With any stock there is both a long and short case, and an equal assessment of both should be performed before deciding on an investment. In biotechnology these published opinions appear to be much more impactful, as they can often lead to inappropriate selling and or buying pressure.
Prior to Monday, Galena Biopharma (GALE) was among the top tier of best performing stocks of the year. It had traded higher thanks to the potential, and the data, for its lead product, NeuVax. But today the stock is lower by over 30%, following a very bearish point-of-view.
In an article from "PropThink" the firm discusses Galena's acquisition of Apthera, the company's management, lack of catalysts, and a slew of upgrades and bullish forecasts that have taken its stock higher. I visited the firm's website to identify the author, which was only listed as editorial staff. What I found to be interesting was who comprised the research team associated with the article. The managing editor's last position was as a senior pharmaceutical analyst at Roth Capital, and another worked for Zacks. Both firms are very positive on Galena Biopharma and have contributed to its rally with their bullish price targets. The PropThink website also discloses that they may have a position either long or short on the securities that they cover. This creates a red flag to me as an investor.
Every analyst has the right to give whatever price target, upgrade, downgrade, or change their opinion as much as they'd like. There are no rules about providing an opinion. However, the timing of the article is a bit strange, right before earnings. Some of the arguments in the article make sense, and should be considered as part of any research. But to ignore what has driven the price of GALE's stock higher is avoiding very important information, as this company has had the developments to back its price.
January 5 - Galena announces investigational new drug approval for Phase 2 trial for NeuVax combined with Herceptin. This upcoming study is one that, in the article, is believed to be responsible for upcoming financing. However, because of pilot data, this study is important to the company and could open many doors. Unfortunately, we won't know until the trial ends if NeuVax is compatible with Herceptin as a form of treatment, but early data suggests that testing the two vaccines could lead to favorable results.
January 20 - Galena initiates patient enrollment in NeuVax Phase 3 PRESENT trials to prevent breast cancer recurrence. This news sparked upside, as beginning a trial is a critical point for any biotechnology company. This trial is the heart and soul to this company's future, and is all that matters.
February 14 - Galena initiates enrollment in Phase 1/2 trial for Folate Binding Protein (E39) in ovarian and endometrial cancer patients. This is yet another major development that led shares higher, and shows a more diversified approach from the company in its clinical development.
February 27 - Galena establishes record date for spin-off stock dividend of RXi Pharmaceuticals. One thing is for certain, RXi was unsuccessful, but from what I can tell, the two are completely different companies, and are no longer connected in any way.
March 20 - Galena receives patent from U.S. Patent and Trademark Office covering the use of its product candidate, NeuVax. Some companies seek patents for lead products for years, so it is a big win that Galena was able to secure this patent in a timely manner.
April 16 - Galena raises $14.5 million in public offering. All financing is viewed as a negative, but is necessary in biotechnology. Given the date of this offering investors shouldn't have to fear additional financing until more data is known.
May 1 - Galena receives Composition of Matter patent, which covers FBP peptide variants for individual or expanded use in combination with the FBP vaccine, E39. The patent provided exclusivity till 2029.
June 4 - Galena presents NeuVax Phase 1/2 Booster data that improved disease-free survival at 60 month median follow-up. Patients who received the vaccine saw a 96.2% disease-free survival compared to 80.5% for the control group, a clear indication of strength for NeuVax.
June 5 - Galena announces a 78.4% recurrence reduction in its target population with NeuVax. This is an unmet medical need, and recurrence reduction rates such as 78.4% will set a new standard of care if proven in larger trials.
July 18 - Galena issued NeuVax U.S. patent, exclusivity until 2028.
August 13 - Galena issued Folate Binding Protein cancer vaccine patent in Japan.
October 26 - Galena announces that NeuVax consistently reduced circulating tumor cells in vaccinated patients.
Also, four other well-respected banks have continued to be bullish on the company. In particular, Maxim recently initiated coverage with a "buy" and a $6 price target, MLV with a "buy" and $6 price target, Cantor with a "buy" and $4 target, and finally Ross Capital has continued to reiterate its "buy" with a $5 target.
In addition to the developments above, Galena has announced several new additions to its scientific advisory board, clinical team, and has received several upgrades and bullish price targets in the process. I think it is clear that Galena is a stock that has moved in 2012 as a result of the company's changing direction and execution. A biotechnology stock moves on data, and Galena has announced several key pieces of data that suggests potential success in a larger trial, although we won't know until the Phase 3 trial is complete, or until interim data is released.
The information above includes data and news releases for investors to make their own decision. The PropThink piece is a one sided biased piece, it needs to be balanced with the company's news and potential results. Instead of focusing on RXI capital structure, investors should really focus on whether the phase III trial of NeuVax provides a decent chance of success based on prior data. If the phase III trial succeeds, GALE will be instantly a multibillion-dollar company. The key question is what is the probability and does the current valuation justify that chance.
After assessing all information, I conclude that Galena's valuation is taking into account all potential risks. A $100 million company does not reflect a large biotechnology company. Nor does it reflect the potential of NeuVax if current data stands in larger trials. Galena's Phase data, upgrades, patents, and additions to its clinical staff have all created upside, and therefore have driven the price of the stock higher. Of course we cannot draw an absolute conclusion until final data is known, which is the case for all biotechnology companies. Given the developments listed above, its current valuation, and the very large sales potential if NeuVax is proven effective, I believe that Galena is presenting a good opportunity for long-term investors.