GLTO - Galecto Biotech Collapse: Opportunity For Galectin Therapeutics

2023-09-14 08:15:00 ET

Summary

• Galecto Biotech's stock has plummeted 75% due to increased rates of adverse events in its idiopathic pulmonary fibrosis (IPF) trial.
• Galecto's synthetic, small molecule approach to galectin-3 inhibition may be causing poor tolerability and negative clinical outcomes.
• Galectin Therapeutics' belapectin, a galectin-3 inhibitor in a phase 3 trial for NASH cirrhosis, is a better value proposition with a strong financial backer and excellent safety profile.

Shares of Galecto Biotech ( GLTO ) have plummeted almost 75% in the past few weeks since its primary drug candidate, GB0139, was axed after showing increased rates of adverse events including serious adverse events in its idiopathic pulmonary fibrosis ((IPF)) trial. In this article, I’ll review suspicions that I’ve had for a while of why Galecto’s synthetic, small molecule, “designer” approach to galectin-3 inhibition is not the best approach for galectin-3 inhibition, potentially causing poor tolerability. Previously, I was not sure the molecular biology of this approach would translate to poor tolerability in the clinic, but after Galecto terminated this program, I'm a bit more confident in my speculation. Therefore, despite a negative enterprise value and the stock being very inexpensive with respect to financials, I would advise caution with regards to investing in Galecto. It is logical to question whether this negative readout carries negative implications for the development of other galectin-3 inhibitors; however, in this article I speculate that Galecto’s negative readout does not necessarily carry negative implications for other galectin-3 inhibitors like Galectin Therapeutics’ ( GALT ) belapectin, which is in a phase 3 trial for NASH cirrhosis and has demonstrated an excellent safety profile. Galectin Therapeutics appears to be a much better value proposition with a strong financial backer and a phase 3 asset with minimal direct competition.

Galecto’s News: Red Flag

Galecto’s press release stating that its GB0139 (formerly TD-139) drug failed in its phase 2 IPF trial was not necessarily a surprise as it was preceded about two years ago by what some investors suggested as benign news: the higher dose (10mg) of GB0139 was to be discontinued as of March 2021 along with the discontinuation of enrolling patients that were currently taking other IPF drugs, namely nintedanib or pirfenidone (Boehringer Ingelheim’s Ofev and Genentech’s ( OTCQX:RHHBY ) Esbriet), due to an imbalance in serious side effects. Three months after that, the company distracted from the poorly tolerated 10mg GB0139 IPF arm by boasting of a “ favorable safety and tolerability profile ” when using GB0139 to treat COVID-19, despite the treatment duration only being 16 days, considerably shorter than the 52-week IPF trial (aka GALACTIC). Now with the IPF trial halted, the jig is up; inhaled GB0139 is not well tolerated in long-term dosing of a chronic disease, IPF. While the reason for this could be molecule-specific, administration-specific, or disease-specific, in my opinion, it is likely that this intolerability stems from the molecule's blocking intracellular galectin-3. This has profound implications for the company’s future—specifically all of its galectin-3 inhibitors which are all small molecules that typically cross into the cell cytoplasm with ease. The stock is extremely risky as recent signs point to future negative clinical readouts or at least drug intolerability. Despite the development risks, the company’s financials are favorable and so the stock could be considered a buy based on readouts expected from other programs, but the safety risk associated with Galecto’s small molecule galectin-3 inhibitors are too great.

A Pattern Emerges

We see the pattern of positive effects in the short term (including the initial 12-week cirrhosis study, the two-week phase Ib/IIa IPF trial, and the two-week COVID study) while longer-term trials (52-week phase 2 IPF trial, phase 2 cirrhosis trial) have yet to be proven well tolerated. In fact, IPF patients on GB0139 3mg daily fared significantly worse than placebo :

GB0139 failed to hit the phase 2 trial’s primary endpoint, a change from baseline in the rate of decline in forced vital capacity ((FVC))—a measure of air exhaled from the lungs—compared to placebo. In fact, the average reduction in FVC was 316.6 ml among patients treated with a 3-mg daily dose of Galecto’s candidate for a year, compared to a less pronounced drop of 127.5 ml for those given placebo, meaning treated patients fared much worse. [...]

‘We clearly saw more side effects in the sort of IPF infection exacerbation with the drug and that's where we're searching for the explanation for what's happening,’ CEO Hans Schambye, M.D., Ph.D., told Fierce Biotech in an interview.

This is an outcome that could be explained by promoting cellular dysfunction via intracellular galectin-3 inhibition, especially systemically and not necessarily targeted to the desired cells (alveolar macrophages, Kupffer cells, etc.). This long term study showing long term intolerance to GB0139 could be explained by intracellular gal-3 blocking and its potential negative effects on cell survival or homeostasis. It may also explain why these safety signals presumably did not show up in preclinical tox studies.

