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Galectin Therapeutics (GALT) is the only publicly traded company with a Galectin-3 inhibitor in clinical trials. Galectin-3 over-expression is implicated in numerous diseases. New data is emerging from the company's clinical trials that shows strong evidence for the efficacy of GR-MD-02 (belapectin) in humans. The market potential is striking, especially as we take a look at GALT's latest clinical data across a variety of disease indications.
There is consensus in the research community that aberrant glycosylation (faulty enzymatic process to construct glycan molecules) plays a significant role in numerous diseases. Errors in glycosylation result in over-expression of Galectin-3, fueling inflammation, fibrosis, and cancer metastasis. According to the journal Nature article "Glycosylation in health and disease" a new field of medicine is emerging known as "glycomedicine."
GALT is the first company to apply glycomedicine for the treatment of advanced nonalcoholic steatohepatitis (NASH), the #1 untapped market of big pharma, and the first company to apply glycomedicine in combo with cancer immunotherapy, which account for the #4 (Bristol-Myers' (BMY) Opdivo) and #5 (Merck's (MRK) Keytruda) top selling drugs of 2018.
Investors are typically cautious about clinical stage biotech companies until there is evidence that the drug will have a therapeutic effect in humans. In this article, we will take a closer look at the efficacy of GR-MD-02 in human clinical trials, and what the latest research says about additional disease indications to further expand GALT's addressable market.
Are the clinical results described below all by coincidence?
If not, then GALT is extremely undervalued. With the conclusion of the subscription rights offering and start of the NASH-RX Phase 3 clinical trial just around the corner, GALT is primed to reach a much higher market cap similar to, or above its NASH Phase 3 peers.
First, let's start with the latest news in clinical research.
Expanding Cancer Indications
About 80 percent of men of age 80 have prostate cancer cells in their prostate. A review article recently published on April 23 2019 in the prestigious journal Nature concludes that "Understanding the roles of galectin family proteins in the development and progression of prostate and bladder cancer could yield key insights to inform the clinical management of these diseases."
The article specifically mentions the Galectin-3 inhibitor, GR-MD-02, developed by Galectin Therapeutics: "Inhibition of Gal3 with GR-MD-02, a polysaccharide polymer with high affinity for Gal3, increased survival in the TRAMP- C1 prostate cancer cell line model, and this agent has also been tested in combination with immunotherapy in ongoing clinical trials designed for melanoma, non-small cell lung cancer and head and neck squamous cell carcinoma."
Pancreatic cancer is another potential future indication for GR-MD-02. According to the review paper "The glycosylation landscape of pancreatic cancer" recently published in Oncology Letters, "It is likely that galectin specific targeting will have a broad therapeutic potential in pancreatic cancer, either alone or in combination with other therapies."
These are just two recent examples where cancer specialty researchers are turning their focus to galectins in the tumor microenvironment.
Evidence For GR-MD-02 In Human Cancer
The prostate and bladder cancer article in the journal Nature (above) is referring to the clinical trial of GR-MD-02 and Merck's (MRK) Keytruda run by Dr. Walter Urba's team at Chiles Research Institute/Providence Medical Center. This is the same research institute that helped win the 2018 Nobel Prize in Medicine for the early clinical trials that led to the discovery of checkpoint inhibitor (aPD-1) cancer immunotherapy.
It says something about GALT's drug that this world-renowned team is spending their time researching the human efficacy and mechanism of action of GR-MD-02 - which is soon to advance to Phase 2 for melanoma, head & neck, and non-small cell lung cancer.
In the Chiles/Providence Phase 1b clinical trial, GR-MD-02 increased the efficacy and reduced the side effects of Merck's Keytruda as combo therapy. Read more details about this combination approach in the Seeking Alpha article "GR-MD-02: Keytruda’s Partner."
