Galectin Therapeutics, Inc. (NASDAQ: GALT), the leading developer
of therapeutics that target galectin proteins, today released this
open letter to stockholders written by its Board Chair Richard E.
Uihlein. The letter reads as follows:
Dear Fellow Stockholders:
As Chairman of Galectin Therapeutics, once again
I wanted to address you directly.
On April 15th the Company announced the record
date, closing date and pricing of the rights offering. I
wanted to share my thoughts about the offering and our rationale
for the pricing. Also, I felt I should describe, from my
perspective, how the offering will work.
As I have previously expressed, in advocating
for the rights offering to the board as our first option, my sole
intention was to limit dilution to you, my co-investors. The
board and management agreed with me that a rights offering is the
most democratic method of raising money. While there are many
different financing options, I wanted to pick the one that I
believe favors the existing stockholders.
Simply put, at this point in our history, we
need to fund our Phase-3 clinical trial in patients with NASH
cirrhosis. Not many companies are fortunate enough to advance
a new drug compound this far. Today we are well advanced into
the trial design, and we are looking forward to getting the trial
underway. For that I want to thank our team led by our CEO,
Harold Shlevin, and our employees and researchers. I am a
long-term investor who clearly believes in the Company but joining
the board has given me a new degree of respect and understanding of
the complexity involved in the clinical trial process. I am
extremely grateful to all involved.
I want to reiterate the conviction of my
commitment to the Company on several levels. My invitation to
our stockholders is to make an investment along side of me in a
science-driven enterprise. I take all investments, including
money and time, extremely seriously, and I urge everyone to do the
same. This is especially the case for me in this endeavor
because I am the Board’s Chairman.
My belief in the Company, the Board, management
and our team, is in addition to my belief in and the commitment to
our science. Neither I as Chairman nor our Board has or can
make a recommendation to you about whether you should invest.
However, speaking as the Company’s largest individual stockholder,
I felt it was important to state my rationale for my personal
investment in this rights offering.
After reviewing reports of our Phase 2 data and
the researchers’ comments with respect to our outcome, I was
extremely encouraged. A statistically meaningful reduction in
portal pressure measured by HVPG has never been observed in a Phase
2 NASH trial in any patient population. While we obtained
this outcome in only a subsection of our trial participants, it
was, and is, a meaningful population.
Additionally, the most promising data from my
perspective, and, not coincidentally, the primary endpoint in our
Phase 3 trial, was the potential to prevent varices in NASH
patients who had yet to develop them. This also has never
been achieved in any Phase 2 NASH trial. These are not only
my words or beliefs. Please read the comments made by our
research team and analysts (See page 3/10 in our December 2017
Annual Meeting Presentation).
When you add this to the findings of the smaller
cancer trials using GR-MD-02 in combination with Keytruda, look at
this data in conjunction with our preclinical animal studies, view
our published material on the effects noted with dermatology and
read peer reviewed articles (e.g. the pilot study reported in the
International Journal of Molecular Sciences, Predictive Biomarkers
for Checkpoint Inhibitor-Based Immunotherapy: The Galectin-3
Signature in NSCLCs), I believe you can understand why my primary
goal is to do everything I can to help enable the Company to
conduct its planned Phase 3 trial. It is a goal that I will
not abandon, and it was important to me to give you the opportunity
to help the Company reach that goal. I have many other goals
with respect to our science as it relates to cutting edge research
surrounding Galectin-3 and its impact on other diseases. The
best way to realize that potential is to move forward on our Phase
3 trial. Clearly, I want your investment decision to be an
informed one, but in addition to your own due diligence, I wanted
to express my own thoughts directly to you about what influenced my
decision to invest.
As I mentioned in my previous letter, I believe
in free market capitalism and its inherent ability to save and
improve lives. Without façade or pretention this is precisely
what I am trying to accomplish. The best Board Chairs, and
leaders in general for that matter, clearly state their goals and
invite people to participate with them in attaining those
goals. This is also the manner in which I operate as Chairman
of my private company, and what I demand of those running my other
investments. As a pure free market capitalist, my goal is to
advance our science to attempt to save lives and maximize our
investment. In fact, it is also my job description as Chairman of
the Board of Galectin Therapeutics.
As far as the rights offering itself is
concerned, I can completely understand that this may be new to
you. After all, rights offerings, especially in the
U.S., are rare. Effectively, a rights offering is similar to
an IPO by a company that is already publicly traded. If you
think about our offering in this manner, it becomes easier to
understand.
