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Table of Contents
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM
10-K
 
 
 
Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2020
 
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from
                    
to
                    
Commission File
No. 001-31791
 
 
GALECTIN THERAPEUTICS INC.
 
 
 
Nevada
 
04-3562325
(State or other jurisdiction
of incorporation)
 
(I.R.S. Employer
Identification No.)
4960 Peachtree Industrial Blvd., Suite 240NorcrossGA
 
30071
(Address of Principal Executive Offices)
 
(Zip Code)
(678)
620-3186
(Registrant’s Telephone Number, Including Area Code)
 
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
 
Trading
Symbol
 
Name of each exchange
on which registered
Common Stock, $0.001 Par Value Per Share
 
GALT
 
The NASDAQ Stock Market
Securities registered pursuant to Section 12(g) of the Act:
None
 
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ☐    No  ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes ☐    No ☒
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 if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K
is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form
10-K
or any amendment to this Form
10-K.  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, a 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.
 
Large accelerated filer      Accelerated filer  
       
Non-accelerated filer      Smaller reporting company  
       
         Emerging growth company  
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.    Yes  ☐    No  
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Exchange Act).    Yes  ☐    No  
The aggregate market value of the voting and
non-voting
common equity held by
non-affiliates
computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of June 30, 2020 was $126 million.
The number of shares outstanding of the registrant’s common stock as of February 28, 2021 was 57,156,030.
 
 
 
 

Table of Contents
INDEX TO FORM
10-K
FOR THE YEAR ENDED DECEMBER 31, 2020
 
        
PAGE
 
PART 1
        
ITEM 1.
  Business      1  
ITEM 1A.
  Risk Factors      14  
ITEM 1B.
  Unresolved Staff Comments      26  
ITEM 2.
  Properties      26  
ITEM 3.
  Legal Proceedings      26  
ITEM 4.
  Mine Safety Disclosure      26  
   
PART II
        
ITEM 5.
  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities      27  
ITEM 6.
  Selected Financial Data      27  
ITEM 7.
  Management’s Discussion and Analysis of Financial Condition and Results of Operations      27  
ITEM 7A.
  Quantitative and Qualitative Discussions About Market Risk      32  
ITEM 8.
  Financial Statements and Supplementary Data      32  
ITEM 9.
  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure      32  
ITEM 9A.
  Controls and Procedures      32  
ITEM 9B.
  Other Information      33  
   
PART III
        
ITEM 10.
  Directors, Executive Officers and Corporate Governance      34  
ITEM 11.
  Executive Compensation      38  
ITEM 12.
  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters      48  
ITEM 13.
  Certain Relationships, Related Transactions and Director Independence      50  
ITEM 14.
  Principal Accountant Fees and Services      51  
   
PART IV
        
ITEM 15.
  Exhibits and Financial Statement Schedules      53  
     58  

Table of Contents
PART I
Item 1.
Business
Overview
We are a clinical stage biopharmaceutical company engaged in drug research and development to create new therapies for fibrotic disease, cancer and selected other diseases. 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, patented 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 galectin proteins have a demonstrated role in the pathogenesis of a given disease. We focus on diseases with serious, life-threatening consequences and those where current treatment options are limited specifically in NASH
(non-alcoholic
steatohepatitis) with cirrhosis and certain cancer indications. 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 one of our programs becomes advanced and requires significant additional resources.
Our lead
galectin-3
inhibitor is belapectin
(GR-MD-02),
which has been demonstrated in preclinical models to reverse liver fibrosis and cirrhosis. Belapectin has the potential to treat many diseases due to
galectin-3’s
involvement in multiple key biological pathways such as fibrosis, immune cell function and immunity, cell differentiation, cell growth, and apoptosis (cell death). The importance of
galectin-3
in the fibrotic process is supported by experimental evidence. Animals with the gene responsible for
galectin-3
“knocked-out”
can no longer develop fibrosis in response to experimental stimuli compared to animals with an intact
galectin-3
gene. We are using our
galectin-3
inhibitor to treat advanced liver fibrosis and liver cirrhosis in NASH patients. We have completed two Phase 1 clinical studies, a Phase 2 clinical study in NASH patients with advanced fibrosis
(NASH-FX)
and a second Phase 2b clinical trial in NASH patients with well compensated cirrhosis
(NASH-CX)
meaning the liver is scarred but still able to perform most of its basic functions.
We are now engaged in a Phase 2b/3 clinical trial. Our study protocol was filed with the FDA on April 30, 2020 for a seamless adaptively-designed Phase 2b/3 clinical study, the NAVIGATE trial (formerly called
NASH-RX),
evaluating the safety and efficacy of its
galectin-3
inhibitor, belapectin
(GR-MD-02),
for the prevention of esophageal varices in patients with
non-alcoholic
steatohepatitis (NASH) cirrhosis (Further details are available at
www.clinicaltrials.gov
under study NCT04365868); this study began enrolling patients in
Q2-2020.
Recently the Company received a letter from the FDA providing comments, asking questions and providing guidance on various aspects of the ongoing NAVIGATE trial.
Additionally, a study protocol entitled “A Single-dose, Open-label, Pharmacokinetic Study of
Belapectin
(GR-MD-02)
in Subjects With Normal Hepatic Function and Subjects With Varying Degrees of Hepatic Impairment” has been filed with the FDA to examine the effects of the drug in subjects with normal hepatic function and subjects with varying degrees of hepatic impairment (study details are listed under study NCT04332432 on
www.clinicaltrials.gov
); this study is enrolling patients.
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 through our majority-owned joint venture subsidiary, Galectin Sciences LLC, a discovery program aimed at the targeted development of small molecules (generally,
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
galectin-3
inhibitor compounds. Three series of composition of matter patents covering discoveries at Galectin Sciences have been filed.
We are also pursuing a development pathway to clinical enhancement and commercialization for our lead compounds in immuno-oncology for cancer therapy in collaboration with Providence Portland Cancer Center. However, our clinical development efforts are primarily focused on liver fibrosis and NASH. All of our proposed products are presently in development, including
pre-clinical
and clinical trials.
We were founded in July 2000 as
Pro-Pharmaceuticals,
Inc., a Massachusetts corporation. On April 25, 2001,
DTR-Med
Pharma Corp. (“DTR”), which was incorporated in Nevada on January 26, 2001, entered into a stock exchange agreement with
Pro-Pharmaceuticals,
Inc., whereby DTR acquired all of the outstanding shares of common stock of
Pro-Pharmaceuticals,
Inc. On May 10, 2001, DTR changed its name to
“Pro-Pharmaceuticals,
Inc.” and on June 7, 2001, the Massachusetts corporation was merged into the Nevada corporation. On May 26, 2011,
Pro-Pharmaceuticals,
Inc. changed its name to “Galectin Therapeutics Inc.” In October, 2012, we moved our headquarters to a suburb of Atlanta, GA to be closer to a center of discovery collaboration while maintaining a laboratory operation in the Boston area.
 
 
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Table of Contents
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 substantiating the importance of
galectin-3
in the fibrotic process arises from gene knockout experiments in animal studies. Mice genetically altered to eliminate 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 as well as development of fibrosis in other tissues.
We have one new proprietary chemical entity (NCE) in development, belapectin, which has shown promise in preclinical and early clinical studies in treatment of fibrosis, severe skin disease, and in cancer therapy. Currently we are focusing on development of belapectin intended to be used in the treatment of liver fibrosis associated with fatty liver disease (NASH) and more specifically in NASH cirrhosis. We have also leveraged our relationships with well-known investigators to demonstrate clinical effects of belapectin in treating moderate to severe plaque psoriasis, severe atopic dermatitis, and in cancer therapy in combination with immune-system modifying agent(s). Belapectin 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,
GM-CT-01
compound has been explored in limited other preclinical studies.
Our product pipeline is shown below:
 
Indication
  
Drug
  
Status
Fibrosis
     
NASH with Advanced Fibrosis:
NASH-CX
trial and
NASH-FX
trial
   belapectin   
IND submitted January 2013. Results from the Phase 1 clinical trial were reported in 2014, with final results reported in January 2015.
The Phase 2 NASH FX trial was designed for patients with advanced fibrosis but not cirrhosis. Its principal purpose was to evaluate various imaging modalities. The NASH FX trial top line data was reported in September 2016
      The Phase 2 NASH CX trial, was designed for patients with well compensated cirrhosis. The NASH CX trial top line data was reported in December 2017 and was published in
Gastroenterology
in 2020.
NASH NAVIGATE      
Based on FDA feedback, the NAVIGATE trial is an adaptive Phase 2b/3 trial for the prevention of esophageal varices in NASH patients with compensated cirrhosis. A Phase 2b interim efficacy analysis will be incorporated to confirm previous Phase 2 data, select an optimal dose and reaffirm the risk/benefit of belapectin. The Phase 3 end of study analysis will evaluate the development of esophageal varices as the primary outcome of efficacy and a composite clinical endpoint including progression to varices requiring treatment as a key secondary outcome of efficacy. See www.clinicaltrials.gov NCT04365868. The first patient was randomized in the third quarter of 2020.
A hepatic impairment is being conducted in subjects with normal hepatic function and subjects with varying degrees of hepatic impairment (CF: www.clinicaltrials.gov NCT04332432) and began enrolling patients in the second quarter of 2020.
Lung Fibrosis    belapectin    In
pre-clinical
development
Kidney Fibrosis    belapectin    In
pre-clinical
development
 
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Indication
  
Drug
  
Status
Cardiac and Vascular Fibrosis    belapectin and
GM-CT-01
   In
pre-clinical
development
Cancer Immunotherapy
     
Melanoma, Head, Neck Squamous Cell
Carcinoma (HNSCC)
   belapectin    Investigator IND study in process. A Phase 1B study began in
Q-1
2016. Early data was reported in February 2017 and additional data were reported in September 2018. The trial is ongoing to expand the dataset of melanoma and HNSCC patients and determine if a Phase 2 trial is warranted.
Psoriasis      
Moderate to Severe Plaque Psoriasis
Severe Atopic Dermatitis
   belapectin    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. Further studies are dependent on finding a suitable strategic partner which is unlikely.
Fibrosis.
 Belapectin is our lead product candidate for treatment of fibrotic disease. Our preclinical data show that belapectin has a significant therapeutic effect on liver fibrosis as shown in several relevant animal models. In addition, in NASH animal models, belapectin has been shown to reduce liver fat, inflammation, and ballooning degeneration (death of liver cells). Therefore, we chose belapectin as the lead candidate in a development program targeted initially at fibrotic liver disease associated with
non-alcoholic
steatohepatitis (NASH). 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 belapectin and pharmacodynamics biomarkers of disease. On March 1, 2013, the FDA indicated we could proceed with a US Phase 1 clinical trial for belapectin with a development program aimed at obtaining support for a proposed indication of belapectin for treatment of NASH with advanced fibrosis. The Phase 1 trial was completed and demonstrated that belapectin up to 8 mg/kg Lean Body Mass (LBM), i.v. was safe and well tolerated.
Additionally, an open label drug-drug interaction study was completed in healthy volunteers during the second quarter of 2015 with belapectin and it showed that with 8 mg/kg LBM dose of belapectin and 2 mg/kg LBM dose of midazolam there was no drug-drug interaction and no serious adverse events or drug-related adverse events were observed. The secondary objective was to assess the safety and tolerability of belapectin when administered concomitantly with midazolam.
Our Phase 2 program in fibrotic disease consisted of two separate human clinical trials. The primary clinical trial was the Phase 2b
NASH-CX
study for one year for patients with NASH with compensated cirrhosis, which began enrolling in June 2015. This study was the primary focus of our program and was a randomized, placebo-controlled, double-blind, parallel-group Phase 2b trial to evaluate the safety and efficacy of belapectin for treatment of liver fibrosis and resultant portal hypertension in NASH patients with compensated cirrhosis. A smaller, exploratory
NASH-FX
trial was conducted to explore potential use of various
non-invasive
imaging techniques in NASH patients with advanced fibrosis but not cirrhosis.
NASH-FX
Trial:
The
NASH-FX
trial was a Phase 2a pilot trial for patients with NASH and advanced fibrosis that explored use of three
non-invasive
imaging technologies. It was a short, single site, four-month trial in 30 NASH patients with advanced fibrosis (F3), but not cirrhosis (F4), randomized 1:1 to either
9 bi-weekly
doses of 8 mg/kg LBM of belapectin 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. We, and many experts in the field, now believe that a four-month treatment period was not sufficient to show efficacy results in established advanced liver fibrosis. This small study was also not adequately powered for the secondary endpoints. In the trial, belapectin was found to be safe and well tolerated with no serious adverse events and evidence of a pharmacodynamic effect. These results provided support for further development in NASH.
NASH-CX
Trial:
The
NASH-CX
trial was a larger multi-center clinical trial that explored the use of belapectin for the treatment of liver fibrosis and resultant portal hypertension in patients with well-compensated 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 LBM of belapectin, 8 mg/kg LBM of belapectin or placebo, with 54 patients in each group. Approximately 50% of patients at baseline had esophageal varices (a complication of portal hypertension). The primary endpoint was a reduction in hepatic venous pressure gradient (HVPG). Patients received an infusion of belapectin or placebo every other week for one year, a total of 26 infusions, and were evaluated to determine the change in HVPG as compared with placebo. Secondary or exploratory endpoints included fibrosis on liver biopsy, measurement of liver stiffness (FibroScan
(R)
) and assessment of liver metabolism (
13
C-methacetin
breath test, Exalenz). Top line data readout was reported in December 2017. The study demonstrated a favorable safety profile and clinically meaningful efficacy results in patients without esophageal varices at baseline demonstrated by a prevention of development of varices when compared to placebo.
 
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In the total patient population, the primary endpoint HVPG showed a trend toward benefit with belapectin treatment, but the difference from placebo was not statistically significant. The mean change in HVPG of placebo from baseline to week 54 was 0.3 mm Hg. The mean change in HVPG from baseline was
-0.37
and
-0.42
for the 2 mg/kg LBM dose and 8 mg/kg LBM dose of belapectin, respectively.
In those NASH cirrhosis patients without varices at baseline (about 50% of the total population), there was a statistically significant effect of the 2 mg/kg LBM dose of belapectin on the absolute change in HVPG
(-1.08
mm Hg, p<0.01). The effect of the 8 mg/Kg LBM dose of belapectin on absolute or percent change in HVPG from baseline to week 54 was not significant.
Also because of the clinical relevance of this population, a responder analysis was performed on those patients without varices at baseline. Analysis was performed looking at two groups: those with an equal to or greater than 2 mm Hg decrease in HVPG from baseline or those with an equal to or greater than 2 mm Hg and a greater than or equal to 20% decrease in HVPG from baseline. In both cases, the change observed in the belapectin 2 mg/kg LBM group was statistically significant (p<0.01) while that of the 8 mg/kg LBM group was not.
Over the
54-week
treatment period, in patients without varices there were statistically significantly fewer new varices that developed in the belapectin treatment groups (0% and 4% in the 2 mg/kg LBM and the 8 mg/kg LBM, respectively) vs placebo (18%). As esophageal varices can lead to hemorrhagic complication, which can be fatal, we believe the prevention of esophageal varices may represent a clinically relevant measure of clinical efficacy in patients with NASH cirrhosis.
The major conclusions from the
NASH-CX
trial results were that: i) belapectin had a statistically significant and clinically meaningful effect in improving HVPG vs placebo in patients with NASH cirrhosis who did not have esophageal varices at baseline. This effect was seen regardless of the patient’s baseline portal hypertension. ii) There was an important drug effect of belapectin in the total patient population on liver biopsy with a statistically significant improvement in hepatocyte ballooning (ie cell death), (iii) There was a statistically significant reduction (p=0.02) in the development of new esophageal varices in drug-treated patients compared to placebo. We believe that this is a clinically relevant endpoint related to patient outcomes, (iv) While there was a drug effect in both the 2 mg/kg LBM and 8 mg/kg LBM groups on the development of varices and liver biopsy there was a consistently greater and statistically significant effect of the 2 mg/kg LBM dose of belapectin, (v) belapectin appears to be safe and well tolerated in this one year clinical trial, a feature that is of prime importance for a cirrhotic population and (vi) We believe this is the first large, randomized clinical trial to demonstrate a clinically meaningful improvement in portal hypertension or liver biopsy in patients with compensated NASH cirrhosis who have not yet developed esophageal varices.
Further information and details on the
NASH-CX
results summarized above is available in public presentations posted to our website and filed with the SEC and in a peer reviewed publication in
Gastroenterology
(Gastroenterology 2020;158:1334–1345).
NASH NAVIGATE Trial:
Building on the experience of the
NASH-CX
trial, the NAVIGATE Trial is a seamless adaptively-designed Phase 2b/3 clinical study evaluating the safety and efficacy of our
galectin-3
inhibitor, belapectin
(GR-MD-02),
for the prevention of esophageal varices in patient with
non-alcoholic
steatohepatitis (NASH) cirrhosis. The major features of this innovative Phase 2b/3 study design are: i) In patients with NASH cirrhosis and clinical signs of portal hypertension but without esophageal varices at baseline, this trial will assess the effect of belapectin on the incidence of new varices (the primary endpoint) – as well as assessing effect on the incidence of long-term, clinically significant cirrhosis-related outcomes (a key secondary efficacy endpoint), (ii) The study targets NASH patients with a clearly identified unmet medical need: patients with compensated cirrhosis who are at risk of developing esophageal varices, a potentially life-threatening complication of cirrhosis (bleeding varices are a cause of death in about
one-third
of cirrhotic patients). There is no approved treatment for preventing varices in these patients. In addition, the development of esophageal varices reflects the progression of hepatic cirrhosis and thus portends the development of other cirrhosis complications such as ascites, hepatic encephalopathy, and liver failure, and (iii) During the first 18 months, two belapectin dose levels (2 mg/kg LBM and 4 mg/kg LBM) will be compared to placebo (phase 2b). Then, at the interim analysis (IA), one belapectin dose will be selected based on efficacy and safety, for continued evaluation (Phase 3). The belapectin dose selected for the phase 2b/3 are based on the analysis of the
NASH-CX
trial, including a dose response pharmacokinetic analysis of the hepatic venous gradient pressure (HVPG, a reflection of portal hypertension). Prior belapectin clinical studies have also indicated the good tolerance and safety profile of belapectin with doses of up to 8 mg/kg LBM for 52 weeks (Phase 2b Study
NASH-CX),
an important feature of the future risk benefit analysis in patients with NASH cirrhosis.
The study design provides for a
pre-specified
interim analysis (IA). The IA of efficacy and safety data will be conducted after all planned subjects in Phase 2b component have completed at least 78 weeks (18 months) of treatment and an esophago-gastro-duodeno endoscopic assessment. The purpose of the IA is to allow potential seamless adaptive modifications of the study, including: (1) the selection of the optimal dose of belapectin for Phase 3, (2) the
re-estimation
of the study sample size for Phase 3 portion of the trial, (3) the
re-evaluation
of the randomization ratio for the Phase 3 portion of the trial, (4) the refinement of the inclusion and exclusion criteria for the Phase 3 portion of the trial, including the cirrhosis status, (5) and/or termination of the study for overwhelming efficacy or for futility.
 
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The trial design also includes a blinded sample size
re-estimation
(“SSR”) during the Phase 2b, prior to the IA, to allow for potential sample size readjustment. The SSR will be conducted when 50% of the patients have completed 18 months of therapy. This will allow us to confirm the underlying assumption regarding the rate of varices development, currently estimated from our prior Phase 2b trial
(NASH-CX).
The study design also minimizes invasive testing requirements, such as the measurement of HVPG or repeated liver biopsies, which we believe will facilitate enrollment and retention of patients. It also provides for a seamless transition of patients from the Phase 2b component into the phase 3 stage, including the potential addition of new patients. The trial design preserves the surrogate
end-point
concepts (development of new varices versus variceal hemorrhage) previously discussed with FDA.
We believe that these adaptations taken together are innovative and optimize conduct of the NAVIGATE trial with a clinically relevant primary outcome giving belapectin the best opportunity to show a positive therapeutic effect to address an unmet medical need. If the IA results of the NAVIGATE trial are compelling, there could be the potential for accelerated FDA approval and/or partnership opportunity with a pharmaceutical company.
In the Phase 3 component of this trial, as proposed in the protocol, the primary endpoint remain the development of varices. Secondary endpoints include a composite clinical outcomes endpoint, including varices requiring treatment (development of large varices or varices with a red wale), decompensating events,
all-cause
mortality, MELD score increase, liver transplant. Also, NASH
non-invasive
biomarkers will be evaluated. To target a population at risk of developing esophageal varices, patient selection will be based on clinical signs of portal hypertension, including, a low platelet count, an increased spleen size and/or evidence of collaterals circulation.
The focus and goal of the therapeutic program is to stop the progression of and/or reverse portal hypertension and thereby prevent the development of varices, potentially one of the most immediately life-threatening complication of cirrhosis. Based on the results of the
NASH-CX
trial and subject to confirmation in later stage clinical trials, we believe that this goal is achievable in a significant portion of the NASH cirrhosis patient population i.e. those NASH cirrhosis patients with clinical signs of portal hypertension.
The
COVID-19
pandemic has delayed and may continue to delay our recruitment of sites and enrollment of patients for our Phase 2b/3 NAVIGATE trial despite a recent uptick in screening activities. Many cities in the United States and Europe have experienced shut-downs, and while some cities have begun to loosen restrictions, they are at risk of experiencing new shut-downs and restrictions. In some countries, shutdown orders have also affected the regulatory process to authorize study starts. Governments and medical facilities are focusing their resources for battling the
COVID-19
pandemic. For several reasons, the pandemic makes enrolling patients for the NAVIGATE trial more challenging, including because patients eligible for the NAVIDGATE trial have liver cirrhosis and, as such, are at a greater health risk of complications from
COVID-19
until vaccinations are more readily available and completed. We believe that as more people get vaccinated for
COVID-19,
site recruitment and patient enrollment will accelerate.    At this time, we estimate that enrollment completion will occur by the end of 2022.
We have identified more than 130 clinical trial sites in 11 countries for the NAVIGATE trial.
Further details on the NAVIGATE trial can be found on
www.clinicaltrials.gov
under study NCT04365868.
The Company also has commenced a Hepatic Impairment Study, which will run in parallel with the phase 2b/3 trial as part of the development program. The Hepatic Impairment Study is being conducted at three sites and will involve approximately 40 patients (divided amongst normal healthy volunteers, and patients with hepatic impairment categorized as Child-Turcotte-Pugh (CTP) classes A (mild), B (moderate), and C (severe)). Each subject will receive a single infusion of belapectin (4 mg/kg LBM) and their serum belapectin levels will be monitored for up to approximately two weeks to define the effects of various stages of cirrhosis on serum belapectin levels. The tolerance and safety of belapectin will be evaluated. Based on the results from this hepatic impairment study, the Company may consider including patients with more advanced cirrhosis in the Phase 3 portion of its NAVIGATE trial. Until dosing and safety profile is further informed in CTP Class B and/or Class C patients, the NAVIGATE trial will enroll only CTP Class A patients. Further details on this hepatic impairment study can be found on
www.clinicaltrials.gov
study NCT04332432.
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 patient’s immune system to fight cancer. It is our goal to use a galectin inhibitor to further 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 belapectin 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,
or 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 belapectin 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 Center’s Earle A. Chiles Research Institute (EACRI).
 
