Tough Choices, Big Opportunities

This week I am in Ireland and going from meeting to meeting with a wide variety of people. And this week's letter is a wide-ranging interview with me, conducted by that doyen of financial-world interviews, Kate Welling. She really is one of the best, and she has graciously given me permission to share the interview with you this week, while I am researching next week's letter on Ireland and Europe. I hope you enjoy reading it half as much as I did recording it.

(Sorry for the letter being late. There was a major technical difficulty. – The Editing Team)

But first, in the interest of full disclosure, I want to briefly note to my readers that I have joined the board of Galectin Therapeutics (Ticker: GALT), a small biotech company with unique potential technologies. I get asked from time to time to join a biotech corporate board, but have so far not done so, and the exception is now GALT.

Basically (to make a long story short), GALT has a deep repository of research performed in the USSR prior to the fall of the Iron Curtain, on carbohydrates. Russian and Eastern European scientists had traveled the world looking for new carbohydrates in plants, etc., and the research spanned many decades. When Russian science lost much of its funding, some of those famous scientists came to the US and brought this research, which was then quite new. In the West, we had concentrated on using proteins as drugs, ignoring by and large their lowly sugary brethren.

In an agonizingly slow process, funding found its way to this research, and some very interesting things were discovered about a particular type of carbohydrate that binds to and blocks a protein called galectin, which appears to cause cirrhosis. It seems to be found in the presence of cancer cells, and according to peer-reviewed research may be the cause of cirrhosis of all types, but specifically of the liver. Mouse and other studies suggest the blocking carbohydrate has the potential to be a cure for cirrhosis, and GALT will be in human trials next year with the very prestigious liver research group at Ludwig Institute in Brussels and plans to be in clinical trials next year for liver fibrosis. One of GALT's molecules also appears to dramatically reduce the side effects of chemotherapy for certain types of cancer treatments. (Phase-two trials indicated a unique combination of increasing median patient survival while reducing the number of severe adverse events by approximately 50%). GALT has an application pending with the government of Colombia, which suggests the possibility of use in Latin America soon).

These are wonderful things, of course, but not why I joined the board. In economics, Bastiat used to talk about "the things you can see and the things you don't see." What I "see" in GALT is what is not yet seen, and that is the treasure trove of data on carbohydrates, for which uses are so far only vague speculation. I see the potential for a lot of very interesting research, which will be very costly, but could have real impact, as their current cirrhosis drug candidates have. I should mention that the liver research is highly speculative, as there are no human trials, only mice, rats and human liver-cell culture studies. These are encouraging, to be sure; but as my doctor, Mike Roizen, constantly reminds me, to help temper my enthusiasm, "John, orange juice works in mice!"

Investing in small biotechs with "potential" is somewhat akin to investing in junior and exploratory gold mining stocks. If everything works out, the returns can be exhilarating, but the majority of them will go to zero, so you need to do a LOT of homework and have a diversified basket of them. I do that with biotechs. I love each one of my "investments," but I fully recognize that for a whole host of reasons they could go to zero. What can be a wonderful technology may not work in humans, or it can work but another company comes along and does it better and cheaper, or (more likely) they run out of money or have management problems.

GALT is a perfect example of what I look for. They have wonderful upside if the technology proves out, but will be a big disappointment if it does not. Clearly, I think there is something there, if I am willing to join the board. I also know that some of you will be tempted to "ride along." Let me say, do not, unless you go to their website, listen to their CEO, Peter Traber, explain the technology and company, read the independent research, and look at the board that chairman Jim Czirr has rounded up. GALT has had "issues" in the past, as my kids would say, and it has taken Jim some time, since he organized a take-over of the board, to get the ship headed in the direction it needed to go; but he is fanatical (almost maniacal) about it, which is of course what you must have. Dr. Traber, formerly in charge of global drug development for Glaxo, is a force in himself and relatively new as the CEO. I am very impressed with him. I really like the management team and the plans going forward. No guarantees of course that the good plans will work out the way we hope.

And if you do the research for yourself and like what you see, then be patient. Do not chase the stock price. Pat Cox of Breakthrough Technology Alert introduced me to the company and I bought a few shares, a long time ago. I intend to buy more over the next year; but as a director, I will allocate an annual amount and buy them on a regular, prearranged basis regardless of share price, and will not start to do so for some reasonable time after this announcement. So, I have a mixed bias. As a director I want to see the company shares do well, but I hope they don't get too high, for a while at least. (It's much like my monthly gold purchases: I am glad to see gold is down, as I get more of it when I buy!)

Don't buy if your time horizon is measured in less than years. If you feel the need to look at charts and current prices, then I suggest you pass. I have no idea what the stock will do in the short term, nor a timetable for reportable results. You can see the website at www.galectintherapeutics.com. You can request a copy of the independent research by emailing your request to squeglia@galectintherapeutics.com or calling the company at 617-559-0033.

Tough Choices, Big Opportunities

As noted above, I had the privilege of finally meeting Kate Welling, who writes the famous (in the financial world) Welling@Weeden letter, in which she highlights interviews and commentary from many of the financial world's luminaries. I must confess, getting time with her has been on my list of "want to's" for a very long time, and we did finally meet this summer in Maine, thanks to David…