The following medical scans visualize the impact of this clinical research on human lives today:
Providence presented their findings on GR-MD-02 Mechanism of Action (MOA) at the Keystone Symposia in March 2019. Keystone Symposia is a conference where researchers are invited to discuss significant breakthroughs prior to publication. While originally known as the UCLA Symposia, in 1984 the meeting "was widely credited with catalyzing a consensus that AIDS was caused by a retrovirus now known as the Human Immunodeficiency Virus."
The title of this oral (yet to be published) presentation at the Keystone Symposia is "Galectin-3 Inhibition with GR-MD-02 Synergizes with T Cell-Targeting Immunotherapy, Leading to Reduced Immune Suppression and Improved Overall Survival."
Source: Keystone Conference Program
A critically important confirmation of the MOA is the observed reduction in myeloid-derived suppressor cells (MDSC) which allow cancer cells to hide from the immune system. Further, multiplex immunohistochemistry (mIHC) shows a correlation with human Gal3 expression and response:
Source: Corporate Update
An independent study published in March 2019 by Italian researchers examined the effect of Galectin-3 levels on immunotherapy with Merck's Keytruda. The large majority of patients with high galectin-3 expression (red lines) showed disease progression after 20 weeks of follow-up; whereas patients with negative–low/intermediate galectin-3-expressing tumors (green lines) showed significant sensitivity to Keytruda immunotherapy.
This result is explored in the Seeking Alpha article "The Galectin Signature."
Evidence For GR-MD-02 In Human Plaque Psoriasis
During the Phase 1 NASH trial, "a clinical effect on plaque psoriasis was observed in a NASH patient who also had this disease. This patient had marked improvement in her psoriasis, with improvement beginning after the third infusion. She reported that her psoriasis was "completely gone" and her skin was "normal" after the fourth infusion. Her skin remained normal for 17 months after the final infusion of study drug."
"As a followup to this serendipitous finding, four patients who received 24 weeks of therapy experienced an average of 48% improvement in their plaque psoriasis. At this time, the average response in all five patients remains at 50% with one patient having an 82% improvement."
Evidence for GR-MD-02 in Human Liver Disease (NASH)
Galectin Therapeutics is now preparing to start the NASH-RX Phase 3 clinical trial for NASH cirrhosis (estimated first patient ~ Fall 2019).
This is the lead indication for the company, as there are currently no FDA approved medications for NASH cirrhosis, and this is a large target market as NASH reaches epidemic levels around the world.
GR-MD-02 targets the liver fibrosis pathway directly, which is key for patients who are in the advanced stages of cirrhosis who require an effect on fibrosis, rather than a reduction in lipids. Most other competing NASH trials target metabolic pathways, which in most cases can also be addressed with diet and exercise. Thus, GALT is addressing the patient population that is most likely to be diagnosed (NASH is known as a silent disease) and therefore most likely to be reimbursed by insurance for treatment.
The chronic nature of advanced NASH means that treatment will require, at minimum, months or years of therapy (unlike 2 weeks of antibiotics for an infection). This is where the excellent safety profile of GR-MD-02 is key to practical adoption in prescribing guidelines. The safety profile is also an important for consideration for combination approaches with other NASH therapies.
In the NASH-CX Phase 2 trial, treatment with GR-MD-02 prevented the formation of esophageal varices in an important subpopulation of NASH patients. In patients that had not yet developed varices (which result from increased pressure in the liver due to fibrosis), 0 out of 25 (0%) patients in the 2 mg/kg GR-MD-02 cohort went on to develop varices, and 1 out of 23 patients (4%) in the 8 mg/kg cohort developed varices, compared with 18% in the placebo group.
According to the company, the NASH-CX trial is the first time a meaningful statistical reduction in portal pressure and/or the reduction in the development of varices has ever been measured in a Phase 2 NASH trial.
The new NASH-RX Phase 3 trial surrogate endpoint will be the "Proportion of patients in treatment groups who develop esophageal varices vs placebo after 2 years of treatment under an accelerated approval (Subpart H) pathway as a surrogate for the development of large varices."
