Short Mafia Attacking Galectin Therapeutics (NASDAQ : GALT) Ahead of Planned Year-End Readout

• Galectin Therapeutics has a top-line readout by year-end
• Shorts claim trial destined to fail & dilution coming (weak analysis)
• Short dogpile led by Adam Feuerstein creates long opportunity
• Half of patients are a redo of a successful subgroup and the other half are at the optimal dose expected to be even better.
• Well designed trial and regulatory feedback indicate a successful readout
• HC Wainwright reiterated buy and multibagger $11.00 price target

Galectin Therapeutics (NASDAQ: GALT) was the subject of an unsophisticated bear raid on December 2nd just as it was approaching the upper end of its trading band ahead of a planned year-end readout in its NAVIGATE trial for MASH cirrhosis.  Substack author BioMusings published a flawed analysis of GALT data in an attempt to spread FUD among existing shareholders. This author has a limited track record of 2 stocks, but to his credit, he correctly called ImmunityBio, Inc.’s (NASDAQ: IBRX) need to conduct an offering. 

Motley Crew Leads the Short Skirmish

Piling on to the short thesis was @biotenic and none other than Adam Feuerstein due to his well-documented feud with biotech analyst Mike Sheikh, as well as Martin Shkreli, known as “pharma bro,” who was infamous for increasing the price of life-saving antiparasitic drug Daraprim from $13.50 to $750 per pill and who was recently released from 5 years in jail.  GALT investors have a monumental opportunity to cash in on a tired short thesis that has no teeth ahead of a widely anticipated positive readout from GALT. 

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The protagonist of this short skirmish is biotech writer Adam Feuerstein who has 116K X.com followers. Substack author Biotenic triggered Adam Feuerstein's Pavlovian response to comment on GALT, quipping the “fruit pectin as a drug” company. There has been a long-standing feud between Adam Feuerstein and Mike Sheikh, who has been a fervent galectin evangelist.  Historically, Feuerstein resorts to personal attacks to bash a stock he doesn’t like when he has no data to manipulate. His short thesis right now is to short the stock because he thinks Mike Sheikh is a promoter. He presented no facts or analysis. 

In a surprising move, Sheikh recently lauded the GALT clinical trial readout in an interview despite the fact that his company Bioxytran Inc. (OTCMKTS: BIXT) has a competing product.  For investors unfamiliar with BIXT, the company has a proven oral next-gennext gen galectin-3 antagonist that had a 100% PCR neg Phase 2 clinical trial endpoint with a p value = 0.001. They appear to be developing the first broad-spectrumbroad spectrum antiviral that works on COVID-19, RSV, and Influenza.  There is also a credible argument for its use in Bird Flu and they have a patent pending for over 60 viruses. 

Preparing for the Next Round of Short Attack on the Data Announcement

The key takeaway for GALT shareholders is that regardless of the clinical trial results, Feuerstein has a personal beef with Sheikh and GALT by proxy and it's almost a certainty that he will have a negative take and manipulate the data readout in the premarket with a negative tweet regardless of the positive outcome.  Expect Feurenstein to cry foul that GALT failed or resorted to subgroup analysis which is a hard sell when the drug meets its primary endpoint and purposely created subgroups. His war cry will likely be that the company changed from an adaptive trial to a stand-alone clinical trial and that it affects the power of the study and the results will never pass the muster of the FDA. This point will be addressed later in the article.   

The other character in this short skirmish piling on the bandwagon was “Pharma Bro” Martin Shkreli.  On December 3rd he did a YouTube stream of his analysis of GALT.  His stream was highly disjointed as he took potential investors through his analysis which was at times almost bipolar as he says “oh pectins can’t be therapeutic. This is super scammy” to “this data is actually not that bad, I just don’t know if I want an IV carbohydrate.”  His stream got almost 1500 views so it's hard to gauge the reaction because his audience is highly skewed to short traders.   

Short Thesis Dissected and Squashed

The meat and potatoes of the short thesis revolved around 2 substack articles. Author Biotenic aptly stated that Galectin’s clinical trial readout isits a binary event, and he telegraphs that the upcoming subgroup analysis could be taken favorably but he was worried about the balance sheet.  At this point, most GALT shareholders would tune out the noise of this article and discount it because they know billionaire Dick Uihlein is backing the company and will give them whatever they need at a favorable interest rate of 2.5% so as to not dilute the company very much. A common short thesis is that the convertible notes will lead to selling en masse and depress the stock price.  As an insider and holder of the notes, that just isn’t a reasonable thesis. 

