UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K

		
þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	
For the year ended December 31, 2016
OR

		
¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	
Commission File Number: 001-33958
___________________________________________________

Galena Biopharma, Inc.
(Exact name of registrant as specified in its charter)
_______________________________________________________

			
Delaware	 	20-8099512	
(State of incorporation)	 	(I.R.S. Employer Identification No.)	
2000 Crow Canyon Place, Suite 380, San Ramon, CA 94583
(855) 855-4253
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)

			
Securities registered pursuant to Section 12(b) of the Exchange Act:	
 	 	 	
Title of Each Class	 	Name of Exchange on Which Registered	
Common Stock, $0.0001 Par Value per Share	 	The NASDAQ Capital Market	
 	 	 	
Securities registered pursuant to Section 12(b) of the Exchange Act:	
 	None	 	
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.     ¨   Yes         þ   No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.     ¨   Yes       þ   No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    þ   Yes         ¨   No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     ¨   Yes         þ   No
Indicate by check mark whether the registrant has submitted electronically and posted on it corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for any such shorter time that the registrant was required to submit and post such files).    þ   Yes         ¨   No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one): 

							
Large accelerated filer	 	¨	 	Accelerated filer	 	þ	
Non-accelerated filer	 	¨
	(Do not check if a smaller reporting company)	Smaller reporting company	 	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):     ¨   Yes     þ   No
Based on the closing price of the Registrant's common stock as reported on the NASDAQ Capital Market, the aggregate market value of the Registrant's common stock held by non-affiliates on June 30, 2016 (the last business day of the Registrant's most recently completed second fiscal quarter) was approximately $85,410,521 .
As of February 28, 2017 , Galena Biopharma, Inc. had outstanding 35,921,324 shares of common stock, $0.0001 par value per share, exclusive of treasury shares.

	

GALENA BIOPHARMA, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2016
TABLE OF CONTENTS

						
Part No.	 	Item No.	 	Description	Page No.	
I	 	1	 	Business	5	
 	 	1A	 	Risk Factors	19	
 	 	1B	 	Unresolved Staff Comments	39	
 	 	2	 	Properties	39	
 	 	3	 	Legal Proceedings	40	
 	 	4	 	Mine Safety Disclosures	42	
II	 	5	 	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	43	
 	 	6	 	Selected Financial Data	46	
 	 	7	 	Management's Discussion and Analysis of Financial Condition and Results of Operations	47	
 	 	7A	 	Quantitative and Qualitative Disclosures About Market Risk	61	
II	 	8	 	Financial Statements and Supplementary Data	62	
 	 	9	 	Changes in and Disagreements with Accountants on Accounting and Financial Disclosures	100	
 	 	9A	 	Controls and Procedures	100	
 	 	9B	 	Other Information	101	
III	 	10	 	Directors, Executive Officers and Corporate Governance	102	
 	 	11	 	Executive Compensation	102	
 	 	12	 	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	102	
 	 	13	 	Certain Relationships and Related Transactions, and Director Independence	102	
 	 	14	 	Principal Accountant Fees and Services	102	
Signatures	103	
Index to Exhibits
	 	
EX-3.1	 	
EX-3.4	 	
EX-4.1	 	
EX-21.1	 	
EX-23.1	 	
EX-31.1	 	
EX-31.2	 	
EX-32.1	 	

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"SAFE HARBOR" STATEMENT

Some of the information contained in this annual report may include forward-looking statements that reflect our current views with respect to our development programs, business strategy, business plan, financial performance and other future events. These statements include forward-looking statements both with respect to us, specifically, and our industry, in general. We make these statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Statements that include the words “expect,” “intend,” “plan,” “believe,” “project,” “estimate,” “may,” “should,” “anticipate,” “will” and similar statements of a future or forward-looking nature identify forward-looking statements for purposes of the federal securities laws and otherwise.

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. There are or will be important factors that could cause actual results to differ materially from those indicated in these statements. These factors include, but are not limited to, those factors set forth in the sections entitled “Business,” “Risk Factors,” “Legal Proceedings,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Quantitative and Qualitative Disclosures About Market Risk” and “Controls and Procedures” in this annual report, all of which you should review carefully. Please consider our forward-looking statements in light of those risks as you read this annual report. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.
If one or more of these or other risks or uncertainties materializes, or if our underlying assumptions prove to be incorrect, actual results may vary materially from what we anticipate. All subsequent written and oral forward-looking statements attributable to us or individuals acting on our behalf are expressly qualified in their entirety by this “Safe Harbor” Statement.

4

PART I

ITEM 1. BUSINESS

Overview
Galena Biopharma, Inc. (“we,” “us,” “our,” “Galena” or the “Company”) is a biopharmaceutical company developing hematology and oncology therapeutics that address unmet medical needs. The Company’s pipeline consists of multiple mid- to late-stage clinical assets, including our hematology asset, GALE-401, and our novel cancer immunotherapy programs including NeuVax™ (nelipepimut-S), GALE-301 and GALE-302. GALE-401 is a controlled release version of the approved drug anagrelide for the treatment of elevated platelets in patients with myeloproliferative neoplasms. GALE- 401 has completed a Phase 2 clinical trial and the asset is ready to advance into a pivotal trial in patients with essential thrombocythemia (ET). NeuVax is currently in multiple investigator-sponsored Phase 2 clinical trials in breast cancer. GALE-301 and GALE-302 have completed early stage trials in ovarian, endometrial and breast cancers.
We are seeking to build value for shareholders through pursuit of the following objectives:
		
•	Develop hematology and oncology assets through clinical development with a focus in areas of unmet medical need. Our hematology asset is targeting the treatment of patients with ET to reduce elevated platelet counts. Our immunotherapy programs are currently targeting two key areas: secondary prevention intended to significantly decrease the risk of disease recurrence in breast, gastric, and ovarian cancers; and primary prevention intended to prevent ductal carcinoma in situ (DCIS) from becoming invasive breast cancer.	
		
•	Evaluating strategic alternatives that may include continuing to advance the clinical programs as a stand-alone entity, a sale of the company, a business combination, merger or reverse merger, and a license or other disposition of corporate assets of the company.	
		
•	Leverage partnerships and collaborations, as well as investigator-sponsored trial arrangements, to maximize the scope of potential clinical opportunities in a cost effective and efficient manner.	

The chart below summarizes the current status of our clinical development pipeline:

5

Hematology

GALE-401 (anagrelide controlled release (CR))

GALE-401 contains the active ingredient anagrelide, an FDA-approved product, for the treatment of patients with myeloproliferative neoplasms (“MPNs”) to lower abnormally elevated platelet levels. The currently available immediate release (“IR”) version of anagrelide causes adverse events that are believed to be dose and plasma concentration dependent, and may limit the use of the IR version of the drug. Therefore, reducing the maximum concentration (“C max ”) and increasing the half-life of the drug is hypothesized to reduce the side effects, while preserving the efficacy, potentially allowing a broader use of the drug.
Multiple Phase 1 studies in 98 healthy subjects have shown GALE-401 reduces the C max of anagrelide and increases the half-life following oral administration, appears to be well tolerated at the doses administered, and to be capable of reducing platelet levels effectively. The Phase 1 program provided the desired PK/PD (pharmacokinetic/pharmacodynamic) profile to enable the initiation of the Phase 2 proof-of-concept trial. The Phase 2, open label, single arm, proof-of concept trial enrolled 18 patients in the United States for the treatment of thrombocytosis, or elevated platelet counts, in patients with MPNs. Final safety and efficacy data from this Phase 2 trial were presented in December 2015 and demonstrated a prolonged clinical benefit with a potentially improved safety profile.
We have analyzed our data and the treatment landscape for MPNs, with a current focus on Essential Thrombocythemia (“ET”). Subject to completion of the manufacturing of the new formulation and other internal work, GALE-401 is ready to advance into a Phase 3 clinical trial in ET patients who are intolerant or resistant to hydroxyurea. The trial is designed to compare GALE-401 (drug arm) versus best available therapy (BAT) to include a sizable population of patients treated with anagrelide IR. A productive meeting with the U.S. Food and Drug Administration (FDA) in December 2016 confirmed that the GALE-401 development program is appropriate for a New Drug Application (NDA) filing using the 505(b)(2) regulatory pathway.
Essential Thrombocythemia is a myeloproliferative blood disorder, and is characterized by the overproduction of platelets in the bone marrow. Elevated platelets alter the normal process of blood coagulation and can lead to thromboembolic events. About a third of patients are asymptomatic at the time of diagnosis. However, many patients develop symptoms during the course of the disease that affect the quality of life.

Novel Cancer Immunotherapies
Our targeted cancer immunotherapy approach is currently based upon two key areas: preventing secondary recurrence of cancer, which is becoming increasingly important as the number of cancer survivors continues to grow; and, primary prevention intended to prevent ductal carcinoma in situ (DCIS) from becoming invasive breast cancer. Once a patient’s tumor becomes metastatic, the outcome is often fatal, making the prevention of recurrence a potentially critical component of overall patient care. Our secondary recurrence programs primarily target patients in the adjuvant (after-surgery) setting who have relatively healthy immune systems, but may still have residual disease. Minimal residual disease, or micrometastasis, that are undetectable by current radiographic scanning technologies, can result in disease recurrence.
Our therapies utilize an immunodominant peptide combined with the immune adjuvant, recombinant human granulocyte macrophage-colony stimulating factor (rhGM-CSF), and work by harnessing the patient’s own immune system to seek out and attack any residual cancer cells. Using peptide immunogens has many potential clinical advantages, including a favorable safety profile, since these drugs may lack the toxicities typical of most cancer therapies. They also have the potential to induce immunologic memory and provide long-lasting protection with a convenient, intradermal mode of delivery.

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NeuVax™ (nelipepimut-S)
NeuVax™ (nelipepimut-S) is a cancer immunotherapy targeting human epidermal growth factor receptor (HER2) expressing cancers. NeuVax is the immunodominant nonapeptide derived from the extracellular domain of the HER2 protein, a well-established and validated target for therapeutic intervention in breast and gastric carcinomas. The NeuVax vaccine is combined with GM-CSF for injection under the skin, or intradermal administration. Data has shown that an increased presence of circulating tumor cells (CTCs) may predict reduced Disease Free Survival (DFS) and Overall Survival (OS) suggesting a presence of isolated micrometastases, not detectable clinically, but, over time, can lead to recurrence of cancer, most often in distant sites. After binding to the specific HLA molecules on antigen presenting cells, the nelipepimut-S sequence stimulates specific cytotoxic T lymphocytes, or CTLs, causing significant clonal expansion. These activated CTLs recognize, neutralize and destroy, through cell lysis, HER2 expressing cancer cells, including occult cancer cells and micrometastatic foci. The nelipepimut immune response can also generate CTLs to other immunogenic peptides through inter- and intra-antigenic epitope spreading.
Breast Cancer : According to the National Cancer Institute (NCI), over 230,000 women in the U.S. are diagnosed with breast cancer annually. While improved diagnostics and targeted therapies have decreased breast cancer mortality in the U.S., metastatic breast cancer remains incurable. Approximately 75% to 80% of breast cancer patients have tissue test positive for some increased amount of the HER2 receptor, which is associated with disease progression and decreased survival. Only approximately 20% to 30% of all breast cancer patients-those with HER2 immunohistochemistry (IHC) 3+ disease, or IHC 2+ and fluorescence in situ hybridization (FISH) amplified-have a HER2 directed, approved treatment option available after their initial standard of care. This leaves the majority of breast cancer patients with low-to-intermediate HER2 expression (IHC 1+, 2+) ineligible for therapy and without an effective targeted treatment option to prevent cancer recurrence.
We currently have two investigator-sponsored trials (IST) ongoing with NeuVax in combination with trastuzumab (Herceptin ® ; Genentech/Roche). The combination of trastuzumab and NeuVax has been shown pre-clinically and in a pilot study to be synergistic. Our Phase 2b clinical trial is a randomized, multicenter, investigator-sponsored, 300 patient study enrolling HER2 1+ and 2+, HLA A2+, A3+, A24 and/or A26, node positive, and high-risk node negative patients. Eligible patients are randomized to receive NeuVax + GM-CSF + trastuzumab or trastuzumab + GM-CSF alone. The primary endpoint of the study is disease-free survival. Genentech/Roche is providing the trastuzumab and partial funding for this trial. Data presented in October 2016 demonstrated that this novel combination of trastuzumab and NeuVax with HER2 low-expressing patients is well tolerated and the cardiac effects of trastuzumab are not impacted by the addition of NeuVax. In February 2017, the Data Safety Monitoring Board (DSMB) reported that there were no safety concerns with the trial and the trial is not futile. The recommendation from the DSMB was to continue the trial with one revision to the statistical analysis plan regarding the timing of the pre-specified interim analysis. Given the lengthy duration of enrollment for the trial, the DSMB determined that the pre-specified interim efficacy analysis be moved up from 12 months to 6 months after the last patient is enrolled. Completion of enrollment is expected in the second quarter of 2017; therefore, the DSMB expects to perform the interim efficacy analysis near the end of 2017.
Our second combination IST is a Phase 2 in HER2 3+ breast cancer patients who have completed neoadjuvant therapy with an approved regimen that includes trastuzumab and fail to achieve a pathological complete response, meaning they have microscopic evidence of residual disease and are therefore at an increased risk of disease recurrence. This multi-center, prospective, randomized, single-blinded Phase 2 trial is enrolling approximately 100 patients with a diagnosis of HER2 3+ breast cancer who are HLA A2+ or HLA A3+ and are determined to be at high-risk for recurrence. High-risk is defined as having received neoadjuvant therapy with an approved regimen that includes trastuzumab but not obtaining a pathological complete response at surgery, or those who undergo surgery as a first intervention and are found to be pathologically node-positive. These high-risk patients are known to have higher recurrence rates than other HER2 3+ breast cancer patients. Eligible patients will be randomized to receive NeuVax + GM-CSF + trastuzumab or trastuzumab + GM-CSF alone. The primary endpoint of the study is disease-free survival. Funding for this trial was awarded through the Congressionally Directed Medical Research Program (CDMRP), funded through the Department of Defense (DoD), via a Breast Cancer Research Program (BCRP) Breakthrough Award. In February 2017, the Data Safety Monitoring Board (DSMB) reported that there were no safety concerns with the trial and the trial is not futile. The pre-specified interim safety analysis was also completed on n=50 patients and demonstrated that the agent is well tolerated with no increased cardiotoxicity associated with giving NeuVax in combination with trastuzumab. The recommendation from the DSMB was to continue the HER2 3+ trial unmodified.

7

A Phase 2 trial clinical with NeuVax as a single agent in patients with ductal carcinoma in situ , or DCIS, is open for enrollment. The trial is being run in collaboration with the NCI, potentially positioning NeuVax as a treatment for earlier stage disease. The trial has an immunological endpoint evaluating NeuVax peptide-specific cytotoxic T lymphocyte (CTL; CD8+ T-cell) response in vaccinated patients. DCIS is defined by the NCI as a noninvasive condition in which abnormal cells are found in the lining of a breast duct and have not spread outside the duct to other tissues in the breast. DCIS is the most common type of breast cancer. In some cases, DCIS may become invasive cancer and spread to other tissues, and at this time, there is no way to know which lesions could become invasive. Current treatment options for DCIS include breast-conserving surgery and radiation therapy with or without tamoxifen, breast-conserving surgery without radiation therapy, or total mastectomy with or without tamoxifen. According to the American Cancer Society, in 2015 there were over 60,000 diagnoses of DCIS.

A Phase 3 PRESENT ( P revention of R ecurrence in E arly- S tage, Node- Positive Breast Cancer with Low to Intermediate HER2 E xpression with NeuVax T reatment) study enrolled 758 HER2 1+/2+ patients who are node-positive and HLA A2 or A3 positive. On June 27, 2016, the Independent Data Monitoring Committee, or IDMC, recommended that the Phase 3 PRESENT clinical trial be stopped for futility. The PRESENT trial was stopped, and we initiated an investigation into the causes of the recommendation. Our analysis of the data showed that there was a separation of the curves, albeit not statistically significant, with the control arm performing better than expected and the NeuVax arm performing consistent with our protocol assumptions for the control group. Because the study was deemed futile, we closed the PRESENT trial, and we expect to present the data at a future medical conference.
Gastric Cancer: According to the NCI, gastric (stomach) cancer is a disease in which malignant (cancer) cells form in the lining of the stomach. Almost all gastric cancers are adenocarcinomas (cancers that begin in cells that make and release mucus and other fluids). Other types of gastric cancer are gastrointestinal carcinoid tumors, gastrointestinal stromal tumors, and lymphomas. Infection with bacteria called Helicobacter pylori (H. pylori) is thought to be the cause of gastric cancer and age, diet, and stomach disease can affect the risk of developing gastric cancer. Gastric cancer is often diagnosed at an advanced stage because there are no early signs or symptoms, and is the second-most common cancer among males and third-most common among females in Asia and worldwide with over 63,000 new cases a year in India, where an initial clinical trial of NeuVax is planned. Overexpression of the HER2 receptor occurs in approximately 20% of gastric and gastro-esophageal junction adenocarcinomas, predominantly those of the intestinal type. Overall, without regard to the stage of cancer, only approximately 28% of patients with stomach cancer live at least five years following diagnosis and new adjuvant treatments are needed to prevent disease recurrence. We currently have an agreement with Dr. Reddy’s Laboratories to conduct a Phase 2 investigational study in gastric cancer in India.

GALE-301 and GALE-302
Our second immunotherapy franchise targets folate binding protein (FBP) receptor-alpha. FBP is a well-validated therapeutic target that is highly over-express in ovarian, endometrial and breast cancers, and is the source of immunogenic peptides that can stimulate cytotoxic T lymphocytes (CTLs) to recognize and destroy FBP-expressing cancer cells. Current treatments after surgery for these diseases are principally with platinum based chemotherapeutic agents. These patients suffer a high recurrence rate and most relapse with an extremely poor prognosis. GALE-301 and GALE-302 are immunogenic peptides that consist of a peptide derived from FBP combined with GM-CSF for the prevention of cancer recurrence in the adjuvant setting. GALE-301 is the E39 peptide, while GALE-302 is an attenuated version of this peptide, known as E39’. Two early stage clinical trials have been completed with our FBP peptides in ovarian, endometrial, and breast cancers. In June 2016, the U.S. Food and Drug Administration (FDA) granted two orphan-drug designations for the treatment (including prevention of recurrence) of ovarian cancer: one for GALE-301 (E39), and one for GALE-301 (E39) and GALE-302 (E39’).

8

  Ovarian Cancer : According to the NCI Surveillance, Epidemiology, and End Results (SEER) Program, new cases of ovarian cancer occur at an annual rate of 11.9 per 100,000 women in the U.S., with an estimated 22,280 new cases and 14,240 deaths in 2016. Only 46.2% of ovarian cancer patients are expected to survive five years after diagnosis. Approximately 1.3% of women will be diagnosed with ovarian cancer at some point during their lifetime (2011 - 2013 data). The prevalence data from 2013 showed an estimated 195,767 women living with ovarian cancer in the United States. Due to the lack of specific symptoms, the majority of ovarian cancer patients are diagnosed at later stages of the disease, with an estimated 80% of women presenting with advanced-stage (III or IV) disease. These patients have their tumors routinely surgically debulked to minimal residual disease, and then are treated with platinum- and/or taxane-based chemotherapy. While many patients respond to this treatment regimen and become clinically free-of-disease, the majority of these patients will relapse. Depending upon their level of residual disease, the risk for recurrence after completion of primary therapy is approximately 70%. Unfortunately, for these women, once the disease recurs, treatment options are limited and the disease is most likely incurable.

Alliance Partners in Therapeutic Areas

We leverage our technology platforms by working with pharmaceutical and biotechnology partners in a number of therapeutic areas in oncology.

9

Intellectual Property

Patents and other intellectual property rights are crucial to our success. It is our policy to protect our intellectual property rights through available means, including filing and prosecuting patent applications in the U.S. and other countries, protecting trade secrets, and utilizing regulatory protections such as data exclusivity. We also include restrictions regarding use and disclosure of our proprietary information in our contracts with third parties, and utilize customary confidentiality agreements with our employees, consultants, clinical investigators and scientific advisors to protect our confidential information and know-how. Together with our licensors, we also rely on trade secrets to protect our combined technology especially where we do not believe patent protection is appropriate or obtainable. It is our policy to operate without infringing on, or misappropriating, the proprietary rights of others. The following chart summarizes our intellectual property rights:

	
				
Drug Candidate	Indication	Scope	Estimated
Exclusivity
Period
 	
GALE-401 (Anagrelide Controlled Release)	Platelet Lowering	Pending and/or issued	2029	
NeuVax™ (nelipepimut-S)	Breast cancer recurrence	Pending and/or issued	2028	
NeuVax™ (nelipepimut-S)	Gastric	Pending and/or issued	2028	
NeuVax™ (nelipepimut-S)	DCIS	Pending and/or issued	2028	
NeuVax™ in combination with trastuzumab	Breast cancer	Pending and/or issued	2026	
NeuVax™ in combination with other compounds	Breast cancer	Pending and/or issued	2037	
GALE-301 & GALE-302	Breast, ovarian and endometrial cancer	Pending and/or issued	2036	

Out-License Agreements

Teva Pharmaceuticals

Effective December 3, 2012, we entered into a license and supply agreement with ABIC Marketing Limited, a subsidiary of Teva Pharmaceuticals (“ABIC”). Under the agreement, we granted ABIC exclusive rights to seek marketing approval in Israel for our NeuVax product candidate for the treatment of breast cancer following its approval by the FDA or the European Medicines Agency, and to market, sell and distribute NeuVax in Israel assuming such approval is obtained. ABIC’s rights also include a right of first refusal in Israel for all future indications for which NeuVax may be approved.

Under the license and supply agreement, ABIC will assume responsibility for regulatory registration of NeuVax in Israel, provide financial support for local development, and commercialize the product in the region in exchange for making royalty payments to us based on future sales of NeuVax. ABIC also agrees in the license and supply agreement to purchase all supplies of NeuVax from us at a price determined according to a specified formula.

Dr. Reddy’s Laboratories Ltd.

Effective January 14, 2014, we entered into a strategic development and commercialization partnership with Dr. Reddy’s Laboratories Ltd. (“Dr. Reddy’s”), under which we licensed commercial rights in India to Dr. Reddy’s for NeuVax in breast and gastric cancers. We currently have an agreement with Dr. Reddy's to conduct a Phase 2 investigational study in gastric cancer in India. To date, Dr. Reddy's has not initiated the Phase 2 study with NeuVax.

10

Kwang Dong Pharmaceutical Co., Ltd.

Effective April 30, 2009, we entered into a license agreement with Kwang Dong Pharmaceutical Co, Ltd (Kwang Dong). Under the agreement, we granted Kwang Dong exclusive rights to seek marketing approval in The Republic of Korea (South Korea) for our NeuVax product candidate for the treatment of breast cancer following its approval by the FDA or the European Medicines Agency, and to market, sell and distribute NeuVax in South Korea assuming such approval is obtained.

11

Recent Developments (in reverse chronological order )

Evaluation of Strategic Alternatives and Resignation of President and Chief Executive Officer. 

On January 31, 2017, the Board of Directors announced that it is in the process of engaging an outside advisor to evaluate strategic alternatives for the company focused on maximizing stockholder value. On March 9, 2017, it was announced that Canaccord Genuity, Inc. was engaged as the Company's financial advisor to assist in the review process. Potential strategic alternatives that may be explored or evaluated as part of this review include continuing to advance the clinical programs as a stand-alone entity, a sale of the company, a business combination, merger or reverse merger, and a license or other disposition of corporate assets of the company. There is no set timetable for this process and there can be no assurance that this process will result in a transaction. On January 31, 2017, the Company also announced the resignation of Mark W. Schwartz, Ph.D., from his position as President and Chief Executive Officer and as a member of the board of directors of each of Galena Biopharma, Inc. and our Apthera, Inc. and Mills Pharmaceutical, LLC and subsidiaries.

Appointment of Interim Chief Executive Officer

On February 21, 2017, our Board of Directors appointed Mr. Stephen Ghiglieri to be our Interim Chief Executive Officer (CEO). Mr. Ghiglieri previously held the position of Executive Vice President and Chief Financial Officer (CFO). He will continue to serve as the Company’s CFO, a position to which he was appointed in November 2016.
Closed a Public Offering of Common Stock and Warrants

On February 13, 2017, we closed the previously announced underwritten public offering of common stock and warrants. The net proceeds to us were approximately $15.5 million.

Positive Outcome from the Data Safety Monitoring Board on the Two NeuVax Clinical Trials in Combination with Trastuzumab 

On February 6, 2017, we reported the results from a meeting of the Data Safety Monitoring Board (DSMB) for the two investigator-sponsored (IST) combination clinical trials with NeuVax plus trastuzumab. The DSMB reported that there are no safety concerns with either trial and neither was found to be futile. For the Phase 2b trial in patients with low-to-intermediate HER2 expression (HER2 1+/2+), n=242 patients were evaluated, and the recommendation from the DSMB is to continue the trial with one revision to the statistical analysis plan regarding the timing of the pre-specified interim analysis. Given the lengthy duration of enrollment for the trial, the DSMB determined that the pre-specified interim efficacy analysis be moved up from 12 months to 6 months after the last patient is enrolled. Completion of enrollment is expected in the second quarter of 2017; therefore, the DSMB expects to perform the interim efficacy analysis near the end of 2017. For the Phase 2 trial in high-risk, HER2 3+ patients, and per the trial protocol, the pre-specified interim safety analysis was also completed on n=50 patients and demonstrated that the agent is well tolerated with no increased cardiotoxicity associated with giving NeuVax in combination with trastuzumab. These findings were similar to the findings presented in October 2016 from the HER2 1+/2+ trial. The recommendation from the DSMB is to continue the HER2 3+ trial unmodified.

FDA Confirms 505(b)(2) regulatory pathway for GALE-401 Phase 3 Trial 

On December 28, 2017, we announced that after a productive meeting with the U.S. Food and Drug Administration (FDA), the Agency confirmed that the GALE-401 development program is appropriate for a New Drug Application (NDA) filing using the 505(b)(2) regulatory pathway in patients with ET who are intolerant to or failed to achieve an optimal response with hydroxyurea.

12

Settlement with the Securities and Exchange Commission

On December 22, 2016, Galena and its former CEO reached an agreement in principle to a proposed settlement that would resolve an investigation by the staff of the Securities and Exchange Commission (SEC) involving conduct in the period 2012-2014 regarding the commissioning of internet publications by outside promotional firms. The proposed settlement is subject to approval by the Commission and would acknowledge our cooperation in the investigation and confirm our voluntary undertaking to continue that cooperation. If the Commission does not approve the settlement, we may need to enter into further discussions with the SEC staff to resolve the investigated matters on different terms and conditions. As a result, there can be no assurance as to the final terms of any resolution including its financial impact or any future adjustment to the financial statements.

Announced the Phase 2 Clinical Trial of NeuVax in DCIS is Open for Enrollment and Screening Patients

On December 14, 2016, the Company announced the NeuVax Phase 2 clinical trial entitled VADIS: Phase 2 trial of the Nelipepimut-S Peptide VA ccine in Women with D C IS of the Breast is now open for enrollment and screening patients. The trial is being run in collaboration with the National Cancer Institute (NCI) and The University of Texas MD Anderson Cancer Center Phase I and II Chemoprevention Consortium.

Presented Two Posters at the San Antonio Breast Cancer Symposium

On December 12, 2016, we announced that two posters were presented at the San Antonio Breast Cancer Symposium (SABCS). The poster, entitled, “ VADIS trial: Phase 2 trial of the nelipepimut-S peptide va ccine in women with D C IS of the breast,” presented the trial design for the planned, Phase 2 investigator-sponsored clinical trial with NeuVax in patients with DCIS. The poster, entitled, “ Determining the optimal vaccination strategy using a combination of the folate binding protein (FBP) peptide vaccine (E39+GM-CSF) and an attenuated version (E39’) to maximize the immunologic response in breast cancer patients,” was presented on the breast cancer patients in the Company’s GALE-301 (E39) and GALE-302 (E39’) Phase 1b clinical trial targeting Folate Binding Protein. In the trial, both the E39 and E39’ peptide vaccines were noted to be well tolerated and immunogenic with no clinicopathologic differences between groups. Local reaction increased in all groups with administration of the vaccine as measured and assessed using orthogonal means. The greatest increase was seen in the treatment arm that administered GALE-301 followed by GALE-302, which approached statistical significance, and this arm was also the only arm with a statistically significant increase in DTH.

Presented GALE-301/GALE-302 Phase 1b Data

On November 14, 2016, data from our GALE-301/GALE-302 clinical program was presented at the Society for Immunotherapy of Cancer Conference 2016 in National Harbor, Maryland. The presentation, entitled, “Phase Ib Trial of Two Folate Binding Protein (FBP) Peptide Booster Vaccines (E39 and E39’) in Breast and Ovarian Cancer Patients,” reported the peptide-specific immune response to E39 and E39’ after different combinations of vaccination and boosting. The data showed that both E39 and E39’ are well tolerated with all related adverse events at grade 1 or grade 2. Though numbers were small, patients boosted with the attenuated peptide showed increased CTL response to boosting regardless of significant residual immunity (SRI) resulting from the primary vaccination series (PVS). While this data needs to be confirmed with a larger sample size, this is consistent with the theoretical advantage of boosting with an attenuated peptide, which is expected to induce less antigen-induced cell death of CTLs.

Announced a Reverse Stock Split

On October 31, 2016, we announced a reverse stock split of our shares of common stock at a ratio of 1-for-20 as approved by the Board of Directors on October 26, 2016. The reverse stock split was authorized by the Company’s stockholders at the Special Meeting of Stockholders held on October 21, 2016. The reverse stock split became effective on November 11, 2016 and the Company’s common stock commenced trading on a split-adjusted basis on Wednesday, November 14, 2016 under the symbol “GALE” but under the new CUSIP number 363256504.

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Presented GALE-301/GALE-302 Phase 1b Data

On October 20, 2016, Dr. Doreen Jackson delivered a podium presentation on our GALE-301 and GALE-302 clinical program at the American College of Surgeons Clinical Congress 2016. The Phase 1b is a single-center, randomized, single-blinded, three-arm study in patients with breast or ovarian cancer diagnosis who were treated with standard of care and were without evidence of disease. The presentation was entitled, “A Phase Ib Trial Comparing Different Doses/Schedules of a Folate Binding Protein (FBP)-derived Peptide Vaccine, E39, and its Attenuated Version, E39’, to Induce Long-term FBP- specific Immunity in Disease-free Cancer Patients.” In this trial, which enrolled mostly breast cancer patients who have lower FBP exposure than ovarian patients, the 500mcg dose appears to provide a more optimal immunological response. This differs from the results in ovarian cancer patients, who have much higher FBP expression, with potential secondary immune tolerance, where 1000mcg was the optimal dose. E39’ (GALE-302) given after E39 (GALE-301) was able to induce long-term immunity in both dosing cohorts, underscoring the potential importance of attenuated peptides in relatively antigen-naïve patients.

Presented NeuVax plus Trastuzumab Interim Safety Data

On October 10, 2016, we presented interim safety data from the NeuVax Phase 2b combination study with trastuzumab at the European Society for Medical Oncology (ESMO) 2016. The clinical trial is a randomized, multicenter, investigator-sponsored, 300 patient Phase 2b study enrolling HER2 1+ and 2+ node positive, and high-risk node negative patients. The poster, entitled “Interim safety analysis of a phase II trial combining trastuzumab and NeuVax, a HER2-targeted peptide vaccine, to prevent breast cancer recurrence in HER2 low expression,” demonstrated that this novel combination of trastuzumab and NeuVax in HER2 low-expressing patients is well-tolerated and the cardiac effects of trastuzumab are not impacted by the addition of NeuVax.

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Competition

The biotechnology industry, including cancer immunotherapy vaccines and hematology therapies, is intensely competitive and involves a high degree of risk. Potential competitors in the U.S. and worldwide are numerous and include pharmaceutical and biotechnology companies, educational institutions and research foundations. We compete with many of these companies who have far greater experience, capital resources, research and technical resources, marketing experience, research and development staffs and facilities than us. Some of our competitors may develop and commercialize products that compete directly with those incorporating our technology, and they may introduce products to market earlier than our products or on a more cost effective basis. We may be unable to effectively develop our technology or any other applications on a cost effective basis or otherwise. In addition, our technology may be subject to competition from other technology or methods developed using techniques other than those developed by traditional biotechnology methods. Our competitors compete with us in recruiting and retaining qualified scientific and management personnel as well as in acquiring technologies complementary to our technology. We, and our collaborators, may face competition with respect to product efficacy and safety, ease of use and adaptability to various modes of administration, acceptance by physicians, the timing and scope of regulatory approvals, availability of resources, reimbursement coverage, price, and patent position including potentially dominant patent positions of others.

For patients with myeloproliferative neoplasms (MPNs), current treatment options include Agrylin ® (anagrelide hydrochloride) and its generic equivalents, hydorxyurea and interferon alpha. Agents currently being studied in patients with MPNs include investigational JAK2 inhibitors (e.g., LY2784544 (Eli Lily), momelotinib (Gilead Sciences) and pegylated interferon alfa-2a (Pegasys, Genentech/Roche)).

For patients with early stage breast cancer, adjuvant therapy is often given to prevent recurrence and increase the chance of long-term disease free survival. Adjuvant therapy for breast cancer can include chemotherapy, hormonal therapy, radiation therapy, or combinations thereof. In addition, the HER2 targeted drug trastuzumab (Herceptin ® ) may be given to patients with tumors with high expression of HER2 (IHC 3+), as well as other novel targets such as MUC1 which may be useful in treating breast cancer.

There are a number of cancer vaccines in development for breast cancer, including but not limited to Lapuleucel-T (Dendreon), AE-37 (Antigen Express), and Stimuvax (Merck KgA). While these development candidates are aimed at a number of different targets, and AE-37 has published data in the HER2 breast cancer patient population, there is no guarantee that any of the these compounds will not in the future be indicated for treatment of low-to-intermediate HER2 breast cancer patients and become directly competitive with NeuVax.

A number of chemotherapeutic agents have demonstrated activity in gynecological carcinomas (ovarian and endometrial), particularly platinum based regimens. New chemotherapy agents are being evaluated including trabectedin (Yondelis) and belotecan as well as targeted agents such as bevacizumab (Avastin) and pazopanib (Avotrient). Monoclonal antibodies are also being developed including farletuzumab and catumaxomab. The Company is not aware of any of these agents being evaluated in the adjuvant setting where GALE-301 is being considered for further development. TPIV200 (TapImmune) is in development targeting FBP in ovarian cancer.

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Government Regulation

The U.S. and other developed countries extensively regulate the preclinical and clinical testing, manufacturing, labeling, storage, record-keeping, advertising, promotion, export, marketing and distribution of drugs and biologic products. The FDA regulates pharmaceutical and biologic products under the Federal Food, Drug, and Cosmetic Act, the Public Health Service Act and other federal statutes and regulations.

To obtain approval of our future product candidates from the FDA, we must, among other requirements, submit data supporting safety and efficacy for the intended indication as well as detailed information on the manufacture and composition of the product candidate. In most cases, this will require extensive laboratory tests and preclinical and clinical trials. The collection of these data, as well as the preparation of applications for review by the FDA involve significant time and expense. The FDA may require post-marketing testing to monitor the safety and efficacy of approved products or place conditions on any product approvals that could restrict the therapeutic claims and commercial applications of these products. Regulatory authorities may withdraw product approvals if we fail to comply with regulatory standards and or the conditions of the regulatory approval at any time following initial marketing of our products.

The amount of time taken by the FDA for approval of an NDA or Biologics License Application (BLA) will depend upon a number of factors, including whether the product candidate has received priority review or fast track designation, the quality of the submission and studies presented, and the workload at the FDA.

We anticipate that our products will be manufactured by our strategic partners, licensees or other third parties. Before approving an NDA or BLA, the FDA will inspect the facilities at which the product is manufactured and will not approve the product unless the manufacturing facilities are in compliance with the FDA’s current good manufacturing practice (“cGMP”), which are regulations that govern the manufacture, holding and distribution of a product. Manufacturers of biologics also must comply with the FDA’s general biological product standards. Our manufacturers also will be subject to regulation under the Occupational Safety and Health Act, the Nuclear Energy and Radiation Control Act, the Toxic Substance Control Act and the Resource Conservation and Recovery Act and other applicable environmental statutes. Following approval, the FDA periodically inspects drug and biologic manufacturing facilities to ensure continued compliance with the good manufacturing practices regulations. Our manufacturers will have to continue to comply with those requirements. Failure to comply with these requirements subjects the manufacturer to possible legal or regulatory action, such as suspension of manufacturing or recall or seizure of product. Adverse patient experiences with the product must be reported to the FDA and could result in the imposition of marketing restrictions through labeling changes or market removal. Product approvals may be withdrawn if compliance with regulatory requirements is not maintained or if problems concerning safety or efficacy of the product occur following approval.

The labeling, advertising, promotion, marketing and distribution of a drug or biologic product also must be in compliance with FDA and Federal Trade Commission requirements which include, among others, standards and regulations for off-label promotion, industry sponsored scientific and educational activities, promotional activities involving the internet, and direct-to-consumer advertising. In addition, we will be subject to various laws and regulations governing laboratory practices and the experimental use of animals. In each of these areas, as above, the FDA has broad regulatory and enforcement powers, including the ability to levy fines and civil penalties, suspend or delay issuance of product approvals, seize or recall products, and deny or withdraw approvals.

We will also be subject to a variety of regulations governing clinical trials and sales of our products outside the U.S. Whether or not FDA approval has been obtained, approval of a product candidate by the comparable regulatory authorities of foreign countries and regions must be obtained prior to the commencement of marketing the product in those countries. The approval process varies from one regulatory authority to another and the time may be longer or shorter than that required for FDA approval. In the European Union, Canada and Australia, regulatory requirements and approval processes are similar, in principle, to those in the U.S.

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Financial Condition

We had cash and cash equivalents of approximately $29.1 million as of February 28, 2017. We believe that our existing cash and cash equivalents, funding available under our Lincoln Park Capital, LLC (LPC) purchase agreement and At The Market Issuance Sales Agreements (ATM), should be sufficient to fund our operations for at least one year. This projection is based on our current limited operations and estimates of legal expenses associated with the ongoing government investigation and legal matters pending against the company, and is subject to changes in our operating plans, resolutions of such government investigation and legal matters, uncertainties inherent in our business, strategic alternatives outcomes, and the need to seek to replenish our existing cash and cash equivalents sooner than we project and in greater amounts that we had projected. There is no guarantee that any debt, additional equity or other funding will be available to us on acceptable terms, or at all. If we fail to obtain additional funding when needed, we would be forced to scale back, or terminate, our operations or to seek to merge with or to be acquired by another company.

On February 13, 2017, the Company closed an underwritten public offering of 17,000,000 shares of common stock and warrants to purchase 17,000,000 shares of common stock priced at $1.00 per share and accompanying warrant. The warrants are immediately exercisable with a strike price of $1.10 and will expire on the fifth anniversary of the date of issuance. The net proceeds of the February 2017 Offering were $15.5 million, after deducting underwriting discounts and commissions and offering expenses paid by the Company.

In addition to the proceeds from the February 2017 Offering, in January and February 2017 the holder of the Debenture redeemed $3.95 million of outstanding principal that was satisfied by the Company with 3,518,663 shares of our common stock. The Company was able to transfer the $3.95 million out of restricted cash and cash equivalents and into unrestricted cash and cash equivalents to be used to fund the Company's ongoing operations. The outstanding principal balance as of March 15, 2017 is $13,617,702.

On January 31, 2017, the Company announced that it is in the process of evaluating strategic alternatives focused on maximizing stockholder value. Potential strategic alternatives that may be explored or evaluated as part of this review include continuing to advance the clinical programs as a stand-alone entity, a sale of the company, a business combination, merger or reverse merger, and a license or other disposition of corporate assets of the company. There is no set timetable for this process and there can be no assurance that this process will result in a transaction. While the Company evaluates its strategic alternatives, Galena’s investigator-sponsored immunotherapy trials will remain ongoing. With the confirmation from the FDA that the GALE-401 development program is appropriate for a New Drug Application (NDA) filing using the 505(b)(2) regulatory pathway in patients with ET who are intolerant or resistant to hydroxyurea, we have developed a clear path forward for GALE-401 in the treatment of ET. Subject to completing the manufacturing of the new formulation and the internal work to prepare the Phase 3 trial for initiation, the Company is evaluating the appropriate time to commence enrollment of the GALE-401 trial and anticipates making a definitive determination in the second half of 2017. The Company has focused on reducing expenditures in order to preserve liquidity while pursuing a strategic alternative.

In addition to the funds raised through underwritten public offerings and the debenture, we maintain a purchase agreement with LPC and ATM with future availability of $2.0 million and $19.1 million, respectively subject to certain terms and conditions. On February 6, 2017, the Company and LPC amended the Purchase Agreement, as amended, to decrease the value of Common Stock that the Company may sell to LPC from $42.2 million to $2.0 million, a reduction of $39.4 million of availability. We may also continue to use the ATM, or other instruments, in order to fund our operations going forward.

We expect to continue to incur operating losses as we advance our product candidates through the drug development and the regulatory process. In the absence of revenue, our potential sources of operational funding are proceeds from the sale of equity, funded research and development payments, debt financing arrangements, and payments received under partnership and collaborative agreements.

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Environmental Compliance

Our development programs involve the controlled use of potentially harmful biological materials as well as hazardous materials, chemicals and various radioactive compounds. We are subject to federal, state and local laws and regulations governing the use, storage, handling and disposal of these materials and specific waste products. We are also subject to numerous environmental, health and workplace safety laws and regulations. The cost of compliance with these laws and regulations could be significant and may adversely affect capital expenditures to the extent we are required to procure expensive capital equipment to meet regulatory requirements.

Human Resources

As of March 15, 2017, the Company had 14 full-time employees. None of our employees are represented by a labor union or covered by a collective bargaining agreement, nor have we experienced any work stoppages.

Corporate Information

Our principal executive offices are located at 2000 Crow Canyon Place, Suite 380, San Ramon, CA 94583, and our phone number is (855) 855-4253. Our website address is www.galenabiopharma.com. We do not incorporate the information on our website into this annual report, and you should not consider such information part of this annual report.

