Galectin Therapeutics: Serendipity In Psoriasis, Strength In NASH … – Seeking Alpha

Introduction

Galectin Therapeutics (NASDAQ:GALT) is a small biotechnology company based in Norcross, Georgia, focusing on the innovation of medicines that inhibit galectin molecules for the treatment of various diseases such as nonalcoholic steatohepatitis ("NASH"), skin cancer and plaque psoriasis. After a temporary nosedive in 2016, share price appreciated by approximately 80% for the past 52-weeks. It is highly likely that recent capital appreciation is reflective of the firm's increasing intrinsic value due to key developments. A notable catalyst was the positive data for the exploratory phase 2a trial, which suggests that lead molecule GR-MD-02 could be used to treat plaque psoriasis. Despite the firm's emphasis on NASH, this research shall focus on the potential therapeutic application of GR-MD-02 for plaque psoriasis.

Source: Google Finance

Plaque Psoriasis

As an autoimmune disease, plaque psoriasis is caused by the body's natural defense system going haywire, thus, causing the presence of well-demarcated red silvery scales on the skin surface. Due to its chronic nature, patients are placed on lifelong therapy. According to expert recommendations, the treatment for plaque psoriasis depends on the disease's severity. Patients with mild to moderate disease are prescribed with topical corticosteroid as the first-line agent. For moderate to severe cases without any contraindication, phototherapy serves as the therapeutic of choice. Those who failed the mentioned light treatment are managed with various approved systemic drugs such as steroid and methotrexate.

Source: Visualdx

The main setbacks for systemic therapies relate to their adverse effects. Nonetheless, doctors still employ such treatments, because the benefits outweigh the risks. In contrast to currently available medicine, GR-MD-02 potentially has a favorable efficacy and safety profile. As a new medicine in its own class, Galectin's lead molecule has a favorable chance of cutting into the multibillion-dollar psoriasis market. This is due to the fact that physicians tend to prescribe a unique therapeutic, especially one with a favorable safety profile like GR-MD-02, rather than another medicine amongst many approved drugs. In other words, GR-MD-02 would have a better chance of market success than a statin in development.

Another positive note for investors is that global data projected sales for psoriasis to increase from $6.6B in 2014 to $13.3B by 2024. If Galectin can cut into a small portion of this pie, the share price should increase multiple folds. And this would signify warranted optimism for shareholders.

Serendipitous Finding

Originally employed in the phase 2 trial for NASH patients, GR-MD-02 was found by chance to be efficacious for treating plaque psoriasis, which often occurs along with NASH. One patient with mild psoriasis participating in the NASH trial reported complete skin disease resolution for over a year. Another patient with moderate psoriasis reported the lesser use of her usual steroid medication. As a result, the aforesaid serendipitous finding prompted Galectin to commence the exploratory phase 2a.

Exploratory Phase 2a Trial

In March 2017, Galectin reported promising data for psoriasis in the aforementioned open-label exploratory phase 2a trial. Five patients employed in the study were infused with 8 mg/kg of GR-MD-02, a total of 13 infusions, for 24 weeks. No serious adverse events were found. All patients achieved an average PASI ("Psoriasis Area and Severity Index") reduction of over 50%, which is a measure of symptomatic improvement. The promising exploratory trial data prompted further development of GR-MD-02 for psoriasis treatment. Nonetheless, Galectin remains focused on innovating therapeutics for NASH.

"We are pleased by the results of our 24-week psoriasis trial demonstrating the safety and efficacy of GR-MD-02 in patients with moderate to severe plaque psoriasis," said Peter Traber, M.D., president, chief executive officer ("CEO"), and chief medical officer ("CMO"). "Moreover, the activity of GR-MD-02 in a human disease strongly associated with non-alcoholic steatohepatitis and increased galectin-3 expression suggests that our lead compound may also show significant activity in NASH, which remains the company's primary target."

As Dr. Traber suggested, the positive psoriasis data can foretell favorable outcome for the NASH trials. In addition, we strongly believe that it is intelligent to speculate trials data results for both NASH and psoriasis by analyzing GR-MD-02's mechanism of action.

Unique Mechanism of Action

Galectins are small molecules in the body that direct communication within the cells when being bound to glycoproteins found on cellular surface. In the disease processes that include inflammation, fibrogenesis, cancer formation, galectin's activity is heightened. Numerous research reports found the supporting role of galectin in the development of psoriasis in human. And it is hypothesized that lead molecule GR-MD-02 works by inhibiting galectin, thus, halting the disease process while stimulating the body to heal itself.

