NASH Liver Disease

Storm Clouds Hover over Intercept with Upcoming NASH Results

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  • Topline NASH FX Results Could Be Strong
  • Galectin-3 Target Strongly Correlated to Human Trials
  • NASH Stocks Stagnating
  • New Management Team Coming for GALT

In the next couple of weeks NASH stocks like Intercept Pharmaceuticals (ICPT) and Allergan (AGN) may see some significant downside pressure.  Galectin Therapeutics (GALT), plans to announce its long awaited phase 2b clinical trial results.  Most investors have written off GALT but if you look at the anecdotal evidence it seems that the crowd might have gotten this one wrong.  AGN bought Tobira for 2.1 billion and the drug doesn’t seem viable for commercialization.  Early stage NASH is soon to be a graveyard if any of these late stage NASH players produce results.  GALT is the first player to the table with phase 2b trial results.  Most of the other players are in phase 1 or 2.  Since mid September the NASH stocks have been under intense pressure after ICPT’s FDA warning letter rattled investor confidence that this drug would every get by the regulators due to safety concerns.  What was unusual about the drop is that it was not followed through by a bounce in one of the other NASH stocks.  The only winner and it’s a marginal winner was GALT.  NASH disease is at epidemic proportions and climbing higher every day so this massive contraction in the market is quite surprising.  Since all the other NASH stocks fell it’s a typical guilt by association drop.

Results Could be Very Strong

There have been rumors of recruitment issues with ICPT’s phase 3 clinical trial.  They just started this year and topline results won’t be due out in another 2 years.  What is so interesting is the perception in the marketplace has ICPT in the lead and that couldn’t be any further from the truth.  GALT has top line Phase 2b clinical trial results due out in the next couple of weeks.  These trial results are pivotal.  What that means is that they could seek registration approval if safety and efficacy results are hitting their endpoints.  What isn’t a mystery is that GALT’s drug GR-MD-02 is safe.  GALT got some of the best marks a drug can get from the Data Monitoring Safety Board (DMSB) in the summer.   This safety profile might also be the reason patients are completing the trial.  A total of 151 patients completed the study vs 162 enrolled.  Intercepts drug Ocaliva, is taken orally once a day versus an intravenous infusion every 3 weeks.  GALT’s protocol is more draconian so one would expect patients would be more apt to drop out of the GALT trial versus ICPT’s trial unless of course the patients were feeling better.  Historically 40% of phase 2 drugs make it on to phase 3.  Of the drugs that fail to progress half fail for efficacy and the other half fail for safety.  With such a safe drug profile there is a 70% chance of approval.  The question is what is the chance for efficacy.

Galectin – 3 Target


The Galectin-3 is upregulated in Cancer and Organ Failure.  The Journal of Dermatological Science has also indicated the Galectin-3 highly expressed in epithelial cells and “can contribute to atopic dermatitis.”  The linkage between the Galectin-3 and psoriasis, atopic dermatitis and cancer exist in many preclinical trial studies.  GR-MD-02, GALT’s lead candidate, has successful clinical trials that showed robust trial results.  In psoriasis and aptopic dermatitis the scores when down 50% respectively.  The cancer results announced on November 12, 2017 were nothing short of spectacular showing extremely rare complete responses with patients in a phase 1 study.  The Galectin-3 target is also believed to be the cause of liver organ failure and in knockout mice with the Galectin-3 the mice were incapable of contracting fibrosis.  Since all these other indications translated to strong results in human trials it seems likely that the upcoming NASH CX trial will be good as well.

Galectin Stocks

There are very few publically traded Galectin stocks but if GALT posts good news there could be a renaissance back to Galectin stocks.  Although they moved away from Galectins, LaJolla (LJPC) still has some intellectual property and may be a potential play on good news.  The other publically traded stock is GlycoMimetics Inc. (GLYC).  The only other company with a compound in clinical trials is Galecto which is a private company.

