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Executive summary:

  • Galena Biopharma's (NASDAQ:GALE) President and CEO, Mark J. Ahn, issued a letter to the company's shareholders in response to an article published by TheStreet.com.
  • While mainly describing the accusations as "specious and conveniently arranged to create controversy", the CEO admits engaging the DreamTeamGroup and that several insiders divested shares in mid January.
  • In not-so-unrelated news, we notice that one insider keeps selling and another one is caught by (partial) seller's remorse.

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Background of the controversy

Galena Biopharma has recently been in the news following an article by TheStreet.com.

The main issues surrounding the company's behavior have been very well summarized by Seeking Alpha contributor EnhydrisPECorp:

  • DreamTeam hired writers to say positive things about Galena on blogs, investor websites, and social media groups. Some of these authors failed to disclose their financial relationship to either Galena or DreamTeam.
  • Galena's management has been selling large amounts of shares on the open market over the past few months, coinciding with DreamTeam's promotional efforts.
  • These sales have occurred mostly around the time the DreamTeam Group was set to conclude their work.
  • Documents highlighting the DreamTeam's investor awareness campaign have been pulled from their websites, and the company has refused to comment to numerous requests for comment by other authors.

In addition to the analysis carried out by EnhydrisPECorp in the quoted article, we'd also like to add the due diligence conducted by BuyersStrike!:

Recently, The Street.com ran an excellent piece exploring the relationship between bio-dreck Galena Biopharma Inc. and a sleazy stock tout shop that goes under many names (DreamTeam Group, MissionIR, Quality Stocks, etc.).

We first ran into this crew during the SEFE promotion in the springtime of 2012. And back then an enterprising reader sent in pictures of the vacant SEFE offices.

Now a CEO as astonishingly brilliant and competent as Galena's Mark Ahn surely would have gone to visit this top-flight firm at their headquarters in Indianapolis. He probably would have brought Galena IR head Ms. Remy Bernarda along as well for a little sitdown and perhaps a coffee.

If that is where the GALE execs would have gone to do some routine due diligence on their new IR partner, that is where, together, we will go. And so, together dear readers, we are off to Indiana.

N. Shadeland runs through a somewhat dilapidated neighborhood in Indy, more comfortably a home for check cashing outfits and "We Buy Gold" shops than for a legitimate PR firm. Presented below are pictures from the two possible storefronts that match the 7399 N. Shadeland address.

The first is a vacant storefront

Alternatively, it is possible that DTG is being run out of this UPS Store branch.

Shareholder's letter

Galena's shareholders received a Valentine's letter from the company's CEO that mostly resumes recent Galena's accomplishments, but falls short of denying the main accusations contained in Adam Feuerstein's article:

The only facts in Mr. Feuerstein's most recent article that are remotely accurate are that Galena previously engaged the DreamTeamGroup and that insiders at the company, including me, divested shares in mid January. All other accusations in this article - as with his prior reporting on Galena - are specious and conveniently arranged to create controversy.

An insider still selling, and a case of seller's remorse

A quick look at the most recent SEC filings show that an insider of the company, Richard Chin, sold 187,500 shares on February 12.

More interesting is the fact that Rudolph Nisi apparently purchased 20,000 shares of GALE at an average price of $4.9371, which makes a great headline:

Galena Biopharma Director Acquires $98,800 in Stock

Galena Biopharma Director Rudolph Nisi bought 20,000 shares of the stock in a transaction that occurred on Friday, February 7th. The shares were purchased at an average price of $4.94 per share, for a total transaction of $98,800.00.

The fine prints, however, are the most revealing part of the filing (emphasis added), and tell a completely different story:

The reporting person's purchase of GALE common stock reported herein was matchable under Section 16(b) of the Securities Exchange Act of 1934 with the reporting person's sale of 20,000 shares of GALE common stock at an average price of $7.111514 per share on January 17, 2014. The reporting person has agreed to pay to GALE $43,487.78, representing the full amount of the profit realized in connection with the short-swing transaction.

A quick look at the original filing reveals that the total number of shares sold by Mr. Nisi in his previous transaction was 200,000, at an average price of $6,90 - so that the recent purchase covers only a small part of his sales, and the company gets back about 10% of the total profits generated by his insider sale.

Start of a trend? - that would make a great answer to the controversy around management's behavior

Will other insiders follow Rudolph Nisi's (forced or autonomous) decision and buy on the open market the shares they previously sold, giving back the generated profits to the company itself?

Much more than a well written CEO shareholder's letter, such a move could really represent a game-changing moment for the company, as it would show a strong factual response to the most recent allegations surrounding management - we'll see if there will soon be any follow up to our rhetorical question.

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.

Source: Galena Biopharma Issues Letter To Shareholders, And A Case Of Insider Seller's Remorse