Unlike an IPO where only a select group of
investors can participate, usually based on a financial connection
to those running the deals, in a rights offering your ownership is
the gatekeeper to your participation. Your rights are
proportionate to your ownership in Company stock. This is the
same test applied when determining who is entitled to a
distribution or dividend, but in reverse, as we need to raise funds
for our Phase 3 clinical trial. If you owned shares (fully
settled in your account) on April 29, 2019 (the record date), by
definition you are allowed to participate.
This week, the Company will distribute a
prospectus to all holders of common stock. There will be
detailed instructions of how to purchase additional units (shares
and warrants) in the rights offering. While you are
guaranteed the right to buy units with common stock equal to thirty
percent (30%) of your holdings, you also may oversubscribe to
purchase additional units. If all of the available rights per
stockholder are not fully subscribed, other stockholders can
purchase those units. I will personally oversubscribe in the
rights offering.
Your rights entitle you to one “unit” per share
of the Company that you own. We are using the term unit as it
comprises 0.30 shares of common stock and a warrant for 0.075
shares of common stock. Since the price of the shares of
common stock is not yet fixed, for efficiency we are asking that
you deposit $5.50 per share of common stock with the subscription
agent. However, the amount of shares and warrants you
actually receive will be based on the pricing formula. This
will determine the price per share of common stock at closing and
corresponding warrants equal to twenty-five percent (25%) of the
shares of common stock you actually purchase.
As I mentioned, you can oversubscribe for any
number of units you would like to purchase in the offering.
For instance, if you own 1,000 shares, you have the right to
purchase 1,000 units (which consists of 300 shares of common stock
and warrants to purchase an additional 75 shares of common
stock). If you would like to purchase more, you simply
subscribe for more. You are only guaranteed in this example
1,000 units (300 shares), so if everyone fully subscribes, you may
only receive your 1,000 units (300 shares). In my case I am
going to subscribe for twenty-million dollars ($20,000,000) of
units. If there is an oversubscription in total, I will not
receive the number of units that would equate to this
commitment. The Company will make a calculation after the
closing date, where it will set the price. It will then
calculate the number of shares and warrants purchased by each
stockholder subscribing in the rights offering.
Our pricing formula was designed to do several
things. We looked at the range over the past several months
and set a high price slightly lower than recent highs
($5.50). This was set as the high end of our range.
Next, we looked to the lows over the past several months and felt a
fair floor should be $4.00. Finally, as indicated by metrics,
we realized that our share price tends to have some inherent
volatility. To smooth the price movements between the range
we estimated that the mid-range should be a five percent (5%)
discount of the weighted average price between April 18, 2019 and
the closing date of May 23, 2019. The rationale for the long
time period to develop the average was to limit price manipulation
to the largest extent practicable.
Finally, I want to address price
volatility. On this point I would also like to solicit your
assistance. Most small market capitalization companies
experience a high degree of stock price volatility. This is
especially the case when there is low volume. However, it has
also come to my attention that financial management firms and
brokerage firms are paying high rates of interest in exchange for
allowing shares to be borrowed from shareholders. Other
directors and I also believe that many margin agreements contain
provisions that allow stock to be loaned out of customer accounts
without additional permission. I have personally seen an
offer to a shareholder for sixteen and one-half percent (16.5%)
interest to allow shares to be loaned out of an account.
The reason that firms offer this level of
interest on your shares is extremely simple. Individuals who
want to short sell the Company’s stock need to borrow shares to do
so. We have such a loyal stockholder base, and the volume is
such that there is an inordinate amount of demand to borrow our
stock to enable individuals to short it (demand is in excess of
supply). My personal belief is that some of this short
selling is caused by the same people who are saying negative things
about the Company and its science on various message boards.
It is not hard to identify the direction in which they would like
to see our share price move.
My request to you regardless of your desire to
participate in our rights offering, is to seriously consider the
consequences of loaning your shares, and its potential impact on
your investment. I would also request that you consider the
potential impact of holding your shares in margin accounts. I do
not make this request due to the fact that I begrudge stock
speculation. I believe at my core in free market capitalism. That
same belief gives me the ability to speak in opposition to those
who do not share in my vision for the Company.
Thank you for your time and your confidence in
me. My sincere hope is that you understand my intention and
my commitment to you as my fellow shareholders and
co-investors.
Sincerely,
Richard E Uihlein
About Galectin Therapeutics
Galectin Therapeutics is dedicated to
developing novel therapies to improve the lives of patients with
chronic liver disease and cancer. Galectin’s lead drug (GR-MD-02)
is a carbohydrate-based drug that inhibits the galectin-3 protein
which is directly involved in multiple inflammatory, fibrotic, and
malignant diseases. The lead development program is in
non-alcoholic steatohepatitis (NASH) with cirrhosis, the most
advanced form of NASH related fibrosis. This is the most common
liver disease and one of the largest drug development opportunities
available today. Additional development programs are in treatment
of severe atopic dermatitis, moderate-to-severe plaque psoriasis,
and in combination immunotherapy for advanced melanoma and other
malignancies; advancement of these additional clinical programs is
largely dependent on finding a suitable partner. Galectin seeks to
leverage extensive scientific and development expertise as well as
established relationships with external sources to achieve
cost-effective and efficient development. Additional information is
available at www.galectintherapeutics.com.
