibroblasts) in response to damage, inflammation or repair. When the fibrotic tissue becomes confluent, it obliterates the cellular architecture, leading to scarring and dysfunction of the underlying organ. Given
galectin-3s broad biological functionality, it has been demonstrated to be involved in cancer, inflammation and fibrosis, heart disease, and renal disease. We have further demonstrated the broad applicability of the actions of our galectin-3
inhibitors biological effect in ameliorating fibrosis involving lung, kidney, blood vessels, and cardiac tissues in a variety of animal models.
The focus and goal of the therapeutic program is to stop the progression of and reverse the fibrosis in the liver and, thereby improve liver
function and prevent the development of complications of fibrosis/cirrhosis and liver-related mortality in patients.
Cancer
Immunotherapy.
We believe there is potential for galectin inhibition to play a key role in the burgeoning area of cancer immunotherapy. For example, there have been several recent approvals of drugs that enhance a patients immune system to
fight cancer. It is our goal to use a galectin inhibitor to enhance the immune system function to fight cancer in a way that complements other approaches to this type of therapy. This hypothesis is supported by the fact that galectin-3 is expressed
at high levels in multiple types of tumors, adds to the malignant nature of the tumors, and protects the tumors from immune system attack. Our drug candidates provide a promising new therapeutic approach to enhance the activity of the immune system
against cancer cells. Preclinical studies have indicated that GR-MD-02 enhances the immune response to cancer cells, increased tumor shrinkage and enhanced survival in immune competent mice with prostate, breast, melanoma and sarcoma cancers when
combined with one of the immune checkpoint inhibitors, anti-CTLA-4 or anti-PD-1, and with the immune cell activator anti-OX40. These preclinical data led to the filing of two Investigator-sponsored INDs and the initiation of studies of GR-MD-02 in
combination with Yervoy
®
(ipilimumab) and KEYTRUDA (pembrolizumab) in Phase 1B studies of patients with metastatic melanoma. The KEYTRUDA trial has also been expanded to include patients
with non-small cell lung cancer and head and neck squamous cell carcinoma. These studies are being conducted under the sponsorship of Providence Portland Medical Centers Earle A. Chiles Research Institute (EACRI).
Data on this combination immunotherapy program was presented on February 7, 2017 at the 9th GTCBio Immunotherapeutics &
Immunomonitoring Conference in San Diego, CA by Dr. William L. Redmond, Providence Cancer Center. Preclinical results in mouse models of multiple types of cancers showed important anti-tumor and increased survival effects of combining
GR-MD-02 with different types of immune modulators, providing a case for progressing studies into human patients with cancer. Seven patients were treated in the GR-MD-02 in combination with Yervoy trial, with no safety concerns in these low dose
cohorts. Due to changes in the standard of care for metastatic melanoma (i.e., approval of anti-PD-1), recruitment has been slowed significantly in this trial. Promising results were reported in the Phase 1b trial combining GR-MD-02 with
pembrolizumab (KEYTRUDA). Cohort 1 was completed (n=6, 5 with melanoma, one head and neck) with one partial response and one mixed response in 5 melanoma patients. There was a rapid and marked tumor response after 3 doses of combined GR-MD-02 and
pembrolizumab in the one partial response patient who had failed high-dose IL-2 and oncolytic virus + ipilimumab. This Phase 1b clinical trial that combines GR-MD-02 with pembrolizumab
(KEYTRUDA
®
) continues to enroll patients and recently completed the second cohort, which used 4 mg/kg GR-MD-02. The third cohort, which will start 85 days following the final patient
enrollment in the second cohort, will enroll 10 patients at a dose of 8 mg/kg GR-MD-02. There will likely be additional data reported in early 2018. The study is ongoing and progression to further development will be based on response rate as
compared to historical response rates to pembrolizumab alone.
14
Severe skin diseases.
Psorasis.
