GALT - Galectin Therapeutics: In For A Long 2-Year Wait

Summary

• The company is all-in on the results of one clinical trial coming in 2024.
• They have to borrow, albeit at favorable terms, to stay afloat until then.
• There are few, if any, catalysts in the meantime.

Galectin Therapeutics ( GALT ), is a microcap (<$70 million) biopharmaceutical company focusing on fibrotic disease and cancer and a leading developer of therapeutics that target galectin proteins. Galectin’s lead drug belapectin (galactoarabino-rhamnogalacturonate, GR-MD-02) is a complex carbohydrate that targets and inhibits the galectin-3 protein which is associated with multiple inflammatory, fibrotic, and malignant diseases. It is the most advanced anti-inflammatory agent in the clinic and has Fast Track designation by the U.S. Food and Drug Administration (FDA) for non-alcoholic steatohepatitis ("NASH") with hepatic fibrosis, commonly known as fatty liver disease with advanced fibrosis. Longs are pinning all their hopes on belapectin’s NAVIGATE (formerly NASH-RX) study.

NAVIGATE is an international, adaptively-designed, seamless, two-stage (Phase 2b/3), double-blind, parallel-groups, randomized, placebo-controlled trial (“RCT”) that will assess the efficacy, safety, and tolerability of biweekly infusions of 2 mg/kg or 4 mg/kg belapectin compared with placebo in patients with NASH cirrhosis and clinical signs of portal hypertension (HVPG greater than or equal to 6 mm Hg) but without esophageal varices at baseline. It has a prespecified interim analysis conducted after all planned subjects in the Phase 2b component have completed at least 78 weeks (18 months) of treatment. If positive, the observed treatment effect will inform the optimal dose, sample size and statistical power for the equally long Phase 3 stage. As of December 1, 290 of the planned 315 patients had been randomized, and an additional 79 were being screened.

In NASH-CX, an earlier Phase 2b RCT of 162 patients with NASH, cirrhosis and portal hypertension, 1 year of biweekly belapectin was not associated with significant reduction in HVPG or fibrosis compared with placebo. However, in a post hoc subgroup analysis of patients without esophageal varices, 2 mg/kg belapectin did significantly reduce HVPG (by –1.61 mm Hg compared to the placebo group which rose by 0.10 mm Hg, P = .02), and had less development of new varices (0% vs 18% placebo, P = .032).Thus, the presence of portal hypertension prior to the development of esophageal varices became most important inclusion criterion in NAVIGATE (Figure 1).

Figure 1. 2022 Corporate Presentation Page 15

NAVIGATE’s primary endpoint (“PEP”) is the incidence of new varices, which will be adjudicated through a centralized review of esophagogastroduodenoscopy (EGD) video recordings by expert EGD readers. While liver biopsy is the gold standard for evaluating fibrosis in NASH trials, the invasive test is not required here and should help with patient convenience and retention. The PEP is in accordance with FDA advice and with the Agency’s draft guidance document, Non-alcoholic Steatohepatitis in Compensated Cirrhosis : Developing Drugs for Treatment:

Line 139 • The drug development program should evaluate the effect of the investigational drug relative to placebo on the composite endpoint of time from randomization to the first of any one of the following outcome events [emphasis added]:

? Complication of ascites including any of the following: spontaneous bacterial peritonitis, diuretic-resistant ascites (refractory ascites), hepato-pleural effusion, etc.

? Variceal hemorrhage

? Hepatic encephalopathy

? Worsening in the MELD score to greater than or equal to 15 (this endpoint approximates listing for liver transplant)

? Liver transplantation

? Death from any cause

... Because currently there is insufficient evidence to support the use of histological improvements as a surrogate endpoint that is reasonably likely to predict clinical benefit to support accelerated approval, in general, the FDA expects to evaluate drugs for the treatment of compensated NASH cirrhosis under the traditional approval pathway.

Finances

As of September 30, Galectin had $15.8 million cash and equivalents. That along with the full availability of a $60 million line of credit (“LOC”), the company believes it has sufficient funds for currently planned operations and research and development activities through at least December 31, 2024. Advances under the LOC bear interest at the Applicable Federal Rate for short term loans ( currently 4.5 % ) plus 2%. There are clauses where the convertible promissory notes may be converted into shares, but in no event for less than $3.00 per share . GALT ended 2022 at $1.13, or -51% for the year. Most of the Galectin’s expenses come from research and development, primarily related to the NAVIGATE study, and have totaled $22.7 million at Q3 end. Although R&D increased over last year’s $23.8 million , it’s not likely to go much past $30 million annually. Net losses have also not topped $10 million in any single quarter. Therefore, it is reasonable to believe management’s claims they can survive until 2024, a crucial year.

NAVIGATE’s interim analysis is expected mid-2024, which, if positive, will likely push shares past $3 and allowing conversion and/or repayment of the LOC principal due January 31, 2026. For comparison, shares of Madrigal Pharmaceuticals ( MDGL ), the new leader in the n oncirrhotic NASH race , skyrocketed 268% following its candidate’s positive pivotal trial readout. Of course, failure would be catastrophic and could spell bankruptcy. One positive development is that CEO and President Joel Lewis thought it was important to demonstrate confidence. So instead of receiving all of his compensation in cash beginning 2023 as previously planned, he is reinvesting 80% of those funds back into the company.

Risks and Takeaways

Since the beginning , the science has been a little shaky. Last year, researchers from the U.K. utilizing Mendelian randomization did not find evidence that blood galectin-3 levels represented a causal risk factor for non-alcoholic fatty liver disease, or for any other of the 800+ human diseases tested for at the population level. It appears more likely that disease progression might be increasing galectin-3 levels, and not higher galectin-3 levels increasing disease risk. Consequently, belapectin or future galectin-3 blockers would be ineffective. However, there remains a small chance that galectin-3 inhibition affects some other process that provides clinical benefit.

With the company primarily focused on completing enrollment of NAVIGATE, there is little in the way of catalysts aside from out-of-nowhere announcements of partnerships for belapectin in oncological indications. Belapectin is Phase 2-ready in combination with a checkpoint inhibitor in recurrent or metastatic head and neck cancer, but Galectin has no money for anything else except preclinical activities. Mid-2024 is too early for option chains (January 19, 2024 is the farthest available). A bear market is typically unkind to biotechs with no approved products and no income. There is a danger of shares falling below $1 and subsequent NASDAQ listing delinquency, which may force a reverse-split and further price erosion. Conversely, negative price movements may provide more attractive entry points for investors interested in the NASH space.

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