GALT - Galectin Therapeutics Rides Roller-Coaster Of Volatility

2023-05-27 04:01:42 ET

Summary

• Since February, there were multiple significant share price fluctuations with no news.
• Patient enrollment completed for a mid-stage clinical trial.
• The readout for this study was delayed.

Galectin Therapeutics ( GALT ), is the microcap (<$110 million) leading developer of therapeutics that target galectin proteins. Previous coverage rated the stock a Hold due to the lack of major catalyst events in the coming year. Since then, a 5-trading-day rally of 63% began on February 1 with no press releases or SEC filings to fuel it, igniting a period of intense volatility (Figure 1). There have been 8 other 3-to-5-day swings of at least 15% in either direction, including a rally to $2.47. This extreme price behavior may be too chaotic for most investors. Unfortunately for longs, the readout of interim analysis results from the Phase 2b portion of the NAVIGATE study evaluating lead drug candidate belapectin has been pushed back to the fourth quarter of 2024.

Figure 1. GALT 2023 price chart

There have been some other developments. The Phase 2b/3 NAVIGATE trial's last patient was randomized at the end of February 2023 into and passed its final data and safety monitoring board review in March. Furthermore, an American Association for the Study of Liver Diseases (AASLD) Conference in March was attended, moderated, and chaired by clinical investigators who have patients enrolled in NAVIGATE. The Conference highlighted 3 things : 1) the importance of targeting liver macrophages to slow down NASH cirrhosis; 2) Galectin as the only company evaluating patients at the non-decompensated portal hypertension stage, which is an intermediary stage between early-stage cirrhosis and decompensated cirrhosis; and 3) NAVIGATE’s primary outcome of efficacy, which is the prevention of esophageal varices, as an interesting clinical option that could address the deficiency of other methods, notably liver biopsy, in nonalcoholic steatohepatitis ("NASH") clinical studies.

Understanding of the galectin-3 (Gal3) protein and its role in the activation of inflammatory cells such as macrophages and the resulting development of fibrosis in various tissues is constantly evolving. One of the stronger rationales cited by the company is that "mice genetically altered to eliminate the galectin-3 gene, and thus unable to produce galectin-3, do not develop liver fibrosis in response to toxic insult to the liver." A very recent review was published in the World Journal of Hepatology . Meanwhile, Chief Medical Officer Pol F. Boudes, MD, will discuss the Gal3 fibrosome concept at Cambridge Healthtech Institute's Fibrosis and Inflammation conference on September 27. The fibrosome (Figure 2) is a macromolecular assembly of complexes, one of which is a key receptor for TGF-?1, a known cytokine that promotes fibrosis. This concept was articulated in the context of idiopathic pulmonary fibrosis and yet to be proven in the hepatic setting.

Figure 2. The Gal3 ‘fibrosome’ and the role of activated macrophages

Finances, Risks and Takeaways

For Q1 2023, net loss was $11.5 million , largely due to increased research and development ($8.8 million) related to the NAVIGATE trial. General and administrative expenses were $1.5 million, while interest expense was $460k. As of March 31, 2023, Galectin had $17.8 million in cash and equivalents. If operational and interest expenses remain constant, even the $40 million remaining available under a $60 million line of credit provided by Galectin’s chairman is barely sufficient to last through Q2, 2024.

Risks largely remain the same. Galectin is still looking to partner belapectin development in oncological indications. Because the company is cash-strapped, expect a secondary offering if there is another major rally. Longs from 2021 are likely still underwater (Figure 3), although those who were brave enough to double down anywhere from November to January would’ve been recovered their paper losses. GALT will likely remain the purview of day- and swing-traders for the coming year. Options (January 19, 2024 is still the farthest available) are no less risky.

Figure 3. GALT 2-year price chart

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