Wednesday, March 18, 2015

Galectin Therapeutics (GALT) Misfired In 2014

Galectin Therapeutics (GALT) just cannot catch a break these days.  They announced a Q4 loss this week, just a day after a law firm announced an investigation of the management team's investor relations program.  It's fair to wonder what went wrong.

One of the company's drugs is GR-MD-02, a treatment for nonalcoholic steatohepatitis (NASH) with advanced fibrosis.  The possible reversibility of fibrosis tempts drug makers to develop treatments.  Alcoholics everywhere will rejoice when their liver problems are solved.  Non-alcoholics will be even happier with a solution for fatty buildups that inflame livers.  Chronic kidney disease (CKD) and end-stage renal disease (ESRD) are related ailments.  The size of the market for fibrosis treatment can be approximated from CDC data on CKD and ESRD, and Medicare pays for a decent slice of the ESRD treatment market.  In other words, a fibrosis treatment would reap financial rewards.

Here's a run-down of Galectin's select metrics from Reuters.  The company's ROA, ROI, and ROE are all disastrous over both the short term and long term.  Galectin's destruction of investor capital is evident in over three years of progressively negative retained earnings.  The GR-MD-02 drug has been under development at least since 2009, according to research papers Galectin cites on its website.  More than half a decade is sufficient to show satisfactory Phase 2 trial results, and yet Galectin is just now beginning Phase 2 for GR-MD-02.  Efficiency is not this company's strong suit.

There is no turnaround in sight.  Galectin will spend more years burning cash until it gets test results, if ever.  I cannot be certain whether its drug pipeline will ever reach an addressable market for liver disease patients comparable to the CKD or ESRD markets.

Full disclosure:  No position in GALT at this time.