UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
  ________________________________
FORM 10-Q
  ________________________________
(Mark One)

		
ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	
For the quarterly period ended June 30, 2015
OR

		
o

	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	

For the transition period from                      to                     
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.)	
4640 SW Macadam Ave., Suite 270, Portland, OR 97239
(Address of principal executive office) (Zip code)

Registrant’s telephone number: (855) 855-4253
   ________________________________

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.    Yes   ý     No   ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its 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 such shorter time that the registrant was required to submit and post such files).   Yes   ý     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	 	o	 	Accelerated filer	 	ý	
 	 	 	 	
Non-accelerated filer	 	o	(Do not check if a smaller reporting company)	Smaller reporting company	 	o	

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):     o   Yes     ý   No

As of July 31, 2015 , Galena Biopharma, Inc. had outstanding 161,715,398 shares of common stock, $0.0001 par value per share, exclusive of treasury shares.

	

GALENA BIOPHARMA, INC.

FORM 10-Q — QUARTER ENDED June 30, 2015

INDEX

	
						
Part
No.	 	Item
No.	 	Description	Page
No.	
I	 	 	 	FINANCIAL INFORMATION	 	
 	 	1	 	Financial Statements	2	
 	 	 	 	Condensed Consolidated Balance Sheets as of June 30, 2015 (unaudited) and December 31, 2014	2	
 	 	 	 	Condensed Consolidated Statements of Comprehensive Loss (unaudited) for the three and six months ended June 30, 2015 and 2014	3	
 	 	 	 	Condensed Consolidated Statement of Stockholders' Equity (unaudited) for the six months ended June 30, 2015	4	
 	 	 	 	Condensed Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2015 and 2014	5	
 	 	 	 	Notes to Condensed Consolidated Financial Statements (unaudited)	6	
 	 	2	 	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25	
 	 	3	 	Quantitative and Qualitative Disclosures About Market Risk	37	
 	 	4	 	Controls and Procedures	37	
II	 	 	 	OTHER INFORMATION	 	
 	 	1	 	Legal Proceedings	38	
 	 	1A	 	Risk Factors	39	
 	 	6	 	Exhibits	43	
Index to Exhibits	43	
Signatures	44	
EX-31.1	 	
EX-31.2	 	
EX-32.1	 	

1

PART I
ITEM  1. FINANCIAL STATEMENTS

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

								
 	June 30, 2015	 	December 31, 2014	
 	(Unaudited)	 		
ASSETS	 	 	 	
Current assets:	 	 	 	
Cash and cash equivalents	$	45,279		 	$	23,650		
Restricted cash	200		 	200		
Accounts receivable, net	1,818		 	1,839		
Inventories	1,426		 	655		
Prepaid expenses	2,399		 	2,680		
Total current assets	51,122		 	29,024		
Equipment and furnishings, net	532		 	555		
In-process research and development	12,864		 	12,864		
Abstral rights, net	13,946		 	14,533		
Zuplenz rights	8,101		 	8,101		
GALE-401 rights	9,255		 	9,255		
Goodwill	6,069		 	6,069		
Deposits and other assets	78		 	87		
Total assets	$	101,967		 	$	80,488		
LIABILITIES AND STOCKHOLDERS’ EQUITY	 	 	 	
Current liabilities:	 	 	 	
Accounts payable	$	2,318		 	$	2,271		
Accrued expenses and other current liabilities	12,923		 	15,669		
Fair value of warrants potentially settleable in cash	18,794		 	5,383		
Current portion of long-term debt	4,079		 	3,910		
Total current liabilities	38,114		 	27,233		
Deferred tax liability	5,053		 	5,053		
Contingent purchase price consideration	6,889		 	6,651		
Long-term debt, net of current portion	2,546		 	4,492		
Total liabilities	52,602		 	43,429		
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; 275,000,000 shares authorized, 161,716,381 shares issued and 162,391,381 shares outstanding at June 30, 2015; 200,000,000 shares authorized, 130,146,341 shares issued and 129,471,341 shares outstanding at December 31, 2014	15		 	12		
Additional paid-in capital	294,877		 	256,377		
Accumulated deficit	(241,678	)	 	(215,481	)	
Less treasury shares at cost, 675,000 shares	(3,849	)	 	(3,849	)	
Total stockholders’ equity	49,365		 	37,059		
Total liabilities and stockholders’ equity	$	101,967		 	$	80,488		

See accompanying notes to condensed consolidated financial statements.

2

Table of Contents
GALENA BIOPHARMA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Amounts in thousands, except share and per share data)
(Unaudited)

	
																
 	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	2015	 	2014	 	2015	 	2014	
Net revenue	$	3,382		 	$	2,331		 	$	6,132		 	$	4,504		
Costs and expenses:	 	 	 	 	 	 	 	
Cost of revenue (excluding amortization of certain acquired intangible assets)	468		 	347		 	861		 	678		
Research and development	7,290		 	8,069		 	13,200		 	14,839		
Selling, general, and administrative	6,451		 	9,600		 	13,878		 	16,430		
Amortization of certain acquired intangible assets	442		 	98		 	588		 	189		
Total costs and expenses	14,651		 	18,114		 	28,527		 	32,136		
Operating loss	(11,269	)	 	(15,783	)	 	(22,395	)	 	(27,632	)	
Non-operating income (expense):	 	 	 	 	 	 	 	
Change in fair value of warrants potentially settleable in cash	(4,267	)	 	(3,353	)	 	(3,115	)	 	6,439		
Interest income (expense), net	(207	)	 	(314	)	 	(449	)	 	(628	)	
Other income (expense)	83		 	(491	)	 	(238	)	 	(656	)	
Total non-operating income (expense), net	(4,391	)	 	(4,158	)	 	(3,802	)	 	5,155		
Net loss	$	(15,660	)	 	$	(19,941	)	 	$	(26,197	)	 	$	(22,477	)	
Net loss per common share:	 	 	 	 	 	 	 	
Basic and diluted net loss per share	$	(0.10	)	 	$	(0.17	)	 	$	(0.18	)	 	$	(0.19	)	
Weighted-average common shares outstanding: basic and diluted	161,383,398		 	118,083,988		 	148,647,581		 	117,154,099		
See accompanying notes to condensed consolidated financial statements.

3

Table of Contents
GALENA BIOPHARMA, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Amounts in thousands, except share amounts)
(Unaudited)

	
																							
 	Common Stock	 	Additional Paid-In Capital	 	Accumulated Deficit	 	Treasury Stock	 	Total	
 	Shares Issued	 	Amount	 	 	 	 	 	 	 	 	
Balance at December 31, 2014	130,146,341		 	$	12		 	$	256,377		 	$	(215,481	)	 	$	(3,849	)	 	$	37,059		
Issuance of common stock	32,158,685		 	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	85,372		 	—		 	110		 	—		 	—		 	110		
Stock-based compensation for directors and employees	—		 	—		 	1,272		 	—		 	—		 	1,272		
Exercise of stock options	983		 	—		 	1		 	—		 	—		 	1		
Net loss	—		 	—		 	—		 	(26,197	)	 	—		 	(26,197	)	
Balance at June 30, 2015	162,391,381		 	$	15		 	$	294,877		 	$	(241,678	)	 	$	(3,849	)	 	$	49,365		

See accompanying notes to condensed consolidated financial statements.

4

Table of Contents
GALENA BIOPHARMA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)

	
								
 	For the Six Months Ended June 30,	
 	2015	 	2014	
Cash flows from operating activities:	 	 	 	
Net loss	$	(26,197	)	 	$	(22,477	)	
Adjustment to reconcile net loss to net cash used in operating activities:	 	 	 	
Depreciation and amortization expense	816		 	461		
Non-cash stock-based compensation	1,272		 	3,136		
Change in fair value of common stock warrants	3,115		 	(6,439	)	
Change in fair value of contingent consideration	238		 	656		
Changes in operating assets and liabilities:	 	 	 	
Accounts receivable	21		 	1,531		
Inventories	(771	)	 	(47	)	
Prepaid expenses and other assets	290		 	(339	)	
Accounts payable	47		 	(624	)	
Accrued expenses and other current liabilities	(2,246	)	 	3,122		
Net cash used in operating activities	(23,415	)	 	(21,020	)	
Cash flows from investing activities:	 	 	 	
Cash paid for acquisition of Zuplenz rights	(500	)	 	—		
Cash paid for acquisition of GALE-401 rights	—		 	(2,315	)	
Cash paid for purchase of equipment and furnishings	(69	)	 	(29	)	
Net cash used in investing activities	(569	)	 	(2,344	)	
Cash flows from financing activities:	 	 	 	
Net proceeds from issuance of common stock	47,416		 	—		
Net proceeds from exercise of stock options	1		 	4,070		
Proceeds from exercise of warrants	—		 	10,585		
Proceeds from common stock issued in connection with ESPP	110		 	91		
Principle payments on long-term debt	(1,914	)	 	(7	)	
Net cash provided by financing activities	45,613		 	14,739		
Net increase (decrease) in cash and cash equivalents	21,629		 	(8,625	)	
Cash and cash equivalents at the beginning of period	23,650		 	47,787		
Cash and cash equivalents at end of period	$	45,279		 	$	39,162		
 	 	 	 	
Supplemental disclosure of cash flow information:	 	 	 	
Cash received during the periods for interest	$	2		 	$	10		
Cash paid during the periods for interest	$	312		 	$	423		
Supplemental disclosure of non-cash investing and financing activities:	 	 	 	
Fair value of warrants issued in connection with common stock recorded as cost of equity	$	10,296		 	$	—		
Reclassification of warrant liabilities upon exercise	$	—		 	$	27,020		
See accompanying notes to condensed consolidated financial statements.

5

Table of Contents
GALENA BIOPHARMA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. Business and Basis of Presentation

Overview
 
Galena Biopharma, Inc. (“we,” “us,” “our,” “Galena” or the “company”) is a biopharmaceutical company focused on developing and commercializing innovative, targeted oncology therapeutics that address major medical needs across the full spectrum of cancer care. Galena’s development portfolio ranges from mid- to late-stage clinical assets, including a robust immunotherapy program led by NeuVax™ (nelipepimut-S) currently in an international, Phase 3 clinical trial. The company’s commercial drugs include Abstral ® (fentanyl) Sublingual Tablets and Zuplenz ® (ondansetron) Oral Soluble Film. Collectively, our clinical and commercial strategy focuses on identifying and advancing therapeutic opportunities to improve cancer care, from direct treatment of the disease to the reduction of its debilitating side-effects. 

Novel Cancer Immunotherapies

Our targeted cancer immunotherapy approach is based upon preventing recurrence of cancer, which is becoming increasingly important as the number of cancer survivors continues to grow. Once a patient’s tumor becomes metastatic, the outcome is most often fatal, making the prevention of recurrence a potentially critical component of overall patient care. Our programs primarily target patients in the adjuvant (after-surgery) setting who have relatively healthy immune systems, but may still have undetected minimal residual disease.

Our therapies utilize immunologically active peptides 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 target, 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 evoke long-lasting protection through activation of the immune system through an intradermal mode of delivery. We are currently engaged in multiple clinical trials with NeuVax™ (nelipepimut-S) and GALE-301, or Folate Binding Protein (FBP), targeting the prevention of recurrence in breast, gastric, ovarian and endometrial cancers.

NeuVax™ (nelipepimut-S)

NeuVax™ (nelipepimut-S), our lead product candidate, is a targeted cancer immunotherapy and is being developed for the prevention of cancer recurrence in human epidermal growth factor receptor (HER2) expressing cancers. NeuVax is the immunodominant nona-peptide derived from the extracellular domain of the HER2 protein, a well-established 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 be a predictive factor of Disease Free Survival (DFS) and Overall Survival (OS) - suggesting a dormancy of isolated micrometastases, which, over time, may lead to recurrence. After binding to the HLA A2, A3, A24 or A26 proteins on antigen presenting cells, the nelipepimut-S sequence stimulates specific cytotoxic T lymphocyte (CTLs). These activated CTLs recognize, neutralize and destroy, through cell lysis, HER2 expressing cancer cells, including undetected 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.

6

Table of Contents
GALENA BIOPHARMA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)

We have multiple trials currently ongoing for NeuVax. For our global pivotal, fully enrolled, 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) trial, NeuVax is targeting the 30,000-40,000 of the 230,000 female breast cancer patients annually diagnosed in the U.S. who are at a higher risk of their breast cancer recurring, which we refer to as “disease recurrence,” after achieving “no evidence of disease” (NED) status, (or becoming a “survivor”) with standard-of-care therapy (surgery, chemotherapy, radiation). These high-risk patients have a particular molecular signature and disease status: HER2 IHC 1+/2+ (oncoprotein associated with aggressive tumor growth), node positive (disease present in the axillary lymph nodes prior to surgery), and HLA A2/A3 (human leukocyte antigen from A2/A3 patients who have the same loci of genes which represents approximately 65% of population). NeuVax has also been shown to bind to A24 and A26 which represents an additional 10-15% of the population in the U.S., but importantly, represents up to 70% of the population in Japan. Up to 25% of resectable, node-positive breast cancer patients, having no radiographic evidence of disease following surgery and adjuvant chemo/radiation therapy, are expected to relapse within three years following diagnosis. The prognosis upon recurrence is very poor. These cancer patients presumably still had isolated, undetected tumor CTCs that led to a recurrence of cancer in the breast (local recurrence) or in another location (metastatic disease).

We currently have a number of ongoing or planned clinical trials designed to expand the clinical and geographic footprint of NeuVax:

•	Phase 3 Ongoing: Our 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 has completed enrollment of 758 patients with HER2 1+ and 2+ under a Special Protocol Assessment (SPA) granted by the U.S. Food and Drug Administration (FDA). The multinational, multicenter, randomized, double-blinded PRESENT trial is fully enrolled with trial sites in North America, Western and Eastern Europe, and Israel. Additional information on the study can be found at www.neuvax.com .	

•	Phase 2b Ongoing: A randomized, multicenter, investigator-sponsored, 300 patient Phase 2b clinical trial is enrolling HER2 1+/2+ node-positive and high-risk node-negative HLA A2/A3/A24/A26 breast cancer patients to study NeuVax in combination with trastuzumab (Herceptin ® ; Genentech/Roche) in the adjuvant setting. This trial is partially funded by Genentech/Roche.	

•	Phase 2 Ongoing: An investigator-sponsored trial is ongoing to study NeuVax in combination with Herceptin. The study will enroll 100 patients who are neoadjuvantly treated node positive and negative HER2 IHC 3+ patients, not achieving a pathological complete response (pCR) or adjuvantly treated node positive HER2 IHC 3+ patients. Partial funding for this trial comes from the Department of Defense (DoD) through the Congressionally Directed Medical Research Program (CDMRP) which is funded through specific requests from individual members of Congress that are part of the Defense Appropriations Act. Funds are "set aside" (obligated) in entirety at the time of assistance agreement award. The grant was awarded under a Breast Cancer Research Program (BCRP) Breakthrough Award given to the lead investigator for the trial.	

