Clinical stage biopharmaceutical company Galectin Therapeutics Inc. (GALT), which is based in Norcross, Ga., develops therapies for treating cancer, fibrotic and other diseases. Its product candidates include NAVIGATE for Non-alcoholic steatohepatitis (NASH) cirrhosis and cancer, which is in its Phase 2b/3 clinical trial, and Galectin-3 inhibitor for the treatment of liver fibrosis, which is in Phase III clinical trials.

Closing yesterday’s session at $2.59, the stock is trading 54.6% below its all-time high. Also, the stock has declined 26% over the past month and 6.8% over the past year. GALT is currently trading lower than its $3.65 and $2.82 respective 50-day and 200-day moving averages, which indicates a downtrend.

While recent positive results from GALT’s phase I clinical trial of Belapectin, in combination with KEYTRUDA, have garnered significant investor attention, given that its leading drug candidates are still in clinical trials, we believe it will take some time for the company to begin generating revenues and profit.

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Here is what we think could influence GALT’s performance in the near term:

Lead Candidates Still in Clinical Stage

The company’s NAVIGATE combination immunotherapy for the treatment of NASH cirrhosis, in collaboration with the Providence Cancer Institute, is currently in its Phase 2b/3 clinical trial. GALT  plans to cease its operations in the event it is unsuccessful in raising additional capital to fund the drug’s development before September 30, 2022. GALT’s lead candidate GR-MD-02 galectin-3 inhibitor has just completed two Phase 1 clinical studies. Furthermore, the company’s GM-CT-01 for the treatment of cardiac and vascular fibrosis, is still in its preclinical development stage. Since none of GALT’s leading products has completed its  clinical trials, it will likely be a long wait before the drugs receive FDA approval and begin generating revenues for the company.

Inadequate Financials

GALT does not generate any revenues because  it currently has no products that have been approved for commercial sale. For the first quarter, ended March 31, 2021, the company’s net loss was  $6.34 million, versus  a $3.6 million net loss in the prior-year period. Its loss per share came in at $0.11, representing an 83.3% increase  from the same period last year. GALT reported a $6.32 million total operating loss, up 76.3% year-over-year.

GALT’s trailing-12-month ROA, ROE and ROTC are negative 114.6%, 93.5% and 53.5%, respectively. In addition, its trailing-12-month cash from operations came in at negative $22.61 million.

Unfavorable Earnings Outlook

Wall Street analysts expect GALT’s EPS to decline 63.6% year-over-year to negative $0.18 in the current quarter, ended June 2021. Its  consensus EPS estimate for the next quarter, ending September 2021, represents a 90% decline from its year-ago value. Also, its EPS is estimated to decline 58.5% in its fiscal year 2021.

POWR Ratings Reflect Bleak Prospects

GALT has an overall D rating, translates to Sell in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree. 

Our proprietary rating system also evaluates each stock based on eight different categories. GALT has a D grade for Quality. This reflects the stock’s negative profit margin.

In terms of Momentum grade, the company has a D grade, which is reflective of its price returns over the past year. Also, it has a D grade for Growth. This is consistent with analysts’ expectation that its earnings will decline.

Beyond the grades we’ve highlighted, one can check out additional GALT ratings for Sentiment, Value, and Stability here. Of the 495 stocks in the F-rated Biotech industry, GALT is ranked #316.

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Bottom Line

Even though GALT’s positive top-line clinical data from Phase 1b clinical trial of Belapectin has raised investors’ hopes for value creation, unless the company  completes all clinical trials and receives approval from the FDA its  revenue-generating prospects remain in question. In addition,  the company’s poor growth prospects and lackluster financials could lead to a further price decline in the near term. So, we think it could be wise to avoid the stock now.

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GALT shares rose $0.01 (+0.39%) in premarket trading Friday. Year-to-date, GALT has gained 15.63%, versus a 17.36% rise in the benchmark S&P 500 index during the same period.

About the Author: Imon Ghosh

Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More...

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