Galectin Therapeutics (NASDAQ: GALT): Disrupting Merck’s Cancer Dominance

• New research challenges Keytruda efficacy
• Keytruda represents about 50% of Merck’s revenue
• FDA action could dramatically shrink patient pool and revenues.
• Regulatory risks are manageable if combo therapy w/ Galectin-3 blockers is implemented 
• Galectin focused biotechs present significant growth potential with minimal risk

Merck (NYSE: MRK) has one of the most successful oncology drugs in the world today.  After all, they cure a very small percentage of patients with few side effects, so what's not to like about this drug?  Keytruda represents 45% of their quarterly sales with $7.5 billion in their last quarter. On their latest investor call they were beating the drums about their 9 approvals and 4 in earlier-stage cancer.  They are pursuing over 20 additional cancer indications to broaden their base of available patients.  This is the same exact strategy they have been pursuing since their first approval in 2016 and it's been monumentally successful for investors, but how long can this streak last? The potential overhang of an FDA requirement for additional testing is a significant cloud that could dramatically affect future sales.  

Recent research is surfacing that Keytruda is neutralized in a majority of the patients they currently treat. While this may be breaking news to most, the first clinical trial results from a galectin-3 blocker used in combination with Keytruda indicated that there was an underlying reason why only a select few Keytruda patients were able to be cured.  In 2018 a small biotech called Galectin Therapeutics (NASDAQ: GALT) completed a combination trial of Keytruda and Belapectin in melanoma that had a 100% objective response rate (with optimal dosing) versus the historical 2-year control of 33%.  In this trial, one-third of the patients in the 2nd cohort had a complete response (cure) in 90 days.  These results from 2018 continue to stand as some of the best clinical trial results in oncology, yet few are taking notice of  them until now.  

The reason these results are so special is that they answer the age-old question of why Keytruda cures a select group of people, but not everyone.  Two peer-reviewed studies in the past year have finally answered the question and opened up Pandora’s box on the viability of PD-1 and PD-L1 antagonists in the treatment of cancer.  Galectin-3 is a protein (often produced by cancer cells but sometimes produced by other cells) that stuns the attacking T-cells and coats them with a plaque that interferes with almost all PD-1 inhibitors.  In essence, the galectin-3 occupies the binding site so Keytruda cannot attach.  This means Keytruda is unable to protect the T-cell from being turned off by the cancer cell.  This mechanism is in addition to several other of galectin-3’s well-known pro-cancer mechanisms whereby galectin-3 interferes with proper immune function and where galectin-3 promotes cancer growth and metastasis.

Tumors are routinely biopsied to confirm the presence of cancer but they can also be used to determine with extreme accuracy if Keytruda is going to work before it is administered. In fact, tests are often performed to determine whether the patient has mismatch repair deficiency or microsatellite instability, which are requirements for treatment.  However, with patients who are eligible for Keytruda treatment, there is another highly accurate correlation that appears to determine whether the treatment will work or not.

In 2019 another peer-review study showed how a diagnostic galectin-3 staining test that costs under $500 could be used to identify 90% of the responders before taking Keytruda.  Although this study was supposed to be followed by a larger confirmatory study it was never attempted.  Those asking why, should simply follow the money or ask what the economic spillover effect would be if over 60% of the patients that currently qualify for Keytruda were denied access because there was a less than 10% chance it was going to work on them due to their high galectin-3 tumor type.

Neutralization of the PD-1 inhibitors is not confined to Keytruda alone.  The latest study demonstrated almost all PD-1 inhibitors were susceptible to neutralization by the Galectin-3.  This includes Roche’s (OTCMKTS: RHHBY) Tecentriq, BristolMyersSquibb’s (NYSE: BMY) Opdivo, AstraZeneca's (NYSE: AZN) Imfinzi, and potentially Summit Therapeutics’ (NASDAQ: SMMT) Ivonescimab.

The study also showed that the level of neutralization was correlated to the level of Galectin-3 expression.  This evidence explained the variability in patients' response to Keytruda over the past 8 years was likely related to the tumor’s levels of galectin-3.  The journal analysis was thorough; it tested the effect of blocking Galectin-3 in Keytruda-resistant mice.  It should come as no surprise that several galectin-3 blockers in combination with Keytruda or other PD-1 inhibitors have been shown to dramatically enhance treatment efficacy. 

