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Needham Expounds On Galena Biopharma, Inc. (GALE) Valuation

|Includes: SELLAS Life Sciences Group, Inc. (SLS)

Needham & Company LLC has initiated coverage on biopharmaceutical company Galena Biopharma with a "Buy" rating and a target price of $3.50. This target price is based on a $236 million enterprise value for the company's NeuVax vaccine and represents five times Needham's 2020 U.S. sales forecast of $497 million, discounted back at 40%. Galena's Abstral drug has been valued at $67 million, based on five times its estimated peak U.S. sales of $50 million and discounted back five years at 30%. Needham adds in $8 million for the company's share of RXi Pharma.

Currently, Galena is developing NeuVax, which is a targeted vaccine for breast cancer. Already, the vaccine has demonstrated increased survival over placebo when given as an adjuvant to standard-of-care. Interim data for Galena's 700-patient pivotal PRESENT study is scheduled to be reported in either the fourth quarter of 2013 or the first quarter of 2014. Needham believes adjuvant vaccine therapy will ultimately become standard of care for various types of cancer and views NeuVax as one of the foremost new product candidates for this pioneering treatment modality. Galena also recently acquired Abstral, which is an approved product for breakthrough cancer pain. Abstral has given the company near-term revenue potential and a commercial oncology presence.

Needham recognizes a growing role for vaccines in the treatment of cancer. Though highly effective treatments exist for most types of tumors, many patients relapse - often with a worse prognosis. Utilizing vaccines to activate a cell-specific immune response promises decreasing relapse rates with few toxicities. NeuVax stimulates an immune response to the HER2, which is a well-validated tumor antigen.

NeuVax demonstrated, in a Phase I/II study in the subset of patients most closely resembling the pivotal trial population, a 36-month DFS rate of 100% versus 77.8% in controls. The vaccine is currently being tested in the pivotal PRESENT study in patients with resectable, node-positive breast cancer. Randomizing 700 patients, the PRESENT trial is testing NeuVax's ability to reduce the three-year relapse rate. Needham expects final data from the trial to be released in mid-2016, with results from an interim analysis expected around year-end 2013 (keeping with protocol stipulations requiring an interim analysis after 70 events).

Differing from Dendreon's Provenge, which is the only vaccine currently approved for cancer, NeuVax is inexpensive to manufacture and is administered by a simple subcutaneous injection. Resultantly, Needham does not expect NeuVax to encounter the adoption and margin issues experienced during Provenge's launch.

A biopharmaceutical company based in Portland, Ore., Galena Biopharma is engaged in the development of innovative, targeted oncology treatments to address major unmet medical needs in the advancement of cancer care. For more information about Galena Biopharma, visit galenabiopharma.com.

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