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ITEM 1A. RISK FACTORS
Our business is subject to numerous risks. We caution you that the following important factors, among others, could cause our actual results to differ materially from those expressed in statements made by us or on our behalf in filings with the SEC, press releases or communications with investors and others. Any or all of our statements in this annual report and in any other public statements we make may turn out to be wrong. They can be affected by inaccurate assumptions or by known or unknown risks and uncertainties. The factors mentioned in the discussion below will be important in determining future results. Consequently, actual future results may vary materially from those anticipated in this annual report or our other public statements.
Risks Relating to Our Former Commercial Operations
We are subject to U.S. federal and state health care fraud and abuse and false claims laws and regulations, and we recently have been subpoenaed in connection with marketing and promotional practices related to Abstral ® (fentanyl) sublingual tablets. Prosecutions under such laws have increased in recent years and we may become subject to such prosecutions or related litigation under these laws. If we have not fully complied with such laws, we could face substantial penalties.
Our former commercial operations and development programs are subject to various U.S. federal and state fraud and abuse laws, including, without limitation, the federal False Claims Act, federal Anti-Kickback Statute, and the federal Sunshine Act. A federal investigation led by the U.S. Attorney’s Office for the Southern District of Alabama (SDAL) of two of the high-prescribing physicians for Abstral has resulted in the criminal prosecution of the two physicians for alleged violations of the federal False Claims Act and other federal statutes. On April 28, 2016, a second superseding indictment was filed in the criminal case, which added additional information about the defendant physicians and provided information regarding the facts and circumstances involving a rebate agreement between the Company and the defendant physicians’ pharmacy as well as their ownership of our stock. The criminal trial , which began on January 4, 2017, concluded with a jury verdict on February 23, 2017 finding these physicians guilty on 19 of 20 counts; sentencing is scheduled for May 2017. At the end of the SDAL case , SDAL dismissed count 18 of the indictment charging that the physicians conspired, through the C&R Pharmacy, to receive illegal kickbacks in exchange for prescribing Abstral. Though certain former employees received trial subpoenas to appear at the trial and provide oral testimony, only one former employee testified at the trial. We agreed to reimburse those former employees’ attorney’s fees. To our knowledge, we were not a target or subject of that investigation.
There have also been federal and state investigations of a company that has a product 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. On December 16, 2015, we received a subpoena issued by the U.S. Attorney’s Office for the District of New Jersey requesting the production of a broad range of documents pertaining to our marketing and promotional practices for Abstral. We have been in contact with the U.S. Attorney’s Office for the District of New Jersey and are cooperating in the production of the requested documents. We have come to understand that the investigation being undertaken by the U.S. Attorney’s Office for the District of New Jersey and Department of Justice is a criminal investigation in addition to a civil investigation that could ultimately involve the company as well as one or more former employees. Pursuant to the Company’s charter, we are currently reimbursing any former employees’ attorney’s fees with respect to the investigation. We are cooperating with the civil and criminal investigation and through our outside counsel we have recently begun preliminary discussions with the government aimed at the ultimate resolution of the investigation regarding the Company.
We may be subject to legal or administrative actions as a result of these matters, or the impact of such matters. If we are found to be in violation of the False Claims Act, Anti-Kickback Statute, Patient Protection and Affordable Care Act, or any other applicable state or any federal fraud and abuse laws, we may be subject to penalties, such as civil and criminal penalties, damages, fines, or an administrative action of exclusion from government health care reimbursement programs. We can make no assurances as to the time or resources that will need to be devoted to these matters or their outcome, or the impact, if any, that these matters or any resulting legal or administrative proceedings may have on our business or financial condition .

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Many of the regulatory provisions that we are subject to include criminal provisions. If we are unable to comply with these provisions in the operation of our business we may become subject to civil and criminal investigations and proceedings that could have a material adverse effect on our business, financial condition and prospects.
The federal False Claims Act prohibits persons from knowingly filing, or causing to be filed, a false claim to, or the knowing use of false statements to obtain payment from, the federal government. Qui tam suits filed under the False Claims Act can be brought by any individual on behalf of the government and such individuals, commonly known as “relators” or “whistleblowers,” may share in any amounts paid by the entity to the government in fines or settlement. The frequency of filing qui tam actions has increased significantly in recent years, causing greater numbers of health care companies to have to defend such qui tam actions and pay substantial sums to settle such actions. The federal Anti-Kickback Statute prohibits persons from knowingly and willfully soliciting, offering, receiving, or providing remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual, or the furnishing or arranging for a good or service, for which payment may be made under a federal health care program such as the Medicare and Medicaid programs. Several courts have interpreted the statute’s intent requirement to mean that if any one purpose of an arrangement involving remuneration is to induce referrals of federal health care covered business, the statute has been violated. The Anti-Kickback Statute is broad, and despite a series of narrow safe harbors, prohibits many arrangements and practices that are lawful in businesses outside of the health care industry. Penalties for violations of the federal Anti-Kickback Statute include criminal penalties and civil and administrative sanctions such as fines, imprisonment and possible exclusion from Medicare, Medicaid and other federal health care programs. An alleged violation of the Anti- Kickback Statute may be used as a predicate offense to establish liability pursuant to other federal laws and regulations such as the federal False Claims Act. Many states have also adopted laws similar to the federal Anti-Kickback Statute, some of which apply to the referral of patients for health care items or services reimbursed by any source, not only Medicare and Medicaid programs.
The federal Patient Protection and Affordable Care Act includes provisions expanding the ability of certain relators to bring actions that would have been dismissed under prior law. When an entity is determined to have violated the federal False Claims Act, it may be required to pay up to three times the actual damages sustained by the government, plus civil penalties for each separate false claim. The Deficit Reduction Act of 2005 encouraged states to enact or modify their state false claims acts to be at least as effective as the federal False Claims Act by granting states a portion of any federal Medicaid funds recovered through Medicaid-related actions. Most states have enacted state false claims laws, and many of those states included laws including qui tam provisions. The federal Patient Protection and Affordable Care Act includes provisions known as the Physician Payments Sunshine Act, which requires manufacturers of drugs, biologics, devices and medical supplies covered under Medicare and Medicaid to record any transfers of value to physicians and teaching hospitals and to report this data beginning in 2013 to the Centers for Medicare and Medicaid Services for subsequent public disclosures. Manufacturers must also disclose investment interests held by physicians and their family members. Failure to submit the required information may result in civil monetary penalties of up to $1 million per year for knowing violations and may result in liability under other federal laws or regulations. Similar reporting requirements have also been enacted on the state level in the U.S., and an increasing number of countries worldwide either have adopted or are considering similar laws requiring transparency of interactions with health care professionals. In addition, some states such as Massachusetts and Vermont imposed an outright ban on certain gifts to physicians. These laws could affect our product promotional activities by limiting the kinds of interactions we could have with hospitals, physicians or other potential purchasers or users of our system. Both the disclosure laws and gift bans also will impose administrative, cost and compliance burdens on us.
We face product liability exposure and, if successful claims are brought against us, we may incur substantial liability if our insurance coverage for those claims is inadequate.
The commercial sale of our products after they are approved as well as the use of our products in clinical trials exposes us to possible product liability claims. This risk exists even if a product is approved for commercial sale by the FDA and manufactured in facilities licensed and regulated by the FDA, if our products were sold to third parties, or if our products are provided in clinical trials. Our products are designed to affect important bodily functions and processes. Any side effects, manufacturing defects, misuse or abuse associated with our products could result in injury to a patient or even death. For example, because the placebo may have performed better than NeuVax in the PRESENT Trial, the use of NeuVax may have worsened the patient’s condition.

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Product liability claims may be brought against us by consumers, health care providers, pharmaceutical companies or others selling or otherwise coming into contact with our products or generic versions of our products. If we cannot successfully defend ourselves against product liability claims we could incur substantial liabilities. Because we have sold Abstral and Zuplenz ® (ondansetron) oral soluble film and provided NeuVax as a study drug in the PRESENT Trial and other clinical trials, regardless of merit or eventual outcome, product liability claims may result in:

•	impairment of our business reputation;	

•	costs of related litigation;	

•	distraction of management’s attention from our primary business; or	

•	substantial monetary awards to patients or other claimants.	
We have obtained product liability insurance coverage for commercial product sales with a $10 million per occurrence and a $10 million annual aggregate coverage limit. Our insurance coverage may not be sufficient to cover all of our product liability related expenses or losses and may not cover us for any expenses or losses we may suffer. Moreover, insurance coverage is becoming increasingly expensive and, in the future, we may not be able to maintain insurance coverage at a reasonable cost, in sufficient amounts or upon adequate terms to protect us against losses due to product liability. If we determine that it is prudent to increase our product liability coverage based on sales of our products, we may be unable to obtain this increased product liability insurance on commercially reasonable terms or at all. Large judgments have been awarded in class action or individual lawsuits based on drugs that had unanticipated side effects, including side effects that may be less severe than those of our products. A successful product liability claim or series of claims brought against us could cause our stock price to decline and, if judgments exceed our insurance coverage, could decrease our cash and have a material adverse effect on our business, results of operations, financial condition and prospects.
Our business involves the use of hazardous materials and we and our third-party manufacturers and suppliers must comply with environmental laws and regulations, which can be expensive and restrict how we do business.
Our third-party manufacturers and suppliers activities involve the controlled storage, use and disposal of hazardous materials. We and our manufacturers and suppliers are subject to laws and regulations governing the use, manufacture, storage, handling and disposal of these hazardous materials even after we sell or otherwise dispose of the products. In some cases, these hazardous materials and various wastes resulting from their use will be stored at our contractors or manufacturers’ facilities pending use and disposal. We cannot completely eliminate the risk of contamination, which could cause injury to our employees and others, environmental damage resulting in costly cleanup and liabilities under applicable laws and regulations governing the use, storage, handling and disposal of these materials and specified waste products. Although we expect that the safety procedures utilized by our third-party contractors and manufacturers for handling and disposing of these materials will generally comply with the standards prescribed by these laws and regulations, we cannot guarantee that this will be the case or eliminate the risk of accidental contamination or injury from these materials. In such an event, we may be held liable for any resulting damages and such liability could exceed our resources. We do not currently carry biological or hazardous waste insurance coverage and our property and casualty and general liability insurance policies specifically exclude coverage for damages and fines arising from biological or hazardous waste exposure or contamination.

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We will continue to be responsible for certain liabilities and obligations related to Abstral and Zuplenz, and if unknown liabilities were to arise it could have a material adverse effect on us.
Under our respective asset purchase agreements with Sentynl Therapeutics, Inc. and Midatech Pharma PLC, our future obligations under our former agreements with Orexo AB and MonoSol Rx have been assumed by Sentynl and Midatech, respectively, except that we will continue to be responsible for chargebacks, rebates, patient assistance and certain other product distribution channel liabilities related to Abstral and Zuplenz for a specified period of time post-closing. We also will be responsible for any pre-closing liabilities and obligations related to Abstral and Zuplenz, including unknown liabilities, and have agreed in the respective asset purchase agreements to indemnify Sentynl and Midatech for any breach of our representations, warranties and covenants in the respective asset purchase agreements up to a certain agreed to amount. We cannot quantify these responsibilities to Sentanyl and Midatech, but if substantial unknown liabilities were to arise, it could have a material adverse effect on our financial condition.
Risks Relating to Our Development Programs
Our drug candidates may not receive regulatory approval or be successfully commercialized.
Before they can be marketed, our products in development must be approved by the FDA or similar foreign governmental agencies. The process for obtaining FDA approval is both time-consuming and costly, with no certainty of a successful outcome. Before obtaining regulatory approval for the sale of any drug candidate, we must conduct extensive preclinical tests and clinical trials to demonstrate the safety and efficacy in humans of our product candidates. Although our drug candidates have exhibited no serious adverse events (“SAEs”) in the Phase 1 and 1/2 clinical trial, SAEs or other unexpected side effects may arising during further testing and development, and A failure of any preclinical study or clinical trial can occur at any stage of testing. The results of preclinical and initial clinical testing of these products may not necessarily indicate the results that will be obtained from later or more extensive testing. It also is possible to suffer significant setbacks in advanced clinical trials, even after obtaining promising results in earlier trials.
Our Phase 3 PRESENT clinical trial has been stopped due to futility and though we have conducted an investigation of the causes for the failure of the clinical trial, we are not certain that the investigation has identified the reason(s) for the failure.
On June 27, 2016, the Independent Data Monitoring Committee conducting the pre-planned interim analysis of the PRESENT Trial recommended that we stop the clinical trial because of futility. We have conducted an investigation of the causes of the failure of the trial. As a result, our observations are that a phenomenon known as pseudoprogression likely had a meaningful impact on the events assessed as NeuVax recurrences in the trial. The purpose of the NeuVax vaccine is to generate a HER2 directed T cell-based immune response targeting those undetected micrometastases and eradicate them before they grow into a clinically detectable tumor. Pseudoprogression is a phenomenon that occurs when radiographic scans in patients responding to treatment with immunotherapy give the appearance of progression due to increased tumor size or swelling from tumor-infiltrating lymphocytes, or TILs, and other immune cells. In simple terms, the cancer looks like it has progressed on radiographic images, but in reality, the immunotherapy has done its job to create an immune response via inflammation around a micrometastasis. Therefore, a growing tumor or a new tumor detected via imaging isn’t always progressing cancer and may simply represent an immune system response to an undetectable micrometastasis that would not otherwise be seen on the scan. In the trial, we believe that the low rate of recurrences in the control arm resulted from an overall improvement in the standard of care. In addition, proactive imaging led to the discovery of lesions, some of which may not have had any clinical significance at the time of identification. Finally, the inflammation caused by TILs within the micrometastases and more specifically the NeuVax-induced cytotoxic T-cells, made them visible on scans in the NeuVax group and not in the control group. We now believe that causing this inflammation may have identified lesions via proactive scanning that may have never progressed to a clinical tumor. Because patients were discontinued from this study at the time they were identified as having DFS event, we do not know if some of these patients who were diagnosed with a recurrence on the CT scan would have progressed to have metastatic cancer. In summary, though we are applying the knowledge and observations to our other immunotherapy programs, we may not have identified the reason(s) for the failure of the clinical trial.

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Our products, GALE-301 and GALE-302 have the same mechanism of action as NeuVax and may not be a viable product to prevent the recurrence of ovarian cancer or other types of cancers.
GALE-301 and GALE-302, which have a similar mechanism of action as NeuVax, may no longer be a viable product to prevent the recurrence of ovarian cancer or other types of cancer, depending upon the reasons for the causes of the failure of NeuVax.
A number of different factors could prevent us from obtaining regulatory approval or commercializing our product candidates on a timely basis, or at all.
We, the FDA or other applicable regulatory authorities, an Independent Data Safety Monitoring Board or “IDSMB” governing our clinical trials, or an institutional review board, or “IRB,” which is an independent committee registered with and overseen by the U.S. Department of Health and Human Services, or “HHS,” that functions to approve, monitor and review biomedical and behavioral research involving humans, may suspend clinical trials of a drug candidate at any time for various reasons, including if we or it believe the subjects or patients participating in such trials are being exposed to unacceptable health risks. Among other reasons, adverse side effects of a drug candidate on subjects or patients in a clinical trial could result in the FDA or other regulatory authorities suspending or terminating the trial and refusing to approve a particular drug candidate for any or all indications of use.
Clinical trials of a new drug candidate require the enrollment of a sufficient number of patients, including patients who are suffering from the disease the drug candidate is intended to treat and who meet other eligibility criteria. Rates of patient enrollment are affected by many factors, and delays in patient enrollment can result in increased costs and longer development times than we expect at present. Patients who are enrolled at the outset of this standard of care also may eventually choose for personal reasons not to participate in the study. We also compete for eligible patients with other clinical trials underway from time to time, and we may experience delays in patient enrollment due to the dependency of other large trials underway in the same patient population.
Clinical trials also require the review and oversight of IRBs, which approve and continually review clinical investigations to protect the rights and welfare of human subjects. An inability or delay in obtaining IRB approval could prevent or delay the initiation and completion of clinical trials, and the FDA may decide not to consider any data or information derived from a clinical investigation not subject to initial and continuing IRB review and approval.
In addition, cancer vaccines are a relatively new form of therapeutic treatment and a very limited number of such products have received regulatory approval. Therefore, the FDA or other regulatory authority may apply standards for approval of a new cancer vaccine that is different from past experience.
Numerous factors could affect the timing, cost or outcome of our drug development efforts, including the following:

•	difficulties or delays in enrolling patients in our planned clinical trials in conformity with required protocols or projected timelines;	

•	conditions imposed on us by the FDA or comparable foreign authorities regarding the scope or design of our clinical trials;	

•	difficulties or delays in arranging for third parties to conduct clinical trials of our product candidates;	

•	problems in engaging IRBs to oversee trials or problems in obtaining or maintaining IRB approval of studies;	

•	third-party contractors failing to comply with regulatory requirements or meet their contractual obligations to us in a timely manner;	

•	our drug candidates having very different chemical and pharmacological properties in humans than in laboratory testing and interacting with human biological systems in unforeseen, ineffective or harmful ways, and the possibility that our previous Phase 1 or Phase 2 trials will not be indicative of our drug candidates’ performance in larger patient populations;	

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•	the need to suspend or terminate our clinical trials if the participants are being exposed to unacceptable health risks;	

•	insufficient or inadequate supply or quality of our drug candidates or other necessary materials necessary to conduct our clinical trials;	

•	disruption at our clinical trial sites resulting from local social or political unrest or other geopolitical factors;	

•	effects of our drug candidates not having the desired effects or including undesirable side effects or the drug candidates having other unexpected characteristics;	

•	negative or inconclusive results from our clinical trials or the clinical trials of others for drug candidates similar to our own or inability to generate statistically significant data confirming the efficacy of the product being tested;	

•	adverse results obtained by other companies developing similar drugs;	

•	modification of the drug during testing;	

•	our capital resources; and	

•	reallocation of our financial and other resources to other clinical programs.	
It is possible that none of the product candidates that we develop will obtain the appropriate regulatory approvals necessary for us to begin selling them or that any regulatory approval to market a product may be subject to limitations on the indicated uses for which we may market the product. The time required to obtain FDA and other approvals is unpredictable but often can take years following the commencement of clinical trials, depending upon the complexity of the drug candidate. Any analysis we perform of data from clinical activities is subject to confirmation and interpretation by regulatory authorities, which could delay, limit or prevent regulatory approval. Any delay or failure in obtaining required approvals could have a material adverse effect on our ability to generate revenue from the particular drug candidate.
In addition, the length of time to develop the product candidates as well as any regulatory delays in the development and regulatory approval process could cause the patent exclusivity to be unavailable or greatly reduced for each product candidate. The lack of patent exclusivity could have a material adverse effect on our ability to generate revenue from the particular drug candidate.
We are also subject to numerous foreign regulatory requirements governing the conduct of clinical trials, manufacturing and marketing authorization, pricing and third-party reimbursement. The foreign regulatory approval process includes all of the risks associated with the FDA approval described above as well as risks attributable to the satisfaction of local regulations in foreign jurisdictions. Approval by the FDA does not assure approval by regulatory authorities outside of the U.S.
We are dependent upon contract manufacturers for clinical supplies of our product candidates.
We do not have the facilities or expertise to manufacture supplies of any of our product candidates for clinical trials. Accordingly, we are dependent upon contract manufacturers for these supplies. There can be no assurance that we will be able to secure needed supply arrangements on reasonable terms, or at all. Our failure to secure these arrangements as needed could have a materially adverse effect on our ability to complete the development of our product candidates or, if we obtain regulatory approval for our product candidates, to commercialize them.

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Our current plans call for the manufacture of our compounds by contract manufacturers offering research grade, Good Laboratory Practices grade and Good Manufacturing Practices grade materials for preclinical studies (e.g., toxicology studies) and for clinical use. Certain of our product candidates are complex molecules requiring many synthesis steps, which may lead to challenges with purification and scale-up. These challenges could result in increased costs and delays in manufacturing. For GALE-401, we will change contract manufacturers for the supply of the clinical study drug and the commercial product, which may lead to delays in the initiation and completion of the Phase 3 trial and filing for regulatory approval.
In the clinical trials using NeuVax, Leukine is also administered and its availability is dependent upon a third-party manufacturer, which may or may not reliably provide Leukine, thus jeopardizing the completion of the trials.
NeuVax is administered in combination with Leukine, a “GM-CSF” available in both liquid and lyopholyzed forms exclusively from Genzyme Corporation, or “Genzyme,” a subsidiary of Sanofi-Aventis. We will continue to be dependent on Genzyme for our supply of Leukine in connection with the ongoing NeuVax and GALE-301/GALE-302 trials and the potential commercial manufacture of these programs. Any temporary interruptions or discontinuation of the availability of Leukine, or any determination by us to change the GM-CSF used with NeuVax or GALE-301/GALE-302, may have a material adverse effect on our clinical trials and any commercialization of the assets.
We may not be able to establish or maintain the third-party relationships that are necessary to develop or potentially commercialize some or all of our product candidates.
We expect to depend on collaborators, partners, licensees, clinical research organizations and other third parties to support our discovery efforts, to formulate product candidates, to manufacture our product candidates, and to conduct clinical trials for some or all of our product candidates. We cannot guarantee that we will be able to successfully negotiate agreements for or maintain relationships with collaborators, partners, licensees, clinical investigators, vendors and other third parties on favorable terms, if at all. Our ability to successfully negotiate such agreements will depend on, among other things, potential partners’ evaluation of the superiority of our technology over competing technologies and the quality of the preclinical and clinical data that we have generated, and the perceived risks specific to developing our product candidates. If we are unable to obtain or maintain these agreements, we may not be able to clinically develop, formulate, manufacture, obtain regulatory approvals for or commercialize our product candidates. Under certain license agreements that we have already entered into, we have minimum dollar amounts per year that we are obligated to spend on the development of the technology we have licensed from our contract partners and other obligations to maintain certain licenses. If we fail to meet this requirement under any of our licenses that contain such requirements or any other obligations under these licenses, we may be in breach of our obligations under such agreement, which may result in the loss of the technology licensed. We cannot necessarily control the amount or timing of resources that our contract partners will devote to our research and development programs, product candidates or potential product candidates, and we cannot guarantee that these parties will fulfill its obligations to us under these arrangements in a timely fashion. We may not be able to readily terminate any such agreements with contract partners even if such contract partners do not fulfill its obligations to us.
In addition, we may receive notices from third parties from time to time alleging that our technology or product candidates infringe upon the intellectual property rights of those third parties. Any assertion by third parties that our activities or product candidates infringe upon its intellectual property rights may adversely affect our ability to secure strategic partners or licensees for our technology or product candidates or our ability to secure or maintain manufacturers for our compounds.

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We are subject to competition and may not be able to compete successfully.
The biotechnology industry, including the cancer immunotherapy market, is intensely competitive and involves a high degree of risk. We compete with other companies that have far greater experience and financial, research and technical resources than us. Potential competitors in the U.S. and worldwide are numerous and include pharmaceutical and biotechnology companies, educational institutions and research foundations, many of which have substantially greater capital resources, marketing experience, research and development staffs and facilities than us. Some of our competitors may develop and commercialize products that compete directly with those incorporating our technology, introduce products to market earlier than our products or on a more cost effective basis. In addition, our technology may be subject to competition from other technology or methods developed using techniques other than those developed by traditional biotechnology methods. Our competitors compete with us in recruiting and retaining qualified scientific and management personnel as well as in acquiring technologies complementary to our technology. We and our collaborators may face competition with respect to product efficacy and safety, ease of use and adaptability to various modes of administration, acceptance by physicians, the timing and scope of regulatory approvals, availability of resources, reimbursement coverage, price and patent position, including the potentially dominant patent positions of others. An inability to successfully complete our product development could lead to us having limited prospects for establishing market share or generating revenue from our technology.
GALE-401 must successfully complete a Phase 3 clinical trial and obtain regulatory approval before we can market the product and our competitors may obtain a successful clinical trial result and regulatory approval before we do.
GALE-401 contains the active ingredient, anagrelide, an FDA-approved product, for the treatment of patients with myeloproliferative neoplasms (MPNs) to lower abnormally elevated platelet levels. The currently available immediate release (IR) version of anagrelide causes adverse events that are believed to be dose and plasma concentration dependent. These adverse events may limit the use of the IR version of the drug. Therefore, reducing the maximum concentration (Cmax) is hypothesized to reduce the side effects, while preserving efficacy, potentially allowing a broader use of the drug. We have analyzed our data and the treatment landscape for MPNs, with a current focus on Essential Thrombocythemia (ET) where we see an unmet medical need in patients who are intolerant to the current standard of care. We may be advancing GALE-401 into a pivotal trial. The risks include but are not limited to regulatory (agreement with regulatory agency on the development plan), operational (rate of enrollment), and statistical confirmation of the safety and efficacy endpoints. In addition, there are other potential competitors whose clinical trials may be successful and obtain regulatory approval prior to our regulatory approval, if our pivotal trial is successful.

We are dependent on technologies we license, and if we lose the right to license such technologies or we fail to license new technologies in the future, our ability to develop new products would be harmed.
We currently are dependent on licenses from third parties for technologies relating to our product candidates. Our current licenses impose, and any future licenses we enter into are likely to impose, various development, funding, royalty, diligence, sublicensing, insurance and other obligations on us. If our license with respect to any of these technologies is terminated for any reason, the development of the products contemplated by the licenses would be delayed, or suspended altogether, while we seek to license similar technology or develop new non-infringing technology. The costs of obtaining new licenses are high.
Risks associated with operating in foreign countries could materially adversely affect our product development.
We may conduct future studies in countries outside of the United States. Consequently, we may be subject to risks related to operating in foreign countries. Risks associated with conducting operations in foreign countries include:

•	differing regulatory requirements for drug approvals and regulation of approved drugs in foreign countries;	

•	unexpected changes in tariffs, trade barriers and regulatory requirements; economic weakness, including inflation, or political instability in particular foreign economies and markets; compliance	

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with tax, employment, immigration and labor laws for employees living or traveling abroad; foreign taxes, including withholding of payroll taxes;

•	foreign currency fluctuations, which could result in increased operating expenses or reduced revenues, and other obligations incident to doing business or operating in another country;	

•	workforce uncertainty in countries where labor unrest is more common than in the U.S.;	

•	production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and	

•	business interruptions resulting from geopolitical actions, including war and terrorism.	
Risks Relating to Our Financial Position and Capital Requirements
We are conducting a review of strategic alternatives for the Company, including evaluating potential paths forward for NeuVax, GALE 301/302 and GALE 401 that could significantly impact our future operations and financial position.

In January 2017, we announced that our board of directors had initiated a review of strategic alternatives that could result in changes to our business strategy and future operations. As part of this process, our board of directors is reviewing alternatives with the goal of maximizing stockholder value. Potential strategic alternatives that we may explore and evaluate during the ongoing review process include, among others, a sale of the company, a reverse merger, a business combination or a sale, license or other disposition of corporate assets of the company. Pending any decision to change strategic direction, we have limited our research and development activities to manage our cash position. We cannot provide any commitment as to the timing of our determination or the strategy we may adopt. If we determine to change our business strategy or to seek to engage in a strategic transaction, our future business, prospects, financial position and operating results could be significantly different than those in historical periods or projected by our management. If we determine to further develop NeuVax, GALE 301/302 and GALE 401, or all of the products, we will need to obtain substantial additional funding. Because of the significant uncertainty regarding our future plans, we are not able to accurately predict the impact of a potential change in our business strategy and future funding requirements.
We may not be able to obtain sufficient financing, and may not be able to develop our product candidates.
We had cash and cash equivalents of approximately $29.1 million as of February 28, 2017. We had no revenue during the year ended December 31, 2016, and our cash burn from operations for the quarter ending December 31, 2016 was approximately $8.0 million. We believe that our existing cash and cash equivalents should be sufficient to fund our operations for at least one year from the date of issuance of the Company's consolidated financial statements. This projection is based on our current limited planned operations, anticipated payments for defense costs for the governmental investigation, and estimates of potential resolution of the SEC investigation, and is also subject to changes in our operating plans, resolution of and unanticipated developments in the ongoing government investigation and other legal matters and uncertainties inherent in our business. We may need to seek to replenish our existing cash and cash equivalents prior over the next year.
In addition, we have approximately $13.7 million of restricted cash as of February 28, 2017. We negotiated an amendment with the holder of the debt that reduces the restricted cash amount to the lesser of $18.5 million or the outstanding balance of the amended debenture under certain conditions. We also have limited funding available under our amended purchase agreement with Lincoln Park Capital Fund, LLC and sales agreements with FBR & Co. and Maxim Group LLC. There is no guarantee that such funding will be available to us on favorable terms or will be sufficient to meet all of our future funding needs.

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At our annual meeting of stockholders adjourned on July 15, 2016, our stockholders approved an increase in our authorized common stock from 275,000,000 to 350,000,000. In addition, our shareholders authorized the Board of Directors to approve a reverse stock split within twelve months of October 21, 2016 at a ratio between 1:2 and 1:20. There was no reduction in the amount of authorized shares. The Board of Directors approved a reverse stock split at a ratio of 1:20, effective on November 11, 2016. We are not able to predict whether volume of shares post reverse stock split will be sufficient based upon the reverse stock split price to meet the Company’s ongoing financing requirements to maintain the Company’s operations.
If we fail to obtain additional future funding when needed, we could be forced to scale back or terminate our operations, or to seek to merge with or to be acquired by another company. We may not be able to meet our obligations as they come due, raising substantial doubts as to our ability to continue as a going concern. Any such inability to continue as a going concern may result in our common stock holders losing their entire investment. There is no guaranty that we will become profitable or secure additional financing.

We expect to continue to incur significant operating and non-operating expenses, which may make it difficult for us to secure sufficient financing, and may lead to uncertainty about our ability to continue as a going concern.
Substantial funds were expended to develop our technologies and product candidates, and additional substantial funds will be required for further preclinical testing and clinical trials of our product candidates, and to manufacture and market any products that are approved for commercial sale. Because the successful development of our products is uncertain, we are unable to precisely estimate the actual funds we will require to develop and potentially commercialize them. In addition, we may not be able to generate enough revenue, even if we are able to commercialize any of our product candidates, to become profitable.
In the event that we are unable to obtain additional financing if needed or if we incur significant expense related to the resolution of the ongoing government investigation, we may not be able to meet our obligations as they come due, that in turn may raise substantial doubts as to our ability to continue as a going concern. Any such inability to continue as a going concern may result in our common stock holders losing their entire investment. There is no guaranty that we will secure additional financing if we need such financing. Our financial statements contemplate that we will continue as a going concern and do not contain any adjustments that might result if we were unable to continue as a going concern. Changes in our operating plans, our existing and anticipated working capital needs, defense costs related to the recent securities lawsuits, resolution of the ongoing government investigation, the acceleration or modification of our expansion plans, increased expenses, potential acquisitions or other events may affect our ability to continue as a going concern. Future financing may be obtained through, and future development efforts may be paid for by, the issuance of debt or equity, which may have an adverse effect on our security holders or may otherwise adversely affect our business.
If we raise funds through the issuance of debt or equity, any debt securities or preferred stock issued will have rights, preferences and privileges senior to those of holders of our common stock in the event of a liquidation. In such event, there is a possibility that once all senior claims are settled, there may be no assets remaining to pay out to the holders of common stock. In addition, if we raise funds through the issuance of additional equity, whether through private placements or additional public offerings, such an issuance would dilute your ownership in us.
The terms of debt securities may also impose restrictions on our operations, which may include limiting our ability to incur additional indebtedness, to pay dividends on or repurchase our capital stock, or to make certain acquisitions or investments. In addition, we may be subject to covenants requiring us to satisfy certain financial tests and ratios, and our ability to satisfy such covenants may be affected by events outside of our control.
You may have difficulty evaluating our business, and our historical financial information may not be representative of our future results.
We have closed our PRESENT trial due to futility, are evaluating the appropriate time to commence the GALE-401 trial and anticipate making a definitive determination in the second half of 2017, and plan to continue to support the investigator-sponsored immunotherapy trials. As a result, we will have no recurring revenues unless and until we are able to obtain marketing approval of one or more of our other product candidates and our historical financial information may not be representative of our future results .

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We may be unable to comply with our reporting and other requirements under federal securities laws.
As a publicly traded company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the “Exchange Act,” and the Sarbanes-Oxley Act of 2002, or the “Sarbanes-Oxley Act.” In addition, the Exchange Act requires that we file annual, quarterly and current reports. Our failure to prepare and disclose this information in a timely manner could subject us to penalties under federal securities laws, expose us to lawsuits and restrict our ability to access financing. The Sarbanes-Oxley Act requires that we, among other things, establish and maintain effective internal controls and procedures for financial reporting. From time to time we evaluate our existing internal controls in light of the standards adopted by the Public Company Accounting Oversight Board. It is possible that we, or our independent registered public accounting firm, may identify significant deficiencies or material weaknesses in our internal control over financial reporting in the future. Any failure or difficulties in implementing and maintaining these controls could cause us to fail to meet the periodic reporting obligations or result in material misstatements in our financial statements.
Section 404 of the Sarbanes-Oxley Act requires annual management and independent auditor assessments of the effectiveness of our internal control over financial reporting. Our failure to satisfy the requirements of Section 404 on a timely basis could result in the loss of investor confidence in the reliability of our financial statements, which in turn could have a material adverse effect on our business and our common stock.
Risks Related to Our Intellectual Property
We may not be able to obtain and enforce patent rights or other intellectual property rights that cover our product candidates and that are of sufficient breadth to prevent third parties from competing against us.
Our success with respect to our product candidates will depend in part on our ability to obtain and maintain patent protection in the U.S. and abroad, to preserve our trade secrets, and to prevent third parties from infringing upon our proprietary rights. Our patents and patent applications, however, may not be sufficient to provide protection for NeuVax or our other products and product candidates against commercial competition.
The active peptide found in NeuVax, the E75 peptide, has been known and studied for many years. We have one issued U.S. patent, US 6,514,942, covering the composition of matter of the E75 peptide, which expired in mid-2015, prior to any potential commercialization of NeuVax. We do not have and will not be able to obtain any composition of matter patent protection for E75, the active peptide in NeuVax. We also have a license from The Henry M. Jackson Foundation to issued U.S., European, Japanese, Korean, Mexican and Australian method of use patents, which expire in 2028, that are directed to a method of inducing immunity against breast cancer recurrence by administering a composition comprising the E75 peptide to patients who have both an immunohistochemistry (IHC) rating of 1+ or 2+ for HER2/neu protein expression, as well as a fluorescence in situ hybridization (FISH) rating of less than about 2.0 for HER2/neu gene expression. The license further includes an issued U.S. method of use patent directed to a method of inducing immunity against recurrence of any HER2/neu expressing tumors by administering the E75 peptide to patients with tumors having a FISH rating of less than about 2.0 for HER2/neu gene expression; an allowed U.S application which includes claims to the use of E75 to reduce the risk of cancer recurrence, including bone only recurrence; and pending applications with similar claims in a number of foreign jurisdiction, all of which expire in 2028. Also included in the license is a method of use patent, which expires in 2026, that is directed to the use of NeuVax in combination with Herceptin ® (trastuzumab) to treat any HER2/neu expressing cancer. Thus, our method of use patents may not prevent competitors from seeking to develop and market NeuVax for use in cancer patients who do not meet these criteria. If any such alternative uses were approved, this could lead to off-label use and price erosion for our NeuVax product. We may seek FDA approval for use of NeuVax to treat cancer patients who fall outside the claimed IHC and FISH ranges and for other cancers as well. Although we are pursuing additional patent protection for NeuVax through pending patent applications, we may not be able to obtain additional patent protection that would provide us with a significant commercial advantage.

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Anagrelide hydrochloride, the sole active pharmaceutical ingredient, or “API,” in GALE-401, has been approved for many years and, thus, it is not possible to obtain composition of matter patents that cover anagrelide hydrochloride. As a result, competitors who obtain the requisite regulatory approval can offer products with the same 43 API as GALE-401, so long as the competitors do not infringe any formulation patents that we may have or may obtain or license, if any. The only patent protection that we have or are likely to obtain covering GALE-401 are patents relating to specific formulations, methods using these formulations, and methods of manufacturing and packaging. We have an issued U.S. Patent, which expires in 2020, covering methods of using anagrelide to reduce platelet count in patients subject to veno-occlusive events. We have granted patents in the U.S., United Kingdom and Japan, which expire in 2029, covering controlled release formulations of anagrelide and methods of use. We also are prosecuting pending patent applications in other territories including, but not limited to, the U.S., Europe, India, and Japan, which may not issue prior to any potential commercialization of GALE-401. We may seek FDA approval for use of GALE-401 to treat patients with myeloproliferative neoplasms that include several hematological disorders, including essential thrombocythemia. Although we are pursuing additional patent protection for GALE-401 through pending patent applications, we may not be able to obtain additional patent protection that would provide us with a significant commercial advantage.
The active peptides found in GALE-301 and GALE-302 are derived from Folate Binding Protein. One of the active peptides, E39, has been known and studied for many years. The other active peptide, GALE-302, is a derivative of E39. We have a license from The Henry M. Jackson Foundation to issued and granted patents in the U.S., Europe, Canada, and Japan, covering composition of matter for the E39 derivative peptides, including GALE-302, alone and in combination with E39, as well as the use of these compositions for the treatment of cancer. These patents are expected to expire in 2022, prior to any potential commercialization of GALE-301. We do not have and will not be able to obtain any composition of matter patent protection for the E39 peptide in any territory. The license we have from The Henry M. Jackson Foundation grants us the right to develop and market GALE-301 for any use, including methods of treating cancer. Our patents may not prevent competitors from seeking to develop and market the E39 peptide alone. If any such alternative uses of compositions containing the E39 peptide were approved, this could lead to off label use and price erosion for GALE-301. We may seek FDA approval for use of GALE-301, alone or in combination with GALE-302, to treat cancer patients with ovarian and endometrial cancers and for other cancers, as well. Although we are pursuing additional patent protection for GALE-301 and the combination of GALE-301 and GALE-302 through pending patent applications, we may not be able to obtain additional patent protection that would provide us with a significant commercial advantage.
Our ability to obtain, maintain and enforce patents is uncertain and involves complex legal and factual questions. Accordingly, rights under any patents we have or may obtain or license may not provide us with sufficient protection for our commercial product and product candidates to afford a commercial advantage against competitive products or processes, including those from branded and generic pharmaceutical companies. In addition, we cannot guarantee that any patents will issue from any pending or future patent applications owned by or licensed to us. Nor can we guarantee that the claims of these patents will be held valid or enforceable by the courts or will provide us with any significant protection against competitive products or otherwise be commercially valuable to us.
Changes in either the patent laws or in the interpretations of patent laws in the U.S. or abroad may diminish the value of our intellectual property. In addition, on September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law. The Leahy-Smith Act includes a number of significant changes to the U.S. patent law. These include provisions that affect the way patent applications will be prosecuted and may also affect patent litigation. Accordingly, it is not clear what, if any, impact the Leahy-Smith Act will have on the operation of our business. However, the Leahy-Smith Act, in particular the first-to-file provision and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement of or defense of our issued patents, all of which could have a material adverse effect on our business and financial condition. Accordingly, we cannot predict the breadth of claims that may be allowed or enforced in our patents or in third-party patents.

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While we intend to take actions reasonably necessary to enforce our patent rights, we may not be able to detect infringement of our own or in-licensed patents, which may be especially difficult for methods of manufacturing or formulation products, and we depend, in part, on our licensors and collaborators to protect a substantial portion of our proprietary rights. In addition, third parties may challenge our in-licensed patents and any of our own patents that we may obtain, which could result in the invalidation or unenforceability of some or all of the relevant patent claims. Litigation or other proceedings to enforce or defend intellectual property rights is very complex, expensive, and may divert our management’s attention from our core business and may result in unfavorable results that could adversely affect our ability to prevent third parties from competing with us.
If another party has reason to assert a substantial new question of patentability against any of our claims in our own and in-licensed patents, the third party can request that the patent claims be reexamined, which may result in a loss of scope of some claims or a loss of the entire patent. In addition to potential infringement suits and, interference and reexamination proceedings, we may become a party to patent opposition proceedings where either the patentability of the inventions subject of our patents are challenged, or we are challenging the patents of others. The costs of these proceedings could be substantial, and it is possible that such efforts would be unsuccessful. As the medical device, biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that others may assert our commercial product and/or product candidates infringe their patent rights. If a third-party’s patents were found to cover our commercial product and product candidates, proprietary technologies or its uses, we or our collaborators could be enjoined by a court and required to pay damages and could be unable to continue to commercialize our products or use our proprietary technologies unless we or it obtained a license to the patent. A license may not be available to us or our collaborators on acceptable terms, if at all. In addition, during litigation, the patent holder could obtain a preliminary injunction or other equitable relief, which could prohibit us from making, using or selling our commercial product and product candidates pending a trial on the merits, which could be years away.
Proprietary trade secrets and unpatented know-how are also very important to our business. Although we have taken steps to protect our trade secrets and unpatented know-how, by entering into confidentiality agreements with third parties, and proprietary information and invention agreements with certain employees, consultants and advisors, third parties may still obtain this information or we may be unable to protect our rights. We also have limited control over the protection of trade secrets used by our licensors, collaborators and suppliers. There can be no assurance that binding agreements will not be breached, that we would have adequate remedies for any breach, or that our trade secrets and unpatented know-how will not otherwise become known or be independently discovered by our competitors. If trade secrets are independently discovered, we would not be able to prevent their use. Enforcing a claim that a third party illegally obtained and is using our trade secrets or unpatented know-how is expensive and time consuming, and the outcome is unpredictable.
We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed to us alleged trade secrets of their other clients or former employers. As is common in the biotechnology and pharmaceutical industry, certain of our employees were formerly employed by other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Moreover, we engage the services of consultants to assist us in the development of our commercial product and product candidates, many of whom were previously employed at or may have previously been or are currently providing consulting services to, other biotechnology or pharmaceutical companies, including our competitors or potential competitors. We may be subject to claims that these employees and consultants or we have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers or their former or current customers. Litigation may be necessary to defend against these types of claims. Even if we are successful in defending against any such claims, any such litigation would likely be protracted, expensive, a distraction to our management team, not viewed favorably by investors and other third parties, and may potentially result in an unfavorable outcome.