Galecto’s Next Steps

Now, Galecto is following in Galectin Therapeutics’ footsteps and is focusing on liver cirrhosis :

Galecto previously announced that it had concluded a U.S. Food and Drug Administration (FDA) Type C meeting centered around the continued development of GB1211, Galecto’s oral galectin-3 inhibitor product candidate for the treatment of compensated and decompensated cirrhosis. As a result of this meeting and in accordance with guidance received from the FDA, Galecto’s next step in the development of GB1211 is to initiate a long-term, randomized, placebo-controlled, Phase 2a trial in patients with decompensated NASH cirrhosis, which will evaluate efficacy and tolerability at additional dose levels. This trial, referred to as the GULLIVER-3 trial, is expected to be initiated in early 2024, subject to obtaining additional financing.

The company is basically copying Galectin’s strategy in NASH (now aka NAFLD/MAFLD/MASH) cirrhosis, where Galectin is a front runner and pioneer in attacking NASH cirrhosis with a galectin-3 inhibitor, one of the only companies running a viable phase 3 trial in NASH cirrhosis, and the premiere true/direct antifibrotic therapy in development. It’s the only phase 3 in development that isn’t a “diet pill:” a metabolic, liver fat or T2DM-targeting therapy. The development field for NASH cirrhosis is less crowded compared with early-stage NASH, so it's a lucrative strategy. As Shambeye noted, cirrhosis carries the weight of liver disease medical cost burden. It is also an area of focus in clinical practice.

Madrigal ( MDGL ) is also running phase 3 evaluating resmetirom in NASH cirrhosis where they previously reported tolerability, reduced liver fat, LDL-C, and other atherogenic lipids, reduced noninvasive measures of liver fibrosis and liver enzymes, and reduced liver volume by an average of ~20% in an open label portion of their otherwise early-stage NASH study. However, reduction in liver volume in cirrhosis is meaningless as natural progression correlates with a reduction in liver size. With no direct antifibrotic mechanism and cirrhosis progression driven by additional collagen deposition, it is unclear if resmeritrom’s efficacy in fibrosis reduction can be duplicated in cirrhosis especially when the 1 stage reduction in fibrosis the company found with its better-tolerated, lower dose of 80mg ( 24% ) is hardly different than the average across larger NASH trials ( 22% ) and while since interobserver and sampling variability is relatively high, and the mechanism may not carry over into patients who already have cirrhosis. This was the case with semaglutide, a GLP-1 receptor agonist, where the semaglutide group underperformed compared with placebo for reduction in 1 stage of fibrosis in a compensated cirrhosis trial, while outperforming placebo in an early stage phase 2 trial (F1-F3). So the jury is still out on resmetirom’s efficacy in cirrhosis, but at least its safety profile is good.

With respect to Galecto’s attempts in NASH cirrhosis, I believe they will have difficulty in this indication for different reasons than Madrigal. Their drugs have not proven safe in the long term, which is especially risky in a liver cirrhosis trial. Additionally, their current positive clinical results data boils down to some liver enzyme levels and a MELD score after a mere 12 week trial.

Galecto previously announced topline results from its Phase 1b/2a GULLIVER-2 trial of GB1211, its orally available galectin-3 inhibitor, for the treatment of decompensated cirrhosis. Topline results from the GULLIVER-2 trial showed statistically significant reductions in liver enzymes (AST, ALT and GGT) and other positive biomarker effects after 12 weeks of treatment, as well as a reduction in MELD score. GB1211 also exhibited a favorable tolerability profile in this trial.

These data are not very clinically meaningful in cirrhosis and do not represent tangible patient outcomes especially considering the long-term intolerability of Galecto’s other small molecule galectin-3 inhibitor tested in IPF. The safety of GB1211 is still in question, both with respect to long term use and with respect to cirrhosis drugs needing to be exceptionally well-tolerated.

Potential Intolerability of Galecto’s Small Molecule Galectin-3 Inhibitors

There are multiple potential reasons for small molecule drug intolerability. Metabolites may be toxic to the body. Off-target effects may explain side effects. Or, the drug’s primary mechanism may explain its side effects, e.g. steroids causing immunosuppression. I suspect Galecto’s drugs may be intolerable due to their primary mechanism of action and the specific way they target galectin-3, which is unlike other drugs targeting galectin-3. Galecto’s galectin-3 inhibitors, as opposed to Galectin Therapeutics’ belapectin or Bioxytran’s ( OTCQB:BIXT ) Prolectin pipeline, are small molecules, which more readily cross the cell membrane and exert intracellular effects. Galecto’s galectin-3 inhibitors will block galectin-3 inside cells while Belapectin and Prolectin, and other early-stage efforts like galectin-3 antibodies and truncated galectin-3, will exert effects outside the cell.

