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EX-31.2 - SARBANES-OXLEY ACT SECTION 302 CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER - Galena Biopharma, Inc.d333623dex312.htm
EX-32.1 - SARBANES-OXLEY ACT SECTION 906 CERTIFICATION OF CEO AND PFO - Galena Biopharma, Inc.d333623dex321.htm
EX-10.6 - THIRD OMNIBUS AMENDMENT TO SECURITIES PURCHASE AGREEMENT - Galena Biopharma, Inc.d333623dex106.htm
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EX-10.7 - FOURTH OMNIBUS AMENDMENT TO SECURITIES PURCHASE AGREEMENT - Galena Biopharma, Inc.d333623dex107.htm
v2.4.0.6
Apthera Acquisition
3 Months Ended
Mar. 31, 2012
Apthera Acquisition [Abstract]  
Apthera Acquisition

3. Apthera Acquisition

On April 13, 2011, the Company completed its acquisition of Apthera, Inc., a Delaware corporation (“Apthera”), under an Agreement and Plan of Merger (“Merger Agreement”) entered into on March 31, 2011. Subject to the terms and conditions of the Merger Agreement, the Company’s wholly owned subsidiary formed for this purpose was merged with and into Apthera, with Apthera surviving as a wholly-owned subsidiary of the Company. Under the Merger Agreement, the Company issued to Apthera’s stockholders approximately 5.0 million shares of common stock of the Company (the “Aggregate Stock Consideration”) and agreed to make future contingent payments of up to $32 million based on the achievement of certain development and commercial milestones relating to the Company’s NeuVax™ product candidate. The contingent consideration is payable, at the election of the Company, in either cash or additional shares of common stock, provided that the Company may not issue any shares in satisfaction of any contingent consideration unless it has first obtained approval of its stockholders in accordance with Rule 5635(a) of the NASDAQ Marketplace Rules.

In connection with the Merger Agreement, the Company deposited with a third-party escrow agent certificates representing 10% of the Aggregate Stock Consideration, which shares will be available to compensate the Company and related parties for certain indemnifiable losses as described in the Merger Agreement. On October 13, 2011, the escrow agent released from the escrow 5% of the Aggregate Stock Consideration, or 248,705 shares. The remaining Aggregate Stock Consideration held with the escrow agent was released in April 2012 (see Note 11).

The Company’s acquisition of Apthera was in concert with the decision by the Company’s Board of Directors to diversify its development programs and to become a late stage clinical development company. The Company does not expect any of its goodwill to be deductible for tax purposes.

The purchase price consideration and allocation of purchase price of Apthera were as follows:

 

         
    (in 000’s)  

Calculation of allocable purchase price:

       

Fair value of shares issued at closing including escrowed shares expected to be released

  $  6,367 (i)

Estimated value of earn-out

    6,460  
   

 

 

 

Total allocable purchase price

  $ 12,827  
   

 

 

 

Allocation of purchase price:

       

Cash

  $ 168  

Prepaid expenses and other current assets

    14  

Equipment and furnishings

    11  

Goodwill

    5,898  

In-process research and development

    12,864  

Accounts payable

    (931 )

Accrued expenses and other current liabilities

    (143 )

Notes payable

    (1 )

Deferred tax liability, non-current

    (5,053 )
   

 

 

 
    $ 12,827  
   

 

 

 

 

(i) The value of the Company’s common stock was based upon a per share value of $1.28, the closing price of the Company’s common stock as of the close of business on April 13, 2011.

 

The estimated value of the earn-out consideration of $6.5 million originally recorded was based on the expected probability of achievement in the future of certain development and commercial milestones relating to the Company’s NeuVax product candidate and then applying a discount rate, based on a corporate debt interest rate index publicly issued, to the expected future payments. The expected timing of the milestones, the probability of success for each milestone and the discount rates applied are updated quarterly using the most current information to measure the contingent liability as of the reporting date. On January 19, 2012, the first milestone of $1,000,000 of this contingent liability was triggered with the first patient enrolled in our Phase 3 PRESENT clinical trial of NeuVax for breast cancer. The Company issued 1,315,789 restricted shares of common stock in payment of the first milestone. The certificates evidencing the milestone shares have been deposited with a third party escrow agent. The milestone shares will be released to the Apthera shareholders from escrow if the issuance of the milestone shares is approved by the stockholders of the Company at our 2012 annual stockholders meeting. Since the release of the shares is subject to stockholder approval, the $1,000,000 has been recorded in accrued expenses and other current liabilities at March 31, 2012 in the accompanying condensed consolidated balance sheet.

If stockholder approval is obtained, the number of milestone shares will be subject to increase to the extent that $0.76 (i.e., the closing price of the Company’s common stock as reported on The NASDAQ Capital Market on January 18, 2012, the day prior to achievement of its first milestone, used for purposes of determining the number of milestone shares) is greater than the closing price of common stock as of the most recent trading day prior to the receipt of stockholder approval. Whether or not stockholder approval is obtained, in addition to the release from escrow of the milestone shares or the payment in cash of the initial milestone, as the case may be, the Company will pay concurrently to the former Apthera shareholders in cash an interest factor of ten percent (10%) per annum on the amount of the final milestone from February 10, 2012 through the day immediately prior to the release of the milestone shares from escrow or the cash payment, as the case may be, less certain legal fees of the stockholder representative to be paid or reimbursed by the Company. As of March 31, 2012, $13,699 of interest had been accrued on this note and is included in accrued expenses and other current liabilities in the accompanying condensed consolidated balance sheet.

The increase in the fair value of the contingent liability during the three months ended March 31, 2012 is $844,000, which was included in other income (expense) in the accompanying consolidated statements of expenses. The fair value of the contingent liability at March 31, 2012 was $6,195,000. Of this amount, $898,000 was recorded as a current contingent liability.

The following presents the pro forma net loss and pro forma net loss per common share for the three months ended March 31, 2011:

 

         
    For the Three
Months Ended
March 31, 2011
 

Net loss

  $ (4,397
   

 

 

 

Net loss per common share

  $ (0.17
   

 

 

 

Weighted average shares outstanding

    25,290,260