During our Phase 1 NASH fibrosis trial with GR-MD-02, a clinical effect on plaque psoriasis was observed in a NASH patient who
also had this disease. This patient had marked improvement in her psoriasis, with improvement beginning after the third infusion. She reported that her psoriasis was completely gone and her skin was normal after the fourth
infusion. Her skin remained normal for 17 months after the final infusion of study drug. The patient is convinced that the improvement in her psoriasis is related to the study drug.
This serendipitous finding, combined with galectin-3 protein being markedly upregulated in the capillary epithelia (small blood vessels) of
the psoriatic dermis (plaque lesions), led to a phase 2a trial in patients with moderate to severe plaque psoriasis. GR-MD-02 inhibition of galectin-3 may attenuate capillary changes in the psoriatic dermis and inflammatory recruitment, perhaps
explaining the improvements observed in the NASH fibrosis trial patient. In this open-label, unblinded trial (no placebo, all patients knowingly receive active drug), 5 patients with moderate to severe plaque psoriasis were administered
GR-MD-02 every two weeks for 24 weeks. In May 2016, we reported positive results on the first four patients after 12 weeks of therapy. Based on these results, we modified the trial to include 24 weeks of therapy. In August 2016, we
reported on four patients after 24 weeks of therapy and one patient after 12 weeks of therapy. The four patients who received 24 weeks of therapy experienced an average of 48% improvement in their plaque psoriasis. At this time, the
average response in all five patients remains at 50% with one patient having an 82% improvement. However, there are existing drugs on the market in this disease that produce 75% and higher improvements in 60-90% of patients. While we are encouraged
that this study has demonstrated clinically meaningful results in a human disease with GR-MD-02, the next steps would entail a controlled, does-ranging clinical trial which we do not expect to conduct absent a strategic partnership. The results of
this Phase 2a clinical trial was presented at the Maui Derm for Dermatologists meeting in March 2017.
Atopic Dermatitis
. Atopic
Dermatitis (AD) is a chronic pruritic (itching), immune-mediated, inflammatory skin disease that for some adult patients can be severe and debilitating. There is an important unmet medical need in adults with severe disease who are not adequately
treated with topical medicines. Our findings in psoriasis led to an interest in exploring the potential utility of the compound in treatment of AD. A Phase 2a open label trial was initiated in 3 adult patients who were treated with GR-MD-02 at 8
mg/Kg every other week for 12 weeks, and dosage could be increased to 12 mg/Kg for weeks 12-24 if an incomplete response was observed. The response was objectively evaluated using two validated scores: the EASI (eczema area and severity index) and
SCORAD (severity scoring of atopic dermatitis index). All three patients showed clinical responses as determined by reduction of EASI and SCORAD during the study. but no subject achieved a primary endpoint. Upon completion of the 24-week treatment
phase subject 1 met both secondary endpoints of SCORAD-50 and EASI-50, and subject 2 met one secondary endpoint (EASI-50). Subject 3 approached a secondary endpoint with an EASI reduction of 49% at week 24. There were no drug related adverse events
during this trial. These initial findings are believed to suggest a clinically relevant effect. Additionally, the 12 mg/Kg dosage was administered safely in this patient population.
We believe the mechanism of action for GR-MD-02 in moderate to severe skin diseases is based upon interaction with, and inhibition of,
galectin proteins, particularly galectin-3, which are expressed at high levels in certain pathological states including inflammation, fibrosis, skin diseases and cancer. While GR-MD-02 is capable of binding to multiple galectin proteins, we believe
that it has the greatest affinity for galectin-3, the most prominent galectin implicated in pathological processes. Blocking galectin in cancer and liver fibrosis has specific salutary effects on the disease process.
Results of Operations
Three and Six Months Ended
June 30, 2017 Compared to Three Months Ended June 30, 2016
Research and Development Expense.
