A Fool's Look at Galena Biopharma's Rally
Natalie is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Chances are, you’re aware of the astonishing gains that some of biotech’s darlings have produced in the first nine months of 2012. Perhaps it’s Arena Pharmaceuticals’ (NASDAQ: ARNA) 350% gain; maybe its Pharmacyclics’ (NASDAQ: PCYC) 330% return, or even Regeneron’s (NASDAQ: REGN) 170% return in 2012 that has caught your attention. But most likely, it hasn’t been Galena Biopharma (NASDAQ: GALE), a $125 million company that has increased in value by 300%! The stock has continued to create momentum, trades with extreme volatility, and is attracting a generous amount of interest from retail investors across the board, with a 25% gain during the last month. But, is the gain well-deserved?
What the Company Does?
Galena is a biotechnology company engaged in the research and development of cancer treatments, specifically immunotherapy, to address unmet medical needs. The company’s NeuVax is a Phase 3 candidate that’s intended to prevent the recurrence of breast cancer in patients who express low to intermediate levels of a particular antigen known as HER2. Research suggests that this antigen is found on the surface of many cancer cells, and at various levels. Galena’s vaccine targets a very large subgroup of patients. Those that benefit do not qualify from the multi-billion dollar per year Herceptin. Galena is trying to prove that its vaccine, NeuVax, targets patients who are expressing low to intermediate levels of HER2. The science behind NeuVax is that, in theory, it works by activating the immune system and then trains it to “seek and destroy” the cancer cells presenting HER2.
What’s Driving the Stock?
NeuVax is the company’s only real market-moving product. It has a folate binding protein-E39 (FBP) but all of its upside is tied to the success of NeuVax and its likelihood of being approved. NeuVax has driven this stock higher, and has created excitement among investors. It is a Phase 3 product under Special Protocol Assessment (SPA) with its primary goal being disease free survival (DFS). This basically means that its success will be measured on the number of patients who stay “disease free,” which makes sense seeing as how it’s a drug intended to keep patients “disease free.” In its Phase 2 trial, it accomplished this goal: Its 36-month landmark data showed a 0% recurrence rate for the vaccinated group and a 22% recurrence rate for the control group which is, by all measures, a success.
The clinical data alone has supported much of the stock’s upside, but when combined with the issuance of patents for both NeuVax and its folate binding protein, an approved IND application by the FDA for its study with Herceptin, strong booster data and 60 month data, and, finally, several upgrades and positive outlooks, it is easy to see why the stock has rallied to a near 300% gain in 2012. It will be interesting to see what happens next. There is no new data expected in the immediate future; but on the bright side, it has become a fairly balanced performer since its massive rally in the first quarter of this year. It looks to have found support, therefore, suggesting that it may be OK for the long-haul.
A Fool’s Breakdown
Cancer is a complicated disease. If it were not, then we would have a cure; but unfortunately, there are parameters that laymen don’t understand. There have been a lot of questions surrounding the “lower expressing patients” of HER2, as bears suggest that it was a retrospective subgroup analysis. In other words, they are suggesting a selection bias or data mining for the company to target low to intermediate levels of HER2. But my takeaway is that, in a trial of 200 patients, the vaccine works! A 50% reduction in the treatment of cancer is something to be proud of. And after taking time to assess the company’s latest developments along with the increase in its stock price, I conclude that its rally is mostly due to the fact that it was foolishly cheap to start the year. If proven successful, this could be a multi-billion dollar drug! And although much is still left to be learned, the early data is as encouraging as anything else in the industry. Thus, after showing a measurable benefit as a sole treatment, in conjunction with Herceptin, and also as a booster vaccine, I think its performance is well-deserved and that this could be a great story of success in the years that lie ahead.
Interested in More Analysis?
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Ndawahare has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.