Wall Street Loves Galena Biopharma. Should You?

Despite all of Wall Street's conflict and contention, a fortunate few companies enjoy unanimous support among professional analysts. If the market's movers and shakers all believe these companies will beat the long-term averages, well, surely they will -- right?

Not so fast! With help from Motley Fool CAPS, the 180,000 member-driven investor community that translates informed opinion into stock ratings of one to five stars, we'll see whether these high-flying favorites deserve analysts' unwavering support.

Today, we'll take a look at biotech Galena Biopharma (Nasdaq: GALE  ) , whose breast cancer therapy is in late-stage clinical trials. Among the analysts that CAPS tracks, only two have weighed in so far on the company, which has no products on the market, but they feel confident it will successfully navigate through the Food and Drug Administration gauntlet. Yet our investor community isn't nearly as supportive: While 87% rate the biotech to outperform the broad market averages, its low two-star CAPS rating suggests they think there are better places for your money.

Let's see why Wall Street might be betting with Galena and how come the CAPS community thinks differently.

Galena Biopharma snapshot

Market Cap $138 million

Revenues (TTM)

$0.0 million

1-Year Stock Return

218.8%

Return on Investment

(164.6%)

Estimated 5-Year EPS Growth

N/A

Dividend and Yield

N/A

Recent Price

$1.79

No. of Analysts

2

CAPS Rating (out of 5)

**

Source: FinViz.com. N/A = not available; Galena doesn't pay a dividend.

But just because Wall Street loves it doesn't mean you have to. Analyst sentiment is only just the jumping-off place for your own research.

All signs point forward
Herceptin is a $1.8 billion blockbuster cancer treatment for Roche, which licenses it through its Genentech subsidiary from PDL BioPharma (Nasdaq: PDLI  ) . The drug has been so effective that it's under study for use in other formulations, such as with ImmunoGen's (Nasdaq: IMGN  ) antibody conjugate technology that Roche is putting through phase 3 trials. Its data shows it's more effective than the current second-line therapy of GlaxoSmithKline's (NYSE: GSK  ) Tykerb with Roche's Xeloda.

This is key to Galena's NeuVax therapy because Herceptin validates the HER2 receptor -- a protein that turns cancer cells "on" -- as a target. NeuVax trains an individual's immune system cells called T-cells to attack and kill those the exhibit the HER2 protein. Through early and mid-stage studies, the vaccine has responded well to low and intermediate levels of HER2 expression, and should it make it through to FDA approval, Galena could have a big blockbuster of its own on its hands.

Off the cliff?
Though not everyone agrees with that assessment. Adam Feuerstein over at TheStreet has scathingly predicted NeuVax and Galena will fail dramatically in the same way that Keryx Biopharmaceuticals (Nasdaq: KERX  ) did with perifosine. He finds it incongruous that NeuVax would respond well only to cells with low to medium expression of HER2, but not to those with very high levels.

In its earlier studies, Galena apparently discovered this dichotomy, so its late-stage study is focusing on those areas where NeuVax performed well. Feuerstein calls that data mining, and he believes that larger pharmaceuticals like Roche have previously vetted the vaccine when it was owned by Apthera before being bought by Galena.

I'm not schooled enough in the nuances of the science to know for certain whether Galena is cherry-picking data as alleged, or whether it's simply following where the science leads it. That's why for the most part I avoid investing in biotechs, also because the FDA can be a very mercurial master, doling out approvals or complete response letters willy-nilly regardless of what its advisory panels advise.

So, you tell me in the comments box below whether you think Galena has a good shot of getting NeuVax through the regulatory labyrinth, or is it, as Feuerstein declares, setting up investors for a terrible fall.

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Read/Post Comments (11) | Recommend This Article (6)

Comments from our Foolish Readers

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  • Report this Comment On November 30, 2012, at 11:06 AM, westchannel wrote:

    I am surprised you are siding with adam feuerstein and not doing your own assessment of galenas product with unbiased experts who may actually be in vovled in medicine. Does not make the fool look transparent.

