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Galena Biopharma (GALE) announced back on February 27th that it had planned on spinning off RXi and its assets. Galena was to concentrate resources on cancer treatment and RXi on the development of RNAi technology. The separation was to create a separate entity and traded OTC under the symbol RXII.

Existing GALE shareholders, as of March 8th, were to receive a special dividend in conjunction with the spin off on a 1:1 ratio for each share they owned. The dividend was contingent upon several factors, which included board of director approval, pending settlement with existing RXi investors, and it was also dependent on the necessary regulatory approvals from the Financial Industry Regulatory Authority (FINRA). As you can see, there were a lot of pieces that needed to fit into place for this special dividend to be distributed.

The announcement of the spin off and dividend attracted the attention of many potential investors. Rare do you see a developmental stage biotech offer a dividend of any sort. Those that have confidence in the future prospects of the RNAi platform were also following the situation closely, as many feel that the commercial applications of success could deliver solid long term revenue opportunities.

However, it looks as though the dividend may be delayed, if ever paid at all, at this time. According to the 8-K filing submitted to the SEC on April 10th the previously stated date of record has been rescinded and no new date set. The current application is set to expire on April 30th, which means if the distribution hasn't taken place by then, that the filing will have to be amended and resubmitted.

The fundamentals of Galena haven't changed. The company is in good shape financially and recently announced a $0.04/share positive earnings report for Q4. The dividend will happen at some point. The company strategy is to focus solely on developing cancer treatments. NeuVax is still the gem of the company with projected potential revenues in the billions of dollars. Investors will be looking forward to the ASCO meeting and will be anticipating any news that comes out of there on the progress of the phase 2 and 3 trials that are currently ongoing. The RXi spin off will happen; it's just a matter of when. I am actually surprised to see the recent drop in price since the recent filing. On paper the company is more valuable by $0.04-$0.08 per share if RXi continues to be held solely by GALE.

I strongly believe that with the financing deal they were able to secure, with very positive terms, and the continued success and progress on the company's blockbuster breast cancer treatment in NeuVax, that the share price of GALE will start to move upward in both the near and long term. The upcoming news announcements from the major cancer conferences will be a strong catalyst. Galena is a stock I am back to accumulating at the current price point, as the overall downturn in the market has made it a very attractive investment. The RXi dividend is minor when looking at the big picture and potential of the company.

Disclosure: I am long GALE.

Source: Galena And The RXi Spin-Off