Galectin-3 blocking intracellularly, as Galecto does, might be particularly problematic in chronic disease states like IPF or NASH cirrhosis where there is significant fibrosis, inflammation, lack of oxygen, and cellular stress on local cells all resulting in a predisposition of a person’s cells towards cell death, namely apoptosis, and needing to upregulate cell survival pathways to survive. This includes galectin-3, which is then being blocked by GB0139 or GB1211.

It’s been shown that intracellular galectin-3 inhibits apoptosis , potentially by interacting with Bcl-2 and Bax proteins to inhibit cytochrome c release , which is required for a major pathway of caspase mediated apoptosis. So there is some pathway theory that is possible, especially in disease states where cells may already be under stress.

This mechanism may be concerning for a normal patient, but the situation is amplified in patients with chronic fibrotic disease with known local hypoxia due to the thickening of scar tissue and weakened oxygen gradient. It turns out that the most direct mechanism of cell death signaling through hypoxia is protected by intracellular galectin-3. “Hypoxia can induce apoptosis by causing hyperpermeability of the inner mitochondrial membrane, which leads to the release of cytochrome C” . As previously mentioned, Bax is a proapoptotic protein that mediates cytochrome c release from mitochondria which then promotes caspase mediated apoptosis. Blocking gal-3 may unleash Bax to start cytochrome c mediate apoptosis.

Additional work on intracellular galectin-3’s role in stress adaptation involving the ER and mitochondria was also published in Nature , which included a few more mechanisms:

Graphic caption: "At the ER-mitochondria interface, Galectin-3 (i) prevents excessive mitochondrial fission and preserves the shape and dynamics of the mitochondrial network; (ii) modulates OXPHOS activity; (iii) reprograms selectively the mRNA translation via a partial inhibition of the mTORC1 pathway; (iv) favours an adaptative UPR following ER stress induction."

This potentially helps to explain or provide a theory for why Galecto’s galectin-3 inhibitors have so far shown to be detrimental in the long term for patient outcomes (IPF trial). This theory of the intolerability being context-dependent is also backed up in cancer drug studies where chemo + synthetic small molecule galectin-3 inhibitors causes cancer cell apoptosis to increase, whereas intracellular galectin-3 inhibition alone doesn’t initiate apoptosis. So the blocking of galectin-3 intracellularly plus a stressor might cause cell death.

Impact to Galecto

Blocking intracellular and observing worsened infections and patient outcomes in the long run suggests that the small molecule gal-3 inhibitors might be causing cellular dysfunction, and this bodes particularly poorly for Galecto’s cirrhosis trial because the IPF trial had worsened infections and worsened outcomes for patients on GB0139. It is possible blocking intracellular galectin-3 is causing cellular dysfunction and this would be a deadly blow to Galecto’s galectin inhibitor aspirations as they have no large molecule (extracellular targeting) galectin-3 inhibitors which have shown excellent safety profiles (particularly belapectin).

Galecto even noted that its drug was systemically uptaken and not targeted to macrophages in the lung. The company noted that: “Absorption within alveolar macrophages, the target-cell in question, also mirrored systemic exposure.” This is, in my opinion, not a good thing. It is rather concerning given the mechanisms above, as it possibly tilted the scale for all kinds of cells, not just alveolar macrophages (which excrete a lot of galectin-3 and work with fibroblasts to create scar tissue), towards cell death. This sits in stark contrast to Galectin Therapeutics’ Belapectin, which is known to be preferentially uptaken by hepatic macrophages, and otherwise pretty much limited to the extracellular space, as well as well tolerated in the long term, potentially reducing adverse events in cirrhosis and oncology (in combination with Merck’s ( MRK ) Keytruda).

Galecto’s Outlook and Financials

GLTO shares could recover due to their negative enterprise value or positive clinical results with other programs such as GB2064 in myelofibrosis. After all, the company had $49.0 million in cash, cash equivalents and investments as of July 31st. However, this leaves the company with under 1 year of cash based on its TTM cash burn (just over $50 million).

The company is undervalued as it is trading below its net cash with an enterprise value of -$33 million. However, this cash will likely be burnt through in about a year if the current burn rate continues. With the small molecule (intracellular-targeting) galectin-3 inhibitors unlikely to succeed and potentially causing serious adverse events, it's our opinion that Galecto shareholders’ best hopes are in positive results with GB2064, their LOXL2 inhibitor, in treating myelofibrosis.

