Before investing in biopharmaceutical stocks, investors need to look at the whole picture before making any decisions. The whole picture includes looking at the science, the technical picture, the fundamentals, and future catalysts. One stock that appears poised for significant growth is Galena Biopharma (GALE). In addition to improving fundamentals and a 52-week share price appreciation of 17%+, investors can look forward to several significant upcoming catalysts.
Galena Biopharma is a biopharmaceutical company focused on developing and commercializing innovative, targeted oncology treatments to address major unmet medical needs and advance cancer care. The company is led by Mark Ahn, the President and Chief Executive Officer. Dr. Ahn has more than 20 years of experience in the biopharmaceutical industry working for several prominent companies including Genentech, Amgen (AMGN), and Bristol-Meyers Squibb (BMY). In addition to having served as Galena's CEO since 2011, Mr. Ahn also serves as an adjunct Professor at Creighton University. Under Mr. Ahn's leadership, Galena appears to be on track.
Over the past couple of years, Galena has worked to build one of the most promising product candidate portfolios in the industry. In addition to their upcoming FDA-approved Abstral launch to treat cancer pain, the company is continuing to develop NeuVax which is used in the treatment of breast cancer. NeuVax has the potential to turn Galena into a billion dollar company upon approved. While the future looks incredibly bright, it's important to take a look at the recent performance as well.
52-Week Stock Performance
As the 1-year chart shows, shareholders in Galena have seen their shares appreciate by more than 37% during the past year.
It's also encouraging that shares have reversed the recent downtrend. Shares now appear headed higher and hopefully will test the May high of $3.00.
Galena's return of 37% is significantly better than both healthcare and overall market related ETFs. The SPDR S&P 500 ETF (SPY) is used to track the performance of the overall market. As the below chart shows, this ETF has increased in price by approximately 22% over the past year.
And lastly, the Health Care SPDR ETF (XLV) is used to track the performance of the healthcare related sector. As the below chart shows, this ETF has increased in price by approximately 33%.
So shareholders in Galena Biopharma have certainly had an enjoyable 52 weeks. With the progress that Galena is making with its pipeline, I expect that shareholders will continue to be pleased with the future share price performance.
When analyzing an early stage biopharmaceutical company, investors need to make sure that the company has a diversified pipeline that offers several opportunities for revenue generation. A deep pipeline offers investors risk management because if one drug fails, the company still has other opportunities to succeed. Galena certainly fits that category as the company has several opportunities for future growth. The diagram below shows the extent of Galena's possibilities.
Abstral Product Launch
On March 18, 2013, Galena entered into an agreement with Orexo AB for the rights to the sale and distribution of Abstral in the United States. Abstral is the only fentanyl sublingual tablet for the management of breakthrough cancer pain in opioid tolerant patients. Breakthrough cancer pain is defined as a transient exacerbation of pain that occurs either spontaneously, or in relation to a specific predictable or unpredictable trigger, despite relatively stable and adequately controlled background pain. Patients who suffer from breakthrough cancer pain can experience an average of 4 episodes per day, each lasting approximately 30 minutes. The pain experienced from these episodes can cause patients to suffer from stress and a substandard quality of life.
Abstral was approved by the FDA in 2011 and since then has become the industry standard for the treatment of breakthrough cancer pain. Studies have shown that 40 to 80% of cancer patients end up suffering from breakthrough cancer pain. The innovative Abstral formulation delivers the power of fentanyl in an easy to use sublingual tablet, which is able to be dissolved under the tongue within seconds. Because of the efficiency and power in Abstral's formula, it is able to relieve breakthrough cancer pain in an extremely short time period.
Galena plans to launch Abstral in the United States during the fourth quarter of 2013. The company expects to use approximately 30 sales representatives to attempt to capture a 10-15% market share. Given that the breakthrough cancer pain market in 2012 was $400 million, investors can expect the company to generate at least $40 million annually once the full sales force is in effect. For the near-term, Galena expects Abstral to generate up to $3 million in revenue during 2013 and between $8 million and $12 million during 2014.
NeuVax - Breast Cancer
In addition to Abstral, Galena is also hoping that NeuVax, its developmental drug for breast cancer, will continue to demonstrate strong results during evaluation. NeuVax is based on the E75 peptide which is derived from HER2 combined with the immune adjuvant granulocyte macrophage colony stimulating factor. Studies conducted thus far have shown that treatment with NeuVax helps to stimulate the cytotoxic T cells in a way that tends to focus on cells expressing any amount of HER2. HER2 is a prominent oncogene that is known to stimulate cell growth. This rapid cell growth tends to lead to aggressive forms of disease including various forms of breast cancer. All levels of HER2 breast cancers (IHC 1+, 2+, and 3+) have an extremely poor prognosis that requires the most aggressive of treatments. NeuVax aims to generate a robust, specific, and durable killer CD-8 Cytotoxic T Lymphocyte response to lyse HER2 expressing tumor cells. If these HER2 expressing cells can be destroyed efficiently and safely, NeuVax may prove to be the new standard of care for breast cancer. Over the past year, Galena has released several positive announcements related to NeuVax.