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Three Months Ended
June 30,
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Six Months Ended
June 30,
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2017 as Compared to 2016
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Three Months
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Six Months
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2017
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2016
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2017
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2016
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$ Change
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% Change
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$ Change
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% Change
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(In thousands, except %)
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Research and development
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$
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3,444
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$
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4,226
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$
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7,216
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$
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8,603
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$
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(782
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)
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(19
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%)
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$
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(1,387
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)
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(16%)
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We generally categorize research and development expenses as either direct external expenses, comprised of
amounts paid to third party vendors for services, or all other research and development expenses, comprised of employee payroll and general overhead allocable to research and development. We consider a clinical program to have begun upon acceptance
by the FDA, or similar agency outside of the United States, to commence a clinical trial in humans, at which time we begin tracking expenditures by the product candidate. Clinical program expenses comprise payments to vendors related to preparation
for, and conduct of, all phases of the clinical trial, including costs for drug manufacture, patient dosing and monitoring, data collection and management, oversight of the trials and reports of results. Pre-clinical expenses comprise all research
and development amounts incurred before human trials begin, including payments to vendors for services related to product experiments and discovery, toxicology, pharmacology, metabolism and efficacy studies, as well as manufacturing process
development for a drug candidate.
15
We have two product candidates, GR-MD-02 and GM-CT-01; however only GR-MD-02 is in active
development. We filed for an IND for GR-MD-02 in January 2013 and in February 2013 we entered into an agreement with CTI to conduct a Phase 1 clinical trial of GR-MD-02. In March 2013, the FDA indicated we could proceed with a Phase 1 human clinical
trial of GR-MD-02, and we began enrolling patients in the third quarter of 2013. In January 2014, we completed the enrollment of the first cohort of patients in the Phase 1 trial with no serious adverse events being reported. We reported initial
safety and tolerability results from the first cohort of patients on March 31, 2014. The second cohort of this Phase 1 trial began and enrollment was completed in April 2014. In July 2014, we reported the results from the second cohort of
patients. Enrollment of the third cohort of Phase 1 began in July 2014 with interim results presented in November 2014 with the final report on cohort 3 presented in January 2015. The results of the Phase 1 study demonstrate that (i) GR-MD-02
was safe and well tolerated by patients with advanced NASH liver fibrosis after IV administration of four doses of 2 mg/kg, 4 mg/kg and 8mg/kg lean body weight, (ii) Pharmacokinetics revealed drug exposure in humans at the 8 mg/kg
dose that was equivalent to the upper range of the targeted therapeutic dose determined from effective doses in NASH animal models, (iii) Disease Serum Marker Effect showed there was a statistically significant, dose-dependent reduction in
FibroTest
®
scores due to a statistically significant reduction in alpha-2 macroglobulin (A2M) serum levels, and (iv) Liver Stiffness Effect, as measured by FibroScan
®
showed that there was a signal of reduced liver stiffness in patients receiving GR-MD-02. The reduction seen in A2M does
not
necessarily mean fibrosis got better in this short study, but
does suggest changes in the fibrogenic process that might lead to an improvement in fibrosis with longer-term therapy. These Phase 1 results in NASH patients with advanced fibrosis provide a firm foundation for entry into a Phase 2 development
program.
The Company held an End of Phase 1 meeting with the FDA and, amongst other things, received guidance on the primary
endpoints for a Phase 2 trial. Our Phase 2 program in fibrotic disease consists of two separate human clinical trials. The first clinical trial is the Phase 2b NASH-CX study for patients with NASH with cirrhosis, which began enrolling in June 2015.
This study is the primary focus of our program and is a randomized, placebo-controlled, double-blind, parallel-group Phase 2 trial to evaluate the safety and efficacy of GR-MD-02 for the treatment of liver fibrosis and resultant portal hypertension
in patients with NASH cirrhosis. Enrollment in this trial was completed in September 2016, and a total of 162 patients at 36 sites in the United States were be randomized to receive either 2 mg/kg of GR-MD-02, 8 mg/kg of GR-MD-02 or placebo,
with approximately 54 patients in each group. The primary endpoint is a reduction in change in hepatic venous pressure gradient (HVPG). Patients are receiving an infusion every other week for one year, total of 26 infusions, and will be evaluated to
determine the change in HVPG as compared with placebo. HVPG will be correlated with secondary endpoints of fibrosis on liver biopsy as well as with measurement of liver stiffness (FibroScan
(R)
)
and assessment of liver metabolism (
13
C-methacetin breath test, Exalenz), which are non-invasive measures of the liver that may be used in future studies. Data readout is expected in early
December 2017.