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Our product candidates may face competition sooner than expected after the expiration of our composition of matter patent protection for such products.
Our composition of matter patents for many of our product candidates have expired or will expire prior to any product approval. We intend to seek data exclusivity or market exclusivity for our NeuVax as well as our GALE-301 and GALE-302 product candidates provided under the Federal Food, Drug and Cosmetic Act, or FDCA, and similar laws in other countries. We believe that these product candidates will qualify for 12 years of data exclusivity under the Biologics Price Competition and Innovation Act of 2009, or BPCIA, which was enacted as part of the Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act of 2010 (collectively, the Affordable Care Act or ACA) enacted in March 2010. Under the BPCIA, an application for a biosimilar product or BLA cannot be submitted to the FDA until four years, or if approved by the FDA, until 12 years, after the original brand product identified as the reference product is approved under a BLA. The BPCIA provides an abbreviated pathway for the approval of biosimilar and interchangeable biological products. The new abbreviated regulatory pathway establishes legal authority for the FDA to review and approve biosimilar biologics, including the possible designation of a biosimilar as “interchangeable” based on its similarity to an existing brand product. The new law is complex and is only beginning to be interpreted and implemented by the FDA. While it is uncertain when any such processes may be fully adopted by the FDA, any such processes could have a material adverse effect on the future commercial prospects for our biological product candidates. There is also a risk that the U.S. Congress could amend the BPCIA to shorten this exclusivity period, potentially creating the opportunity for biosimilar competition sooner than anticipated after the expiration of our patent protection. Moreover, the extent to which a biosimilar, once approved, will be substituted for any reference product in a way that is similar to traditional generic substitution for non-biological products is not yet clear, and will depend on a number of marketplace and regulatory factors that are still developing.
If our product candidates are not considered biologics that would qualify for exclusivity under the BPCIA, they may be eligible for market exclusivity as drugs under the FDCA. The FDCA provides a five-year period of non-patent marketing exclusivity within the U.S. to the first applicant to gain approval of an NDA for a new chemical entity. A drug is a new chemical entity if the FDA has not previously approved any other new drug containing the same active moiety, which is the molecule or ion responsible for the action of the drug substance. During the exclusivity period, the FDA may not accept for review an abbreviated new drug application, or ANDA, or a 505(b)(2) NDA, submitted by another company for another version of such drug where the applicant does not own or have a legal right of reference to all the data required for approval. However, an application may be submitted after four years if it contains a certification of patent invalidity or non-infringement. The FDCA also provides three years of marketing exclusivity for an NDA, 505(b)(2) NDA or supplement to an existing NDA if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by the applicant are deemed by FDA to be essential to the approval of the application, for example, for new indications, dosages, or strengths of an existing drug. This three-year exclusivity covers only the conditions associated with the new clinical investigations and does not prohibit the FDA from approving ANDAs for drugs containing the original active agent.
Even if, as we expect, NeuVax, GALE-301 and GALE-302 are considered to be reference products eligible for 12 years of exclusivity under the BPCIA or five years of exclusivity under the FDCA, another company could market competing products if the FDA approves a full BLA or full NDA for such product containing the sponsor’s own preclinical data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity and potency of the products.
In some countries outside of the U.S., peptide vaccines, such as NeuVax, GALE-301 and GALE-302, are regulated as chemical drugs rather than as biologics and may or may not be eligible for non-patent exclusivity.
Although we have received orphan drug designation for both GALE-301, as well as GALE-301 and GALE-302, there is no guarantee that the drugs will be successfully approved by the FDA, that they will be commercially successful in the marketplace, or that another drug will not be approved for the same indication ahead of our drugs.

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Significant disruptions of information technology systems or breaches of information security could adversely affect our business.
We rely to a large extent upon sophisticated information technology systems to operate our business. In the ordinary course of business, we collect, store and transmit large amounts of confidential information (including, but not limited to, personal information and intellectual property). We also have outsourced significant elements of our operations to third parties, including significant elements of our information technology infrastructure and, as a result, we are managing many independent vendor relationships with third parties who may or could have access to our confidential information. The size and complexity of our information technology and information security systems, and those of our third-party vendors with whom we contract (and the large amounts of confidential information that is present on them), make such systems potentially vulnerable to service interruptions or to security breaches from inadvertent or intentional actions by our employees or vendors, or from malicious attacks by third parties. Such attacks are of ever-increasing levels of sophistication and are made by groups and individuals with a wide range of motives (including, but not limited to, industrial espionage and market manipulation) and expertise. While we have invested significantly in the protection of data and information technology, there can be no assurance that our efforts will prevent service interruptions or security breaches. Any interruption or breach in our systems could adversely affect our business operations and/or result in the loss of critical or sensitive confidential information or intellectual property, and could result in financial, legal, business and reputational harm to us or allow third parties to gain material, inside information that they use to trade in our securities.
Risks Relating to Ownership of Our Common Stock
Our common stock trades at prices less than $1.00 which is the minimum bid price requirement under NASDAQ’s continued listing standards, as such our common stock may be subject to delisting from the NASDAQ Capital Market.
The continued listing requirements of the NASDAQ Capital Market require that the closing bid price of our common stock not be less than $1.00 for 30 consecutive trading days. On March 14, 2017 the last reported sale price of our common stock on the NASDAQ Capital Market was $0.55 per share and has been below the $1.00 closing bid price since February 8, 2017. If our trading price falls below $1.00 for 30 consecutive trading days or more, we may receive a notice from NASDAQ informing us that we may be delisted unless our trading price is above $1.00 for more than 10 consecutive trading days. In accordance with NASDAQ Listing Rule 5810(c)(3)(A), we would have 180 calendar days to regain compliance with the $1.00 minimum bid price requirement. We can regain compliance with the $1.00 minimum bid listing requirement if the closing bid price is at least $1.00 per share for a minimum of ten consecutive trading days during this initial 180-day compliance period. If compliance is not achieved within the 180-day period, NASDAQ would provide written notification to us that our common stock is subject to delisting. In the event that we fail to regain compliance with NASDAQ continued listing standards by the expiration of the applicable cure period or any extension period, NASDAQ will commence suspension and delisting procedures with respect to our common stock, which could impair the value of your investment.
On January 18, 2017, we received an inquiry from NASDAQ Listing Qualifications Department seeking information in connection with the subpoenas issued to the Company by the US Attorney’s Office for the District of New Jersey and the U.S. Attorney’s Office for the Southern District of Alabama. We responded to the inquiry on February 1, 2017. If we are not in compliance with the listing requirements under NASDAQ Listing Rule 5502(a)(2), we could be delisted by NASDAQ.
If our common stock is delisted from NASDAQ Capital Market in the future, such securities may be traded over-the-counter on the “pink sheets.” Such alternative market, however, is generally considered to be less efficient than, and not as broad as, NASDAQ. Accordingly, delisting of our common stock from NASDAQ could have a significant negative effect on the trading volume, liquidity and market price of our common stock. In addition, the delisting of our common stock could adversely affect our ability to raise capital on terms acceptable to us or at all and could reduce the number of investors willing to hold or acquire our common stock.

33

The market price and trading volume of our common stock may be volatile.
The market price of our common stock has exhibited substantial volatility recently. Between January 1, 2016 and February 28, 2017, the sale price of our common stock as reported on The NASDAQ Capital Market ranged from a low of $0.62 to a high of $49.80 as adjusted for the reverse stock split effected in November 2016. The market price of our common stock could continue to fluctuate significantly for many reasons, including the following factors:

•	reports of the results of our clinical trials regarding the safety or efficacy of our product candidates and surrogate markers;	

•	announcements of regulatory developments or technological innovations by us or our competitors;	

•	announcements of business or strategic transactions or our success in finalizing such a transaction;	

•	announcements of legal or regulatory actions against us or any adverse outcome of any such actions;	

•	changes in our relationship with our licensors, licensees and other strategic partners;	

•	our quarterly operating results;	

•	developments in patent or other technology ownership rights;	

•	additional funds may not be available on terms that are favorable to us and, in the case of equity financings, may result in dilution to our stockholders;	

•	government regulation of drug pricing; and	

•	general changes in the economy, the financial markets or the pharmaceutical or biotechnology industries.	
Factors beyond our control may also have an impact on the price of our stock. For example, to the extent that other companies within our industry experience declines in their stock prices, our stock price may decline as well.

34

We are, and in the future may be, subject to legal or administrative actions that could adversely affect our financial condition and our business.
On December 22, 2016, Galena Biopharma, Inc. and its former CEO reached an agreement in principle to a proposed settlement that would resolve an investigation by the staff of the SEC involving conduct in the period 2012-2014 regarding the commissioning of internet publications by outside promotional firms. Under the terms of the proposed settlement framework, Galena and the former CEO would consent to the entry of an administrative order requiring that we and the former CEO cease and desist from any future violations of Sections 5(a), 5(b), 5(c), 17(a), and 17(b) of the Securities Act of 1933, as amended, and Section 10(b), 13(a), and 13(b)(2)(A) of the Securities Exchange Act of 1934, as amended, and various rules thereunder, without admitting or denying the findings in the order. Based upon the proposed settlement framework, the Company will make a $200,000 penalty payment. In addition to other remedies, the proposed settlement framework would require the former CEO to make a disgorgement and prejudgment interest payment as well as a penalty payment to the Commission. To address the issues raised by the SEC staff’s investigation, in addition to previous governance enhancements we have implemented, we have voluntarily undertaken to implement a number of remedial actions relating to securities offerings and our interactions with investor relations and public relations firms. The proposed settlement is subject to approval by the Commission and would acknowledge our cooperation in the investigation and confirm our voluntary undertaking to continue that cooperation. If the Commission does not approve the settlement, we may need to enter into further discussions with the SEC staff to resolve the investigated matters on different terms and conditions. As a result, there can be no assurance as to the final terms of any resolution including its financial impact or any future adjustment to the financial statements. A special committee of the Board of Directors has determined in response to an indemnification claim by the former CEO that we are required under Delaware law to indemnify our former CEO for the disgorgement and prejudgment interest payment of approximately $750,000 that he would be required to pay if and when the settlement is approved by the Commission. Any penalty payment that the former CEO will be required to make in connection with this matter ($600,000 under the proposed settlement framework) will be the responsibility of the former CEO. In the event the Commission does approve the proposed settlement, the Company may not have available certain exemptions and safe harbor protections under the securities laws.
On February 13, 2017, a putative shareholder securities class action complaint was filed in the U.S. District Court for the District of New Jersey entitled, Miller v. Galena Biopharma, Inc., et al . On February 15, 2017, a putative shareholder securities class action complaint was filed in the U.S. District Court for the District of New Jersey entitled, Kattuah v Galena Biopharma, Inc., et al . Within the time allowed under the federal rules and statutes, the Company and the other defendants, former and current officers, will respond to the complaints through an appropriate pleading or motion.

A federal investigation of two of the high-prescribing physicians for Abstral (former commercial product) has resulted in the criminal prosecution of the two physicians for alleged violations of the federal False Claims Act and other federal statutes. The criminal trial began in January 2017 and is ongoing. We have received a trial subpoena for documents in connection with that investigation and we have been in contact with the U.S. Attorney’s Office for the Southern District of Alabama, which is handling the criminal trial, and are cooperating in the production of documents. On April 28, 2016, a second superseding indictment was filed in the criminal case, which added additional information about the defendant physicians and provided information regarding the facts and circumstances involving a rebate agreement between the Company and the defendant physicians’ pharmacy as well as their ownership of our stock. The criminal trial , which began on January 4, 2017, concluded with a jury verdict on February 23, 2017 finding these physicians guilty on 19 of 20 counts; sentencing is scheduled for May 2017. At the end of the SDAL case , SDAL dismissed count 18 of the indictment charging that the physicians conspired, through the C&R Pharmacy, to receive illegal kickbacks in exchange for prescribing Abstral. Though certain former employees received trial subpoenas to appear at the trial and provide oral testimony, only one former employee testified at the trial. We agreed to reimburse those former employees’ attorney’s fees. To our knowledge, we were not a target or subject of that investigation.

35

There also have been federal and state investigations of a company that has a product 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. On December 16, 2015, we received a subpoena issued by the U.S. Attorney’s Office for the District of New Jersey requesting the production of a broad range of documents pertaining to our marketing and promotional practices for Abstral. We have been in contact with the U.S. Attorney’s Office for the District of New Jersey and are cooperating in the production of the requested documents. We have come to understand that the investigation being undertaken by the U.S. Attorney’s Office for the District of New Jersey and Department of Justice is a criminal investigation in addition to a civil investigation that could ultimately involve the company as well as one or more former employees. Pursuant to the Company’s charter, we are currently reimbursing any former employees’ attorney’s fees with respect to the investigation. We are cooperating with the civil and criminal investigation and through our outside counsel we have recently begun preliminary discussions with the government aimed at the ultimate resolution of the investigation regarding the Company.
We may be subject to legal or administrative actions as a result of these matters, or the impact of such matters. If we are found to be in violation of the False Claims Act, Anti-Kickback Statute, Patient Protection and Affordable Care Act, or any other applicable state or any federal fraud and abuse laws, we may be subject to penalties, such as civil and criminal penalties, damages, fines, or an administrative action of exclusion from government health care reimbursement programs. We can make no assurances as to the time or resources that will need to be devoted to these matters or their outcome, or the impact, if any, that these matters or any resulting legal or administrative proceedings may have on our business or financial condition.
Litigation is inherently uncertain. We have incurred and may continue to incur substantial unreimbursed legal fees and other expenses in connection with these or other legal and regulatory proceedings that may not qualify for coverage under, or may exceed the limits of, our applicable directors and officers liability insurance policies and could have a material adverse effect on our financial condition, liquidity, and results of operations. These matters also may distract the time and attention of our officers and directors or divert our other resources away from our ongoing development programs. An unfavorable outcome in any of these matters could damage our business and reputation or result in additional claims or proceedings against us.
Future sales of substantial amounts of our common stock, or the possibility that such sales could occur, could adversely affect the market price of our common stock.
Future sales in the public market of shares of our common stock, including shares referred to in the foregoing risk factors or shares issued upon exercise of our outstanding stock options, or the perception by the market that these sales could occur, could lower the market price of our common stock or make it difficult for us to raise additional capital.
As of December 31, 2016, we had reserved for issuance 560,925 shares of our common stock issuable upon the exercise of outstanding stock options at a weighted-average exercise price of $41.50 per share and 2,569,751 shares of our common stock issuable upon the exercise of outstanding warrants at a weighted-average exercise price of $29.12 per share. Upon exercise of these options and warrants, the underlying shares may be resold into the public market. In the case of outstanding options and warrants that have exercise prices that are below the market price of our common stock from time to time, our stockholders would experience dilution upon the exercise of these options.
Our outstanding warrants may result in dilution to our stockholders.
Our outstanding April 2011 warrants to purchase a total of 12,900 shares of common stock as of December 31, 2016 at a current exercise price of $1.00 per share contain so-called full-ratchet anti-dilution provisions. Our outstanding December 2012 warrants to purchase 151,565 shares of common stock as of December 2016 with a current exercise price of $10.32 per share contain so-called weighted-average anti-dilution provisions. These anti-dilution provisions may be triggered by the issuance of the shares being offered hereby or upon any future issuance by us of shares of our common stock or common stock equivalents at a price per share below the then-exercise price of the warrants, subject to some exceptions. The share and per share amounts described above are presented on a post-split basis that was effected November 11, 2016.

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To the extent that these anti-dilution provisions are triggered in the future, we would be required to reduce the exercise price of all of the warrants on either a full-ratchet or weighted-average basis, which would have a dilutive effect on our stockholders.
We may issue preferred stock in the future, and the terms of the preferred stock may reduce the value of our common stock.
We are authorized to issue up to 5 million shares of preferred stock in one or more series. Our Board of Directors may determine the terms of future preferred stock offerings without further action by our stockholders. If we issue preferred stock, it could affect stockholder rights or reduce the market value of our outstanding common stock. In particular, specific rights granted to future holders of preferred stock may include voting rights, preferences as to dividends and liquidation, conversion and redemption rights, sinking fund provisions, and restrictions on our ability to merge with or sell our assets to a third party.
Anti-takeover provisions of our amended and restated certificate of incorporation and amended and restated bylaws and provisions of Delaware law could delay or prevent a change of control.
Anti-takeover provisions of our amended and restated certificate of incorporation and amended and restated bylaws may discourage, delay or prevent a merger or other change of control that stockholders may consider favorable or may impede the ability of the holders of our common stock to change our management and may be constrained by other contractual agreements with third parties. These provisions of our amended and restated certificate of incorporation and amended and restated bylaws, among other things:

•	divide our board of directors into three classes, with members of each class to be elected for staggered three-year terms;	

•	limit the right of security holders to remove directors;	

•	prohibit stockholders from acting by written consent;	

•	regulate how stockholders may present proposals or nominate directors for election at annual meetings of stockholders; and	

•	authorize our board of directors to issue preferred stock in one or more series, without stockholder approval.	
In addition, Section 203 of the Delaware General Corporation Law provides that, subject to limited exceptions, persons that acquire, or are affiliated with a person that acquires, more than 15% of the outstanding voting stock of a Delaware corporation such as our company shall not engage in any business combination with that corporation, including by merger, consolidation or acquisitions of additional shares for a three-year period following the date on which that person or its affiliate crosses the 15% stock ownership threshold. Section 203 could operate to delay or prevent a change of control of our company.
We have never declared or paid cash dividends on our capital stock and we do not anticipate paying cash dividends in the foreseeable future.
Our business requires significant funding. We currently plan to invest all available funds and future earnings in the development and growth of our business and do not anticipate paying any cash dividends on our common stock in the foreseeable future, and are prohibited by the terms of our outstanding indebtedness from paying dividends on any common stock, except with the prior consent of our lenders. As a result, capital appreciation, if any, of our common stock will be our stockholders’ sole source of potential gain for the foreseeable future.

37

The terms of our outstanding indebtedness may inhibit potential acquirers.
We are prohibited by the terms of our outstanding indebtedness from disposing of any of our business or property, except with the consent of our lenders or if we were to prepay the outstanding indebtedness and related fees in accordance with the loan security agreement. Our outstanding indebtedness may inhibit potential acquirers or other interested parties from seeking to acquire all or a part of our business or assets, and there is no assurance that our lenders would consent to any proposed future transaction that might be beneficial to our stockholders .

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ITEM 1B. UNRESOLVED STAFF COMMENTS

We have received no unresolved written comments from the staff of the SEC regarding our periodic or current reports.

ITEM 2. PROPERTIES

On July 10, 2015, we entered into a lease with Legacy III SR Crow Canyon, LLC for our facility located at 2000 Crow Canyon Place, Suite 380, San Ramon, CA 94583. The facility is approximately 8,100 square feet and is used for our general and administrative offices. The monthly rent is approximately $20,000.

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ITEM 3. LEGAL PROCEEDINGS

On June 24, 2016, the U.S. District Court for the District of Oregon entered a final order and judgment in In re Galena Biopharma, Inc. Derivative Litigation , granting final approval to the settlement awarding attorney’s fees of $4.5 million plus costs, which was paid by our insurance carriers. The settlement included a payment of $15 million in cash by our insurance carriers, which we used to fund a portion of the class action settlement, and cancellation of 1,200,000 outstanding director stock options. The settlement also required that we adopt and implement certain corporate governance measures. The settlement did not include any admission of wrongdoing or liability on the part of us or the individual defendants and included a full release of us and the current and former officers and directors in connection with the allegations made in the consolidated federal derivative actions and state court derivative actions.

On June 24, 2016, the U.S. District Court for the District of Oregon entered a final order and partial judgment in In re Galena Biopharma, Inc. Securities Litigation , granting final approval of the settlement awarding attorney’s fees of $4.5 million plus costs, which was paid out of the settlement funds. The settlement agreement provided for a payment of $20 million to the class and the dismissal of all claims against us and our current and former officers and directors in connection with the consolidated federal securities class actions. Of the $20 million settlement payment to the class, $16.7 million was paid by our insurance carriers and $2.3 million in cash was paid by us on July 1, 2016, along with $1 million in shares of our common stock (24,002 shares) issued by us on July 6, 2016. We are responsible for defense costs and any settlements or judgments incurred for any related opt-out lawsuits.

In July 2016, we resolved claims brought by shareholders that relate to the securities litigation mentioned above in one case for $150,000 plus $150,000 in shares (14,563 shares) of our common stock, and in another case for $1.5 million in shares of our common stock (168,337 shares). The shares issued in connection with such settlements are included in the secondary offering filed on July 25, 2016. The settlements did not include any admission of wrongdoing or liability on the part of us or any of the current or former directors and officers and included a full release of us and the current and former directors and officers in connection with the allegations made. We are not aware of any other claims made by shareholders who have opted out of the securities litigation.

On October 13, 2016, we filed a complaint in the Circuit Court for the County of Multnomah for the State of Oregon against Aon Risk Insurance Services West, Inc. where we are seeking attorney's fees, costs and expenses incurred by us related to our coverage dispute with a certain insurer and for amounts we were required to contribute to the settlements of In re Galena Biopharma, Inc. Derivative Litigation and In re Galena Biopharma, Inc. Securities Litigation as a direct result of certain insurer's failure to pay its full policy limits of liability and other relief. We are currently engaged in written discovery.

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On December 22, 2016, Galena and its former CEO during the period March 2011 to August 2014 reached an agreement in principle to a proposed settlement that would resolve an investigation by the staff of the Securities and Exchange Commission (SEC) involving conduct in the period 2012-2014 regarding the commissioning of internet publications by outside promotional firms. Under the terms of the proposed settlement framework, Galena and the former CEO would consent to the entry of an administrative order requiring that we and the former CEO cease and desist from any future violations of Sections 5(a), 5(b), 5(c), 17(a), and 17(b) of the Securities Act of 1933, as amended, and Section 10(b), 13(a), and 13(b)(2)(A) of the Securities Exchange Act of 1934, as amended, and various rules thereunder, without admitting or denying the findings in the order. Based upon the proposed settlement framework, the Company will make a $200,000 penalty payment. In addition to other remedies, the proposed settlement framework would require the former CEO to make a disgorgement and prejudgment interest payment as well as a penalty payment to the Commission. To address the issues raised by the SEC staff’s investigation, in addition to previous governance enhancements we have implemented, we have voluntarily undertaken to implement a number of remedial actions relating to securities offerings and our interactions with investor relations and public relations firms. The proposed settlement is subject to approval by the Commission and would acknowledge our cooperation in the investigation and confirm our voluntary undertaking to continue that cooperation. If the Commission does not approve the settlement, we may need to enter into further discussions with the SEC staff to resolve the investigated matters on different terms and conditions. As a result, there can be no assurance as to the final terms of any resolution including its financial impact or any future adjustment to the financial statements. A special committee of the Board of Directors has determined in response to an indemnification claim by the former CEO that we are required under Delaware law to indemnify our former CEO for the disgorgement and prejudgment interest payment of approximately $750,000 that he would be required to pay if and when the settlement is approved by the Commission. Any penalty payment that the former CEO will be required to make in connection with this matter ($600,000 under the proposed settlement framework) will be the responsibility of the former CEO.

On February 13, 2017, a putative shareholder securities class action complaint was filed in the U.S. District Court for the District of New Jersey entitled, Miller v. Galena Biopharma, Inc., et al . On February 15, 2017, a putative shareholder securities class action complaint was filed in the U.S. District Court for the District of New Jersey entitled, Kattuah v Galena Biopharma, Inc., et al . Within the time allowed under the federal rules and statutes, the Company and the other defendants, former and current officers, will respond to the complaints through an appropriate pleading or motion.

A federal investigation of two of the high-prescribing physicians for Abstral (former commercial product) has resulted in the criminal prosecution of the two physicians for alleged violations of the federal False Claims Act and other federal statutes. We received a trial subpoena for documents in connection with that investigation and we have been in contact with the U.S. Attorney’s Office for the Southern District of Alabama (SDAL), which is handling the criminal trial, and are cooperating in the production of documents. On April 28, 2016, a second superseding indictment was filed in the criminal case, which added additional information about the defendant physicians and provided information regarding the facts and circumstances involving a rebate agreement between the Company and the defendant physicians’ pharmacy as well as their ownership of our stock. The criminal trial , which began on January 4, 2017, concluded with a jury verdict on February 23, 2017 finding these physicians guilty on 19 of 20 counts; sentencing is scheduled for May 2017. At the end of the SDAL case , SDAL dismissed count 18 of the indictment charging that the physicians conspired, through the C&R Pharmacy, to receive illegal kickbacks in exchange for prescribing Abstral. Though certain former employees received trial subpoenas to appear at the trial and provide oral testimony, only one former employee testified at the trial. We agreed to reimburse those former employees’ attorney’s fees. To our knowledge, we were not a target or subject of that investigation.

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There also have been federal and state investigations of a company that has a product 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. On December 16, 2015, we received a subpoena issued by the U.S. Attorney’s Office for the District of New Jersey requesting the production of a broad range of documents pertaining to our marketing and promotional practices for Abstral, the commercial product we sold in the fourth quarter of 2015. We have been in contact with the U.S. Attorney’s Office for the District of New Jersey and Department of Justice, and we have come understand that the investigation being undertaken by the U.S. Attorney’s Office for the District of New Jersey and Department of Justice is a criminal investigation in addition to a civil investigation that could ultimately involve the Company as well as one or more former employees. Pursuant to the Company’s charter, we are currently reimbursing certain former employees’ attorney’s fees with respect to the investigation. We are cooperating with the civil and criminal investigation, and through our outside counsel we have recently begun preliminary discussions with the government aimed at the ultimate resolution of the investigation regarding the Company.

ITEM 4. Mine Safety Disclosures

Not applicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information
Our common stock is listed on The NASDAQ Capital Market under the symbol “GALE ” The following table shows the high and low per-share sale prices of our common stock for the periods indicated:

	
								
 	High	 	Low	
2015	 	 	 	
First Quarter	$	42.40		 	$	26.60		
Second Quarter	47.80		 	25.40		
Third Quarter	38.40		 	22.00		
Fourth Quarter	36.60		 	27.40		
2016	 	 	 	
First Quarter	$	30.00		 	$	11.80		
Second Quarter	49.80		 	5.60		
Third Quarter	15.40		 	6.20		
Fourth Quarter	7.00		 	1.84		

Holders

As of February 28, 2017, there were approximately 189 holders of record of our common stock. Because many of our shares are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of individual stockholders represented by these holders of record.

Dividends

We have never paid any cash dividends and do not anticipate paying any cash dividends on our common stock in the foreseeable future. We expect to retain future earnings, if any, for use in our development activities and the operation of our business. The payment of any future dividends will be subject to the discretion of our Board of Directors and will depend, among other things, upon our results of operations, financial condition, cash requirements, prospects and other factors that our board of directors may deem relevant. Additionally, our ability to pay future dividends may be restricted by the terms of any debt financing.

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Table of Contents

Equity Compensation Plan

The following table sets forth certain information as of December 31, 2016 , regarding securities authorized for issuance under our equity compensation plans:

	
										
 	(a)	 	(b)	 	Number of
Securities
Remaining
Available for
Issuance
Under Equity
Compensation
Plans
(Excluding
Securities
Reflected in
Column (a))	
Plan Category	Number of
Securities to be
Issued Upon
Exercise of
Outstanding
Options,
Warrants and
Rights	 	Weighted-
Average
Exercise Price
of Outstanding
Options,
Warrants and
Rights	 		
Equity compensation plans approved by our security holders:	 	 	 	 	 	
Amended and Restated 2016 Incentive Plan	560,925		 	$	41.50		 	500,692		
Equity compensation plans not approved by our security holders:	 	 	 	 	 	
Employee Stock Purchase Plan	NA		 	NA		 	20,930		
Outstanding warrants (1)	124,109		 	$	20.15		 	—		
Total	685,034		 	$	37.63		 	521,622		

(1)  	The warrants shown were issued in discrete transactions from time to time as compensation for services rendered by consultants, advisers or other third parties, and do not include warrants sold in private placement or public offering transactions. The material terms of such warrants were determined based upon arm’s-length negotiations with the services providers. The warrant exercise prices approximated the market price of our common stock at or about the date of grant, and the warrant terms range from three to ten years from the grant date.	

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Table of Contents

Performance Graph

The following graph shows the value of an investment of $100 on December 31, 2011 in each of Galena Biopharma, Inc. common stock, the NASDAQ Composite Index, the NASDAQ Biotechnology Index, and Standard & Poor's Index (S&P 500). All values assume reinvestment of pretax value of dividends and are calculated as of December 31 of each year. The historical stock price performance of our common stock shown in the performance graph is not necessarily indicative of future stock performance.

COMPARISON OF FIVE YEAR CUMULATIVE RETURNS

	
																								
 	As of December 31,	
 	2011	 	2012	 	2013	 	2014	 	2015	 	2016	
Galena Biopharma, Inc. (1)	$	100.00		 	$	325.53		 	$	1,055.32		 	$	321.28		 	$	312.77		 	$	20.64		
S&P 500	100.00		 	115.88		 	153.01		 	173.68		 	176.07		 	196.78		
NASDAQ Composite	100.00		 	117.70		 	164.65		 	188.87		 	202.25		 	220.13		
NASDAQ Biotechnology	100.00		 	132.72		 	220.22		 	202.25		 	330.71		 	260.12		
(1) The cumulative return depicted above for Galena Biopharma, Inc. does not include the value of our former subsidiary, RXi Pharmaceuticals Corporation ("RXi"), which we spun off to our stockholders in April 2012.
Recent Sales of Unregistered Securities
During the period covered by this annual report, there were no sales by us of unregistered securities that were not previously reported by us in a Quarterly Report on Form 10-Q or Current Report on Form 8-K.

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Table of Contents

ITEM 6. SELECTED FINANCIAL DATA

The following selected consolidated financial data is not necessarily indicative of results of future operations and should be read in conjunction with Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations and Item 8, Financial Statements and Supplementary Data. On November 11, 2016, the Company effected a reverse stock-split and the following amounts related to earnings per share and shares outstanding have been adjusted for the reverse stock split for all periods reported. See Note 1 of Item 8, Financial Statements and Supplementary Data for further detail on the Stock Split.

	
																				
(amounts in thousands, except share and per share data)	Years Ended December 31,	
 	2016	 	2015	 	2014	 	2013	 	2012	
Operating expenses:	 	 	 	 	 	 	 	 	 	
Research and development (1)	$	19,860		 	$	23,611		 	$	27,674		 	$	20,424		 	$	14,614		
General, and administrative (1)	12,007		 	10,609		 	16,226		 	8,065		 	6,585		
Non-operating income (loss) (1)	21,009		 	(4,371	)	 	15,616		 	(41,786	)	 	(13,178	)	
Loss from continuing operations (1)	(11,101	)	 	(38,956	)	 	(28,284	)	 	(71,327	)	 	(33,325	)	
Loss from continuing operations per share, basic and diluted  (1)	$	(1.11	)	 	$	(5.02	)	 	$	(4.74	)	 	$	(15.82	)	 	$	(10.60	)	
 	As of December 31,	
 	2016	 	2015	 	2014	 	2013	 	2012	
Total assets (1)	$	65,811		 	$	82,144		 	$	80,488		 	$	87,976		 	$	54,986		
Total debt  (1)	16,397		 	4,739		 	8,402		 	9,892		 	—		
Other long-term obligations  (1)	6,756		 	11,560		 	11,704		 	11,874		 	11,311		
Total stockholders' equity  (1)	28,657		 	13,513		 	37,059		 	5,886		 	27,756		

(1) See Note 3 of the notes to the consolidated financial statements for discussion of our spin-off of RXi activities being classified as discontinued operations in the consolidated statements of expenses for 2012. The net assets of RXi were removed from the consolidated balances sheet as of the date of the spin-off and were recorded as an equity distribution. The selected financial data referenced for the year ended December 31, 2012 is exclusive of RXi activities.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion in conjunction with the consolidated financial statements and the notes to consolidated financial statements included elsewhere in this annual report. This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For a discussion of indicators of forward-looking statements and specific important factors that could cause actual results to differ materially from those contained in forward-looking statements, see “Risk Factors” under Part I — Item 1A of this annual report. This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section should be read and interpreted in light of such factors. Our actual results and the timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those discussed below and elsewhere in this annual report.
You may have difficulty evaluating our business, because we completed a partial spin off of RXi on April 26, 2012. Since the partial spin-off, our financial statements no longer reflected the consolidated financial condition and results of operations of RXi, and we have accounted for our partial ownership of RXi based on the cost method of accounting. In addition, during the quarter ended September 30, 2015 the Company completed a strategic review of the Company's commercial business including the ongoing sale, distribution and marketing of our two commercial products, Abstral ®  (fentanyl) Sublingual Tablets and Zuplenz ®  (ondansetron) Oral Soluble Film (our “commercial business” asset group). As a result of the review, we made a determination to sell or otherwise dispose of our commercial business, which was completed during the quarter ended December 31, 2015. These actions caused the Company to meet the relevant criteria for reporting the Company's commercial business as held for sale and in discontinued operations. For these reasons, the historical consolidated financial information included in this annual report does not necessarily reflect the financial condition, results of operations or cash flows that we will achieve in the future.

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Overview
Galena Biopharma, Inc. (“we,” “us,” “our,” “Galena” or the “Company”) is a biopharmaceutical company developing hematology and oncology therapeutics that address unmet medical needs. The Company’s pipeline consists of multiple mid- to late-stage clinical assets, including our hematology asset, GALE-401, and our novel cancer immunotherapy programs including NeuVax™ (nelipepimut-S), GALE-301 and GALE-302. GALE-401 is a controlled release version of the approved drug anagrelide for the treatment of elevated platelets in patients with myeloproliferative neoplasms. GALE- 401 has completed a Phase 2 clinical trial and the asset is ready to advance into a pivotal trial in patients with essential thrombocythemia (ET). NeuVax is currently in multiple investigator-sponsored Phase 2 clinical trials in breast cancer. GALE-301 and GALE-302 have completed early stage trials in ovarian, endometrial and breast cancers.
We are seeking to build value for shareholders through pursuit of the following objectives:
		
•	Develop hematology and oncology assets through clinical development with a focus in areas of unmet medical need. Our hematology asset is targeting the treatment of patients with ET to reduce elevated platelet counts. Our immunotherapy programs are currently targeting two key areas: secondary prevention intended to significantly decrease the risk of disease recurrence in breast, gastric, and ovarian cancers; and primary prevention intended to prevent ductal carcinoma in situ (DCIS) from becoming invasive breast cancer.	
		
•	Evaluating strategic alternatives that may include continuing to advance the clinical programs as a stand-alone entity, a sale of the company, a business combination, merger or reverse merger, and a license or other disposition of corporate assets of the company.	
		
•	Leverage partnerships and collaborations, as well as investigator-sponsored trial arrangements, to maximize the scope of potential clinical opportunities in a cost effective and efficient manner.	

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Critical Accounting Policies and Estimates

Use of Estimates

The preparation of our financial statements requires management to make estimates, allocations and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, management evaluates its estimates, including those related to impairment of goodwill and long-lived assets, accrued liabilities, net revenue, and certain expenses. Our estimates about the carrying values of assets and liabilities that are not readily apparent from other sources are based on historical experience and on other assumptions believed to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. Additionally, the financial information included here may not necessarily reflect the financial position, operating results, changes in our invested equity and cash flows in the future.

Our significant accounting policies are summarized in the notes to our consolidated financial statements. We believe the following critical accounting policies involve significant judgments and estimates used in the preparation of our financial statements.

Research and Development Expenses

Research and development costs are expensed as incurred. Included in research and development costs are wages, benefits and other operating costs, facilities, supplies, external services and overhead related to our research and development departments, and clinical trial expenses.

Clinical trial expenses include direct costs associated with contract research organizations ("CROs"), as well as patient-related costs at sites at which our trials are being conducted.

Direct costs associated with our CROs are generally payable on a time and materials basis, or when certain enrollment and monitoring milestones are achieved. Expense related to a milestone is recognized in the period in which the milestone is achieved or in which we determine that it is more likely than not that it will be achieved.

The invoicing from clinical trial sites can lag several months. We accrue these site costs based on our estimate of upfront set-up costs upon the screening of the first patient at each site, and the patient related costs based on our knowledge of patient enrollment status at each site.

Stock-Based Compensation

We follow the provisions of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, “Compensation — Stock Compensation” (“ASC 718”), which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees, non-employee directors, and consultants, including employee stock options. Stock compensation expense based on the grant date fair value estimated in accordance with the provisions of ASC 718 is recognized as an expense over the requisite service period.

For stock options granted as consideration for services rendered by non-employees, we recognize compensation expense in accordance with the requirements of FASB ASC Topic 505-50 (“ASC 505-50”), “Equity Based Payments to Non-Employees.” Non-employee option grants that do not vest immediately upon grant are recorded as an expense over the vesting period of the underlying stock options. At the end of each financial reporting period prior to vesting, the value of these options, as calculated using the Black-Scholes option-pricing model, will be re-measured using the fair value of our common stock and the non-cash compensation recognized during the period will be adjusted accordingly. Since the fair market value of options granted to non-employees is subject to change in the future, the amount of the future compensation expense will include fair value re-measurements until the stock options are fully vested.

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The fair value of each option grant is estimated using the Black-Scholes option-pricing model, with the following weighted average assumptions to determine the fair value of all its stock options granted:

	
							
 	 	2016	 	2015	
Risk free interest rate	 	1.54	%	 	1.67	%	
Volatility	 	101.13	%	 	73.97	%	
Expected lives (years)	 	6.04		 	6.16		
Expected dividend yield	 	0.00	%	 	0.00	%	

The Company’s expected common stock price volatility assumption is based upon the volatility of a basket of companies that we consider comparable to us. The expected life assumptions for employee grants were based upon the simplified method provided for under ASC 718-10, which averages the contractual term of the options of ten years with the average vesting term of four years for an average of six years. The expected life assumptions for non-employees were based upon the contractual terms of the options. The dividend yield assumption of zero is based upon the fact that the Company has never paid cash dividends and presently has no intention of paying cash dividends in the future. The risk-free interest rate used for each grant was also based upon prevailing short-term interest rates.

The Company has an estimated annualized forfeiture rate of 15.0% for options granted to employees, and 8.0% for options granted to senior management and no forfeiture rate for directors. The Company will record additional expense if the actual forfeitures are lower than estimated and will record a recovery of prior expense if the actual forfeiture rates are higher than estimated.

Derivative Financial Instruments

During the normal course of business, from time to time, we issue warrants and options to vendors as consideration to perform services. We may also issue warrants as part of a debt or equity financing. We do not enter into any derivative contracts for speculative purposes.

We recognize all derivatives as assets or liabilities measured at fair value with changes in fair value of derivatives reflected as current period income or loss unless the derivatives qualify for hedge accounting and are accounted for as such. During the years ended December 31, 2016 and 2015, we issued warrants to purchase approximately 1,382,159 and 700,320 shares of common stock, respectively, in connection with equity transactions. In accordance with ASC Topic 815-40, “Derivatives and Hedging — Contracts in Entity’s Own Stock” (“ASC 815-40”), the fair value of these warrants is required to be recorded as a liability, as the holders have an option to put the warrants back to us in certain events, as defined, and the warrants are determined not to be indexed to the Company’s own stock.

The derivative liabilities are remeasured each period end to the estimated fair value. The fair value of our derivative liabilities is estimated using the appropriate pricing model, with the following assumptions used for the initial measurement of warrants granted:

	
					
 	 	2016	 	2015	
Risk free interest rate	 	1.77%	 	1.41%	
Volatility	 	119.08%	 	73.41%	
Expected lives (years)	 	5	 	5	
Expected dividend yield	 	0.00%	 	0.00%	

The Company’s expected common stock price volatility assumption is based upon the volatility of a basket of companies that we consider comparable to us. The expected life assumptions for the warrants are estimated to coincide with the contractual terms of the warrants.

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Business Combinations and Asset Purchases

We allocate the purchase price of our acquisitions to the assets and liabilities acquired, including identifiable intangible assets, based on their respective fair values at the date of acquisition. Some of the items, including property and equipment, other intangible assets, certain accrued liabilities and other reserves require a degree of management judgment. Certain estimates may change as additional information becomes available. Management finalizes the purchase price allocation within 12 months of the acquisition date as certain initial accounting estimates are resolved.

Goodwill, Other Intangible Assets and Impairment of Long-Lived Assets

Goodwill and Intangible Assets — Goodwill and indefinite-lived intangible assets are not amortized but are tested annually for impairment at the reporting unit level, or more frequently if events and circumstances indicate impairment may have occurred. Factors the company considers important that could trigger an interim review for impairment include, but are not limited to, the following:

•	significant changes in the manner of its use of acquired assets or the strategy for its overall business;	

•	significant negative industry or economic trends;	

•	significant decline in stock price for a sustained period; and	

•	significant decline in market capitalization relative to net book value.	

Goodwill and other intangible assets with indefinite lives are evaluated for impairment first by a qualitative assessment to determine the likelihood of impairment. If it is determined that impairment is more likely than not, the Company will then proceed to the two step impairment test. The first step is to compare the fair value of the reporting unit to the carrying amount of the reporting unit (the “First Step”). If the carrying amount exceeds the fair value, a second step must be followed to calculate impairment (the “Second Step”). Otherwise, if the fair value of the reporting unit exceeds the carrying amount, the goodwill is not considered to be impaired as of the measurement date. In its review of the carrying value of the goodwill for its single reporting unit and its indefinite-lived intangible assets, the Company determines fair values of its goodwill using the market approach, and its indefinite-lived intangible assets using the income approach.

Intangible assets not considered indefinite-lived are reviewed for impairment when facts or circumstances suggest that the carrying value of these assets may not be recoverable. The Company’s policy is to identify and record impairment losses, if necessary, on intangible product rights when events and circumstances indicate that the assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of those assets.

The Company performed its review for impairment using the qualitative assessment for both goodwill and indefinite-lived intangible assets, and has determined that there has been no impairment to these assets as of December 31, 2016 .

Acquisitions and In-Licensing — For all in-licensed products and technologies, we perform an analysis to determine whether we hold a variable interest or a controlling financial interest in a variable interest entity. On the basis of our interpretations and conclusions, we determine whether the acquisition falls under the purview of variable interest entity accounting and if so, consider the necessity to consolidate the acquisition. As of December 31, 2016 , we determined there were no variable interest entities required to be consolidated.

The Company met the relevant criteria for reporting the commercial operations as held for sale as of September 30, 2015, and as a result, assessed the commercial asset group for impairment pursuant to ASC Topic 360, Property, Plant, and Equipment. The net carrying value of the commercial asset group was compared to its fair value as of September 30, 2015. The Company determined that the fair value using a risk adjusted net present value of deal consideration received from bids from potential acquirers. The Company determined that the carrying value exceeded its fair value and as a result recorded an $8.1 million impairment charge on assets classified as held for sale in the quarterly period ended September 30, 2015.

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Refer to Note 12 of the notes to the consolidated financial statements for further information regarding the acquisition of Abstral U.S. rights and Note 15 as to our reporting the commercial operations as held for sale and in discontinued operations.

Valuation of Contingent Purchase Price Consideration

Acquisitions may include contingent consideration payments based on the achievement of certain future financial performance measures of the acquired company (earnout). Contingent consideration is required to be recognized at fair value as of the acquisition date. We estimate the fair value of these liabilities based on financial projections of the acquired companies and estimated probabilities of achievement. We believe our estimates and assumptions are reasonable; however, there is significant judgment involved. We evaluate, on a routine, periodic basis, the estimated fair value of the contingent consideration and changes in estimated fair value, subsequent to the initial fair value estimate at the time of the acquisition, are reflected in income or expense in the consolidated statements of comprehensive loss. Changes in the fair value of contingent consideration obligations may result from changes in discount periods and rates, changes in the timing of development milestones achieved and changes in probability assumptions with respect to the likelihood of achieving the various earnout criteria. Any changes in the estimated fair value of contingent consideration may have a material impact on our operating results.