Implications for Galectin Therapeutics

At a first glance, investors may be wary of investing in other galectin-3 inhibitor companies given Galecto’s galectin-3 inhibitor caused IPF patients to fare worse than placebo. However, as I explained, I believe there’s a reason for that poor performance and I also believe there are reasons that Galectin Therapeutics' galectin-3 inhibitor belapectin, which is a larger complex carbohydrate and not a small synthetic molecule, will not succumb to the same safety issues.

First, belapectin has what appears to be a very good safety profile; belapectin administration was associated with fewer adverse events and improved response in both an advanced head and neck squamous cell carcinoma (HNSCC) and metastatic melanoma ((MM)) cancer trial , as well as a reduction of esophageal varices (which develop as a result of increasing liver scarring and subsequent increased portal pressure) and otherwise no difference in other adverse events in a year-long compensated NASH cirrhosis phase 2 trial (n=162). As such the adaptively designed phase 2b/3 NAVIGATE study is assessing the development of new esophageal varices as a primary endpoint.

Next, I believe that for potentially the same reason Galecto’s drugs are not as well tolerated, Galectin Therapeutics’ belapectin will continue to be well tolerated. Belapectin is a large molecule, blocks extracellular galectin-3, and is (apparently) preferentially uptaken by macrophages which are primary producers of galectin-3. So belapectin blocks galectin-3 at its source as well as in the extracellular space where it is important to block galectin-3, not so much so inside of each and every cell in the body. Thus belapectin would help eliminate galectin signaling to death receptors on the cell surface while having minimal-to-no impact on promoting cell death through blocking intracellular galectin-3.

Galectin's Financials

Galectin has $18 million in cash according to its most recent quarterly business update. With a burn of $9 million per quarter as well as a $30 million LOC, the company has cash to fund operations through the end of 2024. So at some point they will need a bit more cash which might come in the form of an equity offering, another Uihlein convertible note, or a pharma partnership. Uihlein's financial support is critical to keeping the company in a strong position and protecting common stockholders.

Risks

Investments in clinical stage biotech companies are risky for several reasons. The companies require the investment of often hundreds of millions of dollars over the course of years - often a decade or more - for drug development and regulatory approval before they can begin to sell their products. With that comes risks including but not limited to dilution, funding concerns, clinical and preclinical study failures, regulatory risks, and high market volatility. Very small publicly traded biotech companies are now experiencing low market valuations which may make it difficult to raise additional capital, making a low valuation in some cases more of a problem rather than an opportunity. Investors should weigh all biotech positions appropriately. Many drugs ( ~30% ) fail in development due to unmanageable toxicity, which is a concern for Galecto. On Galectin's end, the efficacy of its lead asset, belapectin, in its phase 2 trial in NASH cirrhosis was less than clear. While I believe the drug has great promise, one cannot ignore the chances of failure and the difficulty in treating cirrhosis.

Conclusion

I could be wrong about the aforementioned biological mechanisms which I think are causing intolerability of Galecto’s compounds. Of course, the company itself will have much more data to parse through to find the true cause. But it's difficult not to speculate that tilting stressed liver cells towards cell death by promoting cytochrome c release mediated apoptosis, exacerbated under the conditions of chronic hypoxic inflammatory disease, is playing at least a small role in the long-term intolerability of specifically Galecto’s drugs ( not Bioxytran’s or Galectin’s galectin-3 inhibitors). This reasoning casts doubt on all of their other small molecule galectin-3 inhibitors. Perhaps investors have confidence in the value of their LOXL2 inhibitor which probably has a fairly good chance of success, but in our opinion its best to stay away from the stock given our confidence in future negative catalysts occurring with the rest of their pipeline, despite their attractive valuation in light of their balance sheet. The financials and valuation make the stock attractive, but the medicines with poor safety profiles that likely deteriorate the patient’s well-being are not worth anything.

In contrast, Galectin Therapeutics has a strong financial backer, billionaire Richard Uihlein, who has consistently helped the company stay afloat and has raised money via convertible notes at prices well above the current market price of the stock more than once. Galectin’s belapectin has been shown to be well-tolerated in numerous long-term trials and so the drug’s chances of success in a cirrhosis trial, where drug tolerability is more important than arguably any other disease, as DILI (drug induced liver injury) can easily ensue. It is one of few mid-late stage companies targeting NASH cirrhosis where immense healthcare costs are incurred, and so chances of success in its phase 3 would be significantly higher than any long-term trial (e.g. decompensated cirrhosis) Galecto endeavors to complete. Investors interested in Galecto should potentially contemplate their investment positions in a company that has yet to prove the long-term safety of its compounds and consider investing with billionaire Richard Uihlein in a Galectin Therapeutics, a company with a well-tolerated galectin-3 inhibitor in late stage clinical trials.

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