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Promising results were reported in the Phase 1b trial combining belapectin with pembrolizumab (KEYTRUDA
®
). Cohort 1 was completed (n=6, 5 with melanoma, one with head and neck cancer) with one partial response and one mixed response in the melanoma patients. There was a rapid and marked tumor response after 3 doses of combined belapectin and pembrolizumab in the one partial response patient who had failed high-dose
IL-2
and oncolytic virus + ipilimumab. The study is ongoing and progression to further development will be based on response rate as compared to historical response rates to pembrolizumab alone. In September 2018 we announced additional preliminary clinical data from cohort 3 of this investigator-initiated trial. When aggregated with cohorts previously reported, the data shows a 50% objective response rate in advanced melanoma with belapectin in combination with KEYTRUDA, and a significant decrease in the frequency of suppressive myeloid-derived suppressor cells following treatment in the responding patients (on day 85 post-treatment). Fourteen advanced melanoma patients across three dose cohorts now have Objective Response Rate (ORR) and Disease Control Rate (DCR) data. Six patients completed in cohort 3 (8 mg/kg LBM) have now been added to the three patients completed in cohort 2 (4 mg/kg LBM) and five patients completed in cohort 1 (2 mg/kg LBM). Cohorts 1 and 3 each had two patients with an objective response. All three patients in cohort 2 had an objective response. In addition to the fourteen advanced melanoma patients, six patients with head and neck cancer were enrolled in this trial with a 33% ORR and 67% DCR. These data, taken together with the observed favorable safety and tolerability of the combination, in the view of the principal investigator, provide compelling rationale to move forward. Given that all three melanoma patients were responders at the 4 mg/kg dose, the investigators plan to continue the trial with the expansion of the 4 mg/Kg cohort to include additional advanced melanoma patients and additional head and neck cancer patients. The expansion cohort includes 14 patients and is planned to have continued belapectin dosing to match the recommended duration of pembrolizumab administration. The expansion cohort has been enrolled and further information will be reported as it becomes available. Discussions are ongoing about the planning and feasibility of a multicenter Phase 2 study, assuming the additional expansion cohort data are positive.
Severe skin diseases.
During our Phase 1 NASH fibrosis trial with belapectin, a clinical effect on plaque psoriasis was observed in a NASH patient who also suffered from psoriasis. 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. belapectin 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 belapectin 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 the end of that study, the average response in all five patients was 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 belapectin, the next steps would entail a controlled, does-ranging clinical trial, which we do not expect to conduct absent a strategic partnership which is unlikely.
We believe the mechanism of action for belapectin 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 and cancer. While belapectin 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, as discussed below.
Liver Fibrosis: New Approach for a Significant Unmet Medical Need
When an internal organ is exposed to chronic disease one of the responses is that scar tissue is laid down in the organ (this process is called fibrosis). The longer the disease affects the organ, the more fibrous tissue is deposited, and this ultimately results in the failure of the organ. This chronic fibrosis of organs may occur in the liver, lung, kidney, and heart, as well as others and, as a result, fibrosis of organs has been estimated to account for as much as 45% of all mortality in the United States. Scientific findings during the last few years indicate that the
galectin-3
protein is critically important in this fibrotic process in multiple organs.
In the liver, fibrosis is the end result of multiple inflammatory conditions and infections. Progressive liver fibrosis leads to cirrhosis, which results in reduction of liver function, multiple medical complications and ultimately death. It is estimated that one to two million patients have cirrhosis in the United States with close to 50,000 losing their lives yearly. Only a fraction of patients’ lives, approximately 6,200 per year, are saved by liver transplantation at a cost of at least $350,000 per transplantation with significant additional costs of care and medications after the transplant.
 
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One condition in particular that frequently leads to cirrhosis is
non-alcoholic
steatohepatitis, or NASH, a liver disease characterized by the accumulation of fat in the liver with associated inflammation and fibrosis, which can lead to
end-stage
cirrhosis requiring liver transplantation. The National Institutes of Health estimates that 9 to 15 million Americans are affected by NASH, and other sources suggest it may be as many as 30 million people have NASH, and forecasts that the number of Americans affected by this disease is growing due to obesity and diabetes, with the potential to become the leading cause of liver cirrhosis and liver transplantation in the future. Liver transplantation is currently the only therapeutic approach to NASH or other forms of liver fibrosis because, to the best of our knowledge, there are no drug therapies on the market. Organ transplantation is a difficult, risky and costly procedure, and organ availability is scarce. There is also the risk of developing cirrhosis in the transplanted liver from the same disease that damaged the patient’s original liver. Therefore, there is a great need for other therapeutic options. All diseases that affect the liver (viral hepatitis, alcoholic liver disease, and fatty liver as examples) lead to the development of scarring of the liver.
The primary focus of the Company is to use galectin inhibitors to block
galectin-3
and treat organ scarring or fibrosis in the liver. There are no approved therapies for treatment of liver fibrosis. We believe that our drug candidates have the potential to treat NASH and other forms of liver fibrosis. Scientific evidence suggests that
galectin-3
is essential for the development of liver fibrosis in animals. Published data show that mice lacking the
galectin-3
gene, and thus unable to produce
galectin-3,
are essentially incapable of developing liver fibrosis in response to toxic insult to the liver and in fatty liver disease. Moreover, mice that do not have the
galectin-3
gene are resistant to lung and kidney fibrosis. These published data show that
galectin-3
is a critical protein for the development of organ fibrosis. Our drugs, based on experiments in well characterized animal models, are also potentially useful in scarring or fibrosis of other organs such as lung and kidney which expands the possibilities for future therapeutic indications.
We have evaluated the ability of belapectin to block
galectin-3
in animal models of liver fibrosis, the conclusions of which yielded positive results. Our
pre-clinical
data show that belapectin may have a therapeutic effect on liver fibrosis as shown in several relevant animal models. Therefore, we chose belapectin as the lead candidate in a development program targeted initially at fibrotic liver disease associated with NASH.
We evaluated belapectin in
pre-clinical
toxicology and pharmacology studies during 2013, and filed an IND with the FDA in January 2013, for initiating human studies in patients with NASH. In February 2013, we entered into an agreement with CTI Clinical Trial Services to assist with the design, development and conduct of one or more clinical research studies, specifically for services with respect to our Phase 1 clinical trials to evaluate safety of belapectin in patients with NASH. The FDA notified us in March 2013 that we may proceed with a Phase 1 clinical trial for patients with NASH, and we began enrolling patients in the Phase 1 clinical trial in the third quarter of 2013. In August 2013, belapectin was granted Fast Track designation by the FDA for NASH with hepatic fibrosis, commonly known as fatty liver disease with advanced fibrosis. 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 June 30, 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) belapectin 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 in patients with advanced fibrosis, but not cirrhosis, 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 belapectin. 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, in addition to completion of further toxicology and drug-drug interaction studies provided a firm foundation for entry into a Phase 2 development program (described above). Top line results of our Phase 2b in compensated NASH cirrhosis patients was reported in December 2017 and is more fully described above as well in our SEC filings; the Phase 2b study results provide the foundation for our NAVIGATE trial which is underway.
Belapectin is a proprietary, patented galactoarabino-rhamnogalacturonan polysaccharide polymer that is comprised predominantly of galacturonic acid, galactose, arabinose, rhamnose, and smaller amounts of other sugars. Structural studies have shown that belapectin binds to
galectin-1
and to
galectin-3
with binding affinity to
galectin-3
being significantly greater than binding to
galectin-1.
With respect to belapectin, we currently have, as of December 31, 2020, 24 granted U.S. patents, and 81 foreign granted patents. These patents, which are more fully described below, include a composition of matter patent, and methods of use including manufacture, use patient in patients with NASH, in patients with liver fibrosis, and in patients with diabetic kidney disease. Additional patent applications are pending with respect to, amongst other uses, cancer immunotherapy, lung fibrotic disease, and inflammatory disease associated with increase in inducible nitric oxide synthase. Patents have also been granted with respect to liver fibrosis, NASH, and liver fibrosis in combination with other therapeutic agents.
 
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Galectin Inhibition in Cancer Therapy
We believe the potential exists for galectin inhibition to play an important role in cancer therapy. Galectin proteins, particularly
galectin-1
and
galectin-3,
have been shown to be highly expressed in the majority of cancers and have multiple roles in promoting cancer progression, including tumor cell invasion, metastasis, angiogenesis, and tumor evasion of the immune system.
The role of galectins in cancer immunotherapy can be understood through the “Galectin Effect”, a recent discovery of how tumors avoid the body’s own immune system, i.e., the tumors secrete galectin proteins that block the body’s efforts to fight tumors. Our current program to block the “Galectin Effect” is based on the research of Dr. Pierre van der Bruggen (of the Ludwig Institute of Cancer Research in Brussels, Belgium), demonstrating that
galectin-3,
which is produced by the vast majority of human cancers, binds to and blocks the actions of tumor-infiltrating
T-lymphocytes,
the major immune cell in the body’s defense against cancers. In addition, Dr. William L. Redmond of Providence Portland Medical Center’s Earl A. Chiles Research Institute (EACRI) has shown that our galectin inhibitors can enhance the anti-tumor immunogenic effect of other immunotherapies based on targeting lymphocyte checkpoints such as CTLA4. Based on these results, we believe that the body’s immune cells may be unable to attack and kill tumor cells in the presence of galectins. Using this approach, the mechanism of action for our drugs seeks to block galectins and, in turn, restore the ability of the
T-lymphocytes
to kill tumor cells.
The preclinical study found that belapectin increased tumor shrinkage and enhanced survival in immune competent mice with prostate or breast cancers when combined with one of the immune checkpoint inhibitors,
anti-CTLA-4
or
anti-PD-1.
These findings suggest a role for belapectin in cancer immunotherapy. These preclinical observations by Dr Redmond provided scientific rationale for proceeding and lead to the filing by Providence Portland Medical Center of an Investigator-sponsored IND to conduct a Phase 1B study to determine if belapectin enhances the probability of melanoma response with ipilimumab by inducing proliferation, activation and memory function of CD8+ T cells in human patients. The company has licensed the underlying invention from Providence Portland Medical Center. This study represents a novel approach for patients with metastatic melanoma. The IND was approved by FDA in February 2014. This study is being conducted under the sponsorship of Providence Portland Medical Center’s Earle A. Chiles Research Institute (EACRI) and is being supported by the Company.
The study employs a dose escalation of belapectin in conjunction with the standard therapeutic dose of ipilimumab in patients with advanced melanoma for whom ipilimumab would be considered standard of care. In addition to monitoring for toxicity and clinical response by irRECIST criteria on imaging tests, blood samples will be obtained to assess immunologic measures relevant to galectin biology and ipilimumab
T-cell
check-point inhibition. Galectin Therapeutics is providing its proprietary compound belapectin to EACRI researchers, as well as supplying researchers with supporting analysis of the pharmacokinetics of belapectin and the right to reference the Company’s open IND on belapectin. To date the first two dosing groups have been completed without serious adverse events that were determined to be related to belapectin. The third dosing group is no longer enrolling due to the availability of newer agents such as the
anti-PD1
agents.
Similar to the agreement set forth for the ipilimumab (Yervoy
®
) Phase 1B study, Providence Portland Medical Center submitted an IND in September 2015 to conduct a Phase 1B study of belapectin and pembrolizumab (Keytruda
®
) in patients with metastatic melanoma. The combination of belapectin and an
anti-PD1
(pembrolizumab) has been shown to enhance
T-cell
activation, memory, and effector function, and promote better antitumor responses in multiple mouse studies. The study will test the hypothesis that
galectin-3
antagonism using belapectin with enhance the probability of melanoma response using pembrolizumab in patients by inducing proliferation, activation and memory function of CD8+ T cells that recognize melanoma antigens. Similar to the ipilimumab study, the study employs a dose escalation of belapectin in conjunction with the standard therapeutic dose of pembrolizumab in patients with metastatic melanoma who have had progression of their melanoma after ipilimumab and/or BRAF targeted therapy when a BRAF mutation is present. In addition to monitoring for toxicity and clinical response, blood and tumor samples will be obtained to assess immunologic measures relevant to galectin biology and pembrolizumab
T-cell
checkpoint inhibition. Top line results of the combination of the 3 dosing cohorts was reported in September 2018 and is more fully described above as well in our SEC filings and press releases. These data, taken together with the observed favorable safety and tolerability of the combination, in the view of the principal investigator, provide compelling rationale to move forward. Given that all three melanoma patients were responders at the 4 mg/kg LBM dose, the investigators continued the trial with the expansion of the 4 mg/kg LBM cohort to include additional advanced melanoma patients and additional head and neck cancer patients. The expansion cohort has been enrolled and further information will be reported as it becomes available. Assuming these additional data are positive, the feasibility of a multicenter Phase 2 study will be evaluated. Further details on the study is available at
www.clinicaltrials.gov
(NCT02575404)
Patents and Proprietary Rights
Our development and commercial viability, and ultimately our competitiveness, depend on our ability to develop and maintain the proprietary aspects of our technology and operate without infringing on the proprietary rights of others. We rely on a combination of patent, trademark, trade secret and copyright law and contract restrictions to protect the proprietary aspects of our technologies. We seek to limit disclosure of our intellectual property by requiring employees, consultants, and any third parties with access to our proprietary information to execute confidentiality agreements and by restricting access to that information.
 
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In August 2015, we received a notice of allowance from the U.S. Patent and Trademark Office for patent application number 13/726,900, titled “Galactose-pronged polysaccharides in a formulation for antifibrotic therapies.” This patent extends coverage of the Company’s pectin-derived compounds (including broad molecular weight ranges and other sources of pectin) to include treatment of chronic kidney disease associated with the development of fibrosis, established kidney fibrosis, chronic lung disease associated with the development of fibrosis and established lung fibrosis. Claims in this patent include administering pectin-derived compound parenterally to a patient having at least one of the four aforementioned diseases where the established fibrosis or progression of the fibrosis or cirrhosis is inhibited or slowed down. Additional specific claims encompass deriving the compound from citrus pectin, apple pectin, soybean hull pectin or sugar beet pectin with a molecular weight between 2 kDa and 400kDa. Also covered is the step of administering the modified galacto-rhamnogalacturonan compound in an admixture with a therapeutic agent, where the agent is an antifibrotic compound.
In August 2014, we received a notice of allowance from the U.S. Patent and Trademark Office for patent application number 13/573,442 titled “Composition of Novel Carbohydrate Drug for Treatment of Human Diseases.” The patent covers composition and chemical structural claims for compounds that includes the Company’s lead galectin inhibitor compound belapectin and will expire in December 2031. Claims include multiple routes of administration, including intravenous, subcutaneous and oral. The application also covers therapeutic formulations for use in the treatment of NASH (fatty liver disease), cancer and fibrotic, inflammatory and autoimmune disorders in which galectin proteins are involved, at least in part, in the pathogenesis. Additional specific claims encompass liver fibrosis, kidney fibrosis, lung fibrosis or heart fibrosis. The patent, assigned U.S. Patent No. 8,871,925, was issued October 28, 2014.
In May 2014, we received notice of allowance from the U.S. Patent and Trademark Office for patent application number 13/998,197 titled “Galactose-Pronged Carbohydrate Compounds for the Treatment of Diabetic Nephropathy and Associated Disorders.” The patent covers both composition claim for and uses of the Company’s carbohydrate-based galectin inhibitor compound belapectin in patients with diabetic nephropathy, a type of progressive kidney disease that occurs in individuals with diabetes. Diabetic nephropathy is the major cause for chronic renal failure in the United States. The patent, assigned U.S. Patent No. 8,828,971, was issued September 9, 2014.
In February 2014, we received notice of issuance that the U.S. Patent and Trademark Office issued patent number 8,658,787 to the Company for its application titled “Galacto-rhamnogalacturonate compositions for the treatment of
non-alcoholic
steatohepatitis and
non-alcoholic
fatty liver disease.” The patent covers the Company’s carbohydrate-based galectin inhibitor compound belapectin for use in patients with fatty liver disease with or without fibrosis or cirrhosis, providing patent protection through 2031. The major claims are for methods of obtaining galectin inhibitor compounds, obtaining a composition for parenteral or enteral administration in an acceptable pharmaceutical carrier and administering to a subject having at least one of the following: fatty liver,
non-alcoholic
fatty liver disease,
non-alcoholic
steatohepatitis,
non-alcoholic
hepatitis with liver fibrosis,
non-alcoholic
steatohepatitis with cirrhosis, or
non-alcoholic
steatohepatitis with cirrhosis and hepatocellular carcinoma. The use covers reversing or slowing the progression of disease activity or medical consequences of the disease. Applications are pending in multiple countries to extend patent protection globally.
In January 2014, we received a notice of allowance from the U.S. Patent and Trademark Office for Patent Application Number 13/550,962 titled “Galactose-Pronged Polysaccharides in a Formulation for Anti-fibrotic Therapies.” The patent covers both composition claim for and uses of the Company’s carbohydrate-based galectin inhibitor compound belapectin for use in patients with liver fibrosis in combination with other potential therapeutic agents. The patent covers use of belapectin with agents directed at multiple targets, some of which are currently in clinical development for fibrotic disorders including monoclonal antibodies to connective tissue growth factor, integrins, and
TGF-ß1.
The patent, assigned U.S. Patent No. 8,722,645, was issued May 13, 2014.
In July 2012, we received a notice of issuance from the U.S. Patent and Trademark Office for the U.S. Patent number 8,236,780 issued on August 7, 2013 titled “Galactose-prolonged polysaccharides in a formulation for antifibrotic therapies”. This methods patent covers key methods of derivation and use for our carbohydrate-based galectin inhibitor compound for use in patients with chronic liver disease associated with the development of fibrosis, established liver fibrosis or
end-stage
scarring, or cirrhosis. The major claim is for a method of obtaining a galacto-rhamnogalacturan compound from an apple pectin, obtaining a composition for parenteral administration the galacto-rhamnogalacturonan compound in an acceptable pharmaceutical carrier and administering to a subject having at least one of the following: chronic liver disease associated with the development of fibrosis, established liver fibrosis or cirrhosis. The use covers inhibiting or slowing the progression of fibrosis. belapectin is covered by this patent and it provides opportunities for development of additional compounds in the class.
 
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As of December 31, 2020, Galectin Therapeutics Inc. held 24 granted U.S. patents, 81 foreign granted, 6 Foreign patent applications allowed, 7 Foreign patent applications pending, and 2 U.S. patent applications pending. Many of our patents and patent applications cover composition of matter for complex carbohydrate drugs and/or methods of use for reducing toxicity and enhancing chemotherapeutic drugs by
co-administering
a polysaccharide with a chemotherapeutic agent or for use in treatment of fibrosis. The scheduled expiration dates of our United States patents span out to 2034 before considering any potential extensions. We have corresponding patent applications pending in various territories where we see potential for commercial interest. Additionally, we have patent applications in other areas to utilize our carbohydrate-based compounds to treat disease other than cancer. See “Risk Factors — Risks Related to Our Intellectual Property”. Our competitive position, in part, is contingent upon protection of our intellectual property. Galectin Sciences LLC has 1 granted international patent, 1 international patent allowed, 5 US patent application pending, and 46 foreign applications pending.
Research
Our primary focus is on the design and testing of agents that target galectins in various
in vitro
and
in vivo
systems and that demonstrate efficacy in treatment of experimentally induced fibrosis or enhance immune system responsiveness in various tissues and in live animal models. We contract with independent laboratories and other facilities to conduct our research, which is designed, evaluated and managed by our scientists. While we conduct in house research related to our compounds at SBH laboratories in Massachusetts, we do not anticipate building additional
in-house
research or development facilities or hiring significantly additional staff other than for purposes of designing and managing our
out-sourced
research and development activities.
As we develop products eligible for clinical trials, we contract with independent parties to assist in the design of the clinical trial protocols, arrange for and monitor the clinical trials, collect data and analyze data. In addition, certain clinical trials for our products may be conducted by government-sponsored agencies and will be dependent on governmental participation and funding. Our dependence on independent parties and clinical sites involves risks including reduced control over the timing and other aspects of our clinical trials.
In September 2014, the Company established a collaborative research program with Dr. William Redmond’s laboratory located at the Providence Portland Medical Center, Portland, Oregon. This program focuses on combination immunotherapy plus galectin inhibition to augment tumor immunogenicity.
During the years ended December 31, 2020 and 2019, our expenditures for research and development were $18.0 million and $7.5 million, respectively. We expense all research and development costs as they are incurred.
In January 2014 we created, with SBH Sciences, Inc. (Natick, Ma), Galectin Sciences, LLC, a collaborative joint venture to research and develop small organic molecule inhibitors of
galectin-3
for oral administration.
Using computer molecular modeling techniques coupled with
in vitro
screening of a variety of compound libraries, SBH Sciences had identified several small organic molecules with promising
galectin-3
inhibitory activity
in vitro
. Galectin Sciences LLC will further develop these unique organic molecule inhibitors of
galectin-3
as drug candidates as well as develop additional candidates. Subject to availability of funding, Galectin Sciences LLC will build on the scientific body of knowledge amassed by SBH Sciences, coupled with Galectin Therapeutics’ knowledge and expertise of galectins’ pathological role and mechanism of action in inflammation, fibrosis and many cancers. The long-term goal of this effort is to identify and develop drug candidates that are highly specific galectin inhibitors which may be formulated for oral administration. The intermediate term goal is the development of small molecule inhibitors of
galectin-3
which exhibit activity in
in vivo
preclinical disease models of fibrosis and cancer in which galectins play a key role. Several patent applications have been filed to protect the various series of compounds discovered by these efforts.
Because increased levels of galectin proteins have been implicated in a very large number of inflammatory, fibrotic and neoplastic diseases; the discovery and development of orally active galectin inhibitors would be a major step towards expanded treatment approaches for these disorders. This early drug discovery effort may lead to drugs that would expand our pipeline as
follow-on
compounds to our first in class galectin inhibitors, belapectin and
GM-CT-01.
These efforts have identified several potential compounds which are continuing to be explored to identify lead molecules that may be identified for clinical development.
Manufacturing and Marketing
We are a development stage Company at this time and do not intend to establish internal facilities for the manufacture of our products for clinical or commercial production. To have our products manufactured, we have developed and will continue to develop relationships with third-parties that have established pharmaceutical manufacturing capabilities and expertise. We are not a party to any long-term agreement with any of our suppliers and, accordingly, we have our products manufactured on a purchase-order basis from one of two primary well-known and established pharmaceutical suppliers that meet FDA requirements. Additionally, belapectin is manufactured as a sterile liquid formulation. We have experienced, and may experience in the future, certain delays related to
COVID-19
related supply issues with certain components necessary to manufacture belapectin.
 
