Galena Biopharma Inc (NASDAQ:GALE) is planning to raise $12.6 million through a direct offering of its common stock after being dealt a big blow on a Breast Cancer clinical trial. The company has already entered securities purchase agreements with institutional investors for the issuance of 28 million shares at a price of $0.45 a share. The direct offering also includes warrants of purchase of up to 14 million shares at a price of $0.65 a share.
Direct Offering Proceeds Uses
Galena expects the offering to close on July 13, subject to customary closing conditions. Part of the proceeds from the offering is to cater for expenses on ongoing clinical trials. The remaining amount is to be used to bolster working capital and for general corporate purposes.
The offering comes just days after an Independent Data Monitoring Committee recommended the discontinuation of a Phase 3 trial on the company’s lead candidate NeuVax. The committee approved the halting of the trial on safety and futility analysis being triggered by 70 qualifying disease-free survival events. The committee had at the time, reviewed 71 events.
Interim data according to the committee showed that NeuVax was an ineffective treatment compared to placebo when used for the treatment of HER2 Breast Cancer. The news did not go well with investors who in return sent the stock crumbling in the market by 83%.
Waning Investors’ Confidence
The disappointing clinical trial has all but resulted in an increase in short sellers on the stock given that it was on a bull run for the better of the year. Galena shares were in a rally mode on the IDMC opening a review on the drug after the company reached the 70th qualifying disease-free survival event.
The FDA issuing Galena Biopharma Inc (NASDAQ:GALE) fast track designation for the drug all but helped bolster the stock’s sentiments on the street on the belief the drug could be approved for use. NeuVax according to some analysts had the potential to generate up to $2 billion in sales.