Was The Sell-Off Justified? Here is the Seeking Alpha story that helped contribute to the selling.
Note that the author is long put options on GALT.
https://seekingalpha.com/article/2347785-galectin-therapeutics-why-this-penny-stock-dressed-up-by-stock-promoters-is-a-short
I subscribe to Pat Cox's letter and below is his update on the sell-off.
I will not be posting any specific recommendations from Mr. Cox, regarding buying or selling shares, but feel he is entitled to his response to a personal attack.
Goldguy
July 29, 2014
At the onset of this morning’s trading session, Galectin Therapeutics (GALT) experienced a severe sell-off, with shares falling by as much as 60%. Much of the selling pressure stems from negative rumors floating around Internet message boards in relation to GALT’s second cohort liver disease Phase 1 results, along with a piece published on Seeking Alpha, all of which included misleading and—for the most part—patently false information.
Normally I don’t respond to the all-too-common nonsense published on questionable Internet financial sites. The analyst team, however, tells me that the Galectin Therapeutics’ successful second cohort liver disease Phase 1 results have been aggressively misinterpreted. Moreover, we are being accused of being paid by Galectin Therapeutics (GALT) to promote its stock.
As I’ve said multiple times, neither I nor the analyst team has ever had any direct or indirect financial arrangement with Galectin Therapeutics. If I were lying, there is little doubt that I would be headed for jail. Unlike those who short and attack biotechs on financial websites, our business is pretty constantly scrutinized by the authorities.
So let me be extremely clear. I recommended—and continue to recommend—the company based on the science supporting its platform as well as the professionalism, ethics, and experience of the company’s management. I’ve never received any payment from the company; in fact, I paid for the meal that I shared with the executive chairman of the board when we last met to discuss the company’s progress.
Apparently, the article attacking the company and me dealt with all manner of topics, except the science behind Galectin Therapeutics’ drug candidate GR-MD-02. So let me recap.
In animal studies as well as human-cell culture studies, we have seen consistently that the company’s complex carbohydrates bind to the same sites as galectin-3 proteins, but with even stronger affinity. This is important for several reasons.
First of all, galectin-3 proteins are an essential part of the process of fibrotic deposition. In fact, tissues that have had the gene that makes these galectin-3 proteins shut down cannot form fibrotic tissues. Multiple animal studies, using a variety of animals, have shown the reversal of fibrosis of various sorts, including pulmonary, renal, liver, and cardiac fibrosis.
In all of those studies, however, scientists could take one measurement that is not allowed in current Phase 1 safety studies. They took multiple biopsies of actual tissues to closely examine the actual state of fibrosis. You can’t do that in the current human study because of very real risks associated with liver biopsies, so the company is measuring anything that might help it understand the nature of fibrotic disease as well as the drug’s impact on it.
Galectin-3 proteins, by the way, are also a critical part of cancer formation, because tumors secrete them to bind to T cells, blinding and eventually killing the immune system’s mobile disease fighters. Tumors create a kind of barrier composed of galectin-3s that is lethal to T cells. The important cancer research group, the Ludwig Institute, has showed that T cells can be protected from galectin-3s by the company’s drug candidates.
This is why the Providence Portland Medical Center is funding its own studies of GR-MD-02 in combination with ipilimumab for metastatic melanoma. The IND application was, according to PPMC, prompted by a preclinical study led by tumor immunology expert William L. Redmond, Ph.D., that showed increased tumor shrinkage and enhanced survival in immune competent mice with prostate and breast cancers when combined with one of the immune checkpoint inhibitors, anti-CTLA-4 or anti-PD-1.
In fact, I believe that galectin-3 blockers’ potential in cancer alone gives the company multiple blockbusters. Nevertheless, I applaud the decision to tackle fibrosis, especially liver fibrosis, because there is no drug available for these killers.
The odd thing about this kerfuffle is that the results from the second cohort absolutely met the endpoints of this Phase 1 safety study. There were no adverse effects, and the pharmacokinetics of the drug were confirmed as safe. Specifically, the drug cleared out of the system, with no dangerous accumulation, in a linear matter.