  • Report this Comment On November 30, 2012, at 11:26 AM, TMFCop wrote:

    westchannel,

    How am I siding with Feuerstein? I merely presented what he said...and what GALE says. I noted I'm not well versed enough to make a determination which way this one is heading.

    I would note though one shouldn't become too emotionally wedded to any investment that it prevents you from dispassionately reviewing opinion, both for and against a stock.

    Thanks for reading,

    Rich

  • Report this Comment On November 30, 2012, at 12:18 PM, rjs9787 wrote:

    "Though not everyone agrees with that assessment. Adam Feuerstein over at TheStreet has scathingly predicted NeuVax and Galena will fail dramatically in the same way that Keryx Biopharmaceuticals (Nasdaq: KERX ) did with perifosine. He finds it incongruous that NeuVax would respond well only to cells with low to medium expression of HER2, but not to those with very high levels."

    Adam isn't a researcher and he didn't cite any, so I reached out to the top expert in the development of the peptide vaccines- COL George Peoples.

    I asked Col Peoples to explain why NeuVax, and other HER2 targeting peptide vaccines, appear to bring greater benefit patients with lower HER2 expression. Col Peoples explained that:

    "The basic biology between HER2 0-2+ vs 3+ has been well-documented, and we use this distinction clinically when we subtype breast cancers. 3+ tumors are more aggressive/dangerous. We have shown that vaccines work best in less aggressive tumors.

    The immune system can become tolerized against large quantities of antigen. More is not always better (contrary to the argument). We have shown an element of tolerance in the T cells from HER2 3+ patients relative to the T cells in lower expressors.

    HER2 is sufficiently immunogenic that even the lower levels of HER2 expression can be recognized by highly-specific, vaccine-induced T cells. These CTL can recognize and destroy tumor cells with low and intermediate expression levels (hundreds of papers demonstrating this concept because there are actually only a couple of HER2 over-expressing cell lines available for experimentation. The vast majority of all of the lab work has been done on low- and intermediate-expressors).

    Most importantly, one of the documented differences in the 3+ tumors, and probably related to their aggressiveness, is that these tumors down-regulate HLA expression, making themselves "invisible" to the immune system. Rolf Kiessling at the Karolinska Institute, Stockholm has written extensively about this phenomena (see attached paper by clicking HERE). We are currently trying to verify whether Herceptin treatment can restore the HLA expression, explaining our observation that the CTL-eliciting vaccines, such as NeuVax, may be useful in the 3+ patients in combination with Herceptin."

    From my article at SA.

    http://m.seekingalpha.com/article/1020251-a-fact-based-analy...

    Actually, if you do a simple Google search for high HER2/Nue downregulate HLA you'll find numerous studies explaining and exploring much of what COL Peoples comments upon.

    -Rich Steffens

    PS. Keep an eye on the AE37 vaccine, another that appears highly promising.

  • Report this Comment On November 30, 2012, at 2:17 PM, mbates50 wrote:

    Had I listened to Adam F. I would not have made a ton of money on Arena. He was positive the FDA would reject.

  • Report this Comment On November 30, 2012, at 2:41 PM, BrianNichols6203 wrote:

    Hi Rich, I have followed GALE exclusively over the last 13 months, buying and writing about the stock on several occasions. I am of the group who feels strongly that it will be approved based on Phase 2 results.

    I have read both the bull and bear point of view, and appreciate both perspectives. But I don't think that bears are taking into consideration that NeuVax was never tested on unhealthy immune systems, or high levels of HER2, and during the Phase 2 trial only 25% were optimally dosed.

    I believe strongly with the "follow the science" notion, and that Galena saw the best way to develop NeuVax and is doing so. The Phase 3 trial is tailor made for NeuVax to succeed, and with all patients expected to receive booster shots, I think results will be better in Phase 3 trials.