The second trial, our Phase 2a pilot trial NASH-FX for patients with NASH advanced fibrosis which explored use of three
non-invasive imaging technologies, is now complete. It was a shorter, four-month trial in 30 NASH patients with advanced fibrosis, but not cirrhosis, randomized 1:1 to either 9 bi-weekly doses of 8 mg/kg of GR-MD-02 or placebo. The trial did not
meet its primary biomarker endpoint as measured using multi-parametric magnetic resonance imaging (LiverMultiScan
(R)
, Perspectum Diagnostics). The trial also did not meet secondary endpoints that
measure liver stiffness as a surrogate for fibrosis using, magnetic resonance-elastography and FibroScan score. After analysis of the data, we do not believe that a four-month treatment period was likely long enough in the NASH population to show
efficacy results. This small study was not powered for the secondary endpoints and thus, not surprisingly did not meet the secondary endpoints. In the trial, GR-MD-02 was found to be safe and well tolerated among the patient population with no
serious adverse events.
Although there was no apparent improvement in the three non-invasive tests for assessment of liver fibrosis in
the four-month NASH-FX trial, the principal investigator of the NASH-FX trial has stated that the inhibition of galectin-3 with GR-MD-02 remains promising for the treatment of NASH fibrosis. Of note is that GR-MD-02 has demonstrated an improved
clinical effect in moderate-to-severe psoriasis, suggesting the compound has activity in a human disease that can occur in association with NASH. We believe our drug candidate provides a promising new approach for the therapy of fibrotic diseases,
and liver fibrosis in particular. Fibrosis is the formation of excess connective tissue (collagen and other proteins plus cellular elements such as myofibroblasts) in response to damage, inflammation or repair. When the fibrotic tissue becomes
confluent, it obliterates the cellular architecture, leading to scarring and dysfunction of the underlying organ. Given galectin-3s broad biological functionality, it has been demonstrated to be involved in cancer, inflammation and fibrosis,
heart disease, renal disease and stroke. We have further demonstrated the broad applicability of the actions of our galectin-3 inhibitors biological effect in ameliorating fibrosis involving lung, kidney and cardiac tissues in a variety of
animal models.
The focus and goal of the therapeutic program is to stop the progression of and reverse the fibrosis in the liver and,
thereby improve liver function and prevent the development of complications of fibrosis/cirrhosis and liver-related mortality in patients.
16
Additionally, during the Phase 1 clinical trial, there appeared to be a potential beneficial
effect on at least one patients moderate to severe psoriasis. This serendipitous finding, combined with galectin-3 protein being markedly upregulated in the capillary epithelia (small blood vessels) of the psoriatic dermis (plaque lesions),
led to a phase 2a trial in patients with moderate to severe plaque psoriasis. GR-MD-02 inhibition of galectin-3 may attenuate capillary changes in the psoriatic dermis and inflammatory recruitment, perhaps explaining the improvements observed
in the NASH fibrosis trial patient. In this open-label, unblinded trial (no placebo, all patients knowingly receive active drug), 4 patients with moderate to severe plaque psoriasis were administered GR-MD-02 every two weeks for 12 weeks.
In May 2016, we reported positive results on the first four patients after 12 weeks of therapy. Based on these results, we modified the trial to include 24 weeks of therapy. In August 2016, we reported on four patients after 24 weeks
of therapy and one patient after 12 weeks of therapy. The four patients who received 24 weeks of therapy experienced an average of 48% improvement in their plaque psoriasis. However, there are existing drugs on the market in this disease
that produce 75% and higher improvements. While we are encouraged that this study has demonstrated clinically meaningful results in a human disease with GR-MD-02, we do not expect to conduct further trials in this area absent a strategic
partnership.
