What happened

Shares of the clinical-stage biotech Galmed Pharmaceuticals (NASDAQ:GLMD) are on absolute fire this morning, thanks to a positive midstage trial readout for its experimental nonalcoholic steatohepatitis (NASH) drug Aramchol. Specifically, the company reported that patients receiving the 400 mg dose of Aramchol exhibited a significant reduction in liver fat over the study period compared to those taking a placebo. Curiously, though, patients receiving the higher dose of 600 mg apparently only showed a statistically significant drop in liver fat relative to placebo patients in a post-hoc analysis, according to the press release. 

As of 10:28 a.m. EDT, Galmed stock is up by a whopping 215% in response to this top-line data readout. 

Female researcher pointing to a strand of DNA.

Image source: Getty Images.

So what

Prior to today's news, Galmed's shares were having trouble finding a bottom this year, with investors clearly anticipating that Aramchol would fail to follow in the footsteps of other promising experimental NASH drugs in recent weeks. After this positive readout, however, Galmed now has a high-value NASH drug set to move into pivotal-stage testing. 

Now what

Before investors get too worked up, though, it's important to bear in mind a few key points. First off, Aramchol's top-line results were only marginally significant at the 400 mg dose level (0.045), and the higher-dose arm required a post-hoc analysis of so-called "magnetic resonance spectroscopy responders to push it into statistically significant territory. In other words, these data might not be what they seem at first glance. Another important point is that Galmed will almost certainly use this spike in its share price to raise capital in order to fund the drug's next trial. As such, investors might want to proceed with caution with this high-flying stock for the moment.

George Budwell has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.