According to the complaint for this securities class action, Galena Biopharma, Inc. and two doctors schemed to over-prescribe Galena’s opioid drug for off-label uses and hid their schemes from investors, in violation of the Securities Exchange Act of 1934.
The class for this action is persons and entities who acquired Galena’s securities between August 11, 2014 and January 31, 2017.
Galena is a biopharmaceutical company that develops treatments for hematology and oncology. Its first commercial product is Abstral (fentanyl), an opioid approved for the management of breakthrough pain in cancer patients who are already receiving opioid pain therapy. During the class period, Abstral was the company’s only revenue-generating product.
According to the complaint, in May 2017, two doctors, the top prescribers of Abstral, were arrested for running a “pill mill,” but this news did not reach investors.
On August 6, 2015, Galena reported disappointing figures for its second quarter.
On November 9, the company announced that it was selling its commercial business, including Abstral, leading to a large impairment charge. On December 11, the company’s CFO resigned.
Less than two weeks later, on December 22, 2015, Galena announced it had received a subpoena from the US Attorney’s Office for the District of New Jersey, which the complaint claims asked for “a broad range of documents” about the marketing and promotion of Abstral.
Roughly three months later, on March 10, 2016, the company announced the prosecution of the two doctors and said that the company had received a trial subpoena from the US Attorney’s Office for the Southern District of Alabama. Also, the company noted that “other governmental agencies may be investigating our Abstral promotion practices…”
As the doctors’ case unfolded, the complaint said, details emerged of a kickback agreement with Galena and the doctors’ ownership of Galena stock. Galena announced this news in May 2016.
On January 9, 2017, the company announced it was under criminal as well as civil investigation by the US Attorney’s Office in New Jersey and the Department of Justice (DOJ). At the end of that month, the company announced the resignation of its CEO.
At each of these revelations, the company’s stock declined, closing at $1.12 on February 2.
In September 2017, the DOJ announced it had reached an agreement with Galena about the kickbacks, under which Galena would pay $7.55 million. The complaint alleges that the company’s scheme had been to incentivize the doctors to illegally provide Abstral for off-label use for non-cancer patients. It says that the doctors could profit from owing overvalued stock that they could later cash in on, and that Galena could earn extra revenues and use its overvaluation to obtain equity financing.