Working through mounting issues, Galena cuts staff, seeks ‘alternatives’

Galena is still seeking a sale, merger, combo or spinoff, and has been cutting staff to save cash.

Galena has struggled through a series of setbacks in the past few years: stock promotion claims, the loss of CEOs and major hits to its pipeline.

Since March, it’s been trying to seek “strategic alternatives” that could include almost anything, from a merger, to a reverse merger, asset sale, combo and/or a spinoff.

Today, it said that, with the firm Canaccord Genuity, Galena has had “extensive interactions with numerous companies to explore options for monetizing some or all of its clinical development programs through a license or sale of the assets, and/or transforming the company via a sale, merger, reverse merger, or business combination with another company.”

No deal appears to be on the cards yet, but cuts have been made. “While Galena is working through its strategic alternatives process, management has significantly reduced the staffing levels and certain operational expenses to preserve cash, although work remains ongoing to advance its two core clinical programs, GALE-401 and NeuVax (nelipepimut-S), and maintain their value,” it said in a brief statement.

Breast cancer candidate NeuVax is the company’s lead asset, and it also has a pair of phase 2 candidates: immunotherapy GALE-301 in ovarian and endometrial cancer and GALE-401 (Anagrelide CR) in myeloproliferative neoplasm-related thrombocytosis.

Galena added that it has filed an S-1 registration statement today to “address our current S-3 ineligibility” in order to “register currently outstanding warrants as we had notified warrant holders that we would update the ineffective S-3 through such a filing.” All of the warrants are out of the money.

Back in April, the Securities and Exchange Commission (SEC) charged 27 companies and individuals over allegations of fraudulent promotion of stocks, saying it uncovered a number of writers, sometimes paid by biotech CEOs and communications firms, dressing up unbiased reporting while secretly being paid to tout a company stock. Galena was among these companies.

According to both the SEC and several complaints in court, these companies and people used “deceptive measures” to “hide the true sources of the articles from investors.” In all, the SEC has filed fraud charges against three public companies, seven stock promotion or communications firms, and two company CEOs; also on this hit list are six individuals and nine writers.

ImmunoCellular Therapeutics, CytRx, and Galena were the biotechs cited, with CEOs Manish Singh of ImmunoCellular and Mark Ahn of Galena falling under the SEC’s crosshairs.

Galena and Ahn, who have been hit before by The Street and others on these issues, were said from the SEC to have, over a two-year period from early 2012 to early 2014, “engaged in a scheme to mislead investors by commissioning over 100 internet publications promoting Galena that purported to be independent and objective when, in fact, they were paid promotions funded by Galena.”

Ahn was said to have used Lidingo Holdings, as well as DreamTeam, paying writers to talk about Galena on investment websites through articles and/or postings without disclosing that Galena had in fact funded these pieces.

Cue the departure of Ahn three years ago. They got a new CEO in Mark Schwartz, but he was out the door at the start of the year amid a criminal investigation of the company via the U.S. Attorney's Office and the DOJ.

According to an SEC filing, investigators started looking into Galena’s marketing and promotional practices for Abstral, the company's fentanyl-based painkiller, when Schwartz made his exit. Schwartz in fact played a key role in acquiring Abstral in 2013 and also its marketing afterward, as reported by The Street. The company offloaded the drug in 2015.

CFO Stephen Ghiglieri, who only joined full-time late last year, became its interim chief in February, and its third leader in three years.

As well as management issues, Galena has also been hit by trial setbacks, including last summer when shares fell more than 80% in on news that an independent data monitoring committee stopped a phase 3 Present test of NeuVax in early stage breast cancer for futility.

The trial halt came at a planned safety and futility interim analysis that was triggered after 70 qualifying disease-free survival events.

In its update this morning, the biotech said the CRO in charge of recruiting for its latest phase 2 trial of NeuVax in node-positive and triple-negative HER2 IHC 1+/2+ patients in combination with Roche’s Herceptin (trastuzumab) was nearing full enrollment, with 293 of the 300 patients signed up.

“At the current pace, the CRO expects enrollment of the final seven patients over the next few weeks with the interim analysis performed by the Data Safety Monitoring Board to occur six months after the final patient is enrolled,” it said. This combo may be the glimmer of hope that the biotech has been seeking, but only the data will tell.

“While I am relatively new to Galena, I understand the road many of our shareholders have traveled in their investment with the company, and I am very focused on seeking the best possible outcome from our strategic process that will maximize the opportunity for a financial return,” said Ghiglieri.

“Given the challenges that Galena has faced, we are diligently addressing all aspects of our business and proactively removing potential impediments to executing a transaction. Reducing our expenses and simplifying our capital structure is paramount for us as we work to successfully complete the strategic alternative process.

“Thus far, we have had initial interest in potential transactions from a number of companies. Though this process is still evolving, we are committed to updating the market as key events unfold. My goal is to find the best available option, or options, for the company and our assets to bring value to our shareholders.”

The Nasdaq-listed microcap was trading at 56 cents as of yesterday and worth just $21.28 million.