By Teresa Dawn
Galena Biopharma’s (NASDAQ:GALE) share price has been climbing steadily since the new year — right along with its analyst ratings.
Starting 2013 around $1.80, GALE is now trading consistently above $2.00, partly thanks to new and improved analyst coverage that positions the company as a solid buy: Late last month, Needham & Company initiated coverage with a BUY rating, and Roth Capital upped its price target from $5.00 to $7.00. Also in March, Maxim Group increased its price target from $5.00 to $6.00, and the previous month, Zacks analysts issued a research note reaffirming a rating of OUTPERFORM.
Now boasting an average BUY rating and a target price of $4.80, GALE is no doubt benefiting from this increased analyst esteem. As I noted in a previous piece, analyst confidence leads to greater investor confidence, which in turn leads to increased buying.
But also as I noted, the relationship between stock price and analyst ratings raises a “chicken-or-egg” question, because while investor sentiment varies with analyst opinion, analyst opinion can also vary with the word on the street. Since smart investors won’t hesitate to buck the trend if they catch the scent of hype, it’s worth reviewing the reasons behind the ratings, rather than accepting them at face value.
The Word on the Street
In Needham’s recent initiation report, analyst Chad Messer commented:
Galena is developing NeuVax, a targeted vaccine for breast cancer. NeuVax has already demonstrated increased survival over placebo when given as an adjuvant to standard-of-care. Galena is now enrolling the 700-patient pivotal PRESENT study, which will report interim data in 4Q13 or 1Q14. We believe adjuvant vaccine therapy will ultimately become standard of care for many cancer types, and we view NeuVax as one of the leading new product candidates for this revolutionary treatment modality. Galena also recently acquired an approved product for breakthrough cancer pain, giving the company near-term revenue potential and a commercial presence in oncology.
Here, Messer concisely summarizes several important points that analysts frequently cite in their sunny forecasts for the company. Now let’s take a closer look at each of these points to better understand why this company is more heft than hype:
Phase 3 PRESENT Trial of NeuVax
GALE’s lead immunotherapy candidate for breast cancer, NeuVax, is currently being evaluated in a Phase 3 study under an FDA-issued special protocol assessment (SPA). The SPA was issued on the strength of the Phase 2 data, but while strong, Phase 2 performances do not always translate in Phase 3. The company has made a number of smart decisions to ensure its continued success:
- Study is being conducted in patients with HER2-negative breast cancer, a subset that has been shown to respond particularly well to NeuVax. These Herceptin-ineligible patients, who represent 50% of the breast cancer population (according to NCI), currently have no adjuvant treatment options to prevent recurrence.
- NeuVax is administered post-surgery when patients are in remission, at which point patients are more likely to respond to the vaccine due to low disease burden and relatively healthy immune systems.
- NeuVax dosing schedule includes booster shots once every 6 months, which have been shown to maintain cancer immunity over time.
GALE expects to report interim data at the end of this year or early next. This will be an important catalyst, because although interim results typically hold less water in studies measuring overall survival (case in point: Dendreon Corporation’s (NASDAQ:DNDN) Provenge), they tend to be much more telling of trials measuring disease-free survival, such as PRESENT. The company is therefore likely to attract more interest than usual leading up to its interim data announcement — not only among investors, but also among partners looking to expand their oncology pipelines.
Not a One-Trick Pony
While the PRESENT study will continue taking center stage this year from a clinical standpoint, it’s also worth noting other programs that help diversify Galena’s pipeline while expanding opportunities for its lead product candidate.
Alongside the PRESENT study, Galena is conducting another trial in combination with Herceptin. According Roth Capital analysts, “A potential synergy of NeuVax and Herceptin would make NeuVax an attractive asset for partnering, and could lead to the expansion of the breast cancer patient protection for Herceptin.”
Furthermore, Roth notes that in light of the imminent expiration of Herceptin’s patent, “A potential combination could extend patent protection for Herceptin.”
Galena is also conducting trials of NeuVax in none-negative breast cancer and in prostate cancer, but the company’s folate-binding protein vaccine, which is currently in Phase 1 testing in gynecological cancers, is also worth noting: The protein targeted by the vaccine is present in 90% of ovarian and endometrial cancers, which afflict a combined total of 68,000 women annually.
Acquisition of Breakthrough Pain Product
In my same piece referenced above, I provide a detailed overview of Galena’s recent acquisition of U.S. sales and distribution rights for Abstral Sublingual Tablets (fentanyl) for breakthrough cancer pain.
This deal, which was financed through non-dilutive debt financing, promises substantial, near-term revenues following the product’s expected U.S. launch in the final quarter this year: according to a company press release, the U.S. market for transmucosal immediate-release fentanyl was $400 million in 2012. If Abstral is able to stake out even a 10% share of this market, revenues generated will go a long way toward supporting Galena’s operations and clinical programs– both current and planned– while maintaining a healthy balance sheet.
GALE’s stock price took a dip last December following a public offering announcement to raise money for its ongoing Phase 3 study, but it has steadily climbed back since with the aid of the Abstral acquisition, optimism surrounding future catalysts and strong fundamentals reinforced by the company’s most recent earnings report.
Given these solid building blocks, there’s good reason to believe that the outlook on GALE among analysts and investors will remain high this year.
Disclosure: Long GALE