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Because our products are in the development stage, we have not created a sales and marketing staff to commercialize pharmaceutical products. If we develop products eligible for commercial sale, we will need to develop a sales and marketing capability or rely on third parties such as licensees, collaborators, joint venture partners or independent distributors to market and sell those products. Our dependence on third-party manufacturers, analytical testing and other laboratories and marketers will involve risks relating to our reduced control, and other risks including those discussed in “Risk Factors — Risks Related to our Company — There are risks associated with reliance on our third parties for manufacturing, marketing, sales, managed care and distribution infrastructure channels.”
Competition
Many biotechnology and pharmaceutical companies are developing new technologies for the treatment of cancer, fibrotic diseases and other diseases. Technologies such as monoclonal antibodies could be competitive with our galectin therapeutic platforms. Other companies are trying to improve the therapeutic profile of widely used protein-based drugs. While these companies may broaden the market for our products they may also provide competitive alternatives to our products. We expect increased competition in the area of galectins will be fueled by a nearly exponential increase in the publication rate of research papers on galectins.
See “Risk Factors — Risks Related to Our Company — We face intense competition in the biotechnology and pharmaceutical industries” for additional discussion related to our current and potential competition.
Government Regulation
The research, development, testing, manufacture, labeling, promotion, advertising, distribution, and marketing, among other things, of our products are extensively regulated by governmental authorities in the United States and other countries. The FDA regulates drugs under the federal Food, Drug, and Cosmetic Act and its implementing regulations. Failure to comply with the applicable U.S. requirements may subject us to administrative or judicial sanctions, such as FDA refusal to approve pending New Drug Applications (“NDAs”), warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, and/or criminal prosecution.
Drug Approval Process
Drugs may not be marketed in the U.S. until the FDA has approved them. The steps required before a drug may be marketed in the U.S. include:
 
  1.
Pre-clinical
laboratory tests, animal studies, and formulation studies,
 
  2.
Submission to the FDA of an IND for human clinical testing, which must become effective before human clinical trials may begin,
 
  3.
Adequate and well-controlled human clinical trials to establish the safety and efficacy of the drug for each indication,
 
  4.
Submission to the FDA of a NDA,
 
  5.
Satisfactory completion of an FDA inspection of the manufacturing facility or facilities, at which the drug is produced to assess compliance with current good manufacturing procedures (“cGMP”) established by the FDA,
 
  6.
FDA review and approval of the NDA, and
 
  7.
FDA review and approval of a trademark used in connection with a pharmaceutical.
Pre-clinical
tests include laboratory evaluation of product chemistry, toxicity, and formulation, as well as numerous in vitro and in vivo animal studies. The results of the
pre-clinical
tests, together with manufacturing information and analytical data, are submitted to the FDA as part of an IND, which must become effective before human clinical trials may begin and the Company must resolve any outstanding FDA concerns or questions before clinical trials can proceed. There is no certainty that submission of an IND will result in the FDA allowing clinical trials to begin.
Clinical trials involve the administration of the investigational drug to human subjects under the supervision of qualified investigators and constant oversight by the FDA or foreign regulatory authorities. Clinical trials are conducted under protocols detailing the objectives of the study, the parameters to be used in monitoring safety, and the effectiveness criteria to be evaluated. Each protocol must be submitted to the FDA as part of the IND.
 
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Clinical trials typically are conducted in three sequential phases, but the phases may overlap or be combined. Each trial must be reviewed and approved by an independent Institutional Review Board (“IRB”), before it can begin. Study subjects must sign an informed consent form before participating in a clinical trial. Phase 1 usually involves the initial introduction of the investigational drug into patients to evaluate its safety, dosage tolerance, pharmacodynamics, and, if possible, to gain an early indication of its effectiveness. Phase 2 usually involves trials in a limited patient population to (i) evaluate dosage tolerance and appropriate dosage; (ii) identify possible adverse effects and safety risks; and (iii) evaluate preliminarily the efficacy of the drug for specific indications. Phase 3 trials usually further evaluate clinical efficacy and test further for safety by using the drug in its final form in an expanded patient population. There is no assurance that these trials will be completed within a specified period of time, if at all.
Assuming successful completion of the required clinical testing, the results of the
pre-clinical
studies and of the clinical studies, together with other detailed information, including information on the manufacture and composition of the drug, are submitted to the FDA in an NDA requesting approval to market the product for one or more indications. Before approving an NDA, the FDA usually will inspect the facilities at which the drug is manufactured and will not approve the product unless compliance with cGMP is satisfactory. If the FDA evaluates the NDA and the manufacturing facilities as acceptable, the FDA will generally issue an approval letter. If the FDA evaluates the NDA submission or the manufacturing facilities as not acceptable, the FDA will generally outline the deficiencies in the submission and often will request additional testing or information. Even if an applicant submits the requested additional information, the FDA ultimately may decide that the NDA does not satisfy the regulatory criteria for approval. The testing and approval process require substantial time, effort, and financial resources, and there is no assurance that any approval will be granted on a timely basis, if at all. After approval, certain changes to the approved product, such as adding new indications, manufacturing changes, or additional labeling claims are subject to further FDA review and approval.
See “Risk Factors — Risks Related to the Regulation of Our Products — We will need regulatory approvals to commercialize our products” for additional discussion of regulatory risks related to our drug development program.
FDA Priority Review
FDA procedures provide for priority review of an NDA submitted for drugs that, compared to currently marketed products, offer a significant improvement in the treatment, diagnosis, or prevention of a disease. NDAs that are granted priority review are acted upon more quickly than NDAs given standard review. If we were to seek priority review, there can be no guarantee that the FDA will grant priority review status, that priority review status will affect the time of review, or that the FDA will approve the NDA submitted for any of our product candidates, whether or not priority review status is granted.
Post-Approval Requirements
If FDA approval of one or more of our products is obtained, we will be required to comply with a number of post-approval requirements. For example, holders of an approved NDA are required to report certain adverse reactions to the FDA and to comply with certain requirements concerning advertising and promotional labeling for their products. Also, quality control and manufacturing procedures must continue to conform to current Good Manufacturing Practices (“cGMP”) after approval, and the FDA periodically inspects manufacturing facilities to assess compliance with cGMP. Accordingly, manufacturers must continue to expend time, money, and effort in the area of production and quality control to maintain cGMP compliance. In addition, discovery of problems with a product after approval may result in restrictions on a product, manufacturer, or holder of an approved NDA, including withdrawal of the product from the market. Also, new government requirements may be established that could delay or prevent regulatory approval of our products under development.
Regulation Outside the United States
Before our products can be marketed outside of the United States, they are subject to regulatory approval similar to that required in the United States, although the requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary widely from country to country. No action can be taken to market any product in a country until an appropriate application has been approved by the regulatory authorities in that country. The current approval process varies from country to country, and the time spent in gaining approval varies from that required for FDA approval. In certain countries, the sales price of a product must also be approved. The pricing review period often begins after market approval is granted. No assurance can be given that even if a product is approved by a regulatory authority, satisfactory prices will be approved for such product.
Environmental Regulation
Pharmaceutical research and development involves the controlled use of hazardous materials. Biotechnology and pharmaceutical companies must comply with laws and regulations governing the use, generation, manufacture, storage, air emission, effluent discharge, handling and disposal of certain materials, biological specimens and wastes. We do not anticipate building
in-house
research, development or manufacturing facilities, and, accordingly, do not expect to have to comply directly with environmental regulation. However, our contractors and others conducting research, development or manufacturing activities for us may be required to incur significant compliance cost, and this could in turn could increase our expense or delay our completion of research or manufacturing programs.
 
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Employees
As of February 28, 2021, we currently have six full-time employees, three of whom are involved primarily in management of our
pre-clinical
research and development and clinical trials and three who were involved primarily in management and administration of our Company. As previously announced, Dr. Pol F. Boudes, MD joined us as Chief Medical Officer on March 2, 2020. We also utilize several contractors and consultants who provide product development, manufacture, analytical testing, clinical trial expertise, and clinical trial support.
Available Information
The Company is required to file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission (“SEC”), including Annual Reports on Form
10-K,
Quarterly Reports on Form
10-Q,
Current Reports on Form
8-K
and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov. The Company’s website is www.galectintherapeutics.com. The information contained on, or hyperlinked from, our website or any other websites is not a part of, nor is it incorporated by reference into, this Annual Report on Form
10-K.
 
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Item 1A.    
Risk
Factors
An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below and the other information before deciding to invest in our common stock. The risks described below are not the only ones facing our Company. Additional risks not presently known to us or that we currently consider immaterial may also adversely affect our business. We have attempted to identify below the major factors that could cause differences between actual and planned or expected results, but we cannot assure you that we have identified all of those factors.
If any of the following risks actually happen, our business, financial condition and operating results could be materially adversely affected. In this case, the trading price of our common stock could decline, and you could lose all or part of your investment.
Risks Related to Our Company
We have incurred net losses to date and must raise additional capital in order to continue to operate.
We have incurred net losses in each year of operation since our inception in July 2000 and have no revenues. Our accumulated deficit as of December 31, 2020 was $240 million. We had $27.1 million of unrestricted cash as of December 31, 2020. In December 2018, the Company announced an extension of its, as yet untapped, $10 million unsecured line of credit facility with stockholder and director, Richard E. Uihlein. The Company believes there is sufficient cash, including availability of the line of credit, to fund currently planned operations at least through March 31, 2022. We will require more cash to fund our operations after March 31, 2022 and believe we will be able to obtain additional financing. However, there can be no assurance that we will be successful in obtaining such new financing or, if available, that such financing will be on terms favorable to us.
We may raise capital through public or private equity financings, partnerships, debt financings, bank borrowings, or other sources. Additional funding may not be available on favorable terms or at all. Our most recent significant financing, a rights offering closing in 2019 in which the Company raised $44.9 million, was led by our Chairman, Richard E. Uihlein, who invested $20 million in the offering. Concurrent with the rights offering, Mr. Uihlein exercised 500,000 common stock warrants for cash proceeds to the Company of $2.5 million. Though his investments in the Company and the line of credit that he extended to the Company, Mr. Uihlein has been a critical source of funding. There is no assurance as to the level of future investments to be made in the Company by Mr. Uihlein. If adequate funds are not otherwise available, we may need to significantly curtail operations. To obtain additional funding, we may need to enter into arrangements that require us to relinquish rights to certain technologies, products and/or potential markets. To the extent that additional capital is raised through the sale of equity, or securities convertible into equity, our equity holders may experience dilution of their proportionate ownership of the Company.
We are a development stage company and have not yet generated any revenue.
We are a development stage company and have not generated any revenues to date. There is no assurance that we will obtain FDA approval of belapectin or other products that we may develop, and, even if we do so, that we will generate revenue sufficient to become profitable. Our failure to generate revenue and profit would likely lead to loss of your investment.
Our ability to generate revenue from product sales and achieve profitability will depend upon our ability to successfully commercialize products, including our lead product candidate, or other product candidates that we may
in-license
or acquire in the future. Even if we are able to successfully achieve regulatory approval for these product candidates, we do not know when any of these products will generate revenue from product sales for us, if at all. Our ability to generate revenue from product sales from our current or future product candidates also depends on a number of additional factors, including our ability to:
 
   
successfully complete development activities, including the necessary clinical trials;
 
   
complete and submit new drug applications, or NDAs, to the U.S. Food and Drug Administration, or FDA, and obtain regulatory approval for indications for which there is a commercial market;
 
   
complete and submit applications to, and obtain regulatory approval from, foreign regulatory authorities;
 
   
successfully complete all required regulatory agency inspections;
 
   
set a commercially viable price for our products;
 
   
obtain commercial quantities of our products at acceptable cost levels;
 
   
find suitable distribution partners to help us market, sell and distribute our approved products in other markets; and
 
   
obtain coverage and adequate reimbursement from third parties, including government and private payers.
 
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In addition, because of the numerous risks and uncertainties associated with product development, including that our product candidates may not advance through development or achieve the endpoints of applicable clinical trials, we are unable to predict the timing or amount of increased expenses, or when or if we will be able to achieve or maintain profitability. Even if we are able to complete the development and regulatory process for any product candidates, we anticipate incurring significant costs associated with commercializing these products.
If we are unable to generate revenues from the sale of our products, we may not become profitable and may need to obtain additional funding to continue operations. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce our operations.
We are dependent on the success of our lead product candidate, belapectin, and we cannot be certain that these product candidates will receive regulatory approval or be successfully commercialized.
We currently have no products for sale, and we cannot guarantee that we will ever have any drug products approved for sale. We and our product candidates are subject to extensive regulation by the FDA and comparable regulatory authorities in other countries governing, among other things, research, testing, clinical trials, manufacturing, labeling, promotion, selling, adverse event reporting and recordkeeping. We are not permitted to market any of our product candidates in or outside the United States until we receive approval of a new drug application for a product candidate from the FDA or the equivalent approval from a foreign regulatory authority. Obtaining FDA approval is a lengthy, expensive and uncertain process.
Before obtaining regulatory approval for the sale of any drug candidate, we must conduct extensive
pre-clinical
studies and clinical trials to demonstrate the safety and efficacy of our product candidates in humans.
To obtain FDA approval, we will need to conduct one or more Phase 3 clinical trial for belapectin; however, we cannot assure you that we will be able to finance Phase 3 trials. Additionally, we cannot assure you that future our trials will yield successful results, that they will lead to the generation of revenue, or that we will obtain regulatory approval in other countries.
Pre-clinical
studies and clinical trials are expensive, time-consuming and ultimately may not be successful. The results of
pre-clinical
and initial clinical testing of these products may not necessarily indicate the results that will be obtained from later or more extensive testing. Also, it is possible to suffer significant setbacks in advanced clinical trials, even after obtaining promising results in earlier trials. For example, although there was positive data from our
NASH-CX
Phase 2 trial for belapectin it did not meet its primary endpoint. Similarly, our Phase 2a pilot trial
NASH-FX
for patients with advanced fibrosis, which explored three
non-invasive
imaging technologies, did not meet its primary endpoint. We may engage others to conduct our clinical trials, including clinical research organizations and, possibly, government-sponsored agencies. Additional clinical trials may not start or be completed as we forecast and may not achieve the desired results. The time required to obtain FDA and other approvals is unpredictable but often can take years following the commencement of clinical trials, depending upon the complexity of the drug candidate.
Difficulty and delays in enrolling patients and registering sites for conducting clinical trials may prevent or delay product development and strain our limited financial resources.
Other life sciences companies also conducting clinical trials in patients with the disease indications that our product candidates target. As a result, we must compete with them for clinical sites, physicians and the limited number of patients who fulfill the stringent requirements for participation in clinical trials. Also, due to the confidential nature of clinical trials, we do not know how many of the eligible patients may be enrolled in competing studies and who are consequently not available to us for our clinical trials.
In addition, our clinical trials have been affected by and may continue to be affected by the
COVID-19
pandemic. Clinical site initiation and patient enrollment as well as availability of certain required lab kits for our
non-COVID-19
product candidates have been and may continue to be delayed due to prioritization of hospital resources toward the
COVID-19
pandemic. Some patients have not been and others may not want or be able to comply with clinical trial protocols if quarantines impede patient movement or interrupt healthcare services. Similarly, any inability to recruit and retain patients and principal investigators and site staff who, as healthcare providers, may have heightened exposure to
COVID-19,
may adversely impact our clinical trial operations.
Patient enrollment depends on many factors, including the size of the patient population, the nature of the trial protocol, the proximity of patients to clinical sites, the eligibility criteria for the study and potential reduced enrollment due to the
COVID-19
pandemic. The delay or inability to meet planned patient enrollment may result in increased costs and delays or termination of the trial, which could have a harmful effect on our ability to develop products
 
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Even if we receive regulatory approval, we may be unable to commercialize our product candidates.
Even if belapectin and other future product candidates achieve positive results in clinical trials, we may be unable to commercialize them. The availability of government and third-party payer reimbursement, and pricing, especially compared to competitor products, could affect our ability to commercialize our product candidates. Our general inability to obtain necessary regulatory approvals and, if obtained, to commercialize our products would substantially impair our viability.
There are risks associated with our reliance on third parties to design trial protocols, arrange for and monitor the clinical trials, and collect and analyze data.
As we develop products eligible for clinical trials, we will contract with independent parties to assist us in the design of the trial protocols, arrange for and monitor the clinical trials, provide lab kits, collect data and analyze data and samples. In addition, certain clinical trials for our products may be conducted by government-sponsored agencies and will be dependent on governmental participation and funding. We have contracted with a third party, Covance, for assistance with the design and conduct of our NAVIGATE trial.
Our dependence on independent parties and clinical sites involves risks including reduced control over the timing and other aspects of our clinical trials.
There are risks associated with our reliance on third parties for manufacturing belapectin.
We do not have, and do not now intend to develop, facilities for the manufacture of any of our products, including belapectin, for clinical or commercial production. At this time, we are not a party to any long-term agreement with any of our suppliers, and accordingly, we have our products manufactured on a purchase-order basis from one of two primary suppliers. We are developing relationships with manufacturers and will enter into collaborative arrangements with licensees or have others manufacture our products on a contract basis. We expect to depend on such collaborators to supply us with products manufactured in compliance with standards imposed by the FDA and foreign regulators.
We are exposed to
pre-clinical
and clinical liability risks which could place a financial burden upon us, should we be sued, because we do not currently have product liability insurance beyond our general insurance coverage.
Our business exposes us to potential
pre-clinical,
clinical liability and other liability risks that are inherent in the testing pharmaceutical formulations and products; accordingly, claims may be asserted against us. In addition, the use in our clinical trials of pharmaceutical formulations and products that our potential collaborators may develop and the subsequent sale of such formulations or products by us or our potential collaborators may cause us to assume a portion of or all of the product liability risks. A successful liability claim or series of claims brought against us could have a material adverse effect on our business, financial condition and results of operations. Because we do not currently have any
FDA-approved
products or formulations, we do not currently have any product liability insurance covering commercialized products. Our current and potential partners with whom we have collaborative agreements or our future licensees may not be willing to indemnify us against these types of liabilities and may not, themselves, be sufficiently insured or have sufficient liquidity to satisfy any product liability claims. Claims or losses in excess of any insurance coverage that may be obtained by us could have a material adverse effect on our business, financial condition and results of operations.
We face intense competition in the biotechnology and pharmaceutical industries.
The biotechnology and pharmaceutical industries are intensely competitive. We face direct competition from U.S. and foreign companies focusing on pharmaceutical products, which are rapidly evolving. Our competitors include major multinational pharmaceutical and chemical companies, specialized biotechnology firms and universities and other research institutions. Many of these competitors possess greater financial and other resources, larger research and development staffs and more effective marketing and manufacturing organizations than we possess. In addition, academic and government institutions are increasingly likely to enter into exclusive licensing agreements with commercial enterprises, including our competitors, to market commercial products based on technology developed at such institutions. Our competitors may succeed in developing or licensing technologies and products that are more effective or succeed in obtaining FDA or other regulatory approvals for product candidates before we do. Acquisitions of, or investments in, competing pharmaceutical or biotechnology companies by large corporations could increase such competitors’ financial, marketing, manufacturing and other resources.
 
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The market for our proposed products is rapidly changing and competitive, and new drugs and new treatments that may be developed by others could impair our ability to maintain and grow our business and remain competitive.
The pharmaceutical and biotechnology industries are subject to rapid and substantial technological change. Developments by others may render our proposed products noncompetitive or obsolete, or we may be unable to keep pace with technological developments or other market factors. Technological competition from pharmaceutical and biotechnology companies, universities, governmental entities and others diversifying into the field is intense and is expected to increase. Our resources are limited and we may experience technical challenges inherent in such technologies. Our competitors may develop drugs that are safer, more effective and less costly than our proposed products and, therefore, present a serious competitive threat to us.
The potential widespread acceptance of therapies that are alternatives to ours may limit market acceptance of our proposed products, even if commercialized. Some of our targeted diseases and conditions may also be treated by other medications. These treatments may be widely accepted in medical communities and have a longer history of use. The established use of these competitive drugs may limit the potential for our technologies, formulations and products to receive widespread acceptance even if commercialized.
Our lack of operating experience may cause us difficulty in managing our growth.
We have limited experience in manufacturing or procuring products in commercial quantities, conducting other later-stage phases of the regulatory approval process, selling pharmaceutical products, and negotiating, establishing and maintaining strategic relationships. Although we may engage consultants to assist us, any additional growth may require us to expand our management, operational and financial systems and controls. If we are unable to do so, our business and financial condition would be materially harmed. If rapid growth occurs, it may strain our managerial, operational and financial resources.
We depend on key individuals to develop our products and core technologies and pursue collaborative relationships.
We are highly dependent on our current base of a few employees and external hepatology consultants. These individuals, among other things, design and lead our
pre-clinical
and clinical studies, as well as our U.S. and European regulatory processes. With little or no redundancy in our personnel, the loss of any personnel or failure to attract or retain other key personnel and consultants could result in a loss of experience and accumulated knowledge and prevent us from developing our products and core technologies and pursuing collaborative relationships.
We may fail to comply with our reporting and other requirements under federal securities laws.
As a publicly traded company, we are subject to the reporting requirements of the Exchange Act. The Exchange Act requires that we file annual, quarterly and current reports. Our failure to prepare and disclose this information in a timely manner could subject us to penalties under federal securities laws, expose us to lawsuits and restrict our ability to access financing. We may be required to implement additional and expensive finance and accounting systems, procedures and controls as we grow our business and organization to satisfy new reporting requirements, which will increase our costs and require additional management resources.
Our long-term success is dependent not only upon the success of our trials but also upon us being able to capitalize upon potential positive results of our trials, which is not assured.
To conduct Phase 3 clinical trials or other clinical trials we will need sufficient cash resources to conduct those undertakings. We will also need to obtain sufficient dosages of belapectin for such trials. Manufacturing of belapectin is performed by third parties on a contract basis and production is ongoing to generate what we believe are sufficient quantities of belapectin for our NAVIGATE or other clinical trials. Manufacturing could become delayed due to circumstances beyond our control which could delay any clinical trials. Further because of limited resources, we have curtailed most of our expenditures in research focused on the development of an oral galectin inhibitor to replace our current drug candidate that is delivered via infusion.
We have previously been a defendant in a shareholder derivative action, and any possible future such lawsuits may adversely affect our business, financial condition, results of operations and cash flows.
We and certain of our officers and directors have previously been defendants in a state court shareholder derivative action that concluded in our favor. In addition, there is the potential for other future shareholder litigation and for governmental investigations and/or enforcement actions. Similar lawsuits in the future may divert our attention from our ordinary business operations, and we may incur significant expenses associated with their defense (including, without limitation, substantial attorneys’ fees and other fees of professional advisors and potential obligations to indemnify current and former officers and directors who are or may become parties to such actions). If similar lawsuits do arise in the future, we may be required to pay material damages and fines, consent to injunctions on future conduct and/or suffer other penalties, remedies or sanctions. Accordingly, the ultimate resolution of these matters could have a material adverse effect on our business, results of operations, financial condition, liquidity and ability to meet any debt obligations and, consequently, could negatively impact the trading price of our common stock. Any existing or future shareholder lawsuits and any future governmental investigations and/or enforcement actions could adversely impact our reputation, our relationships with our customers and our ability to generate revenue.
 
