Something very interesting is happening at Galectin Therapeutics Inc (NASDAQ:GALT). The company just put out this 8K, detailing the fact that CEO Peter G. Traber (who also serves as CMO, President and a director) would not be seeking re-election as a director at the company’s 2017 annual shareholder meeting, which is slated for December 14, 2017.
Anyone with experience in the space will know that a CEOs decision not to stand for reelection as director is an unusual one and the fact that this company is just about to release data from its lead clinical trial – data that could really get things moving from a valuation perspective – adds to the strangeness of the scenario.
Alongside the 8K, however, was a letter to the Board of Directors explaining Traber’s decision – and it makes for very interesting reading.
Basically, the situation is this – a fund called the 10X fund, by way of its historical investment in Galectin, essentially has control of the company. Jim Czirr, who is responsible for the decisions made by the 10X fund is also a board member at Galectin. Traber thinks that this is a deep conflict of interest and exemplifies his point with the fact that Czirr wants to try and raise capital before the above-mentioned data, which derives from a trial investigating a drug called GR-MD-02 in a target indication of NASH, or nonalcoholic steatohepatitis, hits press.
The only logical explanation for Czirr wanting to do this is that he is concerned that the numbers will be negative and that Galectin will fall as a result. In turn, this will make it more difficult for the company to raise capital post-release. Of course, the trial is blinded and nobody actually knows whether the data is going to be positive or negative, so Czirr is essentially hedging his bets in trying to raise capital at current rates as opposed to gambling on maybe being able to raise at a higher price or maybe not.
What this says about Czirr and his involvement with Galectin is open to interpretation. What can’t be contended, however, is that Traber is correct in his suggestion that there is a conflict of interest – the ability of one fund and, more specifically, one man, to veto otherwise unanimous decisions made by a public company’s board and to carry out strategic activities without wider interest approval is never a situation a shareholder wants to see.
With that said, however, markets are responding somewhat positively to the development and that can really only be one reason for this – that they are anticipating a shakeup of management and that this shakeup will be beneficial for the company long-term, however it turns out.
As far as a near-term catalyst is concerned, the upcoming data release is going to be key to sentiment heading into any such shakeup. As mentioned, it’s a NASH target trial, which are notoriously difficult to complete successfully. With that said, however, there is some promising early-stage data (especially on the shorter time frames) and regardless of Czirr’s actions, nobody really knows how the numbers are going to play out.
The trial is locked right now but will be unlocked on November 6, at which point Galectin will start to analyze the data. This sort of analysis can take anywhere from a couple of weeks to a month and expectations are that this one will be towards the latter end of this timeframe, so we’re probably looking at a release in and around the shareholder meeting, early December.
A raise is a raise and it’s going to be dilutive whenever it hits, so keep that in mind. If the numbers are strong, however, it won’t matter whether it comes before or after the data release.
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Image courtesy of Ryan Milani via Flickr
Disclosure: We have no position in GALT and have not been compensated for this article.