Author's note: I am grateful to President & CEO, Dr. Harold Shlevin and management, for the interview.
After waiting for more than 12 months to receive updates on belapectin and the pending Phase 3 trial, I don't think anyone is really interested in the introduction. I perceive most folks want me to get down to the nitty-gritty of the interview. For new investors, I will briefly comment that Galectin Therapeutics (GALT) is a small-cap ($217M) clinical-stage biopharma developing innovative therapeutics for chronic diseases with high unmet medical needs including metastatic and advanced melanoma cancer as well as the fibrotic liver disease, NASH.
The results from the 52-week Phase 2b study suggests belapectin could be an effective anti-fibrotic therapy for compensated NASH cirrhosis. Since these patients could be on therapy for several years, effective drug candidates with good safety and tolerability signals are urgently needed. Overall, the clinical success of belapectin to-date highlights a promising path for its continuing clinical development for compensated NASH cirrhosis, possibly making it the first anti-fibrotic drug candidate to gain regulatory approval for NASH.
The Phase 3 Clinical Trial
As I have discussed with subscribers of the Liver Therapy Forum Marketplace, recruiting pathologically suitable patients is one key to increasing the chances of clinical success of any trial. This is because you cannot demonstrate the presumed therapeutic efficacy of an investigative drug candidate if pathologically unsuitable patients are utilized. So, my first question to Dr. Shlevin focused on patient population and size for the pivotal registration Phase 3 trial.
CEO Dr. Shlevin noted that similar to the Phase 2b trial, biopsied patients with confirmed compensated NASH cirrhosis, will be recruited for the Phase 3 "NASH-RX" trial. About 500-600 patients will be recruited globally to 120 clinical sites (including US and 9 other countries) by an established Contract Research Organization (CRO).
Dr. Shlevin commented that the CRO has international experience in global Phase 3 NASH studies. I think this is very important since this means that the CRO is familiar with country-specific clinical and non-clinical regulations as well as infrastructure needs, that have to be in place prior to and during the trial, to ensure that clearly defined goals for enrollment and completion of the study are met. Patient enrollment is expected to take 12 months.
As with any clinical trial, there are selective criteria commonly used in the clinical setting to diagnose pathologically suitable patients. For the Phase 3 trial, CEO Shlevin highlighted the inclusion criteria: biopsy confirmed NASH cirrhosis who did not have esophageal varices at baseline, but are at high risk of developing esophageal varices; Portal Hypertension of 10-12 mm Hg; Liver stiffness at 20kPa. Based on the inclusion criteria, the Phase 3 trial will recruit patients with stage 2 compensated NASH cirrhosis (see Table 1 and Fig. 1) at high risk of developing esophageal varices.
For the observant investor, you may have noted that patients diagnosed as stage 1 compensated NASH cirrhosis with 6-10 mmHg were used for the Phase 2b study. So, why the difference in disease state in Phase 2b and Phase 3 trials? FDA and clinical endpoint that is why and I explain next.
Table 1: Four-Stage Cirrhosis Classification System (Zipprich et. al. Liver Int. 2012)
The data from the 52-week Phase 2b demonstrated clinically meaningful benefit in a subset of patients (50%) without esophageal varices. Esophageal varices are abnormal, enlarged veins connecting the throat and stomach, which are caused by fibrotic scar tissue that block normal blood flow to the liver. Dr. Shlevin reiterated that the presence/absence of varices is part of standard care for NASH patients and is easily assessed by endoscopy.
For this reason, an important goal of treatment of patients with stage 1 compensated NASH cirrhosis is to prevent progression to varices and complications. That is why the inclusion criteria for patients in the Phase 3 trial is biopsy confirmed NASH cirrhosis who did not have esophageal varices at baseline but are at high risk of developing esophageal varices.
The surrogate endpoint agreed with the FDA for the Phase 3 trial is the progression to varices. This means that to gain accelerated conditional approval via FDA Subpart H pathway, the proportion of patients in treatment groups who develop or progress to esophageal varices should be significantly lower than those who received placebo after 2 years of belapectin treatment. For the Phase 4/long-term study, the composite clinical benefit endpoint includes progression to large varices and development of ascites.
The Phase 3 "NASH-RX" trial will be initiated in Q4/2019 with enrollment expected to conclude by Q4/2020. Top-line data readout is anticipated in Q4/2022 as long as there are no unforeseen delays. Next, I asked Dr. Shlevin about interim data readout after 1 year of belapectin treatment. He said none was planned. Personally, I must say that was a fantastic clinical decision as this should prevent unfounded and erroneous speculative analysis.
But, there will be DSMB monitoring as is typical of clinical trials and DSMB has the authority to unblind the study if safety issues develop. In addition, at the end of the 2-year study, 100 patients from the US clinical sites will be biopsied and their HVPG levels determined. This is to further substantiate the potential clinical benefits of belapectin in preventing/halting the development of progression of varices.
Belapectin is stable for storage at room temperature for a maximum of 36 months. Parallel group, randomized, placebo-controlled, double-blinded, of either 2 mg/kg or 4 mg/kg belapectin or placebo will be administered by i.v. infusion every two weeks for two years to NASH cirrhotic patients who did not have esophageal varices at baseline.
I wanted to know why the 8 mg/kg dose of belapectin was ineffective in the Phase 2b NASH trial. Dr. Shlevin explained that it was possible that due to the pharmacokinetics of belapectin, it may not have been completely metabolized by the liver at that high dose after repeated administration. He also explained that in hindsight, an intermediary dose of 4 mg/kg being used in the Phase 3 trial, should have been included in the Phase 2b study as well.