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Risks Related to the Regulation of our Products
We will need regulatory approvals to commercialize our products.
We are required to obtain approval (i) from the FDA in order to sell our products in the U.S. and (ii) from foreign regulatory authorities in order to sell our products in other countries. The FDA’s review and approval process is lengthy, expensive and uncertain. Extensive
pre-clinical
and clinical data and supporting information must be submitted to the FDA for each indication for each product candidate in order to secure FDA approval. Before receiving FDA clearance to market our proposed products, we will have to demonstrate that our products are safe on the patient population and effective for the diseases that are to be treated. Clinical trials, manufacturing and marketing of drugs are subject to the rigorous testing and approval process of the FDA and equivalent foreign regulatory authorities. FDA may change, at any time, its requirements for approval of new drugs based on information and data received from others and ourselves potentially resulting in product approval delays or
non-approvals.
The Federal Food, Drug and Cosmetic Act and other federal, state and foreign statutes and regulations govern and influence the testing, manufacture, labeling, advertising, distribution and promotion of drugs and medical devices. As a result, regulatory approvals can take several years to acquire and may further require the expenditure of substantial financial, managerial and other resources. The FDA could reject an application or, in the alternative, require us to conduct additional clinical or other studies as part of the regulatory review process. Delays in obtaining or failure to obtain FDA approvals would delay or prevent the commercialization of our product candidates, which would prevent, defer or decrease our receipt of revenues. In addition, should we receive initial regulatory approval, our product candidates will be subject to extensive and rigorous ongoing domestic and foreign government regulation.
Even if we obtain regulatory approvals, our marketed drugs will be subject to ongoing regulatory review. If we fail to comply with ongoing regulatory requirements, we could lose our approvals to market drugs, in which case our business would be materially adversely affected.
Following regulatory approval in the United States of any drugs we may develop, we will remain subject to continuing regulatory review, including the review of adverse drug experiences and clinical results that are reported after our drug products are made available to patients. This would include results from any post marketing tests or vigilance required as a condition of approval. The manufacturer and manufacturing facilities we use to make any of our drug products will also be subject to periodic review and inspection by the FDA. The discovery of any new or previously unknown problems with the product, manufacturer or facility may result in restrictions on the drug, manufacturer or facility, including withdrawal of the drug from the market. We would continue to be subject to the FDA requirements governing the labeling, packaging, storage, advertising, promotion, recordkeeping, and submission of safety and other post-market information for all of our product candidates, even those that the FDA had approved. If we fail to comply with applicable continuing regulatory requirements, we may be subject to fines, suspension or withdrawal of regulatory approval, product recalls and seizures, operating restrictions and other adverse consequences.
The drug development process to obtain FDA approval is very costly and time consuming, and if we cannot complete our clinical trials in a cost-effective manner, our results of operations may be adversely affected.
Costs and timing of clinical trials may vary significantly over the life of a project owing to the following
non-exclusive
reasons:
 
   
the duration of the clinical trials;
 
   
the number of sites included in the trials;
 
   
the countries in which the trial is conducted;
 
   
the length of time required and ability to enroll eligible patients;
 
   
the number of patients that participate in the trials;
 
   
the number of doses that patients receive;
 
   
the
drop-out
or discontinuation rates of patients;
 
   
per patient trial costs;
 
   
third party contractors failing to comply with regulatory requirements or meet their contractual obligations to us in a timely manner;
 
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our drug product candidates having different chemical and pharmacological properties in humans than in lab testing;
 
   
the need to suspend or terminate our clinical trials;
 
   
insufficient or inadequate supply or quality of drug product candidates or other necessary materials to conduct our trials;
 
   
potential additional safety monitoring, or other conditions required by FDA or comparable foreign regulatory authorities regarding the scope or design of our clinical trials, or other studies requested by regulatory agencies;
 
   
problems engaging IRBs to oversee trials or in obtaining and maintaining IRB approval of studies;
 
   
the duration of patient
follow-up;
 
   
the efficacy and safety profile of the product candidate;
 
   
the costs and timing of obtaining regulatory approvals; and
 
   
the costs involved in enforcing or defending patent claims or other intellectual property rights.
Each of the above factors and other unanticipated factors beyond our control could prevent us from gaining approval for our drugs in a cost-effective and timely manner, which could have a material adverse impact on our business.
Data obtained from clinical trials are not necessarily predictive of future results, may be negative or inconclusive, and are susceptible to varying interpretations, which could delay, limit or prevent regulatory clearances.
Data already obtained, or in the future obtained, from
pre-clinical
studies and clinical trials do not necessarily predict the results that will be obtained from later
pre-clinical
studies and clinical trials. Moreover,
pre-clinical
and clinical data may be negative or inconclusive. In addition, data is susceptible to varying interpretations. Negative or inconclusive data, or data interpreted in various ways, could delay, limit or prevent regulatory approval. A number of companies in the pharmaceutical industry have suffered significant setbacks in advanced clinical trials, even after they obtained promising results in earlier trials. Despite the results reported in some of our earlier clinical trials for belapectin, our clinical trials may not demonstrate sufficient levels of safety and efficacy necessary to obtain the requisite regulatory approvals for our drugs, and thus, our proposed drugs may not be approved for marketing. If later-stage clinical trials do not produce favorable results, our ability to achieve regulatory approval for any of our product candidates may be adversely impacted. The failure to adequately demonstrate the safety and effectiveness of a proposed formulation or product under development could delay or prevent regulatory clearance of the potential drug. The resulting delays in commercialization could materially harm our business.
Our product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, limit the commercial profile of an approved label, or result in significant negative consequences following any marketing approval.
Undesirable side effects caused by our product candidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreign regulatory authority. Although we are not currently aware of any undesirable side effects caused by our product candidates, it is possible that they may be identified in the clinical trial process.
As a result of undesirable side effects or safety or toxicity issues that we may experience in our clinical trials, we may not receive approval to market any product candidates, which could prevent us from ever generating revenues or achieving profitability. Results of our trials could reveal an unacceptably high severity and prevalence of side effects. In such an event, our trials could be suspended or terminated, and the FDA or comparable foreign regulatory authorities could order us to cease further development or deny approval of our product candidates for any or all targeted indications. These side effects could affect patient recruitment or the ability of enrolled subjects to complete the trial or result in potential product liability claims.
Additionally, if any of our product candidates receives marketing approval, and we or others later identify undesirable side effects caused by such product, a number of potentially significant negative consequences could result, including:
 
   
we may be forced to suspend marketing of such product;
 
   
regulatory authorities may withdraw their approvals of such product;
 
   
regulatory authorities may require additional warnings on the label that could diminish the usage or otherwise limit the commercial success of such products;
 
   
we may be required to conduct post-market studies;
 
   
we could be sued and held liable for harm caused to subjects or patients; and
 
   
our reputation may suffer.
Any of these events could prevent us from achieving or maintaining market acceptance of the particular product candidate, if approved.

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Failure to obtain regulatory approval in international jurisdictions would prevent our product candidates from being marketed abroad.
In order to market and sell our products in the European Union and many other jurisdictions, we must obtain separate marketing approvals and comply with numerous and varying regulatory requirements. The approval procedure varies among countries and can involve additional testing. The time required to obtain approval may differ substantially from that required to obtain FDA approval. The regulatory approval process outside the United States generally includes all of the risks associated with obtaining FDA approval. In addition, in many countries outside the United States, it is required that the product be approved for reimbursement before the product can be approved for sale in that country. We may not obtain approvals from regulatory authorities outside the United States on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one regulatory authority outside the United States does not ensure approval by regulatory authorities in other countries or jurisdictions or by the FDA. We may not be able to file for marketing approvals and may not receive necessary approvals to commercialize our products in any market. If we are unable to obtain approval of any of our product candidates by regulatory authorities in the European Union or other countries, the commercial prospects of that product candidate may be significantly diminished, and our business prospects could decline.
Risks Related to Our Intellectual Property
Our competitive position is contingent upon the protection of our intellectual property.
Development and protection of our intellectual property are critical to our business. All of our intellectual property, patented or otherwise, has been invented and/or developed by employees or former employees of the Company. Our success depends, in part, on our ability to obtain patent protection for our products or processes in the U.S. and other countries, protect trade secrets and prevent others from infringing on our proprietary rights. We will only be able to protect our product candidates from unauthorized making, using, selling, offering to sell or importation by third parties to the extent that we have rights under valid and enforceable patents or trade secrets that cover these activities. If we do not adequately protect our intellectual property, competitors may be able to practice our technologies.
The patent positions of pharmaceutical and biotechnology companies can be highly uncertain and involve complex legal and factual questions for which important legal principles remain unresolved. No consistent policy regarding the breadth of claims allowed in biotechnology patents has emerged to date in the United States. The biotechnology patent situation outside the United States is even more uncertain. Changes in either the patent laws or in interpretations of patent laws in the United States and other countries may diminish the value of our intellectual property. Accordingly, we cannot predict the breadth of claims that may be allowed in our pending patent applications or enforced in our issued patents or in third-party patents.
The degree of future protection for our proprietary rights is uncertain because legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep our competitive advantage. For example:
 
   
others may be able to make compounds that are competitive with our product candidates but are not covered by the claims of our patents;
 
   
we might not have been the first to make the inventions covered by our pending patent applications;
 
   
we might not have been the first to file patent applications for these inventions;
 
   
it is possible that our pending patent applications will not result in issued patents;
 
   
we may not develop additional proprietary technologies that are patentable; or
 
   
the patents of others may have an adverse effect on our business.
We also may rely on trade secrets to protect our technology, especially where we do not believe patent protection is appropriate or obtainable. However, trade secrets are difficult to protect. Although we require our scientific and technical employees and consultants to enter into broad assignment of inventions agreements, and all of our employees, consultants and corporate partners with access to proprietary information to enter into confidentiality agreements, these agreements may not be honored. Enforcing a claim that a third party illegally obtained, and is using, our trade secrets is expensive and time consuming, and the outcome is unpredictable. In addition, courts outside the United States are sometimes less willing to protect trade secrets. Moreover, our competitors may independently develop equivalent knowledge, methods and
know-how.
 
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We may incur substantial costs as a result of litigation or other proceedings relating to patent and other intellectual property rights, and we may be unable to protect our rights to, or use of, our technology.
Some or all of our patent applications may not issue as patents, or the claims of any issued patents may not afford meaningful protection for our technologies or products. In addition, patents issued to us or our licensors, if any, may be challenged and subsequently narrowed, invalidated or circumvented. Patent litigation is widespread in the biotechnology industry and could harm our business. Litigation might be necessary to protect our patent position or to determine the scope and validity of third-party proprietary rights.
If we choose to go to court to stop someone else from using the inventions claimed in our patents, that individual or company would have the right to ask the court to rule that such patents are invalid and/or should not be enforced against that third party. These lawsuits are expensive, and we may not have the required resources to pursue such litigation or to protect our patent rights. In addition, there is a risk that the court will decide that these patents are not valid and that we do not have the right to stop the other party from using the inventions. There is also the risk that, even if the validity of these patents is upheld, the court will refuse to stop the other party on the ground that such other party’s activities do not infringe our rights in these patents.
Furthermore, a third party may claim that we are using inventions covered by the third party’s patent rights and may go to court to stop us from engaging in our normal operations and activities, including making or selling our product candidates. These lawsuits are costly and could affect our results of operations and divert the attention of managerial and technical personnel. There is a risk that a court would decide that we are infringing the third party’s patents and would order us to stop the activities covered by the patents. In addition, there is a risk that a court will order us to pay the other party treble damages for having violated the other party’s patents. The biotechnology industry has produced a proliferation of patents, and it is not always clear to industry participants, including us, which patents cover various types of products or methods of use. The coverage of patents is subject to interpretation by the courts, and the interpretation is not always uniform. If we are sued for patent infringement, we would need to demonstrate that our products or methods of use either do not infringe the claims of the relevant patent and/or that the patent claims are invalid, and we may not be able to do this. Proving invalidity in the U.S., in particular, is difficult since it requires a showing of clear and convincing evidence to overcome the presumption of validity enjoyed by issued patents.
Because some patent applications in the United States may be maintained in secrecy until the patents are issued, patent applications in the United States and many foreign jurisdictions are typically not published until eighteen months after filing, and publications in the scientific literature often lag behind actual discoveries, we cannot be certain that others have not filed patent applications for technology covered by our issued patents or our pending applications or that we were the first to invent the technology. Our competitors may have filed, and may in the future file, patent applications covering technology similar to ours. Any such patent application may have priority over our patent applications and could further require us to obtain rights to issued patents covering such technologies. If another party has filed a United States patent application on inventions similar to ours, we may have to participate in an interference or other proceeding in the PTO or a court to determine priority of invention in the United States. The costs of these proceedings could be substantial, and it is possible that such efforts would be unsuccessful, resulting in a loss of our United States patent position with respect to such inventions.
Some of our competitors may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources. In addition, any uncertainties resulting from the initiation and continuation of any litigation could have a material adverse effect on our ability to raise the funds necessary to continue our operations.
Obtaining and maintaining our patent protection depends upon compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for
non-compliance
with these requirements.
The PTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other provisions during the patent process. There are situations in which noncompliance can result in abandonment or lapse of a patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, competitors might be able to enter the market earlier than would otherwise have been the case.
Our failure to secure trademark registration could adversely affect our ability to market our product candidates and our business.
Our trademark applications in the United States, when filed, and any other jurisdictions where we may file may not be allowed for registration, and our registered trademarks may not be maintained or enforced. During trademark registration proceedings, we may
 
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receive rejections. Although we are given an opportunity to respond to those rejections, we may be unable to overcome such rejections. In addition, in the PTO and in comparable agencies in many foreign jurisdictions, third parties are given an opportunity to oppose pending trademark applications and to seek to cancel registered trademarks. Opposition or cancellation proceedings may be filed against our applications and/or registrations, and our applications and/or registrations may not survive such proceedings. Failure to secure such trademark registrations in the United States and in foreign jurisdictions could adversely affect our ability to market our product candidates and our business.
Confidentiality agreements with employees and others may not adequately prevent disclosure of our trade secrets and other proprietary information and may not adequately protect our intellectual property, which could impede our ability to compete.
Because we operate in the highly technical field of biotechnology and pharmaceutical development, we rely in part on trade secret protection in order to protect our proprietary trade secrets and unpatented
know-how.
However, trade secrets are difficult to protect, and we cannot be certain that others will not develop the same or similar technologies on their own. We have taken steps, including entering into confidentiality agreements with all of our employees, consultants and corporate partners to protect our trade secrets and unpatented
know-how.
These agreements generally require that the other party keep confidential and not disclose to third parties all confidential information developed by the party or made known to the party by us during the course of the party’s relationship with us. We also typically obtain agreements from these parties that provide that inventions conceived by the party in the course of rendering services to us will be our exclusive property. However, these agreements may not be honored and may not effectively assign intellectual property rights to us. Enforcing a claim that a party illegally obtained and is using our trade secrets or
know-how
is difficult, expensive and time consuming, and the outcome is unpredictable. In addition, courts outside the United States may be less willing to protect trade secrets or
know-how.
The failure to obtain or maintain trade secret protection could adversely affect our competitive position.
We may be subject to claims that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.
As is common in the biotechnology and pharmaceutical industry, we employ individuals who were previously employed at other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although no claims against us are currently pending, we may be subject to claims that these employees or we have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management.
Risks Related to Our Common Stock
The market price of our common stock may be volatile and adversely affected by several factors. This could subject us to securities class action litigation, and our stockholders could incur substantial losses.
The market price of our common stock could fluctuate significantly in response to various factors and events, including but not limited to:
 
   
the results of our
pre-clinical
studies and clinical trials, including interim results, as well as those of our competitors;
 
   
regulatory actions with respect to our products or our competitors’ products;
 
   
our ability to integrate operations, technology, products and services;
 
   
our ability to execute our business plan;
 
   
operating results below expectations;
 
   
our issuance of additional securities, including debt or equity or a combination thereof, which may be necessary to fund our operating expenses and the cost of our clinical trials;
 
   
announcements of technological innovations or new products by us or our competitors;
 
   
the success of competitive products;
 
   
loss of any strategic relationship;
 
   
industry developments, including, without limitation, changes in healthcare policies or practices or third-party reimbursement policies;
 
   
regulatory or legal developments in the United States and other countries;
 
   
the level of expenses related to any of our product candidates or clinical development programs;
 
   
disputes or other developments related to proprietary rights, including patents, litigation matters, and our ability to obtain patent protection for our technologies;
 
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economic and other external factors;
 
   
period-to-period
fluctuations in our financial results;
 
   
sales of our common stock by us, our insiders or our other stockholders;
 
   
whether an active trading market in our common stock develops and is maintained;
 
   
engagement and retention of senior management needed for our clinical trials;
 
   
novel and unforeseen market forces and trading strategies, such as the massive short squeeze rally caused by retail investors on companies such as Gamestop.
In addition, the market price for securities of pharmaceutical and biotechnology companies historically has been highly volatile, and the securities markets have from
time-to-time
experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These broad market fluctuations may cause the market price of our common stock to decline substantially.
In the past, securities class action litigation has often been brought against a company, including us, following a decline in the market price of its securities. This risk is especially relevant for us because biotechnology and biopharmaceutical companies have experienced significant stock price volatility in recent years. As described above, we have recently defended a consolidated federal securities class action lawsuit and a consolidated shareholder derivative actions, and we may become involved in additional instances of this type of litigation in the future. Litigation often is expensive and diverts management’s attention and resources, which could materially and adversely affect our business.
Additionally, fluctuations in the trading price or liquidity of our common stock may materially and adversely affect, among other things, the interest of investors to purchase our common stock on the open market and, generally, our ability to raise capital.
Our board of directors has the power to designate, without stockholder approval, additional series of preferred capital, the shares of which could be senior to our common stock and be entitled to conversion or voting rights that adversely affect the holders of our common stock.
Our articles of incorporation authorize the issuance of capital stock including 20,000,000 authorized undesignated shares (all have been designated as of December 31, 2020), and empowers our board of directors to prescribe, by resolution and without stockholder approval, a class or series of undesignated shares, including the number of shares in the class or series and the voting powers, designations, rights, preferences, restrictions and the relative rights in each such class or series. Accordingly, we may designate and issue additional shares or series of preferred stock that would rank senior to the shares of common stock as to dividend rights or rights upon our liquidation,
winding-up,
or dissolution.
Nevada law and our charter documents could make it more difficult for a third party to acquire us and discourage a takeover, which could depress the trading price of our common stock.
Nevada corporate law and our articles of incorporation and bylaws contain provisions that could discourage, delay, or prevent a change in control of our Company or changes in our management that our stockholders may deem advantageous. For example, holders of our common stock do not have cumulative voting rights in the election of directors, meaning that stockholders owning a majority of our outstanding shares of common stock will be able to elect all of our directors. In addition, because if and when we have 200 or more stockholders of record, we are subject to the “business combinations” provisions of the Nevada Revised Statutes, or NRS. These provisions could prohibit or delay a merger or other takeover or change in control attempt and, accordingly, may discourage attempts to acquire our Company even though such a transaction may be in our stockholders’ best interest and offer our stockholders the opportunity to sell their stock at a price above the prevailing market price.
We may issue additional common stock, which might dilute the net tangible book value per share of our common stock.
Our board of directors has the authority, without action or vote of our stockholders, to issue all or a part of our authorized but unissued shares. Such stock issuances could be made at a price that reflects a discount to, or a premium from, the then-current market price of our common stock. In addition, in order to raise capital, we may need to issue securities that are convertible into or exchangeable for a significant amount of our common stock. We may engage in additional capital raising transactions within the next twelve months, which would likely result in issuances of additional shares which would be dilutive to current shareholders. These issuances would dilute the percentage ownership interest, which would have the effect of reducing your influence on matters on which our stockholders vote, and might dilute the net tangible book value per share of our common stock. You may incur additional dilution if holders of stock options, whether currently outstanding or subsequently granted, exercise their options, or if the holders of warrants, whether currently outstanding or subsequently granted, exercise their warrants to purchase shares of our common stock.
 