NASH Stocks Stagnating

Some of the top stocks as the top of the NASH food chain have not done much after Intercept Pharmaceuticals stock tanked in September.  The entire sector has been under contraction.  The swoon ICPT took in September was about $1.5 billion.  There is a vacuum left from the September fall and it seems to follow that one of the NASH stocks would have picked up the slack but none have.  GALT has made the only progress in the group and the gains in market share have been paltry compared to the loss of market cap by ICPT.  Many analyst still write about ICPT as the leader but this is the root of the misconception.  The analysts have grown complacent and haven’t picked up on the fact that GALT is in fact in the lead and ready to announce results.  Until recently Roth capital had a $1 target despite the stock trade over $3 for a month.  Typically there is a run up into results but no such rally has materialized.  It appears to be severe investor apathy because the phase 1 melanoma trial had exceptional results that were met with a tepid response.  The root of this apathy seems to go back to the CEO’s bungling of the NASH FX trial results and then the Psoriasis trial back to back in fall 2016.  The investment community lost confidence in the CEO.  Correctly the market took a heavy discount due to the CEO.  The thing is the market may have overdone it.  The other NASH stocks in the sector suffer from a lack of catalysts because the trials are so far from completion.

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New Management Coming to GALT

The 8-K filings from the CEO Traber in September complaining about Founder Czirr exercising his right for board seats, demonstrates the disconnect he has with the investment public.  Shameless self-promotions has ensued since by chairing and speaking at a number of conferences.  This activity is indicative of a man insecure in his position or job hunting.  It’s clearer now the only reason Traber kept his employment was because his Glaxo crony and Chairman Mark Rubin was on the board.  With Traber’s control of the board gone it seems like this company can finally spread its wings.  The new board has billionaire investor Richard Uihlein who has saved Traber with financing after 2 failed presentations.  It seems reasonable that he will want to have a say in the future direction of the company and perhaps pursue the lowest hanging fruit in cancer.

Intercepts Woes Only Getting Worse

ICPT’s drug Ocaliva is known for severe pruitis, which is severe itching of the skin, and patient deaths. The negative publicity surrounding them doesn’t seem to stop.  Once they were the poster child for NASH now they have fallen from grace.  The safety profile seems too dangerous and the company is targeting too early a stage of fibrosis.  FDA approval doesn’t look likely and it looks like another blow is coming if GALT puts up some good number and there is no credible reason why they won’t.  Only the misinformed bring up the NASH FX trial as a reason the NASH CX trial is destined to fail.  Unfortunately for ICPT good news for GALT is really bad news for ICPT and it deflates any hope they had of getting Ocaliva approved for NASH.

Investment Summary

Results from GALT’s clinical trial will set the tone for the rest of the NASH sector.  Stocks like ICPT, Allergan (AGN), Gilead (GILD), Galmed (GLMD), and Conatus (CNAT) might fall victim to a sector sell off.  If GALT comes out with bad news and no indication of efficacy then nothing will likely happen except the market might start rotating in the next name they feel has a chance at approval.  A short position in ICPT or a long position in GALT might be the best strategies.  GALT has a lot going for it now that there seems some clarity.  It seems clear that a new management team may be coming on board or the company could have results so spectacular a bidding war ensues.  Either way is seems better communication might be on the horizon.  The biggest wild card is who will deliver the presentation?

Target Price

On good GALT news ICPT might lose half its value and head to $30 and hit a technical support level.  Using past metrics for ICPT, it seems that if GALT has good news on the low end their market cap should shoot to $2.0 – $5.0 billion.  On a fully diluted basis that represents $40/share on the low side and $100/share.  Keep in mind that ICPT on similar news when from $77 to $497 in one explosive day.  The difference is that ICPT was in a moderate uptrend and it was a surprise that they stopped the trial early.  If GALT has any efficacy it will go up because it won’t be hard to beat ICPT’s 3% increase over placebo for their Stage 3 fibrosis patients. At first glance these price targets seem nutty, how can there be such a disconnect?  That’s what happens when the CEO doesn’t call for a press conference on spectacular cancer results because he’s at a conference networking for his next job.  Don’t get wrapped up in why it’s so cheap.  Grab the shares while you can.  They represent extreme value here.

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Disclosure: we hold no position in $ICPT or $GALT either long or short, and we have not been compensated for this article.