Exclusive: SunTrust Top Analysts Explain Fatty Liver Diseases, Galmed's Potential In The Space

Galmed Pharmaceuticals Ltd GLMD has had a bad year, with its stock down more than 49 percent. However, analysts have noted the company has plenty of potential in the non-alcoholic steatohepatitis (NASH) space, where there are still no FDA-approved therapies. Back in April, Logribel Biostocks noted in a Seeking Alpha report that the NASH market could be worth $35 billion by 2025.

Benzinga recently had the chance to discuss the company and its potential in the NASH space with SunTrust Robinson Humphrey Managing Director and Senior Biotechnology Analyst Edward Nash and Associate Biotechnology Analyst Mike Guo.

Please note the difference between Nash (the analyst) and NASH (the disease).

Understanding The Ailments

NAFLD, or nonalcoholic fatty liver disease, is a medical condition characterized by a fat buildup in the liver. Under its umbrella, we can find NASH, a more severe form of NAFLD, Nash explicated.

“NASH is a very large metabolic decease,” Guo added. “It affects about 1 to 3 percent of the U.S. population, or about 5 to 10 million people. The bigger spectrum of the decease, NAFLD, affects 5 to 10 percent of the U.S. population. So, the market is huge… Galmed is playing in a field that has magnificent market potential.”

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Galmed, however, is focusing on “the fatty liver portion of the spectrum,” Nash continued. “This is — we could call it — the less life threatening, less severe area. What’s causing this is usually a poor diet; so you’ve got a lot of kids drinking a lot of soda, and eating a lot of food… and they get fat younger [same as] the general population. And, when you gain that normal exterior fat, you are also generating visceral fat, which is interior fat around your organs, and specifically the liver. Over time, fat starts to affect the functioning of the liver, which becomes inflamed… Constant inflammation ends up leading things to fibrosis, and then fibrosis ends up leading to cirrhosis,” the expert expounded.

Galmed Stands On The Far Left

Galmed is one of the only companies in the NASH space that is working on the earlier stages of the fatty liver ailments, Nash went on to explain.

“Most companies are working in the middle to the far-right [portion of the spectrum], where they believe — and we’d agree — the FDA is probably a lot more focused right now because of the fact that it’s the more life threatening,” the analyst added. “The FDA wants to make sure that they can prevent patients with fibrosis from becoming cirrhotic and dying; so, they want companies to develop drugs to start there, and then, only then, we know we can move down the spectrum, and look at the other cases.”

Having said this, Nash supplemented, the market in need of a standalone therapy that is able to offer a fix for those cases on the far left of the spectrum (early stages) is enormous, especially taking into account the fact that many patients cannot ameliorate their diet and work out, like they should in order to get better.

Nonetheless, the focus right now remains on the right side of the spectrum, so Galmed’s drug is still far away from approval. However, “at some point, we believe, it’s going to become an important part of the general multi-facet approach to treating NASH,” SunTrust’s managing director concluded.

A Likely Acquisition Target

Finally, Guo went into the vast M&A activity in the NASH space, citing Allergan plc Ordinary Shares AGN’s purchase of Tobira Therapeutics Inc TBRA, as what SunTrust believes is the largest acquisition premium in the history of biotech.

Gilead Sciences, Inc. GILD also made some big acquisitions in the NASH space recently, Guo added. “We believe the NASH space can be an attractive space for acquisitions. So, because Galmed is in this space, we think it has potential there to be an acquisition target,” he ended.

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Disclosure: Javier Hasse holds no interest in any of the securities or entities mentioned above.