5 Things Galena Biopharma Wants You to Know

Source: Galena Biopharma.

Earlier this month, small-cap biopharmaceutical company Galena Biopharma reported its second-quarter earnings results and delivered the dreaded double miss. For those who may have missed it, Galena generated sales of $3.38 million from sublingual breakthrough cancer pain therapy Abstral and an operating loss of $11.3 million, which was down from the operating loss of $15.8 million reported in the prior-year quarter. Adjusted, Galena's net loss worked out to $0.10 per share. Comparatively, though, Wall Street had been looking for an even narrower loss of $0.09 per share and $3.54 million in revenue from Abstral.

Additionally, Galena announced that full-year revenue from the sale of Abstral and the recently-launched Zuplenz, a nausea and vomiting treatment primarily used for persons on chemotherapy, would be closer to $15 million, which is the low end of its beginning-of-the-year forecast of $15 million to $18 million and about $1 million below what Wall Street was projecting.

Some investors would just as soon forget about Galena after its double miss, but there's much more to this company than what a few paragraphs of its quarterly report can tell you. In order to get a genuine feel for what the future might hold, we need to take a closer look at what its management team had to say during its quarterly conference call.

With that in mind, here are five things that Galena Biopharma's management wants you to know.

This is by far our most important study

For Galena and its shareholders, nothing is more important than the PRESENT study, which is a phase 3 trial involving more than 700 low to moderate expressing HER2 breast cancer patients. NeuVax is an adjuvant therapy designed to prevent cancer from recurring. A 60-month phase 2 study hinted at its potential, with a 78% reduction in risk of recurrence observed in the NeuVax arm relative to the control group.

The PRESENT study, which completed enrollment earlier this year, isn't expected to deliver a final readout until 2018, although there are important interim events along the way that could give investors clues as to NeuVax's efficacy and safety. The first of these event-driven interim analyses will occur when 10% of patients (or 70 trial participants) have reached an event (i.e., recurrence or death). While this interim analysis is merely focused on NeuVax's safety and ensuring it's not coming up well short of the placebo, it could nonetheless be a spark that Galena's investors sorely need. Expect this interim data in either the fourth quarter or the first quarter of 2016.

Source: Galena Biopharma.

We're looking at ways to expand NeuVax

There is arguably no hotter corner of the oncology market than research into cancer immunotherapies and checkpoint inhibitors. These are drugs that are designed to enhance your body's immune system to better locate and fight cancer cells. While NeuVax has generally been geared at breast cancer indications, and is in the process of being studied with Herceptin in two other trials, Galena's management wants you to know that it has every intention of branching out NeuVax and testing its potential in other cancer types.

Per Choy's commentary above and throughout the conference call, it's apparent that Galena intends to partner up NeuVax in non-adjuvant roles, and wants to explore NeuVax's potential as a monotherapy, too. For example, Dr. Reddy's Laboratoriesand Galena are partnering up to run a proof-of-concept phase 2 study on HER2 3+ gastric cancer next year. Look for Galena to get aggressive in the coming quarters with expanding NeuVax's possible indications.

Catalyst alert!

Although the interim analysis from the PRESENT study is being closely monitored by investors, the more immediate catalyst that they should be monitoring is the final readout from the phase 2 study involving GALE-401 for patients with thrombocythemia associated with MPNs.

Initial data from this study demonstrated an overall response rate of 78% across 18 patients, with seven complete responses and seven partial responses. GALE-401 doesn't have nearly the same peak annual sales potential of NeuVax, but its potential approval down the line could be more than enough, along with Galena's current commercial operations, to move Galena into the black. If you're looking for catalysts at Galena, look no further than GALE-401 and its final phase 2 readout later this year.

Source: Galena Biopharma.

The numbers are lumpy, but the trend is positive

The second quarter represented a new record in terms of Abstral sales, but for Wall Street, it wasn't nearly enough. So what's going on?

According to Lento, Abstral is beginning to hit its stride with fewer bottom-line discounts, better insurer coverage, oncology physicians feeling more comfortable prescribing the medication, and the size and dollar amount of each transaction on the rise. What hasn't worked out has been the lumpy quarter-to-quarter sales as a result of inventory levels and (previously) insufficient physician education. With Abstral's gross-to-net-deduction expected to remain steady going forward, it would appear that Abstral may begin to gain a little momentum in the breakthrough cancer-pain space. To be clear, Abstral isn't going to make Galena profitable, but it could definitely put a dent in reducing its annual cash outflow.

Expect a slow start for Zuplenz

Lastly, in regards to the recently-launched Zuplenz, it looks as if it's going to be a bumpy ride. As Dunlap cautions investors, because Zuplenz is a brand-new launch, Galena is probably going to need to offer substantial discounts to get the product moving. Furthermore, its commercial arrangement after purchasing Zuplenz led to it replacing the product from the previous licensee with Galena-owned product, which was longer lasting. As such, until the product has sold through, Galena won't be recognizing any revenue.

Long story short, Zuplenz is probably only going to add $1 million to $2 million to Galena's top line in 2015, and it could be a further drag until insurer coverage and physician awareness of the product improves.

What now for Galena?For investors, it's a patient wait for the PRESENT interim results and the full readout from GALE-401. We very well could see new study announcements and get teased with data in other possible NeuVax labels, but all that really matters through Q1 2016 is that PRESENT and GALE-401 deliver as expected.

The one concern we didn't go into above, but that all shareholders should be aware of, is that Galena ended the quarter with "only" $45.3 million in cash and cash equivalents. A ballpark estimate based on its recent cash burn would suggest that Galena could need more capital about a year from now. It does have about $42 million remaining in a deal with Lincoln Park Financial, whereby Lincoln can privately purchase stock from Galena in order for the company to raise capital. However, cash outflows and capital raises are still a sore issue worth watching.

For now, I'll reiterate what I've said before: Until we have tangible data from PRESENT and no longer have to worry about Galena's capital position, your safest bet is to remain on the sidelines.

The article 5 Things Galena Biopharma Wants You to Know originally appeared on Fool.com.

Sean Williamshas no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen nameTMFUltraLong, track every pick he makes under the screen nameTrackUltraLong, and check him out on Twitter, where he goes by the handle@TMFUltraLong.The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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