    Of course there are risks, but in my opinion the risks associated with the stocks (by bears) are related to the failures of RXi and the price paid to acquire NeuVax. I always say that the failures of RXi is why Galena trades with a sub $100 million market cap despite having a product in Phase 3 trials TAILOR MADE to its strengths with multi-billion dollar potential if successful!

    A $100 million market cap is not expensive. It's not as though Galena is trading with a $1 billion market cap. I think all risks are appropriately priced into the stock, because a Phase 3 product with this level of potential should garner a much larger valuation.

    In regards to "price paid", I feel that argument is irrelevant! Just look at JAZZ, SPPI, QCOR, and Cougar Pharmaceuticals. These are the kinds of value I look for, personally.

    I think you wrote a good article, I appreciate it. Wall Street has been upgrading the stock and as the market cap appreciates (if it appreciates) the stock will see greater institutional ownership and ratings from other analysts. Right now some institutions can't buy the stock, it doesn't meet all of the requirements for a lot of funds such as the Russell. But next year, if the company keeps progressing, I think a lot of questions will be put to rest. Personally, I can't wait, but neither can bears. It is a very opinionated stock indeed.

  • Report this Comment On November 30, 2012, at 3:19 PM, alegzis wrote:

    Adam Feuerstein's logic is not only flawed, it borders on idiocy. His assertion is like saying, "using water to put out a house fire will not work because you cannot put out the fire when the house is fully engulfed in flames, only when the fire is small enough to be controllable". JUST BECAUSE NEUVAX DOES NOT WORK WHEN THE HOUSE IS FULLY ENGULFED IN FLAMES DOES NOT MEAN IT WON'T WORK WHEN THE FIRE IS CONTROLLABLE; I.E., LOW TO INTERMEDIATE LEVELS OF HER2.

  • Report this Comment On November 30, 2012, at 5:04 PM, dlong500 wrote:

    I also think your article is a bit lopsided. Sure, you present Galena's statements and the positive analyst sentiment, but then you treat everything about Galena as suspect and potentially fraudulent (even implying that the FDA has a pattern of ignoring science).

    While we're on the topic of ignoring science, you then give credence to a crackpot (Feuerstein) who has absolutely no scientific credentials and a history of bashing. If he were a credentialed scientist then it might be legitimate to say that you were presenting "both sides", but as it stands you simply gave Feuerstein's opinion piece another voice, and as others have pointed out, his primary concerns are easy to dismiss with a simple Google search on the basics of how drugs and trials work.

    I understand that when a stock becomes popular there will be all sorts of people come out of the shadows (both supporters and naysayers), but it's really getting tiring to see Galena trashed by the shorts every time the stock gains value. It's so typical and obvious. They get to make their quick buck and the real investors get penalized without so much as a single new piece of negative information about the company appearing. It's really sad when an article by someone with no scientific credentials, that points out no new information can generate a selling frenzy.

    So maybe you can understand why so many people would be upset with your article, which like so many others, points out no new information but simply implies that there are problems. Obviously the analysts could be wrong, as with any stock rating, but the fact that Galena is not a sure bet is not a negative by itself. The same could be said for nearly any stock. It's just getting annoying seeing headlines like "XYZ could be risky, maybe you should sell" and then seeing no valid info in the article. It's a good sign that the article itself is designed to manipulate the stock price for short activity and such.

  • Report this Comment On December 03, 2012, at 6:40 AM, piem235 wrote:

    Adam has a degree in Liberal Arts a English major. He doesn't even know the periodic chart and hasn't a major in science or math. So just how does he profess to criticize on the medical field and new products?

  • Report this Comment On December 03, 2012, at 9:24 AM, MKantzler wrote:

    Viruses are amazing machines, particularly given their size. They devise mechanisms using proteins, motors for locomotion, gateways and conveyances for internal and external processes, and strategies for the warfare of matching keys and locks and employing stealth. The latter may be characteristic of why the expressions discussed by Mr. Steffens can be so discriminating.

