Galena Biopharma Inc (GALE): Should You Buy the Hype Surrounding This Product Launch?

While the analysis of peak sales and potential patient populations may be appealing to most, it costs a great deal of money to launch a new product with success. In the case of Galena Biopharma Inc (NASDAQ:GALE), the company doesn’t have the cash, but touts tremendous sales potential, so might the company succeed anyway?

The reality of launching drugs in healthcare

I would like to share with you something that I think is truly telling about product launches in biotechnology, which are facts surrounding recent product launches.

— Last December, Amarin Corporation plc (ADR) (NASDAQ:AMRN) raised $100 million to assist in the launch of Vascepa. During its most recent quarter, the company spent almost $65 million to aid in Vascepa’s launch. As a result, the company earned $2.34 million in revenue during those initial months. During the last year, shares of Amarin Corporation have declined 60% showing its performance post-approval.

— Ariad Pharmaceuticals, Inc. (NASDAQ:ARIA) launched its new drug Iclusig in the first quarter, a drug that treats a form of leukemia. This promising drug, that many believe could achieve annual sales in excess of $1 billion, produced just $6.1 million in its first quarter post-launch. Much like Amarin, the company spent a large deal of money to earn its sales, more than $70 million last quarter.

— VIVUS, Inc. (NASDAQ:VVUS) has had its weight loss product, Qsymia, on the market for the last two quarters. During that period, Vivus has earned just $6 million and has spent more than $115 million. Over the last year, shares of this stock have declined 55%.

The information from these three companies all share certain similarities. Each has products that were once heralded as having billion-dollar potential; many of which still do. All have products that have been expensive to launch and each stock has traded lower during the launch period.

Will this launch be different?

Despite what we see above, Galena Biopharma Inc (NASDAQ:GALE) clearly believes that it will not be “like the others.” The company acquired an FDA approved pain medication called Abstral, which is a form of fentanyl that dissolves under the tongue.

Abstral is already marketed in Europe, but until Galena, no other company had been willing to sell the drug in the U.S. Yet, Galena proudly touts that European marketer ProStrakan reported 2012 sales of $54 million and that Abstral could see peak sales as high as $400 million annually.