Galectin Therapeutics From an Investor Perspective

NASH liver disease has been in the headlines quite a bit as key readouts from Madrigal (MDGL) and Galmed (GLMD) teased the markets with their efficacy.  Galectin Therapeutics (GALT) which is targeting NASH Cirrhosis has had no new data since its topline results in December 2017.  GALT has been essentially flying under the radar for quite some time due to the ex-CEO’s disdain for the spotlight, but the recent announcement of Richard Uihlein as the Chairman and the resignation of the CEO have sparked renewed interest in the company and the technology.  The single most interesting fact that you never knew about GALT is that it has developed a drug GR-MD-02 that is carbohydrate isolated from apples. It inhibits galectin-3 (a carb-binding protein) involved in liver fibrosis, cancer/tumor immunity, and psoriasis (many other diseases as well). The target patient population are people with late stage NASH cirrhosis (aka fatty liver disease).  If untreated this can be fatal and currently has no medical treatment except a costly liver transplant that would require the patient to be on anti-rejection medicine for the rest of their lives.  People with late stage NASH Cirrhosis can be divided into two subgroups, those with varices and without varices. NASH causes veins delivering blood to the liver to become clogged with scar tissue diverting blood flow through smaller vessels in the esophagus. Over time they begin to swell and bulge forming varices that can rupture causing internal bleeding. This is the leading cause of death in people with late stage NASH.

Clinical Trial Results – December 2017

Results from the phase 2b trial for NASH Cirrhosis indicated that 1/2 of the patients had varices and 1/2 did not. The endpoints of the trial which validate the drug’s efficacy are 1) change in Hepatic Venous Pressure Gradient (HVPG) (primary endpoint), which is blood pressure in the liver. 2) liver inflammation/histology by looking at hepatocyte ballooning (ballooning of liver cells caused by fat accumulation).

To the average investor the top-line readout on NASH Cirrhosis appeared marginal and had mixed results.  The headline used in December 2017 was “Galectin Therapeutics fails to meet primary endpoint in phase 2b trial” made the story quite unattractive. This along with some Fake News from Adam Feuerstein helped drive the stock price below $2 briefly.  The analysis starts with the total patient population (162 people).  Compared to Intercept Pharmaceuticals (ICPT) current trial of 1500 people this seemed quite small and raised a red flag.  There had to be some reason for the dramatic difference.  The reason was the endpoints.  ICPT was going after early stage NASH while GALT was going after NASH Cirrhosis.  With early stage NASH the treatment concept is to treat a wide swath of people that might ultimately get the disease and give them a maintenance drug, so they don’t progress to the cirrhotic state.  The only problem with this concept is that 1 in 20 will progress so insurance companies would be forced to pay to treat 20 people who show no symptoms of the disease to save one person from progressing.

The first endpoint in the study was the change in HVPG. In the total patient population there was a decrease in liver portal pressure of -2% among patients that took the 2mg (GR2) and 8mg (GR8) doses compared to an increase of +8% in the placebo group. In the mild portal hypertension population there was -3% and -2% decreases in HVPG for GR2 and GR8 groups respectfully, and a +26% increase in the placebo group. Sounds good right? Well unfortunately the observed differences failed to achieve statistical significance in the total population and therefore failed to meet the FDA’s primary endpoint. Hence the headline but what is so interesting about this data is that patients in this stage never get better on their own and if at worst this drug stabilized the patients which it clearly did there is a very strong case for approval but that is not how the FDA works.

These results were promising. The rationale supporting the drugs mode of action and efficacy was solid: Galectin-3 is implicated in causing cirrhosis of the liver, GR-MD-02 targets and inhibits galectin-3 activity, and patients that took the drug had substantial decreases blood pressure in the liver compared to the placebo patients (liver blood pressure is considered a good bio indicator of NASH severity/progression/status). So just because there was not a statistical significance does not preclude GR-MD-02 from working and looking at the change in HVPG in those that took it, it obviously does.

The narrative dramatically changes when we look at just the patients who did not have any varices, the trend of HPVG reduction in the GR2 group was even more pronounced (-8%) AND statistically significant. The same trend was observed for GR8 (+.6%) change from baseline compared to the placebo (+12%). Because this was in a sub-population (i.e. patients w/o varices) the company technically did not achieve its primary endpoint of reducing HVPG, even though the drug clearly did achieve it endpoint in the sub-population.  The average investor does not understand science isn’t cut and dry. Experiments are performed to answer questions and shed light into biologic/physiologic processes, or in this case, how a drug effects disease pathology and how that varies under different conditions (for example with or without varices). The data clearly shows that GR-MD-02 is more effective on patients where NASH has not progressed to the point of varices. THERE ARE 2 MILLION PEOPLE WITH LATE STAGE NASH WITHOUT VARCIES!!!