In other words, the company merely has to repeat the results of the Phase 2 NASH-CX trial in a larger population for success in Phase 3 NASH-RX.
Source: 2018 NASH Summit
Galectins Implicated In Many Diseases
Since galectins (in particular Galectin-1 and Galectin-3) are involved in inflammation, fibrosis, and other mechanisms that interrupt the normal cell-to-cell communication, recent research has proposed galectin inhibitors as potential therapeutic targets for Alzheimer's disease, myocardial infarction (heart attack), and endometriosis.
Financial Plans For NASH-RX Phase 3
At the time of this writing, Galectin Therapeutics has $7 million in unrestricted cash to fund future operations, and a $10 million unsecured line of credit from Richard Uihlein that was recently extended through December 31, 2022. The line of credit was originally issued in 2017, and there have been no borrowings under the line of credit to date.
According to the most recent 10-Q, "The Company believes there is sufficient cash, including availability of the line of credit, to fund currently planned operations at least through June 30, 2020. We will require more cash to fund our operations after June 30, 2020 and believe we will be able to obtain additional financing. The currently planned operations do not include costs related to a planned Phase 3 clinical trial. While the costs of the trial and general overhead during the Phase 3 trial are expected to be approximately $100 million, the costs and timing of such trial is not yet finalized."
GALT is currently in the midst of a subscription rights offering that seeks to raise between $50 to $70 million to fund the start of the Phase 3 NASH-RX trial. This rights offering is likely to be successful in getting Phase 3 started.
So far, the stock price is trending up during the rights offering period, which is a good sign of underlying support and which increases the incentive for existing shareholders to exercise their rights options.
Longtime investor and Chairman of the Board Richard Uihlein has pledged $20 million of his own money as a rights offering pre-commitment. Richard Uihlein is the billionaire founder and owner of Uline Corporation.
In an open letter to shareholders, Chairman Uihlein writes about his strong commitment to the goals of the company in saving lives:
If you're not familiar with what a subscription rights offering is, you're not alone. Subscription rights offerings are rare in the US, but very common in Europe. The easiest way to think about this is like a new IPO for a company that is already publicly traded. It is beyond this article to get into all of the mechanics here, but existing shareholders who are eligible for the offering should see the prospectus for details.
How Will The GALT Subscription Rights Offering Affect The Stock Price?
I wanted to find out: does this method of financing foreshadow good or bad things for the future stock price?
According to a 2016 study published in the Journal of Financial Economics that investigated why institutions participate at a higher rate compared to retail investors, "firms that conduct rights offering have an average of 22% institutional ownership before the offering. Between the announcement day and the expiration, institutional ownership increases by four percentage points (t-statistic 3.72). This suggests that as a group institutional owners either oversubscribe or fully subscribe and purchase additional shares. This echoes Kothare who finds remarkably similar increases in the stock ownership of blockholders and firm insiders around rights issues. Kothare shows that post-rights ownership by blockholders increases by 3.9% while inside ownership increases by 3.4%."
Thus, it would make sense to see an increase in the institutional ownership. The fact that these offerings attract institutional investors is in sync with the company's conversion of series B preferred stock into common shares in January 2019 in order to "eliminate private equity like rights and protective provisions to which many institutional investors had objected."
I looked at other examples of subscription rights offerings in recent years and examined the chart for mid-term price trends (up to 3 months to a year, since other events impact a stock beyond that timeframe). Perhaps the most relevant example is Genfit (GNFT/OTCPK:GNFTF) which conducted a subscription rights offering in 2016 to similarly raise funds for their Phase 3 NASH trial (there were no other significant catalysts for GNFTF during this timeframe besides the capital raise):
In this example, GNFTF stock price appreciated in the 6 months after the rights offering. This is consistent with historical analysis of rights offering data, that when the purpose of the new capital is for growth, there is typically a favorable effect on the stock price in the following months.
