Bay Area's Galena Biopharma CEO Steps Down, Effective Immediately

Published: Feb 02, 2017

Bay Area's Galena Biopharma CEO Steps Down, Effective Immediately February 1, 2017
By Alex Keown, Breaking News Staff

SAN RAMON, Calif. – Galena Biopharma, Inc. is on the lookout for a new chief executive officer after Mark W. Schwartz stepped down amid a civil and criminal probe related to the company’s marketing of its opioid Abstral (fentanyl).

Galena revealed it was under federal investigation in a filing with the U.S. Securities and Exchange Commission. The U.S. Department of Justice is investigating company employees, as well as two high-prescribing physicians, the company said. The trial for the two physicians began earlier this month. Galena received a trial subpoena for documents in connection with the investigation into the physicians. In the filing, the company said the government was looking into a rebate agreement between Galena and the two physicians. Certain former employees have received trial subpoenas to appear at the trial and provide oral testimony, the company said in the filing. Galena said it intends to cooperate fully with the investigation.

In addition to the investigation of Abstral, which Galena sold at the end of 2015, Galena said there are also federal and state investigations into a company that “competes with Abstral in the same therapeutic class, and we have learned that the FDA and other governmental agencies are investigating our Abstral promotion practices.”

Galena acquired Abstral in 2013. Schwarz was instrumental in that acquisition, as well as in the marketing of the drug, Adam Feuerstein said in The Street this morning, citing former employees.

The government has been cracking down on kickback schemes for prescription drugs, but has paid particular attention to drugs using the addictive fentanyl. Arizona-based Insys has been under fire for its sales tactics regarding Subsys, a fentanyl-based drug. Last year the company faced allegations it falsified data in order to sell more of its painkiller. In September a former sales manager was indicted on a Subsys kickback scheme. In December, six former Insys directors were charged in a kickback scheme to boost sales of Subsys.

In a filing with the SEC, Galena said Schwarz’ departure was “without good reason.” With his departure, Schwarz will receive a payout of $302,068.86, which is equal to six months of his final base salary.

Schwarz is the second CEO to depart Galena within the past two years. In 2014 Galena terminated Mark Ahn for his part in a stock promotion scheme, Feuerstein said.

With Schwarz gone, Galena’s board of directors will appoint an interim CEO within “the next couple of weeks.” Additionally, the board said in a statement it is in the process of engaging an independent advisory firm to evaluate strategic alternatives for the company. Those alternatives include advancing clinical programs as a stand-along entity, a sale of the company, a possible merger or reverse merger or divesting company assets.

While the Company evaluates its strategic alternatives, Galena’s investigator-sponsored immunotherapy trials will remain ongoing, the board of directors said in its statement. Galena is evaluating the appropriate time to commence the GALE-401 trial and anticipates making a definitive determination in the second half of 2017, Sanford Hillsberg, Galena’s chairman of the board of directors, said in a statement.

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