In late 2012, Galena Biopharma entered into an agreement with Teva Pharmaceuticals (TEVA) to commercialize NeuVax in the country of Israel. Investors should see this deal as extremely encouraging given that it will allow Galena to focus on the actual trials and save a lot of its available cash since Teva will shoulder the financial burden of commercialization. As part of the deal, shareholders can expect to see a large royalty on any NeuVax sales that occur in Israel.
Shortly after the deal was announced, Galena announced the NeuVax Phase II results on December 7, 2012. NeuVax is given an intradermal injection once a month for six months. After that 6-month period, patients will then be administered a booster injection once every six months. The science and administration of NeuVax has shown to be quite promising thus far. The trial enrolled 187 patients, 97 of whom were node positive and 90 of whom were node negative. NeuVax demonstrated an excellent safety and tolerability profile, and demonstrated a successful response rate out to 60 months. The maximum toxicity for all inoculations produced either Grade 1 or Grade 2 toxicities, with fatigue being the most common. Response rates were observed at both 24 months and 60 months. At 24 months, 94.3% of NeuVax patients were disease-free vs. 86.8% of patients on the control arm. At 60 months, 89.7% of NeuVax patients were disease-free vs. 80.3% of patients on the control arm.
Currently, Galena is pursuing the Phase III PRESENT trial for NeuVax vaccine in HER2 1+ and 2+ breast cancer patients in the adjuvant setting to prevent recurrence. The PRESENT study is a randomized, multicenter, multinational clinical trial that will enroll approximately 700 breast cancer patients. Based on a successful Phase II trial, which achieved its primary endpoint of disease-free survival, the FDA has agreed that the design and planned analysis of the Phase III study adequately addresses the objectives necessary to support an acceptable regulatory submission for marketing approval.
NeuVax Market Potential
Breast cancer has become so pervasive in today's society that it has become a multibillion-dollar industry. In just one year of funding, in 2007, the National Cancer Institute spent approximately $570 million on breast cancer research. During the same period, the National Institute of Health spent approximately $705 million on breast cancer research as well.
The market potential for Galena's NeuVax is astronomical. The American Cancer Society recently estimated that there will be a little over 232,000 cases of breast cancer diagnosed among women in 2013 in the United States alone. Additionally, the ACS expects that there approximately 40,000 women will die from breast cancer in the same period. The World Health Organization also estimates that there will be approximately 450,000 new cases of breast cancer diagnosed in the European Union. The below diagram indicates the amount of patients that NeuVax will be appropriate for:
So potentially, NeuVax can be used to treat up to 120,000 cases of breast cancer annually. Given that the new treatments in breast cancer can cost up to $10,000 per month, NeuVax has the potential to generate revenue of approximately $14 billion. Given that Galena is only has a market capitalization of $170 million, the opportunity for investors to reap large rewards is there for the taking.
In addition to analyzing a biopharmaceutical company's science, pipeline, and market potential, investors must also look at the current financial health to determine if now is the right time to invest. As of May 13, 2013, Galena Biopharma had approximately $30.2 million available cash. The company also had approximately $10 million of long-term debt. With a burn rate of $1.25 million per month, shareholders should anticipate that the cash might start to run low around the summer of 2014. However, investors also need to remember the revenue projections for the Abstral launch. Galena expects to earn up to $3 million this year and between $8 and $12 million in 2014. Should these projections prove correct, the company may not need to raise more cash but can instead use the Abstral revenue to continue funding operating expenses.
Since breast cancer represents Galena's largest opportunity for revenue generation, it's important to look at potential competitors that could stand in the way. Currently, the fiercest competition occurs in the HER2 IHC 3+ tumor niche. Within this area, there are several blockbuster drug therapies. Roche (RHHBY.OB) has two drugs/therapies called Herceptin and Perjeta. GlaxoSmithKline (GSK) also has a popular drug in this breast cancer niche called Tykerb. Together, these 3 drugs account for billions of dollars of sales. Galena will attempt to capture a portion of this market but clearly will face stiff competition to get a significant market share. But where Galena doesn't face the same competition is for HER 2 ICH 1+/2+ patients. This niche represents a significant unmet medical need and Galena should be able to capture an extremely large share, if not all of the market, upon approval.
As a biopharmaceutical company, Galena certainly isn't without risks. The biggest risks are from failed trial data and lower than projected sales because of competition. As with all biopharmaceutical companies with ongoing trials, any negative data could send the shares falling. However, after carefully examining the data from the NeuVax Phase II trial, it doesn't appear that will happen. In fact, considering the recent partnership with Teva Pharmaceuticals, shareholders should be extremely encouraged about the prospects.
As far as competition goes, Galena will face a couple of biotech giants in Roche and GlaxoSmithKline. But that is only for one particular segment of the breast cancer population. In the other segments, Galena has the potential to capture all of the market. Should this occur, shareholders will see their shares appreciate in value significantly.
As mentioned in the opening paragraph, investors must look for biopharmaceutical companies that have a unique approach to science, a deep pipeline, drugs with huge market potential, and a healthy fundamental picture. Galena has all of these attributes and shareholders with patience will be handsomely rewarded in due time.