Inhale. Exhale. Repeat. If you're a GALE shareholder you've suffered through a rollercoaster ride recently; the stock soared at the beginning of the year, only to plummet recently thanks to a slew of disparaging articles, another of which was posted today on The Street. Everyone needs to separate the facts from speculation, conjecture and innuendo, and invest accordingly. Let's take a look at some of the recent claims and try to figure out what is factual, and what is not.
First, I think it's important to review the timeline of these damning articles.
On 1/16/14 Jim Cramer, who is co-founder and chairman of TheStreet.com, Inc., interviewed Galena (GALE) CEO Mark Ahn on his CNBC program Mad Money. The questions Mr. Cramer asked were difficult, and were certainly slanted towards portraying the company in a bad light, but all things considered I thought they were fair. Cramer noted that investors should consider taking some gains off the table after GALE's incredible run, but, the stock was worth keeping an eye on. The stock closed at $7.48 on the 16th.
Following the 1/16/14 Mad Money segment, TheStreet, which was founded by Cramer, has run seven articles on Galena, two of which were written by Adam Feuerstein (NYSE:AF), and were quite negative. Mr. Feuerstein is known to be controversial with his stance on companies, but we need to keep in mind, that's his job. He is not an analyst, he likes to speculate, and people should not react to his articles as strongly as they do. Among other things, AF questioned the effectiveness of Neuvax, the marketing tactics surrounding Abstral, and stock promoters. There is an abundance of information out there on Neuvax, so I won't discuss that, but I would like to address some of the other perceived issues.
1) On 11/6/13 GALE reported net revenue of 1.2M from Abstral sales for the 3 months ended 9/30/13. These sales were prior to the official launch of the drug. Per the 11/11/13 note from Zacks Small Cap Research, "It's a surprise to us that GALE reported Abstral sales ahead of its official launch and we are pleased with the initial commercial success to date with Abstral which is very encouraging...we expect to see continued Abstral sales growth in the fourth quarter of 2013 and fiscal 2014."
2) Abstral sales are, on average, projected to be 2M/quarter for 2014.
3) Orexo, the company that sold the US rights for Abstral to GALE, stated in their full year 2013 report, which can be found here (http://www.orexo.com/en/Investor-Relations/Press-releases/?guid=848714) that, "Orexo sold the rights of Abstral® to Galena Biopharma, Inc. in the US and the product was re-launched in October. At the end of December Abstral had attained a market share of about 5 % in terms of prescriptions, the highest ever since Abstral was approved in US in 2011."
1) AF notes in his 2/3/14 article, "Galena doesn't make any money when it gives away Abstral for free...Galena bulls have pointed to growing prescription numbers as evidence the drug is taking market share from all the other fentanyl-based products...market share gains derived from free samples don't mean much..."
Rebuttal: I've yet to see an article where a GALE bull is touting prescription numbers for Abstral. Shareholder optimism for Abstral is based on the 1.2M net revenue realized from Abstral sales in Q3 of 2013, and more importantly, the note from Orexo indicating it had already captured a 5% market share in terms of prescriptions. The US market for fast-acting fentanyl products is projected to be $400M to $500M, so shareholders should be optimistic about the drugs impact on the company.
Regarding the free samples, it is a common practice for new drugs to be marketed via free samples. It's a tool that is frequently used in order to introduce new drugs to doctors and patients. It's ridiculous to attempt to portray this practice in a negative light.
1) Analysts at Oppenheimer, Roth Capital, and Piper Jaffrey have rated the stock a buy, strong buy, or outperform.
2) According to the most recent 13-F filings (http://www.nasdaq.com/symbol/gale/institutional-holdings/activity) institutional investors added to their GALE holdings to the tune of a net 8.5M shares.
3) The largest institutional holders are; State Street (5M), Barclay's (3.6M), Blackrock (2.8M), and Vanguard (2.5M), which are well known and well regarded companies.
1) AF notes in his 2/12/14 article that two articles were removed from Seeking Alpha because they were written by the same person. He specifically points to articles written on 8/7 and 11/27 promoting the company.
2) In the same article, AF notes GALE paid 50k to a company for, "advertising, branding, marketing, investor relations and social media services".
Rebuttal: On 8/7 and 8/8 the stock closed at 2.04, a move of exactly 0%. The stock traded around 2.00/share until 8/21 when it moved to 2.14. On 11/26 and 11/27 the stock closed at 3.88/share, a move of exactly 0%. On 12/2 the stock went up to 4.49 on volume of 12.1M shares traded, but quickly retested the 4.00/share level. Clearly the articles referenced above had no impact on the stock, and it's, at best, premature to assume the company had any knowledge that these articles were being written.
Every company in the world that is serious about marketing pays to market itself and its products. When you turn on the TV, you're seeing paid advertisements for companies and products, which include prescription drugs, on a regular basis. Start-up companies don't have the resources to pay top dollar for advertising campaigns, therefore they must find companies that will offer them the most bang for their buck. I won't defend their use of the DreamTeam because I know nothing about that company, but I will say the practice is common.
Investors should diligently research any company they consider investing in. Do your homework and make an informed decision, but don't base your decisions on articles written by those that are whole-heartedly one-sided and devoid of facts. Just as there are bulls who blindly promote stocks, there are bears looking to bash stocks and take advantage of the corresponding fall in stock price.
I am long GALE, currently hold shares, and would recommend buying on this dip.
Disclosure: I am long GALE.