•	Phase 2 Planned: In January 2014, we partnered with Dr. Reddy’s Laboratories, Ltd. in India for the commercialization of NeuVax in that region. Dr. Reddy’s is responsible for managing a Phase 2 gastric cancer trial of NeuVax in India in patients that express any level of HER2 (1+, 2+, and 3+). The trial is expected to initiate in 2016.	

7

Table of Contents
GALENA BIOPHARMA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)

GALE-301 (folate binding protein or FBP)

Our second immunotherapy product candidate, GALE-301, targets folate binding protein receptor-alpha, a well-validated therapeutic target, which is highly over-expressed (20-80 fold) in ovarian, endometrial and breast cancers. GALE-301 is an immunogenic peptide and can stimulate CTLs to recognize and destroy FBP-expressing cancer cells. GALE-301 consists of an FBP peptide combined with GM-CSF, and is currently in a Phase 2a clinical trial for the prevention of recurrence in patients with ovarian and endometrial cancers. Current treatments for these diseases are principally with chemotherapeutic agents and patients suffer a high recurrence rate; and, most patients relapse with an extremely poor prognosis. Although not powered for efficacy, promising preliminary results from the Phase 2a clinical trial of GALE-301 were presented in May 2015 at the American Society of Clinical Oncology conference and demonstrated the estimate for disease free survival at two years is 85.7% (1000 mcg dose group) vs. 19.2% for the control group (p = 0.09), for a 78% reduction in relative risk of recurrence, and that the agent was well-tolerated with primarily Grade 1 and 2 toxicities and elicited a strong in vivo immune response. We expect to present a more mature data set from the Phase 2a trial this Fall at the European Society for Medical Oncology European Cancer Congress 2015.

Hematology

GALE-401 (anagrelide controlled release (CR))

In January 2014, we announced the acquisition of the worldwide rights to anagrelide controlled release (CR), which we renamed GALE-401, through our acquisition of Mills Pharmaceuticals, LLC. GALE-401 contains the active ingredient anagrelide (Agrylin ® , Shire Pharmaceuticals), 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. Therefore, reducing the maximum concentration (C max ) is hypothesized to reduce the side effects, but preserve efficacy.

Multiple Phase 1 studies in 98 healthy subjects have shown GALE-401 reduces the C max of anagrelide following oral administration, appears to be well tolerated at the doses administered, and to be capable of reducing platelet levels. The Phase 1 program provided the desired PK (pharmacokinetic) profile to enable the initiation of the ongoing Phase 2 proof-of-concept trial. The Phase 2, open label, single arm trial enrolled 18 patients in the United States for the treatment of thrombocytosis, or elevated platelet counts in patients with MPNs. Phase 2 top-line safety and efficacy data was presented in June 2015 at the European Hematology Association 20th Congress. We expect to present a more mature data set from the Phase 2 trial later this year. Based on a regulatory meeting with the FDA, Galena believes a 505(b)(2) regulatory filing is an acceptable pathway for development and potential approval of GALE-401, with the reference drug Agrylin ® (anagrelide; Shire Pharmaceuticals).

Commercial Capabilities

Abstral ® (fentanyl) Sublingual Tablets

Our first commercial product, Abstral ® (fentanyl) Sublingual Tablets, is an important treatment option for inadequately controlled breakthrough cancer pain (BTcP), which affects more than 50% of all cancer patients. Abstral is approved by the FDA, and is a sublingual (under the tongue) tablet for the management of breakthrough pain in patients with cancer, 18 years of age and older, who are already receiving, and who are tolerant to, opioid therapy for their persistent baseline cancer pain. The Abstral formulation delivers the analgesic power and increased bioavailability of micronized fentanyl in a convenient sublingual tablet that is designed to dissolve under the tongue in seconds and provide relief of breakthrough pain in minutes. Abstral is a transmucosal immediate release fentanyl (TIRF) product with product class oversight by the TIRF Risk Evaluation and Mitigation Strategy (REMS) access program. Abstral is manufactured for us by contract manufacturers and we distribute and sell Abstral in the U.S. through our commercial organization.

8

Table of Contents
GALENA BIOPHARMA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)

Zuplenz ® (ondansetron) Oral Soluble Film

In July 2014 we licensed our second commercial product, Zuplenz ® (ondansetron) Oral Soluble Film, from MonoSol Rx, LLC, which we launched on July 29, 2015. Zuplenz is approved by the FDA in adult patients for the prevention of highly and moderately emetogenic chemotherapy-induced nausea and vomiting (CINV), radiotherapy-induced nausea and vomiting (RINV), and post-operative nausea and vomiting (PONV). Zuplenz is also approved in pediatric patients treated with moderately emetogenic CINV. Nausea and vomiting are two of the most common side-effects experienced by post-surgery patients and patients receiving chemotherapy or radiation. It is estimated that up to 90% of chemotherapy and up to 80% of radiotherapy patients will experience CINV and RINV, respectively.

The active pharmaceutical ingredient in Zuplenz, ondansetron, belongs to a class of medications called serotonin 5-HT 3 receptor antagonists and works by blocking the action of serotonin, a natural substance that may cause nausea and vomiting. Ondansetron is the most widely prescribed drug in this class of anti-emetics, and used broadly across the oncology spectrum. Zuplenz is clinically bioequivalent to ondansetron orally disintegrating tables (ODT) with a safety profile equivalent to ondansetron.

Zuplenz utilizes MonoSol’s proprietary PharmFilm ® technology, an oral soluble film that dissolves on the tongue in less than 30 seconds. Zuplenz eliminates the burden of swallowing pills during periods of emesis, may be advantageous for patients with oral irritation, and may increase patient adherence and the patient's ability to keep the medication down without vomiting. MonoSol will exclusively manufacture Zuplenz for us for sale in the U.S. through our commercial organization.

Basis of Presentation and Significant Accounting Policies

The accompanying consolidated financial statements included herein have been prepared by Galena pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Unless the context otherwise indicates, references in these notes to the “company,” “we,” “us” or “our” refer to Galena, our wholly owned subsidiary, Apthera, Inc., or “Apthera,” and our wholly owned subsidiary, Mills Pharmaceuticals, LLC or "Mills."

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 certificates of deposit on hand with the company’s financial institutions as collateral for its corporate credit cards.

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

9

Table of Contents
GALENA BIOPHARMA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)

Accounts Receivable - The company maintains credit limits for all customers based upon several factors, including but not limited to financial condition and stability, payment history, published credit reports and use of credit references. Management performs analysis to evaluate accounts receivables to ensure recorded amounts reflect estimated net realizable value. An allowance for doubtful accounts is established based on the Company's best estimate of the amount of probable credit losses in the Company's accounts receivable. As of June 30, 2015 and December 31, 2014 the allowance for doubtful accounts was $160,000 .

Inventories — Inventories are stated at the lower of cost or market value and are determined using the first-in, first-out ("FIFO") method. Inventories consist of work-in-process and finished goods of our commercial products. The company has entered into manufacturing and supply agreements for the manufacture and final packaging of Abstral and Zuplenz finished goods. As of June 30, 2015 , the company had inventories of $1,426,000 , consisting of $1,264,000 of work-in-process and $162,000 of finished goods. As of December 31, 2014 , the company had inventories of $655,000 consisting of $455,000 of work-in-process and $200,000 of finished goods.

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) 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. If the carrying amount exceeds the fair value, a second step must be followed to calculate impairment. 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 assets 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.

The company performed its review for impairment using the qualitative assessment for both goodwill and indefinite-lived intangible assets, as well as assets not considered to be indefinite-lived, and has determined that there has been no impairment to these assets as of June 30, 2015 .

Revenue Recognition - The company recognizes revenue from the sale of Abstral. No revenue has been recorded from the sale of Zuplenz as of June 30, 2015 . Revenue is recognized when (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred and title has passed, (iii) the price is fixed or determinable and (iv) collectability is reasonably assured.

10

Table of Contents
GALENA BIOPHARMA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)

We sell Abstral product in the United States to wholesale pharmaceutical distributors and retail pharmacies, or our "customers," subject to rights of return. We recognize Abstral product sales at the time title transfers to our customer, and provide allowances for estimated future product returns, prompt pay discounts, wholesaler discounts, rebates, chargebacks, patient assistance program benefits and other deductions as needed. The company is required to make significant judgments and estimates in determining some of these allowances. If actual results differ from its estimates, the company will be required to make adjustments to these allowances in the future.

Returns - The company estimates future returns based on historical return information, as well as information regarding prescription information and sell-through trends, in relation to the estimated amount of product in the sales channels and product expiration dates. The allowance for returns is recorded as a reduction to revenue in the period in which the revenue is recognized, with a corresponding allowance against accounts receivable.

Prompt Pay Discounts - As an incentive for prompt payment, the company offers a cash discount to customers, which is generally 2% of gross sales. The company expects that all customers will comply with the contractual terms to earn the discount. The company records prompt pay discounts as a reduction to revenue in the period in which the revenue is recognized, with a corresponding allowance against accounts receivable.

Wholesaler Discounts - The company offers discounts on sales to wholesalers and distributors based on contractually determined rates. The company accrues the discount as a reduction of receivables due from the wholesalers upon shipment to the respective wholesale distributors and retail pharmacies and recognizes the discount as a reduction of revenue in the same period the related revenue is recognized.

Rebates - The company participates in certain rebate programs, which provide discounted prescriptions to members of certain managed care organizations, group purchasing organizations and specialty pharmacies. Under these rebate programs, the company pays the rebates generally two to three months after the end of the quarter in which prescriptions subject to the rebate are filled. The company estimates and accrues these rebates based on current contract prices, historical and estimated future percentages of product sold to qualifying member pharmacies and estimated levels of inventory in the distribution channel. Rebates are recognized as a reduction to revenue in the period that the related revenue is recognized, with a corresponding liability in accrued expenses and other current liabilities.

Chargebacks - The company provides discounts primarily to authorized users of the Federal Supply Schedule (FSS) of the General Services Administration under an FSS contract negotiated by the Department of Veterans Affairs and various organizations under Medicaid or Medicare contracts and regulations. These entities purchase products from the wholesale distributors at a discounted price, and the wholesale distributors then charge back to the company the difference between the current retail price and the price the entity paid for the product. The company estimates and accrues chargebacks based on estimated wholesaler inventory levels, current contract prices and historic chargeback activity. Chargebacks are recognized as a reduction of revenue in the period the related revenue is recognized, with a corresponding allowance against accounts receivable.

Patient Assistance Programs - The company offers discount card programs to eligible patients for Abstral in which those patients receive discounts on their Abstral prescriptions that are reimbursed by the company. The company estimates the total amount that will be recognized based on a percentage of actual redemption applied to inventory in the distribution and retail channel and recognizes the discount as a reduction of revenue and as an other current liability (see Note 4) in the same period the related revenue is recognized.

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 June 30, 2015 , we determined there were no variable interest entities required to be consolidated.

11

Table of Contents
GALENA BIOPHARMA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)

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. The Company completes its valuation analysis no later than twelve months from the date of the acquisition.

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

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.

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, is re-measured using the fair value of the company’s common stock and the non-cash compensation recognized during the period is 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.

12

Table of Contents
GALENA BIOPHARMA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)

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.

There was no income tax expense or benefit for the three and six months periods ended June 30, 2015 and 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 June 30, 2015 , 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. The company maintains significant cash and cash equivalents at two financial institutions that are in excess of federally insured limits.

Comprehensive Loss — Comprehensive loss consists of our net loss, with no other comprehensive income items for the periods presented.

13

Table of Contents
GALENA BIOPHARMA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)

2. Business Combinations

On July 17, 2014 the Company entered into a definitive license and supply agreement with MonoSol for the U.S. commercial rights to Zuplenz ® (ondansetron) Oral Soluble Film (Zuplenz), an FDA approved product. The transaction was accounted for as a business combination under the acquisition method of accounting based on Accounting Standards Codification 805, " Business Combinations. " Accordingly, the assets acquired and liabilities assumed were recorded at fair value. As of the issuance date of the condensed consolidated financial statements for the quarter ended June 30, 2015, the Company finalized the valuation of the acquired assets and liabilities for the transaction. Specifically, more complete information for credit memos for expiring channel inventory and the anticipated gross-to-net deductions on the replacement inventory was provided in order to finalize the business combination accounting.

The following table summarizes the purchase price consideration and allocation of purchase price:

	
					
 	 	Total Acquisition Date Fair Value	
Purchase price consideration:	 	 	
Cash and cash equivalents	 	$	3,556		
Common stock	 	2,482		
Liabilities assumed:	 	 	
Contingent consideration	 	240		
Credit memos for expiring channel inventory	 	1,995		
Total consideration	 	$	8,273		
 	 	 	
Asset acquired:	 	 	
Zuplenz rights	 	$	8,101		
Goodwill	 	172		
Fair value of assets acquired	 	$	8,273		

The above contingent consideration represents a risk adjusted net present value relating to cash payments on achievement of certain milestones.

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 as Level 1. 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 purchase 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.

14

Table of Contents
GALENA BIOPHARMA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)

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):

	
																
Description	June 30, 2015	 	Quoted Prices In    
Active Markets
(Level 1)	 	Significant Other
Observable Inputs
(Level 2)	 	Unobservable 
Inputs
(Level 3)	
Assets:	 	 	 	 	 	 	 	
Cash equivalents	$	42,913		 	$	42,913		 	$	—		 	$	—		
Total assets measured and recorded at fair value	$	42,913		 	$	42,913		 	$	—		 	$	—		
Liabilities:	 	 	 	 	 	 	 	
Warrants potentially settleable in cash	$	18,794		 	$	—		 	$	18,794		 	$	—		
Contingent purchase price consideration	6,889		 	—		 	—		 	6,889		
Total liabilities measured and recorded at fair value	$	25,683		 	$	—		 	$	18,794		 	$	6,889		

	
																
Description	December 31, 2014	 	Quoted Prices In    
Active Markets
(Level 1)	 	Significant Other
Observable Inputs
(Level 2)	 	Unobservable 
Inputs
(Level 3)	
Assets:	 	 	 	 	 	 	 	
Cash equivalents	$	19,477		 	$	19,477		 	$	—		 	$	—		
Total assets measured and recorded at fair value	$	19,477		 	$	19,477		 	$	—		 	$	—		
Liabilities:	 	 	 	 	 	 	 	
Warrants potentially settleable in cash	$	5,383		 	$	—		 	$	5,383		 	$	—		
Contingent purchase price consideration	6,651		 	—		 	—		 	6,651		
Total liabilities measured and recorded at fair value	$	12,034		 	$	—		 	$	5,383		 	$	6,651		

The company did not transfer any financial instruments into or out of Level 3 classification during the three and six months ended June 30, 2015 or 2014. A reconciliation of the beginning and ending Level 3 liabilities for the six months ended June 30, 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	238		
Balance at June 30, 2015	$	6,889		

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.