An open label drug-drug interaction study was completed with GR-MD-02 and it showed that with 8 mg/kg dose of GR-MD-02 and 2
mg/kg dose of midazolam there was no drug-drug interaction and no serious adverse events or drug-related adverse events were observed. This study was required by the FDA and the primary objective was to determine if single or multiple intravenous
(IV) doses of GR-MD-02 affect the pharmacokinetics (PK) of midazolam. The secondary objective was to assess the safety and tolerability of GR-MD-02 when administered concomitantly with midazolam. The lack of a drug interaction in this study
enables Galectin to expand the number of patients eligible for its Phase 2 clinical trial. In addition, should GR-MD-02 be approved for marketing, the success of this study supports a broader patient population for the drug label.
Based on guidance from FDA and in furtherance of its understanding of the GR-MD-02 molecule, we continue to enhance its chemistry,
manufacturing and control procedures on GR-MD-02 active pharmaceutical ingredient (API) as well as on the finished, sterile, pharmaceutical dosage form. Various state of the art and cutting-edge analytical technologies are being utilized, for
example, to characterize and quantify the backbone vs. side-chain constituents and their quantitation, use of sophisticated linkage analysis with 2-D NMR to provide both qualitative and quantitative information on the proportion of oligomers, degree
of methylation, as well as other monoclonal specific antibody techniques to map GR oligomer integrity and distribution. The Company has also characterized how the GR molecule behaves under conditions of forced degradation.
Our research and development expenses were as follows:
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Three Months Ended
June 30,
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Six Months Ended
June 30,
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|
|
2017
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|
|
2016
|
|
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2017
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|
|
2016
|
|
|
|
(in thousands)
|
|
Direct external expenses:
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|
|
|
|
Clinical programs
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|
$
|
2,865
|
|
|
$
|
3,366
|
|
|
$
|
6,027
|
|
|
$
|
6,772
|
|
Pre-clinical activities
|
|
|
35
|
|
|
|
269
|
|
|
|
66
|
|
|
|
574
|
|
All other research and development expenses
|
|
|
544
|
|
|
|
591
|
|
|
|
1,123
|
|
|
|
1,257
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,444
|
|
|
$
|
4,226
|
|
|
$
|
7,216
|
|
|
$
|
8,603
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clinical programs expenses decreased primarily due to costs related to our Phase 2 clinical trials during the
three and six months ended June 30, 2017 as compared to the same periods in 2016. As we continue our Phase 2 trials, we expect our clinical activities costs will increase although they may fluctuate from quarter to quarter as the trials
progress. Clinical activities expenses primarily decreased due to reduced expenses associated with drug manufacturing and preparation. Pre-clinical activities decreased primarily because we have completed pre-clinical work directly related to our
Phase 2 clinical trial program. Other research and development expense decreased in the six months ended June 30, 2017 compared to 2016 primarily due to a decrease in non-cash stock-based compensation expense of approximately $135,000.
Both the time required and costs we may incur in order to commercialize a drug candidate that would result in material net cash inflow are
subject to numerous variables, and therefore we are unable at this stage of our development to forecast useful estimates. Variables that make estimates difficult include the number of clinical trials we may undertake, the number of patients needed
to participate in the clinical trial, patient recruitment uncertainties, trial results as to the safety and efficacy of our product, and uncertainties as to the regulatory agency response to our trial data prior to receipt of marketing approval.
Moreover, the FDA or other regulatory agencies may suspend clinical trials if we or an agency believes patients in the trial are subject to unacceptable risks, or find deficiencies in the conduct of the clinical trial. Delays or rejections may also
occur if governmental regulation or policy changes during our clinical trials or in the course of review of our clinical data. Due to these uncertainties, accurate and meaningful estimates of the ultimate cost to bring a product to market, the
timing of costs and completion of our program and the period during which material net cash inflows will commence are unavailable at this time.