Legal Fees and Insurance Recoveries

There can be a significant time lag between the time that legal fees are incurred and the insurance reimbursement available to offset the related costs. The legal costs are recorded in the period they are incurred, and the insurance recoveries for those costs are recorded in the period when the insurance reimbursement is deemed probable.

Discontinued Operations

We met the relevant criteria for reporting our commercial business as held for sale and in discontinued operations in the accompanying financial statements as of December 31, 2016 and 2015 and for the three years ended December 31, 2016, pursuant to FASB ASC Topic 205-20, Presentation of Financial Statements - Discontinued Operations, and FASB ASC Topic 360, Property, Plant, and Equipment.

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Results of Operations for the Years Ended December 31, 2016 , 2015 and 2014

For the year ended December 31, 2016, our net loss was $23.5 million compared with net losses of $63.9 million and $36.6 million for the years ended December 31, 2015 and 2014, respectively. The $40.4 million decrease in net loss from 2015 to 2016 was primarily driven by a $25.4 million increase in non-operating income and $12.5 million decrease in loss from discontinued operations. The loss from discontinued operations for the year ended December 31, 2015 includes an $8.1 million impairment charge recognized in the third quarter of 2015 and $4.5 million in the loss on the sale of the commercial assets. The $27.3 million increase in net loss from 2014 to 2015 was primarily driven by a $16.6 million increase in loss from discontinued operations, which includes the one time impairment charge and loss on the sale of commercial assets in 2015. In addition, 2015 had an increase of $20.0 million in non-operating expense and a $9.7 million decrease in operating loss compared to 2014.

	
																		
 	 	 	 	 	 	 	% Change	
(dollars in thousands)	2016	 	2015	 	2014	 	2016 vs. 2015	 	2015 vs. 2014	
Operating loss	$	(31,867	)	 	$	(34,220	)	 	$	(43,900	)	 	(7	)%	 	(22	)%	
Non-operating income (expense)	21,009		 	(4,371	)	 	15,616		 	N/A		 	N/A		
Income tax	(243	)	 	(365	)	 	—		 	(33	)%	 	N/A		
Loss from discontinued operations	(12,448	)	 	(24,946	)	 	(8,322	)	 	(50	)%	 	200	 %	
Net loss	$	(23,549	)	 	$	(63,902	)	 	$	(36,606	)	 	(63	)%	 	75	 %	
 	 	 	 	 	 	 	 	 	 	
Net loss per common share:	 	 	 	 	 	 	 	 	 	
Basic and diluted net loss per share, continuing operations	$	(1.11	)	 	$	(5.02	)	 	$	(4.74	)	 	(78	)%	 	6	 %	
Basic and diluted net loss per share, discontinued operations	$	(1.25	)	 	$	(3.21	)	 	$	(1.39	)	 	(61	)%	 	131	 %	
Basic and diluted net loss per share	$	(2.36	)	 	$	(8.23	)	 	$	(6.13	)	 	(71	)%	 	34	 %	

Further analysis of the changes and trends in our operating results are discussed below.

Research and Development Expense

Research and development expense consists primarily of clinical trial expenses and compensation-related costs for our employees dedicated to research and development activities, compensation paid to our Scientific Advisory Board (“SAB”) members, and licensing fees and patent prosecution costs. Research and development expense for the years ended December 31, 2016 , 2015 , and 2014 were as follows (dollars in thousands):

																						
 	Year Ended December 31,	 	Year Ended December 31,	
 	2016	 	2015	 	% Change	 	2015	 	2014	 	% Change	
Research and development expense	$	19,860		 	$	23,611		 	(16	)%	 	$	23,611		 	$	27,674		 	(15	)%	

The majority of our research and development expenses to date relate to our Phase 3 PRESENT clinical trial using NeuVax as a HER2 directed cancer immunotherapy under evaluation to prevent breast cancer recurrence after standard of care treatment. The trial costs were more significant during the recruitment and enrollment phase. We established more than 140 sites in 13 counties and screened over 3,300 patients in order to enroll qualifying patients who currently have no available treatment options to maintain their disease-free status after their standard of care. Once the patient was enrolled, they received vaccination and were to be monitored for a minimum of three years for recurrence of breast cancer, development of other cancers, or death. On April 14, 2015 we announced the completion of over-enrollment in the PRESENT trial of 758 patients, which was 7.7% higher than called for under our FDA-approved Special Protocol Assessment.

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The decrease in research and development expense of 16% for the year ended December 31, 2016 compared to the year ended December 31, 2015 was primarily due to the decrease in enrollment efforts surrounding the Phase 3 PRESENT clinical trial, and ultimately the closing of that trial in the third quarter of 2016 as a result of the recommendation from the IDMC that the trial was futile. The decrease was partially offset by additional consulting expenses incurred in connection with the investigation of the PRESENT trial data to attempt to determine the cause of the futility conclusion.

The completion of over-enrollment in April 2015 reduced expenses related to the trial as we entered the monitoring phase and continued toward our interim safety and futility analysis on June 24, 2016, which resulted in the stopping and eventual closing of the Phase 3 PRESENT trial in the third quarter of 2016. The decrease in recruitment and enrollment expenses related to the Phase 3 PRESENT clinical trial were partially offset by recruitment, enrollment, and monitoring expenses in our other ongoing or planned clinical trials.

On January 31, 2017, we announced that we are evaluating strategic alternatives for the Company focused on maximizing stockholder value. Potential strategic alternatives that may be explored or evaluated as part of this review include continuing to advance the clinical programs as a stand-alone entity, a sale of the company, a business combination, merger or reverse merger, and a license or other disposition of corporate assets of the company. There is no set timetable for this process and there can be no assurance that this process will result in a transaction. While the Company evaluates its strategic alternatives, we anticipate our research and development expenses to be driven by our two ongoing Phase 2 clinical trials of NeuVax in combination with trastuzumab for the prevention of recurrence of breast cancer and our Phase 2 clinical trial of NeuVax in patients with Ductal Carcinoma in Situ. We are evaluating the appropriate time to commence the GALE-401 Phase 3 trial and anticipate making a definitive determination in the second half of 2017.

General and Administrative Expense

General and administrative expense includes compensation-related costs for our employees dedicated to general and administrative activities, legal fees, audit and tax fees, consultants and professional services, and general corporate expenses. General and administrative expense for the years ended December 31, 2016 and 2015 were as follows (dollars in thousands):

	
											
 	Year Ended December 31,	
 	2016	 	2015	 	% Change	
General and administrative expense	$	12,007		 	$	10,609		 	13	%	

The year-over-year increase was primarily related to $0.8 million of additional legal expenses related to reaching an agreement in principle for a proposed settlement that would resolve an investigation by the staff of the SEC, $0.4 million increase in non-cash stock-based compensation, and $0.4 million increase in outside services. These increases were partially offset by a $0.3 million decrease in insurance related expenses.

Selling, general and administrative expense for the years ended December 31, 2015 and 2014 was as follows (dollars in thousands):

	
											
 	Year Ended December 31,	
 	2015	 	2014	 	% Change	
General and administrative expense	$	10,609		 	$	16,226		 	(35	)%	

The year-over-year decrease was significantly impacted by the reduction in legal expenses related to the ongoing litigation and proceedings described in Part I, Item 3 of this report, which were approximately $7 million in 2014. We exceeded the retention (deductible) under our insurance policy during the third quarter of 2014, and therefore realized insurance recoveries of $2 million that partially offset these fees. In 2015, excluding legal expenses associated with the litigation settlement, the majority of the legal expenses incurred were paid by our insurance carriers. In addition to a reduction in legal expenses, non-cash stock-based compensation decreased $3.3 million from 2014 to 2015.

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Non-Operating Income (Expense)

Non-operating income (expense) for the year ended December 31, 2016 and 2015 was as follows (dollars in thousands):

	
													
 	 	Year Ended December 31,	
 	 	2016	 	2015	 	$ Change	
Non-operating income (expense):	 	 	 	 	 	 	
Litigation settlement	 	$	(2,750	)	 	$	(5,282	)	 	$	2,532		
Change in fair value of warrants potentially settleable in cash	 	22,220		 	1,162		 	21,058		
Interest expense, net	 	(3,508	)	 	(760	)	 	(2,748	)	
Change in fair value of the contingent purchase price liability
	 	5,047		 	509		 	4,538		
Total non-operating income (expense), net	 	$	21,009		 	$	(4,371	)	 	$	25,380		

The increase to our non-operating income in 2016 was primarily due to a $21.1 million increase in the non-cash gain on our fair value of warrants accounted for as liabilities. The decrease in the estimated fair value of our warrant liabilities was primarily due to the decrease in our common stock price, which declined 93% in 2016. In addition to the decrease in the fair value of warrants, our contingent purchase price consideration related to the approval of NeuVax also decreased by $4.5 million from 2015 to 2016. The interim analysis of the Phase 3 PRESENT clinical trial and subsequent close down of the trial triggered an intangible asset and goodwill impairment analysis of the carrying amount and the fair value was determined to exceed the carrying amount based on the other ongoing and planned trials with NeuVax. The contingent purchase price consideration is fair valued at each reporting period and the lower probability and extended time line for approval were updated to align with the valuation performed of NeuVax and significantly decreased the fair value which are the two largest variables impacting the liability.

The gains recognized from the changes in the fair values of our warrant liability and contingent purchase price liability were partially offset by $2.8 million in litigation settlements and $3.5 million of interest expense. The litigation settlements in 2016 are comprised of $1.8 million of opt-out cases from our class action settlement that was settled in 2015 and $1.0 million related to the proposed settlement framework with the SEC. The increase of $2.7 million of interest expense was driven by the interest on our debenture, including amortization of discounts and debt issuance costs.

Non-operating income (expense) for the year ended December 31, 2015 and 2014 was as follows (dollars in thousands):

	
													
 	 	Year Ended December 31,	
 	 	2015	 	2014	 	$ Change	
Non-operating income (expense):	 	 	 	 	 	 	
Litigation settlement	 	$	(5,282	)	 	$	—		 	$	(5,282	)	
Change in fair value of warrants potentially settleable in cash	 	$	1,162		 	$	16,556		 	$	(15,394	)	
Interest income (expense), net	 	(760	)	 	(1,110	)	 	350		
Change in fair value of the contingent purchase price liability
	 	509		 	170		 	339		
Total non-operating income (expense), net	 	$	(4,371	)	 	$	15,616		 	$	(19,987	)	

The increase to our non-operating expense in 2015 was primarily due to a $15.4 million decrease in the non-cash gain of the fair value of our warrants accounted for as liabilities. The $1.2 million non-cash gain on the fair value of our warrant liabilities in 2015 was primarily due to a 3% decrease in our common stock price, which is one of the most impactful inputs into the pricing model we use to estimate the fair value of our warrant liabilities. The $16.6 million non-cash gain on the fair value of our warrant liabilities was in 2014 was primarily due to a 70% decrease in our common stock price.

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In addition to the change in our warrant liability, on December 4, 2015 we announced the settlement of the In re Galena Biopharma, Inc. Derivative Litigation and In re Galena Biopharma, Inc. Securities Litigation . The majority of the $20.0 million settlement payment for settlement of In re Galena Biopharma, Inc. Securities Litigation was covered by the Company's insurance carriers and $3.3 million was paid by the Company through a combination of $2.3 million in cash and $1.0 million in shares of the Company's common stock. In addition, to obtain the agreement of the insurance carriers to fund most of the settlement, we also agreed to pay all outstanding defense attorney fees going forward with respect to this litigation and opt out securities litigation amounting to about $2.0 million.

Income Taxes

For the years ended December 31, 2016 and 2015, we recognized income tax expenses of $0.2 million and $0.4 million, respectively. There was no income tax expense or benefit during the year ended December 31, 2014. We continue to maintain a full valuation allowance against our net deferred tax assets.

Loss from Discontinued Operations

During the quarter ended September 30, 2015, we completed a strategic review of our commercial business and operations, and as a result of that review we sold the assets of our commercial business during the fourth quarter of 2015. Our loss from discontinued operations for the year ended December 31, 2016 was $12.4 million compared with losses from discontinued operations of $24.9 million and $8.3 million for the years ended December 31, 2015 and 2014, respectively.

The following table represents the components attributable to the commercial business in 2016, 2015 and 2014 that are presented in the consolidated statements of comprehensive loss as discontinued operations (in thousands):

												
 	2016	 	2015	 	2014	
Net revenue	$	—		 	$	9,734		 	$	9,319		
Additional channel obligations	(2,886	)	 	—		 	—		
Cost of revenue	—		 	(1,780	)	 	(1,403	)	
Amortization of certain acquired intangible assets	—		 	(921	)	 	(440	)	
Research and development	—		 	(355	)	 	(680	)	
Selling, general, and administrative	(9,562	)	 	(17,655	)	 	(15,118	)	
Impairment charge from classification as held for sale	—		 	(8,071	)	 	—		
Loss on sale of commercial business assets	—		 	(4,549	)	 	—		
Severance and exit costs	—		 	(1,349	)	 	—		
Loss from discontinued operations	$	(12,448	)	 	$	(24,946	)	 	$	(8,322	)	

The 2016, 2015 and 2014 discontinued operations are comprised of the net revenue, cost of revenue, and expenses attributable to our commercial operations, which we sold in the fourth quarter of 2015.

• Net Revenue included in discontinued operations comprises revenue from the sale of Abstral, which was provided by our commercial operations.
• Additional Channel Obligations included in discontinued operations in the first quarter of 2016 is comprised of larger than anticipated rebates of Abstral sales that we were responsible for through the end of the first quarter of 2016. The increase in rebates was driven by larger than expected volumes through these rebate channels and additional price protection provisions. The increase in rebates was partially offset by lower than expect patient assistance program reimbursement. The additional channel obligations for the year ended December 31, 2016 relate to adjusted Medicaid billings from previous quarters since the first quarter of 2014 and additional returns received.
• Cost of revenue included in discontinued operations consists of direct product costs and related overhead, Abstral royalties based on net revenue, inventory obsolescence, and other direct costs.

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• Research and development expense included in discontinued operations consists of expenses related to our Abstral RELIEF trial and other product stability costs.
• Selling, general and administrative expense included in discontinued operations consists of all other expenses of our commercial operations that were required in order to market and sell our marketed products. These expenses include all personnel related costs, marketing, data, consulting, legal, consulting, and other outside services necessary to support the commercial operations. During 2016 we incurred $9.2 million related to legal expenses from external counsel associated with an internal and government investigation, and from cooperating, and document production for the subpoenas related to the sales and marketing practices of Abstral. These legal proceedings are further disclosed in Part I, Item 3.
• Impairment charge from classification as held for sale included in discontinued operations consists of impairment recognized from determining that the carrying value exceeds the fair value of the assets.
• Loss on sale of commercial business assets included in discontinued operations consists of the calculation of the gain or loss recognized upon the sale of the company's commercial products, Abstral and Zuplenz, and their related assets.
• Severance and exit costs included in discontinued operations consists of one-time termination benefits provided to employees that were part of the commercial business and did not accept employment opportunities at the companies who purchased Abstral and Zuplenz. In addition to severance costs there are costs included to terminate contracts prior to their contractual term with no economic benefit to the Company.

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Liquidity and Capital Resources

We had cash and cash equivalents of approximately $18.1 million as of December 31, 2016 , compared with $29.7 million as of December 31, 2015.

The decrease of approximately $11.6 million in cash and cash equivalents from December 31, 2015 to December 31, 2016 was attributable to $44.9 million net cash used in operating activities and $5.6 million principal payments on long-term debt. The decrease was partially offset by $33.5 million net proceeds received from the sale of common stock.

On February 13, 2017, the Company closed an underwritten public offering of 17,000,000 units at a price to the public of $1.00 per unit for gross proceeds of $17.0 million ("February 2017 Offering"). Each unit consists of one share of common stock, and a warrant to purchase one share of common stock at an exercise price of $1.10 per share. The net proceeds of the February 2017 Offering were $15.5 million, after deducting underwriting discounts and commissions and offering expenses paid by the Company.

In addition to the proceeds from the February 2017 Offering, in January and February 2017 the holder of the Debenture redeemed $3.95 million of outstanding principal that was satisfied by the Company with 3,518,663 shares of our common stock. As a result of the redemptions, the Company was able to transfer $3.95 million out of restricted cash and cash equivalents and into unrestricted cash and cash equivalents to be used to fund the Company's ongoing operations. The outstanding principal balance on the Debenture as of March 15, 2017 is $13,617,702 and is maintained by the Company as restricted cash.

In addition to the funds raised through underwritten public offerings and the debenture, we maintain a purchase agreement with Lincoln Park Capital LLC (LPC) and At Market Issuance Sales Agreements (ATM) with future availability of $2.0 million and $19.1 million, respectively subject to certain terms and conditions. We may also continue to use the ATM, or other instruments, in order to fund our operations going forward.

On January 31, 2017, the Company announced that it is in the process of evaluating strategic alternatives focused on maximizing stockholder value. Potential strategic alternatives that may be explored or evaluated as part of this review include continuing to advance the clinical programs as a stand-alone entity, a sale of the company, a business combination, merger or reverse merger, and a license or other disposition of corporate assets of the company. There is no set timetable for this process and there can be no assurance that this process will result in a transaction. While the Company evaluates its strategic alternatives, Galena’s investigator-sponsored immunotherapy trials will remain ongoing. With the confirmation from the FDA that the GALE-401 development program is appropriate for a New Drug Application (NDA) filing using the 505(b)(2) regulatory pathway in patients with ET who are intolerant or resistant to hydroxyurea, we have developed a clear path forward for GALE-401 in the treatment of ET. Subject to completing the manufacturing of the new formulation and the internal work to prepare the Phase 3 trial for initiation, the Company is evaluating the appropriate time to commence enrollment of the GALE-401 trial and anticipates making a definitive determination in the second half of 2017. The Company has focused on reducing expenditures in order to preserve liquidity while pursuing a strategic alternative.

We expect to continue to incur operating losses as we continue to advance our product candidates through the drug development and the regulatory process. In the absence of revenue, our potential sources of operational funding are proceeds from the sale of equity, funded research and development payments, debt financing arrangements, and payments received under partnership and collaborative agreements.

We believe that our existing cash and cash equivalents, funding available under an amended LPC purchase agreement, ATM and other instruments, should be sufficient to fund our operations for at least one year from the date of issuance of the Company's consolidated financial statements. This projection is based on our current limited operations and estimates of legal expenses associated with the ongoing government investigation and legal matters pending against the company, and is subject to changes in our operating plans, resolutions of such government investigation and legal matters, uncertainties inherent in our business, strategic alternatives outcomes, and the need to seek to replenish our existing cash and cash equivalents sooner than we project and in greater amounts that we had projected. There is no guarantee that any debt, additional equity or other funding will be available to us on acceptable terms, or at all. If we fail to obtain additional funding when needed, we would be forced to scale back, or terminate, our operations or to seek to merge with or to be acquired by another company.

58

Cash Flows

The following table summarizes our cash flows from operating, investing, and financing activities for the year ended December 31, 2016 and 2015 ($ in thousands):

	
									
 	For the Year Ended December 31,	
 	2016	 	2015	
Cash flows from continuing operations:	 	 	 	
Cash flows used in continuing operating activities	$	(33,230	)	 	$	(38,802	)	
Cash flows used in continuing investing activities	(6	)	 	(354	)	
Cash flows provided by continuing financing activities	34,324		 	43,845		
Total cash flows provided by continuing operations	1,088		 	4,689		
 	 	 	 	
Cash flows from discontinued operations:	 	 	 	
Cash flows used in discontinued operating activities	(11,685	)	 	(9,358	)	
Cash flows provided by (used in) discontinued investing activities	(1,050	)	—		10,749		
Total cash flows provided by (used in) discontinued operations	(12,735	)	 	1,391		
 	 	 	 	
Total cash flows:	 	 	 	
Cash flows used in operating activities	(44,915	)	 	(48,160	)	
Cash flows provided by (used in) investing activities	(1,056	)	 	10,395		
Cash flows provided by financing activities	34,324		 	43,845		
Total increase (decrease) in cash and cash equivalents	$	(11,647	)	 	$	6,080		

Net Cash Flow from Operating Activities

Net cash used in operating activities was approximately $ 44.9 million for the year ended December 31, 2016 , compared with $48.2 million for the year ended December 31, 2015 . The decrease of approximately $3.2 million resulted primarily from a decrease in cash used in our continuing operations of $5.6 million associated with reduced research and development spend from the discontinuation of the Phase 3 PRESENT trial. The increase was partially offset by a $2.3 million increase in cash used in discontinued operations primarily driven by legal expenses from external counsel associated with an internal and government investigation, and cooperating and document production for the subpoenas related to the sales and marketing practices of Abstral.

Net Cash Flow from Investing Activities

Net cash used by investing activities was $1.1 million for the year ended December 31, 2016 , compared with net cash provided by investing activities of $10.4 million for the year ended December 31, 2015 . The sale of our commercial business assets in the fourth quarter of 2015 resulted in the receipt of $11.3 million partially offset by purchases of property and equipment. The sale of the commercial business assets in 2015 resulted in $1.1 million of payments for selling costs paid in the first quarter of 2016 that were incurred from the sale of commercial assets.

Net Cash Flow from Financing Activities

Net cash provided by financing activities was $34.3 million for the year ended December 31, 2016 , compared with $43.8 million for the year ended December 31, 2015 . In 2016, we received proceeds of $33.5 million from the issuance of common stock and $0.3 million from the exercise of common stock options and warrants, and $5.8 million unrestricted net proceeds from our debenture, partially offset by $5.6 million in principal payments on long-term debt. In 2015, we received proceeds of $47.4 million from the issuance of common stock, partially offset by $3.9 million in principal payments on long-term debt.

59

Contractual Obligations

The following table sets forth our contractual obligations as of December 31, 2016 (in thousands):

	
																	
 	 	Payment Due by Period	
 	 	Less than 1 Year	 	1 to 3 Years	 	3 to 5 Years	 	Total	
Long-term debt (1)	 	$	16,397		 	$	—		 	$	—		 	$	16,397		
Cancelable license agreements (2)	 	1,391		 	700		 	7,700		 	9,791		
Non-cancelable employment agreements (2)	 	1,601		 	—		 	—		 	1,601		
Non-cancelable operating leases (2)	 	241		 	497		 	236		 	974		
Total	 	$	19,630		 	$	1,197		 	$	7,936		 	$	28,763		

(1) Long-term debt payments presented are comprised of principal and interest payments. See Note 5 of the notes to the consolidated financial statements for additional information on our long-term debt.

(2) See Note 6 of the notes to the consolidated financial statements for additional information on the referenced contractual obligations.

Off-Balance Sheet Arrangements

We have not entered into any off-balance sheet financing arrangements other than operating leases.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The primary objective of our investment activities is to preserve capital. We do not utilize hedging contracts or similar instruments.

We are exposed to certain market risks relating primarily to (1) interest rate risk on our cash and cash equivalents and (2) risks relating to the financial viability of the institutions which hold our capital and through which we have invested our funds. We manage such risks by investing primarily in money market mutual funds.

In addition, we are exposed to foreign currency exchange rate fluctuations relating to payments we make to certain vendors and suppliers and license partners using foreign currencies. We do not hedge against foreign currency risks. Consequently, changes in exchange rates could adversely affect our operating results and stock price. Such losses have not been significant to date.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

GALENA BIOPHARMA, INC.

FORM 10-K — FISCAL YEAR ENDED DECEMBER 31, 2016

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	
		
 	Page No.	
Report of Independent Registered Public Accounting Firm	63	
Consolidated Balance Sheets as of December 31, 2016 and 2015	64	
Consolidated Statements of Operations for the years ended December 31, 2016, 2015, and 2014	65	
Consolidated Statements of Stockholders’ Equity for the years ended December 31 2016, 2015, and 2014	66	
Consolidated Statements of Cash Flows for the years ended December 31, 2016, 2015, and 2014	67	
Notes to Consolidated Financial Statements	68	

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
Galena Biopharma, Inc.

We have audited the accompanying consolidated balance sheets of Galena Biopharma, Inc. (the Company), as of December 31, 2016 and 2015, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2016. We also have audited the Company's internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express an opinion on these consolidated financial statements and an opinion on the Company's internal control over financial reporting based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Galena Biopharma, Inc., as of December 31, 2016 and 2015, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2016, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, Galena Biopharma, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

/s/ Moss Adams LLP

San Francisco, California
March 15, 2017

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GALENA BIOPHARMA, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share and per share data)

								
 	December 31, 2016	 	December 31, 2015	
ASSETS	 	 	 	
Current assets:	 	 	 	
Cash and cash equivalents	$	18,083		 	$	29,730		
Restricted cash and cash equivalents	18,022		 	401		
Litigation settlement insurance recovery	—		 	21,700		
Prepaid expenses and other current assets	581		 	1,398		
Current assets of discontinued operations	813		 	392		
Total current assets	37,499		 	53,621		
Equipment and furnishings, net	199		 	335		
GALE-401 rights	9,255		 	9,255		
In-process research and development	12,864		 	12,864		
Goodwill	5,898		 	5,898		
Deposits and other assets	96		 	171		
Total assets	$	65,811		 	$	82,144		
LIABILITIES AND STOCKHOLDERS’ EQUITY	 	 	 	
Current liabilities:	 	 	 	
Accounts payable	$	840		 	$	1,597		
Accrued expenses and other current liabilities	4,292		 	5,292		
Litigation settlement payable	950		 	25,000		
Fair value of warrants potentially settleable in cash	1,860		 	14,518		
Current portion of long-term debt	16,397		 	4,739		
Current liabilities of discontinued operations	6,059		 	5,925		
Total current liabilities	30,398		 	57,071		
Deferred tax liability	5,661		 	5,418		
Contingent purchase price consideration	1,095		 	6,142		
Total liabilities	37,154		 	68,631		
Commitments and contingencies		 		
Stockholders’ equity:	 	 	 	
Preferred stock, $0.0001 par value; 5,000,000 shares authorized; no shares issued and outstanding	—		 	—		
Common stock, $0.0001 par value; 350,000,000 shares authorized, 15,224,223 shares issued and 15,190,473 shares outstanding at December 31, 2016; 275,000,000 shares authorized, 8,129,087 shares issued and 8,095,337 shares outstanding at December 31, 2015	15		 	15		
Additional paid-in capital	335,423		 	296,730		
Accumulated deficit	(302,932	)	 	(279,383	)	
Less treasury shares at cost, 33,750 shares	(3,849	)	 	(3,849	)	
Total stockholders’ equity	28,657		 	13,513		
Total liabilities and stockholders’ equity	$	65,811		 	$	82,144		
S ee accompanying notes to consolidated financial statements.

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GALENA BIOPHARMA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except share and per share data)

	
												
 	For the Year Ended December 31,	
 	2016	 	2015	 	2014	
Operating expenses:	 	 	 	 	 	
Research and development	$	19,860		 	$	23,611		 	$	27,674		
General and administrative	12,007		 	10,609		 	16,226		
Total operating expenses	31,867		 	34,220		 	43,900		
Operating loss	(31,867	)	 	(34,220	)	 	(43,900	)	
Non-operating income (expense):	 	 	 	 	 	
Litigation settlement	(2,750	)	 	(5,282	)	 	—		
Change in fair value of warrants potentially settleable in cash	22,220		 	1,162		 	16,556		
Interest expense, net	(3,508	)	 	(760	)	 	(1,110	)	
Change in fair value of the contingent purchase price liability
	5,047		 	509		 	170		
Total non-operating income (expense), net	21,009		 	(4,371	)	 	15,616		
Loss from continuing operations before income taxes	(10,858	)	 	(38,591	)	 	(28,284	)	
Income tax expense	243		 	365		 	—		
Loss from continuing operations	(11,101	)	 	(38,956	)	 	(28,284	)	
Loss from discontinued operations	(12,448	)	 	(24,946	)	 	(8,322	)	
Net loss	$	(23,549	)	 	$	(63,902	)	 	$	(36,606	)	
Net loss per common share:	 	 	 	 	 	
Basic and diluted per share, continuing operations	$	(1.11	)	 	$	(5.02	)	 	$	(4.74	)	
Basic and diluted loss per share, discontinued operations	$	(1.25	)	 	$	(3.21	)	 	$	(1.39	)	
Basic and diluted net loss per share	$	(2.36	)	 	$	(8.23	)	 	$	(6.13	)	
Weighted-average common shares outstanding: basic and diluted	9,958,802		 	7,763,236		 	5,969,418		
See accompanying notes to consolidated financial statements.

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GALENA BIOPHARMA, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Amounts in thousands, except share amounts)

	
																							
 	Common Stock	 	Additional Paid-In Capital	 	Accumulated Deficit	 	Treasury Stock	 	Total	
 	Shares Issued	 	Amount	 		 		 		 		
Balance at December 31, 2013	5,505,035		 	$	10		 	$	188,600		 	$	(178,875	)	 	$	(3,849	)	 	$	5,886		
Issuance of common stock	331,650		 	1		 	10,704		 	—		 	—		 	10,705		
Issuance of common stock under milestone achievement	219,061		 	—		 	9,340		 	—		 	—		 	9,340		
Issuance of common stock upon exercise of warrants	273,351		 	1		 	37,741		 	—		 	—		 	37,742		
Issuance of common stock in connection with employee stock purchase plan	5,732		 	—		 	263		 	—		 	—		 	263		
Stock based compensation for directors and employees	—		 	—		 	5,253		 	—		 	—		 	5,253		
Stock based compensation for services	—		 	—		 	134		 	—		 	—		 	134		
Exercise of stock options	172,488		 	—		 	4,342		 	—		 	—		 	4,342		
Net loss	—		 	—		 	—		 	(36,606	)	 	—		 	(36,606	)	
Balance at December 31, 2014	6,507,317		 	$	12		 	$	256,377		 	$	(215,481	)	 	$	(3,849	)	 	$	37,059		
Issuance of common stock	1,607,934		 	3		 	47,413		 	—		 	—		 	47,416		
Common stock warrants issued in connection with March 2015 common stock offering	—		 	—		 	(10,296	)	 	—		 	—		 	(10,296	)	
Issuance of common stock in connection with employee stock purchase plan	11,566		 	—		 	309		 	—		 	—		 	309		
Stock based compensation for directors and employees	—		 	—		 	2,896		 	—		 	—		 	2,896		
Exercise of stock options	2,270		 	—		 	31		 	—		 	—		 	31		
Net loss	—		 	—		 	—		 	(63,902	)	 	—		 	(63,902	)	
Balance at December 31, 2015	8,129,087		 	$	15		 	$	296,730		 	$	(279,383	)	 	$	(3,849	)	 	$	13,513		
Issuance of common stock	2,872,803		 	—		 	33,534		 	—		 	—		 	33,534		
Common stock warrants issued in connection with common stock offerings	—		 	—		 	(9,886	)	 	—		 	—		 	(9,886	)	
Issuance of common stock to satisfy principal and interest on long-term debt	3,981,208		 	—		 	8,079		 	—		 	—		 	8,079		
Common stock warrants issued in connection with debt financing	—		 	—		 	1,139		 	—		 	—		 	1,139		
Issuance of common stock in connection with settlement of litigation	206,903		 	—		 	557		 	—		 	—		 	557		
Issuance of common stock upon exercise of warrants	20,403		 	—		 	95		 	—		 	—		 	95		
Issuance of common stock in connection with employee stock purchase plan	5,477		 	—		 	2,650		 	—		 	—		 	2,650		
Stock based compensation for directors and employees	—		 	—		 	2,264		 	—		 	—		 	2,264		
Exercise of stock options	8,342		 	—		 	261		 	—		 	—		 	261		
Net loss	—		 	—		 	—		 	(23,549	)	 	—		 	(23,549	)	
Balance at December 31, 2016	15,224,223		 	$	15		 	$	335,423		 	$	(302,932	)	 	$	(3,849	)	 	$	28,657		
See accompanying notes to consolidated financial statements.

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GALENA BIOPHARMA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)

	
														
 	For the Year Ended December 31,	
 	2016	 	2015	 	2014	
Cash flows from operating activities:	 	 	 	 	 	
Cash flows from continuing operating activities:	 	 	 	 	 	
Net loss from continuing operations	$	(11,101	)	 	$	(38,956	)	 	$	(28,284	)	
Adjustment to reconcile net loss to net cash used in operating activities:	 	 	 	 	 	
Depreciation	142		 	107		 	86		
Non-cash accretion of debt issuance costs	3,054		 	248		 	276		
Deferred taxes	243		 	365		 	—		
Non-cash stock-based compensation	2,264		 	1,931		 	4,666		
Litigation settlement payable in common stock	2,650		—		1,000		 	—		
Change in fair value of common stock warrants	(22,220	)	 	(1,161	)	 	(16,556	)	
Change in fair value of contingent consideration	(5,047	)	 	(509	)	 	(170	)	
Changes in operating assets and liabilities:	 	 	 	 	 	
Prepaid expenses and other assets	892		 	(245	)	 	(1,078	)	
Litigation settlement insurance recovery	21,700		 	(21,700	)	 	—		
Litigation settlement payable	(25,000	)	 	24,000		 	—		
Accounts payable	(757	)	 	(289	)	 	(21	)	
Accrued expenses and other current liabilities	(50	)	 	(3,593	)	 	4,044		
Net cash used in continuing operating activities	(33,230	)	 	(38,802	)	 	(37,037	)	
Cash flows from discontinued operating activities:	 	 	 	 	 	
Net loss from discontinued operations	(12,448	)	 	(24,946	)	 	(8,322	)	
Loss on sale of commercial assets	—		 	4,549		 	—		
Impairment charge from classification of assets held for sale	—		 	8,071		 	—		
Changes in operating assets and liabilities attributable to discontinued operations	763		 	2,968		 	2,490		
Net cash used in discontinued operating activities	(11,685	)	 	(9,358	)	 	(5,832	)	
Net cash used in operating activities	(44,915	)	 	(48,160	)	 	(42,869	)	
Cash flows from investing activities:	 	 	 	 	 	
Change in restricted cash	—		 	(201	)	 	—		
Cash paid for acquisition of GALE-401	—		 	—		 	(2,415	)	
Cash paid for purchase of equipment and furnishings	(6	)	 	(153	)	 	(57	)	
Net cash provided by (used in) continuing investing activities	(6	)	 	(354	)	 	(2,472	)	
Net proceeds received from sale of commercial assets (selling costs paid)	(1,050	)	 	11,283		 	—		
Cash paid for commercial assets	—		 	(534	)	 	(3,056	)	
Net cash provided by (used in) discontinued investing activities	(1,050	)	—		10,749		—		(3,056	)	
Net cash provided by (used in) investing activities	(1,056	)	 	10,395		 	(5,528	)	
Cash flows from financing activities:	 	 	 	 	 	
Net proceeds from issuance of common stock	33,534		 	47,416		 	10,704		
Net proceeds from exercise of stock options	261		 	31		 	4,342		
Proceeds from exercise of warrants	233		 	—		 	10,717		
Proceeds from common stock issued in connection with ESPP	95		 	309		 	263		
Net proceeds from issuance of long-term debt	23,401		 	—		 	—		
Minimum cash covenant on long-term debt	(17,621	)	 	—		 	—		
Principal payments on long-term debt	(5,579	)	 	(3,911	)	 	(1,766	)	
Net cash provided by financing activities	34,324		 	43,845		 	24,260		
Net increase (decrease) in cash and cash equivalents	(11,647	)	 	6,080		 	(24,137	)	
Cash and cash equivalents at the beginning of period	29,730		 	23,650		 	47,787		
Cash and cash equivalents at end of period	$	18,083		 	$	29,730		 	$	23,650		

												
 	For the Year Ended December 31,	
 	2016	 	2015	 	2014	
Supplemental disclosure of cash flow information:	 	 	 	 	 	
Cash received during the periods for interest	$	117		 	$	18		 	$	15		
Cash paid during the periods for interest	$	636		 	$	541		 	$	800		
Supplemental disclosure of non-cash investing and financing activities:	 	 	 	 	 	
Fair value of warrants issued in connection with common stock recorded as cost of equity	$	9,886		 	$	10,296		 	$	—		
Fair value of warrants issued in connection with long-term debt recorded as debt issuance costs	$	1,139		 	$	—		 	$	—		
Principal and interest repaid through issuance of common stock	$	8,079		 	$	—		 	$	—		
Reclassification of warrant liabilities upon exercise	$	324		 	$	—		 	$	27,026		
Issuance of common stock in settlement of GALE-401 milestone	$	—		 	$	—		 	$	6,840		
Fair value of shares issued to acquire Zuplenz rights	$	—		 	$	—		 	$	2,500		
Future obligations for Zuplenz rights included in accrued expenses	$	—		 	$	—		 	$	2,716		

See accompanying notes to consolidated financial statements.

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GALENA BIOPHARMA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Business and Basis of Presentation

Overview
Galena Biopharma, Inc. (“we,” “us,” “our,” “Galena” or the “Company”) is a biopharmaceutical company developing hematology and oncology therapeutics that address unmet medical needs. The Company’s pipeline consists of multiple mid- to late-stage clinical assets, including our hematology asset, GALE-401, and our novel cancer immunotherapy programs including NeuVax™ (nelipepimut-S), GALE-301 and GALE-302. GALE-401 is a controlled release version of the approved drug anagrelide for the treatment of elevated platelets in patients with myeloproliferative neoplasms. GALE- 401 has completed a Phase 2 clinical trial and the asset is ready to advance into a pivotal trial in patients with essential thrombocythemia (ET). NeuVax is currently in multiple investigator-sponsored Phase 2 clinical trials in breast cancer. GALE-301 and GALE-302 have completed early stage trials in ovarian, endometrial and breast cancers.

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GALENA BIOPHARMA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Basis of Presentation and Significant Accounting Policies

The accompanying consolidated financial statements included herein have been prepared by Galena pursuant to the generally accepted accounting principles (GAAP). Unless the context otherwise indicates, references in these notes to the “Company,” “we,” “us” or “our” refer (i) to Galena, our wholly owned subsidiary, Apthera, Inc., or “Apthera,” and our wholly owned subsidiary, Mills Pharmaceuticals, Inc. or "Mills."

Management's Plans - We had cash and cash equivalents of approximately $18.1 million as of December 31, 2016, compared with $29.7 million as of December 31, 2015. We expect to continue to incur operating losses as we continue to advance our product candidates through the drug development and the regulatory process. In the absence of revenue, our potential sources of operational funding are proceeds from the sale of equity, funded research and development payments, debt financing arrangements, and payments received under partnership and collaborative agreements.

On February 13, 2017, the Company closed an underwritten public offering of 17,000,000 units at a price to the public of $1.00 per unit for gross proceeds of $17.0 million ("February 2017 Offering"). Each unit consists of one share of common stock, and a warrant to purchase one share of common stock at an exercise price of $1.10 per share. The net proceeds of the February 2017 Offering were $15.5 million, after deducting underwriting discounts and commissions and offering expenses paid by the Company.

In addition to the proceeds from the February 2017 Offering, in January and February 2017 the holder of the Debenture redeemed $3.95 million of outstanding principal that was satisfied by the Company with 3,518,663 shares of our common stock. As a result of the redemptions, the Company was able to transfer $3.95 million out of restricted cash and cash equivalents and into unrestricted cash and cash equivalents to be used to fund the Company's ongoing operations. The outstanding principal balance on the Debenture as of March 15, 2017 is $13,617,702 and is maintained by the Company as restricted cash.

In addition to the funds raised through underwritten public offerings and the debenture, we maintain a purchase agreement with Lincoln Park Capital LLC (LPC) and At Market Issuance Sales Agreements (ATM) with future availability of $2.0 million and $19.1 million, respectively subject to certain terms and conditions. We may also continue to use the ATM, or other instruments, in order to fund our operations going forward.

On January 31, 2017, the Company announced that it is in the process of evaluating strategic alternatives focused on maximizing stockholder value. Potential strategic alternatives that may be explored or evaluated as part of this review include continuing to advance the clinical programs as a stand-alone entity, a sale of the company, a business combination, merger or reverse merger, and a license or other disposition of corporate assets of the company. There is no set timetable for this process and there can be no assurance that this process will result in a transaction. While the Company evaluates its strategic alternatives, Galena’s investigator-sponsored immunotherapy trials will remain ongoing. With the confirmation from the FDA that the GALE-401 development program is appropriate for a New Drug Application (NDA) filing using the 505(b)(2) regulatory pathway in patients with ET who are intolerant or resistant to hydroxyurea, we have developed a clear path forward for GALE-401 in the treatment of ET. Subject to completing the manufacturing of the new formulation and the internal work to prepare the Phase 3 trial for initiation, the Company is evaluating the appropriate time to commence enrollment of the GALE-401 trial and anticipates making a definitive determination in the second half of 2017. The Company has focused on reducing expenditures in order to preserve liquidity while pursuing a strategic alternative.

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GALENA BIOPHARMA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

We believe that our existing cash and cash equivalents, funding available under an amended LPC purchase agreement, ATM and other instruments, should be sufficient to fund our operations for at least one year from the date of issuance of the Company's consolidated financial statements. This projection is based on our current limited operations and estimates of legal expenses associated with the ongoing government investigation and legal matters pending against the company, and is subject to changes in our operating plans, resolutions of such government investigation and legal matters, uncertainties inherent in our business, strategic alternatives outcomes, and the need to seek to replenish our existing cash and cash equivalents sooner than we project and in greater amounts that we had projected. There is no guarantee that any debt, additional equity or other funding will be available to us on acceptable terms, or at all. If we fail to obtain additional funding when needed, we would be forced to scale back, or terminate, our operations or to seek to merge with or to be acquired by another company.

Reverse Stock-Split - On November 11, 2016 the Company effected a 1:20 reverse stock split of the Company's outstanding shares of common stock, outstanding stock options to purchase shares of our common stock and warrants to purchase shares of common stock. In addition, the number of shares of common stock and number of shares of common stock subject to stock options or similar rights authorized under the Company’s equity incentive plan and employee stock purchase plan were proportionately adjusted for the reverse stock-split. Further, the per share exercise price under such plans were proportionately adjusted for the reverse stock-split. These consolidated financial statements give retroactive effect to such reverse stock-split and all share and per share amounts have been adjusted accordingly.

Discontinued Operations - As described in Note 15, during the quarter ended September 30, 2015 the Company met the relevant criteria for reporting the commercial operations as held for sale and in discontinued operations, pursuant to FASB Topic 205-20, Presentation of Financial Statements - Discontinued Operations, and FASB Topic 360, Property, Plant, and Equipment. The Company generally considers assets to be held for sale when (i) the transaction has been approved by the board of directors or management vested with authority to approve the transaction, (ii) the assets are available for immediate sale in their present condition, (iii) the company has initiated an active program to locate a buyer and other actions required to complete the plan to sell the assets, (iv) consummation of the transaction is probable, (v) the assets are being actively marketed for sale at a price that is reasonable in relation to the current fair value, and (vi) the transaction is expected to qualify for recognition as a completed sale, within one year. Following the classification of property and equipment for sale, the Company discontinues depreciating the asset and writes down the asset to the lower of the carrying value or fair market value, if needed. During the quarter ended December 31, 2015, the Company completed the sale of the commercial products and the related assets.

