Galectin Therapeutics Inc.
Q4 2015 Earnings Call Transcript

Published: 15 Mar 2016

[Operator:]

Welcome to the Galectin Therapeutics Fourth Quarter Business Update Conference Call. At this time, all participants are in listen-only mode. Following management's prepared remarks, we'll hold a Q&A session. [Operator Instructions] As a reminder, this conference is being recorded, March 15, 2016. I would now like to turn the conference over to Kim Golodetz. Please go ahead, ma'am.

[Kim Golodetz:]

Thank you. This is Kim Golodetz with LHA. Thank you all for participating in today's call. Joining me from Galectin Therapeutics are Dr. Peter Traber, President, Chief Executive Officer, and Chief Medical Officer; and Jack Callicutt, Chief Financial Officer. Earlier this morning, Galectin Therapeutics announced financial results for the fourth quarter of 2015. If you have not received this news release or if you would like to be added to the company's distribution list, please call LHA in New York at 212-838-3777 and speak with Carolyn Curran [ph]. Before we begin, I would like to caution that comments made during this conference call by management will contain forward-looking statements regarding the operations and future results of Galectin Therapeutics. These statements include those regarding the hope that its lead compound will be successful in treating liver cirrhosis and fibrosis due to fatty liver disease and in connection with cancer immunotherapy. Regardless of the results of any of its development programs Galectin may be unsuccessful in developing partnerships with other companies or raising additional capital that would allow it to further develop and/or fund any studies or trials. For discussion of additional factors impacting Galectin's business, see the company's Annual Report on Form 10-K for the year ended December 31, 2015 and other filings with the SEC. You should not place undue reliance on forward-looking statements. All forward-looking statements speak only as of today's date, March 15, 2016, and except as required by law, the company assumes no obligation to update these forward-looking statements whether as a result of any new information, future events, changed circumstances or otherwise. With that said, I would like to turn the call over to Dr. Traber. Peter?

[Peter Traber:]

Thank you very much, Kim, and good morning to everyone. I'm pleased to be speaking with you this morning from the Roth Capital Investment Conference in Southern California where yesterday I presented our company's story and held various meetings with investors. I'm delighted this morning to provide you with an update on our business and programs. We are doing important work at Galectin Therapeutics. We're developing a drug for the therapy of fatty liver disease or more specifically NASH with advanced fibrosis and for NASH with cirrhosis. Both are unmet medical needs with very large patient populations. In the United States an estimated 30 million people have NASH with 1 million to 2 million people with NASH cirrhosis which is the most advanced severe form of the disease. The potential market is enormous, with an estimated $25 billion in the U.S. and $40 billion worldwide by 2025. Now today there are no approved drugs to treat NASH at any stage in its progression but there are number of companies conducting clinical trials with compounds, primarily for the earlier stages in NASH. We believe we are competitively well positioned with our work in later stage patients. Fibrosis progress is over decades and mortality is associated with advanced fibrosis and cirrhosis, whereas there is no increase in mortality with mild, early stages of fibrosis. Our focus is on patients with advanced fibrosis and cirrhosis. Studies strongly suggest that our drug, GR-MD-02 has potential in NASH with advanced fibrosis. The target of our drug is the galectin-3 protein which has been shown to be an important protein that drives the development of fibrosis. We have very strong preclinical data published in peer review academic journals showing that the ability of GR-MD-02 to reverse fibrosis. We have completed excess successful phase 1 clinical trial in patients with advanced fibrosis whereby we found GR-MD-02 to be safe, we identified the right dose, and we showed some evidence of therapeutic effect. We are now testing the worth of this drug in phase 2 trials. The NASH-FX trial and the NASH-CX trials will be generating data in both the near and mid-term. In addition, inhibition of the galectin-3 protein could be a platform for multiple diseases. Cancer and psoriasis trials are low cost bonus opportunities for our company. I'd now like to turn it -- the call over to Jack Callicutt who will briefly go over our recent financial results with you. Then, I'll come back and discuss our programs and near-term milestones in greater depth. Jack?