15

Table of Contents
GALENA BIOPHARMA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)

4. Accrued Expenses and Other Current Liabilities

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

	
								
 	June 30, 2015	 	December 31, 2014	
Clinical trial costs	$	5,779		 	$	6,967		
Credit memos for expiring Zuplenz channel inventory	1,995		 	1,995		
Compensation and related benefits	1,974		 	2,198		
Professional fees	1,087		 	860		
Patient assistance programs and rebates	953		 	2,444		
Royalties	431		 	408		
Inventory purchases	420		 	—		
Zuplenz milestone payments	240		 	740		
Interest expense	44		 	57		
Accrued expenses and other current liabilities	$	12,923		 	$	15,669		

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 (the "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 lenders seven -year warrants to purchase up to 182,186 shares of our common stock at an exercise price of $2.47 , which equaled a 20 -day average market price of our common stock prior to the date of the grant.

6. Legal Proceedings, Commitments and Contingencies
Legal Proceedings

In re Galena Biopharma, Inc. Stockholder Derivative Litigation and In Re Galena Biopharma, Inc. Derivative Litigation

On January 23, 2015, U.S. District Court for the District of Oregon heard argument on the defendants’ motion to stay and motion to dismiss. On February 4, 2015, the District Court granted in part the motion to stay by staying any discovery until the ruling on the motion to dismiss. On August 5, 2015, the District Court issued its decision by denying in part and granting in part defendants’ motion to dismiss and granting plaintiffs leave to file an amended complaint. The court had stayed the derivative proceeding pending the outcome of the motion to dismiss in the securities class action case.

On August 4, 2105, plaintiffs in the voluntarily dismissed Delaware derivative action have filed a motion seeking to file under seal a derivative complaint in the District Court.

We intend to vigorously defend against and seek resolution to the foregoing claims. As of June 30, 2015, we have not recorded any liabilities with respect to the claims in our consolidated financial statements. We believe that claims are covered under our liability insurance, and we have notified our insurance carriers of the claims. The insurers have responded by requesting additional information and by reserving their rights under the policies, including the rights to deny coverage under various policy exclusions. Subject to their reservation of rights, we are being reimbursed by our insurer for substantially all legal fees relating to our defense of the claims. We have entered into certain undertaking agreements with our directors related to the litigation by which we have agreed to advance reasonable legal fees and costs for the litigation under certain conditions.

16

Table of Contents
GALENA BIOPHARMA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)

SEC Investigation

We are aware that the Securities and Exchange Commission (SEC) is investigating certain matters relating to the use of certain outside investor-relations professionals by us and other public companies. We have been in contact with the SEC staff through our counsel and are cooperating with the investigation.

ANDA Litigation

By letter dated December 23, 2014, Orexo and we received a Paragraph IV certification notice (Notice Letter) regarding an Abbreviated New Drug Application (ANDA) submitted to the FDA by Actavis Laboratories FL, Inc. (Actavis) requesting approval to engage in the m an ufacture , use or sale of generic versions of the Abstral sublingual t a blets Eq 0.1 mg base , Eq 0.2 m g base , E q 0.3 mg base, Eq 0.4 mg base , Eq 0.6 mg base and Eq 0.8 mg base. In the Notice Letter, Actavis contends that the patents held by Orexo for Abstral that are listed in the Orange Book (U.S. Patents 6,759,059, 6,761,910 and 7,910,132, which cover compositions, formulations and methods of using Abstral and which expire in September 2019) and which are licensed to us under the Orexo License Agreement, are invalid, unenforceable and/or will not be infringed by the manufacture, use, or sale of the product set forth in the ANDA. On February 4, 2015, Orexo filed a patent infringement lawsuit in the U.S. District Court for the District of New Jersey against Actavis Laboratories Fl, Inc., Andrx Corporation, Actavis, Inc., and Actavis Pharma, Inc. All of the defendants except Actavis Laboratories FL, Inc. were subsequently dismissed. Actavis has filed an answer and counterclaim. The lawsuit claims infringement of the three patents. Orexo filed the lawsuit within 45 days from the receipt of the Notice Letter and under the Hatch-Waxman Act, the final FDA approval of Actavis’ ANDA will be stayed up to 30 months from the date of receipt of the Notice Letter.

A scheduling conference was held on July 9, 2015, in the District Court and on July 10, 2015, the District Court issued a pre-trial scheduling order. The parties are now engaged in written discovery.

We are obligated under Orexo License Agreement to pay for 88% of the legal costs of the patent infringement lawsuit. We intend to work with Orexo to continue to vigorously enforce intellectual property rights related to the Abstral product.

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.

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 the company might do for clinical, business or other reasons, which would allow the company to avoid making the contingent payments.

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. To date, the company has not incurred costs as a result of these obligations and does not expect to incur material costs in the future. Accordingly, the company has not accrued any liabilities in its financial statements related to these indemnifications.

17

Table of Contents
GALENA BIOPHARMA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)

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, preferences, privileges and restrictions, including voting rights, dividend rights, 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 275,000,000  shares of common stock, $0.0001  par value per share, for issuance.

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 2.5 million shares of the company's common stock at $2.00 per share and the company issued 631,221 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 LPC’s initial purchase of our common stock under the purchase agreement, during the first quarter of 2015, we received net proceeds of $4.4 million from LPC’s subsequent purchases of a total of 2.7 million shares of our common stock, excluding the commitment fee shares.

At Market Issuance Sales Agreements - On May 24, 2013 the Company entered into At Market Issuance Sales Agreements (ATM) with 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 first quarter of 2015, we received $2.3 million in net proceeds from the sale of 1.4 million shares of our common stock through the ATM. There were no sales of our common stock under the ATM during the three months ended June 30, 2015 or during the three and six months ended June 30, 2014.

March 2015 Underwritten Public Offering - On March 18, 2015 the company closed an underwritten public offering of 24,358,974 units at a price to the public of $1.56 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 $2.08 per share. The March 2015 Offering included an over-allotment option for the underwriters to purchase an additional 3,653,846 shares of common stock and/or warrants to purchase up to 1,826,923 shares of common stock. On March 18, 2015, the underwriters exercised their over-allotment option to purchase warrants to purchase an aggregate of 1,826,923 shares of common stock. On April 10, 2015, the underwriters exercised their over-allotment option to purchase 3,653,846 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.

Shares of common stock for future issuance are reserved for as follows (in thousands):

	
			
 	As of June 30, 2015	
Warrants outstanding	22,308		
Stock options outstanding	11,411		
Options reserved for future issuance under the Company’s 2007 Incentive Plan	10,066		
Shares reserved for future issuance under the Employee Stock Purchase Plan	674		
Total reserved for future issuance	44,459		

18

Table of Contents
GALENA BIOPHARMA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)

8. Warrants

The following is a summary of warrant activity for the six months ended June 30, 2015 (in thousands):

	
																								
 	March 2015 Warrants	 	September
2013
Warrants	 	December
2012
Warrants	 	April 2011
Warrants	 	March
2011
Warrants	 	March
2010
Warrants	 	Consultant
and Oxford Warrants	 	Total	
Outstanding, January 1, 2015	—		 	3,973		 	3,031		 	615		 	176		 	25		 	720		 	8,540		
Issued	14,006		 	—		 	—		 	—		 	—		 	—		 	—		 	14,006		
Outstanding, Expired	—		 	—		 	—		 	—		 	—		 	—		 	(238	)	 	(238	)	
Outstanding, June 30, 2015	14,006		 	3,973		 	3,031		 	615		 	176		 	25		 	482		 	22,308		
Expiration	March 2020	 	September 2018	 	December 2017	 	April 2017	 	March 2016	 	March 2016	 	Varies 2014-2020	 	 	

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

Warrants classified as liabilities

Liability-classified warrants consist of warrants to purchase common stock issued in connection with equity financings in March 2015, September 2013, December 2012, April 2011, March 2011, and March 2010. 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 condensed consolidated statement of comprehensive loss as other income (expense). The fair value of the warrants is estimated using an appropriate pricing model with the following inputs:

	
																								
 	As of June 30, 2015	
 	March 2015 Warrants	 	September
2013
Warrants	 	December
2012
Warrants	 	April 2011
Warrants	 	March
2011
Warrants	 	March
2010
Warrants	
Strike price	$	2.08		 	$	2.50		 	$	1.83		 	$	0.65		 	$	0.65		 	$	2.02		
Expected term (years)	4.72		 	3.22		 	2.48		 	1.81		 	0.68		 	0.74		
Volatility %	72.98	%	 	75.59	%	 	72.00	%	 	77.03	%	 	63.12	%	 	64.81	%	
Risk-free rate %	1.54	%	 	1.08	%	 	0.82	%	 	0.57	%	 	0.17	%	 	0.19	%	

	
																				
 	As of December 31, 2014	
 	September
2013
Warrants	 	December
2012
Warrants	 	April 2011
Warrants	 	March
2011
Warrants	 	March
2010
Warrants	
Strike price	$	2.50		 	$	1.90		 	$	0.65		 	$	0.65		 	$	2.15		
Expected term (years)	3.72		 	2.98		 	2.31		 	1.18		 	1.24		
Volatility %	75.60	%	 	76.85	%	 	78.24	%	 	77.38	%	 	77.12	%	
Risk-free rate %	1.30	%	 	1.09	%	 	0.80	%	 	0.32	%	 	0.35	%	

The expected volatility assumptions are based on the company's implied volatility in combination with the 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.

19

Table of Contents
GALENA BIOPHARMA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)

The changes in fair value of the warrant liability for the six months ended June 30, 2015 were as follows (in thousands):

	
																												
 	March 2015 Warrants	 	September
2013
Warrants	 	December
2012
Warrants	 	April 2011
Warrants	 	March
2011
Warrants	 	March
2010
Warrants	 	Total	
Warrant liability, January 1, 2015	$	—		 	$	2,560		 	$	2,027		 	$	625		 	$	163		 	$	8		 	$	5,383		
Fair value of warrants issued	10,296		 	—		 	—		 	—		 	—		 	—		 	10,296		
Change in fair value of warrants	2,663		 	242		 	107		 	82		 	23		 	(2	)	 	3,115		
Warrant liability, June 30, 2015	$	12,959		 	$	2,802		 	$	2,134		 	$	707		 	$	186		 	$	6		 	$	18,794		

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 up to 182,186 shares of common stock at an exercise price of $2.47 , which equaled to the 20 -day average market price of our common stock prior to the date of the grant. The warrants were valued using an appropriate pricing model as described in Note 9, below. 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 $1.93 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.

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, 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 re-measured using the fair value of the company’s common stock and the non-cash compensation recognized during the period is 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 condensed consolidated statements of comprehensive loss for the three and six months ended June 30, 2015 and 2014, respectively (in thousands):

	
																
 	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	2015	 	2014	 	2015	 	2014	
Research and development	$	93		 	$	187		 	$	170		 	$	347		
Selling, general, and administrative	550		 	1,265		 	1,102		 	2,789		
Total stock-based compensation	$	643		 	$	1,452		 	$	1,272		 	$	3,136		

20

Table of Contents
GALENA BIOPHARMA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)

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:

	
												
 	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	2015	 	2014	 	2015	 	2014	
Risk free interest rate	1.69	%	 	—	%	 	1.50	%	 	2.06	%	
Volatility	73.32	%	 	—	%	 	74.20	%	 	78.53	%	
Expected lives (years)	5.76		 	0		 	6.09		 	6.25		
Expected dividend yield	0.00	%	 	0.00	%	 	0.00	%	 	0.00	%	

The weighted-average fair value of options granted during the three and six months ended June 30, 2015 were $1.09 per share and $1.14 per share, respectively.

The company’s expected common stock price volatility assumption is based upon the company's own implied volatility in combination with the implied 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 to do so. 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.

As of June 30, 2015 , there was $5,582,000 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 2.54 years.

As of June 30, 2015 , an aggregate of 26,500,000 shares of common stock were reserved for issuance under the company’s 2007 Incentive Plan, including 11,411,000 shares subject to outstanding common stock options granted under the plan and 10,066,000 shares available for future grants. 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 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	 	Aggregate
Intrinsic
Value
(In Thousands)	
Outstanding at January 1, 2015	8,590		 	$	3.25		 	$	820		
Granted	3,682		 	1.73		 	89		
Exercised	(1	)	 	0.85		 	1		
Cancelled	(860	)	 	2.48		 	16		
Outstanding at June 30, 2015	11,411		 	$	2.82		 	$	892		
Options exercisable at June 30, 2015	6,169		 	$	3.41		 	$	749		

The aggregate intrinsic values of outstanding and exercisable options at June 30, 2015 were calculated based on the closing price of the company’s common stock as reported on The NASDAQ Capital Market on June 30, 2015 of $1.70 per share. The aggregate intrinsic value equals the positive difference between the closing fair market value of the company’s common stock and the exercise price of the underlying options.

21

Note 10. Other Income (Expense)

Other income (expense) is summarized as follows (in thousands):

	
																
 	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	2015	 	2014	 	2015	 	2014	
Change in fair value of the contingent purchase price liability	$	83		 	$	(490	)	 	$	(238	)	 	$	(656	)	
Miscellaneous other income (expense)	—		 	(1	)	 	—		 	—		
Total other income (expense)	$	83		 	$	(491	)	 	$	(238	)	 	$	(656	)	

11. 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):

	
						
 	 Three and Six Months Ended June 30,	
 	2015	 	2014	
Warrants to purchase common stock	22,308		 	9,560		
Options to purchase common stock	11,411		 	9,848		
Total	33,719		 	19,408		

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 assets 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 TM , 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 , a milestone payment of $200,000 upon commencing the Phase 3 PRESENT trial of NeuVax and other clinical milestone payments, as well as royalty payments based on sales of NeuVax or other therapeutic products developed from the licensed technologies.

22

Table of Contents
GALENA BIOPHARMA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)

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 March 18, 2013, we acquired Abstral ® (fentanyl) Sublingual Tablets, a transmucosal immediate-release fentanyl (TIRF) product, for sale and distribution in the United States from Orexo AB (ORX.ST), an emerging specialty pharmaceutical company based in Sweden, and exclusively licensed certain intellectual property from Orexo to use, distribute, market, sell, offer for sale Abstral solely in the United States and to non-exclusively manufacture Abstral for use, distribute, market, sell, offer for sale and import Abstral solely in the United States. Abstral has been approved by the U.S. Food and Drug Administration (FDA).

Under our agreement with Orexo, we assumed responsibility for the U.S. commercialization of Abstral and for all regulatory and reporting matters in the U.S. We also agreed to establish and maintain through 2015 (marketing period) a specified minimum commercial field force to market, sell and distribute Abstral and to use commercially reasonable efforts to reach the specified sales milestones. Orexo is entitled to reacquire the U.S. rights to Abstral from us for no consideration if we breach our obligations to establish and maintain the requisite sales force throughout the marketing period. We expect to maintain our sales efforts beyond this date. We officially launched U.S. commercial sales of Abstral in October 2013.

In exchange for the U.S. rights to Abstral, (1) we paid Orexo $10 million upfront, and a  $5 million milestone payment in cash in October 2013 upon the approval by the FDA of a specified U.S. manufacturer of Abstral; and (2) we agreed to pay to Orexo: (a) three one-time future cash milestone payments based on our net sales of Abstral; and (b) a low double-digit royalty on future net sales. No further milestone or royalty payments will be due after the date on which all claims of the last remaining licensed patents expire (currently 2019 ) or become invalidated by a patent office, court, or other governmental agency of competent jurisdiction in a final and non-appealable judgment. In exchange of license, Galena agreed to pay eight-eight percent of the expenses and costs incurred to prosecute any ANDA action..