Uses of Estimates in Preparation of Financial Statements — The preparation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from those estimates.

Principles of Consolidation — The consolidated financial statements include the accounts of Galena and its wholly owned subsidiaries. All material intercompany accounts have been eliminated in consolidation.

Reclassifications — Certain prior year amounts have been reclassified to conform to current year presentation. These reclassifications had no effect on net loss per share.

Cash and Cash Equivalents — The Company considers all highly liquid debt instruments with an original maturity of 90 days or less to be cash equivalents. Cash equivalents consist primarily of amounts invested in money market accounts and demand deposits.

Restricted Cash — Restricted cash consists of the minimum cash covenant as required by the debenture certificates of deposit on hand with the Company’s financial institutions as collateral for its corporate credit cards.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Fair Value of Financial Instruments — The carrying amounts reported in the balance sheet for cash equivalents, marketable securities, accounts receivable, accounts payable, and capital leases approximate their fair values due to their short-term nature and market rates of interest.

Equipment and Furnishings — Equipment and furnishings are stated at cost and depreciated using the straight-line method based on the estimated useful lives (generally three to five years for equipment and furniture) of the related assets.

Goodwill and Intangible Assets — Goodwill and indefinite-lived intangible assets are not amortized but are tested annually for impairment at the reporting unit level, or more frequently if events and circumstances indicate impairment may have occurred. Factors the company considers important that could trigger an interim review for impairment include, but are not limited to, the following:

•	Significant changes in the manner of its use of acquired assets or the strategy for its overall business;	
• Significant negative industry or economic trends;
• Significant decline in stock price for a sustained period; and
• Significant decline in market capitalization relative to net book value.

Goodwill and other intangible assets with indefinite lives are evaluated for impairment first by a qualitative assessment to determine the likelihood of impairment. If it is determined that impairment is more likely than not, the Company will then proceed to the two step impairment test. The first step is to compare the fair value of the reporting unit to the carrying amount of the reporting unit (the “First Step”). If the carrying amount exceeds the fair value, a second step must be followed to calculate impairment (the “Second Step”). Otherwise, if the fair value of the reporting unit exceeds the carrying amount, the goodwill is not considered to be impaired as of the measurement date. In its review of the carrying value of the goodwill for its single reporting unit and its indefinite-lived intangible assets, the Company determines fair values of its goodwill using the market approach, and its indefinite-lived intangible assets using the income approach.

Intangible assets not considered indefinite-lived are reviewed for impairment when facts or circumstances suggest that the carrying value of these assets may not be recoverable. The Company’s policy is to identify and record impairment losses, if necessary, on intangible product rights when events and circumstances indicate that the assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of those assets.

The company performed its review for impairment using the qualitative assessment for both goodwill and indefinite-lived intangible assets, and has determined that there has been no impairment to these assets as of December 31, 2016 .

Contingent Purchase Price Consideration — Contingent consideration is recorded at the estimated fair value as of the acquisition date. The fair value of the contingent consideration is remeasured at each reporting period with any adjustments in fair value included in our consolidated statement of comprehensive loss.

Acquisitions and In-Licensing — For all in-licensed products and technologies, we perform an analysis to determine whether we hold a variable interest or a controlling financial interest in a variable interest entity. On the basis of our interpretations and conclusions, we determine whether the acquisition falls under the purview of variable interest entity accounting and if so, consider the necessity to consolidate the acquisition. As of December 31, 2016 , we determined there were no variable interest entities required to be consolidated.

We also perform an analysis to determine if the assets and liabilities acquired in an acquisition qualify as a "business." The excess of the purchase price over the fair value of the net assets acquired can only be recognized as goodwill in a business combination.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Patents and Patent Application Costs — Although the Company believes that its patents and underlying technology have continuing value, the amount of future benefits to be derived from the patents is uncertain. Patent costs are, therefore, expensed as incurred.

Legal Fees and Insurance Recoveries — There can be a significant time lag between the time that legal fees are incurred and the insurance reimbursement available to offset the related costs. The legal costs are recorded in the period they are incurred, and the insurance recoveries for those costs are recorded in the period when the insurance reimbursement is deemed probable.

Share-based Compensation — The Company follows the provisions of the FASB ASC Topic 718, “ Compensation — Stock Compensation” (“ASC 718”), which requires the measurement and recognition of compensation expense for all stock-based payment awards made to employees, non-employee directors, and consultants, including stock options and warrants. Stock compensation expense based on the grant date fair value estimated in accordance with the provisions of ASC 718 is recognized as an expense over the requisite service period.

For stock options and warrants granted as consideration for services rendered by non-employees, the Company recognizes compensation expense in accordance with the requirements of FASB ASC Topic 505-50 (“ASC 505-50”), “ Equity Based Payments to Non- Employees .” Non-employee option and warrant grants that do not vest immediately upon grant are recorded as an expense over the vesting period. At the end of each financial reporting period prior to vesting, the value of these options and warrants, as calculated using the Black-Scholes option-pricing model, will be re-measured using the fair value of the company’s common stock and the non-cash compensation recognized during the period will be adjusted accordingly. Since the fair market value of options and warrants granted to non-employees is subject to change in the future, the amount of the future compensation expense will include fair value re-measurements until the stock options are fully vested.

Research and Development Expenses — Research and development costs are expensed as incurred. Included in research and development costs are wages, benefits and other operating costs, facilities, supplies, external services and overhead related to our research and development departments, and clinical trial expenses.

Clinical trial expenses include direct costs associated with contract research organizations ("CROs"), as well as patient-related costs at sites at which our trials are being conducted.

Direct costs associated with our CROs are generally payable on a time and materials basis, or when certain enrollment and monitoring milestones are achieved. Expense related to a milestone is recognized in the period in which the milestone is achieved or in which we determine that it is more likely than not that it will be achieved.

The invoicing from clinical trial sites can lag several months. We accrue these site costs based on our estimate of upfront set-up costs upon the screening of the first patient at each site, and the patient related costs based on our knowledge of patient enrollment status at each site.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Income Taxes — The Company recognizes liabilities or assets for the deferred tax consequences of temporary differences between the tax basis of assets or liabilities and their reported amounts in the financial statements in accordance with FASB ASC 740-10, “ Accounting for Income Taxes” (“ASC 740-10”). These temporary differences will result in taxable or deductible amounts in future years when the reported amounts of the assets or liabilities are recovered or settled. ASC 740-10 requires that a valuation allowance be established when management determines that it is more likely than not that all or a portion of a deferred asset will not be realized. The Company evaluates the realizability of its net deferred income tax assets and valuation allowances as necessary, at least on an annual basis. During this evaluation, the company reviews its forecasts of income in conjunction with other positive and negative evidence surrounding the realizability of its deferred income tax assets to determine if a valuation allowance is required. Adjustments to the valuation allowance will increase or decrease the company’s income tax provision or benefit. The recognition and measurement of benefits related to the company’s tax positions requires significant judgment, as uncertainties often exist with respect to new laws, new interpretations of existing laws, and rulings by taxing authorities. Differences between actual results and the company’s assumptions or changes in the company’s assumptions in future periods are recorded in the period they become known.

For the years ended December 31, 2016 and 2015, we recognized income tax of $243,000 and $365,000 , respectively. There was no income tax expense or benefit for the year ended December 31, 2014. We continue to maintain a full valuation allowance against our net deferred tax assets.

Concentrations of Credit Risk — Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents. The Company maintains cash balances in several accounts with two banks, which at times are in excess of federally insured limits. As of December 31, 2016 , the company’s cash equivalents were invested in money market mutual funds. The Company’s investment policy does not allow investment in any debt securities rated less than “investment grade” by national ratings services. The Company has not experienced any losses on its deposits of cash and cash equivalents. As of December 31, 2016 , we had approximately $17,583,000 in interest-bearing accounts above federally insured limits.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

2. Recently Issued Accounting Pronouncements

In August 2014, the FASB issued ASU No. 2014-15,  Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern , or ASU 2014-15. ASU 2014-15 will explicitly require management to assess an entity’s ability to continue as a going concern, and to provide related footnote disclosure in certain circumstances. The new standard will be effective for all entities in the first annual period ending after December 15, 2016. Earlier adoption is permitted. The Company has adopted this ASU.

In April 2015, the FASB issued ASU No. 2015-03,  Simplifying the Presentation of Debt Issuance Costs , which requires that debt issuance costs be reported in the balance sheet as a direct deduction from the face amount of the related liability, consistent with the presentation of debt discounts. Further, ASU 2015-03 requires the amortization of debt issuance costs to be reported as interest expense. Similarly, debt issuance costs and any discount or premium are considered in the aggregate when determining the effective interest rate on the debt. ASU 2015-03 is effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. ASU 2015-03 must be applied retrospectively. The Company adopted this ASU on January 1, 2016. There was no impact to the Company’s consolidated financial statements upon adoption.

In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes or ASU 2015-17. ASU 2015-17 requires that deferred tax liabilities and assets be classified as noncurrent on the balance sheet. Previous guidance required deferred tax liabilities and assets to be separated into current and noncurrent amounts on the balance sheet. The guidance will become effective for us beginning in the first quarter of 2017 and may be applied either prospectively or retrospectively. Early adoption is permitted. At the time of adoption, we will reclassify current deferred tax amounts on our Consolidated Balance Sheets as noncurrent. The Company adopted this ASU on January 1, 2017. There was no impact to the Company’s consolidated financial statements upon adoption.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments , which updates certain aspects of recognition, measurement, presentation and disclosure of financial instruments. ASU 2016-01 will be effective for the Company beginning in its first quarter of 2019 and early adoption is not permitted. The Company does not believe the adoption of the new financial instruments standard will have a material impact on its consolidated financial statements.

In February 2016, the FASB issued Accounting Standards Update No. 2016-02,  Leases . The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is currently evaluating the impact of our pending adoption of the new standard on the consolidated financial statements.

In March 2016, the FASB issued Accounting Standards Update 2016-09,  Compensation-Stock Compensation . ASU 2016-09 includes several areas of simplification to stock compensation including simplifications to the accounting for income taxes, classification of excess tax benefits on the Statement of Cash Flows and forfeitures. ASU 2016-09 is effective for annual reporting periods beginning after December 15, 2016. An entity that elects early adoption must adopt all of the amendments in the same period. The Company adopted this ASU on January 1, 2017. There was no impact to the Company’s consolidated financial statements upon adoption..

In August 2016, the Financial Accounting Standards Board issued ASU No. 2016-15 "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force." The objective of ASU No. 2016-15 is to provide specific guidance on eight cash flow classification issues and how to reduce diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows under Topic 230, Statement of Cash Flows, and other Topics. The amendments in this update are effective for public business entities for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. We are still evaluating the effect of this update.

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GALENA BIOPHARMA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

In November 2016, the FASB issued ASU No. 2016-18, Restricted cash , amending the presentation of restricted cash within the statement of cash flows. The new guidance requires that restricted cash be included within cash and cash equivalents on the statement of cash flows. The ASU is effective retrospectively for reporting periods beginning after December 15, 2017, with early adoption permitted. We are evaluating the effect of this update.

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GALENA BIOPHARMA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

3. Fair Value Measurements

The Company follows ASC 820, “Fair Value Measurements and Disclosures,” (“ASC 820”) for the Company’s financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and are re-measured and reported at fair value at least annually using a fair value hierarchy that is broken down into three levels. Level inputs are defined as follows:
Level 1 — quoted prices in active markets for identical assets or liabilities.
Level 2 — other significant observable inputs for the assets or liabilities through corroboration with market data at the measurement date.
Level 3 — significant unobservable inputs that reflect management’s best estimate of what market participants would use to price the assets or liabilities at the measurement date.

The Company categorized its cash equivalents and marketable securities as Level 1 inputs. The valuations for Level 1 were determined based on a “market approach” using quoted prices in active markets for identical assets. Valuation of these assets does not require a significant degree of judgment. The Company categorized its warrants potentially settleable in cash as Level 2 inputs. The warrants are measured at market value on a recurring basis and are being marked to market each quarter-end until they are completely settled. The warrants are valued using an appropriate pricing model, using assumptions consistent with our application of ASC 718. The contingent purchase price consideration is categorized as Level 3 inputs and is measured at its estimated fair value on a recurring basis and is adjusted at each quarter-end until it is completely settled. The contingent price consideration is valued based on the expected timing of milestones, the expected probability of success for each milestone and discount rates based on a corporate debt interest rate index publicly issued.

The following tables present information about our assets and liabilities measured at fair value on a recurring basis in the condensed consolidated balance sheets (in thousands):

	
																
 	December 31, 2016	 	Level 1	 	Level 2	 	Level 3	
Assets:	 	 	 	 	 	 	 	
Cash equivalents	$	16,192		 	$	16,192		 	$	—		 	$	—		
Restricted cash equivalents	17,622		 	17,622		 	—		 	—		
Total assets measured and recorded at fair value	$	33,814		 	$	33,814		 	$	—		 	$	—		
Liabilities:	 	 	 	 	 	 	 	
Warrants potentially settleable in cash	$	1,860		 	$	—		 	$	1,860		 	$	—		
Contingent purchase price consideration	1,095		 	—		 	—		 	1,095		
Total liabilities measured and recorded at fair value	$	2,955		 	$	—		 	$	1,860		 	$	1,095		

																
 	December 31, 2015	 	Level 1	 	Level 2	 	Level 3	
Assets:	 	 	 	 	 	 	 	
Cash equivalents	$	29,171		 	$	29,171		 	$	—		 	$	—		
Total assets measured and recorded at fair value	$	29,171		 	$	29,171		 	$	—		 	$	—		
Liabilities:	 	 	 	 	 	 	 	
Warrants potentially settleable in cash	$	14,518		 	$	—		 	$	14,518		 	$	—		
Contingent purchase price consideration	6,142		 	—		 	—		 	6,142		
Total liabilities measured and recorded at fair value	$	20,660		 	$	—		 	$	14,518		 	$	6,142		

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GALENA BIOPHARMA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

The company has not transferred any financial instruments into or out of Level 3 classification during the years ended December 31, 2016 or 2015. A reconciliation of the beginning and ending Level 3 liabilities for the years ended December 31, 2016 and 2015 is as follows (in thousands):

	
				
 	Fair Value
Measurements
Using Significant
Unobservable
Inputs
(Level 3)	
Balance, January 1, 2015	$	6,651		
Change in the estimated fair value of the contingent purchase price consideration	(509	)	
Balance, December 31, 2015	6,142		
Change in the estimated fair value of the contingent purchase price consideration	(5,047	)	
Balance at December 31, 2016	$	1,095		

The fair value of the contingent purchase price consideration is measured at the end of each reporting period using Level 3 inputs in a probability-weighted, discounted cash-outflow model. The significant unobservable assumptions include the probability of achieving each milestone, the date we expect to reach the milestone, and a determination of present value factors used to discount future expected cash outflows. The decrease in the estimated fair value of the contingent purchase price consideration during 2016 reflects a lowering of the probability and lengthening of the timeline for the potential approval of NeuVax, as these assumptions are now based principally on our Phase 2 combination trial with trastuzumab whereas previously, the valuation was based on our Phase 3 PRESENT trial, which was deemed futile by the Independent Data Monitoring Committee ("IDMC") in June 2016 and subsequently closed.

4. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following (in thousands):

	
								
 	December 31,	
 	2016	 	2015	
Clinical development expense	$	3,088		 	$	3,294		
Professional fees	229		 	435		
Compensation and related benefits	975		 	1,535		
Interest expense	—		 	28		
Accrued expenses and other current liabilities	$	4,292		 	$	5,292		

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

5. Long-term Debt

On May 8, 2013, we entered into a loan and security agreement with Oxford Finance LLC, as collateral agent, and related lenders under which we borrowed the first tranche of $10 million ("Loan"). The Loan payment terms include 12 months of interest-only payments at the fixed coupon rate of 8.45% , followed by 30 months of amortization of principal and interest until maturity in November 2016. In connection with the Loan, we paid the lender a 1% cash facility fee and a 5.5% cash final payment and granted to the lender seven -year warrants to purchase up to 9,109 shares of our common stock at an exercise price of $49.4 . On May 10, 2016, the Company prepaid the outstanding principal amount and cash final payment.

On May 10, 2016, the Company entered into a Securities Purchase Agreement ("Purchase Agreement"), with certain purchasers pursuant to which the Company sold, at a 6.375% original issue discount, a total of $25,530,000 Senior Secured Debenture (“Debenture”) and warrants to purchase up to 50,000 shares of the Company's common stock. Net proceeds to the Company from sale of the Debenture, after payment of commissions and legal fees, were approximately $23.4 million The Debenture matures November 10, 2018, accrues interest at 9% per year, and does not contain any conversion features into shares of our common stock. On August 22, 2016, the Company, the purchasers and certain other parties entered into an amendment agreement, which provides for the amendment and restatement of the Debenture, an amendment to the terms of the Series A Common Stock Purchase Warrant issued by the Company to the purchasers pursuant to the terms of the Purchase Agreement, and certain other terms and conditions, as summarized below.

On December 14, 2016, the Company and the holder entered into a waiver (the “Waiver”) that amended the Securities Purchase Agreement dated May 10, 2016 between the Company and the holder, as amended on August 22, 2016 (the “SPA”). The Waiver provides that solely with respect to the calendar months of December 2016, January 2017, February 2017 and March 2017 (collectively, the “Specified Months”), the holder waives, subject to certain delineated exceptions, the requirement of paragraph (i) of the definition of “Equity Conditions” set forth in Section 1 of the Debenture, thereby continuing to allow the Company to deliver shares of its Common Stock in respect to a portion of its amortization obligation under the Debenture. Furthermore, the waiver sets out a Monthly Allowance for each Specified Month equal to $1,500,000 and required the Company to withdraw all cash and/or cash equivalents in excess of eighteen million five hundred thousand dollars ( $18,500,000 ) from certain accounts and deposit such funds into an account in a form acceptable to the holder, such that the Company requires the prior written consent of the holder for certain withdrawals. The Waiver also grants the holder special redemption rights depending upon the price of our common stock, including the right to redeem the debenture.

The Debenture carries an interest only period of six months, following which interest is due monthly and payable in cash or stock at the election of the Company. Interest deferred during the interest only period is added to and considered principal. Following the interest only period, the Company has the right under the Debenture, commencing November 10, 2016, to pay the monthly redemption amount of the outstanding balance in cash, shares of the Company's common stock or a combination thereof, if certain conditions are met. The maximum monthly redemption amount was increased from $1,100,000 to $1,500,000 under the amended Debenture; provided, that if the trading price of the Company’s common stock is at least $8.00 per share (as adjusted for stock splits, combinations or similar events) during such calendar month, then such maximum monthly redemption amount may be increased to $2,200,000 at the holder's election and if the Company has already elected to satisfy such monthly redemptions in shares of common stock. In addition, notwithstanding the foregoing limitations on the monthly redemption amount, the holder may elect up to three times in any 12-month period to increase the maximum monthly redemption to $2,500,000 .

If the Company elects to pay the redemption amount in shares of its common stock, then the shares will be delivered at the lesser of A) 7.5% discount to the average of the 3 lowest volume weighted average prices over the prior 20 trading days or B) a 7.5% discount to the prior trading day’s volume weighted average price. The Company may only opt for payment in shares of common stock if certain equity conditions are met. The Company, at its option, may also force the holder to redeem up to double the monthly redemption principal amount of the Debenture but not less than the monthly payment.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

The holder received 50,000 warrants upon the closing on the sale of the Debenture at an exercise price of $30.20 , maturing 5 years from issuance, and in accordance with the terms of the amendment agreement, the exercise price of the warrant was reduced to $8.60 per share. Additionally, the holder received 50,000 warrants upon the Company's public company announcement of the interim analysis on June 29, 2016 at an exercise price of $8.60 .

The amendment agreement provides that, following November 10, 2016, the holder may elect to convert any portion of the outstanding balance into shares of common stock at a fixed price of $12.00 per share (as adjusted for stock splits, combinations or similar events).

The Company’s obligations under the Debenture can be accelerated in the event the Company undergoes a change in control and other customary events of default. In the event of default and acceleration of the Company’s obligations, the Company would be required to pay all amounts of principal and interest then outstanding under the Debenture in cash. The Company’s obligations under the Debenture are secured under a security agreement by a senior lien on all of the Company’s assets, including all of the Company’s interests in its consolidated subsidiaries. Under the subsidiary guarantee agreement, each subsidiary guarantees the performance of the Company of the Purchase Agreement, Debenture and related agreements. The Company must also maintain as a compensating cash balance, the lesser of a minimum of $18.5 million in cash or the outstanding principal and accrued and unpaid interest, which such amount is included in restricted cash as of December 31, 2016. The holder of the Debenture has the right, at any time and from time to time, to require the Company to prepay the lesser of $18.5 million plus accrued and unpaid interest or the outstanding principal and accrued and unpaid interest.

As of December 31, 2016 the outstanding principal balance of the Debenture was $17,621,702 . The current portion of long-term debt of $16,397,030 is net of unamortized discounts and debt issuance costs of $1,224,672 . In January and February 2017, the holder of the Debenture redeemed $3,950,000 of principal, which the Company satisfied with 3,541,077 shares of our common stock. The outstanding principal balance as of March 15, 2017 is $13,671,702 .

Armentum Partners, LLC (“Placement Agent”) acted as the placement agent in the offering of the Debenture and the Company paid the Placement Agent a fee equal to 2% of the funds received from the sale of the Debenture. The Company paid half of the placement fee upon funding and paid the other half during the third quarter of 2016 .

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

6. Legal Proceedings, Commitments and Contingencies

Legal Proceedings

On June 24, 2016, the U.S. District Court for the District of Oregon entered a final order and judgment in In re Galena Biopharma, Inc. Derivative Litigation , granting final approval to the settlement awarding attorney’s fees of $4.5 million plus costs, which was paid by our insurance carriers. The settlement included a payment of $15 million in cash by our insurance carriers, which we used to fund a portion of the class action settlement, and cancellation of 60,000 outstanding director stock options. The settlement also required that we adopt and implement certain corporate governance measures. The settlement did not include any admission of wrongdoing or liability on the part of us or the individual defendants and included a full release of us and the current and former officers and directors in connection with the allegations made in the consolidated federal derivative actions and state court derivative actions.

On June 24, 2016, the U.S. District Court for the District of Oregon entered a final order and partial judgment in In re Galena Biopharma, Inc. Securities Litigation , granting final approval of the settlement awarding attorney’s fees of $4.5 million plus costs, which was paid out of the settlement funds. The settlement agreement provided for a payment of $20 million to the class and the dismissal of all claims against us and the other defendants in connection with the consolidated federal securities class actions. Of the $20 million settlement payment to the class, $16.7 million was paid by our insurance carriers and $3.3 million was paid by us through a combination of $2.3 million in cash and $1 million in shares of our common stock ( 24,002 shares) issued by us on July 6, 2016. In addition to the $3.3 million settlement payment, the company paid $2.0 million in December 2015 in attorney fees outstanding as a condition of the settlement.

In July 2016, we resolved claims brought by shareholders that relate to the securities litigation mentioned above in one case for $150,000 plus $150,000 in shares ( 14,563 shares) of our common stock, and in another case for $1.5 million in shares of our common stock ( 168,337 shares). The shares issued in connection with such settlements are included in the secondary offering filed on July 25, 2016. The settlements did not include any admission of wrongdoing or liability on the part of us or any of the current or former directors and officers and included a full release of us and the current and former directors and officers in connection with the allegations made. We are not aware of any other claims made by shareholders who have opted out of the securities litigation.

On October 13, 2016, we filed a complaint in the Circuit Court for the County of Multnomah for the State of Oregon against Aon Risk Insurance Services West, Inc. where we are seeking attorney's fees, costs and expenses incurred by us related to our coverage dispute with a certain insurer and for amounts we were required to contribute to the settlements of In re Galena Biopharma, Inc. Derivative Litigation and In re Galena Biopharma, Inc. Securities Litigation as a direct result of certain insurer's failure to pay its full policy limits of liability and other relief. We are currently engaged in written discovery.

On February 13, 2017, a putative shareholder securities class action complaint was filed in the U.S. District Court for the District of New Jersey entitled, Miller v. Galena Biopharma, Inc., et al . On February 15, 2017, a putative shareholder securities class action complaint was filed in the U.S. District Court for the District of New Jersey entitled, Kattuah v Galena Biopharma, Inc., et al . Within the time allowed under the federal rules and statutes, the Company and the other defendants, former and current officers, will respond to the complaints through an appropriate pleading or motion.

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A federal investigation of two of the high-prescribing physicians for Abstral (former commercial product) has resulted in the criminal prosecution of the two physicians for alleged violations of the federal False Claims Act and other federal statutes. The criminal trial began in January 2017 and is ongoing. We received a trial subpoena for documents in connection with that investigation and we have been in contact with the U.S. Attorney’s Office for the Southern District of Alabama (SDAL), which is handling the criminal trial, and are cooperating in the production of documents. On April 28, 2016, a second superseding indictment was filed in the criminal case, which added additional information about the defendant physicians and provided information regarding the facts and circumstances involving a rebate agreement between the Company and the defendant physicians’ pharmacy as well as their ownership of our stock. The criminal trial , which began on January 4, 2017, concluded with a jury verdict on February 23, 2017 finding these physicians guilty on 19 of 20 counts; sentencing is scheduled for May 2017. At the end of the SDAL case , SDAL dismissed count 18 of the indictment charging that the physicians conspired, through the C&R Pharmacy, to receive illegal kickbacks in exchange for prescribing Abstral. Though certain former employees received trial subpoenas to appear at the trial and provide oral testimony, only one former employee testified at the trial. We agreed to reimburse those former employees’ attorney’s fees. To our knowledge, we were not a target or subject of that investigation.

There are also federal and state investigations of a company that has a product 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. On December 16, 2015, we received a subpoena issued by the U.S. Attorney’s Office for the District of New Jersey requesting the production of a broad range of documents pertaining to our marketing and promotional practices for Abstral, the commercial product we sold in the fourth quarter of 2015. We have been in contact with the U.S. Attorney’s Office for the District of New Jersey and the Department of Justice, and we have come to understand that the investigation being undertaken is a criminal investigation in addition to a civil investigation that could ultimately involve the Company as well as one or more former employees. Pursuant to the Company’s charter, we are currently reimbursing certain former employees’ attorney’s fees with respect to the investigation. We are cooperating with the civil and criminal investigation, and through our outside counsel we have begun preliminary discussions with the government aimed at the ultimate resolution of the investigation regarding the Company.

On December 22, 2016, the Company and its former CEO reached an agreement in principle to a proposed settlement that would resolve an investigation by the staff of the Securities and Exchange Commission (SEC) involving conduct in the period 2012-2014 regarding the commissioning of internet publications by outside promotional firms. Under the terms of the proposed settlement framework, the Company and the former CEO would consent to the entry of an administrative order requiring that we and the former CEO cease and desist from any future violations of Sections 5(a), 5(b), 5(c), 17(a), and 17(b) of the Securities Act of 1933, as amended, and Section 10(b), 13(a), and 13(b)(2)(A) of the Securities Exchange Act of 1934, as amended, and various rules thereunder, without admitting or denying the findings in the order. Based upon the proposed settlement framework, the Company will make a $200,000 penalty payment. In addition to other remedies, the proposed settlement framework would require the former CEO to make a disgorgement and prejudgment interest payment as well as a penalty payment to the Commission. To address the issues raised by the SEC staff’s investigation, in addition to previous governance enhancements we have implemented, we have voluntarily undertaken to implement a number of remedial actions relating to securities offerings and our interactions with investor relations and public relations firms. The proposed settlement is subject to approval by the Commission and would acknowledge our cooperation in the investigation and confirm our voluntary undertaking to continue that cooperation. If the Commission does not approve the settlement, we may need to enter into further discussions with the SEC staff to resolve the investigated matters on different terms and conditions. As a result, there can be no assurance as to the final terms of any resolution including its financial impact or any future adjustment to the financial statements. In response to an indemnification claim by the former CEO, a special committee of our Board of Directors has determined that we are required under Delaware law to indemnify our former CEO for the disgorgement and prejudgment interest payment of approximately $750,000 that he would be required to pay if and when the settlement is approved by the Commission. Any penalty payment that the former CEO will be required to make in connection with this matter ( $600,000 under the proposed settlement framework) will be the responsibility of the former CEO.

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The litigation settlements are summarized as follows (in thousands):

				
 	Amount	
Class action settlement in 2015	$	20,000		
Derivative settlement in 2015	5,000		
Shareholders securities litigation settlements in 2016	1,800		
SEC settlement in 2016	950		
Total settlements	$	27,750		
 	 	
Payable by the Company in cash as of December 31, 2016	$	950		
Paid by the insurance carriers in 2016	21,700		
Paid by the Company in cash in 2016	2,450		
Paid by the Company in common stock in 2016	2,650		
Total settlements	$	27,750		

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Commitments

The Company acquires assets still in development and enters into research and development arrangements with third parties that often require milestone and royalty payments based on the progress of the asset through development stages. Milestone payments may be required, for example, upon approval of the product for marketing by a regulatory agency. In certain agreements, the Company is required to make royalty payments based upon a percentage of the sales. Because of the contingent nature of these payments, they are not included in the table of contractual obligations shown below.

These arrangements may be material individually, and in the unlikely event that milestones for multiple products covered by these arrangements were reached in the same period, the aggregate charge to expense could be material to the results of operations. In addition, these arrangements often give the Company the discretion to unilaterally terminate development of the product, which would allow the Company to avoid making the contingent payments; however, the Company is unlikely to cease development if the compound successfully achieves clinical testing objectives. The Company’s contractual obligations that may require future cash payments as of December 31, 2016 are as follows (in thousands):

	
																				
 	Operating
Leases (1)	 	Non-Cancelable
Employment
Agreements (2)	 	Subtotal	 	Cancelable
License
Agreements (3)	 	Total	
2017	$	241		 	$	1,601		 	$	1,842		 	$	1,391		 	$	3,233		
2018	246		 	—		 	246		 	350		 	596		
2019	251		 	—		 	251		 	350		 	601		
2020	236		 	—		 	236		 	7,350		 	7,586		
2021 and thereafter	—		 	—		 	—		 	8,815		 	8,815		
Total	$	974		 	$	1,601		 	$	2,575		 	$	18,256		 	$	20,831		

(1)  	Operating leases are primarily facility and equipment related obligations with third party vendors. Operating lease expenses during the years ended December 31, 2016, 2015, and 2014 were approximately $291,000 , $116,000 and $72,000 , respectively.	

(2)  	Employment agreement obligations include management contracts, as well as scientific advisory board member compensation agreements. Certain agreements, which have been revised from time to time, provide for minimum salary levels, adjusted annually at the discretion of the Compensation Committee, as well as for minimum bonuses that are payable.	

(3)  	License agreements generally relate to the company’s obligations with The Board of Regents, University of Texas M.D. Anderson Cancer Center and the Henry M. Jackson Foundation for our oncology therapies and the obligations with Biovascular Inc. and Mills Pharma for our GALE-401 asset. The company continually assesses the progress of its licensed technology and the progress of its research and development efforts as it relates to its licensed technology and may terminate with notice to the licensor at any time. In the event these licenses are terminated, no amounts will be due.	

The Company applies the disclosure provisions FASB ASC Topic 460 (“ASC 460”), “ Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others," to its agreements that contain guarantee or indemnification clauses. The Company provides (i) indemnifications of varying scope and size to certain investors and other parties for certain losses suffered or incurred by the indemnified party in connection with various types of third-party claims and (ii) indemnifications of varying scope and size to officers and directors against third party claims arising from the services they provide to us. These indemnifications give rise only to the disclosure provisions of ASC 460. In 2016, the Company has incurred $750,000 as a result of these obligations as a result of its obligation to its former CEO as noted above. Accordingly, the Company has accrued this liability in its financial statements related to these indemnifications.

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7. Stockholders’ Equity

Preferred Stock — The Company has authorized up to 5,000,000  shares of preferred stock, $0.0001 par value per share, for issuance. The preferred stock will have such rights, privileges and restrictions, including voting rights, dividend conversion rights, redemption privileges and liquidation preferences, as shall be determined by the Company’s board of directors upon its issuance. To date, the Company has not issued any preferred shares.

Common Stock — The Company has authorized up to 350,000,000  shares of common stock, $0.0001  par value per share, for issuance.

Issuances of common stock are as follows:

November 2014 Purchase Agreement with Lincoln Park Capital, LLC - On November 18, 2014, the Company entered into a purchase agreement with Lincoln Park Capital, LLC (LPC), pursuant to which the Company has the right to sell to LPC up to $50 million in shares of the Company's common stock, subject to certain limitations and conditions over the 36 month term of the purchase agreement. Pursuant to the purchase agreement, LPC initially purchased 125,000 shares of the Company's common stock at $40.00 per share and the Company issued 31,561 shares of common stock to LPC as a commitment fee, which was recorded as a cost of capital. As a result of this initial issuance, the Company received initial net proceeds of $4.9 million , after deducting commissions and other offering expenses. In addition to the LPC’s initial purchase of our common stock under the purchase agreement, during 2014, we received net proceeds of $8.5 million from LPC’s subsequent purchases of a total of 230,000 shares of our common stock, excluding the commitment fee shares. During the years ended December 31, 2016 and 2015 we received $0.8 million and $4.4 million by issuing 150,000 and 135,000 shares of our common stock, respectively. On February 6, 2017, Purchase Agreement was amended to the total value of common stock that the Company may sell to LPC from $55,000,000 to $15,600,000 .

At-The-Market Issuance Sales Agreements - On May 24, 2013 the Company entered into At-The-Market Issuance Sales Agreements (ATM) with FBR & Co. (formerly MLV & Co. LLC) and Maxim Group LLC (the Agents). From time to time during the term of the ATM, we may issue and sell through the Agents, shares of our common stock, and the Agents collect a fee equal to 3% of the gross proceeds from the sale of shares, up to a total limit of $20 million in gross proceeds. The ATM is available to the Company until it is terminated by the Agents, or the Company. During the years ended December 31, 2016 and 2015 we received $0.9 million and $2.3 million by issuing 334,000 and 72,000 shares of our common stock. During the year ended December 31, 2014, we received $2.3 million in net proceeds from the sale of 70,000 shares of our common stock through the ATM. On December 4, 2015 we replenished the ATM limit up to $20 million in gross proceeds available for future sales of our common stock.

March 2015 Underwritten Public Offering - On March 18, 2015 the Company closed an underwritten public offering of 1,217,948 units at a price to the public of $ 31.20 per unit for gross proceeds of $38 million (the "March 2015 Offering"). Each unit consists of one share of common stock, and a warrant to purchase 0.50 of a share of common stock at an exercise price of $41.60 per share. The March 2015 Offering included an over-allotment option for the underwriters to purchase an additional 182,692 shares of common stock and/or warrants to purchase up to 91,346 shares of common stock. On March 18, 2015, the underwriters exercised their over-allotment option to purchase warrants to purchase an aggregate of 91,346 shares of common stock. On April 10, 2015, the underwriters exercised their over-allotment option to purchase 182,692 shares of common stock for additional net proceeds of $5.4 million . The total net proceeds of the March 2015 Offering, including the exercise of the over-allotment option to purchase the warrants, were $40.8 million , after deducting underwriting discounts and commissions and offering expenses payable by the Company.

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January 2016 Underwritten Public Offering - On January 12, 2016 the Company closed an underwritten public offering of 988,636 units at a price to the public of $22.00 per unit for gross proceeds of $21.8 million ("January 2016 Offering"). Each unit consists of one share of common stock, and a warrant to purchase 0.60 of a share of common stock at an exercise price of $28.40 per share. The January 2016 Offering included an over-allotment option for the underwriters to purchase an additional 148,295 shares of common stock and/or warrants to purchase up to 88,977 shares of common stock. On January 12, 2016, the underwriters exercised their over-allotment option to purchase warrants to purchase an aggregate of 88,977 shares of common stock. The underwriters did not exercise their over-allotment option to purchase 148,295 shares of our common stock. The total net proceeds of the January 2016 Offering, including the exercise of the over-allotment option to purchase the warrants, were $20.2 million , after deducting underwriting discounts and commissions and offering expenses paid by the Company.

July 2016 Registered Direct Offering - On July 13, 2016, we closed the sale to certain institutional investors of 1,400,000 shares of common stock at a purchase price per share of  $9.00  in a registered direct offering, and warrants to purchase up to 700,000 shares of common stock with an exercise price of $13.00  per share in a concurrent private placement. The warrants are initially exercisable six months and one day following issuance and have a term of five years from the date of issuance. The net proceeds to Galena after deducting placement agent fees and estimated offering expenses were approximately  $11.7 million .

February 2017 Underwritten Public Offering - On February 13, 2017, the Company closed an underwritten public offering of 17,000,000 shares of common stock and warrants to purchase 17,000,000 shares of common stock priced at $1.00 per share and accompanying warrant ("February 2017 Offering"). The warrants are immediately exercisable with a strike price of $1.10 and will expire on the fifth anniversary of the date of issuance. The shares of common stock and the warrants will be issued separately and will be separately transferable immediately upon issuance . The net proceeds of the February 2017 Offering were $15.5 million , after deducting underwriting discounts and commissions and offering expenses paid by the Company.

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8. Warrants

The following is a summary of warrant activity for the years ended December 31, 2016 and 2015 (in thousands):

	
																	
Warrant Issuance	Outstanding, December 31, 2015	 	Granted	 	Exercised	 	Expired	 	Outstanding, December 31, 2016	 	Expiration	
July 2016	—		 	700		 	—		 	—		 	700		 	January 2022	
January 2016	—		 	682		 	—		 	—		 	682		 	January 2021	
March 2015	700		 	—		 	—		 	—		 	700		 	March 2020	
September 2013	199		 	—		 	—		 	—		 	199		 	September 2018	
December 2012	152		 	—		 	—		 	—		 	152		 	December 2017	
April 2011	31		 	—		 	(18	)	 	—		 	13		 	April 2017	
March 2011	9		 	—		 	(1	)	 	(8	)	 	—		 	March 2016	
March 2010	1		 	—		 	—		 	(1	)	 	—		 	March 2016	
Other	24		 	100		 	—		 	—		 	124		 	November 2021	
 	1,116		 	1,482		 	(19	)	 	(9	)	 	2,570		 	 	

	
																	
Warrant Issuance	Outstanding, January 1, 2015	 	Granted	 	Exercised	 	Expired	 	Outstanding, December 31, 2015	 	Expiration	
March 2015	—		 	700		 	—		 	—		 	700		 	March 2020	
September 2013	199		 	—		 	—		 	—		 	199		 	September 2018	
December 2012	152		 	—		 	—		 	—		 	152		 	December 2017	
April 2011	31		 	—		 	—		 	—		 	31		 	April 2017	
March 2011	9		 	—		 	—		 	—		 	9		 	March 2016	
March 2010	1		 	—		 	—		 	—		 	1		 	March 2016	
Other	36		 	—		 	—		 	(12	)	 	24		 	November 2021	
 	428		 	700		 	—		 	(12	)	 	1,116		 	 	

Warrants consist of warrants potentially settleable in cash, which are liability-classified warrants, and equity-classified warrants.

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Warrants classified as liabilities

Liability-classified warrants consist of warrants to purchase common stock issued in connection with equity financings in July 2016, January 2016, March 2015, September 2013, December 2012, April 2011, March 2011, March 2010 and August 2009. These warrants are potentially settleable in cash and were determined not to be indexed to our common stock.

The estimated fair value of outstanding warrants accounted for as liabilities is determined at each balance sheet date. Any decrease or increase in the estimated fair value of the warrant liability since the most recent balance sheet date is recorded in the consolidated statement of operations as other income (expense). The fair value of the warrants is estimated using an appropriate pricing model with the following inputs:

	
															
As of December 31, 2016	
 	 	 	 	 	 	 	 	 	 	
Warrant Issuance	Outstanding	 	Strike price	 	Expected term	 	Volatility %	 	Risk-free rate %	
July 2016	700		 	$	13.00		 	4.54	 	117.82	%	 	1.82	%	
January 2016	682		 	$	28.40		 	4.03	 	120.38	%	 	1.71	%	
March 2015	700		 	$	41.60		 	3.22	 	131.46	%	 	1.52	%	
September 2013	199		 	$	50.00		 	1.72	 	164.01	%	 	1.10	%	
December 2012	152		 	$	31.60		 	0.98	 	204.55	%	 	0.84	%	
April 2011	13		 	$	13.00		 	0.31	 	103.79	%	 	0.53	%	
 	 	 	 	 	 	 	 	 	 	
As of December 31, 2015	
Warrant Issuance	Outstanding	 	Strike price	 	Expected term	 	Volatility %	 	Risk-free rate %	
March 2015	700		 	$	41.60		 	4.22	 	75.85	%	 	1.58	%	
September 2013	199		 	$	50.00		 	2.72	 	74.70	%	 	1.24	%	
December 2012	152		 	$	31.60		 	1.98	 	76.37	%	 	1.05	%	
April 2011	31		 	$	13.00		 	1.31	 	65.60	%	 	0.77	%	
March 2011	9		 	$	13.00		 	0.18	 	47.98	%	 	—	%	
March 2010	1		 	$	40.04		 	0.24	 	71.41	%	 	—	%	

The Company’s expected volatility is based on a combination of implied volatilities of similar publicly traded entities. The expected life assumption is based on the remaining contractual terms of the warrants. The risk-free rate is based on the zero coupon rates in effect at the time of valuation. The dividend yield used in the pricing model is zero , because the company has no present intention to pay cash dividends.

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The changes in fair value of the warrant liability for the years ended December 31, 2016 and 2015 were as follows (in thousands):

	
																				
Warrant Issuance	Warrant liability, December 31, 2015	 	Fair value of warrants granted	 	Fair value of warrants exercised	 	Change in fair value of warrants	 	Warrant liability, December 31, 2016	
July 2016	$	—		 	$	4,296		 	$	—		 	$	(3,543	)	 	$	753		
January 2016	—		 	5,590		 	—		 	(5,061	)	 	529		
March 2015	10,337		 	—		 	—		 	(9,905	)	 	432		
September 2013	1,933		 	—		 	—		 	(1,852	)	 	81		
December 2012	1,565		 	—		 	—		 	(1,500	)	 	65		
April 2011	537		 	—		 	(278	)	 	(259	)	 	—		
March 2011	144		 	—		 	(46	)	 	(98	)	 	—		
March 2010	2		 	—		 	—		 	(2	)	 	—		
 	$	14,518		 	$	9,886		 	$	(324	)	 	$	(22,220	)	 	$	1,860		

	
															
Warrant Issuance	Warrant liability, January 1, 2015	 	Fair value of warrants granted	 	Fair value of warrants exercised	 	Change in fair value of warrants	 	Warrant liability, December 31, 2015	
March 2015	—		 	10,296		 	—		 	41		 	10,337		
September 2013	2,560		 	—		 	—		 	(627	)	 	1,933		
December 2012	2,027		 	—		 	—		 	(462	)	 	1,565		
April 2011	625		 	—		 	—		 	(88	)	 	537		
March 2011	144		 	—		 	—		 	—		 	144		
March 2010	2		 	—		 	—		 	—		 	2		
 	5,358		 	10,296		 	—		 	(1,136	)	 	14,518		

Warrants classified as equity

Equity-classified warrants consist of warrants issued in connection with consulting services provided to us. Additionally, on May 8, 2013 as a part of our Loan financing, we granted Oxford Financial LLC warrants to purchase 9,109 shares of common stock at an exercise price of $49.40 per share, which equaled the 20 -day average market price of our common stock prior to the date of the grant. The warrants were valued using the Black Scholes model. The fair value assumptions for the grant included a volatility of 75.34% , expected term of seven years, risk free rate of 1.20% , and a dividend rate of 0.00% . The fair value of the warrants granted was $38.60 per share. These warrants are recorded in equity at fair value upon issuance, and not as liabilities, and are not subject to adjustment to fair value in subsequent reporting periods.