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A sale of a substantial number of shares of the common stock may cause the price of our common stock to decline.
Finance transactions resulting in a large amount of newly issued shares that become readily tradable, or other events that cause current stockholders to sell shares, could place downward pressure on the trading price of our stock. Some of our shareholders have registration rights to facilitate sales of large blocks of our common stock. We have filed a shelf registration statement to allow registered sales by us of up to $100 million, which includes the offer and sell shares of our common stock having an aggregate offering price of up to $40,000,000 from time to time pursuant to our At The Market Issuance Sales Agreement with H.C. Wainwright & Co., LLC. We may consider additional or other capital raising transactions within the next twelve months, which would likely result in issuances of additional shares that would be dilutive to current shareholders. In addition, the lack of a robust resale market may require a stockholder who desires to sell a large number of shares of common stock to sell the shares in increments over time to mitigate any adverse impact of the sales on the market price of our stock.
If our stockholders sell, or the market perceives that our stockholders intend to sell for various reasons substantial amounts of our common stock in the public market, including shares issued upon the exercise of outstanding options or warrants, the market price of our common stock could fall. Sales of a substantial number of shares of our common stock may make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate. We may become involved in securities class action litigation that could divert management’s attention and harm our business.
We have not paid cash dividends on our common stock in the past and do not expect to pay cash dividends in the foreseeable future.
We have never paid cash dividends on our common stock and do not anticipate paying cash dividends on our common stock in the foreseeable future. The payment of dividends on our common stock will depend on our earnings, financial condition and other business and economic factors affecting us at such time as the board of directors may consider relevant. If we do not pay dividends, our common stock may be less valuable because a return on your investment will only occur if the market price of our common stock price appreciates.
At times, our shares of common stock and warrants have been thinly traded, so you may be unable to sell at or near ask prices or even at all if you need to sell your shares to raise money or otherwise desire to liquidate your shares.
We cannot predict the extent to which an active public market for our common stock will develop or be sustained. Our common stock is currently traded on The NASDAQ Capital Market and experiences periods when it could be considered “thinly-traded.” This situation may be attributable to a number of factors, including the fact that we are a small company that is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk averse and would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares until such time as we became more seasoned and viable. As a consequence, there may be periods of several days, weeks or months when trading activity in our shares is minimal, as compared to a seasoned issuer that has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. We cannot give you any assurance that a broader or more active public trading market for our common stock will be sustained, or that current trading levels will be sustained or not diminish.
Concentration of ownership by our principal stockholders may limit your ability to influence the outcome of director elections and other transactions requiring stockholder approval.
A significant percentage of our outstanding stock is held by a limited number of investors, including Richard E. Uihlein. Mr. Uihlein, the chairman of our board of directors, who beneficially owns approximately 13.9% of our outstanding common stock as of February 28, 2021 (which does not include any shares issuable upon exercise of options and warrants) and the 10X Fund, LP , which now owns 11.1% of the issued and outstanding shares of common stock of the Company as of February 28, 2021 (which does not include any shares issuable upon exercise of options and warrants). Mr. Uihlein is also an investor in the 10X Fund as a limited partner but is not deemed to be a beneficial owner of, or have a reportable interest in, any shares owned by 10X Fund. As a result of their ownership of shares of common stock, Mr. Uihlein and 10X Fund have and will have significant influence over corporate actions requiring stockholder approval, including the following actions:
 
   
to elect or defeat the election of our directors;
 
   
to amend or prevent amendment of our certificate of incorporation or bylaws;
 
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to effect or prevent a merger, sale of assets or other corporate transaction; and
 
   
to control the outcome of any other matter submitted to our stockholders for vote.
Such persons’ stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of our company, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price.
Richard E. Uihlein’s and 10X Fund’s significant ownership positions may deter or prevent efforts by other companies to acquire us, which could prevent our stockholders from realizing a control premium.
As a result of Mr. Uihlein’s and 10X Fund’s significant ownership and Mr. Uihlein’s position as chairman of the board of directors, other companies may be less inclined to pursue an acquisition of us or we may not have the opportunity to be acquired in a transaction that stockholders might otherwise deem favorable, including transactions in which our stockholders might realize a substantial premium for their shares.
Richard E. Uilhlein and/or 10X Fund could sell or transfer a substantial number of shares of our common stock, which could depress the price of our securities or result in a change in control of our company.
Although Mr. Uihlein has held common stock of the Company since 2012 and has not sold any of the shares of common stock that he has acquired during this time period, and although 10X Fund has been a long-time investor in the Company, neither Mr. Uihlein nor 10X Fund are subject to any contractual restrictions with us on their ability to sell or transfer our common stock on the open market, in privately negotiated transactions or otherwise, and these sales or transfers could create substantial declines in the price of our securities or, if these sales or transfers were made to a single buyer or group of buyers, could contribute to a transfer of control of our company to a third party. Sales by Mr. Uihlein or 10X Fund of a substantial number of shares, or the expectation of such sales, could cause a significant reduction in the market price of our common stock.
The outbreak of the novel strain of coronavirus,
SARS-CoV-2,
which causes
COVID-19,
could adversely impact our business, including our preclinical studies and clinical trials.
In response to the spread of
COVID-19,
we have closed our executive offices with our administrative employees continuing their work outside of our offices, restricted
on-site
staff to only those required to execute their job responsibilities and limited the number of staff in any given research and development laboratory.
As a result of the
COVID-19
outbreak, or similar future pandemics, we have and may in the future experience disruptions that could severely impact our business and our anticipated rollout and/or continuation of our NAVIGATE trial, including:
 
   
delays or difficulties in enrolling patients in our clinical trials;
 
   
delays or disruptions in
non-clinical
experiments due to unforeseen circumstances at contract research organizations and vendors along their supply chain;
 
   
increased rates of patients withdrawing from our clinical trials following enrollment as a result of contracting
COVID-19,
being forced to quarantine, or not accepting in office or home health visits;
 
   
diversion of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as sites for our NAVIGATE trial and hospital staff supporting the conduct of such trials;
 
   
interruption of key clinical trial activities, such as clinical trial site data monitoring, due to limitations on travel imposed or recommended by federal or state governments, employers and others or interruption of clinical trial subject visits and study procedures (particularly any procedures that may be deemed
non-essential),
which may impact the integrity of subject data and clinical study endpoints;
 
   
interruption or delays in the operations of the FDA and comparable foreign regulatory agencies, which may impact review and approval timelines;
 
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interruption of, or delays in receiving, supplies of our product candidates from our contract manufacturing organizations due to staffing shortages, production slowdowns or stoppages and disruptions in delivery systems; and
 
   
limitations on employee resources that would otherwise be focused on the conduct of our preclinical studies and clinical trials, including because of sickness of employees or their families, the desire of employees to avoid contact with large groups of people, an increased reliance on working from home or mass transit disruptions.
These and other factors arising from the
COVID-19
pandemic could worsen in countries that are already afflicted with
COVID-19,
could continue to spread to additional countries, or could return to countries where the pandemic has been partially contained, each of which could further adversely impact our ability to conduct clinical trials and our business generally, and could have a material adverse impact on our operations and financial condition and results.
In addition, the trading prices for our common stock and other biopharmaceutical companies have been highly volatile as a result of the
COVID-19
epidemic. As a result, we may face difficulties raising capital through sales of our common stock or such sales may be on unfavorable terms. The
COVID-19
outbreak continues to rapidly evolve. The extent to which the outbreak may impact our business, preclinical studies and clinical trials will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions and actions to contain the outbreak or treat its impact, such as social distancing and quarantines or lock-downs in the United States and other countries, business closures or business disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the disease.
 
Item 1B.
Unresolved Staff Comments
None.
 
Item 2.
Properties
We lease 3,610 square feet for our executive offices located at 4960 Peachtree Industrial Blvd., Norcross, GA. We also lease on a
month-to-month
basis approximately 300 square feet in Natick, MA, for use by research and development employee and which is collocated with one of our research and development service vendors. We believe these spaces are suitable for our present operations.
 
Item 3.
Legal Proceedings
From time to time, the Company is exposed to litigation relating to its operations. The Company is not currently engaged in any legal proceedings that are expected, individually or in the aggregate, to have a material, adverse effect on its financial condition or results of operations.
 
Item 4.
Mine Safety Disclosures
Not applicable.
 
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PART II
 
Item 5.
Market for Registrant
s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our common stock began trading on The NASDAQ Capital Market under the symbol GALT effective March 23, 2012.
Holders of Common Stock
As of February 28, 2021, there were 148 shareholders of record of our common stock. Because shares of our common stock are held by depositaries, brokers and other nominees, the number of beneficial holders of our shares is substantially larger than the number of record holders. Based on information available to us, we believe there are approximately 13,800
non-objecting
beneficial owners of our shares of our common stock in addition to the record holders.
Dividends
We have never paid cash dividends on our common stock and do not anticipate paying cash dividends on our common stock in the foreseeable future. The payment of dividends on our common stock will depend on our earnings, financial condition and other business and economic factors affecting us at such time as the board of directors may consider relevant.
 
Item 6.
Selected Financial Data
Not applicable.
 
Item 7.
Management
s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
In addition to historical information, the following Management’s 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 at least March 31, 2022; 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 management’s 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,
 
   
our early stage of development,
 
   
we have incurred significant operating losses since our inception and cannot assure you that we will generate revenue or profit,
 
   
our dependence on additional outside capital,
 
   
we may be unable to enter into strategic partnerships for the development, commercialization, manufacturing and distribution of our proposed product candidates,
 
   
uncertainties related to any litigation, including shareholder class actions and derivative lawsuits filed,
 
   
uncertainties related to our technology and clinical trials, including expected dates of availability of clinical data,
 
   
we may be unable to demonstrate the efficacy and safety of our developmental product candidates in human trials,
 
   
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,
 
   
competition and stock price volatility in the biotechnology industry,
 
   
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, and
 
   
the impact resulting from the outbreak of
COVID-19,
which has delayed and may continue to delay our clinical trial and development efforts, as well as the impact that
COVID-19
has on the volatility of the capital market and our ability to access the capital market.
We caution investors that actual results or business conditions may differ materially from those projected or suggested in forward-looking statements as a result of various factors including, but not limited to, those described above and in the Risk Factors section of this annual report on Form
10-K.
We cannot assure you that we have identified all the factors that create uncertainties. Moreover, new risks emerge from time to time and it is not possible for our management to predict all risks, nor can we assess the impact of all risks on our business or the extent to which any risk, or combination of risks, may cause actual results to differ from those contained in any forward-looking statements. Readers should not place undue reliance on forward-looking statements. We undertake no obligation to publicly release the result of any revision of these forward-looking statements to reflect events or circumstances after the date they are made or to reflect the occurrence of unanticipated events.
Results of Operations from the Years Ended December 31, 2020 and 2019
Research and Development Expense
 
    
Year ended

December 31,
    
2020 as Compared to 2019
 
    
2020
    
2019
    
$Change
    
% Change
 
    
(in thousands, except %)
 
Research and development
   $ 17,976      $ 7,467      $ 10,509        141
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 and for additional toxicology studies to support advanced development, 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. We have two product candidates, belapectin and
GM-CT-01;
however only belapectin is in active development.
Our research and development expenses were as follows:
 
    
Year Ended

December 31,
 
    
2020
    
2019
 
    
(in thousands)
 
Direct external expenses:
     
Clinical programs
   $ 14,229      $ 4,826  
Pre-clinical
activities
     532        394  
Other research and development expenses:
  
Payroll and other including stock-based compensation
     3,215        2,247  
  
 
 
    
 
 
 
    
$17,976
    
$7,467
 
  
 
 
    
 
 
 
Clinical programs expenses increased in the year ended December 31, 2020 over the year ended December 31, 2019 primarily due to costs related to our the NAVIGATE clinical trial activities and preparations and some preclinical activities incurred in support of the planned clinical program such as development and reproductive toxicity studies, clinical supplies and other supportive activities. Other research and development expense increased in the year ended December 31, 2020 over the year ended December 31, 2019 primarily due to hiring our Chief Medical Officer in March 2020 and an increase in
non-cash
stock-based compensation expense.
 
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General and Administrative Expense
 
    
Year ended

December 31,
    
2020 as Compared to 2019
 
    
2020
    
2019
    
$Change
    
% Change
 
    
(in thousands, except %)
 
General and administrative
   $ 5,468      $ 5,971      $ (503      (8 )% 
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 for the year ended December 31, 2020, as compared to the same period for 2019, are due to decreases in legal expenses of $339,000, investor relations expenses of $128,000, and
non-cash
stock-based compensation of $82,000 partially offset by an increase in insurance expenses of $331,000.
Other Income and Expense
During the year ended December 31, 2020, other income and expense consisted of $66,000 of interest income offset by amortization of the debt discount associated with warrants issued with a line of credit entered into in December 2017 of $87,000 which is classified as interest expense.
Results of Operations from the Years Ended December 31, 2019 and 2018
Research and Development Expense
 
    
Year ended

December 31,
    
2019 as Compared to 2018
 
    
2019
    
2018
    
$Change
    
% Change
 
    
(in thousands, except %)
 
Research and development
   $ 7,467      $ 6,471      $ 996        15
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 V, 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. We have two product candidates, belapectin and
GM-CT-01;
however only belapectin is in active development.
Our research and development expenses were as follows:
 
    
Year Ended

December 31,
 
    
2019
    
2018
 
    
(in thousands)
 
Direct external expenses:
     
Clinical programs
   $ 4,826      $ 2,296  
Pre-clinical
activities
     394        208  
Other research and development expenses:
  
Payroll and other including stock-based compensation
     2,247        3,967  
  
 
 
    
 
 
 
    
$7,467
    
$6,471
 
  
 
 
    
 
 
 
 
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Clinical programs expenses increased in the year ended December 31, 2019 over the year ended December 31, 2018 primarily due to costs related to our the NAVIGATE clinical trial planning and site
start-up
and qualification processes globally and preparations and some preclinical activities incurred in support of the planned clinical program such as development and reproductive toxicity studies, clinical supplies and other supportive activities. Other research and development expense decreased in the year ended December 31, 2019 over the year ended December 31, 2018 primarily due to a decrease in
non-cash
stock-based compensation expense of approximately $1,626,000.
General and Administrative Expense
 
    
Year ended

December 31,
    
2019 as Compared to 2018
 
    
2019
    
2018
    
$Change
    
% Change
 
    
(in thousands, except %)
 
General and administrative
   $ 5,971      $ 7,131      $ (1,160      (16 )% 
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 for the year ended December 31, 2019, as compared to the same period for 2018, are due to decreased
non-cash
stock-based compensation of $1,136,000.
Other Income and Expense
During the year ended December 31, 2019, other income and expense consisted of $231,000 of interest income offset by amortization of the debt discount associated with the warrants issued with a line of credit entered into in December 2017 of $87,000 which is classified as interest expense.
Liquidity and Capital Resources
As described above in the Overview and elsewhere in this Annual Report on Form
10-K,
we are in the development stage and have not generated any revenues to date. 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 December 31, 2020, we raised a net total of $197.7 million from these offerings. At December 31, 2020, the Company had $27.1 million of unrestricted cash and cash equivalents available to fund future operations plus a $10 million unsecured line of credit facility with stockholder and director, Richard E. Uihlein. The Company has not drawn under the line of credit. The Company believes there is sufficient cash, including availability of the line of credit, to fund currently planned operations at least through March 31, 2022. We will require more cash to fund our operations after March 31, 2022 and believe we will be able to obtain additional financing. The currently planned operations include costs related to our adaptively designed NAVIGATE Phase 2b/3 clinical trial. Currently, we expect to require an additional approximately
$45-$50 million
to cover costs of the trial to reach the planned interim analysis estimated to occur in the second half of 2023 along with drug manufacturing and other scientific support activities and general and administrative costs and further amounts to complete the Phase 3 portion of the trial. However, there can be no assurance that we will be successful in obtaining such new financing or, if available, that such financing will be on terms favorable to us.
2020 compared to 2019
Net cash used in operations increased by $9,753,000 to $20,601,000 for 2020, as compared to $10,848,000 for 2019. Cash operating expenses increased principally due to increased research and development activities primarily related to our NAVIGATE clinical trial and associated activities.
There were no equipment purchases or other investing activities in 2020 or 2019.
Net cash provided by financing activities was $263,000 during 2020 as compared to $50,075,000 during 2019, due primarily to the transactions described below.
In 2020, we received proceeds of $44,000 from issuances of common stock through the At the Market issuances and received $219,000 from exercise of common stock options. In 2019, we completed an issuance of common stock and warrants in stockholder rights offering generating $44,889,000 in proceeds and additionally, received $2,930,000 from issuances of common stock through the At the Market issuances, and received $2,650,000 from exercise of common stock options and warrants. In 2019, we also paid cash dividends of $394,000 on Series A and C preferred stock.
 
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2019 compared to 2018
Net cash used in operations increased by $669,000 to $10,848,000 for 2019, as compared to $10,179,000 for 2018. Cash operating expenses decreased principally due to increased research and development activities primarily related to our NAVIGATE clinical trial and associated activities.
There were no equipment purchases or other investing activities in 2018 or 2017.
Net cash provided by financing activities was $50,075,000 during 2019 as compared to $15,379,000 during 2018, due primarily to the transactions described below.
In 2019, we completed an issuance of common stock and warrants in stockholder rights offering generating $44,889,000 in proceeds and additionally, received $2,930,000 from issuances of common stock through the At the Market issuances, and received $2,650,000 from exercise of common stock options and warrants. In 2019, we also paid cash dividends of $394,000 on Series A and C preferred stock. In 2018, we completed sales of common stock through At the Market issuances totaling $5,603,000. Additionally, in 2018, we received proceeds totaling $6,003,000 and $3,773,000 from the exercise of common stock warrants and options, respectively.
Operating leases
Effective December 31, 2018, the Company entered into an amendment to its operating lease for office space in Norcross, GA for a term of thirty-eight months, beginning on January 1, 2019 and ending February 28, 2022 at a rate of approximately $3,800 per month. The amended lease provided for free rent for the first two months of the lease and continues the security deposit of $6,000. In addition to base rental payments included in the contractual obligations table above, the Company is responsible for our
pro-rata
share of the operating expenses for the building.
In October 2012, the Company entered into an operating lease for office and lab space for research and development activities in Natick, MA. The lease is for a period of one year, beginning on October 1, 2012, for a rate of $15,000 for the term, payable in equal monthly increments. This lease was continued on a
month-to-month
basis from October 1, 2013.
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.
Critical Accounting Policies and Estimates
Our significant accounting policies are more fully described in Note 2 to our consolidated financial statements included elsewhere in this annual report on Form
10-K.
Certain of our accounting policies, however, are critical to the portrayal of our financial position and results of operations and require the application of significant judgment by our management, which subjects them to an inherent degree of uncertainty. In applying our accounting policies, our management uses its best judgment to determine the appropriate assumptions to be used in the determination of certain estimates. Our more significant estimates include stock option valuations and performance vesting features of certain of these instruments, accrued liabilities, deferred income taxes and cash flows. These estimates are based on our 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. We believe that the critical accounting policies discussed below involve more complex management judgment due to the sensitivity of the methods, assumptions and estimates necessary in determining the related asset, liability, revenue and expense amounts.
Accrued Expenses
. As part of the process of preparing our consolidated financial statements, we are required to estimate accrued expenses. This process involves identifying services that third parties have performed on our behalf and estimating the level of service performed and the associated cost incurred on these services as of each balance sheet date in our consolidated financial statements. Examples of estimated accrued expenses include professional service fees, such as those arising from the services of attorneys and accountants and accrued payroll expenses. In connection with these service fees, our estimates are most affected by our understanding
 
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of the status and timing of services provided relative to the actual services incurred by the service providers. In the event that we do not identify certain costs that have been incurred or we under- or over-estimate the level of services or costs of such services, our reported expenses for a reporting period could be understated or overstated. The date on which certain services commence, the level of services performed on or before a given date, and the cost of services are often subject to our judgment. We make these judgments based upon the facts and circumstances known to us in accordance with accounting principles generally accepted in the U.S.
Research and Development Expenses.
 Research and development expenses, including personnel costs, allocated facility costs, lab supplies, outside services, contract laboratory costs related to manufacturing drug product, clinical trials and preclinical studies are charged to research and development expense as incurred. The Company accounts for nonrefundable advance payments for goods and services that will be used in future research and development activities as expense when the service has been performed or when the goods have been received. Our current NAVIGATE clinical trial is being supported by third-party contract research organizations, or CROs, and other vendors. We accrue expenses for clinical trial activities performed by CROs based upon the estimated amount of work completed on each trial. For clinical trial expenses and related expenses associated with the conduct of clinical trials, the significant factors used in estimating accruals include the number of patients enrolled, the number of active clinical sites, and the duration for which the patients have been enrolled in the trial. We monitor patient enrollment levels and related activities to the extent possible through internal reviews, review of contractual terms and correspondence with CROs. We base our estimates on the best information available at the time. We monitor patient enrollment levels and related activities to the extent possible through discussions with CRO personnel and based our estimates of clinical trial costs on the best information available at the time. However, additional information may become available to us which will allow us to make a more accurate estimate in future periods. In that event, we may be required to record adjustments to research and development expenses in future periods when the actual level of activity becomes more certain.
Stock-Based Compensation
. Stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the service period, which generally represents the vesting period. For awards that have performance-based vesting conditions the Company recognizes the expense over the estimated period that the awards are expected to be earned. The Company generally uses the Black-Scholes option-pricing model to calculate the grant date fair value of stock options. The expense recognized over the service period is required to include an estimate of the awards that will be forfeited.
 
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
Due to the nature of our operations, assets and absence of debt, we are not exposed to any significant market risks at December 31, 2020 and 2019.
 
Item 8.
Financial Statements and Supplementary Data
The financial statements required by this item are attached to this Annual Report on Form
10-K
beginning on Page
F-1.
 
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
 
Item 9A.
Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
As required by Rule
13a-15
under the Securities Exchange Act of 1934, (the “Exchange Act”) as of the end of the period covered by this Annual Report, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of December 31, 2020. Our management has concluded, based on their evaluation, that our disclosure controls and procedures were effective as of December 31, 2020 to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.
(b) Management’s Annual Report on Internal Control Over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. As defined in
Rule 13a-15(f)
under the Exchange Act, internal control over financial reporting is a process designed by, or under the supervision of, a company’s principal executive and principal financial officers and effected by a company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. It includes those policies and procedures that:
 
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a) Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;
b) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of a company are being made only in accordance with authorizations of management and the board of directors of the Company; and
c) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on its financial statements.
Because of the inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
The Company’s management has used the criteria established in “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), or COSO, to evaluate the effectiveness of the Company’s internal control over financial reporting. Management has selected the COSO 2013 framework for its evaluation as it is a control framework recognized by the SEC and the Public Company Accounting Oversight Board, that is free from bias, permits reasonably consistent qualitative and quantitative measurement of the Company’s internal controls, is sufficiently complete so that relevant controls are not omitted, and is relevant to an evaluation of internal controls over financial reporting. Management conducted an evaluation of internal controls based on the COSO 2013 framework. The evaluation included a full scale, documented risk assessment, based on the principles described in the framework, and included identification of key controls. Management completed documentation of its testing to verify the effectiveness of the key controls. Based on the evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2020.
(c) Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the fourth quarter of 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
 
Item 9B.
Other Information
None.
 
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PART III
 
Item 10.
Directors, Executive Officers and Corporate Governance
Each of our directors is elected annually and holds office until his or her successor has been elected and qualified or until the earlier of his or her death, resignation or removal. Our board of directors currently consists of eleven members, all of whom were elected at our 2020 Annual Meeting of Stockholders.
The following table sets for the certain biographical information about our directors as of February 28, 2021, and the qualifications, experiences and skills considered in determining that each such person should serve as a director.
 
