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Galectin Therapeutics (GALT) A Discount Opportunity Moving on Analysts Upgrade

Galectin Therapeutics (GALT) A Discount Opportunity Moving on Analysts Upgrade
Written by
Chris Sandburg
Published on
April 10, 2024
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After a 2 year consolidation due to a dearth of press releases from management, Galectin Therapeutics (NASDAQ: GALT) is on a bullish run bounding toward its $11 price target recently reiterated by HC Wainwright on April 1, 2024. A couple weeks earlier Seeking Alpha analyst Terry Chrisomalis highlighted an interim report on NASH Cirrhosis which was due in Q4 2024. This is a major readout and inflection point for the company as it is the only company working on NASH Cirrhosis. Adding fuel to the price momentum was a press release that indicated the Data Safety Monitoring Board (DSMB) recommended a continuation of the trial. The release also contained calming news with respect to an increase in credit facilities which translates into no foreseeable dilution. Underlying all this news is investors' burning desire to crown the next heir apparent in NASH after Madrigal Pharmaceuticals (NASDAQ: MDGL) recent drug approval in NASH on March 15, 2024.

GALT stock is finally moving.  Perhaps it took 5 times before investors realized that carbohydrate drugs and galectin-3 antagonists in general are safe and are likely to work in a number of disease indications. The news also leaked over and was positive for the other galectin therapy companies like Bioxytran Inc. (OTCMKTS: BIXT) and Galecto Bioscience (NASDAQ: GLTO) which also rose on the news.  

Dilution Fear Abolished by Chairman Uhlein

In 2021 the fully diluted share count was 58.5 million, and that increased to 59.4 million in 2022, and at the end of 2023 the fully diluted share count was 60.2 million. This represents only 3.0% of dilution over the past 2 years while the stock was consolidating.  

At the end of FY 2023 GALT had approximately $25 million in cash.  Given their $32 million annual burn rate its reasonable to believe that investors were bracing for another round of dilution, but billionaire investor Richard Uhlein added another $10 million credit line to the company leaving them with their existing cash and access to another $30 million in credit that has been on very favorable terms to the company. This move removed any possible dilution before a pivotal Phase 3 readout.  Cash is expected to last until March 15, 2025.     

Interim Data Inflection Point by Q4 

When GALT provided its business update on March 29, 2024 it reiterated it was on track to provide top-line interim analysis in Q4 2024. With the 5th DSMB behind them, a recommendation to continue, and very strong phase 2 results that showed the elimination of gastric varices, it's easy to see that investors believe a positive readout is coming. 

Madrigals NASH Playbook

Translating a favorable NASH outcome to a forward looking market capitalization, investors only need to look to the Madrigal Pharmaceuticals (NASDAQ: MDGL) model. Madrigal eventually got approval for their NASH drug Rezdiffra this year on March 15, 2024 but the real play was on the top-line announcement in December 2022. They announced their positive pivotal clinical trial results on December 15, 2022 and skyrocketed from from $63.80 to over $300 per share or basically $1.0 billion to $5.0 billion market cap. GALT reaches this similar point by Q4 of this year, so the market is playing catchup discounting a good data readout.. GALT could easily hit HC Wainwright’s target of $11.00 this year which would represent a $660 million market cap and about $400 million short of where MDGL started its epic run.

Huge Market in NASH  

MDGL and their drug Rezdiffera are targeting early stage NASH patients that could potentially get better with diet and exercise.  Their marketplace is more complicated because of reimbursements, and a whole host of side effects in 5% of the patients that include diarrhea, itching, vomiting, constipation, and nausea.  There are approximately 5 million Americans that will get cirrhosis and the only curative treatment once they get to this stage is a liver transplant. Approval for GALT would mean a monopoly on this patient population until another Galectin-3 antagonist comes along. Rediffera is priced at $47,400 per year.  If GALT gets just 100K of the 5 million cirrhotic patients it represents $5.0 billion in annual sales at $50,000 per person. This revenue stream could be 2 years away.      

GALT Anointed the Next Leader in NASH

In the race to get a NASH  drug to market there have been a number of ups and downs in the space.  Intercept Pharmaceuticals was the first major contender in NASH but got shut down by the FDA because the risks didn’t outweigh the benefits.  Eventually the company was bought out by AlphaSigma in November 2023 for $800 million after peaking in 2019 with a $4.0 billon market cap. 