In 2016, we issued 100,000 to the holder of the Debenture. The holder received 50,000 warrants upon the closing on the sale of the Debenture at an exercise price of $30.20 , maturing 5 years from issuance, and in accordance with the terms of the amendment agreement, the exercise price of the warrant was reduced to $8.60 per share. The fair value assumptions for the grant included a volatility of 77.13% , expected term of 5.5 years, risk free rate of 1.26% , and a dividend rate of 0.00% . Additionally, the holder received 50,000 warrants upon the Company's public company announcement of the interim analysis on June 29, 2016 at an exercise price of $8.60 . The fair value assumptions for the grant included a volatility of 106.63% , expected term of 5.5 years, risk free rate of 1.35% , and a dividend rate of 0.00% . In addition to the warrants issued to the holder of the debenture we have 15,000 outstanding warrants issued to service providers with a weighted average exercise price of $79.40 as of December 31, 2016 and 2015. These warrants are recorded in equity at fair value upon issuance, and not as liabilities, and are not subject to adjustment to fair value in subsequent reporting periods.

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9. Stock-Based Compensation

Options to Purchase Shares of Common Stock — The Company follows the provisions ASC 718, which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees, non-employee directors and consultants, including employee stock options. Stock compensation expense based on the grant date fair value estimated in accordance with the provisions of ASC 718 is recognized as an expense over the requisite service period.

For stock options and warrants granted in consideration for services rendered by non-employees, the company recognizes compensation expense in accordance with the requirements of ASC Topic 505-50. Non-employee option and warrant grants that do not vest immediately upon grant are recorded as an expense over the vesting period. At the end of each financial reporting period prior to vesting, the value of these options and warrants, as calculated using the Black-Scholes option-pricing model, is being re-measured using the fair value of the company’s common stock and the non-cash compensation recognized during the period will be adjusted accordingly. Since the fair market value of options and warrants granted to non-employees is subject to change in the future, the amount of the future compensation expense will include fair value re-measurements until the stock options and warrants are fully vested.

The following table summarizes the components of stock-based compensation expense in the Consolidated Statements of Comprehensive Loss for the years ended December 31, 2016 , 2015, and 2014 (in thousands):

	
												
 	2016	 	2015	 	2014	
Research and development	$	298		 	$	350		 	$	484		
General and administrative	1,966		 	1,591		 	4,903		
Total stock-based compensation	$	2,264		 	$	1,941		 	$	5,387		

The Company uses the Black-Scholes option-pricing model and the following weighted-average assumptions to determine the fair value of all its stock options granted:

	
									
 	2016	 	2015	 	2014	
Risk free interest rate	1.47	%	 	1.67	%	 	2.01	%	
Volatility	102.62	%	 	73.97	%	 	79.37	%	
Expected lives (years)	5.93		 	6.16		 	6.16		
Expected dividend yield	0.00	%	 	0.00	%	 	0.00	%	

The weighted-average fair value of options granted during the years ended December 31, 2016 and 2015 was $6.09 and $21.40 per share, respectively.

The Company’s expected common stock price volatility assumption is based upon the volatility of a basket of comparable companies. The expected life assumptions for employee grants were based upon the simplified method provided for under ASC 718-10, which averages the contractual term of the Company’s options of ten years with the average vesting term of four years for an average of six years . The expected life assumptions for non-employees were based upon the contractual term of the option. The dividend yield assumption is zero, because the Company has never paid cash dividends and presently has no intention of paying cash dividends in the future. The risk-free interest rate used for each grant was also based upon prevailing short-term interest rates. The Company has estimated an annualized forfeiture rate of 15% for options granted to its employees, 8% for options granted to senior management and zero for non-employee directors. The Company will record additional expense if the actual forfeitures are lower than estimated and will record a recovery of prior expense if the actual forfeiture rates are higher than estimated.

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GALENA BIOPHARMA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

As of December 31, 2016 , there was $2,295,000 of unrecognized compensation cost related to outstanding options that is expected to be recognized as a component of the Company’s operating expenses over a weighted-average period of 2.30 years.

As of December 31, 2016 , an aggregate of 1,325,000 shares of common stock were reserved for issuance under the Company’s 2016 Incentive Plan, including 561,000 shares subject to outstanding common stock options granted under the plan and 501,000 shares available for future grants. On July 14, 2016, shareholders approved the 2016 Incentive Plan. The 2016 Incentive Plan replaced the 2007 Incentive Plan that expired on February 23, 2017. The administrator of the plan determines the times when an option may become exercisable. Vesting periods of options granted to date have not exceeded four years . The options generally will expire, unless previously exercised, no later than ten years from the grant date.

The following table summarizes option activity of the company:

	
							
 	Total
Number of
Shares
(In Thousands)	 	Weighted
Average
Exercise
Price	
Outstanding at December 31, 2015	663		 	$	51.60		
Granted	146		 	9.40		
Exercised	(8	)	 	31.44		
Cancelled	(240	)	 	50.28		
Outstanding at December 31, 2016	561		 	$	41.50		
Options exercisable at December 31, 2016	329		 	$	56.06		

The weighted average remaining contractual life of options outstanding as of December 31, 2016, 2015, and 2014 was 7.02 , 7.63 , and 7.35 years, respectively. The weighted average remaining contractual life of options exercisable as of December 31, 2016, 2015, and 2014 was 5.52 , 6.20 , and 6.51 years, respectively.

The aggregate intrinsic value of outstanding options as of December 31, 2016, 2015, and 2014 was $0 , $539,000 , and $610,000 , respectively. The aggregate intrinsic value of exercisable options as of December 31, 2016, 2015, and 2014 was $0 , $518,000 , and $509,000 , respectively. The aggregate intrinsic value is calculated based on the positive difference between the closing fair market value of the Company's common stock and the exercise price of the underlying options.

The aggregate intrinsic value of options exercised during the years ended December 31, 2016, 2015, and 2014 was $56,000 , $37,000 , and $13,429,000 respectively.

Employee Stock Purchase Plan — The Company also has an employee stock purchase plan (“ESPP”) which allows employees to contribute up to 15% of their cash earnings, subject to certain maximums, to be used to purchase shares of our common stock on each semi-annual purchase date. The purchase price is equal to 85% of the market value per share on either the first or last day of the semi-annual period, whichever is lower. Our ESPP is non-compensatory pursuant to the provisions of generally accepted accounting principles for share-based compensation expense. The ESPP contains an “evergreen provision” with annual increases in the number of shares available for issuance on the first day of each year through January 1, 2015 equal to the lesser of: (a)  12,500 shares increased on each anniversary of the adoption of the Plan by 1%  of the total shares of stock then outstanding and (b)  50,000 shares. As of December 31, 2016, an aggregate of 20,930 shares of common stock were authorized and available for future issuance under the ESPP. The Company has issued 29,070 shares under the ESPP through December 31, 2016.
Restricted Stock Units — In addition to options to purchase shares of common stock, the Company may grant restricted stock units (“RSU”) as part of its compensation package. If granted, each RSU would be granted at the fair market value of the Company's common stock on the date of grant. Vesting is determined on a grant-by-grant basis. There were no RSUs outstanding as of December 21, 2016 and 2015.

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GALENA BIOPHARMA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

10. Net Loss Per Share

The Company accounts for and discloses net loss per common share in accordance with FASB ASC Topic 260 “ Earnings per Share.” Basic net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding. Diluted net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted-average number of common shares that would have been outstanding during the period assuming the issuance of common shares for all potential dilutive common shares outstanding. Potential common shares consist of shares issuable upon the exercise of stock options and warrants.

The following table sets forth the potentially dilutive common shares excluded from the calculation of net loss per common share because their inclusion would be anti-dilutive (in thousands):

	
						
 	December 31,	
 	2016	 	2015	
Warrants to purchase common stock	2,570		 	1,115		
Options to purchase common stock	561		 	663		
Total	3,131		 	1,778		

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GALENA BIOPHARMA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

11. Income Taxes
The components of federal and state income tax expense are as follows (in thousands):

	
													
 	 	As of December 31,	
 	 	2016	 	2015	 	2014	
Current	 	 	 	 	 	 	
Federal	 	$	—		 	$	—		 	$	—		
State	 	—		 	—		 	—		
Total current	 	—		 	—		 	—		
Deferred expense	 	 	 	 	 	 	
Federal	 	210		 	332		 	—		
State	 	33		 	33		 	—		
Total deferred	 	243		 	365		 	—		
Total income tax expense	 	$	243		 	$	365		 	$	—		
The components of net deferred tax assets are as follows (in thousands):

	
									
 	 	As of December 31,	
 	 	2016	 	2015	
Net operating loss carryforwards	 	$	97,168		 	$	75,221		
Tax credit carryforwards	 	4,083		 	3,866		
Stock based compensation	 	5,757		 	5,050		
Other	 	58		 	1,430		
Licensing deduction deferral	 	10,263		 	9,910		
Gross deferred tax assets	 	117,329		 	95,477		
Valuation allowance	 	(117,329	)	 	(95,477	)	
Net deferred tax asset	 	$	—		 	$	—		
The components of net deferred tax liabilities are as follows (in thousands):

	
									
 	 	As of December 31,	
 	 	2016	 	2015	
In-process research and development not subject to future amortization for tax purposes	 	$	5,661		 	$	5,418		
Gross deferred tax liability	 	$	5,661		 	$	5,418		

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GALENA BIOPHARMA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

The provision for income taxes differs from the provision computed by applying the federal statutory rate to net loss before income taxes as follows (in thousands):

	
													
 	 	As of December 31,	
 	 	2016	 	2015	 	2014	
Expected federal income tax benefit	 	$	(7,977	)	 	$	(21,603	)	 	$	(12,447	)	
State income taxes after credits	 	(1,575	)	 	(2,375	)	 	(1,283	)	
Unrealized gain on marketable securities	 	—		 	—		 	—		
Changes in warrant value	 	(8,728	)	 	(456	)	 	(6,503	)	
Stock compensation	 	(1,782	)	 	508		 	3,996		
Effect of change in valuation allowance	 	21,852		 	24,029		 	17,275		
Income tax credits	 	(217	)	 	(276	)	 	(42	)	
Other	 	(1,330	)	 	538		 	(996	)	
 	 	$	243		 	$	365		 	$	—		
The Company has incurred net operating losses from inception. At December 31, 2016, the Company had domestic federal and state net operating loss carryforwards of approximately $251.5 million and $200.0 million , respectively, available to reduce future taxable income, which expire at various dates beginning in 2016 through 2036 . The Company also had federal and state research and development tax credit carryforwards of approximately $2.6 million and $2.5 million , respectively, available to reduce future tax liabilities and which expire at various dates beginning in 2023 through 2035 . The income tax expense for the year ended December 31, 2016 relates to indefinite lived deferred tax liabilities.
At December 31, 2016, approximately $1.4 million of the Company's net operating loss carryforwards were generated as a result of deductions related to the exercises of stock options. If utilized, this portion of the Company's carryforwards, as tax effected, will be accounted for as a direct increase to contributed capital rather than as a reduction of that year's provision for income taxes. Net operating loss carryforwards created by excess tax benefits from the exercise of stock options are not recorded as deferred tax assets.
Under the provisions of the Internal Revenue Code, certain substantial changes in the Company’s ownership may result in a limitation on the amount of net operating loss carryforwards and research and development credit carryforwards which could be utilized annually to offset future taxable income and taxes payable.
Based on an assessment of all available evidence including, but not limited to the Company’s limited operating history in its core business and lack of profitability, uncertainties of the commercial viability of its technology, the impact of government regulation and healthcare reform initiatives, and other risks normally associated with biotechnology companies, the Company has concluded that it is more likely than not that these net operating loss carryforwards and credits will not be realized and, as a result, a 100% deferred income tax valuation allowance has been recorded against these assets. The valuation allowance increased by $21.8 million and $24.2 million for the years ended December 31, 2015 and 2014, respectively.
The Company files income tax returns in the U.S. federal, Massachusetts, Colorado, California, Connecticut, Georgia, Oregon, and Texas jurisdictions. The Company is subject to tax examinations for the 2012 tax year and beyond. The Company does not believe there will be any material changes in its unrecognized tax positions over the next 12 months . The Company has not incurred any interest or penalties. In the event that the Company is assessed interest or penalties at some point in the future, they will be classified in the financial statements as general and administrative expense.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

12. License Agreements

As part of its business, the Company enters into licensing agreements with third parties that often require milestone and royalty payments based on the progress of the licensed asset through development and commercial stages. Milestone payments may be required, for example, upon approval of the product for marketing by a regulatory agency, and the Company may be required to make royalty payments based upon a percentage of net sales of the product. The expenditures required under these arrangements in any period may be material and are likely to fluctuate from period to period.

These arrangements sometimes permit the Company to unilaterally terminate development of the product and thereby avoid future contingent payments; however, the Company is unlikely to cease development if the compound successfully achieves clinical testing objectives.

In conjunction with the acquisition of NeuVax, the Company acquired rights and assumed obligations under a license agreement among Apthera and The University of Texas M. D. Anderson Cancer Center (“MDACC”) and The Henry M. Jackson Foundation for the Advancement of Military Medicine, Inc. (“HJF”) which grants exclusive worldwide rights to a U.S. patent covering the nelipepimut-S peptide and several U.S. and foreign patents and patent applications covering methods of using the peptide as a vaccine. Under the terms of this license, we are required to pay an annual maintenance fee of $200,000 , clinical milestone payments including $200,000 upon commencement of the Phase 3 PRESENT trial of NeuVax and royalty payments based on sales of NeuVax or other therapeutic products developed from the licensed technologies.

Effective December 3, 2012, we entered into a license and supply agreement with ABIC Marketing Limited, a subsidiary of Teva Pharmaceuticals (“ABIC”), under which we granted ABIC exclusive rights to seek marketing approval in Israel for our NeuVax product candidate for intradermal injection for the treatment of breast cancer following its approval by the FDA or the European Medicines Agency, and to market, sell and distribute NeuVax in Israel assuming such approval is obtained. ABIC’s rights also include a right of first refusal in Israel for all future indications for which NeuVax may be approved. Under the license and supply agreement, ABIC will assume responsibility for regulatory registration of NeuVax in Israel, provide financial support for local development, and commercialize the product in the region in exchange for making royalty payments to us based on future sales of NeuVax. ABIC also agrees in the license and supply agreement to purchase from us all supplies of NeuVax at a price determined according to a specified formula.

On November 19, 2015, Galena Biopharma, Inc. (the “Company”) and Sentynl Therapeutics Inc., a Delaware corporation (“Sentynl”), entered into and closed upon an Asset Purchase Agreement (the “Purchase Agreement”), pursuant to which the Company agreed to sell to Sentynl and Sentynl agreed to purchase from the Company, certain assets of the Company related to and including its Abstral ® (fentanyl) sublingual tablets product (“Abstral”). The assets sold and assigned to Sentynl pursuant to the Purchase Agreement included all of the Company’s rights and interests in the Asset Purchase Agreement by and between the Company and Orexo AB (“Orexo”) dated March 15, 2013, and the License Agreement by and between the Company and Orexo dated March 18, 2013 (collectively, the “Orexo Agreements”). The Company’s future obligations under the Orexo Agreements were assumed by Sentynl pursuant to such assignment. The Purchase Agreement further provides that the Company will continue to be responsible for any pre-closing liabilities and obligations related to Abstral, as well for certain channel liabilities related to Abstral for a period of time post-closing. In connection with the transactions contemplated by the Purchase Agreement, the Company assigned to Sentynl all of its rights to and interests in the Orexo Agreements. In connection with such assignment, Orexo released the Company from any future liabilities and obligations under the Orexo Agreements.
 
The total potential consideration payable to the Company under the Purchase Agreement is $12 million , comprised of an $8 million upfront payment and up to an aggregate of $4 million , consisting of two one-time payments based on Sentynl's achievement of "net sales" of Abstral in amounts ranging from $25 million to $35 million .

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GALENA BIOPHARMA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

On January 12, 2014, we acquired worldwide rights to anagrelide controlled release (CR) formulation, which we renamed GALE-401, through our acquisition of Mills Pharmaceuticals, LLC ("Mills"), and Mills became a wholly owned subsidiary. GALE-401 contains the active ingredient anagrelide, an FDA-approved product that has been in use since the late 1990s for the treatment of myleoproliferative neoplasms (MPNs). Mills holds an exclusive license to develop and commercialize anagrelide CR formulation, pursuant to a license agreement with BioVascular, Inc. Under the terms of the license agreement, Mills has agreed to pay BioVascular, Inc. a mid-to-low single digit royalty on net revenue from the sale of licensed products as well as future cash milestone payments based on the achievement of specified regulatory milestones. We are responsible for patent prosecution and maintenance.

On December 17, 2015, Galena Biopharma, Inc. (the “Company”) and Midatech Pharma PLC, a public limited company organized under the laws of England and Wales (“Midatech”), entered into an Asset Purchase Agreement (the “Purchase Agreement”), pursuant to which the Company agreed to sell to Midatech and Midatech agreed to purchase from the Company, certain assets of the Company related to and including its Zuplenz ® (ondansetron) Oral Soluble Film (“Zuplenz”). The assets to be sold and assigned to Midatech pursuant to the Purchase Agreement include all of the Company’s rights and interests in the License and Supply Agreement by and between the Company and MonoSol Rx, LLC (“MonoSol”) dated July 17, 2014 (the “MonoSol License”). The Company’s future obligations under the MonoSol agreement will be assumed by Midatech pursuant to such assignment. The Purchase Agreement further provides that the Company will continue to be responsible for any pre-closing liabilities and obligations related to Zuplenz, as well for certain channel liabilities related to Zuplenz for a period of time post-closing. The transaction was completed on December 24, 2015.

The total potential consideration payable to the Company under the Purchase Agreement is $29.75 million , comprised of a $3.75 million upfront payment upon the closing and up to an aggregate of $26 million , consisting of four one-time payments based on Midatech's achievement of "net sales" of Zuplenz in amounts ranging from $12 million to $70 million .

Through a separate agreement with MonoSol entered into on December 16, 2015 (the “MonoSol License Amendment”), (i) the Company and MonSol agreed to amend the MonoSol License in order to reduce the number of field representatives that the Company is required to maintain with respect to Zuplenz, and (ii) the Company agreed to pay MonoSol $900,000 of the upfront fee payable to the Company under the Purchase Agreement and 20% of any future milestone payments received by the Company under the Purchase Agreement.

On December 24, 2015, the Company and Midatech closed upon the Purchase Agreement. In connection with the closing of the transactions contemplated by the Purchase Agreement, the Company assigned to Midatech all of its rights to and interests in the Company’s License and Supply Agreement, dated July 17, 2014 (the “MonoSol License”). As a result of such assignment, Midatech assumed all of the Company’s obligations under the MonoSol License.

13. Related Party Transactions
From 2011 to 2016, the Company retained TroyGould PC as outside corporate counsel. Sanford J. Hillsberg, the Chairman of Galena, is a senior lawyer with TroyGould PC. The Company incurred $209,000 , $577,000 , and $533,000 for services provided by TroyGould PC during the years ended December 31, 2016, 2015, and 2014, respectively. At December 31, 2015, Galena owed $20,000 to TroyGould PC. There was no payable to TroyGould PC as of December 31, 2016.

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GALENA BIOPHARMA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

14. Employee Benefit Plan

The Company sponsors a 401(k) retirement savings plan (the “Plan”). Participation in the Plan is available to full-time employees who meet eligibility requirements. Eligible employees may defer a portion of their salary as defined by Internal Revenue Service regulations. The Company may make matching contributions on behalf of all participants in the 401(k) Plan in an amount determined by the Company’s Board of Directors. The Company may also make additional discretionary profit sharing contributions in amounts as determined by the Board of Directors, subject to statutory limitations. Matching and profit-sharing contributions, if any, are subject to a vesting schedule; all other contributions are at all times fully vested. The Company intends the 401(k) Plan, and the accompanying trust, to qualify under Sections 401(k) and 501 of the Internal Revenue Code so that contributions by employees to the 401(k) Plan, and income earned (if any) on plan contributions, are not taxable to employees until withdrawn from the 401(k) Plan, and so that the Company will be able to deduct its contributions, if any, when made. The trustee under the 401(k) Plan, at the direction of each participant, invests the assets of the 401(k) Plan in any of a number of investment options. The Company made matching contributions totaling $108,000 for the year ended December 31, 2016. For the years ended December 31, 2015 and 2014, the Company made matching contributions totaling $115,000 and $70,000 , respectively

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GALENA BIOPHARMA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

15. Discontinued Operations

As part of the Company's strategic objective to focus its resources on its development pipeline, our management and Board of Directors decided and committed to pursue a plan to sell or otherwise divest the Company’s commercial business during the third quarter of 2015. The Company’s commercial business was comprised of two products: Abstral ® (fentanyl) Sublingual Tablets and Zuplenz ® (ondansetron) Oral Soluble Film. As described in Note 14, both products were sold in the fourth quarter of 2015.

The Company met the relevant criteria for reporting the commercial business as held for sale and in discontinued operations in the accompanying financial statements pursuant to FASB Topic 205-20, Presentation of Financial Statements--Discontinued Operations, and FASB Topic 360, Property, Plant, and Equipment. The Company assessed the commercial business net asset group for impairment pursuant to FASB Topic 360, as discussed in Note 1, determining that the carrying value exceeded the fair value of the assets, therefore the Company recorded a $8.1 million impairment charge as of September 30, 2015.

The Company entered into an agreement with a third party firm to assist the Company with the divestiture of its commercial operations including identifying potential acquirers. Pursuant to the terms of the agreement, in the event the Company successfully completed a divestiture through the sale of its commercial operations to a third-party, the Company paid a success fee to the third party firm in an amount of $0.9 million , reimbursement for reasonable out-of-pocket expenses and agreed to pay 5% of realized future revenue and payment streams.

The Company entered into compensatory arrangements related to the divestiture of our commercial business with certain members of commercial management. Under the terms of these arrangements, if the Company met certain sales and margin numbers in the fourth quarter of 2015 and successfully completed a divestiture through sale of its commercial operations to a third-party, the Company paid a retention fee to the three employees in a combined total amount equal to $352,000 or 3% of cash consideration received as upfront payment in the transactions. These employees will also receive severance payments equal to one month’s salary for between four and seven months. In addition to these compensatory agreements loss from discontinued operations includes one-time termination benefits provided to employees that were part of the commercial business and did not accept employment opportunities at the companies who purchased Abstral and Zuplenz.

The following table describes the net proceeds from the sale and the assets and liabilities sold, net of selling costs (in thousands):

	
								
 	Sale of Abstral and related assets on November 19, 2015
	 	Sale of Zuplenz and related assets on December 24, 2015
	
Net proceeds from sales	 	 	 	
Total consideration	$	8,348		 	$	3,750		
Less selling costs*	(815	)	 	(1,050	)	
Proceeds from sale, net of selling costs	$	7,533		 	$	2,700		
*Note selling costs related to the sale of Zuplenz and related assets are included in accrued liabilities and were paid in the first quarter of 2016.

In addition to the upfront proceeds received from the sale of Abstral and Zuplenz and their related assets, the Company is eligible to receive up to $30 million in future milestone payments based on future net revenue of the products. The additional consideration will be recognized in the period that the net revenue milestones are achieved.

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GALENA BIOPHARMA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

The following table presents a reconciliation of the carrying amounts of assets and liabilities of the commercial operations to assets held for sale in the balance sheets (in thousands):

								
 	2016	 	2015	
Carrying amounts of assets included as part of discontinued operations:	
Accounts receivable	$	813		 	$	392		
Total current assets of discontinued operations	$	813		 	$	392		
 	 	 	 	
Carrying amounts of liabilities included as part of discontinued operations:	
Accounts payable	$	3,115		 	$	1,491		
Accrued expenses and other current liabilities	2,944		 	4,434		
Total current liabilities of discontinued operations	$	6,059		 	$	5,925		

The following table represents the components attributable to the commercial business in 2016, 2015, and 2014 that are presented in the consolidated statements of comprehensive loss as discontinued operations (in thousands):

												
 	2016	 	2015	 	2014	
Net revenue	$	—		 	$	9,734		 	$	9,319		
Cost of revenue	—		 	(1,780	)	 	(1,403	)	
Additional channel obligations	(2,886	)	 	—		 	—		
Amortization of certain acquired intangible assets	—		 	(921	)	 	(440	)	
Research and development	—		 	(355	)	 	(680	)	
Selling, general, and administrative	(9,562	)	 	(17,655	)	 	(15,118	)	
Impairment charge form classification as held for sale	—		 	(8,071	)	 	—		
Loss on sale of commercial business assets	—		 	(4,549	)	 	—		
Severance and exit costs	—		 	(1,349	)	 	—		
Loss from discontinued operations	$	(12,448	)	 	$	(24,946	)	 	$	(8,322	)	

Additional channel obligations included in discontinued operations in 2016 is comprised of larger than anticipated rebates of Abstral sales for which we were responsible through the end of the first quarter of 2016. The increase in rebates was driven by larger than expected volumes through these rebate channels and additional price protection provisions over which the Company has no control and was partially offset by lower than expected patient assistance program reimbursement.

Selling, general and administrative expense included in discontinued operations consists of all other expenses of our commercial operations that were required in order to market and sell our marketed products prior to our sales of the rights to these commercial products. These expenses include all personnel related costs, marketing, data, consulting, legal, and other outside services necessary to support the commercial operations. During the year ended December 31, 2016 we incurred $9.2 million related to legal fees from external counsel associated with document production for the subpoenas related to the sales and marketing practices of Abstral. See Note 6 for further disclosures related to these legal proceedings.

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GALENA BIOPHARMA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

16. Selected Quarterly Financial Data (Unaudited)

The following amounts are in thousands, except per share amounts:

	
																	
 	 	1st Quarter	 	2nd Quarter	 	3rd Quarter	 	4th Quarter	
2016	 	 	 	 	 	 	 	 	
Net income (loss)	 	$	(16,493	)	 	$	5,389		 	$	(6,929	)	 	$	(5,516	)	
Net income (loss) per share, basic and diluted	 	$	(1.84	)	 	$	0.59		 	$	(0.66	)	 	$	(0.51	)	
 	 	 	 	 	 	 	 	 	
2015	 	 	 	 	 	 	 	 	
Net revenue	 	$	2,750		 	$	3,382		 	$	2,166		 	$	1,436		
Gross profit on net revenue	 	$	2,357		 	$	2,914		 	$	1,454		 	$	1,229		
Net loss	 	$	(10,537	)	 	$	(15,660	)	 	$	(18,026	)	 	$	(19,678	)	
Net loss per share, basic and diluted	 	$	(1.55	)	 	$	(1.94	)	 	$	(2.23	)	 	$	(2.51	)	

17. Subsequent Events

The Company evaluated all events or transactions that occurred after December 31, 2016 up through the date these financial statements were issued. Other than as disclosed elsewhere in the notes to the condensed consolidated financial statements, the Company did not have any material recognizable or unrecognizable subsequent events.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

Not applicable.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures
Rule 13a-15(e) under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), defines the term “disclosure controls and procedures” as those controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms and that such information is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Our Interim Chief Executive Officer and Chief Financial Officer has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined under Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based upon that evaluation, our Interim Chief Executive Officer and Chief Financial Officer has concluded that our disclosure controls and procedures are effective.
Evaluation of Disclosure Controls and Procedure Management’s report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our Interim Chief Executive Officer and Principal Accounting Officer, we conducted evaluations of the effectiveness of our internal control over financial reporting based on the framework in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on our evaluations under the framework in Internal Control-Integrated Framework (2013) issued by the COSO, our Interim Chief Executive Officer and Chief Financial Officer concluded that our internal control over financial reporting was effective as of December 31, 2016.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

This annual report includes an attestation report of the company’s registered public accounting firm regarding internal control over financial reporting.
There have been no changes in our internal controls over financial reporting during the fourth quarter and the year ended December 31, 2016 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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ITEM 9B. OTHER INFORMATION

None.

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PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

We will file with the SEC a definitive Proxy Statement, which we refer to herein as the “Proxy Statement,” not later than 120 days after the fiscal year ended December 31, 2016. The information required by this item is incorporated herein by reference to the information to be contained in the Proxy Statement.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this item is incorporated herein by reference to the information to be contained in the Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this item is incorporated herein by reference to the information to be contained in the Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this item is incorporated herein by reference to the information to be contained in the Proxy Statement.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this item is incorporated herein by reference to the information to be contained in the Proxy Statement.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report to be signed on its behalf by the undersigned thereunto duly authorized.

	
				
 	GALENA BIOPHARMA, INC.	
 	 	 	 	
 	By:	 	/s/ Stephen F. Ghiglieiri	
 	 	 	 	
 	 	 	Stephen F. Ghiglieri	
 	 	 	Interim Chief Executive Officer and Chief Financial Officer	
 	 	 	 	
 	 	 	Date: March 15, 2017	

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Dated: March 15, 2017

Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

	
					
Signature	 	Title	 	Date	
 	 	 	 	 	
/s/ Stephen F. Ghiglieri	 	Interim Chief Executive Officer and Chief Financial Officer (Principal Executive and Accounting Officer)	 	March 15, 2017	
Stephen F. Ghiglieri	 		 	 	
 	 	 	 	 	
/s/ Sanford J. Hillsberg	 	Director, Chairman of the Board	 	March 15, 2017	
Sanford J. Hillsberg	 	 	 	 	
 	 	 	 	 	
/s/ William L. Ashton	 	Director	 	March 15, 2017	
William L. Ashton	 	 	 	 	
 	 	 	 	 	
/s/ Richard Chin	 	Director	 	March 15, 2017	
Richard Chin, M.D.	 	 	 	 	
 	 	 	 	 	
/s/ Irving M. Einhorn	 	Director	 	March 15, 2017	
Irving M. Einhorn	 	 	 	 	
 	 	 	 	 	
/s/ Stephen S. Galliker	 	Director	 	March 15, 2017	
Stephen S. Galliker	 	 	 	 	
 	 	 	 	 	
/s/ Mary Ann Gray	 	Director	 	March 15, 2017	
Mary Ann Gray	 	 	 	 	
 	 	 	 	 	
/s/ Rudolph Nisi	 	Director	 	March 15, 2017	
Rudolph Nisi, M.D.	 	 	 	 	

104

ITEM 15. EXHIBITS

	
						
Exhibit Number	Exhibit Description	Form	Exhibit	Filing Date/Period End Date	
1.1	Underwriting Agreement dated as of March 13, 2015 by and between Galena Biopharma, Inc. and Raymond James & Associates,	8-K	1.1		16-Mar-15	
	Inc.					
1.2	Underwriting Agreement dated as of January 7, 2016 by and between 	8-K	1.1		7-Jan-16	
	Galena Biopharma, Inc. and Raymond James Financial, Inc.					
2.1	Unit Purchase Agreement, dated as of January 12, 2014, between Galena Biopharma, Inc. and Mills Pharmaceuticals, LLC.	10-Q	2.1		17-Mar-14	
3.1	Amended and Restated Certificate of Incorporation of	 	 	 	
	Galena Biopharma, Inc. (formerly RXi Pharmaceuticals Corporation),				
	amended as of February 10, 2017**				
3.2	Certificate of Ownership and Merger	8-K	3.1		26-Sep-11	
3.3	Amended and Restated By-Laws of Galena Biopharma, Inc.**	 	 	 	
4.1	Form of Common Stock Certificate**	 	 	 	
4.2	Form of Warrant Agreement by and Galena Biopharma, Inc., Computershare Inc. and Computershare Trust Company, N.A.	8-K	4.1		13-Sep-13	
4.3	Form of Warrant Agreement by and Galena Biopharma, Inc., Computershare Inc. and Computershare Trust Company, N.A.	8-K	4.1		16-Mar-15	
4.4	Form of Warrant agreement by and among Galena Biopharma, Inc., 	8-K	4.1		7-Jan-16	
	Computershare Inc. and Computershare Trust Company, N.A					
4.5	Form of Warrant, to be issued by Galena Biopharma, Inc. to the Investors on July 13, 2016.	8-K	4.1		8-Jul-16	
4.6	9% Original Issues Discount Senior Secured Debenture of Galena Biopharma, Inc.	10-Q	4.1		10-May-16	
4.7	Securities Purchase Agreement dated May 10, 2016 between Galena Biopharma, Inc. and Purchasers	10-Q	10.1		9-Aug-16	
4.8	Amended and Restated 9% Original Issue Discount Senior Secured Debenture Due November 10, 2018, issued to JGB (Cayman) Newton Ltd. as of August 22, 2016	8-K	4.1		23-Aug-16	
4.9	Series A Common Stock Purchase Warrant assigned to JGB (Cayman) Newton Ltd.	10-Q	4.2		9-Aug-16	
4.1	Series B Common Stock Purchase Warrant assigned to JGB (Cayman) Newton Ltd.	10-Q	4.3		9-Aug-16	
4.11	Subsidiary Guarantee dated May 10, 2016 between Galena Biopharma, Inc. and JGB Collateral LLC.	10-Q	10.2		9-Aug-16	
4.12	Registration Rights Agreement dated May 10, 2016 between Galena Biopharma, Inc. and Purchasers.	10-Q	10.3		9-Aug-16	
4.13	Security Agreement dated May 10, 2016 between Galena Biopharma, Inc. and JGB Collateral LLC	10-Q	10.4		9-Aug-16	
4.14	Amendment Agreement between Galena Biopharma, Inc. and JGB (Cayman) Newton Ltd. dated August 22, 2016.	8-K	10.1		23-Aug-16	
4.15	Form of Securities Purchase Agreement, dated as of July 7, 2016, by and among Galena Biopharma, Inc. and the Investors	8-K	10.2		8-Jul-16	
4.16	First Amendment to Securities Purchase Agreement, dated as of July 12, 2016, by and between Galena Biopharma, Inc. and each purchaser identified on the signature pages therein, amending the Securities Purchase Agreement, dated as of July 7, 2016, by and among the Company and the purchasers named therein	8-K	10.1		18-Jul-16	

105

	
						
4.17	Form of Common Stock Purchase Warrant issued in April 2011	8-K	4.1		15-Apr-11	
4.18	Form of December 2012 Warrant.	8-K	4.1		19-Dec-12	
4.19	Form of warrants granted on May 8, 2013 under the Loan and Security	10-Q	10.7		9-May-13	
	Agreement					
4.2	Warrant Agreement, dated as of March 18, 2015, by and among Galena Biopharma, Inc., Computershare, Inc. and Computershare Trust Company,	10-Q	10.1		6-Aug-15	
	N.A.					
4.21	Warrant Agreement, dated as of January 12, 2016, by and among Galena Biopharma, Inc., Computershare Inc. and Computershare Trust Company,	10-K	4.9		10-Mar-16	
	N.A.					
4.22	Registration Rights Agreement, dated January 12, 2014, between Galena Biopharma, Inc. and each former owner of membership units of Mills Pharmaceuticals, LLC	10-Q	4.9		17-Mar-14	
4.23	Form of Contingent Value Rights Agreement among Galena Biopharma, Inc. (formerly RXi Pharmaceuticals Corporation), Computershare Trust Company,	8-K	10.1		14-Apr-11	
	N.A., Computershare Inc., and Robert E Kennedy, dated April 13, 2011					
4.24	First Amendment to Contingent Value Rights Agreement among Galena Biopharma, Inc. (formerly RXi Pharmaceuticals Corporation), Computershare Trust Company, N.A., Computershare Inc., and Robert E Kennedy, dated February 15, 2012	10-K	10.2		28-Mar-12	
10.1	Galena Biopharma, Inc. (formerly RXi Pharmaceuticals Corporation)	Schedule 14A	Annex A		23-Apr-10	
	Amended and Restated 2007 Incentive Plan*					
10.2	Amendment to Galena Biopharma, Inc. (formerly RXi Pharmaceuticals	Schedule 14A	Annex A		31-May-11	
	Corporation) Amended and Restated 2007 Incentive Plan*					
10.3	Galena Biopharma, Inc. 2016 Incentive Plan*	8-K	10.3		22-Aug-16	
10.4	Form of Incentive Stock Option*	10-Q	10.1		8-Aug-15	
10.5	Form of Nonstatutory Stock Option*	10-Q	10.2		8-Aug-15	
10.6	Patent and Technology License Agreement, dated September 11, 2006, by and among the Board of Regents of the University of	10-Q	10.1		15-Aug-11	
	 Texas System, the University of Texas M.D. Anderson Cancer Center,					
	the Henry M. Jackson Foundation for the Advancement of Military Medicine, Inc., and Apthera, Inc. (formerly Advanced Peptide Therapeutics, Inc.)					
10.7	Amendment No. 1 to Patent and Technology License Agreement, dated	10-Q	10.2		15-Aug-11	
	December 21, 2007, by and among the Board of Regents of the					
	University of Texas System, the University of Texas M.D. Anderson					
	Cancer Center, the Henry M. Jackson Foundation for the Advancement					
	of Military Medicine, Inc., and Apthera, Inc. (formerly Advanced Peptide Therapeutics, Inc.)					
10.8	Amendment No. 2 to Patent and Technology License Agreement, dated	10-Q	10.3		15-Aug-11	
	September 3, 2008, by and among the Board of Regents of the					
	University of Texas System, the University of Texas M.D. Anderson					
	Cancer Center, the Henry M. Jackson Foundation for the Advancement					
	of Military Medicine, Inc., and Apthera, Inc. (formerly Advanced Peptide Therapeutics, Inc.)					

106

	
						
10.9	Amendment No. 3 to Patent and Technology License Agreement, dated	10-Q	10.4		15-Aug-11	
	July 8, 2009, by and among the Board of Regents of the University of Texas System, the University of Texas M.D. Anderson Cancer Center, the Henry M. Jackson Foundation for the Advancement					
	 					
	of Military Medicine, Inc., and Apthera, Inc. (formerly Advanced Peptide Therapeutics, Inc.)					
10.1	Amendment No. 4 to Patent and Technology License Agreement, dated	10-Q	10.5		15-Aug-11	
	February 11, 2010, by and among the Board of Regents of the					
	University of Texas System, the University of Texas M.D. Anderson					
	Cancer Center, the Henry M. Jackson Foundation for the Advancement					
	of Military Medicine, Inc., and Apthera, Inc. (formerly Advanced Peptide Therapeutics, Inc.)					
10.11	Amendment No. 5 to Patent and Technology License Agreement, dated	10-Q	10.6		15-Aug-11	
	January 10, 2011, by and among the Board of Regents of the					
	University of Texas System, the University of Texas M.D. Anderson					
	Cancer Center, the Henry M. Jackson Foundation for the Advancement					
	of Military Medicine, Inc., and Apthera, Inc. (formerly Advanced Peptide Therapeutics, Inc.)					
10.12	Scientific Advisory Agreement between Galena Biopharma, Inc. (formerly RXi Pharmaceuticals Corporation) and	10-K	10.19		12-Mar-13	
	George E. Peoples, Ph.D., dated May 1, 2011 as amended through					
	 November 1, 2017					
10.13	Exclusive License Agreement, dated as of July 11, 2011, by and among	8-K	10.1		21-Sep-11	
	The Henry M. Jackson Foundation for the Advancement of Military Medicine, Inc., Galena Biopharma, Inc. (formerly RXi					
	Pharmaceuticals Corporation) and its wholly-owned subsidiary, Apthera, Inc.					
	 					