Name
  
Age
    
Director Since
 
Gilbert F. Amelio, Ph.D. (2)(3)
     77        2009  
James C. Czirr
     67
       2009  
Kary Eldred (1)
     46        2018  
Kevin D. Freeman (1)(2)(3)
     59        2011  
Joel Lewis
     51        2017  
Gilbert S. Omenn, M.D., Ph.D. (2)
     79        2014  
Marc Rubin, M.D. (3)
     66        2011  
Elissa J. Schwartz, Ph.D.
     50        2020  
Harold H. Shlevin, Ph.D.
     71        2019  
Richard E. Uihlein, Chairman
     75        2017  
Richard A. Zordani (1)
     48        2020  
 
(1)
Member of audit committee
(2)
Member of compensation committee
(3)
Member of nominating and governance committee
Gilbert F. Amelio, Ph.D
., a director since February 2009, began his career at Bell Labs in Murray Hill, New Jersey. Since January 1, 2012, Dr. Amelio has provided consulting and advisory services through GFA, LLC, a California limited liability company. He was a Senior Partner of Sienna Ventures (a privately held venture capital firm in Sausalito, California) from April 2001 until the fund closed per plan on December 31, 2011. Dr. Amelio was Chairman and Chief Executive Officer of Jazz Technologies, Inc. (now a wholly owned subsidiary of Tower Semiconductor Ltd., an independent specialty wafer foundry) from August 2005 until his retirement in September 2008 (when he was named Chairman Emeritus). Dr. Amelio was Chairman and Chief Executive Officer of Beneventure Capital, LLC (a full-service venture capital firm in San Francisco, California) from 1999 to 2005 and was Principal of Aircraft Ventures, LLC (a consulting firm in Newport Beach, California) from April 1997 to December 2004. Dr. Amelio was elected a Director of AT&T in February 2001 and had previously served as an Advisory Director of AT&T (then known as SBC Communications Inc.) from April 1997 to February 2001. He served as a Director of Pacific Telesis Group from 1995 until the company was acquired by AT&T in 1997. Prior to 1997, he served as Chairman, President and CEO of National Semiconductor (1991-1996) and Apple Computer (1996-1997). We believe Dr. Amelio’s qualifications to sit on our Board of Directors include his executive leadership and management experience, as well as his extensive experience with global companies, his financial expertise and his years of experience providing strategic advisory services to organizations.
James C. Czirr
, is being nominated by 10X Fund L.P., pursuant to contractual rights set forth in certain warrants to purchase Common Stock that 10X Fund L.P. holds. Mr. Czirr has served as a director since February 2009, served as Chairman of the Board from February 2009 until January 2016 and Executive Chairman from February 2010 until January 2016, is a
co-founder
of 10X Fund, L.P. and is a managing member of 10X Capital Management LLC, the general partner of 10X Fund, L.P. Mr. Czirr was a
co-founder
of Galectin Therapeutics in July 2000. Mr. Czirr was instrumental in the early-stage development of Safe Science Inc., a developer of anti-cancer drugs; served from 2005 to 2008 as Chief Executive Officer of Minerva Biotechnologies Corporation, a developer of nano particle bio chips to determine the cause of solid tumors; and was a consultant to Metalline Mining Company Inc., now known as Silver Bull Resources, Inc., (AMEX: SVBL), a mineral exploration company seeking to become a low cost producer of zinc. Mr. Czirr received a B.B.A. degree from the University of Michigan. We believe that Mr. Czirr is best situated to sit on our Board because he is the director who was a
co-founder
of the Company and is familiar with our business and industry.
Kary Eldred,
is a director since 2018 and Chief Investment Officer for the Living Stones Foundation since July 2015 and has been an active private equity investor for many years. In these capacities, he serves and has served on a number of corporate boards of companies with potential for and driving toward initial public offerings and is currently serving as a board member in Buy It Installed (since 2017), Babywise and Wise King Media (since 2015). Kary Eldred also served on the board and audit committee of GCT Semiconductor. From January 2011 through October 2014, Mr. Eldred was CEO & Chairman of Altadona, S.A. a software integration company based in Europe and prior to that was a principal in Parakletos Ventures, an institutional venture capital firm with several
 
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investments in companies that went on to be acquired or become publicly listed on different exchanges around the world including the NASDAQ, KOSDAQ and the GEM market. Mr. Eldred has an Executive MBA from IE Business School and a BA in Foreign Service from Baylor University. We believe that Mr. Eldred’s qualifications to sit on our board include his experience serving on boards of several companies and experience in venture capital and private equity investing.
Kevin D. Freeman,
a director since May 2011, holds the Chartered Financial Analyst designation and is Chief Executive Officer of Cross Consulting and Services, LLC, an investment advisory and consulting firm founded in 2004. He is also author of a New York Times best-selling book about the stock market and economy and the host of a television program (Economic War Room with Kevin Freeman) that airs on BlazeTV. Formerly he was Chairman of Separate Account Solutions, Inc. and held several offices at Franklin Templeton Investment Services from 1991 to 2000. He holds a B.S. in business administration from University of Tulsa, Tulsa, Oklahoma. We believe Mr. Freeman’s qualifications to sit on our Board of Directors includes his extensive financial expertise and his years of experience providing financial advisory services.
Joel Lewis
, a director since 2017, became our President and Chief Executive Officer on September 2, 2020. Previously, he was the Managing Director of Shareholder Services at Uline, Inc. (a distributor of shipping, packaging and industrial supplies), a position he held from 2007 through 2019. Mr. Lewis is a financial executive with over 26 years of experience started his career in public accounting in 1992. Prior to his employment with Uline Inc., Mr. Lewis served as a Tax and Accounting Manager for Century America LLC from 2001 to 2006 and a Tax Manager for Deloitte & Touche from 1998 to 2001. After spending a decade in public accounting where he specialized in both financial reporting and taxation, Mr. Lewis migrated to privately held companies focusing on high net worth family businesses. Mr. Lewis has a wide range of expertise including working in a variety of industries and disciplines including taxation, restructuring, acquisition and private equity ventures. Mr. Lewis is a registered CPA in the state of Illinois. He holds a B.S. in Accountancy from the University of Illinois and a Masters in Taxation from DePaul University. We believe that Mr. Lewis’ qualifications to sit on our Board include his business and financial expertise and his service as a board observer on our Board during 2017.
Gilbert S. Omenn, M.D., Ph.D.
, a director since September 2014, served on the board of directors of Amgen Inc. for 27 years and of Rohm & Haas Company for 22 years. He currently serves on the boards of Oncofusion Therapeutics and MedsynBio LLC of Ann Arbor, MI. Dr. Omenn is the Harold T. Shapiro Distinguished University Professor of Computational Medicine & Bioinformatics, Internal Medicine, Human Genetics, and Public Health and Director of the university-wide Center for Computational Medicine and Bioinformatics at the University of Michigan. Dr. Omenn served as executive vice president for medical affairs and as chief executive officer of the University of Michigan Health System from 1997 to 2002. Prior, he was dean of the School of Public Health and Community Medicine and professor of medicine and a Howard Hughes Medical Institute investigator at the University of Washington and Member of the Fred Hutchinson Cancer Research Center. Earlier he was Associate Director of the White House Office of Science and Technology Policy and of the Office of Management and Budget. He is the author of 600 research papers and scientific reviews and author/editor of 18 books. Dr. Omenn received his B.A. summa cum laude from Princeton University, M.D. magna cum laude from Harvard Medical School, and Ph.D. in genetics from the University of Washington. We believe Dr. Omenn’s qualifications to sit on our Board of Directors include his extensive executive leadership and management experience in the medical industry and his continuing cutting-edge research.
Marc
 Rubin, M.D,
a director since October 2011 and Chairman of the Board from January 2016 through May 2018, is Executive Chairman of the Board of Directors of Titan Pharmaceuticals, Inc. (TTNP: OTC BB) and served as its President and Chief Executive Officer from October 2007 to January 2009. Until February 2007, Dr. Rubin served as Head of Global Research and Development for Bayer Schering Pharma, as well as a member of the Executive Committee of Bayer Healthcare and the Board of Management of Bayer Schering Pharma. Prior to the merger of Bayer Pharmaceuticals and Schering AG in June 2006, Dr. Rubin was a member of the Executive Board of Schering AG since joining the company in October 2003, as well as Chairman of Schering Berlin Inc. and President of Berlex Pharmaceuticals, a division of Schering AG. From 1990 until August 2003, Dr. Rubin was employed by GlaxoSmithKline where he held positions of responsibility in global clinical and commercial development overseeing programs in the United States, Europe, Asia and Latin America. From 2001 through 2003 at GlaxoSmithKline, he was Senior Vice President of Global Clinical Pharmacology & Discovery Medicine. Dr. Rubin holds an M.D. from Cornell University Medical College and is board certified in internal medicine with subspecialties in medical oncology and infectious diseases. Dr. Rubin is a member of the Board of Directors of Curis Inc. (Nasdaq: CRIS) and formerly served on the Board of Directors of Medarex, Inc., now a subsidiary of Bristol-Myers Squibb Company. We believe Dr. Rubin’s qualifications to sit on our Board of Directors include his extensive executive leadership and management experience in the pharmaceutical industry.
Elissa J. Schwartz, Ph.D.,
a director appointed by the board in September 2020, is a disease modeler who is currently a professor of biological sciences and mathematics at Washington State University (WSU). She received a PhD in Biomedical Sciences from Mount Sinai–NYU, a BA in Mathematics from UC Berkeley, and interdisciplinary postdoctoral training in Biomathematics and Biostatistics from UCLA. She is also affiliated with the WSU College of Veterinary Medicine in microbiology and pathology, and she is currently on the WSU
COVID-19
modeling task force. Dr. Schwartz is the author of over 30 scientific publications on infectious disease, the immune response, and biological modeling. She serves on the Board of Directors for the Society for Mathematical Biology, and she previously served as a consultant for Pharmerit International, LP, a pharmaceutical economics company. Dr. Schwartz has held fellowships with the Mathematical Biosciences Institute (Ohio State University) and the African Institute for Mathematical Sciences (Cape Town, South Africa), and she served on the teaching faculty for courses in British Columbia, India, and Nepal. We believe Dr. Schwartz’ qualifications to sit on our Board of Directors include her extensive expertise in biomathematics and biostatistics in the pharmaceutical industry.
 
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Harold Shlevin, Ph.D.
, retired from being our President and Chief Executive Officer on September 2, 2020, a position he had held since June 14, 2018; however, Dr. Shlevin has entered into a consulting agreement with the Company. Dr. Shlevin previously served as our Chief Operating Officer and Secretary from October 1, 2012. Dr. Shlevin previously had been employed at the Georgia Institute of Technology’s Advanced Technology Development Center as Principle and Manager of bioscience commercialization efforts since November 2009, where he has assisted faculty in identifying technology worthy of commercialization, catalyzed formation of new
start-up
bioscience companies, and mentored new company management. From October 2008 to November 2009, he served as Head of Operations and Commercial Development for Altea Therapeutics Corporation, an advanced drug delivery company focused on the delivery of therapeutic levels of water-soluble biotherapeutics and small drugs through the skin. At Altea, he was responsible for pharmaceutical research and development, clinical research, regulatory affairs, engineering, clinical and commercial manufacturing, quality assurance, information technology, facility operations and finance. From July 2006 to September 2008, Dr. Shlevin served as the President and Chief Executive Officer of Tikvah Therapeutics, Inc., a
start-up
pharmaceutical enterprise focused on later-stage development of neuroscience therapeutics. From May 2000 to January 2006, he served as President and CEO of Solvay Pharmaceuticals, Inc. (US). In January 2006, he was promoted to a global senior Vice President role within Solvay Pharmaceuticals, SA and member of the Board of Solvay Pharmaceuticals, SA. Previously, Dr. Shlevin served on the Board of Directors of Cardiome Pharma Corporation (NASDAQ: CRME), now known as Correvio Pharma Corp. (NASDAQ: CORV) from 2004 to June 2016. He was Chair of the Compensation Committee and member of the Corporate Governance Committee and Audit Committees. We believe Dr. Shlevin’s qualifications to sit on our Board of Directors include his extensive executive leadership and management experience in the pharmaceutical industry.
Richard E. Uihlein
, a director since 2017 and Chairman since May 2018,
co-founded
Uline, Inc. (a leading distributor of shipping, packaging and industrial supplies) in 1980, and has served as its Chief Executive Officer and Chairman since its founding. Prior to founding Uline Inc., Mr. Uihlein was employed at General Bindings Corp., Northbrook, IL from 1967 to 1980. Mr. Uihlein graduated from Stanford University, Palo Alto, CA. with a BA degree in history in 1967. We believe Mr. Uihlein’s qualifications to sit on our Board includes his extensive executive leadership and management experience.
Richard A. Zordani,
a director appointed by the board in September 2020, has been the Director of Shareholder Services at Uline, Inc. (a distributor of shipping, packaging and industrial supplies) since 2013. Prior to joining Uline, Mr. Zordani served as a Director and Vice President for Diversified Financial Management Corp. (Pritzker family office) where he advised on complex legal and tax structures for domestic and foreign entities and trusts from 2003 through 2013 and an Audit Manager for Altschuler, Melvoin & Glasser LLP (now RSM McGladrey) from 1996 through 2003. Mr. Zordani received his undergraduate degree from the University of Illinois at Urbana/Champaign and is a Registered CPA in the state of Illinois. We believe that Mr. Zordani’s qualifications to sit on our Board include his business and financial expertise.
Code of Ethics
We have adopted a Code of Ethics that applies to all our directors, officers and employees. The Code of Ethics is publicly available on our website at www.galectintherapeutics.com. Amendments to the Code of Ethics and any grant of a waiver from a provision of the Code of Ethics requiring disclosure under applicable SEC rules will be disclosed on our website.
Hedging Policy
At this time, the Company has not adopted a policy regarding the ability of officers, directors and employees to purchase financial instruments (including prepaid variable forward contracts, equity swaps, collars, and exchange funds) or otherwise engage in transactions, that hedge or offset, or are designed to hedge or offset, any decrease in the market value of the Company’s equity securities.
Director Nominations
No material changes have been made to the procedures by which security holders may recommend nominees to our board of directors.
 
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Audit Committee
The members of this committee are Richard A. Zordani (chair), Kary Eldred and Kevin D. Freeman. The Audit Committee is responsible for oversight of the quality and integrity of the accounting, auditing and reporting practices of Galectin Therapeutics. More specifically, it assists the Board of Directors in fulfilling its oversight responsibilities relating to (i) the quality and integrity of our financial statements, reports and related information provided to stockholders, regulators and others, (ii) our compliance with legal and regulatory requirements, (iii) the qualifications, independence and performance of our independent registered public accounting firm, (iv) the internal control over financial reporting that management and the Board have established, and (v) the audit, accounting and financial reporting processes generally. The Committee is also responsible for review and approval of related-party transactions. The Board has determined that Mr. Zordani is an “audit committee financial expert” within the meaning of SEC rules. The Audit Committee has the authority to obtain advice and assistance from, and receive appropriate funding from the Company for, outside legal, accounting or other advisors as it deems necessary to carry out its duties.
Risk Management
The Board has an active role, as a whole and also at the committee level, in overseeing management of our risks. The Board regularly reviews information regarding our credit, liquidity and operations, as well as the risks associated with each. The Compensation Committee of our Board is responsible for overseeing the management of risks relating to our executive compensation plans and arrangements. The Audit Committee of our Board oversees management of financial risks. The Nominating and Corporate Governance Committee of our Board manages risks associated with the independence of the Board members and potential conflicts of interest. While each committee is responsible for evaluating certain risks and overseeing the management of such risks, the entire Board of Directors is regularly informed through committee reports about such risks.
We believe that any risks arising from our policies and programs are not reasonably likely to have a material adverse effect on the Company. Our programs reflect sound risk management practices including:
 
   
Use of multiple compensation vehicles that provide a balance of long- and short-term incentives with fixed and variable components; and
 
   
Equity incentive awards that generally vest over several years, so while the potential compensation payable for equity incentive awards is tied directly to appreciation of our stock price, taking excessive risk for a short term gain is discouraged because it would not maximize the value of equity incentive awards over the long-term.
EXECUTIVE OFFICERS
Harold Shlevin, Ph.D.
, was President and Chief Executive Officer until September 2, 2020, see above under directors.
Joel Lewis
, age 51, became our President and Chief Executive Officer on September 2, 2020, see above under directors.
Pol F. Boudes, M.D.,
age 62, became our Chief Medical Officer on March 3, 2020. Prior to joining the Company, Dr. Boudes served as the Chief Medical Officer of CymaBay Therapeutics, where he worked on CymaBay’s proprietary NASH compound and was instrumental in inventing and launching programs in rare liver diseases. Prior to his time at CymaBay, Dr. Boudes served as the Chief Medical Officer of Amicus Therapeutics, a company focusing on rare lysosomal storage disorders. Following this experience, Dr. Boudes became a Board member of Protalix BioTherapeutics, a company developing plant cell expressed recombinant proteins with improved therapeutic profiles, notably for lysosomal disorders. Before his time working as a Chief Medical Officer, Dr. Boudes held positions of increased responsibilities in clinical development at Bayer HealthCare Pharmaceuticals, Wyeth
Research, Hoffman-La Roche
and Pasteur Merieux.
Jack W. Callicutt
, age 53, became our Chief Financial Officer on July 1, 2013. From August 2012 through June 2013, Mr. Callicutt was the Chief Financial Officer of REACH Health, Inc., a telemedicine technology company headquartered in Alpharetta, GA. From April 2010 through August 2012, Mr. Callicutt was the Chief Financial Officer of Vystar Corporation, a publicly traded company that holds proprietary technology to remove antigenic proteins from natural rubber latex. Prior to that Mr. Callicutt was Chief Financial Officer of IVOX, Inc., Tikvah Therapeutics and Corautus Genetics, a publicly traded biotechnology company which was developing gene therapy for treatment of cardiovascular disease. Mr. Callicutt previously spent more than fourteen years in public accounting, most recently as a senior manager at Deloitte, where he specialized in technology companies from 1989 to 2003. Mr. Callicutt is a Certified Public Accountant and graduated with honors from Delta State University with a B.B.A. in accounting and computer information systems.
SIGNIFICANT EMPLOYEES
The following employees are not executive officers of the Company but make significant contributions to the Company.
 
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J. Rex Horton,
age 51, joined the Company and January 2013 and currently serves as Vice President Commercial Development, Regulatory Affairs and Quality Assurance. Mr. Horton most recently was Director of Regulatory Affairs at Chelsea Therapeutics, where he successfully led the organization through its first NDA filing and favorable FDA Advisory Committee Meeting. In past leadership roles at Solvay Pharmaceuticals and Abbott Laboratories, he led approval efforts for key products including Androgel
®
Stickpack, Creon
®
Capsules and Luvox
®
CR Capsules. He has also provided chemistry, manufacturing and controls (CMC) regulatory leadership and support of INDs and NDAs, including Estrogel
®
and Androgel
®
Pump. Mr. Horton was a member of the executive leadership team that successfully implemented solutions to significant regulatory issues encountered by Solvay in its interactions with the FDA. Mr. Horton earned his Bachelor’s degree in industrial/manufacturing & systems engineering from The Georgia Institute of Technology. He is a member of the Regulatory Affairs Professional Society (RAPS), Drug Information Association (DIA) and American Association of Pharmaceutical Scientists (AAPS).
Eliezer Zomer, Ph.D.,
age 74, has been our Executive Vice President of Manufacturing and Product Development since the Company’s inception in 2000. Prior to joining our Company, Dr. Zomer had been the founder of Alicon Biological Control, where he served from November 2000 to July 2002. From December 1998 to July 2000, Dr. Zomer served as Vice President of Product Development at SafeScience, Inc. and Vice President of Research and Development at Charm Sciences, Inc. from June 1987 to November 1998. Dr. Zomer received a B. Sc. degree in industrial microbiology from the University of Tel Aviv in 1972, a Ph.D. in biochemistry from the University of Massachusetts in 1978 and undertook a post-doctoral study at the National Institute of Health.
None of the directors, executive officers and significant employees share any familial relationship.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our officers and directors, and persons who beneficially own more than ten percent of our common stock, to file reports of ownership and changes of ownership of such securities with the SEC. All reports were timely filed during the fiscal year ended December 31, 2020.
Item 11.
Executive Compensation
COMPENSATION PHILOSOPHY DISCUSSION
The Compensation Committee is responsible for creating and reviewing the compensation of the Company’s executive officers, as well as overseeing the Company’s compensation and benefit plans and policies and administering the Company’s equity incentive plans. The following Compensation Philosophy Discussion (“Compensation Discussion”) describes our 2020 executive compensation program and explains the Company’s compensation philosophy, policies, and practices, focusing primarily on the compensation of our named executive officers, or NEOs. This Compensation Discussion is intended to be read in conjunction with the tables that follow, which provide detailed historical compensation information for our following NEOs:
 
Name
  
Title
Harold H. Shlevin, Ph.D.
  
Chief Executive Officer and President, until September 2, 2020
Joel Lewis
  
Chief Executive Officer and President, from September 2, 2020
Pol F. Boudes, M.D.
  
Chief Medical Officer
Jack W. Callicutt
  
Chief Financial Officer
Compensation Philosophy
The Company believes in providing a competitive total compensation package to its executives through a combination of base salary, annual performance bonuses, and long-term equity awards. The executive compensation program is designed to achieve the following objectives:
 
   
provide competitive compensation that will help attract, retain and reward qualified executives;
 
   
align executives’ interests with our success by making a portion of the executive’s compensation dependent upon corporate performance; and
 
   
align executives’ interests with the interests of stockholders by including long-term equity incentives.
The Compensation Committee believes that the Company’s executive compensation program should include annual and long-term components, including cash and equity-based compensation, and should reward consistent performance that meets or exceeds expectations. The Compensation Committee evaluates both performance and compensation to make sure that the compensation provided to executives remains competitive relative to compensation paid by companies of similar size and stage of development operating in the life sciences industry and taking into account the Company’s relative performance and its own strategic objectives.
 
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Executive Compensation Review and Design
The Company has historically conducted a review of the aggregate level of its executive compensation, as well as the mix of elements used to compensate its NEOs. The Company has based this review primarily on the experience of the members of the Compensation Committee and our Board, many of whom sit on the boards of directors of, or have previously advised, numerous companies, including companies in the life sciences industry.
At our last
“Say-on-Pay
vote” held at our 2019 annual meeting of stockholders approximately 86% of our outstanding common stock voting on the matter voted in favor of the compensation of our NEOs, as disclosed in the proxy materials for the 2019 annual meeting. At our 2019 annual meeting, the holders of approximately 78% of our outstanding common stock voting on the matter voted in favor of holding the stockholder advisory vote every three years. As a result of such vote, our Board decided to hold the
“Say-on-Pay”
advisory vote every three years. Accordingly, the Company’s next
“Say-on-Pay”
advisory vote on the compensation of our NEOs will be held at our 2022 annual meeting of stockholders.
In 2014 and 2015, the Compensation Committee undertook a review of our compensation policies and practices and retained the compensation consulting firm of Barney & Barney LLC to provide compensation information and analysis with respect to the life science and healthcare industry and with respect to our peer companies within the industry. Barney & Barney LLC reviewed information from industry and other sources, surveys and databases, including publicly-available compensation information of other companies with which we compete, to gauge the competitiveness of our compensation programs. Barney & Barney LLC then reported its findings to the Compensation Committee, with recommendations to bring the Company’s executive compensation closer to the 50
th
percentile of the total compensation of our competitor companies. These findings continued to inform the Compensation Committee’s decisions on compensation in subsequent years, including 2020.
The Compensation Committee may use a compensation consultant in the future and to take into account publicly-available data relating to the compensation practices and policies of other companies within and outside our industry. The Compensation Committee intends to benchmark its executive compensation program to target at least the 50
th
percentile of the total compensation programs of our competitor companies; however, adjusted as deemed to be in the best interest of the Company to assure retention of key employees during the NAVIGATE trial.
Elements of Executive Compensation
The compensation program for the Company’s NEOs consists principally of three components:
 
   
base salary;
 
   
performance and retention bonuses;
 
   
long-term compensation in the form of equity-based awards.
Base Salary
Base salary is the only
fixed-pay
component in our executive compensation program. Base salaries for the NEOs are initially established through
arm’s-length
negotiation at the time the NEO is hired, taking into account such NEO’s qualifications, experience, prior salary, the scope of his or her responsibilities, and known competitive market compensation paid by other companies for similar positions within the industry. Base salaries are reviewed annually and adjusted from time to time to realign salaries with market levels after taking into account individual responsibilities, performance, and experience. In making decisions regarding salary increases, the Company may also draw upon the experience of members of the Compensation Committee and the Board of Directors, many of whom sit on the boards of directors of, or have previously advised, numerous companies, including companies in the life sciences industry. The Compensation Committee has not previously applied specific formulas to determine increases. This strategy is consistent with the Company’s intent of offering base salaries that are cost-effective while remaining competitive.
 