My final clinical question focused on the expression of galectin-3 on Kupffer cells (i.e. resident liver macrophages) after belapectin treatment. Mechanistically, belapectin specifically binds to galectin-3 proteins in macrophages/Kupffer cells to disrupt its functional effects. Histologically, I wanted to know if the expression levels of galectin-3 on Kupffer cells after belapectin treatment in NASH patients were decreased. Alternatively, could patients be screened histologically for galectin-3 in liver Kupffer cells prior to and after treatment? Dr. Shlevin commented that fibrotic damage to the liver architecture due to compensated NASH cirrhosis made it difficult to make those evaluations. My final question focused on rights offering.
The Financial Plan
Phase 3 "NASH-RX" trial is expected to initially cost $50-70M in the absence of delays and a successful clinical outcome. In Q1/2019, Galectin announced a way to fund the pending Phase 3 trial was via a planned Rights Offering of common stock and warrants to its stockholders to raise between $50M and $70M.
Richard E. Uihlein, chairman of the board, has indicated his non-binding intent to purchase $20M in the offering. I cheekily noted that Richard E. Uihlein is a billionaire and $20M is gas money for him!. Why should folks like me and others waiting on our millions to manifest participate in the rights offering? CEO Shlevin noted he and management felt that a public offering such as this was the best democratic way to let people participate. The press release states that:
In the Rights Offering the Company will distribute to all of its stockholder a non-transferable subscription right to purchase a unit consisting of 0.3 shares of the Company's common stock and a warrant to purchase 0.075 share of the Company's common stock (representing 25% warrant coverage) for each share of common stock they own on the record date.
Further details for the Right Offerings was provided in the recent S-3 filing:
Shareholders can oversubscribe and may get more shares than their current holdings entitle them to if other shareholders do not exercise their rights. Those extra shares will be purchased at a discount and also come with a warrant attached. A GALT shareholder may want to buy extra shares simply to get the warrant and then sell the extra shares at a future date when they have a mall profit. The warrants will be priced at a 25-50% premium but if the trial works, the stock price will be well above that level and the warrants will pay off in a big way.
Given the long time until results will be seen, some investors may want to play GALT via the warrants and not the shares so as not to have their capital tied up so long when there will be no catalysts to move the stock price. If so, the only way to get those warrants is to participate in the offering and the only way to get extra warrants is to use the oversubscription option.
The Rights Offering process involves:
The Company will announce a Record Date on which Shareholders on that date may subscribe for shares and warrants in the Rights Offering. The announcement of the date will occur about 10-14 days prior to the actual Record Date. Then shareholders may subscribe for their pro-rata ownership OR over subscribe for as much of the offering as they choose.
Closing will occur about 3 weeks from the Record Date and that date will be announced concurrently with the Record Date announcement. The Offering consists of about 14M shares and 3.5M warrants to purchase shares which is about 30% of the outstanding shares and 25% warrant coverage on the shares offered. Pricing, which also will be announced, is expected to be a small discount to the market price
At the end of Q1/2019, Galectin filed for subscription rights offering S-3 Registration statement which was recently approved by the SEC. Next, Galectin will set the record date and the dates of the commencement and expiration of the Rights Offering.
I always like to have the last word, after all, it is my article! I decided self-centeredness was not a good quality and I really appreciate Dr. Shlevin chatting with me. Therefore, I will leave you with his thoughts on the rights offering:
We are very excited to be embarking on a Phase 3 program GR-MD-02/belapectin (still old school!) in treatment of compensated NASH cirrhotic patients. We look forward to the continued support of our stockholders in this undertaking. In particular, Mr. Uihlein has been a staunch supporter of the Company and continues to tangibly demonstrate his commitment to the Company. His efforts have been instrumental in helping us advance our development programs targeted to assisting patients with NASH cirrhosis".
Actionable Event, Financials, and Risks
Presently, there are really good things happening at Galectin Therapeutics with the initiation of the Phase 3 trial and rights offering. It has been a really long wait. But, clinical trials are never easy or straightforward which is what makes them exciting in my opinion.
For the investor displeased with the waiting period, try to focus on what this trial will achieve if clinically successful. Always remember, the 500 patients and counting are human beings that may now have a therapeutic option. That is simply beautiful!
To initiate the Phase 3 trial, contractual obligations have to be agreed with the CRO, drug supply manufacturing has to be completed (that is smart!). Belapectin is protected by a strong and robust IP portfolio of 77 granted and 27 pending patents across a broad group of human diseases through at least 2033. Cover composition of matter for complex carbohydrate drugs and/or various methods of use in treatment of fibrosis and other relevant diseases.
Clinical trials are unpredictable and always high risk. While I believe that the likelihood of clinical success is high, delays in patient recruitment, FDA hold, and negative data readout could all impact share the price. Galectin Therapeutics needs to raise enough funds to successfully execute this trial and stay afloat. I must say that rights offering must be successful and the $20M financial backing of billionaire Mr. Uihlein is simply beautiful!.
I am giving Dr. Shlevin the last word again! The pathophysiology of NASH is complex and is incompletely defined and understood. Patients with late phase NASH are at a greater disadvantage than patients with early phase NASH due to the progression of the disease. Furthermore, most investigative drug candidates are in development for early phase NASH leaving patients with cirrhotic NASH few potential therapeutic options. Galectin 3 is at the epicenter of fibrotic injury giving Galectin Therapeutics an advantage in cirrhotic NASH.
The full length article was discussed in more depth with members of my private investing community, Liver Therapy Forum
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Disclosure: I am/we are long GALT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.