Galectin Therapeutics (NASDAQ:GALT) announced compelling clinical data on Atopic Dermatitis (AD). That data alone showed that 3 patients in a pilot study had "clinically significant improvements" This pilot study was expanded from one patient last year who according to Dr. Simon Ritchie "had one male patient with a 20 year history of atopic dermatitis and failed topical steroids, methotrexates, mycphenolate mofetil, phototherapy, Xolair, Xeljanz, and Otezla. After four doses on GR-MD-02 every other week, he showed remarkable improvement and his eczema area and severity index (NYSEARCA:EASI) improved 65% and the severity scoring of atopic dermatitis index (SCORAD) improved 56%." The key quality of life issues were that his itching was nearly resolved and he was sleeping better at night and his eyebrows were re-growing. Two additional patients were enrolled with this investigator and the interim results were presented today summarized in the following slide.
When you look at this limited data set and see that after 4 doses every single patient improved some by a little and some by a lot its not hard to see that if this was expanded to a bigger data set and the results continued there would be clear and convincing evidence of efficacy for the FDA. This would likely translate into fast track drug approval because Severe AD is a condition for which the FDA has classified as having an unmet medical need. It's not hard to make the leap from this pilot study to designing a Pivotal Phase II study with endpoints of EASI and SCORAD as high as 30% a target response rate traditionally used by RECIST to measure a response in Cancer Trials for approval. Please note that the patients in the pilot study are well ahead of this 30% improvement from the baseline and it's likely that the FDA would be less stringent on an indication with an unmet medical need. What makes the risk of failed trial so low is that that safety data surrounding this carbohydrate drug is so good. With over 3000 doses in various indications there have been no Serious Adverse Events (SAE's).
The data for a drug deal exists right now with this interim data because research has implicated the Galectin-3 as the pathway to disease progression in Severe AD. GR-MD-02 is targeting this immune mechanism in skin disease and yielding results. All the company needs to do now is duplication of this same data on a much larger scale and drug approval for this indication is almost a foregone conclusion. The other interesting anecdote to this pilot trial is the dose escalation. This is the first time GR-MD-02 has been increased above 8mg/kg. The reason this is so significant is because in the Psoriasis trial a similar effect was noticed on the treatment curve. After 2 months of dosing the curve flattened out suggesting the dosage or frequency of dose might need to be adjusted to increase the clinical benefit. The same thing happened with AD in the first patient. From weeks 6 - 12 he stabilized then once the dosage was increased his results improved. Although its only one person it's a confirmatory point that higher dosages will likely leader to greater outcomes.
GALT is the only public company actively developing a galectin inhibitor. The Gal-3 is a universal target in Immuno-Oncology (I-O), a target in organ fibrosis, and even implicated in the cause of type 2 diabetes. There are many catalysts coming this year with the next major catalyst on February 7, 2017 at the GTCBio 9th Immunotherapeutics & Immunomonitoring Conference regarding the increase in survival benefit of combination therapy with a galectin inhibitors and improving anti-tumor activity. Following that should be a presentation of Psoriasis at the American Academy of Dermatology (AAD) March 3 -7, 2017. Shortly thereafter it wouldn't be unreasonable to expect final data on this pilot study in Severe AD. When you look at this before and after shot of a Psoriasis patient it's very hard to make the case that this drug doesn't work.
Galectin Therapeutics Annual 2016 Slide Presentation
GALT appears to be very undervalued given its current market capitalization of $32 million. It has a growing pipeline of indications for its lead compound in I-O, AD, Psoriasis, and NASH. NASH and AD will be seeking approval for an unmet medical need. GALT has a pivotal Phase II trial in NASH with top line data due this coming December and if they meet their endpoints this is the first likely candidate for FDA registration of end stage NASH. No other drugs are in development for end stage NASH. The only other company that is arguably closer to approval is Intercept Pharmaceuticals (NASDAQ:ICPT) with its OLCAVIA, but that is for early stage NASH before it's symptomatic.
The global annual market for NASH is estimated to be $20.27 Billion by 2025. That represents a current 99.999% discount to market. Being a little more realistic the CDC estimated the mortality due to chronic liver disease and cirrhosis was 38,170 in 2016. If GR-MD-02 was approved in 2018 for this indication and just went after a little more than 50% of these patients whose only hope is a liver transplant. They would net 20,000 potential patients. The drug cost could be as high as $500,000, the cost of a liver transplant, but if you assumed it was 10% of the cost of the only existing option that would equate to a $50,000 annual treatment cost for 20,000 patients. This drug could arguably do $1.0 Billion in sales its first year provided it meets the endpoints 10 months from now. These estimates are extremely modest to illustrate how the market has not properly digested the risk of a successful outcome. Assuming a 10% chance of approval and assuming a competitor comes in their the following year and takes over the market. This companies risk adjusted market cap should be $100 million or a target price of $3.00/share.
The company has sufficient operating capital in place to report top line NASH CX data in December 2017. The company had $16.0 mil in cash as of September 2016 and added an additional $4.0 mil in December from long term investor Richard Uline. The risk reward profile on this stock is very favorable. The company has spent over $100 mil in developing this technology and the stock is close to the lowest point in the last 7 years.
Give the preponderance of recent data, GR-MD-02 targets the Gal-3 and has a therapeutic effect. The Gal-3 is implicated as one of the primary causes of fibrosis and fibrosis eventually leads to cirrhosis. There is compelling clinical evidence in Psoriasis and AD that GR-MD-02 targets the Gal-3 with is the same exact pathway as in NASH. Robustly designed preclinical animal models also suggest a very favorable outcome in NASH. Even the I-O results seem to be trending very favorably with more data next week. If all 4 indications had a 10% probability of success the cumulative probability of the drug making it to market would be 40%. The only problem with this logic is that the chance of approval in AD has got to be closer to 60% given all they have to do at this point is reproduce the current trial results on a larger scale. It is for this reason that I argue that GR-MD-02 is an approvable drug right now and given that should be valued closer to 50% of 2018 potential revenue.
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.