Name
  
2020 Base Salary
   
2019 Base Salary
 
Joel Lewis
   $ 500,000  (3)      - (1) 
Pol F. Boudes, M.D..
   $ 440,500       - (2) 
Jack W. Callicutt
   $ 302,100     $ 285,000  
 
  (1)
Mr. Lewis became our President and Chief Executive Officer on September 2, 2020.
 
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  (2)
Dr. Boudes became our Chief Medical Officer on March 3, 2020.
 
  (3)
Pursuant to Mr. Lewis’s Employment Agreement and Deferred Stock Unit Agreement, 20% of Mr. Lewis’ base salary will be paid in cash and 80% will be paid in the form of deferred-stock units in accordance with the terms and subject to the provisions of the DSU Agreement
Performance Bonuses
In addition to the payment of base salaries, the Company believes that annual performance bonuses can play an important role in providing appropriate incentives to its NEOs to achieve the Company’s strategic objectives.
In prior years, performance bonuses were awarded based on the Company’s Employee Short-Term and Long-Term Incentive Program (the “Program”), which was adopted for executives and employees of the Company. The Program is a performance-based program and was adopted in recognition of the importance of aligning executive and employee interests with that of our stockholders. Our Program is designed to reward the efforts of our executives and employees and to be competitive in attracting and retaining them. There are two elements of the Program: (1) a short-term incentive in the form of cash bonuses and (2) a long-term incentive in the form of stock option grants. The cash bonus incentive is targeted to be up to 30% to 50% of the NEO’s base salary as of the end of the applicable year. Half of each NEO’s annual performance bonus is based upon achievement of the Company’s documented performance objectives for the year and the other half is based upon achievement of individual performance objectives set for the year. The 2020 performance bonuses were paid in March 2021.
 
Name
  
Performance Bonus

Amount
   
Awarded Amount

As % of Base Salary
 
Joel Lewis
   $ 75,000  (3)      45 % (1) 
Pol F. Boudes, M.D.
   $ 110,000       30 % (2) 
Jack W. Callicutt
   $ 85,000       28
(1) Mr. Lewis joined the Company on September 2, 2020 and his bonus was prorated for his employment duration in 2020.
 
(2) Dr. Boudes the Company on March 2, 2020 and his bonus was prorated for his employment duration in 2020.
 
(3) Pursuant to Mr. Lewis’s Employment Agreement and Deferred Stock Unit Agreement, 20% of Mr. Lewis’ bonus will be paid in cash and 80% will be paid in the form of deferred-stock units in accordance with the terms and subject to the provisions of the DSU Agreement
                
In 2018, the Board approved potential cash incentive bonuses (the “Transaction Bonuses”). The potential Transaction Bonuses are payable in connection with a Transaction (as defined below). A “Transaction” is (i) any licensing, development, partnership, or similar arrangements relating to any of the Company’s drug candidates (a “Partnership Transaction”) or (ii) the acquisition of the Company or any of its material assets (an “Acquisition Transaction”). The amounts payable pursuant to the Transaction Bonuses will be equal to 10% of the recipient’s base salary for each $50 million payable to the Company or the Company’s shareholders, as applicable, pursuant to the Transaction to the extent paid in cash or marketable securities, up to a maximum payment of 300% of base salary. If Transaction is a Partnership Transaction and payments to the Company are deferred or otherwise made over time, the amount of the Transaction Bonuses will be based on the Board’s reasonable estimate of the value of the Transaction. To be entitled to receive a Transaction Bonus, if the Transaction is an Acquisition Transaction, an individual must be employed by the Company on the date the Transaction is consummated, or, if the Transaction is a Partnership Transaction, an individual must be employed by the Company on the date that the definitive transaction agreement(s) are executed. No Transaction Bonuses were earned in 2020.
Additionally in 2018, the Board also approved retention bonuses payable to certain employees of the Company, including Dr. Shlevin and Mr. Callicutt, equal to 25% of such employee’s base salary (the “Retention Bonuses”) if such employees remained employed by the Company on each of June 30, 2019, December 31, 2019, June 30, 2020 and December 31, 2020 and based upon the annualized salary level in effect on such date. Mr. Lewis and Dr. Boudes joined the Company as employees and officers in 2020 and thus were not part of the retention bonus plan.
 
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Name
  
Retention Bonus

Amount
    
Awarded Amount

As % of Base Salary
 
Harold H. Shlevin, Ph.D.
   $ 125,000        25 % (1) 
Jack W. Callicutt
   $ 151,050        50
 
  (1)
Dr. Shlevin retired as our President and Chief Executive Officer effective September 2, 2020 and thus did not receive a retention bonus at December 31, 2020.
Long-Term Incentive Compensation
The Company believes that by providing its NEOs the opportunity to increase their ownership of Company stock, the interests of its NEOs will be more closely-aligned with the best interests of the Company’s stockholders and it will encourage long-term performance. The stock awards enable the NEOs to participate in the appreciation in the value of the Company’s stock, while personally participating in the risks of business setbacks.
Under the long-term incentive portion of the Program, the NEOs are granted options based upon achievement of the Company performance and individual performance objectives and rank in the Company. All option grants under the Program through December 2019 were made under the 2009 Incentive Compensation Plan. Grants made after January 1, 2020, were made pursuant to the 2019 Omnibus Equity Incentive Plan.
On January 9, 2020, the NEOs were awarded the options noted below based on 2019 performance. Of the options, 25% vest on each of June 30, 2020, December 31, 2020, June 30, 2021 and December 31, 2021. The exercise price of the options is set at the closing price of our stock as of the grant date.
 
Name
  
Grant Date
    
Number of Securities

Underlying Options
    
Exercise Price
 
Harold H. Shlevin, Ph.D.
     1/9/2020        70,000      $ 2.86  
Jack W. Callicutt
     1/9/2020        50,000      $ 2.86  
Material Terms of Employment Contracts of Named Executive Officers
Set forth below are descriptions of the principal terms of the employment agreements for each of our NEOs. Each employment agreement provides for post-termination restrictive covenants and payments due upon termination of employment or change in control of the Company, which is provided in further detail under the section entitled “Potential Payments Upon Termination or Change in Control.”
Joel Lewis, Chief Executive Officer (effective September 2, 2020)
In connection with the appointment of Mr. Lewis, the Company and Mr. Lewis entered into an employment agreement, dated August 31, 2020 (the “
Employment Agreement
”), and a Deferred Stock Unit Agreement, dated August 31, 2020 (the “
DSU Agreement
”). The Employment Agreement has an initial term of two years and automatically renews for
additional one-year terms
thereafter, unless either Mr. Lewis or the Company elects not to renew. Mr. Lewis will serve as Chief Executive Officer of the Company effective as of September 2, 2020 (the “
Start Date
”), and will be paid an annual base salary of $500,000. Under the terms of the Employment Agreement, 20% of his base salary will be paid in cash, and 80% will be paid in the form of deferred-stock-units (“
DSUs
”) in accordance with the terms and subject to the provisions set forth in the DSU Agreement. In addition, Mr. Lewis is entitled to participate in the Company’s performance bonus plan with a potential of up to 50% of his annual base salary, which will also be paid 20% in cash and 80% in DSU’s. Further, Mr. Lewis received on the date of the agreement an initial grant of options to purchase 250,000 shares of the Company’s common stock, par value $0.001 per share, which options shall
vest one-twelfth on
a quarterly basis for twelve consecutive quarters, such that the options shall be fully vested twelve quarters following the date of grant (the “
Award
”). The options under the Award shall be issued pursuant to the Company’s 2019 Omnibus Equity Incentive Plan (the “
Plan
”). Pursuant to the Employment Agreement, Mr. Lewis is also eligible to receive healthcare benefits as may be provided from time to time by the Company to its employees generally, to participate in the Company’s 401(k) plan and to receive paid time off annually in accordance with the Company’s policies in effect from time to time. Finally, pursuant to the Employment Agreement, the Company will be required to furnish a lump sum cash payment to Mr. Lewis upon a termination of Mr. Lewis without “Cause” or upon Mr. Lewis’ resignation for “Good Reason” as such terms are defined in the Employment Agreement or in the event the Company gives notice
of non-renewal on
or before September 30, 2023. The Employment Agreement includes customary intellectual property, assignment, and other representations by Mr. Lewis.
 
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Pursuant to the DSU Agreement, 80% of Mr. Lewis’ base salary under the Employment Agreement shall be payable in DSUs, which DSUs credited to Mr. Lewis as of any date shall be fully vested and nonforfeitable at all times. The Company shall issue the shares underlying the outstanding whole number of DSUs credited to Mr. Lewis as follows: twenty five percent shall be issued on March 1, 2023, twenty five percent shall be issued on September 1, 2023 and fifty percent shall be issued on March 1, 2024.
Harold H. Shlevin, Ph.D., Chief Executive Officer (until September 2, 2020)
Dr. Shlevin retired as Chief Executive Officer effective September 2, 2020. Prior to his retirement his employment was pursuant to an employment agreement dated December 11, 2014 as amended June 8, 2018. Under his employment agreement as amended Dr. Shlevin received a base salary of $500,000 with a target bonus opportunity equal to 50% of his base salary.
In connection with his retirement, Dr. Shlevin entered into a Retirement Agreement with the Company dated August 31, 2020 (the “Retirement Agreement”) and a Consulting Agreement with the Company dated August 31, 2020 (the “Consulting Agreement”). The Retirement Agreement provides that Dr. Shlevin shall receive his base compensation through the separation date of September 2, 2020 plus a cash bonus for 2020 of $210,000 in lieu of any other bonuses. He shall be eligible to receive his portion of the “pharma deal achievement bonus” as established by the Board of Directors of the Company on May 22, 2018 in the event a transaction qualifying under such program were to occur during the term of the Consulting Agreement. In addition, Dr. Shlevin’s previously issued stock option awards under the Plan shall continue to vest so long as Dr. Shlevin provides consulting services to the Company under the Consulting Agreement. The Consulting Agreement has an initial term of one year, and for his services Dr. Shlevin shall receive payment of $432 per hour, but not less than $8,640 per month. The Consulting Agreement also includes certain intellectual property, assignment,
and non-compete obligations
by Dr. Shlevin.
Pol F. Boudes, M.D., Chief Medical Officer
On February 19, 2020, the Company entered into an Employment Agreement with Dr. Boudes (the “
Agreement
”), which governs the terms of Dr. Boudes’ employment in his position as the Company’s Chief Medical Officer. Dr. Boudes will serve as the Chief Medical Officer of the Company during an initial term that commences on March 2, 2020 (the “
Commencement Date
”) and expires on February 28, 2021 (the “
Initial Term
”). Following the Initial Term, the term of the Agreement automatically renews for successive twelve (12) month terms unless either party provides the other party with notice
of non-renewal at
least sixty (60) days prior to the expiration of the then-current term. Under the Agreement, the Company has agreed to pay Dr. Boudes a base salary of $444,500 per year (the “
Base Salary
”). Provided that certain performance objectives are met, Dr. Boudes will also be entitled to receive an annual performance bonus equal to thirty percent (30%) of the Base Salary (the “
Performance Bonus
”). Subject to certain restrictions described in the Agreement, Dr. Boudes will receive a $100,000 signing bonus pursuant to the Agreement. Dr. Boudes will also be granted options to purchase 300,000 shares (the “
Options
”) of the Company’s common stock pursuant to the Company’s 2019 Omnibus Equity Incentive Plan. The Options vest as follows: twenty percent (20%) of the Options shall vest upon one (1) year of employment, twenty percent (20%) of the Options shall vest upon two (2) years of employment, twenty percent (20%) of the Options shall vest upon three (3) years of employment, and the remaining forty percent (40%) of the Options shall vest upon four (4) years of employment.
Jack W. Callicutt, Chief Financial Officer
We entered into an employment agreement with Mr. Callicutt dated July 1, 2013 (the “Callicutt Employment Agreement”), in conjunction with Mr. Callicutt’s appointment as our Chief Financial Officer. Pursuant to the terms of the Callicutt Employment Agreement, Mr. Callicutt received an initial base salary of $175,000 and was eligible to receive a performance bonus equal to 20% of his base salary. Effective March 31, 2015, Mr. Callicutt’s annual base salary was increased to $240,000, and his annual base salary was increased again to $260,000 in February 2016. In June 2018, Mr. Callicutt’s annual base salary increased to $285,000. He also received a signing bonus of $10,000. In addition to his cash compensation, the Company awarded Mr. Callicutt a grant of options to purchase 200,000 shares of the Company’s Common Stock at an exercise price equal to the closing price of the Company’s Common Stock on July 1, 2013, with 25,000 shares vesting on December 31, 2013, 50,000 shares vesting on December 31, 2014, 50,000 shares vesting on December 31, 2015 and 75,000 shares vesting on December 31, 2016. The options were granted pursuant to the 2009 Incentive Compensation Plan and expire ten years after the date of grant.
On August 11, 2017, we entered into an amendment to the Callicutt Employment Agreement with Mr. Callicutt (the “Amendment”). Pursuant to the Amendment, (i) Mr. Callicutt’s target bonus opportunity was increased to 30% of his base salary and (ii) an error in the severance provision of the Callicutt Employment Agreement was corrected. Prior to the Amendment, the Callicutt Employment Agreement did not provide for any severance if Mr. Callicutt’s employment was terminated by the Company “without cause,” or by Mr. Callicutt for “good reason” after the date that was 24 months after the Commencement Date.
 
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Employee Benefits & Perquisites
From time to time, the Company has provided the NEOs with employee benefits and perquisites that our Board believes are reasonable. Our NEOs are eligible to participate in the same broad-based employee benefit plans that are offered to our other employees, such as health insurance, disability insurance, life insurance and a 401(k) plan. These benefits are provided as part of the basic conditions of employment for all of our employees, and therefore providing them to our NEOs does not represent a significant incremental cost to us. The Company does not view employee benefits and perquisites as a significant element of its comprehensive compensation structure, but does believe they can be useful in attracting, motivating, and retaining the executive talent for which the Company competes. The Company believes that these additional benefits may assist the NEOs in performing their duties and provide time efficiencies for the NEOs in appropriate circumstances, and the Company may consider providing additional employee benefits and perquisites in the future. All future practices regarding employee benefits and perquisites will be approved and subject to periodic review by the Compensation Committee.
SUMMARY COMPENSATION TABLE
The following table summarizes the compensation paid to our NEOs for the fiscal years ended December 31, 2020 and 2019.
 
Name and Principal Position
  
Year
 
Salary

($)
    
Bonus

($)
    
Option

Awards

($) (1)
    
All Other

Compensation

($)
   
Total

($)
 
Harold H. Shlevin, Ph.D.,
   2020(2)     375,583        335,000        154,266        54,487 (4)      919,336  
Chief Executive Officer & President
   2019 (3)     500,000        465,625        268,196        72,686  (5)      1,306,507  
Joel Lewis, Chief Executive Officer & President
   2020(10)     164,773        75,000        486,125        27,660 (11)      753,558  
Pol F. Boudes, M.D., Chief Medical Officer
   2020(12)     367,083        210,000        419,460        85,938 (13)      1,082,481  
Jack W. Callicutt,
   2020 (6)     300,675        236,050        110,190        73,457  (8)      720,372  
Chief Financial Officer
   2019 (7)     285,000        233,451        191,568        68,105  (9)      778,124  
 
(1)
Represents the aggregate grant date fair value of option awards made during 2020 and 2019 computed in accordance with the Stock Compensation Topic of the FASB ASC, as modified of supplemented. Fair value was calculated using the Black-Scholes options pricing model. For a description of the assumptions used to determine these amounts, see Note 7 of the Notes to the Consolidated Financial Statements in our Annual Reports on Form
10-K
(or Form
10-K/A,
as applicable) for the fiscal years ended December 31, 2020 and 2019.
(2)
Dr. Shlevin retired from employment as our President and Chief Executive Officer effective September 2, 2020.    His salary in 2020 includes the salary earned prior to his retirement.    Dr. Shlevin’s bonus amount in 2020 consisted of $125,000 retention bonus in July 2020 and a bonus of $210,000 pursuant to his retirement agreement.
(3)    Dr.
Shlevin’s bonus amount in 2019 consisted of $125,000 retention bonuses paid in July 2019 and January 2020 and $215,625 performance bonus earned in 2019 which was paid in January 2020.
(4)
Includes $48,635 for health and other insurance and $5,852 for 401(k) plan contributions.
(5)
Includes $61,486 for health and other insurance and $11,200 for 401(k) plan contributions.
(6)    Mr.
Callicutt’s bonus amount in 2020 consisted of $75,525 retention bonuses paid in July 2020 and January 2021 and $85,000 performance bonus earned in 2020 which was paid in March 2021.
(7)
Mr. Callicutt’s bonus amount in 2019 consisted of $71,250 retention bonuses paid in July 2019 and January 2020 and $90,951 performance bonus earned in 2019 which was paid in January 2020.
(8)
Includes $62,057 for health and other insurance and $11,400 for 401(k) plan contributions.
(9)    Includes
$56,905 for health and other insurance and $11,200 for 401(k) plan contributions.
(10)
Mr. Lewis became our Chief Executive Officer and President effective September 2, 2020, and his performance bonus was prorated for 2021 and paid in March 2021. Pursuant to his employment agreement, 20% his salary and bonus are paid in cash and 80% are in deferred stock units.    
(11)
Includes $25,419 for health and other insurance and $2,341 for 401(k) plan contributions.
(12)
Dr. Boudes became our Chief Medical Officer effective March 2, 2020. He was paid a $100,000 bonus upon joining the Company. His performance bonus of $110,000 was prorated for 2020 and paid in March 2021.
(13)
Includes $74,538 for health and other insurance and $11,400 for 401(k) plan contributions.
 
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OUTSTANDING EQUITY AWARDS AT FISCAL
YEAR-END
2020
The following table sets forth information regarding all outstanding equity awards held by the NEOs at December 31, 2020. The exercise price of the options is set at the closing price of our stock at the date prior to or as of the date of grant. Outstanding options have been approved by our Compensation Committee and our Board.
 
    
Option Awards
    
Stock Awards
 
Name
  
Number of

Securities

Underlying

Unexercised

Options

(#)

Exercisable
 
Number of

Securities

Underlying

Unexercised

Options

(#)

Unexercisable
 
Equity

Incentive

Plan

Awards:

Number of

Securities

Underlying

Unexercised

Unearned

Options

(#)
    
Option

Exercise

Price

($)
  
Option

Expiration

Date
    
Number

of Shares

or Units

of Stock

That

Have Not

Vested

(#)
   
Market

Value of

Shares

or Units

of Stock

That

Have Not

Vested

($)
    
Equity

Incentive

Plan

Awards:

Number of

Unearned

Shares,

Units or

Other

Rights

That

Have

Not

Vested

(#)
    
Equity

Incentive

Plan

Awards:

Market

or Payout

Value of

Unearned

Shares,

Units or

Other

Rights

That

Have Not

Vested

($)
 
Joel Lewis
   54,250 (1)        2.39      12/14/2027        20,455 (12)      45,819      
     35,000 (2)            4.72    01/16/2029                             
     40,000 (3)            2.86    01/09/2030                             
     20,833 (4)   229,167 (4)          2.65    08/31/2030                             
Pol F. Boudes, M.D.
   — (5)   300,000 (5)      1.75      03/12/2030                             
Jack W. Callicutt
   26,000 (6)        13.38      01/21/2024                             
     8,706 (7)            1.37    01/20/2026                             
     90,000 (8)            5.87    01/15/2028                             
     90,000 (9)            4.16    05/22/2028                             
     50,000 (10)            4.72    01/16/2029                             
     25,000 (11)   25,000 (11)          2.86    01/09/2030                             
 
(1)
100% of the options vested in full on December 14, 2018.
(2)
100% of the options vested in full on January 16, 2020.
(3)
100% of the options vested in full on December 31, 2020.
(4)
One-twelfth
of the total options vest quarterly from August 31, 2020, which was the grant date.
(5)
20% of the options vest on each of March 2, 2021, March 2, 2022, and March 2023 and 40% of the options vest on March 2, 2024.
(6)
25% of the options vested on January 21, 2014, the grant date with the remainder vested ratably on a monthly basis over a three-year period.
(7)
25% of the options vested on January 29, 2015, the grant date with the remainder vested ratably on a monthly basis over a three-year period.
(8)
25% of the options vested on January 15, 2018 (grant date), 25% vested on June 30, 2018, and 50% vested on December 31, 2018.
(9)
25% of the options vested on June 30, 2018, 25% vested on September 30, 2018, and 50% vested on December 31, 2018.
(10)
25% of the options vested on June 30, 2019, 25% vested on December 31, 2019, 25% vested on June 30, 2020, and 25% vested on December 31, 2020.
(11)
25% of the options vested on June 30, 2020, 25% vested on December 31, 2020, 25% vest on June 30, 2021, and 25% vest on December 31, 2021.
(12)
Mr. Lewis’ stock awards in the table are from board compensation taken in restricted stock in lieu of cash compensation prior to becoming president and CEO in September 2020.
 
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2009 Incentive Compensation Plan
The options granted under our 2009 Incentive Compensation Plan, the options will become immediately vested and exercisable upon a change of control. Upon termination of employment for cause, all outstanding options immediately terminate. Options remain exercisable for one year following termination due to the executive’s death or disability or retirement, or for twelve months after termination for any other reason other than for cause.
Under the 2009 Incentive Compensation Plan, change of control is defined as:
 
  (1)
the acquisition of beneficial ownership of 50% or more of either the value of then outstanding equity securities of the Company or the combined voting power of our securities, except for any acquisition directly from us, any acquisition by us or any person that owns a controlling interest in the Company, or any acquisition by any of our employee benefit plans;
 
  (2)
during any period of three (3) consecutive years, a majority of the Board is no longer comprised of individuals who, as of the beginning of that period, constituted our Board and individuals whose nomination for election was approved by the Board;
 
  (3)
a reorganization, merger, statutory share exchange or consolidation or similar transaction, a sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or equity of another entity by the Company, in each case unless (i) substantially all of the owners, respectively, of our outstanding shares of common stock or the combined voting power of our securities immediately before the transaction beneficially own more than 50% of, respectively, the common stock and the combined voting power of the securities of the resulting corporation, in substantially the same proportions as their ownership immediately prior to the transaction, (ii) no person owns 50% of, respectively, the common stock and the combined voting power of the securities of the resulting corporation, unless such ownership existed prior to the transaction and (iii) at least a majority of the members of the board of directors of the resulting entity were members of the Board of Directors of the Company at the time of the execution of the initial agreement or of the action of the Board providing for such transaction ; or
 
  (4)
approval by the stockholders of a complete liquidation or dissolution of the Company.
“Disability” is defined as a permanent and total disability (within the meaning of Code Section 22(e)), as determined by a medical doctor satisfactory to the Compensation Committee.
“Cause” means the failure by the executive to perform, in a reasonable manner, his or her duties as assigned by the Company, (ii) any violation or breach by the executive of his or her employment, consulting or other similar agreement with the Company, if any, (iii) any violation or breach by the executive of any
non-competition,
non-solicitation,
non-disclosure
and/or other similar agreement with the Company, (iv) any act by the executive of dishonesty or bad faith with respect to the Company, (v) use of alcohol, drugs or other similar substances in a manner that adversely affects the executive’s work performance, or (vi) the commission by the executive of any act, misdemeanor, or crime reflecting unfavorably upon the executive or the Company.
2019 Omnibus Equity Incentive Plan
Under the 2019 Omnibus Equity Incentive Plan, if there is a merger or consolidation of the Company with or into another corporation or a sale of substantially all of the Company’s stock (a “Corporate Transaction”), and the outstanding awards are not assumed by surviving company (or its parent company) or replaced with economically equivalent awards granted by the surviving company (or its parent company), the Company will cancel any outstanding awards that are not vested and nonforfeitable as of the consummation of such Corporate Transaction (unless the Company accelerates the vesting of any such awards) and with respect to any vested and nonforfeitable awards, the Company may either (i) allow all grantees to exercise options and SARs within a reasonable period prior to the consummation of the Corporate Transaction and cancel any outstanding options or SARs that remain unexercised upon consummation of the Corporate Transaction, or (ii) cancel any or all of such outstanding awards (including options and SARs) in exchange for a payment (in cash, or in securities or other property) in an amount equal to the amount that the grantee would have received (net of the exercise price with respect to any options or SARs) if the vested awards were settled or distributed or such vested options and SARs were exercised immediately prior to the consummation of the Corporate Transaction. If an exercise price of the option or SAR exceeds the fair market value of our Common Stock and the option or SAR is not assumed or replaced by the surviving company (or its parent company), such options and SARs will be cancelled without any payment to the grantee.
 
