SCHEDULE: Fairmount Funds Boosts Galecto Stake to 19.99% Post-Damora Merger

Fairmount Funds Management and its affiliates have reported a 19.99% beneficial ownership in Galecto, Inc. following the acquisition of Damora Therapeutics and a $285 million PIPE financing.

Summary

• Fairmount Funds Management LLC and its affiliates (Fairmount Healthcare Fund II L.P., Fairmount Healthcare Co-Invest V L.P., Peter Harwin, and Tomas Kiselak) have filed a Schedule 13D, reporting a 19.99% beneficial ownership in Galecto, Inc.
• The beneficial ownership includes 397,000 shares of Common Stock issuable upon conversion of 397 shares of Series C Preferred Stock held by Fund II.
• Galecto, Inc. acquired Damora Therapeutics, Inc. on November 10, 2025, through a merger agreement.
• In connection with the merger, Galecto issued 265,309 shares of Common Stock, 16,366 shares of Series B Preferred Stock, and 4,241 shares of Series C Preferred Stock to Damora stockholders.
• Galecto also completed a private investment in public equity (PIPE) financing on November 12, 2025, selling 39,641 shares of Series C Preferred Stock for approximately $285 million to investors, including the Reporting Persons.
• The conversion of Series B and Series C Preferred Stock is subject to a beneficial ownership limitation of 19.99% of outstanding Common Stock, which will reduce to 9.99% if Fairmount and its affiliates beneficially own 9.0% or less of Common Stock.
• Peter Harwin, a managing member of Fairmount Funds Management, serves on Galecto's board of directors.
• Galecto plans to hold a stockholders' meeting to approve the conversion of preferred stock, the redomicile of the company, and potentially a reverse stock split to maintain Nasdaq listing standards.
• Certain Damora stockholders and Galecto directors/officers, including the Reporting Persons, entered into 180-day lock-up agreements on shares held at the merger closing.
• Galecto is required to file a resale registration statement with the SEC within 45 calendar days following the financing closing date.

Sentiment

Score: 7

Explanation: The filing details a significant strategic merger and a substantial capital raise, indicating growth and investor confidence. However, the complexities of preferred stock conversions and the need for shareholder approvals introduce some operational hurdles.

Positives

• Galecto completed a strategic merger with Damora Therapeutics, Inc., potentially expanding its pipeline or capabilities.
• The company secured a substantial $285 million in PIPE financing, indicating significant investor confidence and providing capital for future operations.
• Fairmount Funds Management and its affiliates have taken a significant 19.99% beneficial ownership stake, suggesting a strong belief in the company's prospects.

Risks

• The conversion of Series B and Series C Preferred Stock is subject to a beneficial ownership limitation of 19.99%, which could restrict immediate full conversion.
• Shareholder approval is required for key corporate actions, including the conversion of preferred stock, the redomicile of the company, and potential amendments to the certificate of incorporation or a reverse stock split.
• A potential reverse stock split may be necessary to maintain compliance with Nasdaq listing standards, which can sometimes be perceived negatively by the market.

Future Outlook

Galecto, Inc. intends to hold a stockholders' meeting to seek approval for the conversion of Series B and Series C Preferred Stock into Common Stock, the redomicile of the company, and potentially an amendment to its certificate of incorporation to authorize sufficient shares or effect a reverse stock split to maintain Nasdaq listing standards. The company is also committed to filing a resale registration statement with the SEC within 45 calendar days following the financing closing date.

Industry Context

This announcement reflects a strategic move within the biotechnology or pharmaceutical sector, where a publicly traded company (Galecto) is acquiring a private entity (Damora Therapeutics). Such mergers are often driven by the desire to expand product pipelines, acquire new technologies, or consolidate market positions. The accompanying PIPE financing is a common method for funding such transactions and indicates external investor confidence in the combined entity's future prospects, aligning with broader trends of capital deployment in growth-oriented life sciences companies.

Corporate Governance

Stakeholder Impact

• Shareholders: Will be required to vote on significant corporate actions including preferred stock conversion, company redomicile, and potential reverse stock split. Their ownership percentage may be diluted by preferred stock conversions.
• Investors (Fairmount Funds Management LLC and affiliates): Have significantly increased their beneficial ownership and hold preferred stock with protective provisions, giving them substantial influence and a stake in the company's future.
• Damora Stockholders: Received Galecto shares (Common, Series B, Series C Preferred) as consideration for the merger, subject to a 180-day lock-up period.
• Company Management/Board: Peter Harwin, a managing member of Fairmount, is on the board, indicating direct investor representation and influence on corporate activities.

Next Steps

• Galecto, Inc. will hold a stockholders' meeting to approve the conversion of Series B and C Preferred Stock, the redomicile of the Company, and potentially an amendment to the certificate of incorporation for sufficient shares or a reverse stock split.
• Galecto, Inc. intends to file a proxy statement and other relevant materials with the SEC regarding the upcoming stockholder meeting.
• Galecto, Inc. is required to prepare and file a resale registration statement with the SEC within 45 calendar days following the Financing Closing Date (November 12, 2025).

Key Dates

Keywords

Galecto, Damora Therapeutics, Merger, Acquisition, PIPE Financing, Schedule 13D, Beneficial Ownership, Preferred Stock, Convertible Securities, Nasdaq Listing, Fairmount Funds