[Jack Callicutt:]

Thanks, Peter and good morning, everyone. We were pleased during the fourth quarter of 2015, we completed an equity offering of common stock and warrants raising $9.8 million. As of December 31, 2015, we had $25.8 million of non-restricted cash and cash equivalents. We believe that our cash runway will take us through the first quarter of 2017 given our currently planned operations and research and development activities. Just to recap, research and development expense for 2015 was $13.1 million which is up $8.4 million from 2014 due to activities related to our phase 2 clinical programs with GR-MD-02 and NASH with advanced fibrosis and NASH with cirrhosis. We were pleased that our G&A -- general and administrative expenses were flat for 2015 compared to 2014 at $7 million. For 2015 the company reported a net loss applicable to common stock holders of $21.1 million or $0.88 per share, whereas in 2014, we reported a net loss applicable to common stock holders of $17 million or $0.78 a share. With that, I'll turn the call back over to Peter.

[Peter Traber:]

Thanks, Jack. We reported a number of important accomplishments during 2015 and recent weeks. In the clinic with positive phase 1 data with GR-MD-02 in NASH and in strengthening our intellectual property. Based on the phase 1 data and with comfort in our patent position, we began our phase 2 program in NASH with two clinical trials. One study is in NASH with patients with advanced fibrosis, our NASH-FX trial and the other is in NASH patients was cirrhosis which we call our NASH-CX trial. NASH-FX study will enroll 30 patients in total with 15 receiving eight milligrams per kilogram of GR-MD-02 and 15 patients receiving placebo, every other week for 16 weeks. This study will evaluate the safety and efficacy of GR-MD-02 on liver fibrosis using liver multiscan as the primary endpoint. Liver multi-scan is a magnetic resonance imaging test that was recently approved for diagnostic use by the FDA. We choose this test as our primary endpoint for the study for several important reasons. First, in a treatment trial of less than one year liver biopsy is not a practical alternative because of its invasive nature and serious potential side effects. Additionally, the known sampling error of liver biopsy requires much larger patients to evaluate therapies. Second, liver multiscan is a precise and reproducible test of liver fibrosis and inflammation. Repeat testing on the same subject has a very low variation of only 1.7%. This low coefficient of variation is in stark contrast to liver biopsy, and therefore liver multiscan allows smaller treatment trials that are well powered to demonstrate differences between placebo and drug treatment. Third, liver multiscans have been shown to correlate with liver biopsy determined degrees of fibrosis in NASH. And finally, when inflammation in fibrosis is reduced as often occurs with obesity surgery, the changes are detected in and with liver multiscan effectively. As secondary endpoints, we will look for improvements in liver stiffness as assessed by magnetic resonance-elastography and FibroScan. I'm very pleased with the pace of enrollment and we are scheduled to report topline data around the end of this year's third quarter. Our larger NASH-CX trial is also proceeding as planned and currently we have 50 approved U.S. sites participating. This study is a multi-center, randomized, placebo-controlled, double-blind parallel group phase 2 study to evaluate the safety and efficacy of GR-MD-02 for the treatment of liver fibrosis and resultant portal hypertension or HVPG. In this study, 156 patients are being randomized to either two milligram from kilogram of GR-MD-02, eight milligram per kilogram of GR-MD-02 or placebo with 52 patients in each arm. The primary endpoint is a reduction in HVPG, a measure of portal hypertension. I would refer interested parties to a recent CEO perspective that I wrote in which I described this test and the importance of portal hypertension. Patients will receive infusions every other week for one year for a total of 26 infusions at which time they will be evaluated for a change in HVPG compared with placebo. HVPG will be correlated with secondary endpoints of fibrosis on liver biopsy, as well as with measurement of liver stiffness via fiber scan, an assessment of liver metabolism using Exalenz, C13 methacetin breath test. These three secondary endpoints are non-invasive measures of the liver and may be used in future studies. We are pleased with the pace of the NASH-CX study and we remain on-track for data readout at the end of 2017. We are hopeful that this trial will ultimately be accepted by the FDA as a pivotal trial. We know GR-MD-02 inhibits galectin-3, and we know that the galectin-3 protein is elevated in the skin of patients with plaque psoriasis. As it happens, one of the patients participating in our phase 1 NASH study was a long-term psoriasis suffer, and this patients psoriasis cleared as the study progressed and remained clear for many months following the conclusion of the study. With an established theoretical pathway for how inhibition of galectin-3 might affect psoriasis we began an open-label 10 patient phase 2a pilot study in patients with moderate to severe plaque psoriasis. We expect data readout from this study