Galena: A Small-Cap Biotech Ready To Fly?

| About: Galena Biopharma, (GALE)

The rising investor confidence in biotechs is a positive sign overall for the sector's investment potential. In my opinion investors should allocate a small position of their holdings in promising biotech firms. Large pharmaceutical firms eager to restock drug pipelines are interested in gobbling up smaller firms at premium prices.

Looking for the next gem that could explode isn't easy, but Seeking Alpha and some other websites are great sources to find interesting candidates that are worthy to consider. I think I found an interesting company that could see renewed interest going forward.

Therapeutic vaccines

A novel cancer therapeutic vaccine has traditionally been seen as the "Holy Grail" of biopharma. The 2010 approval of Dendreon's (NASDAQ:DNDN) Provenge for metastatic prostate cancer proved the company and the technology to be the real deals. Another promising therapeutic cancer vaccine candidate is NeuVax for HER2-positive breast cancers. This therapy is being developed by Galena Biopharma, Inc (NASDAQ:GALE), a Portland, Oregon-based biopharmaceutical company developing innovative, targeted oncology treatments.

Below you will find the company's current product pipeline.

Source: company's website

The company website gives a good description of Galena's two main products:

NeuVax™ (nelipepimut-S)

NeuVax consists of the E75 peptide derived from Human Epidermal growth factor Receptor 2 (HER2) combined with the immune adjuvant granulocyte macrophage colony stimulating factor (GM-CSF). Treatment with NeuVax stimulates cytotoxic (CD8+) T cells in a highly specific manner to target cancer cells expressing any level of HER2. NeuVax is given as an intradermal injection once a month for six months, followed by a booster injection once every six months to keep the body's immune response against HER2 strong. Based on a successful Phase II trial, which achieved its primary endpoint of disease-free survival, the Food and Drug Administration (FDA) granted NeuVax a Special Protocol Assessment ((NYSE:SPA)) for a Phase III clinical trial in adjuvant therapy of women with low-to-intermediate HER2 expression breast cancer.

According to the National Cancer Institute, over 230,000 women in the U.S. are diagnosed with breast cancer annually. Of these women, about 75% test positive for HER2 (IHC 1+, 2+ or 3+). Only 25% of all breast cancer patients, those with HER2 3+ disease, are eligible for the standard of care Herceptin® (trastuzumab; Roche-Genentech) which had revenues of over $5 billion in 2010. NeuVax targets the remaining 50% of low-to-intermediate (also known as HER2-Negative, not eligible for Herceptin) HER2 expression breast cancer patients who achieve remission with current standard of care, but have no available HER2 targeted adjuvant treatment options to maintain their disease-free status.

Folate Binding Protein-E39

Folate Binding Protein-E39 is a targeted vaccine aimed at preventing the recurrence of ovarian, endometrial and breast cancers. The FBP vaccine consists of the E39 peptide derived from the folate binding protein combined with the immune adjuvant granulocyte macrophage colony stimulatingfactor (GM-CSF). FBP is over-expressed (20-80 fold) in more than 90% of ovarian and endometrial cancers, as well as 20-50% of breast, lung, colorectal and renal cell carcinomas. FBP has very limited tissue distribution and expression in non-malignant tissue, making it an ideal immunotherapy target, theoretically with very little chance of autoimmune response.

Ovarian cancer occurs in over 22,000 patients per year in the U.S. and is the most lethal gynecologic cancer. Despite the fact that the incidence of ovarian cancer is only approximately 20% of that of breast cancer, the number of patients dying from ovarian cancer is nearly 50% of the number due to breast cancer deaths. This is due to the lack of specific symptoms for ovarian cancer, the majority of ovarian cancer patients are diagnosed at later stages of the disease, making treatment more difficult with a poor prognosis. These patients are routinely surgically debulked (tumor is partially surgically removed) to minimal residual disease, and then treated with platinum- and/or taxane-based chemotherapy. While most patients respond to this treatment regime and become clinically free of disease, the majority of these patients will relapse, and once the disease recurs, the treatment options and successes drop dramatically.

Endometrial cancer is the most common gynecologic cancer and occurs in over 46,000 women, with over 8,000 deaths, in the US annually. There are two basic types of endometrial cancer: endometriod and papillary serous. The latter has a much more aggressive clinical course and the majority of these patients will die of this form of the disease. If FBP clinicals begin yielding positive interim results, the therapy could take some of the spotlight off NeuVax but would give shareholders the benefit of yet another promising therapy and minimize the downside risk with diversification. With another possible candidate with catalysts coming soon, Galena will not be considered a "one trick pony" like many development-phase companies, increasing its investment potential and perhaps garnering a bit of larger pharmaceutical interest as events unfold.


Last quarter Galena Biopharma has been busy forging partnerships. In December the company signed a pact with Teva Pharmaceuticals (NYSE:TEVA) to commercialize the biotech's lead product, NeuVax, in Israel. At least four sites of the Phase III trial will be in Israel, a fact that was noted in the release about Galena's deal with Teva. The agreement calls on Teva, which is making a push into more novel drug development after becoming the world's largest generic drugmaker, to tackle regulatory submission and support local development of NeuVax.

"This agreement is the first piece of our global commercialization strategy," Mark Ahn, Galena's CEO, stated. "Teva is a world-class pharmaceutical company and a major pharmaceutical company in Israel. We look forward to their valuable financial support towards our development goals in Israel, as well as market leadership for NeuVax commercialization in the region."

It's second partner deal announced last quarter was with U.K.'s Leica Biosystems. Leica will support the development of a companion diagnostic to measure the presence of HER2 to select which patients should be treated with Galena's NeuVax. Taking a bit of guesswork out of candidate selection and providing regulatory agencies with a more objective means of patient selection should help Galena progress through the regulatory process if Phase III data are worthy of a new drug application (NDA).

Final Note

Galena's NeuVax, which is in late-stage development for preventing recurrence in women with breast cancer that has infiltrated the lymph nodes and has low or intermediate HER2 expression, could be the holy grail for both investors and the company.

Galena Biopharma has received a patent granting its breast cancer vaccine exclusivity until 2028.

Big pharmaceuticals are paying attention. Companies like Novartis (NYSE:NVS), Pfizer (NYSE:PFE) and Roche (OTCQX:RHHBY) are making deals with potentially very large payoffs to acquire these technologies, hoping to help offset patent and revenue losses.

I foresee a potential buyout of Galena going forward, but before that I think we will see a nice rebound to the $3 levels. Many analysts are positive; so am I. As the NeuVax and FBP trials progress and interim data are presented, investors and Big Pharma will be watching closely. Neither group wants to buy something that won't return rewards on their investments, while neither wants to miss the boat and have to buy shares (or the company) at the premium prices that would be required if either therapy proves itself to be safe, effective and marketable. With a current $123 million market capitalization, share price and market capitalization prices could each move quickly. Careful risk/reward evaluation should be undertaken by Big Pharma and individual investors alike.

Disclosure: I am long GALE. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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