GALT Is Undervalued Relative To Competitors
There are only five companies starting or in active NASH Phase 3: Galectin Therapeutics (GALT), Intercept Pharmaceuticals (ICPT), Madrigal Pharmaceuticals (MDGL), Genfit, and Allergan (AGN). Gilead (GILD) is not included since their lead NASH drug selonsertib recently failed their clinical trial.
Taking a closer look at the market cap of the 3 companies based in the US (Genfit is based in France, and has not been listed on Nasdaq until this year, and we won't compare Allergan since they have many other drugs that provide their revenues), it is revealing that the competitors have a market cap that is currently ~5 to 10x larger than GALT's market cap. Even if we include Genfit in the financial comparison, their market cap is ~3x larger than GALT:
|Galectin Therapeutics||GR-MD-02 (belapectin)||Anti-Fibrotic (Gal3)||281Mil|
|Intercept Pharmaceuticals||Ocaliva||Metabolic (FXR)||2.80B|
|Madrigal Pharmaceuticals||Resmetirom||Metabolic (THR-β)||1.59B|
When considering that GALT is the only company with a drug that works directly on anti-fibrotic pathways entering/in Phase 3, the large difference in valuations is striking.
The field for metabolic NASH drugs is a crowded field (and in most cases, the metabolic pathway can be improved with diet and exercise); whereas the field for anti-fibrotic NASH drugs (for the seriously ill, advanced cirrhosis patients) has little competition.
The headline of the GALT equity research report with B Riley FBR initiating coverage in February 2019 has the same observation regarding GALT's competitive moat - "Phase III NASH Cirrhosis Candidate Gliding Under the Radar As Competition Clears Out; Initiating at Buy, $11 PT."
This market cap comparison does not include the cancer immunotherapy indication because there is no other company for the basis of comparison that has similar effects as GR-MD-02 (shown to synergize with aPD-1 immunotherapy with zero side effects). We can conservatively estimate that the cancer indication is worth several billion if proven successful.
On top of all of this, the market cap comparison above also has not considered the other diseases where prestigious journals such as Nature are urging the investigation of galectin-3 inhibitors for potential therapeutic effect (e.g. Alzheimer's disease, cardiac disease, and endometriosis).
GALT has a potential platform drug, and we can only begin to imagine the future market value if proven efficacious for the large variety of diseases where Galectin-3 plays a key role in the disease process.
Another way of viewing the additional disease indications on top of NASH is their effect on reducing the investment risk if there are any problems with the NASH-RX clinical trial in the future (GALT has multiple shots on goal).
Biology is complex, and final clinical results and ultimate FDA approval cannot be predicted. We can only make educated guesses about the probability of success. GALT's ability to fully fund NASH-RX Phase 3 and to expand to additional disease indications beyond NASH and cancer depends on the company's ability to secure additional funding or licensing partnerships.
This article is not intended to be investment advice to take any given action, but rather to inspire the starting seed for your own research and due diligence (I've included links to the references to make this easier).
Most biotech investors are cautious until there is a hint of clinical efficacy in humans. GALT is now at the point where there is compelling data for efficacy in multiple disease indications in humans, including both clinical response and understanding of the mechanism of action (MOA), as highlighted in this article.
What is the probability that all of the good results for GR-MD-02 in the early human clinical trials across NASH, cancer immunotherapy, and psoriasis are by chance? What is the corresponding p-value for all of the evidence considered together? In my opinion, this combined p-value would be so low, that GR-MD-02 has essentially demonstrated efficacy in humans (not to mention, the consistency with pre-clinical animal models).
Now, it is only a matter of time before the stock price responds to the start of NASH-RX Phase 3, with more widespread investment community awareness of the potential of GR-MD-02 to save lives for multiple disease indications.
My recommendation is Strong Buy for GALT.
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. I have no business relationship with any company whose stock is mentioned in this article.