10.14	Galena Biopharma, Inc. (formerly RXi Pharmaceuticals Corporation)	 	 	 	
	Employee Stock Purchase Plan*				
10.15	License Agreement, effective as of April 30, 2009, between Kwangdong Pharmaceutical Co., Ltd. and Apthera, Inc.	10-K	10.45		28-Mar-12	
10.16	Amendment No. 1 to License Agreement, dated as of January 13, 2012, by and among Apthera, Inc., Kwangdong Pharmaceutical Co.,	10-K	10.46		28-Mar-12	
	 Ltd., and Galena Biopharma, Inc.					
10.17	Form of Amendment to Stock Options Granted under Galena Biopharma, Inc. (formerly RXi Pharmaceuticals Corporation) 2007	10-Q	10.2		15-Aug-11	
	Incentive Plan, entered into in April 2011 by Galena Biopharma, Inc.					
	with all directors of Galena Biopharma, Inc., as of April 1, 2011,					
	 and Mark J. Ahn, Ph.D.					
10.18	License and Supply Agreement, effective December 3, 2012, between	10-K	10.43		12-Mar-13	
	Galena Biopharma, Inc. and ABIC Marketing Limited, a subsidiary of Teva Pharmaceuticals					
10.19	Loan and Security Agreement dated May 8, 2013 among Galena Biopharma, Inc., Apthera, Inc., Oxford Finance LLC and the Lenders	10-Q	10.6		9-May-13	
	 					
10.2	At Market Issuance Sales Agreement dated May 24, 2013 between Galena Biopharma, Inc. and Maxim Group LLC.	8-K	10.2		31-May-13	
10.21	At Market Issuance Sales agreements dated May 24, 2013 between Galena Biopharma, Inc. and MLV & Co. LLC	8-K	10.1		31-May-13	
10.22	Form of warrants granted on May 8, 2013 under the Loan and Security	10-Q	10.7		9-May-13	
	Agreement					

107

	
						
10.23	License and Development Agreement, dated January 13, 2014, between Galena Biopharma, Inc. and Dr. Reddy’s Laboratories, Ltd.	10-Q	10.36		17-Mar-14	
	 					
10.24	Exclusive License Agreement, dated as of December 20, 2013, between Mills Pharmaceuticals, LLC and BioVascular, Inc.	10-Q	10.37		17-Mar-14	
	 					
10.25	License and Supply Agreement dated as of July 17, 2014 between Galena Biopharma, Inc. and MonoSol Rx, LLC	10-Q	10.1		11-Aug-14	
10.26	Purchase Agreement, dated as of November 18, 2014, by and between	8-K	10.1		20-Nov-14	
	Galena Biopharma, Inc. and Lincoln Park Capital Fund, LLC					
10.27	Amendment dated August 8, 2016 to the Purchase Agreement, dated as of November 18, 2014, by and between Galena Biopharma, Inc. and Lincoln Park Capital Fund, LLC	10-Q	10.1		9-Nov-16	
10.28	Separation and Consulting Agreement, dated as of June 24, 2015, by and between Galena Biopharma, Inc. and Margaret Kivinski,	10-Q	10.4		6-Aug-15	
	and General Release, dated as of June 24, 2015, by Margaret Kivinski					
	 					
10.29	Employment Offer Letter effective June 25, 2015, between Galena	10-Q	10.5		6-Aug-15	
	Biopharma, Inc. and Thomas J. Knapp					
10.3	Employment Agreement, dated as of October 30, 2015, between Galena Biopharma, Inc. and Bijan Nejadnik, M.D.	10-K	10.33		10-Mar-16	
10.31	Asset Purchase Agreement, dated November 19, 2015, between Galena Biopharma, Inc. and Sentynl Therapeutics Inc.	10-K	10.34		10-Mar-16	
10.32	Amendment, dated as of December 16, 2015, to License and Supply	10-K	10.35		10-Mar-16	
	Agreement dated as of July 17, 2014 between Galena Biopharma, Inc. and MonoSol Rx, LLC					
10.33	Asset Purchase Agreement, dated December 17, 2015, between Galena Biopharma, Inc. and Midatech Pharma PLC	10-K	10.36		10-Mar-16	
10.34	Separation Agreement and Releases, dated December 31, 2015, between Galena Biopharma, Inc. and Ryan Dunlap	10-K	10.37		10-Mar-16	
	 					
10.35	Amendment, dated December 31, 2015, to Employment Offer Letter	10-K	10.38		10-Mar-16	
	effective June 25, 2015, between Galena Biopharma, Inc. and Thomas J. Knapp					
	 					
10.36	Form of Undertaking re Advancement of Expenses between Galena	10-K	10.39		10-Mar-16	
	Biopharma, Inc. and certain of its Existing or Former Directors and Executive officers					
10.37	Placement Agency Agreement, dated as of July 7, 2016, by and between Galena Biopharma, Inc. and Raymond James & Associates, Inc.	8-K	10.1		8-Jul-16	
10.38	Severance Agreement, dated as of August 22, 2016, between Galena Biopharma, Inc. and John T. Burns	8-K	10.1		22-Aug-16	
10.39	Second Amendment to Employment Agreement, dated as of August 22, 2016, between Galena Biopharma, Inc. and Bijan Nejadnik	8-K	10.2		22-Aug-16	
10.4	Second Amendment to Offer Letter between Galena Biopharma, Inc. and Thomas J. Knapp	8-K	10.1		6-Oct-16	
10.41	Employment Agreement between Galena Biopharma, Inc. and Stephen Ghiglieri dated November 1, 2016	8-K	99.2		3-Nov-16	
14.1	Code of Ethics and Conduct, as amended January 2012	10-K	14.1		15-Apr-08	
21.1	Subsidiaries of the Registrant.**	 	 	 	
23.1	Consent of Moss Adams LLP, Independent Registered Public Accounting Firm.**	 	 	 	
31.1	Sarbanes-Oxley Act Section 302 Certification of Stephen F. Ghiglieri.**	 	 	 	
32.1	Sarbanes-Oxley Act Section 906 Certification of Stephen F. Ghiglieri.**	 	 	 	
101.INS	XBRL Instance Document.**	 	 	 	

108

	
						
101.SCH	XBRL Taxonomy Extension Schema.**	 	 	 	
 	 	 	 	 	
101.CAL	XBRL Taxonomy Extension Calculation.**	 	 	 	
 	 	 	 	 	
101.DEF	XBRL Taxonomy Extension Definition.**	 	 	 	
 	 	 	 	 	
101.LAB	XBRL Taxonomy Extension Label.**	 	 	 	
 	 	 	 	 	
101.PRE	XBRL Taxonomy Extension Presentation.**	 	 	 	
 	 	 	 	 	
101.PRE	XBRL Taxonomy Extension Presentation.**	 	 	 	

*	Indicates a management contract or compensatory plan or arrangement.	
		
**	Filed herewith.	

109

Exhibit 3.1
Delaware
The First State

Page 1

I, JEFFREY W. BULLOCK, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED ARE TRUE AND CORRECT COPIES OF ALL DOCUMENTS FILED FROM AND INCLUDING THE RESTATED CERTIFICATE OR A MERGER WITH A RESTATED CERTIFICATE ATTACHED OF “GALENA BIOPHARMA, INC.” AS RECEIVED AND FILED IN THIS OFFICE.
THE FOLLOWING DOCUMENTS HAVE BEEN CERTIFIED:

RESTATED CERTIFICATE, FILED THE SIXTH DAY OF FEBRUARY, A.D.

2008, AT 4:40 O`CLOCK P.M.

CERTIFICATE OF AMENDMENT, FILED THE TWENTY-SIXTH DAY OF JULY, A.D. 2011, AT 4:08 O`CLOCK P.M.
CERTIFICATE OF OWNERSHIP, CHANGING ITS NAME FROM "RXI PHARMACEUTICALS CORPORATION" TO "GALENA BIOPHARMA, INC.", FILED THE TWENTY-SIXTH DAY OF SEPTEMBER, A.D. 2011, AT 10:28 O`CLOCK A.M.
CERTIFICATE OF AMENDMENT, FILED THE TWENTY-EIGHTH DAY OF JUNE, A.D. 2013, AT 4:56 O`CLOCK P.M.

Delaware
The First State

Page 2

CERTIFICATE OF CHANGE OF REGISTERED AGENT, FILED THE TWENTY- SECOND DAY OF JULY, A.D. 2013, AT 9:13 O`CLOCK A.M.
CERTIFICATE OF AMENDMENT, FILED THE NINETEENTH DAY OF JUNE,

A.D. 2015, AT 2:23 O`CLOCK P.M.

CERTIFICATE OF AMENDMENT, FILED THE SEVENTEENTH DAY OF OCTOBER, A.D. 2016, AT 10 O`CLOCK A.M.
CERTIFICATE OF AMENDMENT, FILED THE SECOND DAY OF NOVEMBER,

A.D. 2016, AT 10 O`CLOCK A.M.

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF
RXI PHARMACEUTICALS CORPORATION
a Delaware Corporation

RXi Pharmaceuticals Corporation, a corporation organized and existing under the laws of the State of Delaware (the "Corporation " ), does hereby submit this Amended and Restated Certificate of Incorporation , duly adopted pursuant to Sections 242 and 245 of the General Corporation Law of the State of Delaware, for the purpose of amending and restating the Certificate of Incorporation of the Corporation, as originally filed with the Secretary of State of the State of Delaware on April 3, 2006 and as subsequently amended on November 28, 2006, January 8, 2007 and June 19, 2007. The text of the Certificate of Incorporation is hereby restated and amended to read in its entirety as follows:

ARTICLE I

The name of this corporation is RXi Pharmaceuticals Corporation.

ARTICLE II

The nature of the business and the purposes to be conducted and promoted by the Corporation shall be to conduct any lawful business, to promote any lawful purpose, and to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware (the "DGCL").

ARTICLE III

A. Classes of Stock. This corporation i s authorized to issue 55,000,000 shares. 50,000,000 shares shall be Common Stock with a par value of $0.0001 per share ("Common Stock") and 5,000,000 shares shall be Preferred Stock with a par value of $0.0001 per share ("Preferred Stock").

8. Rights, Preferences, Privileges and Restrictions of Preferred Stock. Preferred Stock may be issued from time to time in one or more series, each of such series to have such tem1s as stated or expre ss ed herein and in the re s olution or resolutions providing for the issue of such series adopted by the Board of Directors of the Corporation (the "Board of Director s" ) as hereinafter provided. Any shares of Preferred Stock that may be redeemed, purcha se d or acquired by the Corporation may be reissued except as otherwise provided by law or this Certificate of Incorporation . Different series of Preferred Stock shall not be construed to constitute different classes of shares for the purposes of
voting by cla ss es unless expressly provided in the resolution or resolutions providing for the issue of such series adopted by the Board of Directors as hereinafter provided.

Authority is hereby expressly granted to the Board of Directors from time to time to issue the Preferred Stock in one or more series, and in connection with the creation of any such series, by resolution or resolutions providing for the issue of the shares thereof , to determine and fix such voting powers, full or limited, or no voting power s, and such de s ignations , preferences and relative participating , optional or other special rights, and qualifications, limitations or restrictions thereof,

including without limitation thereof, dividend rights, conversion rights, redemption privileges and liquidation preferences, as shall be stated and expressed in such resolutions, all to the full extent now or hereafter permitted by the DGCL. Without limiting the generality of the foregoing, the resolutions providing for issuance of any series of Preferred Stock may provide that such series shall be superior or rank equally or be junior to the Preferred Stock of any other series to the extent permitted by law and this Certificate of Incorporation. Except as otherwise provided in this Certificate of Incorporation, no vote of the holders of the Preferred Stock or Common Stock shall be a prerequisite to the

designation or issuance of any shares of any series of the Preferred Stock authorized by and complying with the conditions of this Certificate of lncorporation, the right to have such vote being expressly waived by all present and future holders of the capital stock of the Corporation.

A. Common Stock. The voting, dividend and liquidation rights of the holders of the Common Stock are s ubject to and qualified by the rights of the holders of the Preferred Stock of any serie s as may be designated by the Board of Directors upon issuance of any s uch Preferred Stock. The holders of the Common Stock shall have no preemptive rights to subscribe for any shares of any class of s t ock of the Corporation whether now or hereafter authorized.

1.	Dividend Rights . Dividends may be declared and paid on the Common Stock from funds lawfully available therefor as and when determined by the Board of Directors and subject to any preferential dividend rights of any then outstanding Preferred Stock.	

2.	Liquidation Rights . Upon the dissolution or liquidation of the Corporation, whether voluntary or involuntary , holders of Common Stock will be entitled to receive all assets of the Corporation available for distribution to its stockholders, subject to any preferential rights of any then outstanding Preferred Stock.	

3.	Redemption . The Common Stock is not redeemable .	

4.	Voting Rights . Each share of Common Stock shall be entitled to one vote. There s hall be no cumulative voting.	

5.	Number . The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the s tock of the Corporation entitled to vote, irrespective of the provisions of Section 242(b)(2) of the DGCL.	

ARTICLE IV

The corporation is to have perpetual existence.

ARTICLE V

Except to the extent that the DGCL prohibits the elimination or limitation of liability of directors for breaches of fiduciary duty, no director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for any breach of fiduciary duty as a
director, notwithstanding any provision of law imposing such liability. No amendment to or repeal of
this provision shall apply to or have any effect on the liability or alleged liability of any director of the Corporation or with respect to any acts or omissions of such director occurring prior to such amendment or repeal.

ARTICLE VI

The corporation shall, to the fullest extent p e rmitted by the provisions of Section 145 of the General Corporation Law of the State of Delaware, as the same may be amended and supplemented, indemnify any and all persons whom it shall have power to indemnify under said Section from and against any and all of the expenses , liabilities, or other matters referred to in or covered by said section , and the indemnification provided for herein shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any Bylaw, agreement, vote of stockholders or disinterested directors or otherwise , both as to action in his official capacity and as to action in another capacity while holding such office , and shall continue as to a person who has ceased to be a director, officer , employee , or agent and shall inure to the benefit of the heirs, executors,

and administrators of such person.

ARTICLE VII

A. Indemnification. The Corporation shall, to the maximum extent permitted under the DGCL and except as set forth below, indemnify and upon request advance expenses to each person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was , or ha s agreed to become, a director or officer of the Corporation, or is or was serving, or has agreed to serve, at the request of the Corporation, as a director, officer, employee or trustee of, or in a similar capacity with, another corporation, partnership, joint venture , trust or other enterprise, including any employee benefit plan (all such per s ons being referred to hereafter as an " lndemnitee"), or by reason of any action alleged to have been taken or omitted in such capacity , against all expenses (including attorneys' fees) , judgments , fines and amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with such action , suit or proc e eding and any appeal therefrom , if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. Notwithstanding anything to the contrary in this Article, the Corporation shall not indemnify an Indemnitee seeking indemnification in connection with any action, suit, proceeding, claim or counterclaim, or part thereof, initiated by the Indemnitee unless the initiation thereof was approved by the Board of Directors.

B. Determination of Entitlement to Indemnification . Any indemnification under Paragraph A of this Article (unles s ordered by a court) shall be made by the Corporation only as authorized in the s pecific case upon a determination that indemnification is proper in the circumstances because such person has either met the applicable standard of conduct set forth in this Article and that the amount requested has been actually and reasonably incurred. Such determination shall be made:

1.	by a majority vote of the directors who are not partie s to such action, suit or proceeding, even though less than a quorum; or	
		
2.	by a committee of such directors designated by a majority vote of such directors, even though less than a quorum; or	

3.	ifthere are no such directors, or if such directors so direct, by independent legal counsel in a written opinion; or	

4.	by the holders of the Common Stock .	

A. Advance of Expenses . Notwithstanding any other provisions of this Certificate of Incorporation, the By-Laws of the Corporation, or any agreement, vote of stockholders or disinterested directors , or arrangement to the contrary, the Corporation may advance payment of expenses incurred by an Indemnitee in advance of the final disposition of any matter only to the extent such advance is not prohibited by applicable law, and then only upon receipt of an undertaking by or on behalf of the lndemnitee to repay all amounts so advanced in the event that it shall ultimately be determined that the Indemnitee is not entitled to be indemnified by the Corporation as authorized in this Article. Such undertaking may be accepted without reference to the financial ability of the Indemnitee to make such repayment.

B. Subsequent Amendment . No amendment, termination or repeal of this Article or of the relevant provisions of the DGCL or any other applicable laws shall affect or diminish in any way the rights of any lndemnitee to indemnification under the provisions hereof with respect to any action, suit, proceeding or investigation arising out of or relating to any actions, transactions or facts occurring
prior to the final adoption of such amendment, termination or repeal.

C. Other Rights . This corporation may, to the extent authorized from time to time by its Board of Directors, grant indemnification rights to other employees or agents of the Corporation or other

persons serving the Corporation and such rights may be equivalent to, or greater or less than, those set forth in this Article.

D. Merger or Consolidation . If the Corporation is merged into or consolidated with another corporation and the Corporation is not the surviving corporation, the surviving corporation shall assume the obligations of the Corporation under this Article with respect to any action, suit, proceeding or investigation arising out of or relating to any actions , transactions or facts occurring prior to the date of such merger or consolidation .

E. Savings Clause . If this Article or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each Indemnitee as to any expenses, including attorneys' fees , judgments, fines and amounts paid in settlement in connection with any action, suit, proceeding or investigation, whether civil, criminal or administrative, including an action by or in the right of the Corporation , to the fullest extent permitted by any applicable portion of this Article that shall not have been invalidated and to the fullest extent permitted by applicable law .

F. Scope of Article . Indemnification and advancement of expenses , as authorized by the preceding provisions of this Article, shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any agreement, vote of stockholders or disinterested directors or otherwise , both as to action in an official capacity and as to
action in another capacity while holding such office. The indemnification and advancement of expenses provided by or granted pursuant to this Article shall , unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be an authorized representative and shall inure to the benefit of the heirs, executors and administrators of such a person.

I.      Insurance . The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, trustee, employee or agent of the Corporation , or is or was serving at the request of the Corporation as a director, officer, trustee, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against the person and incurred by the person in any such capacity, or arising out of his or her status as such , whether or not the Corporation would have the power or the obligation to indemnify such person against such liability under the provisions of thi s Article .

ARTICLE VIII

The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation , in the manner now or hereafter prescribed by statute and this Certificate of Incorporation, and all rights conferred upon stockholders herein are granted subject to this reservation.

ARTICLE IX

This Article is inserted for the management of the business and for the conduct of the affairs of the Corporation .

A. Number of Directors . The Board of Directors shall consist of one or more members , each of whom shall be a natural person. The exact number of directors within the limitations specified in the preceding sentence shall be fixed from time to time by, or in the manner provided in , the By-Laws of the Corporation.

B. Classes of Directors . The Board of Directors shall be and is divided into three classes: Class I, Cla s s II and Class III. N o one cla ss shall have more than one director more than any other class. If a fraction is contained in the quotient arrived at by dividing the designated number of directors by three, then , if such fraction is one-third, the extra director shall b e a member of Class III, and if such fraction is two-thirds , one of the extra directors shall be a member of Class III and one of the extra directors shall be a member of Class II , unless otherwise provided from time to time by resolution adopted by the Board of Director s.

C. Election of Directors . Elections of directors need not be by written ballot except as and to the extent provided in the By-Laws of the Corporation .

D. Terms of Office . Except as pro v ided in Paragraph G of this Article , each director shall serve for a term ending on the d a te of the third annual meeting following the annual
meeting at which such director was elected ; provided , however , that each initial director in Class I shal1 serve for a term ending on the date of the annual meeting in 2008; each initial director in Class II shall serve for a term ending on the date of the annual meeting in 2009; and each initial director in Class Ill shall serve for a term ending on the date of the annual meeting in 20 I O; and provided , further ,
that the term of each director shall be subject to the election and qualification of his suc ce sso r and to his earlier death, resignation or removal.

E. Allocation of Directors Among Classes in the Event of Increases or Decreases in the Number of Director s . In the event of any increase or decrease in the authorized number of directors, (i) each director then serving as such shall nevertheless continue as a director of the class of which he is a member and (ii) the newly created or eliminated directorships resulting from such increase or decrease shall be apportioned by the Board of Directors among the three classes of directors so as to ensure that no one class has more than one director more than any other class. To the extent possible, consistent with the foregoing rule , any newly created directorships shall be added to those classes whose terms of office are to expire at the latest dates following such allocation , and any newly eliminated directorships shall be subtracted from tho se classes whose terms of offices are to expire at the earliest dates following such allocation, unless otherwise provided from time to time by resolution adopted by the Board of Directors .

F. Removal . The directors of the Corporation may be removed only for cause by the affirmative vote of the holders of at least seventy five percent (75%) of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors , voting together as a single class, cast at a meeting of the stockholders called for that purpose.

G. Vacancies . Any vacancy in the Board of Directors, however occurring , and any newly created directorship resulting from an enlargement of the Board , shall be filled only by vot e of a majority of the directors then in office , although les s than a quorum , or by a sole remaining director. A director elected to fill a vacancy shall be elected for the unexpired term of his predecessor in office, and a director chosen to fill a position r es ulting from an increase in the number of director s shall hold office until the next election of the class for which such director shall h ave been chosen, subject to the election and qualification of hi s successo r and to hi s earlier death, resignation or removal.

H. Stockholder Nominations and Introduction of Business, Etc . Advance notice of stockholder nominations for election of directors and other business to be brought by s tockholders before either an annual or special me e ting of stockholders shall be given in the manner provided by the By-Laws of the Corpo ration.

I. Amendment to Article . No twithstanding any other provi s ions of law, this Certificate of Incorporation or the By-Laws, each as amended, and notwithstanding the fact that a lesser percentage may be spec ified by Jaw , this Certificate of Incorporation or the By-Laws of the Corporation, the affirmative vote of at lea s t seventy five percent (75%) of the outstanding shares of capital s tock of the Corporation entitled to vote generally in the election of directors , voting together as a single class, shall be required to amend or repeal, or to adopt any provisions inconsistent with the purpose or intent of
this Article IX.

ARTICLE X

Except as otherwise provided in the By-Laws, the stockholders of the Corporation and the Board of Director s may hold their meetings and have an office or offices outside of the State of Delaware and, subject to the provisions of the laws of said State, may keep the books of the corporation outside of

said State at such places as may, from time to time , be designated by the Board of Directors or by the By-Laws of the Corporation.

ARTICLE XI

At any time during which a class of capital stock of the Corporation is registered under Section 12 of the Securities Exchange Act of 1934 or any similar successor statute, stockholders of the Corporation may not take any action by written consent in lieu of a meeting . Notwithstanding any other provisions of law , thi s Certificate of lncorporation or the By-Laws, each as amended , and notwithstanding the fact that a lesser percentage may be specified by law , this Certificate of Incorporation or the By-Laws of the Corporation, the affirmative vote of at least seventy five percent (75%) of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to amend or repeal or to adopt any provisions inconsistent with the purpo se or intent of this Article XI.

ARTICLE XII

Special meetings of stockholders may be called at any time only by the Chairman of the Board of Directors, the Chief Executive Officer (or if there is no Chief Executive Officer, the President) or the Board of Directors . Any business transacted at any special meeting of stockholders shall be limited to matters relating to the purpose or purposes stated in the notice of meeting . Notwithstanding any other provisions of law , this Certificate of Incorporation or the By-Laws , each as amended, and notwithstanding the fact that a les se r percentage may be specified by law , this Certificate of Incorporation or the By-Laws of the Corporation, the affirmative vote of at least seventy five percent (75 % ) of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of director s, voting together as a single cla ss, shall be required to amend or repeal or to adopt any provi s ions inconsistent with the purpose or intent of this Article XII.

ARTICLE XIII

The regi s tered office of the corporation in the State of Delaware is Corporation Trust Center, 1209 Orange Street, City of Wilmington, County of New Castle. The name of its registered agent at such offi ce is The Corporation Trust Company .

IN WITNESS WHEREOF, the Corporation has caused this Certificate of lncorporation to be signed by its President and Chief Executive Officer on this 5th day of February, 2008.

RXI PHARMACEUTICALS CORPORATION

By: / s/ Tod Woolf Tod Woolf
President and Chief Executive Officer

State of Delaware Secretary of State Division of Corporations
Delivered 04:08 PM 07/26/2011 FILED 04 : 08 PM 07 / 26 / 2011
SRV 110859225 - 4136433 FILE

CERTIFICATE OF AMENDMENT TO
RESTATED CERTIFICATE OF INCORPORATION OF RXi PHARMACEUTICALS CORPORATION

RXi Pharmaceutical s Corporation, a Delaware corporation (the " Company"), hereby certifies that:

1. The following resolution has been unanimously adopted by the Company's Board of Directors and has been approved by the holder s of a majority of the Company's outstanding common stock in accordance with the Delaware General Corporation Law for the purpose of amending the Company ' s Restated Certificate of lncorporation :

RESOLVED, that the Restated Certificate of lncorporation of the Company be amended by deleting in its entirety Article III, Section A, and by replacing it with the foll o wing:
" A .      Classes of Stock . This Corporation is authorized to is s ue 130,000 , 000 shares , of which 125,000,000 shares shall be Common Stock with a par value of $0.000 I per share (" Common Stock ") and 5,000 , 000 shares will be Preferred Stock with a part value of $0 . 0001 per share (" Preferred Stock ")."
2. The above a mendment was duly adopted by the Company in accordance with the provisions of Section 242 of the Delaware General Corporation Law.

IN WITNESS WHEREOF , RXi Pharm a ceuticals Corporation has caused this Certificate of Amendment to be signed by a duly authorized officer this 18th day of July 2011.

RXi Pharmaceuticals Corporation

By: /s/ Mark J. Ahn
Mark J. Ahn
President and Chief Executive Officer

State of Delaware Secretary of State Division of Corporations
Delivered 10:28 AM 09/26/2011 FILED 10:28 AM 09/26/2011
SRV 111039489 - 4136433 FILE
CERTIFICATE OF OWNERSHIP AND MERGER MERGING
GALENA BIOPHARMA, INC.
(a Delaware corpor a tion)

WITH AND INTO
RXI PHARMACEUTICALS CORPORATION
(a Delaware corporation)

( Pursuant to Section 253 of the Delaware General Corporation Law)

RXi Pharmaceuticals Corporation, a Delaware corporation (t he " Co mpan y" ), does her eby c ert ify to the following facts relating to the merger (the " M erger ") of Galena Biopharma, Inc ., a Delaware corporation (the " Su bsidiary "), with and into the Company, with the Company r ema ining as the surv i v ing corporation under the name of "Gal ena Biopharma, In c. "

1. The Subsidi ary is a corporation incorporated on September 8, 2011 under the Delaware General Corporation Law (the " DGC L ").

2.	The Company i s a corporation incorporat e d on April 3, 2006 under the DGCL.	

3. The Company is the owner of all of the outstanding s hares of the cap it al stock of the Subsidiary.

4. The Board o f Directors of the Company, by resolutions duly adopted a t a me et i ng of the Board of Directors of the Company held on August 23 , 2011 , determined t o merge into itself the Subsidiary, and to effect a change of the Company's name t o "Galena Bioph arma, In c. " in connection with such merger, pursuant to Section 253 of the DGCL. Such r eso lutions are as follows:

WHEREAS, in view of the Company ' s proposed transfer and contributi o n to a wholly ­ owed subsidiary of the Company of certain RNAi assets and rel ate d obligations of RXi Pharmaceuticals Corporation (the " Company ") (the " Spin-Off'' ), the Company has proposed to change its corporate name so as not to include the name "RXi" or "RNAi"; and

WHEREAS, after thorough con s ideration , the Board of Dire ctors belie ves it i s ad v isable and in the best interests of the Company and its stockholders to change the name of the Company to Galena Biopharma, Inc. from RXi Pharmaceuticals Corporation (the " Name Change "), and to effect such Name Change pursuant to the provisions of Section 253 of the Delaware Genera l Corporat i o n Law (the " DGCL "); and

WHEREAS, in order to effect the Name Change, the Company desir es to form a new corporation named Galena Biopharma, Inc., a Delaware corporation (th e " Subsidiary "), and to acquire shares of common stock, par va lue $0.0001 pe r share, of the Subs idi ary (co llectiv ely, the " I ncorpora tion "); and

WHEREAS , followin g the effecti veness of the Incorporation, the Company will own all of the outstanding s har es o f the capital stock of th e Sub sidiary; and

WHEREAS, in order to consummate the Name Change, the Board of Directors of the Company believes it is advisable and in the best interests of the Company and its stockholders that, following the effectiveness of the Incorporation, the Subsidiary

be merged with and into the Company (the " Merger ") pursuant to Section 253 of the DGCL , so that the Company will be the surviving corporation following the Merger and that the Name Change be effected as part of the Merger as permitted under the DGCL;

NOW, THEREFORE, BE IT RESOLVED, that the Incorporation is hereby authorized and approved in all respects ; and it is

RESOLVED FURTHER, that the officers of the Company be and each hereby is authorized, empowered and directed, by and on behalf of the Company and in its name , to prepare or cause to be prepared, and to execute and file with the Delaware Secretary of State a Certificate of Incorporation to form the Subsidiary, and to take all such other actions as they or any one of them shall deem necessary or appropriate to consummate the Incorporation; and it is

RESOLVED FURTHER, that the Merger and the Name Change are hereby authorized and approved; and it is

RESOLVED FURTHER, that following the Incorporation, the officers of the Company be and each hereby is authorized , empowered and directed, by and on behalf of the Company and in its name, to effect the Name Change by merging the Subsidiary with and into the Company pursuant to Section 253 of the DGCL, so that the Company will be the surviving corporation and possess all of the Subsidiary's property, rights, privilege s and powers, and assume all of th e Subsidiary's liabilities and obligations; and it is

RESOLVED FURTHER , that by virtue of the Merger and without any action on the part of the holder thereof, each then outstanding share of common stock, par va lue $0.0001 per s hare , of the Company (the " Common Stock ") shall remain unchanged and continue to remain outstanding as one share of Common Stock, held by the person who was the holder of such share of Common Stock immediately prior to the Merger; and it is

RESOLVED FURTHER , that by virtue of the Merger and without any action on the part of the holder thereof, each then outstanding share of common stock, par value $0.0001 per share, of the Subsidiary shall be cancelled and no consideration shall be issued in respect thereof; and it is

RESOLVED FURTHER, that the directors and officers of the Company immediately prior to the Merger shall continue to remain the directors and officers of the Company until the earlier of their death, resignation or removal or until their respective successors are duly elected and qualified, as the case may be; and it i s

RESOLVED FURTHER, that, pursuant to Section 253(b) of the DGCL, upon th e effective date of the Merger, the corporate name of the Company shall be changed to Galena Biopharma , Inc. ; and it is

RESOLVED FURTHER, that the Certificate of Incorporation of the Company as in effect immediately prior to the effective time of the Merger shall be the certificate of

incorporation of the surviving corporation, except that Art icle 1 thereof shall be amended in its entire ty to read as fo llo ws:

"A RTICLE I

The name of this corporatio n is Galena Biopharma, Inc . "

RESOLVED FURTH ER, that the Bylaws of the Company as in effect immediately prior to the effective time of the Merger shall be amended and restated to reflect the Name Change; and it is

RESOLVED FURTHER , that t he office rs of th e Company be and each hereby is auth oriz ed , empowered and directed, in the name and on behalf of the Company, to prepare or cause to be prepared, and to execute and file wit h the Delaware Secretary of State a Certificat e of Own e rship and Merger that sets forth therein a copy of these r esolut ion s and the date th a t such re solu tion s were adop ted by the Board of Di rec tors; a nd it is

R ESOLVED FURTHER, t hat the officers of the Company be, and each of them her eby is, authorized, empowered and directed, in the name and on behalf of the Company, to (i) notify the Company's transfer agent and reg i strar for the Company 's common stock of the Name Change, (ii) obtain a new CUSIP number, (iii) prepare and file with the SEC a

cur rent report on Form 8-K to dis close the transactions contemplated by the foregoing resolutions, and {iv) exe cute su c h document s, di sburse such funds, engage s uch persons, and take all such other actions that such officer may deem n ecessa ry or advisable in connection with the Name Change and the Merger and to carry out the intent and purpose of t he foregoing re so luti ons.

1. T h e Compa ny shall be the su r viving corporation of the Merger.

2. The Certificate of Incorporation of the Company as in effect immediately prior to th e effective time of the Merger shall be the certificate of in co rp orat ion of the surviving corporation , except that Article I thereof shall be amended in its entirety to read as follows:

"ARTICLE I

The name of this corporation is Ga lena B i opharma , I n c."

3.	The Merger shall be effective as of September _26 , 2011 .	

IN WITNESS W HEREOF, RXi Pharmaceuticals Corporation ha s caused this Cert ifi cate of Ownership and Merger to be s igned b y it s duly autho ri zed officer, this ·· 26 day of September 201 1.

RXI PHARMACEUTICALS CORPORATION

By; /S/ Mark J. Ahn     
Name : Mark J. Ahn, Ph.D.
Title: President and Chief Exe c utive Officer

State of Delaware Secretary of State Division 0£ Corporations
Delivered 04 : 59 PM 06/28/2 0 13
FILED 04 : 56 PM 06/28/2 0 13
SRV 130832067 - 4136433 FILE

CERTIFICATE OF AMENDMENT
TO
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF
GALENA BIOPHARMA, INC.

that:
Gal en a Biopharma , Inc ., a Delaw a re co rp oration ( the " Corpora tion”), hereby certifie s

1. The following resolution ha s been unanimously adopted by th e Corporation ' s Board of Direc t ors and ha s been approved by the holder s of a m ajo r it y of the Corpora tion' s outs t anding common stock in accordance with the Delaware General Co rporation Law for t he purpose of amendi ng the Corporat ion 's Amended and Re s tated Certificate of Inc orporation:

RESOLV E D. that AR T ICL E III, Sec tion A of the Amended and Re s tated
C ertificate of Incorporati o n o f the Corp o r a tion s hall be amended to read in i ts enti rct y as follows:

" A.      Classes of Stock. This Corporation is auth or i ze d t o iss ue 205 ,00 0 , 000 share s, of which 200,000,000 s hares sha ll be Common Stock with a par va lue of $0.0001 per share (“ Common Stock ") and 5 , 000.000 shar es s hall be Preferred Sto ck with a par value of $0.0001 per s hare (" Preferred Stock ” ).' '

2. The above amend ment was duly adopted by the Corporation i n acccmi<rnce with the pro v i s ion s of Section 2 42 of the D e laware G enera l Corporation Law.

l N WlT NES S WHEREOF. Galena Biopharm a, . I n c. has caused t hi s Cer tifi ca t e of
Amendment t o be s ign ed b y duly authorized officer t hi s 28 th da y o f June 20 1 3 .

Galena Biopha rma. I nc.

By; /S/ Mark J. Ahn     
Name : Mark J. Ahn, Ph.D.
Title: President and Chief Exe c utive Officer

State of Delaware Secretary of State
Division of Corporations Delivered 11:17 AM 0 7 /22/20 13
FILED 09: 13 AM 0 7 /22/20 13
SRV 130900861 - 4136433 FILE

C ERTIFICATE OF CHANGE OF LOCATION OF REGISTERED OFFICE AND OF REGISTERED AGENT
OF

GALENA BIOPHARMA, INC.

It i s hereb y ce rtified tha t:

1.	The name of the corporation (hereinafter called the "corporation " ) i s :	

GALENA BIOPHARMA, INC.

2 . Th e register e d office of the corporation within the Stat e of D e l a ware i s hereby changed to 2711 Centerville Road , Suite 400 , City of Wilmington 19808, C o unty of N e w Castle .

3. The registered agent of the corporation within the Stat e of Delaware i s hereby changed to Corporation Service Company, the busines s office o f which i s identical with the registered office of the corporation as hereby changed.

4. The corporation has authorized the change s hereinbefore set forth by r es olution of its Board of Directors.

Signed:
Galena Biopharma, Inc.

By: /s/ Mark W. Schwartz
Name . Mark W. Schwartz , Ph.D.
Title : Executi ve Vice Pr es ident & COO

State of Delaware Secretary of State Division of Corporations
Delivered 02:36 PM 06/19/2015 FILED 02:23 PM 06/19/2015
SRV 150947213 - 4136433 FILE

CERTIFICATE OF AMENDMENT TO
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF GALENA BIOPHARMA, INC.

that:
Galena Biopharma, Inc ., a Delaware corporation (the "Corporation"), hereby certifies

1.      The following resolution has been unanimously adopted by the Corporation 's Board of Directors and has been approved by the holders of a majority of the Corporation's outstanding common stock in accordance with the Delaware General Corporation Law for the purpose of amending the Corporation's Amended and Restated Certificate of Incorporation:

RESOLVED, that ARTICLE III, Section A of the Amended and Restated Certificate of lncorporation of the Corporation shall be amended to read in its entirety as follows:

" A .      Classes of Stock . This Corporation is authorized to issue 280,000,000 shares, of which 275,000,000 shares shall be Common Stock with a par value of $0 . 0001 per share ("Common Stock") and 5,000,000 shares shall be Preferred Stock with a par value of $0.0001 per share ("Preferred Stock" ). "

2 .      The above amendment was duly adopted by the Corporation in accordance with the provisions of Section 242 of the Delaware General Corporation Law .

IN WITNESS WHEREOF, Galena Biopharma, Inc . has caused this Certificate of Amendment to be signed by a duly authorized officer this I 9 1 day of June 2015.

Galena Biopharma, Inc.

By: /s/ Mark W. Schwartz
Name . Mark W. Schwartz , Ph.D.
President and Chief Executive Officer

Stat e o f Delaware S ec r e tar y of Stat e D i v i sion o f Corporations
D eli v ered 10:00 AM 10 / 1 712 016 FILED 1 0 : 00 AM1 0 / 1 7n0 1 6
SR 2 0 16625 0 7 4 0 - File N umb e r 41 36433

STATE OF DELAWARE CERTIFICATE OF AMENDMENT
OF CERTIFICATE OF INCORPORATION

Galena Biopharma , Inc ., organized and existing under and by virtue of th e General Corporation Law of the State of Delaware, does hereby certify:
FIRST : That at a meeting of the Board of Directors of Galena Biopharma, Inc. resolutions were duly adopted setting forth a propo se d amendment of the
Certificat e of Incorporation of said corporation, declaring said amendment to be advisable and calling a meeting of the stockholders of said corporation for consideration thereof. The resolution setting forth the proposed amendment i s as follows:

RESOLVED, that the Certificate of Incorporation of this corporation be amended by changing th e Article thereof numbered " Section (A) of Articl e III " so that, as amended , said Article s hall be and read as follows:
A. Classes of Stock. This Corporation is authorized to issue 355,000,000 shares , of which 350 , 000 , 000 shares shall be Common Stock with a par value of $0.0001 per share ("Common Stock") and 5,000,000 s hares shall be Preferred Stock w ith a par va lue of
$0.0001 per share ("Preferred Stock") .

SECOND : That thereafter, pursuant to resolution of its Bo ar d of Director s, at the annual meeting of the stockholders of sa id corporation duly ca ll e d and held upon notice in accordanc e with Se c tion 222 of th e General Corporation Law of the St a te of Delaw are at which meeting the necessary number of shares as required b y s tatute were vo t ed in favor of the amendment.

THIRD : That said amendment was duly adopted in accordance w ith the provisions of S ec t io n 242 of the Gene ra l Corporation L a w of the State of D elaware.

IN WITNESS WHEREOF , said corporation ha s caused thi s c e rt i ficate to b e signed this
14th day of September 2016.

By :/S/ Thomas J. Knapp         
Authorized Officer
Titl e: Corporate S ec retary

Name: T hom as J. Knapp

S tate of D e lawar e Secretar y o f S tate Divis io n o f Co rporati o n s
Deliver e d 1 0:00 AM 11/02 / 2 0 1 6 FIL E D 10 :00 A M 11/0 2 /20 16
SR 2 0 1 66 4 6 8 00 4 - Fil e N umb e r 4136433

STATE OF DELAWARE CERTIFICATE OF AMENDMENT
OF CERTIFICATE OF INCORPORATION

Galena Biopharma , Inc ., o rganized and exis ting under and by virtue of t he General Co rporation Law of the State of Delaware , does hereby certify:
FIRST : That at a meetin g of th e Board of Directors of Galena Bi op harm a, Inc. , r esol ution s were duly a dopted s ettin g forth an amendment of the Certificate of Incorp orat ion of sa id corporation , de cl ar ing sa id amendment to be e ffective based on the vote of s tockholder s at a s pe cial meeting of the s tockholders of s aid corporation. The re sol ut i on se tting forth the amen dm ent is as follows :

RESOLVED , that the Ce rtific ate of Incorporation of thi s corporation be a mended b y c h a nging the Articl e thereof numbered " Sect io n (A) of Articl e ITI " so that , as ame nd ed a nd re s tated, sa id Article s hall be and re a d a s follows:
" A. Classes of Stock. This Corporation is au thoriz ed to issue 355 , 000,000 s h a res , of which 3 5 0,000 , 000 shall be Co mmon Stock with a pa r va lue of $ 0 . 0001 per sha r e (the " Common Stock " ) and 5,000,000 shares sh a ll be Pr e ferred Stock wi th a par value of $0.0 001 per sha r e.
Rever se Stock S p lit . Effec tive at 12:0I a. m ., Eas tern Standard Time on November 11, 20 16 ( the "E ffective Time " ), each 20 shares of common s tock is s ued an d out s tandin g or held by t he Corporation in treasury i mmedi a tely prior to th e Effective Time ( the "O ld Common Stock") shall automatically without fu rther actio n on t he part of the Co rporati o n or any h old er of Old Co mmon Stock , be recl ass ified , combined and c hanged into one fully paid a nd n o na sses s ab l e share of new common stock (the "N ew Common Stock"). Th er e shall be no fractional s hares i ssue d with respect to th e New Common Stock . I n li e u thereof, the aggregate of all frac tion a l shares o th erw i se i ssua b le to the holder s of reco rd of Old C ommon Stock s hall b e issued to Computershare (the " Trans fer Agent") , as ag e nt , for th e accounts of all holder s of record of Old Common Stoc k ot herwis e e ntitled t o have a fra c tion of a s har e i ss u e d to th e m . The sa le of all fractional interests will be effected by the Transfe r Agent as soon as practicable af ter the E ffecti ve Tim e on t he ba s is of prevai l in g mark et prices of the New Common St ock at the time of sale . Aft er su ch sale and upon the su rrender of the s tockhold e rs' s to c k certificates , th e Tran s f er Ag e nt w ill p ay to such ho l d er s of record th e ir pro rata s hare of the net proceeds deriv e d from the sale of th e fract io n a l intere s t s . Fro m and af t e r th e E ffectiv e Tim e , certificates repr ese nting the Old Common Sto c k s hall represent the number of whole s hare s of New C omm o n Sto c k into w hich such Old Co mmon Stoc k sh all have been reclassified, combined a nd changed pur s uant to this Certificate of Am en dm en t , subject to t he elimination of fractional s hare interests as describ e d abov e . "

SECOND: T h a t pursu a nt to resolution of its Board of Director s, at the s pecial meeting of the stockholders of sa id corp ora tion duly called a nd held upon notic e in accordance with Section 222 of th e Gener al Co rpo r ation Law of the State of Delaware at w hi ch mee tin g the n ec es sary number of shares as requi re d by statute were voted in favor of th e ame ndm ent.

THIRD: Th a t sai d amendment wa s duly adopted in accor dance wit h the provisions of Sec tion 242 of the Ge ne ra l Co rp orat i on

Law of the State of Delaware.

IN WIT N ESS WHEREOF , sa id co rporation h as cau se d thi s c e rt ificate to b e s i gned t h i s 1st d ay of Nov em ber 2016.

B y: /S/ Thomas J. Knapp
Authorized Officer
Title: Co rporat e Secre t ary Nam e: Thomas J. Knapp

Exhibit 3 .3

AMENDED AND RESTATED BY-LAWS, AS AMENDED

OF
GALENA BIOPHARMA, INC.

(a Delaware Corporation)

REFLECTING AMENDMENTS THROUGH MAY 10, 2016

w

AMENDED AND RESTATED BY-LAWS

OF
GALENA BIOPHARMA, INC. (FORMERLY RXI PHARMACEUTICALS CORPORATION)

ARTICLE I – OFFICES

1.1 Registered Offices . The registered office of [amended August 6, 2013) Galena Biopharma, Inc. (formerly RXi Pharmaceuticals Corporation) (the "Corporation") in the State of Delaware shall be located at Corporation Trust Center , 1209 Orange Street, Wilmington County, New Castle , Delaware 1980I. The name of the Corporation's registered agent at s uch address shall be The Corporation Trust Company. The registered office and/or registered agent of the Corporation may be changed from time to time by action of the Board of Directors.

1.2      Other Offices . The Corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the Corporation may require.

1.3      Books . The books of the Corporation may be kept within or without of the State of Delaware as the Board of Directors may from time to time determine or the business of the Corporation may require.

ARTICLE 2 –STOCKHOLDERS

2.1      Place of Meetings . All meetings of stockholders shall be held at such place within or without the State of Delaware as may be designated from time to time by the Board of Directors or the Chief Executive Officer (or , if there is no Chief Executive Officer, the President) or, if not so designated, at the registered office of the Corporation .