    Viruses and cancers share the trait of survival prioritization, and established cancers in large tumors are less vulnerable to immune (natural or artificial) response than cancers at lower expression, and so it is logical that those of lower expression should be more susceptible to countermeasures and adept at processes like protein-key deceptions in order to ensure survival and established growth.

    Adam Feuerstein has no understanding of the complexities involved with molecular biology; indeed, even the scientists and doctors on Galena's advisory board, some who accepted appointments late, post-Feuerstein assaults, will admit there is much that is still not understood, but they are secure enough that their reputations will not suffer the calamity Feuerstein predicts for Galena's trials. This is another way to follow the science, by putting your money on the commitment of the involved scientists, not the market-based prognostications of an untrained and, therefore, non-objective reporter.

  • Report this Comment On December 04, 2012, at 2:56 AM, kquach wrote:

    Hi Rich,

    I really suspect you were trying to get a rise out of the people following GALE by throwing in AF's name. Honestly, I very much doubt that you or anyone else can't decipher that all his "analysis" are purely opinions that are not based on an understanding of science or math. I seriously can't figure out his motivation for these articles other than to mislead. He writes well so there has to be intelligence but his "analysis" is so loopy that it's hard to imagine an intelligent person would write such a poorly supported article unless there is intent to mislead.

    AF's lack of math understanding: Seriously, "datamining" and "follow the science"? That's just semantic. The fact is phase 2 had sufficient data points and very good p-value of < 0.08. How you get it is pretty irrelevant if you have sufficient data points and you're not being selective. In GALE's study they just separated the different groups and found better results with one group v another. Really nothing wrong with doing that. Maybe not the preferred method but any honest statistician will say there ain't nothing wrong. But remember p-value score doesn't provide conclusions, it just says there is something to be had with the data and that it deserves more attention; hence, phase 3. It doesn't say the data definitively proves anything. I just says you can't reject the hypothesis that GALE reduces recurrence rate. So there is risk to investing in GALE - this can't be avoided.

    AF's lack of understanding of science: Anyone who's ever taken an introductory immunology course at the college level would understand the science behind the article posted by Rich Steffens, who pretty much copy/pasted an excerpt of his article in his response to this article, but that doesn't make his response any less relevant. Two main points of the article/response from Rich Steffens: 1) Too much antigen and the immune system can't recognize the Her+3 as foreign 2) Her+3 down regulates HLA basically means the body can't kill what it can't see/find. This is pretty well understood in science (immunology).

    Ultimately, pretty simple stuff, so the fact that AF doesn't understand either, well that pretty much discounts him as any type of expert. He writes convincingly enough (anyone who doesn't think so please see market reactions after each of his article) so his Liberal Arts degree is being put to good use at least, but really if anyone is buying into his spiel...well...caveat emptor.

  • Report this Comment On December 08, 2012, at 12:55 AM, cioannid wrote:

    Mr. Adam is the hero of Galena patients,owners and owner- inventors. He discovered a " Christmas Eve " secret contract dispossessing owners ( University, HHS, DOD and Inventors). It is unknown what was traded in secret for $ 2500 between an accountant family and an attorney.

    I hope Mr. Adam to find it and report it to HHS together with any secret amendment.

    Mr. Adam is honest. He calculated profits under 13th amendment and included women pay.

    Until today It appears that only inventors pay Trial costs. We keep track and supervise.

    Galena managers decided to measure HER-2 levels scientifically,which is a good step to satisfy Owner -Inventors and cancer patients.Now they must participate in the trial with their money too, not only mine, which are on loan for research only, and could not be given away.

    Patients must receive additional doses of vaccine. T cells do not live forever. I hope that Galena managers will perform their duties as expected and consider and the innovations we proposed. Results are good.

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