Roth's Piros: Galectin Therapeutics Shares Can Quadruple In Next 12 Months

Shares of Galectin Therapeutics Inc (NASDAQ: GALT) could reach $6 in the next 12 months, according to Roth Capital's Elemer Piros who initiated the stock with a Buy rating.

Galectin is developing a drug that could prevent and reverse fibrosis in nonalcoholic steatohepatitis (NASH) patients who suffer from cirrhosis. There are only a handful of drugs in mid-stage development. Galectin's GR-MD-02 has a differentiated profile: it can reduce inflammation and prevent and reverse fibrosis in animal models.

"There are ~50MM patients suffering from NASH in the U.S. and in key European countries (EU5), in our estimate," Piros wrote in a note to clients.

The path for drug approval for NASH is evolving. Intercept Pharmaceuticals Inc (NASDAQ: ICPT) and Genfit (OTC: GNFTF), with Phase 3 drug candidates, are paving the way with regulators. By the time Galectin gets to the pivotal stage (2018), the market will have a much better understanding of trial endpoints, duration and patient characteristics.

"While their drugs may reduce inflammation and liver fat, we are unimpressed with the results on decreasing fibrosis. As a matter of fact, to our knowledge Galectin's GR-MD-02 is the only drug candidate to prevent and reverse progression of fibrosis," Piros noted.

Galectin plans to release data on GR-MD-02's impact on fibrosis in NASH patients, using non-invasive imaging, as an endpoint. The findings are expected to be out in the third quarter of 2016.

While the study is small (15+15 patients), GR-MD-02 could be the first agent to show an effect on fibrosis in four months, where others failed to impress even after 72 weeks of treatment.

A much larger trial (50+50+50 patients) investigates GR-MD-02 in advanced NASH cirrhosis, with a potential readout in the fourth quarter of 2017.

Piros said NASH is a multi billion-dollar indication. The bar set by Intercept and Genfit is relatively low: 10-15 percent meaningful response rates are observed. The impact on fibrosis is questionable at best. During the next six-to-20 months, it will be known whether GR-MD-02's favorable preclinical profile translates to success in patients.

"In our calculation, GR-MD-02 could achieve ~$7B in peak sales five years from launch (2022) in 2026. We estimate the risk-adjusted NPV (25% probability of success, 15% discount rate) of a royalty stream (20%) at $285MM, or $6/fully diluted share, corresponding to our 12-month target price of $6/share on Galectin," Piros added.

Shares of Galectin were down 3.35 percent at $1.44 on Wednesday.