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 essential thrombocythemia (ET). 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. Mills is also responsible for patent prosecution and maintenance.

On July 17, 2014, we entered into a definitive license and supply agreement with MonoSol for the U.S. commercial rights to Zuplenz ® (ondansetron) Oral Soluble Film, an FDA-approved product for the prevention of highly and moderately emetogenic chemotherapy-induced nausea and vomiting (CINV), radiotherapy-induced nausea and vomiting (RINV), and post-operative nausea and vomiting (PONV). In exchange for the U.S. rights to Zuplenz, and in connection with the effectiveness of the license and transfer to us of the New Drug Application (NDA) for Zuplenz, we paid MonoSol a total of $5 million in cash and shares of our common stock in 2014 and $0.5 million in cash in 2015. In addition to these payments, we will pay MonoSol $0.25 million within 30 days after MonoSol’s payment of applicable fees relating to the notice of allowance by the United States Patent and Trademark Office of a U.S. patent with composition claims covering Zuplenz that extend beyond 2028, (ii) future cash milestone payments of up to an aggregate of $16.5 million based on our achievement of specified “net sales” of Zuplenz in amounts ranging from $20 million to $100 million , and (iii) a low double-digit royalty on future “net sales.”

23

Table of Contents
GALENA BIOPHARMA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Continued
(Unaudited)

Under the terms of the license agreement, we assumed responsibility for the commercialization of Zuplenz and for all regulatory and reporting matters in the U.S. We also agreed in the license and supply agreement to use our best commercial efforts to begin commercializing Zuplenz in the U.S. in accordance with a joint commercialization plan to be established by the company and MonoSol. We also agreed that, until net sales of Zuplenz exceed a specified minimum amount or a competing product has been approved by the FDA and is placed into the market for sale, we will maintain a specified minimum number of field sales force personnel on specified terms.

Under the license and supply agreement, MonoSol has the exclusive right to supply all of our requirements for Zuplenz, subject to certain conditions.

13. Significant Customers and Concentration of Credit Risk

The company is engaged in the business of developing and commercializing pharmaceutical products. As of June 30, 2015, the Company had sales from one active commercial product, Abstral, available in six dosing strengths, and all sales reported are in the United States.

Sales to the following customers represented 10% or more of net revenue during at least one of the periods are presented as follows:

	
													
 	 	Three Months Ended June 30,	 	Six Months Ended June 30,	
Customer	 	2015	 	2014	 	2015	 	2014	
Customer A	 	25	%	 	38	%	 	29	%	 	45	%	
Customer B	 	28	%	 	5	%	 	26	%	 	10	%	
Customer C	 	23	%	 	6	%	 	22	%	 	10	%	
Customer D	 	16	%	 	14	%	 	18	%	 	8	%	
Customer E	 	8	%	 	31	%	 	4	%	 	22	%	

The following customers represented 10% or more of total accounts receivable as of at least one of the balance sheet dates presented:

	
							
 	 	June 30, 2015	 	December 31, 2014	
Customer	 	(Unaudited)	 		
Customer A	 	14	%	 	63	%	
Customer B	 	18	%	 	1	%	
Customer C	 	35	%	 	5	%	
Customer D	 	21	%	 	3	%	
Customer E	 	11	%	 	21	%	

In addition to concentrations in our customer base, concentrations also exist with respect to the dispensing pharmacies to which our customers sell Abstral. For example 47% and 57% of our prescriptions, at wholesaler acquisition cost, were dispensed by our top 3 pharmacies for the three month periods ending June 30, 2015 and 2014, respectively. Additionally, 52% and 59% of our prescriptions, at wholesaler acquisition cost, were dispensed by our top 3 pharmacies for the six months periods ending June 30, 2015 and 2014, respectively.

14. Subsequent Events

The company evaluated all events or transactions that occurred after June 30, 2015 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.

24

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

In this section , "Galena," “we,” “our,” “ours” and “us” refer to Galena Biopharma, Inc. and its consolidated subsidiaries, Apthera, Inc., or “Apthera,” and Mills Pharmaceuticals, LLC, or "Mills."

This management’s discussion and analysis of financial condition as of June 30, 2015 and results of operations for the three and six months ended June 30, 2015 and 2014, respectively, should be read in conjunction with management’s discussion and analysis of financial condition and results of operations included in our Annual Report on Form 10-K for the year ended December 31, 2014 which was filed with the SEC on March 5, 2015.

The discussion and analysis below includes certain forward-looking statements related to the commercialization of our products in the U.S., our future financial condition and results of operations and potential for profitability, the sufficiency of our cash resources, our ability to obtain additional equity or debt financing, possible partnering or other strategic opportunities for the development of our products, as well as other statements related to the progress and timing of our product commercialization and development activities, present or future licensing, collaborative or financing arrangements or that otherwise relate to future periods, which are all forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. These statements represent, among other things, the expectations, beliefs, plans and objectives of management and/or assumptions underlying or judgments concerning the future financial performance and other matters discussed in this document. The words “may,” “will,” “should,” “plan,” “believe,” “estimate,” “intend,” “anticipate,” “project,” and “expect” and similar expressions are intended to connote forward-looking statements. All forward-looking statements involve certain risks, including the uncertainties and other factors described in our Annual Report on Form 10-K for the year ended December 31, 2014 that could cause our actual commercialization efforts, development activities, financial condition and results of operations, and business prospects and opportunities to differ materially from these expressed in, or implied by, those forward-looking statements. We caution investors not to place significant reliance on the forward-looking statements contained in this report. These statements, like all statements in this report, speak only as of the date of this report (unless another date is indicated) and we undertake no obligation to update or revise forward-looking statements.

25

Overview

Galena Biopharma, Inc. (“we,” “us,” “our,” “Galena” or the “company”) is a biopharmaceutical company focused on developing and commercializing innovative, targeted oncology therapeutics that address major unmet medical needs across the full spectrum of cancer care. Galena’s development portfolio ranges from mid- to late-stage clinical assets, including a robust immunotherapy program led by NeuVax™ (nelipepimut-S) currently in an international, Phase 3 clinical trial. The company’s commercial drugs include Abstral ® (fentanyl) Sublingual Tablets and Zuplenz ® (ondansetron) Oral Soluble Film. Collectively, our clinical and commercial strategy focuses on identifying and advancing therapeutic opportunities to improve cancer care, from direct treatment of the disease to the reduction of its debilitating side-effects. 

We are seeking to build value for shareholders through pursuit of the following objectives:

•	Develop novel cancer immunotherapies to address unmet medical needs through the use of peptide based vaccines targeting well-established tumor antigens in the adjuvant, minimum residual disease setting, in high risk patients who are more likely to benefit from treatment via immunotherapy. Our immunotherapy programs currently seek to significantly decrease the risk of disease recurrence in breast, gastric, endometrial and ovarian cancers.	

•	Expand our development pipeline by enhancing the potential clinical and geographic footprint of our technologies. We can accomplish this through the initiation of additional clinical trials as well as through acquisition of additional development stage products in related oncology indications. We also seek to leverage valuable 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.	

•	Maintain commercial capabilities to sell, market, and distribute oncology related pharmaceutical products in the U.S. through our established commercial infrastructure. This commercial strategy creates the opportunity to generate accretive cash flows to support our development programs, and also provides future leverage to support the potential commercialization of our clinical stage technologies in one of the world's largest economic markets.	
The chart below summarizes the current status of our pipeline:

26

Novel Cancer Immunotherapies

Our targeted cancer immunotherapy approach is based upon preventing recurrence of cancer, which is becoming increasingly important as the number of cancer survivors continues to grow. Once a patient’s tumor becomes metastatic, the outcome is most often fatal, making the prevention of recurrence a potentially critical component of overall patient care. Our programs primarily target patients in the adjuvant (after-surgery) setting who have relatively healthy immune systems, but may still have undetected minimal residual disease.

Our therapies utilize immunologically active peptides 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 target, 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 evoke long-lasting protection through activation of the immune system through a convenient, and a patient friendly intradermal mode of delivery. We are currently engaged in multiple clinical trials with NeuVax™ (nelipepimut-S) and GALE-301, or Folate Binding Protein (FBP), targeting the prevention of recurrence in breast, gastric, ovarian and endometrial cancers.

NeuVax™ (nelipepimut-S)

NeuVax™ (nelipepimut-S), our lead product candidate, is a targeted cancer immunotherapy and is being developed for the prevention of cancer recurrence in human epidermal growth factor receptor (HER2) expressing cancers. NeuVax is the immunodominant nona-peptide derived from the extracellular domain of the HER2 protein, a well-established 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 be a predictive factor of Disease Free Survival (DFS) and Overall Survival (OS) - suggesting a dormancy of isolated micrometastases, which, over time, may lead to recurrence. After binding to the HLA A2, A3, A24 or A26 proteins on antigen presenting cells, the nelipepimut-S sequence stimulates specific cytotoxic T lymphocyte (CTLs). These activated CTLs recognize, neutralize and destroy, through cell lysis, HER2 expressing cancer cells, including undetected 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, 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% 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) positive - have an approved treatment option available. This leaves the majority of breast cancer patients with low-to-intermediate HER2 IHC 1+/2+ ineligible for targeted therapy and without an effective treatment option to prevent cancer recurrence.

We have multiple trials currently ongoing for NeuVax. For our global pivotal, fully enrolled, 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) trial, NeuVax is targeting the 30,000-40,000 of the 230,000 female breast cancer patients annually diagnosed in the U.S. who are at a higher risk of their breast cancer recurring, which we refer to as “disease recurrence,” after achieving “no evidence of disease” (NED) status, (or becoming a “survivor”) with standard-of-care therapy (surgery, chemotherapy, radiation). These high-risk patients have a particular molecular signature and disease status: HER2 IHC 1+/2+ (oncoprotein associated with aggressive tumor growth), node positive (disease present in the axillary lymph nodes prior to surgery), and HLA A2/A3 (human leukocyte antigen from A2/A3 patients who have the same loci of genes which represents approximately 65% of population). NeuVax has also been shown to bind to A24 and A26 which represents an additional 10-15% of the population in the U.S., but importantly, represents up to 70% of the population in Japan. Up to 25% of resectable, node-positive breast cancer patients, having no radiographic evidence of disease following surgery and adjuvant chemo/radiation therapy, are expected to relapse within three years following diagnosis. The prognosis upon recurrence is very poor. These cancer patients presumably still had isolated, undetected tumor CTCs that led to a recurrence of cancer in the breast (local recurrence) or in another location (metastatic disease).

27

Gastric Cancer : Gastric cancer (also known as stomach cancer) is a disease in which the cells forming the inner lining of the stomach become abnormal and start to divide uncontrollably, forming a cancerous tumor mass. Cancer can develop in any of the five sections of the stomach. Symptoms and outcomes of the disease will vary depending on the location of the cancer. Stomach cancer is one of the leading causes of cancer deaths in several areas of the world, most notably in Asian countries. Annually, almost one million people will be diagnosed worldwide with stomach cancer and over 700,000 will die from the disease. More than 90% of stomach cancers are caused by adenocarcinomas, malignant cancers that originate in glandular tissues. Overexpression of the HER2 receptor occurs in approximately 20% of gastric and gastro-esophageal junction adenocarcinomas, predominantly those of the intestinal type. Overall, 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 a number of ongoing or planned clinical trials designed to expand the clinical and geographic footprint of NeuVax:

•	Phase 3 Ongoing: Our 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 has completed enrollment of 758 patients with HER2 1+ and 2+ under a Special Protocol Assessment (SPA) granted by the U.S. Food and Drug Administration (FDA). The multinational, multicenter, randomized, double-blinded PRESENT trial is fully enrolled with trial sites in North America, Western and Eastern Europe, and Israel. Additional information on the study can be found at www.neuvax.com .	

•	Phase 2b Ongoing: A randomized, multicenter, investigator-sponsored, 300 patient Phase 2b clinical trial is enrolling HER2 1+/2+ node-positive and high-risk node-negative HLA A2/A3/A24/A26 breast cancer patients to study NeuVax in combination with trastuzumab (Herceptin ® ; Genentech/Roche) in the adjuvant setting. This trial is partially funded by Genentech/Roche.	

•	Phase 2 Ongoing: An investigator-sponsored trial is ongoing to study NeuVax in combination with Herceptin. The study will enroll 100 patients who are neoadjuvantly treated node positive and negative HER2 IHC 3+ patients, not achieving a pathological complete response (pCR) or adjuvantly treated node positive HER2 IHC 3+ patients. Partial funding for this trial comes from the Department of Defense (DoD) through the Congressionally Directed Medical Research Program (CDMRP) which is funded through specific requests from individual members of Congress that are part of the Defense Appropriations Act. Funds are "set aside" (obligated) in entirety at the time of assistance agreement award. The grant was awarded under a Breast Cancer Research Program (BCRP) Breakthrough Award given to the lead investigator for the trial.	

•	Phase 2 Planned: In January 2014, we partnered with Dr. Reddy’s Laboratories, Ltd. in India for the commercialization of NeuVax in that region. Dr. Reddy’s is responsible for managing a Phase 2 gastric cancer trial of NeuVax in India in patients that express any level of HER2 (1+, 2+, and 3+). The trial is expected to initiate in 2016.	
GALE-301 (folate binding protein or FBP)

Our second immunotherapy product candidate, GALE-301, targets folate binding protein receptor-alpha, a well-validated therapeutic target, which is highly over-expressed (20-80 fold) in ovarian, endometrial and breast cancers. GALE-301 is an immunogenic peptide and can stimulate CTLs to recognize and destroy FBP-expressing cancer cells. GALE-301 consists of an FBP peptide combined with GM-CSF, and is currently in a Phase 2a clinical trial for the prevention of recurrence in patients with ovarian and endometrial cancers. Current treatments for these diseases are principally with chemotherapeutic agents and patients suffer a high recurrence rate; and, most patients relapse with an extremely poor prognosis. Although not powered for efficacy, promising preliminary results from the Phase 2a clinical trial of GALE-301 were presented in May 2015 at the American Society of Clinical Oncology conference and demonstrated the estimate for disease free survival at two years is 85.7% (1000 mcg dose group) vs. 19.2% for the control group (p = 0.09), for a 78% reduction in relative risk of recurrence, and that the agent was well-tolerated with primarily Grade 1 and 2 toxicities and elicited a strong in vivo immune response. We expect to present a more mature data set from the Phase 2a trial this Fall at the European Society for Medical Oncology European Cancer Congress 2015.

28

Ovarian and Endometrial Cancer : Ovarian cancer occurs in more than 22,000 patients per year in the U.S. and is the most lethal gynecologic cancer. Despite the incidence of ovarian cancer being only approximately 10% of that of breast cancer, the number of patients who die from ovarian cancer is nearly 50% that of breast cancer. Due to the lack of specific symptoms, the majority of ovarian cancer patients are diagnosed at later stages of the disease. For their treatment, these patients typically have their tumors surgically debulked to minimal residual disease, and then are treated with platinum- and/or taxane-based chemotherapy. While most patients respond to this treatment regimen and become clinically free-of-disease, the majority of these patients will relapse, and once the disease recurs, the treatment options and successes drop dramatically. Endometrial cancer is the most common gynecologic cancer and occurs in more than 46,000 women with more than 8,000 deaths in the U.S. annually. There are two basic types of endometrial cancer: endometrioid and papillary serous. The latter has a much more aggressive clinical course and the majority of these patients will die of this form of the disease.