MDGL won the race in NASH and is first to market with its oral drug for NASH but it does come with side effects, which means some people might not be able to take it.  Rezdiffera is not very useful once a patient's disease progresses to cirrhosis.  This is where GALT’s drug, belapectin which is taken intravenously fulfills this large unmet medical need.  However what makes belapectin so special is its pristine safety profile which makes it ideal for FDA approval. There is the inconvenient IV administration, but the benefits far outweigh the inconvenience. While MDGL’s drug improves NASH resolution and provides hope to treat patients, belepectin has the potential to be disease modifying and it has the potential for label expansion.    

Galectin Science Linked to Dozens of Chronic Diseases

Belapectin is a galectin-3 antagonist which means it neutralizes the galectin-3 glycoproteins responsible for the inflammatory cascade of the NASH disease.  Basically it restores homeostasis to the body's immune system and brings them out of the inflammatory cycle. Over time this enables a restorative environment for the body to heal and undo the fibrosis.  In animal studies belapectin was able to reverse fibrosis.   

The same galectin antagonist, belapectin showed efficacy in cancer, atopic dermatitis, and plaque psoriasis. Other easy to take oral galectin antagonists have shown efficacy as a broad spectrum antiviral in COVID19, RSV, and H1N1. The galectin blockers have also been successfully tested in age macular degeneration and herpes zosters.

Rising Tide Plays

They say a rising tide lifts all ships, so it is vitally important to look at the competitors in the space that have next generation galectin inhibitors.  Belapectin is a molecule in development since 2008.  Bioxytran Inc. (OTCMKTS: BIXT) has the most advanced technology that targets the galectin signature of the disease instead of the singular galectin-3 target.  BIXT has an oral galectin antagonist that racked up an impressive 82% responders rate in COVID-19 in just 3 days in standard risk patients versus 50% in 8 days historically.  This drug is at a phase 3 ready stage for COVID-19 and one of the officers of the company have stressed that once they get regulatory approval they plan to embark on a massive label expansion that includes cancer and NASH. BIXT stock is very undervalued at a $20 million market cap considering it has an orally taken phase 3 ready drug.  Despite the company’s anorexic balance sheet, it compensates with its thin float, large insider ownership, and dominant patent position in treating over 60 viruses. Given the advanced stage of development of their oral Galectin-3 antagonists GALT shareholder would be wise to protect their investment by diversifying with shares of BIXT which has developed an oral galectin-3 antagonist which could be used for a number of disease indication that include NASH and cancer.  

Galecto Bioscience (NASDAQ: GLTO) would also be a sympathy play.  They have announced that they abandoned some of their cancer trials and Idiopathic Pulmonary Fibrosis (IPF) trials to focus on liver disease.  They seem to be following the pathway forged by GALT.  Unfortunately they had a clinical trial failure of their small molecule galectin-3 antagonist in IPF that left them seeking strategic alternatives and conserving their cash burn.  They have a $20 million market cap and are trading below cash.  It's important to do a deep dive into their tech because they are employing a small molecule which behaves differently than the carbohydrate drugs of GALT and BIXT.  Based on clinical trial results GLTO has the weakest tech and BIXT has the strongest tech with 2 clinical trials with 100% responders rate.

Investment Summary

In a short week GALT has captured the imagination of fund managers as they reposition to the next big NASH drug company. There’s a perfect storm propelling the stock higher.  There are no fears of dilution, the drug is approvable, a top-line readout is coming in Q4, and this is the only NASH stock on fire after the MDGL approval.  Fund managers are answering the call of what’s next.  Despite the exponential run up it’s nowhere near fair value and neither are its competitors for that matter. The stock enjoys a cult following just look at Stocktwits and the Yahoo Finance message boards.  There is some historical overhang in the $4-6 range, but should the stock breach this resistance expect a nice steady move higher as fund managers position for the Q4 readout.

If you are a long term player or like additional alpha, don't forget a possible hedge with the other galectin science companies like BIXT and GLTO which offer additional alpha and represent an inexpensive hedge against future development in this field of research.  Keep in mind that if the results on GALT are good, as expected, big pharma, not institutional investors are going to ask who is next as they position to get a competing galectin-3 blocker.  BIXT has the best of breed technology with its oral galectin-3 antagonist, but development has stalled due to the lack of funding.  Any amount of funding or partnership makes BIXT an instant contender.  GALT is the newly anointed, but BIXT is the dark horse pick that could yield massive upside for your portfolio if you have a little patience. 


Disclosure: Insider Financial and its owners do not have a position in the stocks posted and have posted this article for free without editorial input. A guest contributor wrote this article and solely reflects his opinions.

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