late in the third quarter of 2016. So we have yet another exciting milestone ahead of us this year. Investigators at the Providence Cancer Center in Portland Oregon, are studying GR-MD-02 in combination with two commercial melanoma immunotherapy drugs; Yervoy and Keytruda. The phase 1b Yervoy study started enrolling patients last year and the phase 1b Keytruda study started enrolling patients earlier this year. The work by these investigators is based on pre-clinical research in mouse cancer models which showed that our compound enhances the efficacy of immune checkpoint inhibitors by boosting anti-tumor immunity, reducing tumor size, and increasing survival. We are eager to learn if this activity will be replicated in humans and look forward to initial data from select cohorts in both studies later this year. Note that we are dependent on the Providence Portland Cancer Center to conduct and fund these trials while we provide the drug GR-MD-02. We strengthened our U.S. patent position during 2015 and more recently obtained an extension of coverage for method of use patents of our drug in a number of fibrotic diseases including pulmonary fibrosis. We are formulating plans to leverage our intellectual property. We believe that our patent portfolio is robust and that along with method of use patents in pulmonary fibrosis, kidney fibrosis and heart fibrosis, it could be very attractive to potential partner. We expect it will serve to enhance our discussions with respect to NASH indications. We have also strengthened our corporate governance, in January we named lead Independent Director, Dr. Marc Rubin, as Chairman of our Board of Directors. Dr. Rubin is a leading bioscience industry executive with more than 25 years of senior management and board experience in the development and commercialization of pharmaceuticals. 2016 has also started off well with positive development on an issue that has been distracting, dismaying and dismaying for the company. In January, the United States District Court of Northern -- for Northern Georgia dismissed all claims against Galectin and certain officers, directors and. shareholder 10X Fund alleged in a consolidated securities class action, originally filed in July 2015; and all claims against certain officers and directors alleged in a consolidated shareholder derivative action, originally filed in August 2014. The court dismissed both actions with prejudice based on the court's finding that any further amendment of the complaints would be futile. Plaintiffs have filed a Notice of Intent to appeal both matters. Further on March 3, 2016, the Nevada State Court dismissed a shareholder derivative complaint filed against the company's officers and directors in Nevada and entered a judgment in favor of the company. The plaintiff has 30 days to appeal after the judgment order. We are very pleased that these matters appear to very close to a final resolution in favor of the company, our officers, and our directors. Before we open up the call to your questions, I want to emphasize the solid position we are in from clinical, financial, and leadership perspectives. We believe that Galectin Therapeutics has a powerful investment thesis with an excellent risk-reward proposition. We have taken out much of the program risk with preclinical work in phase 1 trials. And over the course of this year and next, we have several critical milestones with potential to show the effectiveness of our therapeutic approach in fatty liver disease. The reward potential is very high given that there are no medical therapies in this disease that affects a very large group of patients. I also want to invite you to peruse my blog which we call, CEO perspective, and is available on the home page of galectintherapeutics.com. I've been using this blog to keep shareholders and other interested parties apprised of Galectin's activities; and also to provide general information regarding NASH, the difficulty of diagnosis, the nature of the disease and other topics that may be of interest. As it happens, word on the web has gotten around and we've had some inquiries from both potential subjects for our clinical trials based on the perspectives blog. As a physician that has been very gratifying to me. I also want to make you aware of a recent article in Newsweek Magazine in which Galectin was profiled among other companies, and in which I provided a fair amount of commentary. The article is entitled NASH is the 21st Century's Looming Public Health Threat. You can find a link to it on our homepage. Newsweek has brought into the mainstream consciousness the serious nature of fatty liver disease, and the growing threat it represents to human health and to the well-being of our nation's health system. So with that overview of our progress, operator, we are ready for questions from the group.

[Operator:]

[Operator Instructions] Our first question is from Vernon Bernardino with FBR & Company.

[Vernon Bernardino:]

Hi, Peter, thanks for taking my question and congratulations on progress in 2015. I just wanted to ask you about the studies with GR-MD-02 in melanoma. You had mentioned that you were dependent on problems for lung cancer centers to conduct on some of these trials. Just wanted to also confirm what the doses were for the trial with -- in the trial with Yervoy?

