A Bio-Pharmaceutical With Huge Upside Potential

Mohsin is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Galena BioPharma (NASDAQ: GALE) has shared excellent clinical trial results for NeuVax. The stock is trading well below analysts’ consensus mean target price and, I believe, offers a huge return to investors.

Galena has already attracted two Big Pharma partners, namely Roche and Teva Pharmaceuticals (NYSE: TEVA). I believe that the interest of big pharma warrants much higher valuations for this stock. The company has the potential to be acquired by Teva, Roche and Pfizer (NYSE: PFE). TEVA and Pfizer are looking to replenish their diminishing drug portfolio. Teva’s patents for Copaxone have expired, and Pfizer has also suffered big time after the expiry of its Lipitor patents.

Pfizer is already targeting the cancer market with its PD-0332991, making its interest in Galena relevant in more ways than one. Roche has partnered with Galena to test combination of its drug Herceptin, with Galena's NeuVax. If these trails are successful it would be a big incentive for Roche to acquire Galena. All three companies have mammoth cash portfolios and can easily afford to takeover Galena which has a market capitalization of around $100 million. Therefore, I recommend that investors buy Galena and take advantage of this low entry point.

Galena Biopharma
Galena Biopharma was formally known as RXi Pharmaceuticals Corporation and was founded in 2003. Galena is a biopharmaceutical company that seeks to develop and commercialize treatments for unmet medical needs. The company uses peptide based immunotherapy to treat cancer related ailments in human patients. It currently has two drug candidates in different stages of clinical trials.

NeuVax

NeuVax is currently in the Phase III clinical trials and has already shown excellent results in Phase II trials. It is a peptide-based vaccine aimed at the delay and prevention of breast cancer recurrence. The target markets for the vaccine are the cancer survivors who achieve remission after treatments such as surgery, radiation, chemotherapy etc.

NeuVax uses patients' own immune systems to target any residual cancer cells (located in ovarian, pancreatic, colon, bladder, or other tissues). During the Phase II trials, the drug was tested for a five-year period on nearly 200 breast cancer patients. The results showed NeuVax to be safe and effective and demanded further studies: a Phase III trial with 700 patients, and a Phase II trial with 300 patients.

This second Phase II trial focuses on the treatment of patient with a combination of NeuVax and Herceptin. Galena is also developing Folate Binding Protein-E39, a vaccine still in clinical trials. It will be used for the prevention of recurrence in gynecological cancers, e.g., breast, ovarian, endometrial, etc.

Thesis & Catalyst

NeuVax has a huge potential for both delay and prevention of breast cancer. The company presented SN-33 Trial and final results from the Phase ½ trials of NeuVax data, at the 35th Annual CTRC-AACR San Antonio Breast Cancer Symposium. The findings shared by the company, reinforce the belief that NeuVax will be eligible for FDA approval. The primary investigator of these studies, COL. George E. Peoples said:

'I'm very pleased with the overall conduct of the Phase 1/2 adjuvant trials which have demonstrated the safety and efficacy of NeuVax to prevent recurrence'

The company also stated in their press release:

'the combined phase ½ Neuvax clinical trials, sn-33 (node positive, np) and sn-34 (node negative, nn) continue to demonstrate an excellent safety and efficacy profile at 60 months'

Investors should be very interested in Galena, especially after these results. NeuVax is targeting a huge market and can have high sales potential. A cancer drug being developed by Pfizeri i.e. PD-0332991, has a peak sales potential of $5 billion dollar. Although both drugs act differently, with NeuVax acting as a vaccine, this large figure however does go on to show the high potential of this market. Any announcements by Galena, on NeuVax will act as major catalyst for the stock, because it's the primary candidate of Galena and all future valuations will be directly affected by NeuVax updates.

Partnerships

The immense potential of Galena has already attracted a couple of big partners. The company has a partnership with Roche (RHHBY) to test a cocktail of NeuVax and Roche's Herceptin. It has also entered into a commercialization agreement with TEVA Pharmaceuticals. The following key points entail this partnership:

i) This partnership will focus on the future commercialization of NeuVax in Israel

ii) The approval and establishment of key clinical sites in Israel for Present Phase 3 trial

Valuations

The stock is currently trading at approximately 40% discount to its 52-weeks high. Analysts' target price for Galena varies between $3 and $6, with a mean target price of $4.83. This shows that the stock is currently offering a 100% return on its lowest target price and 200% return on its mean target price. I am very optimistic about NeuVax's prospects, due to the positive 60 month trial data and the interest of major pharmaceutical companies. Therefore, I believe the stock can give at least a 100% return.


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