About Richard E. Uihlein
Richard E. Uihlein, a director since 2017,
co-founded Uline, Inc. (a leading distributor of shipping,
packaging and industrial supplies) in 1980, and has served as its
Chief Executive Officer and Chairman since its founding.
Prior to founding Uline, Inc., Mr. Uihlein was employed at General
Bindings Corp., Northbrook, IL from 1967 to 1980. Mr. Uihlein
graduated from Stanford University, Palo Alto, CA with a BA degree
in history in 1967.
Forward Looking Statements
This prospectus contains forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. These statements relate to future events or
future financial performance, and use words such as “may,”
“estimate,” “could,” “expect,” “intend” and others. They are based
on management’s current expectations and are subject to factors and
uncertainties that could cause actual results to differ materially
from those described in the statements. These statements include
those regarding the hope that the Company’s development program for
GR-MD-02 will lead to the first therapy for the treatment of fatty
liver disease with cirrhosis and those regarding the hope that our
lead compounds will be successful in the treatment of severe atopic
dermatitis, moderate-to-severe plaque psoriasis and in cancer
immunotherapy and in other therapeutic indications. Factors that
could cause actual performance to differ materially from those
discussed in the forward-looking statements include, among others,
that the Company may not be successful in developing effective
treatments and/or obtaining the requisite approvals for the use of
GR-MD-02 or any of its other drugs in development; the Company may
not be successful in scaling up manufacturing and meeting
requirements related to chemistry, manufacturing and control
matters; the Company’s current clinical trial and any future
clinical studies may not produce positive results in a timely
fashion, if at all, and could prove time consuming and costly;
plans regarding development, approval and marketing of any of the
Company’s drugs are subject to change at any time based on the
changing needs of the Company as determined by management and
regulatory agencies; regardless of the results of any of its
development programs, the Company 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. The Company has incurred operating losses since inception,
and its ability to successfully develop and market drugs may be
impacted by its ability to manage costs and finance continuing
operations. For a discussion of additional factors impacting the
Company’s business, see the Company’s Annual Report on Form 10-K
for the year ended December 31, 2018, and subsequent filings with
the SEC. You should not place undue reliance on forward-looking
statements. Although subsequent events may cause its views to
change, management disclaims any obligation to update
forward-looking statements.
Contact:
Jack Callicutt, Chief Financial Officer(678)
620-3186ir@galectintherapeutics.com
Galectin Therapeutics and its associated logo is
a registered trademark of Galectin Therapeutics, Inc.
IMPORTANT
Please note that if you do not timely exercise
your subscription rights, your ownership interest in Galectin
Therapeutics, Inc. (the “Company”) will be diluted. For a longer
overview of the rights offering, please see pages 4 and 29 of the
prospectus dated April 29, 2019 (the “Prospectus”), relating to the
rights offering by the Company in connection with the Company’s
registration statement on Form S-3, which became effective on April
12, 2019 (File No. 333-230085). Please see page 7 of the
Prospectus for a discussion of risk factors relating to the rights
offering.
This prospectus is not an offer to sell and we
are not soliciting an offer to buy in any state or other
jurisdiction in which the offer or sale is not permitted. Please
see “Plan of Distribution” at page 44 of the Prospectus for more
information.
THE ISSUER HAS FILED A REGISTRATION STATEMENT
(INCLUDING A PROSPECTUS) WITH THE SEC FOR THE OFFERING TO WHICH
THIS COMMUNICATION RELATES. BEFORE YOU INVEST, YOU SHOULD READ THE
PROSPECTUS IN THAT REGISTRATION STATEMENT AND OTHER DOCUMENTS THE
ISSUER HAS FILED WITH THE SEC FOR MORE COMPLETE INFORMATION ABOUT
THE ISSUER AND THIS OFFERING. YOU MAY GET THESE DOCUMENTS FOR FREE
BY VISITING EDGAR ON THE SEC WEB SITE AT WWW.SEC.GOV.
ALTERNATIVELY, THE ISSUER WILL ARRANGE TO SEND YOU THE PROSPECTUS
IF YOU REQUEST IT BY CALLING TOLL-FREE AT 1-844-886-5456.
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