Source: Galectin

Focusing on Orphan Disease

In building its presence in the multibillion-dollars orphan disease market, Galectin is conducting two clinical trials, NASH-CX and NASH-FX for the treatment of NASH cirrhosis and NASH advanced fibrosis, respectively. Investing in orphan disease is seemingly the new trend for biopharmaceuticals investing. A firm can charge a premium price for a drug that treats rare ("orphan") diseases. And not only that this is viewed favorably by authority, the approach also ensures profitability for the company as well as the availability of lifesaving drugs for patients.

Source: Galectin

NASH asides, Galectin concurrently innovates GR-MD-02 for treating other fibrotic conditions, including lung, kidney, and heart. In addition, the named molecule is being studied for its applications together with other approved therapies ("Yervoy and Keytruda") to treat the dreaded skin cancer that is melanoma.

Adequate Funding

The majority of developing biotech firms operate in the red, as it takes substantial capital in the ballpark of more than a billion dollars to fund a drug from bench research to marketing. Hence, one can observe the increasing trend in operational cash flow that is needed to develop GR-MD-02 in the figure below.

Source: Morningstar

It is wise for biotech investors to note three key financial metrics. The first is that dilutive financing is not excess. The second is that debt to equity is not staggering. The third is whether the firm has adequate capital to fund their drugs to full development. That being said, Galectin increased its shares outstanding from 6M to 30M for the past decade, which is not unwarranted for a developing biopharma. It is a good sign that the firm's balance sheet is clean of long-term debts while there is only $3.8M borrowed for the short-term. As of March 2017, $13M in non-restricted cash and cash equivalents remain for operational spending. This amount is adequate to fund operation through the end of this year, which is sufficient for the reporting of NASH-CX's top line data.

Capable Management

With the strong track record of performance and many years of wisdom, Peter Traber, M.D. is the top-notch CEO and CMO to navigate this ship for Galectin shareholders. Prior to joining Galectin, Dr. Traber served as CEO of the prestigious medical schools: Baylor University and the University of Pennsylvania. As the former CMO at GlaxoSmithKline (NYSE:GSK), Dr. Traber knows the ins of the large and successful biopharma.

Due to his uniquely diverse background as a physician, executive and a molecular biology research scientist with over 100 original research publications, Dr. Traber has the differentiated wisdom to gauge whether a molecule can succeed in both clinical trials as well as in the market. After all, a doctor knows which medicine will be likely prescribed. Burdening with a total of roughly $1B to be invested in a developing drug, it is comforting for investors that Dr. Traber is the cream of the crops expert. The chief is highly likely to deliver the best capital appreciation for shareholders and hopes for countless patients worldwide.

Potential Risks

As alluded, it takes significant funding to innovate a molecule from bench research to marketing. The chance of success is less than 5%, as more than 95% of the drugs in development failed to make it to the market. Therefore, it is imperative for investors to be cognizant that investing in a developmental stage biopharma incurs substantial risks as well as upsides. During this lengthy process, any negative data or indication of negativity can cause significant stock depreciation. An unfavorable trial outcome can nose dive share price by more than 50%. Conversely, positive data could throttle share price in the North by leaps and bounds. Substantial risks, volatility, and rewards are inherent to biotech investing. And while some investors lost money in biopharma investing, shareholders of Exelixis (NASDAQ:EXEL) and Jazz Pharmaceuticals (NASDAQ:JAZZ) have enjoyed over 10-bagger and 100-bagger returns, respectively.

To minimize the risks and to maximize the rewards, investors should exercise a basket approach to biopharma investing. A good strategy is to invest in a group of firms with promising drugs-in-development, leading by expert management with a strong track record, and having adequate cash to run their drugs through the complete innovation process. Of note, investors only need a few successful firms like Exelixis and Jazz to compound outstanding returns for a small portfolio in the run.

Conclusion

After the mini recession in the biopharmaceutical industry in late 2015 through 2016, there is a sense of warranted optimism in the market. Of many bio firms enjoying the late 2016 to 2017 rebound, Galectin has promising data and deserves the consideration of serious biotech investors. This small capitalization firm has a unique lead therapeutic that leverages on the biology of galectin to potentially treat the orphan disease, namely NASH. Moreover, the data favors its application to other conditions, particularly psoriasis, due to the drug's promising efficacy and safety profile. Despite that it is highly difficult to gauge the success of an early stage drug, the positive data for psoriasis can mean favorable outcome for the NASH trials. Furthermore, it only takes a single blockbuster, a drug that sells more than one billion dollars annually, to turn a small capitalization firm into a powerful growth biopharma. All in all, our analytical research reveals highly asymmetric risks to rewards that can deliver multiple folds capital appreciation for investors in the long run and hopes for patients worldwide.

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.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.

View original post here:
Galectin Therapeutics: Serendipity In Psoriasis, Strength In NASH ... - Seeking Alpha