Galmed Pharmaceuticals (GLMD) PT Lowered to $9 at Maxim Group

Maxim Group analyst Jason Kolbert cut his price target on Galmed Pharmaceuticals (NASDAQ: GLMD) to $9.00 (from $24.00) but maintained a Buy rating.

Kolbert highlighted:

• The biotechnology bear market that emerged in late 2015 continues to drive an increase in the cost of capital and the dilution that companies face. In addition, a lack of data, or "data trough," has emerged for many companies. For microcap companies that are traversing a data trough (i.e. lack of catalysts) to get to proof-of-concept (POC) data (as Galmed is doing in nonalcoholic steatohepatitis, or NASH), valuations are penalized.
• The next major inflection point for Galmed is POC data for Aramchol in NASH in 2018. Minor catalysts, such as small regional partnerships like the one announced last week with SAMIL Pharm Co in Korea (which provide sources of non-dilutive capital in the form of modest upfront payments and potential milestones), may represent positive events. However, we note that GLMD traded lower on the day that news was announced, suggesting that investor focus remains solely on NASH.
• The net effect is a valuation that is skewed to the low end of the historical range. Our original price target was set at the height of the bull market when Galmed's IPO was completed (and interest in the NASH space was very high). We estimate that when including the $2M upfront payment from SAMIL, the company has $18M on the balance sheet. This should provide sufficient runway to data, but we believe that investors' concerns will increase as cash balance declines.
• Acquisition potential. Certain large players like Gilead (GILD-$79.47-Hold) are active in NASH. Gilead purchased Nimbus Therapeutics for its NASH program for $400M upfront and $800M in milestones. We believe that potential exists for Galmed, too. POC data could set the stage for acquisition interest, which could push the valuation range back to the high end.
• Model changes. We push out our timing for the potential commercialization of Aramchol to 2022, as our original timeline was optimistic in hindsight.
• Valuation. We factor in a risk adjustment of 30% to our therapeutic model, in addition to applying a 30% discount rate across our valuation metrics (FCFF, discounted EPS, and SOP models).
• Conclusion. We believe it is prudent to adjust our assumptions given a combination of the bearish biotech market environment, catalysts, and revisions to our timeline, as well as other related assumptions. The net result is a reduction in our price target to $9, from $24, which still supports a Buy rating given GLMD's current valuation.

For an analyst ratings summary and ratings history on Galmed Pharmaceuticals click here. For more ratings news on Galmed Pharmaceuticals click here.

Shares of Galmed Pharmaceuticals closed at $4.27 yesterday.

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