[Peter Traber:]

Yes. Hi Vernon, thanks for your question. Yes, the dose, first of all, in the Yervoy trial, the dose of Yervoy is the recommended dose based on labeling for the marketed product. The dose of GR-MD-02 is an ascending dose starting at one milligram per kilogram of GR-MD-02. And the dose is ascending in cohorts so the first cohort of three patients; it's a three plus three design; meaning, the three patients are treated and if there are no adverse events then you go to the next level. If there is an adverse event, you treat three more at that dosing level which is a typical design for a phase 1 oncological agent. We treated the first group of three at one milligram per kilogram with no adverse events, the second cohort was a two milligrams per kilogram and the next, those three were treated with no adverse events. And so now they are in the process of enrolling -- not completed enrollment of cohort three which is a four milligrams per kilogram and a final dosing cohort, following that will be at eight milligrams per kilogram which is the highest dose we've used in our phase 1 clinical trials. So the -- that is where we are now in completing enrolment of the third cohort or four milligrams per kilogram. The FDA required -- because it was a combination therapy, the FDA required us to start at a bit of a lower dose in the first cohort of one milligram per kilogram. You may recall, Vernon that we started the phase 2 trials in -- excuse me, the phase 1 trial in NASH patients at two milligrams per kilogram because it was a combination therapy, they had to start at a lower dose of one milligram per kilogram in that study. Now once we reach eight milligrams per kilogram, there will be an option to increase the dose if we so desire or continue and enroll 10 additional patients in an extension of that dose of eight milligrams per kilogram. So I hope that answers your question. What -- was there another part Vernon, I might have missed?

[Vernon Bernardino:]

No.

[Peter Traber:]

No?

[Vernon Bernardino:]

No, that's exactly it. And the end points are safety of course, and then you're looking at perhaps some indication of effect on resist, as well as immune markers. Do you anticipate at least with the one milligram and two milligram doses which are done presenting data this year or…

[Peter Traber:]

We do, we are -- again, we are dependent on our collaborators to determine when it's appropriate to report data but we do expect data to be reported by the end of this year. You're correct, the end points -- actually the end points are fairly important here. One is our RECIST criteria or immune response RECIST criteria, which of course is evaluation of the tumor size. That turns out as you know not to be that reliable in immunotherapies because very often you get stable disease and you don't get much shrinkage of tumor early on despite the fact that the patients have long-term responses. On the other hand, the immune markers that we're measuring are very important. And these immune markers identify all the different subsets of T-cells and other white blood cells in the circulation of these patients. And there are dozens of them that are being measured, the increase/decrease or change in these immune markers is a very important way of determining whether there is an immunological effect in cancer immunotherapy. The Providence Cancer Center is one of the strongest groups in the nation for the measurement of these endpoints. And so we should be able to get some understanding of the additional effect of GR-MD-02 in combination with Yervoy and Keytruda from these immune markers. And this may be a very important early indication of what type of effect the combination is having. If it is analogous to what we have seen in the mouse studies; we've seen a marked increase in the type of T-cells, CD8 positive activated T-cells that are important in cancer immunotherapy. So we're hoping to see a replication of some of the results that we've seen in animals in the human trials.

[Vernon Bernardino:]

Okay. And just to confirm, when we do see data later this year, it will likely be these immune marker data?

[Peter Traber:]

Yes, it will be both, the RECIST criteria and the immune marker data.

[Vernon Bernardino:]

Okay, great. Thanks for taking my question.

[Peter Traber:]

Thanks a lot Vernon.

[Operator:]

[Operator Instructions] Our next question comes from David White with David White Financials.

[David White:]

Good morning. Dr. Traber, this David White. Congratulations on your progress. My first -- my business partner's first wife died of NASH, so what you're doing is incredibly important as of course you know. And I believe that you're going to be known in history as making very significant medical advances.

[Peter Traber:]

Thank you David.

[David White:]

I believe your plate must be overflowing with the scientific work. So my question is why did you orchestrate removing Jim Czirr as your business, as your Chairman and take over his business duties.

[Peter Traber:]

Well, I did not orchestrate that that was a decision made by the Board of Directors. Jim had been Chairman of the Board for seven years, did a very fine job, and currently remains an important Member of the Board of Directors. The Board of Directors felt that with the progress of the company and the shift to more advanced clinical development programs, that it was wise to shift leadership to Dr. Mark Rubin who had been Lead Director. And Jim Czirr remains a very important and active Member of the Board of Directors.