• Hepatic Venous Pressure Gradient Endpoint from 2017 was Flawed

Biotenic’s other point revolves around GALT’s failure to meet its primary endpoints in its past trial which means it's likely to fail this one.  What he neglects to realize is that the endpoint of Hepatic Pressure Venous Gradient (HVPG) is not the same in the upcoming readout, its gastric varices. HVPG was designed to measure the severity of portal hypertension and was not a good tool to measure liver function caused by NASH because increases in portal hypertension lead to the formation of a varices that act as a shunt that actually relieves the pressure. This means patients in the control had their disease progress but the reduction in HVPG showed they were getting better which is another reason why it was scratched from the new trial. 

• Healthier Patients Enrolled in NAVIGATE Study Mitigate Trial Failure Risk

Biotenic also failed to factor in that the patients in the NASH-CX trial were sicker than the patients in the NAVIGATE trial. Then he talks about no dose response and that the high dose response was not statistically significant.  Furthermore he downplays the u shaped dose response curve which is highly relevant in this class of drug. 

• Poor Trial Design Responsible for Failure in 2017 

GALT’s failure in the NASH-CX study was for the most part a result of poor trial design.  They got the wrong dose because they failed to follow the mouse model on dosing not to mention the short 12 month therapeutic window versus 18 months in this trial.  Typically more of an inhibitor is better when the receptor you're blocking is overexpressed in a disease. When it comes to carbohydrate drugs, research points to how crucial it is to find the optimal dosage. For example, GCS-100 is a galectin-3 inhibitor that was developed by LaJolla Pharmaceuticals to treat Chronic Kidney Disease (CKD) which is fibrosis of the kidney.  Its phase 2 clinical trial showed a statistically significant improvement at the lower dose compared to the higher dose pointing to the importance of finding the optimal dosage in this class of drugs.  

• Belapectin Must be Taken at the Optimal Dosage to Drive Efficacy

One of the best case studies is the optimization of Belapectin in the melanoma trial. Notice in the chart that the 4 mg/kg was the optimal dosage that led to a complete response and 8 mg/kg was the worst.  The reason for this negative feedback at the higher dosage is because the drug binds to the galectin-3 receptor so well and blocks so much of it so quickly that the body fights this by producing more galectin-3 to keep it in balance.  What investors should pay attention to is how robust the belapectin clinical trial results were at the optimum dosage. It achieved an unheard of 100% objective response rate in the 2nd cohort with 1 complete response. Do any of the shorts mention this possibility? GALT has had some of the best cancer response rates for the past 6 years and investors are listening to substack biohackers trying to sell them into selling shares.        

The medical discussion for the NASH-CX trial was parsed in this journal article whereby the therapeutic range was between 2 mg/kg to 8 mg/kg.  In the NASH-CX study the trial dosed on both ends of the therapeutic window but not at the optimal point of the therapeutic window which was 4 mg/kg.  The NAVIGATE study set to read out has a 2 mg/kg group that achieved statistical significance in that subgroup of the NASH-CX trial, and a newly explored 4 mg/kg group expected to be at the optimal dosage.       

When the NASH-CX trial read out gastric varices were not a primary or secondary endpoint and extrapolated in post hoc analysis. The important point to remember is that there is very little difference in dosing from the NASH-CX study to the NAVIGATE study so the statistically significant results with a p value = .02 should repeat.  Simplifying this for investors there’s a 98% probability that the 2 mg/kg group is going to get 0 varices if you trust statistics.  The unknown is the 4 mg/kg group. Assuming that 2 mg/kg dosage was optimal, based on a linear relationship it should be better than the 8 mg/kg group and result in data that meets the primary endpoint.  

Short Thesis 2 Dissected and Squashed

Stubstack author Goderguy focuses more on the science, data, and the mechanism of action.  The standard short playbook of high risk of dilution was last on his list.  He takes investors on a journey back to the preclinical mouse models that showed significant reductions in fibrosis but what's missing is the disclaimer that these results happened while they poisoned and treated the rat at the same time.  Consider curing an alcoholic of liver fibrosis while he continues to drink. GALT had a very robust study and there is no doubt that Galectin-3 is tied to fibrosis and blocking it can halt the disease and even reverse it. The case he is trying to make is that the mouse models are not translating in humans.  The evidence he uses is how the portal pressure leads to esophageal varices.  Portal pressure is no longer an endpoint and not part of this study because it's not a good proxy of the liver disease state. He attempts to paint a picture that humans don't respond the way mice do and beats on the drum of little movement in HVPG instead of the endpoint of gastric varices.   