So let’s talk about the data that have apparently led to confusion. First of all, the only relevant results in this Phase 1 study are the demonstrated safety, and the pharmacokinetics showing that the drug behaves as expected in the system. What seems to have surprised some people is that certain cytokine and liver stiffness markers did not go down in some of the treated patients, though they did in at least one of the placebo patients.
What does this mean? We don’t know, because these secondary tests are all experimental and unproven. They are not accepted by the FDA as an indication of efficacy and would not lead to approval or rejection. Nevertheless, let’s speculate about why the first cohort showed apparent improvements in these markers while, overall, the second did not.
The big difference between the two cohorts is the timing of the tests. In the first cohort, patients were tested 14 days after the last dose. In the second cohort, patients were tested three days after last dosing.
The obvious implication is that the process of destruction of fibrotic tissues actually puts markers of fibrosis into the bloodstream for three or four days, which is probably how long macrophages survive and operate after they’ve been activated by GR-MD-02, the drug candidate. In the first cohort, however, the measurements were taken two weeks out, when the body had cleared the cytokines that were blasted into the bloodstream by attacking macrophages.
In fact, we just don’t know if this is actually the case. None of these secondary markers are known to be directly related to the process of fibrosis. Given the confusion, I asked the company COO, Harold Shleven, if he regretted having changed the testing from 14 to 3 days. He said “Absolutely not,” because he’s learned very valuable information.
Remember, the Phase 1 safety study is proceeding perfectly. There have been no serious adverse effects, and nobody really thought that we would see the indications of efficacy that were apparent in the first cohort, when measurements were taken at 14 days. It will not be until the Phase 2 efficacy studies that actual liver biopsies are taken. Then we will know with certainty whether or not GR-MD-02 is reversing fibrosis. All the science—including multiple tests in various animals—however, convinces me that this is exactly what we’ll see.
By the way, the analyst team has looked into the specific charges made against the company. The first is that Galectin Therapeutics is using multiple organizations, including TransTech Alert, to pump stock sales. I know nothing about the other organization, Emerging Growth Corp./TDM Financial, but neither I nor my analysts have any financial stake in promoting the company.
I have only recently had the freedom to buy the company’s stock, but have not yet done so. Given the dip in price, however, I may do so soon.
The article also says that insiders have been selling the stock in the midst of a campaign to promote the stock to retail investors and retirees. In fact, the analysts have looked closely at this charge and tell me the opposite is true. Insiders have, in fact, been (wisely) accumulating shares over the last 12 months. Insiders have acquired 1,223,779 shares compared to selling 285,722 over the last 12 months, representing a buy-to-sell ratio of 4.28.
The third claim—that Galectin Therapeutics has consistently spent more on SG&A than R&D—is completely untrue. S&P Capital IQ clearly shows that GALT has spent more on R&D than SGA over the last two years.
Of all these charges, the only one that might be true is that Emerging Growth Corp./TDM Financial has a financial stake in promoting the company’s stock. If it owns significant shares, this could be true, and the analysts are going to investigate. Even if true, however, it does not mean in any way that Galectin Therapeutics has encouraged what is a common activity in many similar analyst groups.
Since these sorts of attacks are common, Galectin Therapeutics management isn’t inclined to punch the tar baby, to borrow an old metaphor. Nevertheless, I’m going to try to do an in-depth video analysis of the successful Phase 1 first and second cohort data with one of the scientists from the company.
In the meantime, relax. We’ve seen this sort of bear attack hundreds of times before, and we’ll see them many times again. I encourage you to spend time on the company’s website, which has enormous amounts of scientific information validated by respected third parties, as opposed to unsupported assertions published on the Internet. Read it and stop listening to uninformed third-party attackers. As I’ve said many times, Galectin Therapeutics is the most important player in the emerging science of galectin-3 blockers. There is absolutely nothing in the second cohort data that would prove otherwise.