17
General and Administrative Expense.
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|
Three Months
Ended June 30,
|
|
|
Six Months
Ended June 30,
|
|
|
2017 as Compared to 2016
|
|
|
|
|
|
Three Months
|
|
|
Six Months
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
$ Change
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|
|
% Change
|
|
|
$ Change
|
|
|
% Change
|
|
|
|
(In thousands, except %)
|
|
General and administrative
|
|
$
|
1,070
|
|
|
$
|
1,305
|
|
|
$
|
2,244
|
|
|
$
|
3,742
|
|
|
$
|
(235
|
)
|
|
|
(18
|
%)
|
|
$
|
(1,498
|
)
|
|
|
(40
|
)%
|
General and administrative expenses consist primarily of salaries including stock based compensation, legal
and accounting fees, insurance, investor relations, business development and other office related expenses. The primary reasons for the decrease in general and administrative expenses for the three months ended June 30, 2017 as compared to the
same period in 2016 are reduced investor relations expenses of approximately $138,000 and decreased non-cash stock compensation expense of approximately $86,000. The primary reasons for the decrease in general and administrative expenses for the six
months ended June 30, 2017 as compared to the same period in 2016 is due to recording of severance of $300,000, acceleration of non-cash, stock-based compensation expense of $578,000 related to the termination of the Companys executive
chairman in January 2016, a decrease in investor relations expenses of approximately $309,000, and a decrease in non-cash stock based compensation expense of $313,000.
Liquidity and Capital Resources
Since
our inception on July 10, 2000, we have financed our operations from proceeds of public and private offerings of debt and equity. As of June 30, 2017, we raised a net total of $131 million from these offerings. We have operated at a
loss since our inception and have had no significant revenues. We anticipate that losses will continue for the foreseeable future. At June 30, 2017, we had $9.1 million of unrestricted cash and cash equivalents available to fund future
operations. We believe that with the cash on hand at June 30, 2017, there is sufficient cash to fund currently planned operations through January 2018. Our ability to fund operations after our current cash resources are exhausted depends on our
ability to obtain additional financing or achieve profitable operations, as to which no assurances can be given. Accordingly, based on the forecasts and estimates underlying our current operating plan, the financial statements do not currently
include any adjustments that might be necessary if we are unable to continue as a going concern.
Net cash used in operations increased by
$765,000 to $8,865,000 for the six months ended June 30, 2017, as compared to $8,100,000 for the six months ended June 30, 2016. Cash operating expenses increased principally just due to timing of payments for research and development
activities related to our clinical trial activity with GR-MD-02.
Net cash provided by financing activities the six months ended
June 30, 2017 and 2016, of $2,630,000 and $257,000, respectively, represents net proceeds from the sale of common stock and warrants.
Other.
We have engaged outside vendors for certain services associated with our clinical trials. These services are generally available from
several providers and, accordingly, our arrangements are typically cancellable on 30 days notice.
Off-Balance Sheet Arrangements
We have not created, and are not a party to, any special-purpose or off-balance sheet entities for the purpose of raising capital, incurring
debt or operating parts of our business that are not consolidated into our financial statements. We do not have any arrangements or relationships with entities that are not consolidated into our financial statements that are reasonably likely to
materially affect our liquidity or the availability of capital resources.
Application of Critical Accounting Policies and Estimates
The preparation of condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of
assets, liabilities, expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to intangible assets, accrued expenses, stock-based compensation, contingencies and
litigation. We base our estimates on historical experience, terms of existing contracts, our observance of trends in the industry, information available from other outside sources and on various other factors that we believe to be appropriate under
the circumstances. Actual results may differ from these estimates under different assumptions or conditions.
Critical accounting policies
are those policies that affect our more significant judgments and estimates used in preparation of our consolidated financial statements. We believe our critical accounting policies include our policies regarding stock-based compensation, accrued
expenses and income taxes. For a more detailed discussion of our critical accounting policies, please refer to our 2016 Annual Report on Form 10-K.
18