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Employment Agreements with our Named Executive Officers
Joel Lewis:
Under Mr. Lewis’ Employment Agreement, the Company is required to furnish a lump sum cash payment to Mr. Lewis upon a termination of Mr. Lewis without “Cause” or upon Mr. Lewis’ resignation for “Good Reason” as such terms are defined in the Employment Agreement or in the event the Company gives notice of
non-renewal
on or before September 30, 2023.
Under the Deferred Stock Unit Agreement, if a Change in Control of the Company occurs prior to the date on which Mr. Lewis is scheduled to receive shares and cash in an installment payment or in a lump sum (a “Settlement Date”), Mr. Lewis’ account will be credited with the consideration payable in such Change in Control with respect to the shares subject to the DSUs then credited to Mr. Lewis’ Account immediately prior to such Change in Control. If Mr. Lewis’ employment with the Company continues after a Change in Control, Mr. Lewis’ account will be credited with the cash value of the portion of his base salary and annual performance bonus that would have been credited in the form of DSUs but for the Change in Control. The portion of Mr. Lewis’ Account denominated in cash pursuant to the preceding sentence (i.e., the amount attributable to base salary and annual performance bonuses credited to Mr. Lewis’ Account after the Change in Control) shall be credited with interest at three (3%) percent compounded annually. For avoidance of doubt, a Change in Control shall not result in acceleration of the settlement of Mr. Lewis’ Account and the payment of all amounts or other property credited to Mr. Lewis’ Account in connection with the Change in Control shall be paid or delivered to Mr. Lewis on as soon as reasonably practicable after the Settlement Date.
Pol Boudes:
Under the Employment Agreement with Dr. Boudes, if (i) Dr. Boudes terminates the Agreement for Good Reason (as defined in the Agreement) or (ii) the Company terminates the Agreement without Cause (as defined in the Agreement), then the Company shall pay to Dr. Boudes: (1) the Base Salary accrued through the date of termination, (2)(A) if termination occurs within twelve (12) months of the Commencement Date, an amount equal to three (3) months of the Base Salary, or (B) if such termination occurs after the twelve-month anniversary of the Commencement Date, but prior to the eighteen-month anniversary of the Commencement Date, an amount equal to six (6) months of the Base Salary or (C) if termination occurs after the eighteen-month anniversary of the Commencement Date, but prior to the twenty four-month anniversary of the Commencement Date, an amount equal to nine (9) months of Base Salary or (D) if termination occurs after the twenty four-month anniversary of the Commencement Date, an amount equal to twelve (12) months of the Base Salary, (3) reimbursement of unreimbursed expenses and (4) payment of a portion of the Performance Bonus.
If, within the period ending twelve (12) months after the date of a Change of Control, Dr. Boudes’ employment with the Company is (i) terminated without Cause or (ii) terminated for Good Reason by Dr. Boudes, the Company shall pay to Dr. Boudes (A) the Base Salary accrued through the date of termination, to the extent not theretofore paid, (B) reimbursement of any unreimbursed expenses, (C) a
pro-rated
amount of the Performance Bonus assuming payout at maximum performance and (D) an amount equal to twelve (12) months of Base Salary, payable in a lump sum no later than thirty (30) days following such termination. Upon any such Change of Control, Dr. Boudes’ unvested Options shall be one hundred percent (100%) vested, but shall otherwise continue to be governed by the terms and conditions of the Plan and the applicable stock option agreement.
Jack Callicutt:
Mr. Callicutt’s Employment Agreement provides that if, within the period ending twelve (12) months after the date of a Change of Control, Mr. Callicutt’s employment with the Company is (i) without Cause by the Company (or by the acquiring or successor business entity following a Change of Control), or (ii) terminated for Good Reason by Mr. Callicutt, the Company shall pay to Mr. Callicutt (A) the Base Salary accrued through the date of termination, to the extent not theretofore paid, (B) reimbursement of any unreimbursed expenses, (C) a portion of the amount of the Performance Bonus (as defined in the Employment Agreement) equal to the maximum amount of the Performance Bonus multiplied by a fraction, (X) the numerator of which shall be the number of days elapsed from the beginning of the calendar year in which such termination occurs and (Y) the denominator of which shall be the total number of days in the calendar year in which such termination occurs (being 365 in a full year and 184 in 2013) and (D) an amount equal to twelve (12) months of Mr. Callicutt’s Base Salary, payable in a lump sum no later than thirty (30) days following such termination. Upon any such Change of Control, Mr. Callicutt’s unvested options to purchase shares of the Company’s common stock shall be one hundred percent (100%) vested, but shall otherwise continue to be governed by the terms and conditions of the Stock Option Agreement. However, if, in connection with a transaction that technically meets, or may meet, the definition of Change of Control (as defined in the Employment Agreement), Mr. Callicutt’s employment by the Company or a successor to the Company is
 
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terminated, but Mr. Callicutt is immediately
re-hired
as an employee of a successor to the Company or surviving company in such a transaction in a comparable position, with the same or greater total annual cash compensation, including bonus potential, and with an employment agreement containing substantially equivalent provisions as this Agreement with respect to termination of the Mr. Callicutt and severance, no benefits shall be payable under the Change of Control provision of the Employment Agreement.
DIRECTOR COMPENSATION
The following table details the total compensation earned by our
non-employee
directors during the year ended December 31, 2020.
 
Name
  
Fees Earned

or Paid in

Cash ($)
    
Restricted

Stock

Awards

($) (4)
    
Option

Awards

($) (2)
    
Non-Equity

Incentive Plan

Compensation

($)
    
All Other

Compensation

($) (3)
    
Total

($)
 
Gilbert F. Amelio, Ph.D.
     47,000               87,997                      134,997  
James C. Czirr
     38,500               65,998                      104,498  
Kevin D. Freeman
     48,500               98,997                      147,497  
Kary Eldred
     42,500               65,998                      108,498  
Joel Lewis
            58,500        87,997                      146,497  
Gilbert S. Omenn, M.D., Ph.D.
     45,000               87,997                      132,997  
Marc Rubin, M.D.
     38,500               65,998                      104,498  
Elissa J. Schwartz, Ph.D. (1)
     11,569                                    11,569  
Harold H. Shlevin, Ph.D. (1)
     11,569                                    11,569  
Richard Uihlein
            35,000        98,997                      133,997  
Richard A. Zordani (1)
     16,528                                    16,528  
 
(1)
Dr. Schwartz and Mr. Zordani were appointed to the board effective August 31, 2020. Dr. Shlevin retired as our Chief Executive Officer and president effective September 2, 2020 but retained his position on our board.    Dr. Shlevin’s board compensation is for the period after his retirement from employment through the end of the year.    
(2)
Represents the grant date fair value of option awards based upon the Black Scholes valuation model made in 2020. Options were granted on January 9, 2020 and will vested in full on December 31, 2020. For a description of the assumptions used to determine these amounts, see Note 7 to the Notes to the Consolidated Financial Statements herein our Annual Report on Form
10-K
for the fiscal year ended December 31, 2020.
(3)
Excludes travel expense reimbursements.
(4)
Mr. Lewis and Mr. Uihlein elected to receive restricted stock in lieu of cash retainer for their service. The restricted shares vest in full on January 9, 2021.
 
Name
  
Number of

Shares Subject

to Option

Awards Held as of

December 31,

2020
 
Gilbert F. Amelio, Ph.D.
     75,000  
James C. Czirr
     755,125  
Kary Eldred
     101,875  
Kevin D. Freeman
     179,839  
Joel Lewis (1)
     379,250  
Gilbert S. Omenn, M.D., Ph.D.
     178,750  
Marc Rubin, M.D.
     104,565  
Richard Uihlein
     66,362  
  
 
 
 
TOTAL
     1,436,154  
  
 
 
 
 
  (1)
Mr. Lewis became our Chief Executive Officer and president effective September 2, 2020 and was granted 250,000 stock options which is included here.    
 
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For a more detailed description of the assumptions used for purposes of determining grant date fair value, see Note 7 to the Consolidated Financial Statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates — Stock-Based Compensation” included herein the Form
10-K
for the 2020 fiscal year.
We also reimburse our directors for reasonable travel and other related expenses.
Pursuant to the Company’s cash compensation program for directors,
non-employee
directors of the Company will receive an annual cash retainer of $35,000. Each Nominating and Corporate Governance Committee member will receive an additional cash retainer of $3,500; each Compensation Committee member will receive an additional cash retainer of $5,000; and each Audit Committee member will receive an additional cash retainer of $7,500. In addition to the annual fee and committee membership retainers, the Nominating and Corporate Governance Committee Chairman will receive an annual cash retainer of $3,500; the Compensation Committee Chairman will receive an annual cash retainer of $5,000; and the Audit Committee Chairman will receive an annual cash retainer of $7,500. Additionally, in December 2016, the Board approved cash retainers of $3,500 to be paid to each member of the Board’s investor relation/public relations committee.
On January 9, 2020, stock option grants were made to
non-employee
directors which vest 100% on December 31, 2020. The Chairman and Vice-Chairman were each granted 45,000 stock options, the chairs of the Nominating and Corporate Governance Committee, the Audit Committee and the Compensation Committee were each granted 40,000 stock options and remaining
non-employee
directors were each granted 30,000 stock options.
 
Item 12.    
Security
Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth, as of February 28, 2021, certain information concerning the beneficial ownership of our common stock and Series A Preferred Stock by (i) each person known by us to own beneficially five percent (5%) or more of the outstanding shares of each class, (ii) each of our directors and named executive officers, and (iii) all of our executive officers and directors as a group. The table also sets forth, in its final column, the combined voting power of the voting securities on all matters presented to the stockholders for their approval at the Annual Meeting, except for such separate class votes as are required by law.
The number of shares beneficially owned by each 5% stockholder, director or executive officer is determined under the rules of the Securities and Exchange Commission, or SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under those rules, beneficial ownership includes any shares as to which the individual or entity has sole or shared voting power or investment power and also any shares that the individual or entity has the right to acquire within 60 days after February 28, 2021 through the exercise of any stock option, warrant or other right, or the conversion of any security. Unless otherwise indicated, each person or entity has sole voting and investment power (or shares such power with his or her spouse) with respect to the shares set forth in the following table. The inclusion in the table below of any shares deemed beneficially owned does not constitute an admission of beneficial ownership of those shares.
 
Name and Address (1)
  
Shares of

Common

Stock

Beneficially

Owned (2)
   
Percent of

Common

Stock (3)
   
Shares of

Series A

Preferred

Stock

Beneficially

Owned
   
Percent of

Series A

Preferred

Stock (4)
 
5% Stockholders
        
James C. Czirr
     13,610,095  (5)      21.4     100,000       7.5
10X Fund, L.P. (8)
     12,068,687  (6)      19.2            
David Smith (9)
                 175,000       13.2
Early Equities LLC (9)
                 100,000  (7)      7.5
Richard E. Uihlein (11)
     11,223,949  (12)      18.6            
Directors and Named
Executive Officers
        
James C. Czirr
     13,610,095  (5)      21.4     100,000       7.3
Gilbert F. Amelio, Ph.D.
     139,614       *              
Kevin Freeman
     888,881  (10)      1.5            
Joel Lewis
     361,785       *              
Gilbert S. Omenn, M.D., Ph.D.
     260,990       *       50,000       3.7
Marc Rubin, M.D.
     118,146       *              
Richard E. Uihlein
     11,223,949  (12)      18.6            
Richard A. Zordani
     15,353       *              
 
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Table of Contents
Name and Address (1)
  
Shares of

Common

Stock

Beneficially

Owned (2)
 
Percent of

Common

Stock (3)
 
Shares of

Series A

Preferred

Stock

Beneficially

Owned
  
Percent of

Series A

Preferred

Stock (4)
Elissa J. Schwartz
         
Kary Eldred
   911,575 (13)   1.6%     
Harold H. Shlevin, Ph.D.
   366,706   *     
Pol F. Boudes
   60,000   *     
Jack W. Callicutt
   293,905   *     
All executive officers and directors as a group (13 persons)
   28,250,999 (14)   42.4%   150,000    11.0%
 
* Less than 1%.
(1)
Except as otherwise indicated, the address for each named person is c/o Galectin Therapeutics Inc., 4960 Peachtree Industrial Blvd., Suite 240, Norcross, GA 30071.
(2)
Includes the following number of shares of our common stock issuable upon exercise of outstanding stock options granted to our named executive officers and directors that are exercisable within 60 days after February 28, 2021.
 
Directors, Nominees and Named Executive Officers
  
Options Exercisable

Within 60 Days
 
James C. Czirr
     755,125  
Gilbert F. Amelio, Ph.D.
     75,000  
Marc Rubin, M.D.
     104,565  
Gilbert S. Omenn, M.D., Ph.D
     178,750  
Kevin Freeman
     179,839  
Kary Eldred
     101,875  
Joel Lewis.
     170,916  
Richard E. Uihlein.
     66,362  
Harold Shlevin, Ph.D.
     358,000  
Pol F. Boudes, M.D.
     60,000  
Jack Callicutt
     289,706  
  
 
 
 
All executive officers and directors as a group
     2,340,138  
  
 
 
 
 
(3)
For each named person and group included in this table, percentage ownership of our common stock is calculated by dividing the number of shares of our common stock beneficially owned by such person or group by the sum of (i) 57,156,030 shares of our common stock outstanding as of February 28, 2021 and (ii) the number of shares of our common stock that such person has the right to acquire within 60 days after February 28, 2021.
(4)
Based on 1,302,500 shares of Series A preferred stock outstanding as of February 28, 2021.
(5)
Includes (i) 12,068,687 shares of common stock and stock held by 10X Fund, L.P., as to which Mr. Czirr, in his capacity as a managing member of 10X Capital Management Fund, LLC, a Florida limited liability company and general partner of 10X Fund (referred to herein as 10X Management) has shared voting and investment power, and disclaims beneficial ownership, which shares consist of: 5,732,253 common shares issuable upon exercise of warrants; shares of common stock acquired upon exercise of warrants; and common shares issued as stock dividends paid on the Series B preferred stock which is net of shares sold or distributed to 10X Fund, L.P.; and (ii) 1,541,408 shares of common stock owned directly by Mr. Czirr, consisting of 769,616 shares of common stock owned by Mr. Czirr, 755,125 shares issuable upon the exercise of vested stock options owned by Mr. Czirr, and 16,667 shares of our common stock issuable upon conversion of Series A preferred stock owned by Mr. Czirr.
(6)
Includes 5,732,253 common shares issuable upon exercise of warrants; shares of common stock acquired upon exercise of warrants; and common shares issued as stock dividends paid on the Series B preferred stock which is net of shares sold or distributed to 10X Fund limited partners, as to which Mr. Czirr, in his capacity as a managing member of 10X Capital Management Fund, LLC, a Florida limited liability company and general partner of 10X Fund, has voting and investment power, and disclaims beneficial ownership, of these securities.
(7)
Mr. Smith is the manager of Early Equities LLC, a Connecticut limited liability company, and may be deemed to have voting and investment control over, but disclaims beneficial ownership of, the shares of Series A preferred stock.
(8)
Contact: c/o 10X Capital Management, LLC at Investment Law Group attn: Bob Mottern 545 Dutch Valley Road NE, Suite A, Atlanta, GA 30324.
(9)
Contact: c/o David Smith 34 Shorehaven Road E., Norwalk, CT 06855.
 
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Table of Contents
(10)
Includes 569,141 shares of the Company’s common stock managed by Cross Consulting and Services, LLC, a Texas limited liability company, d/b/a Freeman Global Investment Counsel. Mr. Freeman, in his capacity as CEO of Freeman Global Investment Counsel, has voting and investment control over, but disclaims beneficial ownership of, these shares.
(11)
Contact: c/o Uline Corporation, 12575 Uline Drive, Pleasant Prairie, WI 53158
(12)
Includes (i) 7,937,869 shares of common stock, (ii) 3,136,384 common shares issuable upon the exercise of common stock purchase warrants, (iii) 66,362 common shares issuable upon the exercise of common stock options, and (iv) 83,334 common shares issuable upon conversion of Series C preferred
non-voting
stock.
(13)
Includes 44,915 shares of common stock, 16,869 common stock purchase warrants, and 101,875 common stock options personally owned by Mr. Eldred and 431,527 shares of common stock and 311,964 common stock purchase warrants owned by two private foundations over which Mr. Eldred shares management control, and 4,425 shares of Common Stock held in a trust for a minor child; however, Mr. Eldred disclaims beneficial ownership of the shares and warrants owned by such private foundations and trust.
(14)
Includes 5,732,253 common shares issuable upon exercise of warrants and common shares acquired upon exercise of warrants or issued as stock dividends on the Series B preferred stock net of shares sold or distributed to 10X Fund limited partners, as to which Mr. Czirr has voting and investment control but are counted one time for purposes of this total. For additional information about the beneficial ownership of our capital stock by Mr. Czirr, see note 5.
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information as of December 31, 2020 about the securities issued, or authorized for future issuance, under our equity compensation plans, consisting of our 2001 Stock Incentive Plan, our 2003
Non-Employee
Director Stock Incentive Plan, our 2009 Incentive Compensation Plan and our 2019 Omnibus Equity Incentive Plan at December 31, 2020.
 
Plan Category
  
Number of Securities

to be issued upon

exercise of

outstanding options
    
Weighted-

average

exercise price of

outstanding

options
    
Number of securities

remaining available for

future issuance under

equity compensation

plans (excluding

securities reflected in

column (a))
 
Equity compensation plans approved by security holders
     3,487,575      $ 3.90        2,872,307  
Equity compensation plans not approved by security holders (1)
     500,000      $ 7.02         
  
 
 
    
 
 
    
 
 
 
Total
     3,987,575      $ 4.29        2,872,307  
 
 
(1)
Represents grants by our Board for stock options granted to employees and consultants that are outside of the stockholder approved compensation plans. The shares underlying these grants are not registered upon exercise and have six month holding restrictions under Rule 144 of the SEC.
 
Item 13.    
Certain Relationships, Related Transactions and Director Independence
Certain Relationships and Related Transactions
Except as set forth below, since the beginning of fiscal year 2020, we did not participate in any transactions in which any of the Company Nominees, Series B Directors or Series B Nominees, executive officers, any beneficial owner of more than 5% of our common stock, nor any of their immediate family members, had a direct or indirect material interest.
Our Audit Committee Charter requires that members of the Audit Committee, all of whom are independent directors, conduct an appropriate review of, and be responsible for the oversight of, all related party transactions on an ongoing basis. Except as set forth below, there were no related party transactions during the fiscal year ended December 31, 2020.
The Company has a $10 million Line of Credit arrangement with Richard E. Uihlein, a director and shareholder pursuant to an agreement established in December, 2017 and amended in December, 2018 and January, 2019. Under the arrangement the Company may borrow up to $10 million from Mr. Uihlein on an unsecured basis and with any borrowings bearing interest at the Applicable Federal Rate for short terms loans published by the Internal Revenue Service (0.14% in January 2021). Borrowings may be made through December 31, 2021 with repayment due on December 31, 2022. In connection with the Line of Credit agreement, the Company issued to Mr. Uihlein warrants to purchase 1 million shares of the Company’s common stock for $5 per share. Half of the warrants vested at closing of the Line of Credit and the other half vest ratably with borrowings under the agreement. As of the date of this Annual Report, there have been no borrowings under the Line of Credit.
 
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Compensation Committee Interlocks and Insider Participation
None of our executive officers or directors serves as a member of the board of directors or compensation committee of any entity that has one or more of its executive officers serving as a member of our Board of Directors or Compensation Committee.
Board Determination of Director Independence
Our board of directors has reviewed the materiality of any relationship that each of our directors has with the Company, either directly or indirectly. Based upon this review, our board has determined that all of our directors other than Mr. Lewis and Dr. Shlevin are “independent directors” as defined by The NASDAQ Stock Market. Our board of directors also determined that Drs. Amelio, Rubin, and Mr. Freeman, who comprise our nominating and governance committee, all satisfy the independence standards for such committees established by the SEC and the NASDAQ Marketplace Rules, as applicable. With respect to our audit committee, our board of directors has determined that Messrs. Zordani, Freeman and Eldred satisfy the independence standards for such committee established by Rule
10A-3
under the Exchange Act, the SEC and the NASDAQ Marketplace Rules, as applicable. Furthermore, the Nominating and Corporate Governance Committee, with concurrence by the Board, has determined that Mr. Zordani is an “audit committee financial expert” within the meaning of SEC rules. With respect to our compensation committee, our board of directors has determined that Drs. Omenn, Amelio and Mr. Freeman satisfy the independence standards for such committee established by Rule
10C-1
under the Exchange Act, the SEC and the NASDAQ Marketplace Rules, as applicable.
In making such determinations, the board of directors considered the relationships that each such
non-employee
director or director nominee has with our company and all other facts and circumstances the board of directors deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each
non-employee
director. In considering the independence of our directors, our board of directors considered the association of each such
non-employee
director has with us and all other facts and circumstances our board of directors deemed relevant in determining independence.
 
Item 14.    
Principal
Accountant Fees and Services
The Board of Directors has appointed Cherry Bekaert LLP as our independent auditors for the fiscal year ending December 31, 2020.
FEES PAID TO CHERRY BEKAERT LLP
 
    
Fiscal Year

2020
    
Fiscal Year

2019
 
Audit Fees (1)
   $ 135,000      $ 161,000  
Audit-Related Fees (2)
     14,323        22,000