March 18 Shares of Galena Biopharma Inc fell as much as 21 percent on Tuesday after the company said the U.S. Securities and Exchange Commission was investigating its dealings with an external investor-relations firm.
Galena, which also reported a bigger-than-expected loss for the fourth quarter, said in a regulatory filing on Monday that it came to know of the SEC probe in February. (r.reuters.com/xex67v)
The company did not give any further details investigation, but analysts said it was related to the hiring of investor-relations firm DreamTeamGroup in 2013.
Adam Feuerstein, an influential biotech columnist at TheStreet.com, alleged in February that the firm was behind several positive articles on Galena written by supposedly independent bloggers on investment website Seeking Alpha.
The articles, Feuerstein said, included identical paragraphs saying that mid-stage trial results for Galena's experimental breast cancer vaccine Neuvax were well-received by analysts.
Neuvax, Galena's lead drug in development, is being tested in a late-stage study for the treatment of breast cancer. It is also in mid-stage testing for gastric cancer.
Galena issued a letter to shareholders accusing Feuerstein of having "an agenda" but acknowledged that it had "previously engaged" DreamTeamGroup.
An investor named Richard Pearson alleged in a blog post last week on Seeking Alpha that he had been approached by DreamTeamGroup to write paid promotional pieces on Galena and CytRx Corp. CytRx shares were down 3 percent.
Seeking Alpha said it had removed some articles from its website following Pearson's allegations.
Galena and DreamTeamGroup did not immediately respond to requests for comment.
Galena said on Tuesday it had been in contact with the SEC staff and was cooperating with the investigation.
The company also said that some shareholders had filed lawsuits alleging that its executives made false statements and questioning share sales by insiders.
Cantor Fitzergald analyst Mara Goldstein maintained her "sell" on Galena's stock, saying valuation could be clouded due to the lawsuits and the potential for additional investigations.
Joseph Pantginis of Roth Capital Partners said the investigation could have a negative impact because of legal fees. He cut the price target on Galena's stock to $7 from $12.
Galena reported a loss of 46 cents per share on revenue of $1.32 million in the fourth quarter. Analysts were expecting a loss of 9 cents per share on revenue of $1.62 million, according to Thomson Reuters I/B/E/S.
Galena's shares were down were down 7 percent at $2.98 in late morning trading on the Nasdaq. Galena's shares had risen nearly 70 percent in the past year to Monday's close. (Reporting by Shailesh Kuber and Vrinda Manocha; Editing by Sriraj Kalluvila and Ted Kerr)