- $10 million unsecured credit line
- Warrants at $5.00 over double the current market price
- Short Attacks Running out of steam
- Market Has it Wrong
- Company Fights Back
Long-term investor and newly elected board member Richard Uihlein delivered a knockout punch to the shorts recently. The terms of the $10 million unsecured line of credit should put to bed the last hope for the shorts about massive dilution looming as the company searches for a PHARMA partner. Strategic Investor, Uihlein has shown a strong pattern of support for the company and his belief has been rewarded by excellent clinical trial data for metastatic melanoma and NASH cirrhosis. This support should be a knockout punch to shorts who have nothing left to cling to except FAKE NEWS.
The shorts have exploited a vulnerability in the company’s public relations and media presentations. When results are expected to be announced for some reason only know to management and the IR firm the written presentation was released 30 min prior to the actual conference call. Trial results are very scientific in nature and need explanation, so what the shorts did was screenshot the most unfavorable headline and then tweet it out coordinating with a known short biotech writer Adam Feuerstein. What ensues are bid slapping and then very low offers with a lot of size to indicate a negative press release. Investors playing into the binary nature of an event have a low threshold for pain and sell first then get the details later. This is exactly what happened on recent news as well as the July 2014 with the announcement of Phase 1 data from the 3rd cohort, and again in Sept 2016 when they announced the FX trial results. Unfortunately, the company seems incapable of sending a positive message even then the news is exceptionally good as with the CX trial results. The company also buried the metastatic melanoma results with an announcement 2 minutes later about Dr. Traber heading to a conference. Hopefully, the new Board of Directors with Mr. Uihlein’s business acumen will fix this before future announcements.
The trial results were the first statistically significant signs of efficacy in a disease effecting millions worldwide. This $85 million market cap company has results that that show an effect on patients who are part of probably largest epidemic facing the world today, the silent epidemic called NASH. It’s completely understandable why the shorts would want to hijack this message because if investors truly understood the significance of the results and the value of the drug, and responded like they should have, then this would be a career killer for the shorts. The data is out supporting a huge market valuation. It seems it’s only a matter of time before investors wake up an realize that trusted sources of news are more reliable than a 10 min armchair analysis on social media.
Powerful Insider Statement
In the press release Richard E. Uilein stated “I have been a shareholder and supporter of Galectin Therapeutics for many years, and I am very encouraged by the Company’s positive efficacy results in its NASH-CX trial for patients with cirrhosis due to NASH. My desire to provide this credit line was to assist the Company with favorable financing while it continues to progress the drug towards the goal of bringing therapy and hope to a large number of patients who have no currently approved treatment options.” The terms of the deal are a credit line of $10 million at a 1.51% the lowest Federal Rate for short-term loans. The significance of the interest rates is that this is the lowest rate that can be charged to a business that it is considered a legitimate transaction that could be written off if it went unpaid. With principal and interest due by the end of 2019 which is two years away AND “at the discretion” of the Company so there is no effective liability triggered until then. In consideration of the deal, the company gave him warrants well over 250% over the current closing price of $1.93 and it was only for 1 million shares. This usually indicates a desire by the lender to buy more stock at $5.00. The takeaway for investors is this is a very clever way for the insider to say I think the stock is worth $5.00 a share right now and I put my money where my mouth is. The clue here is that this insider is “ALL IN” on support for this company and the shorts are going to find it very difficult to take on a billionaire.
An analyst from HC Wainwright Ed Arce published “the market gets it wrong. Again.” This is a powerful headline that should resonate with investors. He stated the reaction was predictable because it wasn’t a “clean win” which means the data fit in a nicely packaged box for the FDA. He goes on to say that the “study is a landmark for the treatment of cirrhosis (across several parameters), but also because it defines a highly clinically significant and easily identifiable patient sub-population.” This analyst speak means that this company could get Breakthrough Therapy Designation for NASH cirrhosis patients without varices and that is 50% of the patient population or about 2 million people. The FDA asked for the HVPG endpoint which the Company proved with statistical relevance. It all comes down to the negotiations with the FDA over the next months as the company seeks Breakthrough designation and a favorable trial design for a phase 3 study. The perfect safety record should help speed the FDA decision. This will also help with partner negotiations. This is the same analyst that called the buyout of Tobira correctly after a failed endpoint. The fake news spinmaster attacked Ed Arce directly and said “Re:
$GALT — H.C. Wainwright published today one of the most embarrassing research notes you’ll ever read. This is what they do. And yes, a stock offering is obviously coming.” With an unsecured credit line, it seems pretty obvious which is real and which is fake.
Favorable Follow Up from Company
After the Trial results, the company used the shareholder meeting as a forum to emphasize it’s message that scientists, clinician’s, and researchers get what a landmark breakthrough this is, and how far ahead they are compared to the competition. Dr. Traber was quote that “NASH cirrhosis do not have esophageal varices which demonstrates a large potentially addressable population.” This essentially means the company has a lock on this market for YEARS. The CEO said that he is highly confident that they will get Breakthrough Therapy designation. Investors or shorts should keep in mind that due to the extremely safe safety profile and the requests from clinicians to extend the trial, there is strong possibility that the FDA could conditionally approve registration of the drug while conducting the phase 3. Also expect the company to use some of the best phase 1 trial data in melanoma to make the case that this is a platform technology.
Earning a current market cap value of $84 million, GALT seems grossly undervalued and decoupled from insider perceptions about the drug, acceptance from the medical and scientific community about the potential of the drug to work on multiple diseases including NASH. The company is one trial phase away from a multi-billion dollar blockbuster drug approval. It’s virtually inconceivable the company won’t get a shot at a phase 3 with so many positive trial results. The company just got $10 million with no strings attached and the billionaire investor has indirectly set a short-term price target of $5.00. Watch this one very close as the battle between the longs and the shorts unfold. It will be interesting to see which side wins the battle between major medical progress and “fake news.” We will update the story again soon as developments transpire. Sign-up for continuing coverage on shares of $GALT stock, as well as other hot stock picks, get our free newsletter today and get our next breakout pick!
Disclosure: we hold no position in $GALT, either long or short, and we have not been compensated for this article.