[David White:]

Okay, thank you.

[Peter Traber:]

Thank you, Mr. White.

[Operator:]

Our next question comes from the line of Michael Cram [ph], who is a private investor.

[Unidentified Analyst:]

Yes, thank you. Congratulations on your work to-date. I am retired gastro-neurologist, hepatologist and an investor in the company. I'm very excited as to what you are doing. I just wondered have you approached Gilead or Gilead approached you in terms of doing the. synergistic study with their monoclonal inhibitor along with GR-MD-02?

[Peter Traber:]

Yes, this is a good question and it brings up the issue of combination therapy. As you know, as a gastroenterologist, many chronic diseases ultimately are approached by combination therapy and Hepatitis C is a perfect example of that. There are currently -- Hepatitis C has been essentially cured in the vast majority of patients based on a cocktail of medications. Similar situation in HIV and other types of chronic illnesses outside of viral infections as well. So you're right to think about the fact that with a successful monotherapies that combination therapies could be effective. Gilead Sciences is the only other company that has therapy directed at late-stage liver fibrosis and cirrhosis, in the pan plea [ph] of companies that are treating NASH. Their drug is called Simtuzumab, it's a monoclonal antibody directed at LOX Cell-2 like enzyme which is an enzyme that crosslinks collagen and therefore it would be expected to work on newly laid down collagen rather than existing collagen. And therefore it acts as a very different mechanism than our mechanism of inhibiting galectin-3 where we actually see the reduction of existing collagen, so we see prevention, as well as reversal of fibrosis. In that way the two different mechanism of action of the two drugs could be additive or synergistic. We have spoken with many different companies, bringing them up-to-date on our programs and there is great interest across the industry in drugs that could affect fibrosis and therefore there is interest. We have certainly spoken with Gilead and the topic of combination therapy certainly came up. What I would say is that both of us have phase 2 clinical trial programs that will read out in near and mid-term, and with success of those programs the opportunity for combination-type approaches then presents itself. But I think that you are quite right that in this chronic disease with advanced -- with many different stages from early-stages to late-stages of fibrosis, that in fact a combination approach and multiple drugs targeted at different phases is going to be an approach of the future ultimately as we begin to have drugs against fatty liver disease. So I think your question is insightful one and I think that, that will be the future of therapeutics.

[Unidentified Analyst:]

Can I ask a follow-up?

[Peter Traber:]

Of course.

[Unidentified Analyst:]

I look at your financials and I'm a little concerned about your burn rate. I saw that last year was $21 million and you only have $25 million plus in the bank. Are you guys concerned as my concern?

[Peter Traber:]

Well, we know that our cash extends through the first quarter of 2017 which means that we will need additional funding to complete the NASH-CX trial. I'm not concerned from the standpoint that we have clarity about the amount of money that we need to conduct the clinical trials as Mr. Callicutt mentioned, we have kept administrative costs flat and as low as possible, putting all of our -- the vast -- the majority of our funding into our clinical trial programs. But indeed there is a gap between the funding we have and the end of the NASH-CX trial which we will have to deal with for next year.

[Unidentified Analyst:]

Thank you and good luck and hopefully, beyond the monetary considerations here you will do something which will be beneficial to mankind. So that's what it's all about.

[Peter Traber:]

Thank you. That's why we -- that's why I, in particular as a physician, I'm so interested in this having seen patients like this for many years. I mean the real goal is to do something for patients that currently do not have any options. Thank you so much for your questions.

[Unidentified Analyst:]

Absolutely.

[Operator:]

There are no further questions at this time. Please proceed with your presentation or any closing remarks.

[Peter Traber:]

Okay, operator, thank you very much. We are very excited as the management of the company about the year ahead. We will have data from both, the NASH-FX trial and from our pilot trial in psoriasis later this year. And I look forward to continuing consistent outreach via frequent CEO perspective blog postings and conference participation among other activities to keep our shareholders informed of our plans, accomplishments and milestones. I'd like everybody to have a great day. And thank you for your participation.

[Operator:]

Ladies and gentlemen, that concludes your conference call for today. We thank you for your participation and ask that you please disconnect your lines.