Hematology

GALE-401 (anagrelide controlled release (CR))

In January 2014, we announced the acquisition of the worldwide rights to anagrelide controlled release (CR), which we renamed GALE-401, through our acquisition of Mills Pharmaceuticals, LLC. GALE-401 contains the active ingredient anagrelide (Agrylin ® , Shire Pharmaceuticals), 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. Therefore, reducing the maximum concentration (C max ) is hypothesized to reduce the side effects, but preserve efficacy.

Multiple Phase 1 studies in 98 healthy subjects have shown GALE-401 reduces the C max of anagrelide following oral administration, appears to be well tolerated at the doses administered, and to be capable of reducing platelet levels. The Phase 1 program provided the desired PK (pharmacokinetic) profile to enable the initiation of the ongoing Phase 2 proof-of-concept trial. The Phase 2, open label, single arm trial enrolled 18 patients in the United States for the treatment of thrombocytosis, or elevated platelet counts in patients with MPNs. Phase 2 top-line safety and efficacy data was presented in June 2015 at the European Hematology Association 20th Congress. We expect to present a more mature data set from the Phase 2 trial later this year. Based on a regulatory meeting with the FDA, Galena believes a 505(b)(2) regulatory filing is an acceptable pathway for development and potential approval of GALE-401, with the reference drug Agrylin ® (anagrelide; Shire Pharmaceuticals).

Myeloproliferative neoplasms : MPNs are a closely related group of hematological malignancies in which the bone marrow cells that produce the body's blood cells develop and function abnormally. The main myeloproliferative neoplasms are Polycythemia Vera (PV), Essential Thrombocythemia (ET), Primary Myelofibrosis (PMF), and Chronic Myelogenous Leukemia (CML), all of which are associated with high platelet counts. The MPNs are progressive blood cancers that can strike anyone at any age, and for which there is no known cure.

Commercial Capabilities

Though we primarily develop innovative, targeted oncology therapeutics that address major unmet medical needs across the full spectrum of cancer care, we have established a commercial operation to market and sale acquired commercial products.

Abstral ® (fentanyl) Sublingual Tablets

Our first commercial product, Abstral ® (fentanyl) Sublingual Tablets, is an important treatment option for inadequately controlled breakthrough cancer pain (BTcP), which affects more than 50% of all cancer patients. Abstral is approved by the FDA, and is a sublingual (under the tongue) tablet for the management of breakthrough pain in patients with cancer, 18 years of age and older, who are already receiving, and who are tolerant to, opioid therapy for their persistent baseline cancer pain. The Abstral formulation delivers the analgesic power and increased bioavailability of micronized fentanyl in a convenient sublingual tablet that is designed to dissolve under the tongue in seconds and provide relief of breakthrough pain in minutes. Abstral is a transmucosal immediate release fentanyl (TIRF) product with product class oversight by the TIRF Risk Evaluation and Mitigation Strategy (REMS) access program. Abstral is manufactured for us by contract manufacturers and we distribute and sell Abstral in the U.S. through our commercial organization.

29

Zuplenz ® (ondansetron) Oral Soluble Film

In July 2014 we licensed our second commercial product, Zuplenz ® (ondansetron) Oral Soluble Film, from MonoSol Rx, LLC, which we launched on July 29, 2015. Zuplenz is approved by the FDA in adult patients for the prevention of highly and moderately emetogenic chemotherapy-induced nausea and vomiting (CINV), radiotherapy-induced nausea and vomiting (RINV), and post-operative nausea and vomiting (PONV). Zuplenz is also approved in pediatric patients treated with moderately emetogenic CINV. Nausea and vomiting are two of the most common side-effects experienced by post-surgery patients and patients receiving chemotherapy or radiation. It is estimated that up to 90% of chemotherapy and up to 80% of radiotherapy patients will experience CINV and RINV, respectively.

The active pharmaceutical ingredient in Zuplenz, ondansetron, belongs to a class of medications called serotonin 5-HT 3 receptor antagonists and works by blocking the action of serotonin, a natural substance that may cause nausea and vomiting. Ondansetron is the most widely prescribed drug in this class of anti-emetics, and used broadly across the oncology spectrum. Zuplenz is clinically bioequivalent to ondansetron orally disintegrating tables (ODT) with a safety profile equivalent to ondansetron.

Zuplenz utilizes MonoSol’s proprietary PharmFilm ® technology, an oral soluble film that dissolves on the tongue in less than 30 seconds. Zuplenz eliminates the burden of swallowing pills during periods of emesis, may be advantageous for patients with oral irritation, and may increase patient adherence and the patient's ability to keep the medication down without vomiting. MonoSol will exclusively manufacture Zuplenz for us for sale in the U.S. through our commercial organization.

Recent Operational Developments (in reverse chronological order)

Launched Zuplenz - We officially launched Zuplenz ® (ondansetron) oral soluble film.

On July 29/30, 2015, we announced the official launch of Zuplenz (ondansetron) Oral Soluble Film, in the United States. Zuplenz is now available nationwide and is supplied in both 4 mg and 8 mg ondansetron doses. Zuplenz is clinically bioequivalent to ondansetron orally disintegrating tablets (ODT) with a safety profile equivalent to ondansetron. The novel, PharmFilm ® , oral soluble film technology utilized by Zuplenz provides for convenient delivery and several key patient benefits including:

•	Rapidly dissolves in the mouth in about 10 seconds.	
		
•	Eliminates the burden of swallowing pills during emesis.	
		
•	Does not require water to administer, making it ideal in cases of oral irritation.	
		
•	Pleasant peppermint flavor with no gritty aftertaste.	
		
•	Nonsedating.	

Zuplenz is approved in adult patients for the prevention of highly and moderately emetogenic chemotherapy-induced nausea and vomiting (CINV), radiotherapy-induced nausea and vomiting (RINV), and post-operative nausea and vomiting (PONV). Zuplenz is also approved for moderately emetogenic CINV in pediatric patients four years and older.

The active pharmaceutical ingredient in Zuplenz, ondansetron, is used to prevent nausea and vomiting caused by cancer chemotherapy, radiation therapy, and surgery. The National Comprehensive Cancer Network (NCCN) 2014 guidelines recommend the use of ondansetron in patients with highly and moderately emetogenic cancer chemotherapy-induced, and radiotherapy-induced nausea and vomiting. Ondansetron belongs to a class of medications called serotonin 5-HT3 receptor antagonists and works by blocking the action of serotonin, a natural substance that may cause nausea and vomiting. The product was licensed from MonoSol Rx, LLC, the developer of the oral soluble film technology, PharmFilm®, and manufacturer of the product.

GALE 401 Phase 2 clinical trial data presented - We presented data from our Phase 2 clinical trial of GALE-401 at the European Hematology Association 20 th Congress in Vienna, Austria.

On June 15, 2015, we announced our poster presentation entitled "Phase 2 Study of a Novel Controlled-Release Formulation of Anagrelide (GALE-401) in Subjects with Myeloproliferative Neoplasm (MPN)-Related Thrombocytosis," which was presented on June 13, 2015. The Phase 2 study demonstrated that GALE-401 was well tolerated with primarily Grade 1 and 2 toxicities in 16 of the 18 subjects enrolled. The efficacy shown in the trial compares favorably to historical anagrelide immediate release (IR) response rates with the following platelet response: overall response rate (ORR) of 78% (14/18); complete response (CR) of 39% (7/18); partial response (PR) of 39% (7/18). The median time to response was 5 weeks (range, 3-10), and the median duration of response has not yet been reached. Based on the data, the investigators concluded that GALE-401 remains a viable potential treatment option for MPNs, and a randomized trial comparing GALE-401 versus anagrelide IR is warranted. Final data from the GALE-401 Phase 2 trial is expected to be presented later this year.

Published Abstracts related to GALE-301 and Leica Biosystem’s Companion Diagnostic - We presented two abstract publications at the American Society of Clinical Oncology (ASCO) 2015 Annual Meeting.

On May 27, 2015, we announced two abstract publications at the ASCO 2015 Annual Meeting related to our cancer immunotherapy programs, one related to GALE-301 and one related to the companion diagnostic in our NeuVax Phase 3 PRESENT trial.

We presented data related to GALE-301 in abstract #e14031, entitled, "Preliminary Results of the Phase I/IIa Dose Finding Trial of a Folate Binding Protein Vaccine (E39+GM-CSF) in Ovarian and Endometrial Cancer Patients to Prevent Recurrence." This data showed that GALE-301 is well tolerated and elicits a strong and dose-dependent in vivo immune response. The trial is designed as a safety and dose optimization trial and is not powered for a disease free survival efficacy endpoint. However, early efficacy results from the trial are promising in the 1000 mcg dose cohort. Of the 51 patients enrolled in the trial, 29 were in the vaccinated group (15 patients at 1000 mcg vs. 14 patients at < 1000 mcg) and 22 were in the control group. With 9.8 months median follow-up, the 1000 mcg vaccine dose group had only one clinical recurrence vs 11 in the control group (6.7% VG vs. 50% CG, p = 0.01). Combining all dose groups, the complete response (CR) rate was 38% in the

30

vaccine group vs. 50% in the control group (p = 0.41). Currently, the estimate for disease free survival at two years is 85.7% (1000 mcg dose group) vs. 19.2% for the control group (p = 0.09), for a 78% reduction in relative risk of recurrence.

We presented data related to our NeuVax Phase 3 PRESENT trial companion diagnostic in abstract #e11609, entitled, "Analytical Validation of BOND Oracle HER2 IHC System for Identifying Low to Intermediate HER2 Expressing Breast Cancer in NeuVax PRESENT Phase 3 Clinical Trial." This data demonstrated a direct correlation between cell line receptor load, quantitative measure of HER2 protein, and IHC score. The ability to discriminate HER2 protein expression at the low and intermediate levels in breast cancer tumors will identify patients for new treatments in development such as NeuVax. Specifically, the validation of the Bond Oracle HER2 IHC System to distinguish lower levels of HER2+ expressions supports its use as a companion diagnostic.

NeuVax Phase 3 PRESENT Over-Enrollment Completed - We announced the completion of enrollment in our NeuVax Phase 3 PRESENT clinical trial.

On April 14, 2015 we announced the completion of enrollment in the NeuVax™ (nelipepimut-S) 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) clinical trial. NeuVax is a first-in-class, HER2-directed cancer immunotherapy under evaluation to prevent breast cancer recurrence after standard of care treatment in the adjuvant setting. As anticipated, we over-enrolled the trial by 7.7% with a total of 758 patients now in the intent-to-treat (ITT) population. The protocol for the PRESENT trial, being conducted under an FDA approved Special Protocol Assessment (SPA), called for 700 patients; and, the Company expects this higher number of ITT patients will increase the confidence in both the timing and quality of the statistics and the final outcome of the trial. The primary endpoint is currently expected to be reached in 2018, after the last patient dosed reaches her 36th month of treatment, or a total of 141 events (recurrence or death) occur, whichever comes later.

Expanded Patient Population in NeuVax Combination Trial - We announced the expansion of the patient population in the NeuVax and trastuzumab combination trial in HER2 1+/2+ patients to include HLA A24+ and HLA-A26+ patients.

On March 26, 2015, we announce that human leukocyte antigen (HLA) - A24+ or HLA-A26+ women are now eligible for enrollment into the ongoing Phase 2b clinical trial with NeuVax™ (nelipepimut-S) in combination with trastuzumab (Herceptin ® ; Genentech/Roche). The trial evaluates node positive and triple negative, node negative breast cancer patients with immunohistochemistry (IHC) HER2 1+/2+ expressing tumors who are disease-free after standard of care therapy.

Enrolled 700 th Patient in NeuVax Phase 3 PRESENT Clinical Trial - We announced enrollment of the 700 th patient in our Phase 3 PRESENT clinical trial.

On February 9, 2015, we announced the enrollment of the 700 th patient in the NeuVax™ (nelipepimut-S) 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) clinical trial. Seven hundred is the patient enrollment target as defined by the PRESENT Phase 3 clinical trial protocol.

31

Results of Operations for the Three and Six Months Ended June 30, 2015 and 2014

For the three months ended June 30, 2015 , our net loss was approximately $15.7 million compared with a net loss of $19.9 million for the three months ended June 30, 2014 . The net loss decreased by $4.3 million , or approximately 21% , primarily attributable to a $4.6 million dollar reduction in our operating loss, discussed in more detail below, partially offset by a $0.9 million increase in our non-cash loss on our warrant liability.

For the six months ended June 30, 2015 , our net loss was approximately $26.2 million compared with a net loss of $22.5 million for the six months ended June 30, 2014 . The net loss increased by $3.7 million , or approximately 17% , primarily attributable to a $6.4 million non-cash gain on our warrant liability for the six months ended June 30, 2014 compared to a $3.1 million non-cash loss on our warrant liability for the six months ended June 30, 2015 , partially offset by a $5.3 million reduction in our operating loss, discussed in more detail below.

Abstral is our first commercial product and revenue was recorded for the first time during the year ended December 31, 2013. We acquired our second commercial product, Zuplenz, in the third quarter of 2014 and launched the product in July 2015. There was no gross or net revenue from the sale of Zuplenz in any of the periods presented. For these reasons, we expect our future results of operations may differ materially from our historical results. We expect to continue to incur significant costs and expenses in connection with our commercial operations in the U.S. We must achieve higher net sales before realizing a profit from the sale and distribution of our commercial products. Further analysis of the changes and trends in our operating results are discussed below.

Net Revenue

The company recognizes revenue from the sale of Abstral to wholesale pharmaceutical distributors and retail pharmacies, net of product-related discounts, allowances, an estimate of product returns, rebates, chargebacks, and patient assistance benefits, as applicable.

Gross revenue for the three and six months ended June 30, 2015 and 2014 was comprised of gross to net deductions and net revenue as follows:

	
				
 	Net revenue	 	Gross to net deductions	

32

Net revenue for the three months ended June 30, 2015 increased 45% compared to the three months ended June 30, 2014 . The increase was a result of a 38% improvement in the gross to net deductions and a 19% increase in gross revenue. In March of 2014 we launched the Galena Patient Services (GPS) program, a full service support program designed to navigate patient access to Abstral that is coordinated through a third party vendor. Along with the launch of GPS, we also made changes to our patient assistance program (PAP) to reduce the use of free product vouchers and rely more heavily upon an expedited prior authorization process. The success of the GPS program has resulted in a significant improvement in our gross to net deductions as a percent of gross revenue.

Overall prescription demand increased 23% for the three months ended June 30, 2015 compared to three months ended June 30, 2014 . More importantly, non-voucher prescriptions increased 77% for the three months ended June 30, 2015 compared to the three months ended June 30, 2014 , as a direct result of the successful implementation of our GPS program and the changes to our PAP program resulting in a reduction in the percentage of our prescriptions being filled with vouchers.

