Galena Pharma: High Hopes For The Shares

Apr. 8.13 | About: Galena Biopharma, (GALE)

Analysts have high hopes for Galena Biopharma (NASDAQ:GALE) with their close to $5 target on the stock (last quoted price $2.06). There are a handful of reasons for their bullish stance and with the shares now approaching 52-week highs, the market (myself included) is beginning to recognize the potential in the stock.

It all starts with NeuVax, the company's novel formulation for breast cancer. NeuVax is given as an intradermal injection once a month for six months, followed by a booster injection once every six months. Based on a successful Phase II trial, which achieved its primary endpoint of disease free survival (DFS), the FDA granted NeuVax a Special Protocol Assessment for a Phase III clinical trial in adjuvant therapy of women with low-to-intermediate (also known as HER2-Negative, not eligible for Herceptin) status.

The Phase III trial is based on promising Phase II results released last year. The combined SN-33 (Node Positive) and SN-34 (Node Negative) Intent-to-treat (ITT) population continued to demonstrate an excellent safety and efficacy profile. Phase 2 HER2 IHC 1+/2+ patients from SN-33 established the Phase 3 patient population. After establishing statistical significance at the 36-month Landmark Analysis, or the same endpoint as the ongoing Phase 3 trial, the 60-month Landmark Analysis demonstrated a 5.6% recurrence rate with NeuVax vs. a 25.9% recurrence rate in the control arm, a recurrence reduction of 78.4%. Booster inoculations were shown to be well-tolerated and appear to maintain long-term peptide-specific immunity and reduce disease recurrence rates. In the Phase 1/2 trial, boosted patients have lower recurrence rates and improved disease-free survival compared to patients who did not receive the vaccine.

The market opportunity for NeuVax is tremendous. 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 Human Epidermal growth factor Receptor 2 (IHC 1+, 2+ or 3+). Only 25% of all breast cancer patients, those with HER2 3+ disease are eligible for Herceptin which had revenues of over $6 billion in 2011. NeuVax is creating a niche for itself in the marketplace by targeting the remaining 50% of low-to-intermediate (also known as HER2-Negative, not eligible for Herceptin) who achieve remission with current standard of care, but have no available HER2 targeted adjuvant treatment options to maintain their disease free status.

Needham, which initiated GALE with a buy rating and a price target of $3.50 two weeks ago, had high praise of the potential cancer treatment, saying, "We believe adjuvant vaccine therapy will ultimately become standard of care for many cancer types, and we view NeuVax as one of the leading new product candidates for this revolutionary treatment modality."

A Zacks analyst, which mentioned GALE as being one of 6 biotechs with "staggering" potential, had this to say, "We believe NeuVax could be a meaningful alternative for the treatment of breast cancer. According to the Centers for Disease Control and Prevention, in the U.S. alone, approximately 202,964 individuals are diagnosed with breast cancer each year. Of these patients, approximately 20,000 (about 10%) will be eligible for NeuVax treatment. This is a huge market for NeuVax, which can reach a blockbuster status easily."

The market is closely paying attention to any news related to the Phase III trial, which is currently enrolling patients in more than 100 clinical sites worldwide, and there are two milestones coming up that could serve as catalysts for the shares. The completion of the enrollment of the trial is first up followed by the interim analysis. The latter of which should bring a lot of attention and trading volume to the shares.

In other product news for Galena Pharma, the company announced an acquisition in mid-March of an FDA-approved cancer pain treatment, Abstral, putting the first building block in place of the company's commercial strategy. Abstral is an important new treatment option for inadequately controlled breakthrough cancer pain in patients who are already receiving, and who are tolerant to, opioid therapy for their persistent baseline cancer pain. Abstral was approved by the FDA in January 2011 and, it is the transmucosal immediate-release fentanyl (TIRF) market leader in Europe where it achieved sales of $54 million by ProStrakan/Kyowa Hakko Kirin in 2012. In 2012, the U.S. market for TIRFs was $400 million, providing Galena with a sizeable market to compete in.

The acquisition of Abstral also has the benefit of selling synergies for Galena. GALE's launch of Abstral will build relationships with future prescribers of NeuVax as medical oncologists who manage tumor and treatment related pain, predominantly prescribe TIRFs for advanced breast cancer and other solid tumor patients. The selling point here is that the doctors will be able to prescribe NeuVax in combination with Abstral to their patients for the cure and pain tolerability of breast cancer. The next milestone for Abstral is expected in Q4, when the company is planning to launch the therapy in the US.

Grant Zeng, the Zacks analyst who spoke highly of Galena, also discussed the potential of Pressure BioSciences (NASDAQ:PBIO) and Attosa Genetics (NASDAQ:ATOS) in the interview.

Mr. Zeng called Pressure BioSciences, featuring Pressure Cycling Technology (PCT), one of the "most" undervalued biotechs. PCT uses cycles of hydrostatic pressure between ambient and ultra-high levels to control bio-molecular interactions. One of the company's main focuses for PCT is developing a rape kit processing system, especially now that Congress is making a push to end the backlog for rape kits, estimated at 400,000 in the United States. On Friday, Pressure BioSciences released an announcement, saying that scientists from Florida International University (FIU) reported further advancements in their goal to develop an improved method for rape kit testing based on PBI's patented pressure cycling technology platform.

The company reported two breakthroughs at FIU. One researcher reported on a novel cell capture method that could result in an even better DNA profile of the perpetrator that should lead to more rapid identifications and thereby, an increase in arrests. The other breakthrough resulted in a unique DNA profile of the sperm then can be compared to the millions of DNA profiles contained in various DNA databases around the world in an attempt to determine the identity of the perpetrator.

Mr. Zeng said Attosa Genetics is undervalued with low downside risk and high upside potential. Attosa Genetics is focused on preventing breast cancer through the commercialization of patented, FDA-designated Class II diagnostic medical devices and patented, laboratory developed tests that can detect precursors to breast cancer up to eight years before mammography, and through research and development that will permit it to commercialize treatments for pre-cancerous lesions.

The stock chart is beginning to form an interesting pattern of trading in a tight range before seeing its shares double in a short-time frame and pulling back and forming a new trading range. The last spike occurred in the middle of March when shares jumped from $6.50 to over $12 a share. The jump was due to the company's announcement of a major investor's decision to buy shares at $12 in combination with a $30 million stock purchase agreement. The stock has now pulled back to $8, providing investors with another opportunity to jump in before the next potential spike.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.