The shares of Galena (GALE) are up almost 35% since my August recommendation to buy the stock. Since then the company has successfully raised capital and launched its cancer pain drug Abstral. On Monday, the company presented some more good news for investors that has triggered a 15% rally.
Galena has announced initial trial data for its Folate Binding Protein Vaccine during the Immunotherapy of Cancer Conference. FBP (Folate Binding Protein) is an immunotherapy for HLA A2 positive patients in combination with GM-CSF (Granulocyte Macrophage-Colony Stimulating Factor). The treatment aims to prevent recurrence high risk patients with endometrial and ovarian cancer. The treatment is only for patients which have already shown remission (disease free) after completing other already available treatments.
The aim of this trial was to show the safety and also to determine the optimal dose for treatment. The subjects were rechecked after 6 months of administration and results show that there were 2 (13.3%) recurrences in vaccine group as compared to 4 (25%) in the control group. The optimal dose of the drug has been determined at 250 mcg GM-CSF combined with 500 mcg peptide (FBP). More importantly the treatment has also shown to be safe along with being efficacious.
On the basis of these encouraging results, the company has announced that it will move forward with Phase IIa of FBP. Mark J. Ahn, President and Chief Executive Officer of Galena Biopharma has announced that the trail will start by the end of this year.
The initiation of FBP's Phase II trials is a major boost to the valuations of Galena. Along with FBP, the company is already working on NeuVax which is a cancer prevention vaccine. It's in the Phase III of trial, and enrolling patients for the study. It's being developed in collaboration with Teva (TEVA), Leica and Kwang Dong Pharmaceutical Company Limited and the Phase IIb (NeuVax+Herceptin) with Genetech, HJF and Roche.
The vaccine is based on E75-peptide, derived from HER2 (Human Epidermal growth factor Receptor 2) protein. The vaccine uses the person's own immune system by stimulating the cytotoxic (CD-8) positive T-cells, which when recognize a foreign target attack it and ultimately kill them. This results in eradicating the residual cancer cells that exhibit HER2 and eliminates the chances of recurrence of the cancer cells. HER2-positive is an aggressive form of breast cancer, and all levels of HER2 (IHC 1+, 2+, 3+) have poor prognosis.
Phase II Results
The Phase II study showed positive results for NeuVax both in mono-therapy and in combination with Herceptin®, a HER2 targeting therapy for breast cancer. A total of 187 patients were enrolled. The patients were given an inoculation every month, for six months and a booster dose every six months. The booster dose didn't cause any side effects, and only enhanced the success rate.
For the trial of patients (n=187) who were rendered disease free, after 24 months of NeuVax treatment 94.3% remained disease free and after 60 months 89.7% patients remained disease free.
In the trial that administered additional booster dose of NeuVax, the patients (n=45) after 24 to 36 months showed 0% recurrences, and after 60 months showed a 5.6% recurrence rate.
At the completion of 5 year follow up period NeuVax showed a significant increase in the Disease Free Survival (DFS) rate.
Phase III Trial
As a result of successful Phase II trials, FDA has concurred a Special Protocol Assessment (SPA) for Phase III trials of NeuVax. The Phase III PRESENT (Prevention of Recurrence in Early Stage, Node-Positive Breast Cancer with Low to Intermediate HER2 Expression with NeuVax Treatment) will enroll approximately 700 breast cancer patients.
The trial will be conducted in node positive adjuvant breast cancer patients, who have low or intermediate HER2 expression and an HLA status of A2/A3+. These patients can't receive Herceptin therapy, which is currently only approved for high HER2 or 3+ expression patients. The endpoint of the trial is disease free survival at three years.
Other than FBP and NeuVax, Galena has already launched Abstral. The details of this launch and its future prospects can be found here.
In the U.S. over 230,000 women are diagnosed with breast cancer annually, according to National Cancer Institute. Approximately 75% of these patients are tested positively for HER2 (IHC 1+, 2+, 3+). Out of the HER2-positive patients NeuVax targets approximately 50-60%, who experience recurrence in the disease due to non-availability of HER2 adjuvant treatment options that would help them to live with their disease free status.
Once the endpoint for Phase III trials is achieved and the FDA approves the drug for marketing, it could prove to be breakthrough product, with the ability to prevent recurrence in cancer patients. The trial results show strong potential with minimal to no side effects.
Furthermore, NeuVax is the only vaccine in Phase III targeting HER2 breast cancer and its success highly anticipated.
FBP is also targeting an equally huge market. There are approximately 22,000 new patients of Ovarian cancer in the U.S. Although this number might seem small as compared to breast cancer but the number of patients that die from ovarian cancer is nearly 50% of that of breast cancer.
In one of my previous articles, I mentioned that Galena would be a good fit with AstraZeneca (AZN). The British drug maker is suffering from falling revenues due to expiring patents and a pretty weak pipeline. The company has decided to focus on oncology as one of its three key segments. NeuVax and Abstral will fit in nicely with AstraZeneca's already impressive oncology portfolio. Besides AstraZeneca, Roche (OTCQX:RHHBY) is also a very promising potential acquirer of the company.
Small biotechnology companies are always on the lookout for potential partners and the bigger these partners are the better. This is because securing a research partnership doesn't only reduce the considerable financial burden of conducting lengthy trials and bring technical expertise to the table; it also provides a well-informed potential buyer. There are numerous examples of large partners buying out early stage biotechnology companies and a recent example is of MAP pharmaceuticals. The company was acquired for around a billion dollars by none other than its partner in development of its key drug Levadax, Allergan. The pharmaceutical giant already had partial marketing rights for the drug but chose to completely own the migraine treatment.
Galena is currently testing the combination NeuVax and Herceptin in Phase II trials. The partner for this trial is none other than Roche. This puts Roche in an excellent position to assess the potential of NeuVax and its combined effect with its drug Herceptin. Therefore, I believe Roche is another highly likely candidate for the acquisition of Galena. With Herceptin's patent protection ending in 2014, the company is desperately looking for more innovative formulations to extend patent protection and fend of generic threat. The combination of Herceptin and NeuVax would be an ideal solution (albeit a partial one) to this problem.
Roche has a massive balance sheet with around $15 billion in cash and can easily acquire a company worth around $200 million. If we look at fundamentals, Galena is also in excellent financial health to be a good acquisition target. It has around $65 million as cash i.e. 35% of market capitalizations and a promising product on store shelves.
The successful Phase I trial of FBP is just more icing on the cake. The market has already realized the importance of this news which is why the trading volumes are already double the 10-day average and shares are up almost 8% today. There can be some profit taking on this appreciation but that should not concern investors who are in it for the long haul. Moreover, as the company has lain out no clear monetary road-map on the Phase II trial for FBP, further dilution to fund the trial cannot be ruled out. However, such an occurrence is highly unlikely in the near future due to a pretty health cash position of Galena i.e. $65 million in cash.
The next important catalyst for short term investors is the release Abstral sales numbers. The sell side expects sales to reach around $13 million by the end of 2014. I believe the initial low sales figures for Abstral shouldn't disappoint long term investors as the drug any drug launch in a mature market can take a little time to get traction.