Net revenue for the six months ended June 30, 2015 increased 36% compared to the six months ended June 30, 2014 . The increase was a result of a 38% improvement in the gross to net deductions and gross revenues increased nominally. In March of 2014 we launched the Galena Patient Services (GPS) program, a full service support program designed to navigate patient access to Abstral that is coordinated through a third party vendor. Along with the launch of GPS, we also made changes to our patient assistance program to reduce the use of free product vouchers and rely more heavily upon an expedited prior authorization process. The success of the GPS program has resulted in a significant improvement in our gross to net deductions as a percent of gross revenue.

Overall prescription demand increased 16% for the six months ended June 30, 2015 compared to six months ended June 30, 2014 . More importantly, non-voucher prescriptions increased 92% for the six months ended June 30, 2015 compared to the six months ended June 30, 2014 , as a direct result of the successful implementation of our GPS program and the changes to our PAP program resulting in a reduction in the percentage of our prescriptions being filled with vouchers. Our current expectations for 2015 net revenue from the sale of our commercial products is approximately $15 million, but there is no assurance we will achieve our expectations. We acquired our second commercial product, Zuplenz, in the third quarter of 2014 and launched the product in July 2015. No revenue has been recorded from the sale of Zuplenz in the periods presented.

Cost of Revenue and Amortization of Certain Acquired Intangible Assets

Cost of revenue and amortization of certain acquired intangible assets for the three months ended June 30, 2015 and 2014 , respectively, were as follows (dollars in thousands):

														
 	Three Months Ended June 30,	
 	2015	 	% of net revenue	 	2014	 	% of net revenue	
Cost of revenue (excluding amortization of certain acquired intangible assets:	 	 	 	 	 	 	 	
Abstral royalties	$	406		 	12	%	 	$	281		 	12	%	
Direct product costs and related overhead	19		 	1	%	 	21		 	1	%	
Other cost of revenue	43		 	1	%	 	45		 	2	%	
Total cost of revenue	$	468		 	14	%	 	$	347		 	15	%	
Amortization of certain acquired intangible assets	$	442		 	13	%	 	$	98		 	4	%	

Cost of revenue, which excludes the amortization of certain acquired intangible assets, was $0.5 million and $0.3 million for the three months ended June 30, 2015 and 2014, respectively. Variable cost of revenue includes the royalty due to Orexo and product costs. Product related overhead and other cost of revenue are fixed in nature, and will decrease or increase as a percentage of net revenue as net revenue increases or decreases, respectively. Cost of revenue improved slightly as a percent of net revenue which is attributable to the 45% increase in net revenue for the three months ended June 30, 2015 compared to three months ended June 30, 2014 .

Amortization of certain acquired intangible assets was $0.4 million and $0.1 million for the three months ended June 30, 2015 and 2014, respectively. Amortization of certain acquired intangible assets is a non-cash variable cost based on net revenue during the period.

33

Cost of revenue and amortization of certain acquired intangible assets for the six months ended June 30, 2015 and 2014 , respectively, were as follows (dollars in thousands):

	
														
 	Six Months Ended June 30,	
 	2015	 	% of net revenue	 	2014	 	% of net revenue	
Cost of revenue (excluding amortization of certain acquired intangible assets:	 	 	 	 	 	 	 	
Abstral royalties	$	736		 	12	%	 	$	540		 	12	%	
Direct product costs and related overhead	38		 	1	%	 	50		 	1	%	
Other cost of revenue	87		 	1	%	 	88		 	2	%	
Total cost of revenue	$	861		 	14	%	 	$	678		 	15	%	
Amortization of certain acquired intangible assets	$	588		 	10	%	 	$	189		 	4	%	

Cost of revenue, which excludes the amortization of certain acquired intangible assets, was $0.9 million and $0.7 million for the six months ended June 30, 2015 and 2014, respectively. Variable cost of revenue includes the royalty due to Orexo and product costs. Product related overhead and other cost of revenue are fixed in nature, and will decrease or increase as a percentage of net revenue as net revenue increases or decreases, respectively. Cost of revenue improved slightly as a percent of net revenue, which is attributable to the 36% increase in net revenue for the six months ended June 30, 2015 compared to six months ended June 30, 2014 .

Amortization of certain acquired intangible assets was $0.6 million and $0.2 million for the six months ended June 30, 2015 and 2014, respectively. Amortization of certain acquired intangible assets is a non-cash variable cost based on net revenue during the period.

Research and Development Expense

Research and development expense consists primarily of clinical trial expenses, 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 three and six months ended June 30, 2015 and 2014 , respectively, was as follows (dollars in thousands):

	
																						
 	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	2015	 	2014	 	% Change	 	2015	 	2014	 	% Change	
Research and development expense	$	7,290		 	$	8,069		 	(10	)%	 	$	13,200		 	$	14,839		 	(11	)%	

The decreases of 10% and 11% for the three and six months ended June 30, 2015 compared to the three and months ended June 30, 2014 in research and development expense was primarily related to the completion of our enrollment efforts for the Phase 3 PRESENT clinical trial. We expect research and development expense related to our PRESENT trial to decrease throughout 2015 as we transition to the monitoring and follow-up phase. The expected decrease in costs could be partially offset by the increase in research and development expense related to enrollment efforts in our NeuVax combination clinical trials, ongoing trial costs related to our GALE-301 Phase 2 clinical trial, and completion of our Phase 2 clinical trial of the GALE-401 program.

34

Selling, General and Administrative Expense

Selling, general and administrative expense includes compensation-related costs for our employees dedicated to sales and marketing, general and administrative activities, legal fees, audit and tax fees, consultants and professional services, and general corporate expenses. Selling, general and administrative expense for the three and six months ended June 30, 2015 and 2014 , respectively, was as follows (dollars in thousands):

	
																						
 	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	2015	 	2014	 	% Change	 	2015	 	2014	 	% Change	
Selling, general and administrative expense	$	6,451		 	$	9,600		 	(33	)%	 	$	13,878		 	$	16,430		 	(16	)%	

The 33% and 16% decreases in selling, general, and administrative expense for the three and six months ended June 30, 2015 compared to the three and six months ended June 30, 2014 , respectively, was driven by the $3 million incurred in legal expenses during the three months ended related to the ongoing litigation and proceedings described in Part II, Item 1 of this report. During the third quarter of 2014 we exceeded the retention (deductible) under our insurance policy and have been realizing significant insurance recoveries against the fees associated with the litigation and proceedings referenced above. This decrease was partially offset by the ramp up of our commercial operations leading into the launch of Zuplenz, the expansion of our management team and infrastructure needed to support the expanded commercial operations and development pipeline.

Non-Operating Income

Non-operating income for the three and six months ended June 30, 2015 and 2014 , respectively, was as follows (dollars in thousands):

	
																						
 	Three Months Ended June 30,	 	Six Months Ended June 30,	
 	2015	 	2014	 	% Change	 	2015	 	2014	 	% Change	
Change in fair value of warrants potentially settleable in cash	$	(4,267	)	 	$	(3,353	)	 	27	 %	 	$	(3,115	)	 	$	6,439		 	(148	)%	
Interest income (expense), net	(207	)	 	(314	)	 	(34	)%	 	(449	)	 	(628	)	 	(29	)%	
Other income (expense)	83		 	(491	)	 	(117	)%	 	(238	)	 	(656	)	 	(64	)%	
Total non-operating income (expense), net	$	(4,391	)	 	$	(4,158	)	 	6	 %	 	$	(3,802	)	 	$	5,155		 	(174	)%	

The decrease in our non-operating income (increase in our net non-operating expense) during the three and six months ended June 30, 2015 compared to the three and six months ended June 30, 2014 was primarily due to a increase in the change in fair value of warrants accounted for as liabilities. This increase in the estimated fair value of our warrant liabilities was primarily due to the increase 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.

Income Taxes

For the three and six months ended June 30, 2015 and 2014, there was no income tax benefit or expense recognized.

35

Liquidity and Capital Resources

We had cash and cash equivalents of approximately $45.3 million as of June 30, 2015 , compared with $23.7 million as of December 31, 2014.
 
The increase of approximately $21.6 million in our cash and cash equivalents from December 31, 2014 to June 30, 2015 was attributable primarily to $47.4 million in net proceeds from issuance of common stock and warrants to purchase common stock, partially offset by $23.4 million used in operating activities, $1.9 million in payments on long-term debt, and $0.5 million for a milestone related to our acquisition of U.S. rights to Zuplenz.

On March 18, 2015, we announced the closing of our underwritten public offering of 24,358,974 shares of common stock and 12,179,487 warrants to purchase our common stock at an exercise price of $2.08. The underwriters also exercised their over-allotment option to purchase warrant to purchase an aggregate of 1,826,923 shares of our common stock. On April 10, 2015 the underwriters exercised their option to purchase an additional 3,653,846 shares of common stock for additional net proceeds of $5.4 million. The total net proceeds to us were approximately $40.8 million.

We expect to continue to incur operating losses as we continue to commercialize Abstral, launch commercialization of Zuplenz in the U.S. and advance our product candidates through the drug development and regulatory process. We will need to generate significant revenue to achieve profitability and may never do so. In the absence of revenue from the commercialization of Abstral, Zuplenz or our product candidates, our potential sources of operational funding are proceeds from the sale of equity and funded research and development payments and payments received under partnership and collaborative agreements.

We believe that our existing cash and cash equivalents, along with revenue from our commercial operations, should be sufficient to fund our operations for at least one year. This projection is based on our current planned operations and revenue expectations and is subject to changes in our plans and uncertainties inherent in our business, and we may need to seek to replenish our existing cash and cash equivalents sooner than we project. There is no guarantee that we will generate sufficient revenue from the sale of Abstral and Zuplenz to become profitable or that any debt, additional equity or other funding will be available to us on acceptable terms, or at all. If we fail to generate adequate revenue or 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.

Cash Flows

The following table summarizes our cash flows from operating, investing, and financing activities for the six months ended June 30, 2015 and June 30, 2014 ($ in thousands):

	
									
 	 	Six Months Ended June 30,	
 	 	2015	 	2014	
Total cash provided by (used in):	 	 	 	 	
Operating activities	 	$	(23,415	)	 	$	(21,020	)	
Investing activities	 	(569	)	 	(2,344	)	
Finance activities	 	45,613		 	14,739		
Increase (decrease) in cash and cash equivalents	 	$	21,629		 	$	(8,625	)	

Net Cash Flow from Operating Activities

Net cash used in operating activities was approximately $23.4 million for the six months ended June 30, 2015 , compared with $21.0 million for the six months ended June 30, 2014 . Despite a $5 million reduction in the operating loss for the six months ended June 30, 2015 compared with the six months ended June 30, 2014 , net cash used in operating activities increased due to the paying down of accrued expenses and other current liabilities during the six months ended June 30, 2015 .

36

Net Cash Flow from Investing Activities

Net cash used in investing activities was $0.6 million for the six months ended June 30, 2015 , compared with $2.3 million for the six months ended June 30, 2014 . The decrease was due to the $2.1 million initial payment for GALE-401 rights during the six months ended June 30, 2014 compared to the $0.5 million milestone payment for U.S. rights to Zuplenz during the six months ended June 30, 2015 .

Net Cash Flow from Financing Activities

Net cash provided by financing activities was $45.6 million for the six months ended June 30, 2015 , compared with $14.7 million for the six months ended June 30, 2014 . The increase was primarily attributable to $42.2 million in net proceeds from the issuance of common stock and warrants to purchase common stock during the six months ended June 30, 2015 compared to net proceeds of common stock warrant exercises of $10.6 million and net proceeds of common stock option exercises of $4.1 million during the six months ended  June 30, 2014 .

Off-Balance Sheet Arrangements

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

Critical Accounting Policies and Estimates

In our Annual Report on Form 10-K for the year ended December 31, 2014, we disclosed our critical accounting policies and estimates upon which our financial statements are derived. There have been no changes to these policies since December 31, 2014 that are not included in Note 1 of the accompanying condensed consolidated financial statements for the three and six months ended June 30, 2015. Readers are encouraged to read our Annual Report on Form 10-K in conjunction with this report.

 ITEM 3. 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 interest rate risk on our cash and cash equivalents and risks relating to the financial viability of the institutions which hold our capital and through which we have invested our funds. We manage the latter 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.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

As of the end of the period covered by this quarterly report on Form 10-Q, our principal executive officer and our principal accounting officer (the “Certifying Officers”), evaluated the effectiveness of our disclosure controls and procedures. Disclosure controls and procedures are controls and procedures designed to reasonably assure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 (the “Exchange Act”), such as this quarterly report on Form 10-Q, is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms. Disclosure controls and procedures are also designed to reasonably assure that such information is accumulated and communicated to our management, including the Certifying Officers, as appropriate to allow timely decisions regarding required disclosure. Based on these evaluations, the Certifying Officers have concluded, that, as of the end of the period covered by this quarterly report on Form 10-Q:

(a)	our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports we file or submit under the Exchange Act was recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms; and	

(b)	our disclosure controls and procedures were effective to provide reasonable assurance that material information required to be disclosed by us in the reports we file or submit under the Exchange Act was accumulated and communicated to our management, including the Certifying Officers, as appropriate to allow timely decisions regarding required disclosure.	

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting that occurred during the three and six months ended June 30, 2015 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

37

PART II
ITEM 1. LEGAL PROCEEDINGS
In re Galena Biopharma, Inc. Stockholder Derivative Litigation and In Re Galena Biopharma, Inc. Derivative Litigation

On January 23, 2015, U.S. District Court for the District of Oregon heard argument on the defendants’ motion to stay and motion to dismiss. On February 4, 2015, the District Court granted in part the motion to stay by staying any discovery until the ruling on the motion to dismiss. On August 5, 2015, the District Court issued its decision by denying in part and granting in part defendants’ motion to dismiss and granting plaintiffs leave to file an amended complaint. The court had stayed the derivative proceeding pending the outcome of the motion to dismiss in the securities class action case.

On August 4, 2105, plaintiffs in the voluntarily dismissed Delaware derivative action have filed a motion seeking to file under seal a derivative complaint in the District Court.

We intend to vigorously defend against and seek resolution to the foregoing claims. As of June 30, 2015, we have not recorded any liabilities with respect to the claims in our consolidated financial statements. We believe that claims are covered under our liability insurance, and we have notified our insurance carriers of the claims. The insurers have responded by requesting additional information and by reserving their rights under the policies, including the rights to deny coverage under various policy exclusions. Subject to their reservation of rights, we are being reimbursed by our insurer for substantially all legal fees relating to our defense of the claims. We have entered into certain undertaking agreements with our directors related to the litigation by which we have agreed to advance reasonable legal fees and costs for the litigation under certain conditions.

SEC Investigation

We are aware that the Securities and Exchange Commission (SEC) is investigating certain matters relating to the use of certain outside investor-relations professionals by us and other public companies. We have been in contact with the SEC staff through our counsel and are cooperating with the investigation.