2.2      Annual Meeting . The annual meeting of stockholders for the election of directors and for the transaction of such other business as may properly be brought before the meeting shall be held at such other date and time as shall be fixed by the Board of Directors, pursuant to a resolution adopted by the affirmative vote of a majority of the total number of directors then in office, or the Chief Executive Officer (or , if there is no Chief Executive Officer, the President) and stated in the notice of the meeting. If no annual meeting is held in accordance with the foregoing provisions, the Board of Directors shall cause the meeting to be held a s soon thereafter as convenient. If no annual meeting is held in accordance with the foregoing provisions, a special meeting may be held in lieu of the annual meeting , and any action taken at that special meeting shall have the same effect as if it had been taken at the annual meeting, and in such case al l references in these By-Laws to the annual meeting of stockholders shall be deemed to refer to such special meeting.

2.3      Special Meeting . Special meetings of stockholders may be called at any time by only the Chairman of the Board of Di rectors, if there is one, the Chief Executive Officer (or , if there is no Chief Executive Officer , the President) or by the Board of Directors of the Corporation pursuant to a resolution adopted by the affirmative vote of a majority of the total number of directors then in office. Any business transacted at any special meeting of stockholders shall be limited to matters relating to the purpose or purposes stated in the notice of meeting.

2.4      Notice of Meetings . Except as otherwise provided by law , written notice of each meeting of stockholders , whether annual or special, shall be given not less than ten (10) nor more than sixty ( 60) days before the date of the meeting to each stockholder entitled to vote at such meeting. The notices of all meetings shall state the place , date and hour of the meeting. The notice of a special meeting shall state , in addition, the purpose or purposes for which the meeting is called. If mailed , notice is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his or her address as it appears on the records of the Corporation. If notice is given by electronic transmission , s uch notice will be deemed given at the time specified in Section 232 of the General Corporation Law of Delaware.

2.5      Voting List . The officer who has charge of the stock ledger of the Corporation shall prepare , at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order , and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder , for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (I 0) days prior to the meeting, at a place within the city where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time of the meeting, and may be inspected by any stockholder who is present.

2.6      Quorum . Except as otherwise provided by law, the Certificate of Incorporation or these By-Laws, the holders of a majority of the shares of the capital stock of the Corporation issued and outstanding and entitled to vote at the meeting, present in person or represented by proxy , shall constitute a quorum for the transaction of business . A quorum, once established at a meeting, shall not be broken by the withdrawal of enough votes to leave less than a quorum.

2.7 Adjournments . Any meeting of stockholders may be adjourned to any other time and to any other place at which a meeting of stockholders may be held under these By-Laws by a majority of the stockholders present or represented at the meeting and entitled to vote, although less than a quorum, or, if no stockholder is present, by any officer entitled to preside at or to act as Secretary of such meeting. It shall not be necessary to notify any stockholder of any adjournment of less than thirty (30) days if the time and place of the adjourned meeting are announced at the meeting at which adjournment is taken, unless after the adjournment a new record date is fixed for the adjourned meeting. At the adjourned meeting , the Corporation may transact any business, which might have been transacted at the original meeting .

2.8      Voting and Proxies . Except as otherwise provided by the General Corporation Law of the State of Delaware, the Certificate of Incorporation or these By-Laws, each stockholder shall have one vote for each share of capital stock entitled to vote and held of record by such stockholder . To the extent permitted by Jaw, each stockholder of record entitled to vote at a meeting of stockholders may vote in person (including by means of remote communications, if any , by which stockholders may be deemed present in person and vote at such meeting in accordance with the General Corporation Law of Delaware) or may authorize another person or persons to vote or act for him or her by proxy , which proxy may be authorized in writing, by telephone or by electronic means by the stockholder or his or her authorized agent. No such proxy shall be voted or acted upon after three years from the date of its execution, unless the proxy expressly provides for a longer period.

2.9      Proxy Representation . Every stockholder may authorize another person or persons to act for him or her by proxy in all matters in which a stockholder is entitled to participate, whether by waiving notice of any meeting, objecting to or voting or participating at a meeting, or expressing consent or dissent without a meeting. The delivery of a proxy on behalf of a stockholder consistent with telephonic or electronically transmitted instructions obtained pursuant to procedures of the Corporation reasonably designed to verify that such instructions have been authorized by such stockholder shall constitute execution and delivery of the proxy by or on behalf of the stockholder. No proxy shall be voted or acted upon after three years from its date unless such proxy provides for a longer period. A duly executed proxy shal 1 be irrevocable if it states that it is irrevocable and, if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A proxy may be made irrevocable regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the Corporation generally. The authorization of a proxy may, but need not, be limited to specified action, provided, however, that if a proxy limits its authorization to a meeting or meetings of stockholders, unless otherwise specifically provided such proxy shall entitle the holder thereof to vote at any adjourned session but shall not be valid after the final adjournment thereof A proxy purporting to be authorized by or on behalf of a stockholder, if accepted by the Corporation in its discretion, shall be deemed valid unless challenged at or prior to its exercise, and the burden of proving invalidity shall rest on the challenger.

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2.10      Action at Meetin g. When a quorum is present at any meeting, a plurality of the votes properly cast for election to any office shall elect to such office and a majority of the votes properly cast upon any question other than an election to an office shall decide the question , except when a larger vote is required by law, by the Certificate of Incorporation or by these
By-laws. No ballot shall be required for any election unless requested by a stockholder present or represented at the meeting and entitled to vote in the election.

2.11      Nomination of Directors . Except for any directors elected in accordance with Section 3 .6 to fill a vacancy or newly­ created directorships, only persons who are nominated in accordance with the following procedures shall be eligible for election as directors. The nomination for election to the Board of Directors of the Corporation at a meeting of stockholders may be made by the Board of Directors or by any stockholder of the Corporation entitled to vote for the election of directors at such meeting who complies with the notice procedures set forth in this Section 2.11. Such nominations, other than those made by or on behalf of the Board of Directors, shall be made by notice in writing delivered or mailed by first class United States mail, postage prepaid , to the Secretary , and received at the principal executive offices of the Corporation not less than sixty (60) days nor more than ninety (90) days prior to the anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that if the annual meeting is not held within thirty (30) days before or after such anniversary date , then such nomination shall have been delivered to or mailed and received by the Secretary not later than the close of business on the 10th day following the date on which the notice of the meeting was mailed or such public disclosure was made , whichever occurs first. Such notice shall set forth (a) as to each proposed nominee (i) the name, age, business address and, if known, residence address of each such nominee, (ii) the principal occupation or employment of each such nominee, (iii) the number of shares of stock of the Corporation which are beneficially owned by each such nominee, and (iv) any other information concerning the nominee that must be disclosed as to nominees in proxy solicitations pursuant to Regulation 14A under the Securities Exchange Act of 1934 , as amended, including such person's written consent to be named as a nominee and to serve as a director if elected; and (b) as to the stockholder giving the notice (i) the name and address, as they appear on the Corporation's books , of such stockholder and (ii) the class and number of shares of the Corporation which are beneficially owned by such stockholder (iii) a description of all arrangements or understandings between such stockholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made by such stockholder, (iv) a representation that such s tockholder intends to appear in person or by proxy at the meeting to nominate the person(s) named in its notice and (v) a representation whether the stockholder intends or is part of a group which intends (a) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the corporation's outstanding capital stock required to elect the nominee and/or (b) otherwise to solicit proxies from stockholders in support of such nomination; and (c) as to the beneficial owner , if any , on whose behalf the nomination is being made (i) such beneficial owner 's name and address , (ii) the class and number of shares of stock of the corporation which are beneficially owned by such beneficial owner, (iii) a description of all arrangements or understandings between such beneficial owner and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made and (iv) a representation whether the beneficial owner intends or is part of a group which intends (a) to deliver a proxy statement and / or form of proxy to holders of at least the percentage of the corporation ' s outstanding capital stock requirement to elect the nominee and/or (b) otherwise to solicit proxies from stockholders in support of such nomination. In addition, to be effective, the stockholder's notice must be accompanied by the written consent of the proposed nominee to serve as a director if elected. The Corporation may require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as a director of the Corporation.

The chairman of the meeting may, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedure , and if he or she should so determine, he or she shall so declare to the meeting and the defective nomination shall be disregarded.

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2.12      Notice of Business at Annual Meetings . At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) otherwise properly brought before the meeting by or at the direction of the Board of Directors, or (c) otherwise properly brought before an annual meeting by a stockholder. For business to be properly brought before an annual meeting by a stockholder, if such business relates to the election of directors of the Corporation, the procedures in Section 2.11 must be complied with. If such business relates to any other matter, the stockholder must have given timely notice thereof in writing to the Secretary. To be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation not less than sixty (60) days nor more than ninety (90) days prior to the anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that if the annual meeting is not held within thirty (30) days before or after such anniversary date, then for the notice by the stockholder to be timely it must be so received not later than the close of business on the 10th day following the date on which the notice of the meeting was mailed or such public disclosure was made, whichever occurs first. A stockholder 's notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting (a) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (b) the name and address, as they appear on the Corporation's books, of the stockholder proposing such business, (c) the class and number of shares of the Corporation which are beneficially owned by the stockholder, (d) a description of all arrangements or understandings between such stockholder or such beneficial owner , if any , and any other person or persons (including their names) in connection with the proposal of such business by such stockholder and any material interest of the stockholder or such beneficial owner, if any, in such business , (e) a representation that such stockholder intends to appear in person or by proxy at the annual meeting to bring such business before the meeting, (f) a representation whether the stockholder or the beneficial owner, if any , intends or is part of a group which intends (i) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the corporation's outstanding capital stock required to approve or adopt the proposal and/or (ii) otherwise to solicit proxies from stockholders in support of such proposal, and (g) any material interest of the stockholder in such business. Notwithstanding anything in these By-Laws to the contrary , no business shall be conducted at any annual meeting except in accordance with the procedures set forth in this Section 2.12, except that any stockholder proposal which complies with Rule 14a-8 of the proxy rules , or any successor provision, promulgated under the Securities Exchange Act of 1934, as amended, and is to be included in the Corporation's proxy statement for an annual meeting of stockholders shall be deemed to comply with the requirements of this Section 2 . 12.

The chairman of the meeting shall, if the facts warrant , determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section 2.12 , (including whether the stockholder or beneficial owner, if any, on whose behalf the proposal is made solicited (or is part of a group which solicited) or did not so solicit, as the case may be, proxies in support of such stockholder's proposal in compliance with the representation with respect thereto required by this Section 2.12), and if he or she should so determine, the chairman shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted.

Notwithstanding the foregoing provisions of this Section 2.12, if the stockholder (or a qualified representative of the stockholder) does not appear at the annual meeting of stockholders of the corporation to present business, such business shall not be transacted, notwithstanding that proxies in respect of such vote may have been received by the corporation.

2.13	Action without Meeting . Stockholders may not take any action by written consent in lieu of a meeting.	

2.14      Organization . The Chairman of the Board, if there is one, or in his or her absence the President shall call meetings of the stockholders to order, and act as chairman of such meeting; provided , however, that the Board of Directors may appoint any stockholder to act as chairman of any meeting in the absence of the Chairman of the Board. The Secretary of the Corporation shall act as secretary at all meetings of the stockholders; provided , however , that in the absence of the Secretary at any meeting of the stockholders, the acting chairman may appoint any person to act as secretary of the meeting.

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2.15      Conduct of Meetings , The Board of Directors of the corporation may adopt by resolution such rules, regulations and procedures for the conduct of any meeting of stockholders of the corporation as it shall deem appropriate including , without limitation , such guidelines and procedures as it may deem appropriate regarding the participation by means of remote communication of stockholders and proxyholders not physically present at a meeting. Except to the extent inconsistent with such rules, regulations and procedures as adopted by the Board of Directors , the chairman of any meeting of stockholders shall have the right and authority to prescribe s uch rules, regulations and procedures and to do all such acts as, in the judgment of such chairman , are appropriate for the proper conduct of the meeting . Such rules , regulations or procedures, whether adopted by the Board of Directors or prescribed b y the chairman of the meeting, may include , without limitation, the following : (i) the establi s hment of an agenda or order of business for the meeting ; (ii) rules and procedures for maintaining order at the meeting and the safety of those present ; (iii) limitations on attendance at or participation in the meeting to stockholders of record of the corporation, their duly authorized and constituted proxie s or such other persons as shall be determined; (iv) restrictions on entry to the meeting after the tim e fixed for the commencement thereof; and (v) limitations on the time allotted to questions or comments by participants. Unless and to the extent determined by the Board of Directors or the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.

ARTICLE 3 – DIRECTORS

3.1      General Powers . The business and affairs of the Corporation shall be managed by or under the direction of a Board of Directors, who may exercise all of the powers of the Corporation except as otherwise provided by law, the Certificate of Incorporation or these By-Laws. In the event of a vacancy in the Board of Director s , the remaining directors , except as otherwise provided by law , may exercise the powers of the full Board of Directors until the vacancy is filled.

3.2      Number; Election and Qualification . The number of directors which s hall constitute the whole Board of Directors shall be determined by resolution of the Board of Directors, but in no event shall be less than three . The directors shall be elected at the annual meeting of stockholders by such stockholders as have the right to vote on such election. The directors need not be stockholders of the Corporation.

3.3      Classes of Directors . The Board of Directors shall be and is divided into three classes: Class I, Class II and Class III. No one class shall have more than one director more than any other class. If a fraction is contained in the quotient arrived at by dividing the designated number of directors by three, then, if such fraction is one-third, the extra director shall be a member of Class III, and if such fraction is two-thirds, one of the extra directors shall be a member of Class III and one of the extra directors shall be a member of Class II, unless otherwise provided from time to time by resolution adopted by the Board of Directors .

3.4 Terms of Office . Except as otherwise provided in the Certificate of Incorporation or these By-Laws, each director shall serve for a term ending on the date of the third annual meeting following the annual meeting at which such director was elected; provided , however, that each initial director in Class I shall serve for a term ending on the date of the annual meeting of stockholders in 2008; each initial director in Class II shall serve for a term ending on the date of the annual meeting of stockholders in 2009; and each initial director in Class III shall serve for a term ending on the date of the annual meeting of stockholders in 201 O; and provided, further, that the term of each director shall be subject to the election and qualification of his or her successor and to his or her earlier death, resignation or removal.

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3.5      Allocation of Directors Among Clas s es in the Event of Increases or Decreases in the Number of Directors . In the event of any increase or decrease in the authorized number of directors, (i) each director then serving as such shall nevertheles s continue as a director of the class of which he or she is a member and (ii) the newly created or eliminated directorships resulting from such increase or decrease shall be apportioned by the Board of Directors among the three classes of directors so as to ensure that no on e class has more than one director more than any other class. To the extent possible, consistent with the foregoing rule, any newly created directorships shall be added to those classes whose terms of office are to expire at the latest dates following such allocation , and any newly eliminated directorships shall be subtracted from those classes whose terms of offices are to expire at the earliest dates following such allocation, unless otherwise provided from time to time by resolution adopted by the Board of Directors .

3.6      Vacancies . Any vacancy in the Board of Directors, however occurring, including a vacancy resulting from an enlargement of the Board of Directors , shall be filled only by vote of a majority of the directors then in office, although less than a quorum, or by a sole remaining director and shall not be filled by stockholders. A director elected to fill a vacancy shall be elected for the unexpired term of his or her predecessor in office , and a director chosen to fill a position resulting from an increase in the number of directors shall hold office until the next election of the class for which such director shall have been chosen, subject to the election and qualification of his or her successor and to his or her earlier death , resignation or removal.

3.7      Resignation . Any director may resign by delivering his or her written resignation to the Corporation at its principal office or to the President or Secretary. Such resignation shall be effective upon receipt unless it is specified to be effective at s ome other time or upon the happening of some other event.

3.8      Regular Meetings . The regular meetings of the Board of Directors may be held without notice at such time and place , either within or without the State of Delaware, as shall be determined from time to time by the Board of Directors; provided, that any director who is absent when such a determination is made shall be given notice of the determination. A regular meeting of the Board of Director s may be held without notice immediately after and at the same place as the annual meeting of stockholders .

3.9      Special Meetings . Special meetings of the Board of Directors may be held at any time and place, within or without the State of Delaware , designated in a call by the Chairman of the Board of Directors , if there is one, the Chief Executive Officer (or if there is no Chief Executive Officer , the President), two or more directors or by one director in the event that there is only a single director in office.

3.10      Notice of Special Meetings . Notice of any special meeting of the Board of Directors shall be given to each director by the Secretary or by the officer or one of the directors calling the meeting. The notice shall be duly given to each director
(i) by giving notice to such director in person or by telephone at least twenty four (24) hours in advance of the meeting,
(ii) by sending a telegram, telecopy , facsimile or electronic email, or delivering written notice by hand , to his or her last known business, home or electronic mail address at least twenty four (24) hours in advance of the meeting , or (iii) by mailing written notice to his or her last known business or home address at least seventy two (72) hours in advance of the meeting. A notice or waiver of notice of a special meeting of the Board of Directors need not specify the purposes of the meeting.

3.11      Meetings by Telephone Conference Calls . The Board of Directors or any members of any committee of the Board of Directors designated by the directors may participate in a meeting of the Board of Directors or such committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. Participation by such means shall constitute presence in person at such meeting.

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3.12      Quorum . A majority of the total number of the whole Board of Directors shall constitute a quorum at al l meetings of the Board of Directors. In the event one or more of the directors shall be disqualified to vote at any meeting, then the required quorum shall be reduced by one for each such director so disqualified; provided , however, that in no case shall less than one-third (1 / 3) of the number of directors so fixed constitute a quorum. In the absence of a quorum at any such meeting, a majority of the directors present may adjourn the meeting from time to time without further notice , other than announcement at the meeting, until a quorum shall be present.

3.13      Action at Meeting . At any meeting of the Board of Directors at which a quorum is present, the vote of a majority of tho se present shall be sufficient to take any action, unless a different vote is specified by law , the Certificate of Incorporation or these By-Laws.

3.14      Action by Consent . Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee of the Board of Directors may be taken without a meeting, if all members of the Board or committee, as the case may be , consent to the action in writing or by electronic transmission , and the written consents or electronic transmis s ions are filed with the minutes of proceedings of the Board of Directors or committee of the Board of Directors, a s applicable.

3.15      Removal . The directors of the Corporation may not be removed without cause and may be remo ve d for cause only b y the affirmative vote of the holders of seventy-five percent (75%) of the shares of the capital stock of the Corporation issued and outstanding and entitled to vote generally in the election of directors cast at a meeting of the stockholders called for that purpose .

3.16      Committees . The Board of Directors may , by resolution passed by a majority of the whol e Board, designate one or more committees , each committee to consist of one or more of the directors of the Corporation . The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee , the member or members of the committee present at any meeting and not di s qualified from voting, whether or not he , s he or they constitute a quorum, may unanimou s ly appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors and subject to the provisions of the General Corporation Law of the State of Delaware, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation and may authorize the seal of the Corporation to be affixed to all papers which may require it. Each such committee shall keep minutes and make such reports as the Board of Directors may from time to time request. Except as the Board of Directors may otherwise determine, any committee may make rules for the conduct of its business, but unless otherwise provided by the directors or in such rules, its business shall be conducted as nearly as possible in the same manner as is provided in these By-Law s for the Board of Directors.

3.17      Compensation of Directors . The directors may be paid such compensation for their services and such reimbursement for expense s of attendance at meetings as the Board of Directors may from time to time determine . No such payment shall preclude any director from serving the Corporation or any of its parent or s ubsidiary corporations in any other capacity and receiving compensation for such service.

ARTICLE 4 –OFFICERS

4.1      Enumeration . The officers of the Corporation shall consist of a Chief Executive Officer , a President , a Secretary and a Treasurer. The Board of Directors may appoint other officers with such titles and powers, as it may deem appropriate, including, without limitation, a Chief Financial Officer, one or more Vice Presidents and one or more Controllers.

4.2      Election . The Chief Executive Officer, President, Secretary and Treasurer shall be elected annually by the Board of Directors at its first meeting following the annual meeting of stockholders. Other officers may be appointed by the Board of Directors at such meeting or at any other meeting .

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4.3      Qualification . No officer need be a stockholder of the Corporation. Any two or more offices may be held by the same person .

4.4      Tenure . Except as otherwise provided by law , by the Certificate of Incorporation or b y these By-Laws, each officer shall hold office until his or her successor is elected and qualified , unless a different term is specified in the vote choosing or appointing him or her, or until his or her earlier death, resignation or removal.

4.5      Resignation and Removal . Any officer may resign by delivering his or her written resignation to the Corporation at its principal office or to the Chief Executive Officer or Secretary. Such resignation shall be effective upon receipt unless it is specified to be effective at so me other time or upon the happening of some other event. Any officer may be removed at any time , with or without cause, by vote of a majority of the entire number of directors then in office .

Except as the Board of Directors may otherwise determine, no officer who resigns or is removed shall have any right to any compensation as an officer for any period following his or her resignation or removal, or any right to damages on account of such removal , whether his of her compensation be by the month or by the year or otherwise, unless such compensation is ex pressl y provided in a duly authorized written agreement with the Corporation.

4.6      Vacancies . The Board of Directors may fill any vacancy occurring in any office for any reason and may, in its discretion, leave unfilled for such period as it may determine any offices other than those of Chief Executive Officer, President, Secretary and Treasurer. Each such successor shall hold office for the unexpired term of hi s or her predecessor and until his or her successor is elected and qualified , or until his or her earlier death , resignation or removal.

4.7      Chairman of the Board . The Board of Directors may appoint a Chairman of the Board. If the Board of Directors appoints a Chairman of the Board, he or she shall perform such duties and possess such powers as are a ssigne d to him or her by the Board of Directors and as are consistent with the customary duties of the chairman of a corporation organized under laws of the State of Delaware.

4.8      Chief Executive Officer . The Chief Executive Officer shall, subject to the direction of the Board of Directors, have general charge and supervision of the business of the Corporation. Unless otherwise provided by the Board of Directors , he or she shall preside at all meetings of the stockholders and, if he or she is a director, at all meetings of the Board of Directors. The Chief Executive Officer shall perform such other duties and pos sess such other powers as the Board of Directors may from time to time prescribe.

4.9      President . The President shall perform such duties and possess such powers as the Board of Directors or the Chief Executive Officer may from time to time prescribe. In the event of the absence, inability or refusal to act of the Chief Executive Officer, the President shall perform the duties of the Chief Executive Officer and when so performing s hall have all the powers of and be subject to all the restrictions upon the office of Chief Executive Officer.

4.10      Chief Financial Officer . The Chief Financial Officer shall perform such duties and possess such powers as the Board of Director s or the Chief Executive Officer may from time to time prescribe. The Chief Financial Officer shall have the custody of the corporate funds and securities; shall keep full and accurate all books and accounts of the Corporation as shall be neces s ary or desirable in accordance with applicable law or generall y accepted accounting principle s; shall deposit all monies and other valuable effects in the name and to the credit of the Corporation as may be ordered by the Chairman of the Board or the Board of Directors; s hall cause the funds of the Corporation to be disbursed when such disbursements have been duly authorized, taking proper vouchers for such disbursements; and shall render to the Board of Directors, at its regular meeting or when the Board of Directors so requires, an account of the Corporation.

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4.11      Vice Pre si dent s . An y Vice Pre si d en t sha ll perform such duti es and possess s u c h powers as t he Bo ard of D ire c tors, the C hief Executiv e Officer o r the Presid e nt ma y from time to tim e pr esc rib e. The Board of Directors m ay ass i gn t o a n y Vi ce President the title of Exec utive Vice President, Senior Vice President or any other such ti tle.

4.12      Controllers . Any Controller sh all perform such duti es and p ossess s uch powers as the Board of Di rectors, the Chief Execu ti ve Offi cer or any Vice Pre side nt may from time to ti m e pre sc rib e.

4.13      3 Secretary . Th e Secre ta ry shall perform s uch dutie s and po ssess s uch power s as the Bo a rd of Director s or th e C hie f Executive Officer ma y from time to time prescribe. In addition , th e S ecr e tary shall p e rform su c h duties and h ave such p owers as are incident to th e office of the Secretary , including without limitation the duty and power to give notices of all meetings of stoc kholders and s p ec i a l meetings of the Board of Directors, to attend all meetings of s t ockhol d ers and the Bo a rd of
Directors and ke ep a record of the proc ee din gs, t o maintain a s t ock led ger and prepar e lists of stockhol de rs and their addresses as requ i r ed, to be custo dian of corpora t e records and th e cor p orate seal and to affix and attes t to the same on d ocume nts .

In th e event of the abse n ce, inability or refusa l to act of the Secretary at any mee ting of stockholde r s o r di recto r s, the person presiding at th e m eet ing shall designat e a temporary se cret ary to keep a record of the meeting.

4.14      Treasur e r . The Treasurer shall perform s u c h duties and possess s uch power s as the Board of Director s and the C hi ef Executive Offic er may from tim e to time prescribe. In addition, th e Treasurer s hall perform such dut i es a nd have s uch powers as are incident to the office of Treasurer , including without limitation the duty and power to keep and be respons i ble fo r all funds and sec uriti es of the Corporation, to d e po s it fund s of the Co rporati on in depo si torie s se lected in accordance with th ese B y -Law s, t o di sb ur se s uch fund s as ordered b y the Board of Dir ectors, to m ake p r o p er ac coun ts of suc h funds , and t o rend e r as required b y the Board of Directors sta tements of all suc h tr ansa ction s and of the financia l condition of the Corporat ion.

In the event of the absence, inability or r efusa l to act of the Tr easurer, the Board of Dir ec tors s hall a ppoint a te mporary treasurer, w ho s h all p e r form the duties and exe rci se the power s of the Treasure r .

4.15      Other Officers , Assistant Offi cers an d Agents . Offi cers, assistant officers and age n ts, i f any , other than those whose duties are provided for in th ese B y -la ws, s hall h ave suc h authori ty a nd p e rform s u c h du ties as ma y from tim e to t ime b e prescribed by re solu tion of the Board of Dir ec tor s.

4.16      Sa lari es . Officers of the Corporation shall b e enti tl ed to s uch sa laries , compensation o r reimbursement as s h a ll be fixed o r allo we d from tim e to time by th e B oard of Directors.

ARTICLE 5 - CAPITAL STOCK

5.1      I ss uanc e of Stoc k . Un l ess o th erwise vote d b y the s tockhold ers a nd su bj ect to the pr ov i s i ons of t h e Certificate of In co rporation, th e whole or any part of any uni ss u e d balance of th e a uthorized capital stoc k of t he Corporation or the who l e or any part of any uni ss u e d balance of the authorized capital stock of th e Corporation h el d i n i ts t r easury may b e is sued , so ld , transferred or otherwise di s posed of by vote of th e Board of Dir ec tor s in s uch mann er, for s uch consideration and on such te rms as the Board of Directors ma y de te rmin e.

5.2      Certificates of Stock . Every holder of s toc k of the Corporation s hall b e e nti tled t o h ave a certifica t e, in suc h form as m ay be prescribed b y la w and b y the Board of Directors , certifyin g th e number and c l ass of sha r es owned b y him or her in th e Corporation. Each s u c h certificate s hall be s ign e d b y, or in th e name of the Co rp oration by , t h e C hairman of the Boa r d of Directors, the Chief Executive Officer or th e Pre s id e nt, and the Tre as urer or the Sec retary of t he Co rporation. Any or a ll of the s ignatures on the cert ificate may be a fac s imile.

9

Each certificate for shares of stock that are subject to any restriction on transfer pursuant to the Certificate of Incorporation, the By -Laws, applicable securities Jaws or any agreement among any number of stockholders or among such holders and the Corporation shall have conspicuously noted on the face or back of the certificate either the full text of the restriction or a statement of the existence of such restriction.

5.3      Transfers . Except as otherwise established by rules and regulations adopted by the Board of Directors, and subject to applicable law, shares of stock may be transferred on the books of the Corporation by the surrender to the Corporation or its transfer agent of the certificate representing such shares properly endorsed or accompanied by a written assignment or power of attorney properly executed, and with such proof of authority or the authenticity of signature as the Corporation or its transfer agent may reasonably require. Except as may be otherwise required by law, by the Certificate of Incorporation or by these By-Laws , the Corporation shall be entitled to treat the record holder of stock as shown on its books as the owner of such stock for all purposes , including the payment of dividends and the right to vote with respect to such stock, regardless of any transfer, pledge or other disposition of such stock, until the shares have been transferred on the books of the Corporation in accordance with the requirements of these By-Laws.

5.4      Lost, Stolen or Destroyed Certificates . The Corporation may issue a new certificate of stock in place of any previously issued certificate alleged to have been lost, stolen, or destroyed , upon such terms and conditions as the Board of Director s may prescribe , including the presentation of reasonable evidence of such loss, theft or destruction and the giving of such indemnity as the Board of Directors may require for the protection of the Corporation or any transfer agent or registrar.

5.5      Record Date . The Board of Directors may fix in advance a date as a record date for the determination of the stockholders entitled to notice of or to vote at any meeting of stockholders, or entitled to receive payment of any dividend or other distribution or allotment of any rights in respect of any change , conversion or exchange of stock, or for the purpose of any other lawful action. Such record date s hall not be more than sixty ( 60) nor less than ten (I 0) days before the date of such meeting, nor more than sixty (60) days prior to any other action to which such record date relates .

If no record date is fixed, the record date for determining stockholders entitled to notice of or to vote at a meeting of s tockholders shall be at the close of busine ss on the da y before the day on which notice i s given, or, if notice is waived, at the close of business on the day before the day on which the meeting is held. The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating to such purpose.

A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided , however, that the Board of Directors may fix a new record date for the adjourned meeting.

5.6      Dividends . Subject to limitations contained in the General Corporation Law of the State of Delaware , the Certificate of Incorporation and these By-Jaw s, the Board of Directors ma y declare and pay dividends upon the shares of capital stock of the Corporation, which dividends may be paid either in cash, in property or in shares of the capital stock of the Corporation.

ARTICLE 6 - GENERAL PROVISIONS

6.1      Fiscal Year . Except as from time to time otherwise designated by the Board of Director s, the fiscal year of the Corporation shall begin on the first day of January of each year and end on the last day of December in each year .

6.2	Corporate Seal . The corporate seal shall be in such form as shall be approved by the Board of Directors.	

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6.3      Form of Notice . Whenever any notice whatsoever is required to be given in writing to any stockholder by law, by the Certificate of Incorporation or by these By-laws, such notice may be given by a form of electronic transmission if the stockholder to whom such notice is given has previously consented to the receipt of notice by electronic transmission.

6.4      Waiver of Notice . Whenever any notice whatsoever is required to be given by law, by the Certificate of Incorporation or by these By-Laws, a waiver of such notice either in writing signed by the person entitled to such notice or such person's duly authorized attorney , or by telegraph, cable or any other available method, whether before, at or after the time stated in such waiver, or by the appearance of such person at such meeting in person or by proxy, shall be deemed equivalent to such notice. Any member of the Board of Directors or any committee thereof who is present at a meeting shall be conclusively presumed to have waived notice of such meeting except when such member attends for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Such member shall be conclusively presumed to have assented to any action taken unless his or her dissent shall be entered in the minutes of the meeting or unless his or her written dissent to such action shall be filed with the person acting as the secretary of the meeting before the adjournment thereof or shall be forwarded by registered mail to the Secretary of the Corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to any member who voted in favor of such action.

6.5      Voting of Securities . Except as the directors may otherwise designate, the Chief Executive Officer or Treasurer may waive notice of, and act as, or appoint any person or persons to act as, proxy or attorney-in-fact for this Corporation (with or without power of substitution) at, any meeting of stockholders or shareholders of any other corporation or organization, the securities of which may be held by this Corporation .

6.6      Evidence of Authority . A certificate by the Secretary, or a temporary secretary, as to any action taken by the stockholders, directors, a committee or any officer or representative of the Corporation shall, as to al l persons who rely on the certificate in good faith, be conclusive evidence of such action.

6.7      Certificate of Incorporation . All references in these By-Laws to the Certificate of Incorporation shall be deemed to refer to the Certificate of Incorporation of the Corporation, as amended or restated and in effect from time to time.

6.8      Transactions with Interested Parties . No contract or transaction between the Corporation and one or more of the directors or officers, or between the Corporation and any other corporation, partnership, association, or other organization in which one or more of the directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or a committee of the Board of Directors which authorizes the contract or transaction or solely because his , her or their votes are counted for such purpose, if:

(1) The material facts as to his, her or their relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board of Directors or committee of the Board of Directors in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum;

(2) The material facts as to his, her or their relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders ; or

(3) The contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified by the Board of Directors, a committee of the Board of Directors, or the stockholders.

Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee, which authorizes the contract or transaction.

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6.9      Severability . Any determination that any provision of these By - Laws is for any reason inapplicable, illegal or ineffective shall not affect or invalidat e any other provision of these By-Laws .

6.10      Pronoun s . All pronouns used in the se By-Laws sha ll be deemed to refer to the ma s culine , feminine or neuter , s ingular or plural, as the identity of the person or persons ma y require.

6.11      Contracts . In addition to the powers otherwise granted to officers pursuant to Article 4 h e reof, the Board of Directors may authorize any officer or officer s, or any agent or agents, of the Corporation to enter into any contract or to execute and deliver any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances.

6.12      Inspection of Books and Records . The Board of Director s shall have power from time to time to determine to what ex tent and at what t i me s and place s and under what conditions and regulations the accounts and books of the Corporation, or any of them, shall b e op e n to the inspection of the s tockholders ; and no s tockholder shall have any right to inspect any account or book or document of the Corporation , except as conferred by the laws of the State of Delaware , unless and unti l a uthorized so to do by resolution of the Board of Directors or of the stockholders of the Corporation.

6.13      Sec t ion Headings . Section head i ngs in these By-laws ar e for convenience of refer e nc e only and shall not be given any substantive effect in limiting or otherwise construing any provision herein.

6.14      Incon s istent Provisions . In the event that any provi s ion of the se By-laws is or be co me s inconsistent with any pro v i si on of the Am e nded a nd Restat e d Certificate of Incorporation , th e General Corporation Law of the State of Delaware or any other applicable law , the provision of these By-laws shall not be given any effect to th e extent of such inconsi s t ency but shall otherwise be given full force and effect.

		
6.15	RESERVED	

ARTICLE 7 – AMENDMENTS

7.1 By the Board of Directors. These B y -Laws may be altered, amended or repealed or new By-Laws may be adopted by the affirmative vot e of a majority of the dir e ctor s present at any regular or special meeting of the Board of Director s at which a quorum is pre se nt.

12

7 . 2 By the Stockholders . Notwithstanding any other provision of law, the Certificate of Incorporation or these By-Laws, and notwithstanding the fact that a lesser percentage may be specified by law, the affirmative vote of the holders of at least seventy-five percent (75%) of the shares of the capital stock of the Corporation issued and outstanding and entitled to vote shall be required to alter, amend or repeal any provision of these By-Laws or to adopt new By-Laws, unless such alteration , amendment or repeal has been approved by a majority of those directors of the Corporation who are not affiliated or associated with any person or entity holding 10% or more of the voting power of the outstanding capital stock of the Corporation .

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THIS CERTIFIES THAT is the owner of CUSIP DATED COUNTERSIGNED AND REGISTERED: COMPUTERSHARE TRUST COMPANY, N.A. TRANSFER AGENT AND REGISTRAR, COMMON STOCK SEE REVERSE FOR CERTAIN DEFINITIONS Certificate Number Shares . GALENA BIOPHARMA, INC. INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE President & Chief Executive Officer By AUTHORIZED SIGNATURE COMMON STOCK PAR VALUE $0.0001 FULLY-PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF Galena Biopharma, Inc. (hereinafter called the “Company”), transferable on the books of the Company in person or by duly authorized attorney, upon surrender of this Certificate properly endorsed. This Certificate and the shares represented hereby, are issued and shall be held subject to all of the provisions of the Amended and Restated Certificate of Incorporation, as amended, and the Amended and Restated By-Laws, as amended, of the Company (copies of which are on file with the Company and with the Transfer Agent), to all of which each holder, by acceptance hereof, assents. This Certificate is not valid unless countersigned and registered by the Transfer Agent and Registrar. Witness the facsimile seal of the Company and the facsimile signatures of its duly authorized officers. Vice President, Finance & Corporate Controller THIS CERTIFICATE IS TRANSFERABLE IN CANTON, MA, JERSEY CITY, NJ AND COLLEGE STATION, TX 363256 50 4 ZQ|CERT#|COY|CLS|RGSTRY|ACCT#|TRANSTYPE|RUN#|TRANS# DD-MMM-YYYY * * 0 0 0 0 0 0 * * * * * * * * * * * * * * * * * * * * * 0 0 0 0 0 0 * * * * * * * * * * * * * * * * * * * * * 0 0 0 0 0 0 * * * * * * * * * * * * * * * * * * * * * 0 0 0 0 0 0 * * * * * * * * * * * * * * * * * * * * * 0 0 0 0 0 0 * * * * * * * * * * * * * * ** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Sample **** Mr. Sample **000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares*** *000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares**** 000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****0 00000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****00 0000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000 000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****0000 00**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****00000 0**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000 **Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000* *Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000** Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**S ***ZERO HUNDRED THOUSAND ZERO HUNDRED AND ZERO*** MR. SAMPLE & MRS. SAMPLE & MR. SAMPLE & MRS. SAMPLE ZQ00000000 Certificate Number s 1234567890/123456789 0 1234567890/123456789 0 1234567890/123456789 0 1234567890/123456789 0 1234567890/123456789 0 1234567890/123456789 0 Total Transactio n Num/No . 123456 Denom . 123456 Tota l 1234567 MR A SAMPL E DESIGN ATION (IF ANY ) ADD 1 ADD 2 ADD 3 ADD 4 PO BOX 43004, Providence, RI 02940-3004 CUSI P XXXXXX XX X Holder ID XXXXXXXXX X Insurance Value 1,000,000.0 0 Number of Share s 12345 6 DT C 12345678 12345678901234 5 

 

The IRS requires that we report the cost basis of certain shares acquired after January 1, 2011. If your shares were covered by the legislation and you have sold or transferred the shares and requested a specific cost basis calculation method, we have processed as requested. If you did not specify a cost basis calculation method, we have defaulted to the first in, first out (FIFO) method. Please visit our website or consult your tax advisor if you need additional information about cost basis. If you do not keep in contact with us or do not have any activity in your account for the time periods specified by state law, your property could become subject to state unclaimed property laws and transferred to the appropriate state. The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common UNIF GIFT MIN ACT- . . . . . . . . . .Custodian . . . . . . . . . . . . . . . TEN ENT - as tenants by the entireties under Uniform Gifts to Minors Act . . . . . . . . . . . . . JT TEN - as joint tenants with right of survivorship UNIF TRF MIN ACT . . . . . . . . . . . . . . .Custodian (until age. . . ). . . . . . . . . . . and not as tenants in common (Cust) (Minor) under Uniform Transfers to Minors Act. . . . . . . . . . (State) Additional abbreviations may also be used though not in the above list. For value received, ____________________________hereby sell, assign and transfer unto ________________________________________________________________________________________________________________________________ ________________________________________________________________________________________________________________________________ ________________________________________________________________________________________________________________________________ _______________________________________________________________________________________________________________________ Shares _______________________________________________________________________________________________________________________ Attorney Dated: __________________________________________20__________________ Signature: ____________________________________________________________ Signature: ____________________________________________________________ Notice: The signature to this assignment must correspond with the name as written upon the face of the certificate, in every particular, without alteration or enlargement, or any change whatever. (Cust) (Minor) (State) PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE, OF ASSIGNEE) of the common stock represented by the within Certificate, and do hereby irrevocably constitute and appoint to transfer the said stock on the books of the within-named Corporation with full power of substitution in the premises. . Galena Biopharma, Inc. THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH SHAREHOLDER WHO SO REQUESTS, A SUMMARY OF THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OF THE COMPANY AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND RIGHTS, AND THE VARIATIONS IN RIGHTS, PREFERENCES AND LIMITATIONS DETERMINED FOR EACH SERIES, WHICH ARE FIXED BY THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF THE COMPANY, AS AMENDED, AND THE RESOLUTIONS OF THE BOARD OF DIRECTORS OF THE COMPANY, AND THE AUTHORITY OF THE BOARD OF DIRECTORS TO DETERMINE VARIATIONS FOR FUTURE SERIES. SUCH REQUEST MAY BE MADE TO THE OFFICE OF THE SECRETARY OF THE COMPANY OR TO THE TRANSFER AGENT. THE BOARD OF DIRECTORS MAY REQUIRE THE OWNER OF A LOST OR DESTROYED STOCK CERTIFICATE, OR HIS LEGAL REPRESENTATIVES, TO GIVE THE COMPANY A BOND TO INDEMNIFY IT AND ITS TRANSFER AGENTS AND REGISTRARS AGAINST ANY CLAIM THAT MAY BE MADE AGAINST THEM ON ACCOUNT OF THE ALLEGED LOSS OR DESTRUCTION OF ANY SUCH CERTIFICATE. Signature(s) Guaranteed: Medallion Guarantee Stamp THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (Banks, Stockbrokers, Savings and Loan Associations and Credit Unions) WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM, PURSUANT TO S.E.C. RULE 17Ad-15. 

 

Exhibit 21.1

SUBSIDIARIES OF THE REGISTRANT

Jurisdiction of Incorporation
Name                              Ownership Percentage                  /Formation

Apthera, Inc.                            100%                        Delaware
Mills Pharmaceuticals, LLC               100%                            Delaware
Galena Biopharma UK Limited        100%                United Kingdom

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statements on Form S-3 (Nos. 333-188847, 333-188849, 333-195260, 333-199517, 333-208330, 333-208331, 333-212674, 333-213908, 333-213493, and 333-213908) and Form S-8 (Nos. 333-151154, 333-153847, 333-175763, 333-174819, 333-182578, 333-183300, 333-190540, 333-210833, and 333-213248) of our report dated March 15, 2017, relating to the consolidated financial statements of Galena Biopharma, Inc., and the effectiveness of internal control over financial reporting of Galena Biopharma, Inc., appearing in this Annual Report on Form 10-K for the year ended December 31, 2016.

/s/ Moss Adams

San Francisco, CA
March 15, 2017

Exhibit 31.1
CERTIFICATION OF INTERIM CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Stephen F. Ghiglieri, certify that:
1. I have reviewed this Annual Report on Form 10-K of Galena Biopharma, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Dated: March 15, 2017

	
		
 	/s/ Stephen F. Ghiglieiri	
 	 	
 	Stephen F. Ghiglieri	
 	Interim Chief Executive Officer and Chief Financial Officer	

Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the accompanying Annual Report of Galena Biopharma, Inc., (the “Company”) on Form 10-K for the year ended December 31, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned officer of the Company certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to their knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the Company’s financial condition and result of operations.

	
	
/s/ Stephen F. Ghiglieiri	
 	
Stephen F. Ghiglieri	
Interim Chief Executive Officer and Chief Financial Officer	
 	
Date: March 15, 2017