The existence of both peer-reviewed studies represents a serious regulatory risk to Merck’s and the other companies’ PD-1 inhibitors.  Merck could see the biggest impact due to their 45% sales concentration of Keytruda.  The FDA has a duty to do no harm and the black-and-white test results of these peer-reviewed articles show millions of patients are currently taking PD-1 blockers that won't work. This is the single biggest risk in the stock.

When analyzing Merck’s pipeline to see what they have in place to overcome this potential sales cliff, it's clear they have no contingency plan for a regulatory action of this magnitude. Adding to the cliff is the patent expiration of Keytruda in 2028 leaving MRK with little room to maneuver.  Their strategy in oncology is to expand the number of cancer indications and combination therapy, but this makes no sense given their patent cliff in 2028.  In their pipeline, they only have 2 stand-alone oncology drugs not used in combination with Keytruda. They need to start testing Keytruda in combination with galectin-3 inhibitors when treating patients with high galectin-3 in case the FDA notices this emerging research and takes action.

For the sake of argument, let's assume the FDA takes no action and lets millions of cancer patients continue to receive the harmful effects of Keytruda even though the patients with high tumor galectin-3 will likely experience no treatment efficacy. Even in that case, there’s a more immediate threat. Summit Therapeutics (NASDAQ: SMMT) launched a very powerful PD-1 inhibition that doubles as a VEGF inhibitor. In a head-to-head study, they proved superiority and it’s only a matter of time before others take this approach. It's an arms race because one month later $200 million in funding is flowing into Glycomimetics (NASDAQ: GLYC) to fund the development of a drug that “matches the format and pharmacology of ivonescimab.”       

PD-1 / PD-L1 resistance is a very real issue being considered by the FDA. Industry guidance from the FDA for the past 2 years is currently related to the dosing regimens to minimize the patient's risk which basically means they don’t want patients taking Keytruda or other PD-1 inhibitors unless 1) they have to and 2) they know that the PD-1 inhibitors are going to work. There’s a very good article called Keytruda’s Third Wheel written by Bioxtyran Inc. (OTCMKTS: BIXT) that gets into the details of how galectin-3 occupies Keytruda’s binding site.  The article also analyzed 2 clinical trials of galectin-3 antagonists in combination with PD-1 inhibitors that include Keytruda. This is a must-read if you want a concise overview of how Galectin-3 antagonists can be used in combination with Keytruda to overcome the PD-1 / PD-L1 resistance. 

Investment Summary

Keytruda does ~$25 billion in annual sales and if the FDA forces them to do a galectin-3 tumor staining test the good news is that it's going to make their drug close to 100% effective, but it will also likely lose them approximately 60% of their existing patient population.  That's a $15 billion revenue cliff assuming the FDA moves forward with the highly anticipated action.  Regulatory guidance is very hard to predict, but market forces show that SMMT has a Keytruda killer drug and wolves are circling the wagon if you look at the recent GLYC merger announcement.  There are major uptrends in both of these biotechs.  

The most obvious solution for MRK is to buy a company with a galectin-3 antagonist.  Galecto, Inc. (NASDAQ: GLTO), Galectin Therapeutics (NASDAQ: GALT), and Bioxytran, Inc. (OTCMKTS: BIXT) are the leading biotechs with a galectin-3 asset.  While the best technology is owned by BIXT with an oral galectin-3 antagonist with 100% efficacy in their infectious disease clinical trials, GALT is expected to have a December readout in the MASH cirrhosis (liver) indication, which is widely expected to warrant a regulatory approval if successful.  Peak sales of this drug could be $5+ billion so at a $175 mil market cap and a potentially pivotal readout in a couple of months it's very undervalued considering the same drug worked 100% in one cancer cohort. 

While MRK is currently close to 2-year lows it can go much lower once investors figure out the science behind the drug accounting for almost half of their sales is at risk. Investors could look at Moderna (NASDAQ: MRNA) as the model of a biotech that swooned on doubt over the efficacy of their main product.  The smartest way to play the Ketruda trade is to buy the best of breed of the Galectin-3 antagonists: BIXT and GALT where you get the best bang for your buck.

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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.