The next part of Goderguy’s analysis was on the statistical data and how the p value was incorrectly calculated and how the p value under his analysis was not statistically significant.  If the baseball's score is 6 - 0 it's pretty clear there is a winner. Investors need to use a little common sense here that this guy is out to lunch with his statistical nonsense. He goes on to talk about the dose response curve which was covered earlier and introduces a theory that higher doses promote Galectin-9 which is pro fibrotic based on a LaJolla pharmaceuticals drug GCS-100 which was mentioned earlier in this article.  His science discussion ends by talking about the Mechanism of Action (MOA) and how TGF-Beta is the key instead of Galectin-3.  

Drug Safety Monitoring Board (DSMB) Ratification

The DSMB has a responsibility to not only keep the patients safe but to ensure efficacy in the clinical trial.  They look at unblinded data and can tell if the drug looks promising.  With 5 successful DSMB’s recommendations to continue the trial, it's reasonable to say that they think the drug is safe and is showing progress toward its primary endpoint. These MASH cirrhosis patients are fragile and if there was a safety signal they would need to stop.  There are no safety signals which is why this is the nail in the shorts coffin and notice how not one of them pointed this out.  If Belepectin fails to meet their endpoint the DSMB failed those patients 5 times for not shutting down the trial.  

Over-Enrollment is a Positive

It's very hard to recruit patients into clinical trials especially one that requires an intravenous administration like belapectin.  This clinical trial was overenrolled at 357 patients.  The plan was for a total of 315 or 105 in the control, the 2 mg group and the 4 mg group.  Over-enrollment is a positive tell that the clinical trial results are good. It means the investigators like the outcomes they are seeing and want to get as many patients as they can enrolled in the trial. Over enrollment is loosely correlated with the probability of a successful trial.  Once they were over 315 they got feedback from the FDA that it would make sense to analyze the Stage 1 portion as a stand-along clinical trial.  Once announced this boosted investor confidence that led to speculation that the FDA was going to look at this as a potentially pivotal trial. While it's possible that the FDA could consider this a registrational trial it's more likely that they finally give Belapectin a Breakthrough Therapy Designation (BTD) that typically gets valuations in the billions especially in a disease with such a high unmet medical need.    

‍Binary Outcomes

There are 4 possible outcomes of the upcoming interim analysis and two of them are positive for investors.  

1. Declaring NAVIGATE a Pivotal trial with a phase 4 study
2. Breakthrough Therapy Designation (BTD) with a requirement to dose more patients. 
3. Moving forward to the second stage with adaptations for optimal dosage or fine tuning the number of patients needed to reach statistical significance.
4. Halting the NAVIGATE study due to lack of efficacy

HC Wainwright has been covering GALT for over a decade and understands the company much better than any of these short reporters. They are looking at an $11.00 target and that is a conservative upside target.   

Investment Summary

There is a monumental opportunity for investors who understand statistics.  The 2 mg/kg subgroup had no varices in the NASH-CX clinical trial and it was statistically significant.  They redid this group in the NAVIGATE trial with less sick patients.  There should be no varices in the upcoming readout. The 4 mg/kg group was deemed the optimal dosage that was also the optimal dosage in cancer.  The shorts are basically all in betting that 4mg is going to be worse than the last trial, and it's just not a good bet.  There is an optimal curve in NASH, Cancer, and CKD.  The evidence is overwhelming that the shorts are going to lose this battle. Dilution is just not a factor to consider when the Chairman is a billionaire. The stock is extremely undervalued at $125 million market cap and HC Wainwright analyst Ed Arce has an $11.00 price target.  The December options have a huge premium in them because investors are betting on a readout before expiration but with a week left and no announcement of the DSMB which has to come BEFORE the data readout its wise for investors to get more time if they want to speculate.  The data is supposed to come this year but could slip into next year with the holidays.  The shorts are going to pounce on this so investors need to be ready.  GALT represents one of the best risks to reward top line data release plays. 

Keep in mind the pair trade buying BIXT and Galecto (NASDAQ: GLTO).  These stocks could also see their valuations rise dramatically in sympathy as big pharma wakes up to the concept of galectin science.

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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.