Ignore the Drama: Here’s Why Galena Is a Good Buy
Let me start off immediately by saying that I hold no position in Galena Pharmaceuticals (NASDAQ:GALE) and have no plans to invest in the name. I just don’t have the stomach for the volatility. I tell you this because there has been a lot of drama surrounding Galena Pharmaceuticals in the last two weeks, and a full disclosure is warrented. There have been a number of negative ‘hit’ pieces published of late in response to an alleged stock promotion scam involving the company in addition to criticisms over its growth potential. I believe for the long-term speculative investor, Galena actually presents a high risk, but a very high reward play should the company meet its goals. Let me start by recapping the timeline for February.
Galena had risen through 2013 after promising data was released, in addition to positive analyst coverage as well as positive blog commentary. On February 1, an article was published suggesting the stock was overvalued. At the time, Galena was trading at $5.27 a share. Issues raised in the article — which I believe we overblown — included Galena’s potentially blockbuster cancer vaccine, Neuvax, as being unable to generate revenues for the company. It also slammed Galena for being unable to enjoy exclusivity and was facing patent expiration. The latter is true. The author went on to argue that Galena’s pipeline and partnerships were essentially a façade and would add little value to the company.
I disagree. Two major acquisitions — that of Abstral for cancer pain and the purchase of Mills Pharmaceuticals — were completely downplayed despite the growth this would provide Gale. One legitimate issue raised was that of paying for stock promotion (more on this later in the article) and a wave of insider selling. The insiders did sell; Gale had tripled in price and so a wave of selling occurred to lock in gains. It should be noted that options were also exercised. Whether this is a red flag or not is up to the investment community, but fundamentally, I do not view this as an issue with the company. Rather, it harnessed the massive increase in price expecting a pullback.