ANDA Litigation

By letter dated December 23, 2014, Orexo and we received a Paragraph IV certification notice (Notice Letter) regarding an Abbreviated New Drug Application (ANDA) submitted to the FDA by Actavis Laboratories FL, Inc. (Actavis) requesting approval to engage in the m an ufacture , use or sale of generic versions of the Abstral sublingual t a blets Eq 0.1 mg base , Eq 0.2 m g base , E q 0.3 mg base, Eq 0.4 mg base , Eq 0.6 mg base and Eq 0.8 mg base. In the Notice Letter, Actavis contends that the patents held by Orexo for Abstral that are listed in the Orange Book (U.S. Patents 6,759,059, 6,761,910 and 7,910,132, which cover compositions, formulations and methods of using Abstral and which expire in September 2019) and which are licensed to us under the Orexo License Agreement, are invalid, unenforceable and/or will not be infringed by the manufacture, use, or sale of the product set forth in the ANDA. On February 4, 2015, Orexo filed a patent infringement lawsuit in the U.S. District Court for the District of New Jersey against Actavis Laboratories Fl, Inc., Andrx Corporation, Actavis, Inc., and Actavis Pharma, Inc. All of the defendants except Actavis Laboratories FL, Inc. were subsequently dismissed. Actavis has filed an answer and counterclaim. The lawsuit claims infringement of the three patents. Orexo filed the lawsuit within 45 days from the receipt of the Notice Letter and under the Hatch-Waxman Act, the final FDA approval of Actavis’ ANDA will be stayed up to 30 months from the date of receipt of the Notice Letter.

A scheduling conference was held on July 9, 2015, in the District Court and on July 10, 2015, the District Court issued a pre-trial scheduling order. The parties are now engaged in written discovery.

We are obligated under Orexo License Agreement to pay for 88% of the legal costs of the patent infringement lawsuit. We intend to work with Orexo to continue to vigorously enforce intellectual property rights related to the Abstral product.

38

ITEM 1A. RISK FACTORS

In addition the risk factors included in our Annual Report on Form 10-K for the year ended December 31, 2014 and most recent Quarterly Report on Form 10-Q for the three months ended March 31, 2015 filed with the SEC, you should consider the following new or updated risk factors:

Risks Related to Our Business
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. Our collaborators or we will 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. 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.

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+), in the adjuvant setting 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), and AE-37 (Antigen Express). 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.

We may be unable to achieve profitability with our commercial operations in a timely manner, and may have to make changes to our commercial strategy to maximize the value of our commercial assets to our shareholders.
We launched Abstral in the fourth quarter of 2013, and launched Zuplenz on July 29, 2015. As of June 30, 2015, Abstral has not achieved profitability as a product line, and there is no assurance that it will achieve profitability within the period of time outlined by management in setting our commercial strategy. Also, there is no assurance that we will be successful launching Zuplenz, or that Zuplenz will reach profitability as a product line in timely manner, if ever.
Management may determine that a change to our commercial strategy is necessary to address the lack of profitability of the commercial products. Such potential strategic changes include, but are not limited to, increased investment in our commercial operations, significant expansion or reduction to our sale force, acquisition of additional commercial products, or partial or full divesture of our commercial products and operations. Any such significant change to our commercial strategy could materially affect the amounts of revenue we generate in future periods, the extent and timing of future costs incurred, and could result in changes to our financial results that are materially different than those realized historically.
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 commercial product or product candidates and that are of sufficient breadth to prevent third parties from competing against us.

39

Our success with respect to our commercial product and 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 Abstral, 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 March 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 outside the U.S. We also have a license from The Henry M. Jackson Foundation to issued U.S. European, Japanese 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, which expires in 2028, that is 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. 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 ® 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.
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 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 two granted patents in the United Kingdom, an issued U.S. patent and allowed Japanese application, 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 hermatological disorders. 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.
Orexo AB filed an action in the U.S. District Court for the District of New Jersey on June 30, 2011 asserting infringement by Mylan Pharmaceuticals Inc., of one of our licensed U.S. patents, US 6,761,910, covering Abstral. This patent is directed to pharmaceutical compositions for the treatment of acute disorders by sublingual administration. The claims of the patent cover formulations for other products in addition to Abstral, including Ambien (and generic forms of Ambien, which is the subject of the infringement action). Validity of the patent was challenged as part of the court proceeding, and certain claims in the patent were the subject of a Markman order. Though that action was settled, that Markman order may be used to challenge any infringement claims Orexo would make in the action entitled, Orexo AB vs. Actavis Laboratories FL, Inc. pending in the U.S. District Court for the District of New Jersey. The outcome in the Orexo AB vs. Actavis Laboratories FL, Inc. action could affect our license of the Abstral patents and our ability to market, sell, distribute or manufacture Abstral in the U.S.
        The active peptides found in GALE-301 are derived from Folate Binding Protein. One of the active peptides, E39, has been known and studied for many years. The other active peptide(s) in GALE-301 are derivatives 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 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

40

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 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 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 the patent office 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. The U.S. Patent Office is currently developing regulations and procedures to govern administration of the Leahy-Smith Act, and many substantive changes to patent law associated with the Leahy-Smith Act have not yet become effective. 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 post grant review processes and 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.
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 its 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

41

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 its 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 its 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 its former employers or its 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.
Risks Related to Our Capital Structure

Our outstanding warrants may result in dilution to our stockholders.
Our outstanding March 2011 and April 2011 warrants to purchase a total of 791,398 shares of common stock as of December 31, 2014 at a current exercise price of $0.65 per share contain so-called full-ratchet anti-dilution provisions. Our outstanding March 2010 and December 2012 warrants to purchase 25,000 and 3,031,311 shares of common stock as of December 31, 2014 at current exercise prices of $2.15 per share and $1.90 per share, respectively, 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.
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.

42

ITEM 6. EXHIBITS

	
				
Exhibit
Number	  	Description	 	
 	 	 	 	
1.1	 	Underwriting Agreement dated as of March 13, 2015 by and between Galena Biopharma, Inc. and Raymond James & Associates, Inc. (1)	
 	 	 	 	
3.1	 	Certificate of Amendment to Amended and Restated Certificate of Incorporation of Galena Biopharma, Inc. **	
 	 	 	
4.1	 	Warrant Agreement, dated as of March 18, 2015, by and among Galena Biopharma, Inc., Computershare, Inc. and Computershare Trust Company, N.A. **	
 	 	 	
10.1	 	Form of Incentive Stock Option under the Galena Biopharma, Inc., Amended and Restated 2007 Incentive Plan. * **	
 	 	 	
10.2	 	Form of Nonstatutory Stock Option under the Galena Biopharma, Inc., Amended and Restated 2007 Incentive Plan.* **	
 	 	 	
10.3	 	Amendment to Galena Biopharma, Inc. Amended and Restated 2007 Incentive Plan. (2)*	
 	 	 	
10.4	 	Separation and Consulting Agreement, dated as of June 24, 2015, by and between Galena Biopharma, Inc. and Margaret Kivinski and General Release, dated as of June 24, 2015, by Margaret Kivinski.**

10.5	 	Employment Offer Letter effective June 25, 2015, between Galena Biopharma, Inc. and Thomas J. Knapp. * **	

31.1	 	Sarbanes-Oxley Act Section 302 Certification of Mark W. Schwartz, Ph.D.**	
 	 	 	
31.2	 	Sarbanes-Oxley Act Section 302 Certification of Ryan M. Dunlap.**	
 	 	 	
32.1	 	Sarbanes-Oxley Act Section 906 Certification of Mark W. Schwartz, Ph.D., and Ryan M. Dunlap.**	
 	 	 	
101.INS	 	XBRL Instance Document.**	
 	 	 	
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.	
 	 	
(1)	Previously filed as an Exhibit to the Registrant's Form 8-K filed on March 16, 2015 and incorporated herein by reference.

(2)	Previously filed as Annex B to the Registrant's Proxy Statement on Schedule 14A filed on April 30, 2015 and incorporated by reference herein by reference.

43

SIGNATURES

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

	
				
 	GALENA BIOPHARMA, INC.	
 	 	 	 	
 	By:	 	/s/ Mark W. Schwartz	
 	 	 	 	
 	 	 	Mark W. Schwartz, Ph.D.	
 	 	 	President and Chief Executive Officer	
 	 	 	 	
 	 	 	Date: August 6, 2015	
 	 	 	 	
 	By:	 	/s/ Ryan M. Dunlap	
 	 	 	 	
 	 	 	Ryan M. Dunlap	
 	 	 	Vice President and Chief Financial Officer	
 	 	 	 	
 	 	 	Date: August 6, 2015	

44

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

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

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 Incorporation 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 19 th day of June 2015.

		
 	 	
 	Galena Biopharma, Inc.	

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

- .

WARRANT AGREEMENT
THIS WARRANT AGREEMENT made as of March 18, 2015 (the “ Issuance Date ”), between Galena Biopharma, Inc., a Delaware corporation (the “ Company ”), Computershare Inc., a Delaware corporation (“ Computershare ”), and its wholly-owned subsidiary, Computershare Trust Company, N.A., a federally chartered trust company (and together with Computershare, the “ Warrant Agent ”).
WHEREAS, the Company has sold, or may sell, up to 24,358,974 shares of common stock, par value $0.0001 per share (the “ Common Stock ” and includes any share capital into which such Common Stock shall have been changed or any share capital resulting from a reclassification of such Common Stock), of the Company and warrants to purchase 14,006,410 shares of Common Stock (each, a “ Warrant Share ” and, collectively, the “ Warrant Shares ”), subject to adjustment as described herein (each, a “ Warrant ” and, collectively, the “ Warrants ”), pursuant to an Underwriting Agreement between the Company and Raymond James & Associates, Inc., as Representative of the Underwriters, dated March 13, 2015 (the “ Underwriting Agreement ”); and
WHEREAS, both the Common Stock and the Warrants were issued by the Company in a public offering pursuant to an effective shelf registration statement on Form S-3, Registration No. 333-188849 (the “ Registration Statement ”) filed with the Securities and Exchange Commission (the “ Commission ”) under the Securities Act of 1933, as amended (the “ Act ”), and a related base prospectus and prospectus supplement; and
WHEREAS, the Company desires the Warrant Agent to act on behalf of the Company, and the Warrant Agent is willing to so act, in connection with the issuance, registration, transfer, exchange and exercise of the Warrants; and
WHEREAS, the Company desires to provide for the form and provisions of the Warrants, the terms upon which they shall be issued and exercised, and the respective rights, limitation of rights, and immunities of the Company, the Warrant Agent, and the holders of the Warrants; and
WHEREAS, all acts and things have been done and performed which are necessary to make the Warrants, when executed on behalf of the Company and countersigned by or on behalf of the Warrant Agent, as provided herein, the valid, binding and legal obligations of the Company, and to authorize the execution and delivery of this Warrant Agreement.
NOW, THEREFORE, in consideration of the mutual agreements herein contained, the parties hereto agree as follows:
1. Appointment of Warrant Agent . The Company hereby appoints the Warrant Agent to act as agent for the Company for the Warrants, and the Warrant Agent hereby accepts such appointment and agrees to perform the same in accordance with the terms and conditions set forth in this Warrant Agreement.
2. Warrants .
2.1 Form of Warrant . Each Warrant shall be issued in registered form only, shall be in substantially the form of Exhibit A hereto, the provisions of which are incorporated herein, and shall be signed by, or bear the facsimile signature of, the Chief Executive Officer, Chief Financial Officer, President or Secretary of the Company. In the event the person whose facsimile signature has been placed upon any Warrant shall have ceased to serve in the capacity in which such person signed the Warrant before such Warrant is issued, it may be issued with the same effect as if he or she had not ceased to be such at the date of issuance.
2.2. Effect of Countersignature . Unless and until countersigned by the manual or facsimile signature of the Warrant Agent pursuant to this Warrant Agreement, a Warrant shall be invalid and of no effect and may not be exercised by the holder thereof.
2.3. Registration .
2.3.1. Warrant Register . The Warrant Agent shall maintain books (the “ Warrant Register ”) for the registration of original issuance and the registration of transfer of the Warrants. Upon the initial issuance of the Warrants, the Warrant Agent shall issue and register the Warrants in the names of the respective holders thereof in such denominations and otherwise in accordance with instructions delivered to the Warrant Agent by the Company. The Warrants may be represented by definitive Warrant Certificates in physical form or by one or more book-entry warrant certificates (the “ Book-Entry Warrant Certificates ”) deposited with the Depository Trust Company (the “ Depository ”) and registered in the name of Cede & Co., a nominee of the Depository. Definitive Warrant Certificates shall be in substantially the form annexed hereto as Exhibit A . Ownership of beneficial interests in the Book-Entry Warrant Certificates shall be shown on, and the transfer of such ownership shall be effected through, records maintained (i) by the Depository or its nominee for each Book-Entry Warrant Certificate; (ii) by institutions that have accounts with the Depository (such institution, with respect to a Warrant in its account, a “ Participant ”); or (iii) directly on the book-entry records of the Warrant Agent with respect only to owners of beneficial interests that request such direct registration.
If the Depository subsequently ceases to make its book-entry settlement system available for the Warrants, the Company may instruct the Warrant Agent regarding making other arrangements for book-entry settlement within ten (10) days after the Depository ceases to make its book-entry settlement available. In the event that the Company does not make alternative arrangements for book-entry settlement within ten (10) days or the Warrants are not eligible for, or it is no longer necessary to have the Warrants available in, book-entry form, the Warrant Agent shall provide written instructions to the Depository to deliver to the Warrant Agent for cancellation each Book-Entry Warrant Certificate, and the Company shall instruct the Warrant Agent to deliver to the Depository definitive Warrant Certificates in physical form evidencing such Warrants.
2.3.2. Beneficial Owner; Registered Holder . The term “beneficial owner” shall mean any person in whose name ownership of a beneficial interest in the Warrants evidenced by (a) a Book-Entry Warrant Certificate is recorded in the records maintained by the Depository or its nominee or (b) a definitive Warrant Certificate is recorded in the book-entry records of the Warrant Agent. Prior to due presentment for registration of transfer of any Warrant, the Company and the Warrant Agent may deem and treat the person in whose name such Warrant shall be registered in the Warrant Register (“registered holder”), as the absolute owner of such Warrant and of each Warrant represented thereby (notwithstanding any notation of ownership or other writing on the Warrant Certificate made by anyone other than the Company or the Warrant Agent), for the purpose of any exercise thereof, and for all other purposes, and neither the Company nor the Warrant Agent shall be affected by any notice to the contrary.
2.4. Detachability of Warrants . The Common Stock and the Warrants will be issued separately and will be separately transferable immediately upon issuance.
3. Terms and Exercise of Warrants .
3.1. Exercise Price . The exercise price per whole share of the Common Stock under each Warrant shall be $2.08, subject to adjustment hereunder (the “ Exercise Price ”).
3.2. Duration of Warrants . A Warrant may be exercised only during the period (the “ Exercise Period ”) commencing on the Issuance Date and terminating at 5:00 P.M., Eastern time on March 18, 2020 (the “ Expiration Date ”). Each Warrant not exercised on or before the Expiration Date shall become void, and all rights thereunder and all rights in respect thereof under this Warrant Agreement shall cease at the close of business on the Expiration Date.
3.3. Exercise of Warrants .
3.3.1. Exercise and Payment . A registered holder may exercise a Warrant by delivering, not later than 5:00 P.M., Eastern time, on any Business Day during the Exercise Period (the “ Exercise Date ”) to the Warrant Agent at its corporate trust department (i) the Warrant Certificate evidencing the Warrants to be exercised, or, in the case of a Book-Entry Warrant Certificate, the Warrants to be exercised (the “ Book-Entry Warrants ”) free on the records of the Depository to an account of the Warrant Agent at the Depository designated for such purpose in writing by the Warrant Agent to the Depository from time to time, (ii) an election to purchase the Shares underlying the Warrants to be exercised (the “ Election to Purchase ”), properly completed and executed by the registered holder on the reverse of the Warrant Certificate or, in the case of a Book-Entry Warrant Certificate, properly delivered by the Participant in accordance with the Depository’s procedures, and (iii), except as provided in Section 3.3.8, the Warrant Price for each Warrant to be exercised in lawful money of the United States of America by wire, certified or official bank check, or wire transfer, in immediately available funds. The term “ Warrant Price ” as used in this Warrant Agreement refers to price per share of Common Stock at which shares may be purchased at the time the Warrant is exercised.
If any of (A) the Warrant Certificate or the Book-Entry Warrants, (B) the Election to Purchase, or (C) the Warrant Price therefor, is received by the Warrant Agent after 5:00 P.M., Eastern time, on the specified Exercise Date, the Warrants will be deemed to be received and exercised on the Business Day next succeeding the Exercise Date. If the date specified as the Exercise Date is not a Business Day, the Warrants will be deemed to be received and exercised on the next succeeding day that is a Business Day. If the Warrants are received or deemed to be received after the Expiration Date, the exercise thereof will be null and void and any funds delivered to the Warrant Agent will be returned to the registered holder or Participant, as the case may be, as soon as practicable. In no event will interest accrue on funds deposited with the Warrant Agent in respect of an exercise or attempted exercise of Warrants. The validity of any exercise of Warrants will be determined by the Company in its sole discretion and such determination will be final and binding upon the registered holder and the Warrant Agent. Neither the Company nor the Warrant Agent shall have any obligation to inform a registered holder of the invalidity of any exercise of Warrants.
The Warrant Agent shall forward funds received for warrant exercises in a given month by the 5th Business Day of the following month by wire transfer to an account designated by the Company.
All funds received by Computershare under this Warrant Agreement that are to be distributed or applied by Computershare in the performance of services (the “ Funds ”) shall be held by Computershare as agent for the Company and deposited in one or more bank accounts to be maintained by Computershare in its name as agent for the Company. Until paid pursuant to the terms of this Warrant Agreement, Computershare will hold the Funds through such accounts in: deposit accounts of commercial banks with Tier 1 capital exceeding $1 billion or with an average rating above investment grade by Standard and Poor’s Corporation (LT Local Issuer Credit Rating), Moody’s Investors Service, Inc. (Long Term Rating) and Fitch Ratings, Inc. (LT Issuer Default Rating) (each as reported by Bloomberg Finance L.P.). Computershare shall have no responsibility or liability for any diminution of the Funds that may result from any deposit made by Computershare in accordance with this paragraph, including any losses resulting from a default by any bank, financial institution or other third party. Computershare may from time to time receive interest, dividends or other earnings in connection with such deposits. Computershare shall not be obligated to pay such interest, dividends or earnings to the Company, any holder or any other party.
3.3.2. Issuance of Certificates . The Warrant Agent shall, within a reasonable time, advise the Company and the transfer agent and registrar in respect of (a) the Shares issuable upon such exercise as to the number of Warrants exercised in accordance with the terms and conditions of this Warrant Agreement, (b) the instructions of each registered holder or Participant, as the case may be, with respect to delivery of the Warrant Shares issuable upon such exercise, and the delivery of definitive Warrant certificates, as appropriate, evidencing the balance, if any, of the Warrants remaining after such exercise, (c) in case of a Book-Entry Warrant Certificate, the notation that shall be made to the records maintained by the Depository, its nominee for each Book-Entry Warrant Certificate, or a Participant, as appropriate, evidencing the balance, if any, of the Warrants remaining after such exercise and (d) such other information as the Company or such transfer agent and registrar shall reasonably require.
The Company shall cause the Warrant Agent to, by 5:00 P.M., Eastern time, on the third Business Day next succeeding the Exercise Date of any Warrant and the clearance of the funds in payment of the Warrant Price (the “ Warrant Shares Delivery Date ”), execute, issue and deliver, on the Company’s behalf, the Warrant Shares to which such registered holder or Participant, as the case may be, is entitled, in fully registered form, registered in such name or names as may be directed by such registered holder or the Participant, as the case may be. If the Warrant Agent fails for any reason to deliver to such registered holder or Participant, as the case may be, the Warrant Shares subject to an exercise notice by the Warrant Shares Delivery Date, the Company shall pay to the registered holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of Warrant Shares subject to such exercise (based on the VWAP of the Common Stock on the date of the applicable exercise notice), $10 per Trading Day (increasing to $20 per Trading Day on the fifth Trading Day after such liquidated damages begin to accrue) for each Trading Day after such Warrant Shares Delivery Date until such Warrant Shares are delivered or the registered holder rescinds such exercise
In lieu of delivering physical certificates representing the Warrant Shares issuable upon exercise, provided the Company’s transfer agent is participating in the Depository’s Fast Automated Securities Transfer program, the Company shall use its reasonable best efforts to cause its transfer agent to electronically transmit the Warrant Shares issuable upon exercise to the Depository’s Fast Automated Securities Transfer program.
If the Warrant Agent fails to comply with the preceding paragraphs in this Section 3.3.2 by the Warrant Shares Delivery Date, then the registered holder or Participant will have the right to rescind its exercise.
3.3.3. Valid Issuance . All shares of Common Stock issued upon the proper exercise of a Warrant in conformity with this Warrant Agreement shall be validly issued, fully paid and nonassessable.
3.3.4. Dividends . The accrual of dividends, if any, on the Warrant Shares issued upon the valid exercise of any Warrant will be governed by the terms generally applicable to the Common Stock. From and after the issuance of such Warrant Shares, the former holder of the Warrants exercised will be entitled to the benefits generally available to other holders of Common Stock and such former holder’s right to receive payments of dividends and any other amounts payable in respect of the Warrant Shares shall be governed by, and shall be subject to, the terms and provisions generally applicable to the Common Stock.