The responder analysis was very telling.  Here the company looked to see how many of the patients had 1) a reduction in HVPG greater than or equal to 2mmHg (mmHg is a unit of pressure) AND 2) a decrease of greater than or equal to 20% from their baseline HVPG. The trend just described above was repeated. At the total patient population level there was an improvement in HVPG in both groups, especially GR2 compared to the placebo. But it was not statistically significant. Then we look at patients with and w/o varices and see a very statistically significant treatment effect in the GR 2 group (p=.01) compared to the placebo. That is, 43% of patients in GR2 group achieved criteria 1 & 2 compared to 12% in placebo. It’s clear from this data that the target population should be patient’s w/o varices.  Furthermore, in the GR2 and GR8 groups 0/25 and 1/23 patients formed new varices respectfully compared to 6/33 in the placebo. The phase 3 endpoint could be whether or not patients developed varices, but that is up to GALT and the FDA to negotiate.  On the surface it is clear that the drug halts NASH progression preventing the formation of new varices, and yes, this was statistically significant in GR2 group. Moreover, the investigation into liver inflammation/histology had a statistically significant (P=.01) reduction in hepatocyte ballooning in the GR2 group. Lastly, there were no safety concerns and the GR was well tolerated.

The take away? GALT has developed a drug effective at treating late stage NASH cirrhosis, especially in patient’s w/o varices and with mild portal hypertension (an unmet medical need). Given the statistical significance in the sub-group the Phase 3 (P3) should confirm this. At the last FDA meeting with GALT they agreed for the target population in P3 to be patient’s w/o varices and the primary endpoints to be either change in HVPG or the progression of varices (both of which were achieved in p2 in patient’s w/o varices).  GALT is positioned to blow P3 out of the water and gain FDA approval. Not to mention there will be an interim analysis which can get the drug approved even quicker.

The next golden nugget was efficacy demonstrated in combination with a cancer drug ‘Keytruda’ in patients with recurrent metastatic melanoma (meaning tumor growth progressed despite treatment with Keytruda alone). What’s so impressive aside from the clinical response from patients considered ‘out of options’ was it being in a phase 1b study designed to show safety, not efficacy, yet they saw efficacy! An article on emerginggrowth.com covers this nicely.  http://emerginggrowth.com/cancers-last-stand-gr-md-02-nearly-doubles-response-rate-added-keytruda/

In a nutshell: there were 3 cohorts (groups of patients). Cohort 1= 5 patients given 2mg dose, cohort 2= 3 patients given 4mg dose, and cohort 3= 10 patients given 8mg dose.

Cohort 1: Three patients had a progressive response (tumor kept growing), two patients had partial responses (tumor shrank in size), and one had a complete response (tumor was killed)

Cohort 2: Two partial responses, one complete response

THESE RESULTS/RESPONSE RATES WERE 30% BETTER THAN WITH KEYTRUDA ALONE AND IN A FRACTION OF THE TIME. WHAT MERCK WOULD PAY FOR IT? Granted, the population sizes were very small. Nonetheless, given the solid rationale: Galectin-3 is implicated in tumor immune defense and GR targets these proteins I am confident cohort 3 data will be a smashing success. The data is expected this summer.

Now this is all old news. This has all been public information since December 2017 when the stock price was below $2 (minus the phase 3 approval). Let’s look at recent developments.

The first catalyst that sprang GALT from the depths of $3 was FDA approval to start phase 3 with an interim analysis in the study design, and acceptance of change in HVPG and progression of varices as primary endpoints and surrogates for clinical outcomes. After that GALT fizzled for a while in the $4 range while day traders bought and sold, shorts loaded up, and institutional investors came sniffing around. Since P3 approval, there have been four positive new developments that are EXTREMELY BULLISH about where the share price is headed.

First: Form 8-K released May 22nd. It contained an update following the annual shareholders meeting. It stated that the company approved equity incentives for top executives for ‘transaction bonuses’ of 10% of the employee’s base salary in 2018 for every 50 million paid to the company up to 300%. This includes partnerships, licensing agreements, or a buyout. Furthermore, the board approved retention bonuses up to 75% of their 2018 salaries if the executives achieve a transaction deal by 12/29/18 and stay employed by GALT until the agreement or transaction is official. Or if they have not achieved this by the end of December they have until 01/15/19 to do the same thing. And what do you know that is only a couple days before January 2019 options expire…. Mighty convenient. Basically, this screams GALT is for sale through January 15th and the executive have equity incentives to sell for as much as possible to max out their transaction bonuses.

Second: Richard Uihlein was elected chairman of the board of directors. This is incredibly good news. Mr. Uihlein is a self-made billionaire, has been a director since 2017, and owns a significant portion of the company stock (doubled his stake in the past year). Him accepting this role reflects his investment in Galectin and its success, both financially and medically. When this was announced my fear of dilution dissipated. The way I see it, he did not come this far to sell GALT for a discount.

Third: The CEO Dr. Traber resigned and is being replaced by the COO Dr. Shlevin. From what I have heard, Traber was a phenomenal doctor and scientist but a bad CEO. This reinforces the signal that the company has entered a new phase and his expertise is no longer relevant. The business men are now in control and they want to make sure things are executed optimally.

Fourth: GALT hired Bay Back Life Science, a transaction advisory company. This is more evidence GALT is seeking a buyout or partnership. Management knows what GALT brings to the table is very valuable. Hiring Bay Back helps ensure the payout to GALT is optimized in any transaction.

The next big catalyst will be data from cohort 3 from the melanoma study. A smaller catalyst will probably be the finalization of P3 design and acceptance of the protocol by the FDA. It is time to be extremely excited about the future of Galectin Therapeutics not only for the investors, but patients with NASH and cancer in need of a viable treatment.