Galena Discloses SEC Investigation Focused on Stock-Touting Campaign

LAKE OSWEGO, Oregon (TheStreet) -- Galena Biopharma (GALE) is under a federal investigation by the Securities and Exchange Commission, according to regulatory filing Monday night. 

"In February 2014, we learned that the SEC is investigating certain matters relating to our company and an outside investor-relations firm that we retained in 2013. We have been in contact with the SEC staff through our counsel and are cooperating with the investigation," Galena disclosed in its 10-K Monday night.

Galena shares are down 16.5% to $2.68 in Tuesday trading. 

On Feb. 12, TheStreet published a story documenting how Galena paid an investor relations firm, The DreamTeam Group, to engage in a stock-promotion campaign on behalf of the company. The DreamTeam's work for Galena included publishing promotional articles written under false names on the investor web site Seeking Alpha.

Aided by this promotional campaign, Galena shares tripled in value from last summer. Coincidence or not, Galena insiders, including CEO Mark Ahn, made millions of dollars by selling company stock in January.

In addition to the SEC investigation, five lawsuits have been filed against Galena in federal and state court, accusing the company of violating federal securities laws and breaching fiduciary duties. All the lawsuits pertain to Galena's involvement in the stock-promotion campaign and the insider stock sales.

"Based on the very early stage of the litigation, it is not possible to estimate the amount or range of possible loss that might result from an adverse judgment or a settlement of these matters," Galena said in its 10-K.

Galena also issued a statement: "We intend to vigorously defend against the recent claims against us, and recognizing the impact that it has had on our shareholders, we are taking every possible step to address the situation," said Ahn.

Irving Einhorn, a former SEC enforcement attorney, was appointed to Galena's board of directors, the company said.

Net sales of the cancer pain drug Abstral were $1.3 million in the fourth quarter, below analyst consensus expectations of $1.8 million. Galena forecast 2014 Abstral sales in the range of $11-15 million, which brackets current consensus expectations of $12.3 million.

Net loss for the fourth quarter was $48.5 million, including $38.9 million in non-cash charges.

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