Galena Biopharma Inc (NASDAQ:GALE) Looks Oversold Right Now

Here's an interesting one. Galena Biopharma Inc (NASDAQ:GALE) just announced that the Board of Directors has entered into a separation agreement with Mark W. Schwartz, Ph.D. under which Dr. Schwartz will resign from the company and its affiliates as the President, Chief Executive Officer, and member of the Board of Directors. The agreement, effective as of January 31, can only really be interpreted as negative for the company near term, and action seen over the last twenty-four hours or so is representative of this interpretation. The company closed out the Tuesday session at a circa 3% discount to its open, and is currently around 10% down on the close pre-market Wednesday.What's going on?Well, first up, it's worth noting that while the company has dressed this up as a resignation, it's basically a forced exit (read: Schwartz has been sacked). He's mixed up in the whole fentanyl, Abstral, Insys situation, and the assumption is that the company doesn’t want him (and by proxy, the criminal allegations relating to fentanyl marketing) associated with the Galena brand. It's a little late for disassociation, but it's damage limitation, at least.Of course, this isn’t the first time the company has been mixed up in this sort of bad press. Back in 2014, the company fired its then-CEO Mark Ahn based on his involvement in a promotional scheme. Then, as now, Galena moved to quickly disassociate itself from the situation, but not before some damage was done.So what's the situation now?Well, management has been relatively vague in its communication, but for us, there's only one real path forward, and that's the company dressing itself up and selling itself to the highest bidder. Here's an excerpt from the most press release, the one announcing the Schwartz disposal:

"… it is the right time to run a strategic evaluation of our opportunities as we look to maximize value for our stockholders… Potential strategic alternatives that may be explored or evaluated as part of this review include continuing to advance the clinical programs as a stand-alone entity, a sale of the company, a business combination, merger or reverse merger, and a license or other disposition of corporate assets of the company."

Now, the standalone entity route, in our opinion, is out of the question. Yes, there's cash on hand, $43 million at September 30, and some assets in the pipeline worth pursuing, but the Galena name looks finished. A sale would be one of the most attractive outcomes for current shareholder, as even with $24 million debt taken into account, there's every chance of a decent premium on any sale price. GALE-401 is still a valuable development asset, whatever is going on behind the scenes, and it can currently be picked up for a fraction of its long term worth (as a standalone asset) by a company with a bit of cash in the bank. That's not even taking GALE-301 and GALE-302 into consideration – something that any potential suitor will certainly do when determining a premium on the offer. A reverse merger agreement would likely mean a pivot in focus (and potentially a side sale of the 401, 301 and 301 assets) but could also bring in a premium on current PPS, and would likely involve some degree of upfront capital injection. It's attractive from a shareholder perspective, but these sorts of transactions always leave the door open to a bit of risk (rooted in what percentage of the new entity is represented by the old shareholder base).Whatever happens, our bottom line here is that in each of the potential strategic pathways, there looks to be some upside on current market cap. The company is beaten down right now, and with a market cap of just $13 million, it's tough to imagine things remaining oversold for too long.We will be updating our subscribers as soon as we know more. For the latest updates on GALE, sign up below!Disclosure: We have no position in GALE and have not been compensated for this article.