Is Galena Biopharma Inc (NASDAQ:GALE) Just Down, Or Is It Out?

Few companies in any sector have had as tough a couple of weeks as has Galena Biopharma Inc (NASDAQ:GALE). Between February and June, the company gained from $.65 a share to $2.27 a share, on market expectations of positive interim data from its lead breast cancer trial. On June 28, however, the company announced it would be discontinuing the trial, and had 83% wiped from its market capitalization in one session. It's now attempting a regroup, but what are its chances?The company is a development stage biotech company with an oncology focus. Its lead candidate, NeuVax, is an immuno oncology drug. It works by recruiting a patient's own T cells (one of the key cells in the immune system) to target and destroy cells that express what's called human epidermal growth factor receptor (HER2). A large number of solid tumor cancers express this in abundance, and so the theory is that by instructing the immune system to destroy the cells that express it, they will selectively destroy (in this instance) breast cancer cells. It's promising because its selectivity allows for treatment of cancer that has spread. In breast cancer especially, but as is true with a number of other cancers, metastasis is associated with a very poor prognosis.Galena was hoping to improve this prognosis.So what went wrong? Well, the trial that the drug was resting on was a phase III investigating efficacy in the above mentioned breast cancer indication, as measured by what's called a futility analysis. Basically this means the trial is evaluated at a certain point, and if it triggers futility at this point, it gets discontinued (in most cases). The analysis triggered futility here, and that, in turn, triggered the discontinuation.Galena tanked so heavily because it is pretty much wholly reliant on NeuVax for its market valuation. There are a couple of secondary products – Gale-301 and Gale-401 – in its early pipeline, but markets really wanted to see the company have a go at commercializing this one before they would be convinced the company could fund the rest of its pipeline's development. There are also a few more trials with NeuVax ongoing, specifically a couple of phase 2s looking at a combination of NeuVax and Roche Holding Ltd. (ADR) (OTCMKTS:RHHBY)'s Herceptin, but these won't carry much weight going forward taking the latest release into consideration.So what's next?Well, Galena just announced the pricing of an RDO, which should see the company generate $12.6 million cash based on relatively favorable terms. It's had to issue 42 million shares to do so, but given its current position, there isn’t too much bargaining power available. When this raise closes, Galena should have a pretty strong balance sheet. Cash on hand came in at a little over $35 million as of March 31, 2016, and the RDO should add circa 40% on to this figure. Clearly, the company was expecting to fund an NDA submission and, beyond that, a commercialization phase, but now the cash earmarked for these things has become available for alternative allocation.The point here is that Galena has taken a huge hit on the discontinuation of its lead trial, but its not totally out of the game. There's a chance its Roche combination treatment might bear fruit come data day, and if it does, we should quickly see some level of recovery. A low end of $1 a share doesn’t look unrealistic. Beyond that, however, there's the remaining pipeline. Both candidates have shown promise in early clinical development, and there's no question over Galena's ability to finance development through to late stage given a look at its balance sheet.All said, it's a set back, yes, but not necessarily terminal. We'll be keeping a close eye on the remainder of the company's pipeline to gain insight into just much of an impact the phase III discontinuation has had, and what that means going forward. We will be updating Insider Financial as soon as we know more. For continuing coverage on GALE, sign up for our free newsletter today and get a free ebook as an added bonus!Disclosure: We have no position in GALE and have not been compensated for this article.