3.3.5 No Fractional Exercise . A registered holder may exercise a Warrant from time to time only for whole shares of Common Stock. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of a Warrant. As to any fraction of a share which the holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share. If fewer than all of the Warrants evidenced by a Warrant Certificate are exercised, a new Warrant Certificate for the number of unexercised Warrants remaining shall be executed by the Company and countersigned by the Warrant Agent as provided in Section 2 of this Warrant Agreement, and delivered to the holder of the Warrant Certificate at the address specified on the books of the Warrant Agent or as otherwise specified by such registered holder. If fewer than all the Warrants evidenced by a Book-Entry Warrant Certificate are exercised, a notation shall be made to the records maintained by the Depository, its nominee for each Book-Entry Warrant Certificate, or a Participant, as appropriate, evidencing the balance of the Warrants remaining after such exercise. The Company shall provide an initial funding of one thousand dollars ($1,000) for the purpose of issuing cash in lieu of fractional shares. From time to time thereafter, the Warrant Agent may request additional funding to cover payments for fractional Warrant Shares. The Warrant Agent shall have no obligation to make such payments for fractional Warrant Shares unless the Company shall have provided the necessary funds to pay in full all amounts due and payable with respect thereto.
3.3.6 No Transfer Taxes . Issuance of Warrant Shares shall be made without charge to a registered holder for any issue or transfer tax or other incidental expense in respect of the issuance of such Warrant Shares, all of which taxes and expenses shall be paid by the Company, and such Warrant Shares shall be issued in the name of the registered holder or in such name or names as may be directed by the registered holder; provided, however, that in the event Warrant Shares are to be issued in a name other than the name of the registered holder, a Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the registered holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. The Company shall pay all transfer agent fees required for same-day processing of any exercise notice.
3.3.7 Date of Issuance . Each person in whose name any such certificate for shares of Common Stock is issued shall for all purposes be deemed to have become the holder of record of such shares on the date on which the Warrant was surrendered and payment of the Warrant Price was made, irrespective of the date of delivery of such certificate, except that, if the date of such surrender and payment is a date when the stock transfer books of the Company are closed, such person shall be deemed to have become the holder of such shares at the close of business on the next succeeding date on which the stock transfer books are open.
3.3.8 Optional Cashless Exercise . If at any time during the term of this Warrant Agreement there is no effective registration statement registering, or no current prospectus available for, the issuance or resale of the Warrant Shares by the registered holder, then the Warrant may also be exercised, in whole or in part, at such time by means of a “cashless exercise” in which the holder shall be entitled to receive a number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:
(A) = the VWAP on the Trading Day immediately preceding the date on which holder elects to exercise this Warrant by means of a “cashless exercise,” as set forth in the applicable exercise notice;
(B) = the Exercise Price of this Warrant, as adjusted hereunder; and
(X) = the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.
“ VWAP ” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market (as defined below), the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if the OTC Bulletin Board is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin Board, (c) if the Common Stock is not then listed or quoted for trading on the OTC Bulletin Board and if prices for the Common Stock are then reported in the “Pink Sheets” published by OTC Markets, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Company and reasonably acceptable to the holders of a majority in interest of the total number of Warrants issued under the Underwriting Agreement then outstanding, the fees and expenses of which shall be paid by the Company.
“ Trading Day ” means a day on which the principal Trading Market is open for trading.
“ Trading Market ” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE MKT, the NASDAQ Capital Market, the NASDAQ Global Market, the NASDAQ Global Select Market, the New York Stock Exchange, the OTC Bulletin Board or the OTC Markets, Inc. (or any successors to any of the foregoing).
Notwithstanding the first sentence of this Section 3.3.8 or any other provision hereof, on the Termination Date, this Warrant, to the extent not exercised prior thereto, shall be automatically exercised via cashless exercise pursuant to this Section 3.3.8.
Upon receipt of an Election to Purchase for a cashless exercise, the Company shall calculate and transmit to the Warrant Agent, and the Warrant Agent shall have no obligation under this Warrant Agreement to calculate, the Cashless Exercise Ratio. The number of shares of Common Stock to be issued on such exercise will be determined by the Company (with written notice thereof to the Warrant Agent) using the formula set forth in this Section 3.3.8, the Warrant Agent shall have no duty or obligation to investigate or confirm whether the Company’s determination of the number of shares of Common Stock to be issued on such exercise, pursuant to this Section 3.3.8 is accurate or correct.
3.3.9 Disputes . In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the Warrant Shares, the Company shall promptly issue to the registered holder the number of Warrant Shares that are not disputed.
3.3.10 Limitations on Exercise . The Warrant Agent shall not effect any exercise of this Warrant, and a registered holder shall not have the right to exercise any portion of the Warrant to the extent that after giving effect to such issuance after exercise as set forth on the applicable exercise notice, the registered holder (together with the registered holder’s affiliates, and any other persons acting as a group together with the registered holder or any of the registered holder’s affiliates), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the registered holder and its affiliates shall include the number of shares of Common Stock issuable upon exercise of the Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised portion of the Warrant beneficially owned by the registered holder or any of its affiliates and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Common Stock equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the registered holder or any of its affiliates. Except as set forth in the preceding sentence, for purposes of this Section 3.3.10, beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”) and the rules and regulations promulgated thereunder, it being acknowledged by the registered holder that the Company is not representing to the registered holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the registered holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 3.3.10 applies, the determination of whether the Warrant is exercisable (in relation to other securities owned by the registered holder together with any affiliates) and of which portion of the Warrant is exercisable shall be in the sole discretion of the registered holder, and the submission of an exercise notice shall be deemed to be the registered holder’s determination of whether the Warrant is exercisable (in relation to other securities owned by the registered holder together with any affiliates) and of which portion of the Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 3.3.10, in determining the number of outstanding shares of Common Stock, a registered holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the transfer agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a registered holder, the Company shall within two Trading Days confirm orally and in writing to the registered holder the number of shares of Common Stock then outstanding as established by (A), (B) or (C) above, as applicable. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including the Warrant, by the registered holder or its affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “ Beneficial Ownership Limitation ” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of the Warrant. The registered holder, upon not less than 61 days’ prior notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 3.3.10, provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon exercise of the Warrant held by the registered holder and the provisions of this Section 3.3.10 shall continue to apply. Any such increase will not be effective until the 61st day after such notice is delivered to the Company and shall only be effective with respect to such registered holder. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 3.3.10 to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of the Warrant.
3.4. Buy-in Procedures and Compensation . In addition to any other rights available to a registered holder, if the Company fails to cause its transfer agent to transmit to the registered holder the Warrant Shares pursuant to an exercise on or before the Warrant Shares Delivery Date, and if after such date, the registered holder is required by its broker to purchase (in an open market transaction or otherwise) or the registered holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the registered holder of the Warrant Shares that the registered holder anticipated receiving from the Company upon such exercise (a “ Buy-In ”), then the Company shall (A) pay in cash to the registered holder the amount, if any, by which (x) the registered holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the registered holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the registered holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the registered holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the registered holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the registered holder $1,000. The registered holder shall provide the Company written notice indicating the amounts payable to the registered holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a registered holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.
Notwithstanding the foregoing, the Company shall not be required to make the payments set forth herein in the case of uncertificated Warrant Shares if the registered holder fails to timely file a request with the Depository Trust Company to receive such uncertificated Warrant Shares.
3.5 Cost Basis Information. (a) In the event of a cash exercise, the Company hereby instructs the Warrant Agent to record cost basis for newly issued shares in a manner to be subsequently communicated by the Company to the Warrant Agent.
(b) In the event of a cashless exercise: the Company shall provide cost basis for shares issued pursuant to a cashless exercise at the time the Company confirms the number of Warrant Shares issuable in connection with the cashless exercise to the Warrant Agent pursuant to Section 3.3.3 hereof.
4. Adjustments .
4.1. Stock Dividends and Splits . If the Company, at any time while a Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of a Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon exercise of a Warrant shall be proportionately adjusted such that the aggregate Exercise Price of a Warrant shall remain unchanged. Any adjustment made pursuant to this Section 2(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.
4.2. Subsequent Rights Offerings . If the Company, at any time while a Warrant is outstanding, shall issue rights, options or warrants to all holders of Common Stock (and not to the registered holders of the Warrants) entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the VWAP on the record date mentioned below, then, the Exercise Price shall be multiplied by a fraction, of which the denominator shall be the number of shares of the Common Stock outstanding on the date of issuance of such rights, options or warrants plus the number of additional shares of Common Stock offered for subscription or purchase, and of which the numerator shall be the number of shares of the Common Stock outstanding on the date of issuance of such rights, options or warrants plus the number of shares which the aggregate offering price of the total number of shares so offered (assuming receipt by the Company in full of all consideration payable upon exercise of such rights, options or warrants) would purchase at such VWAP. Such adjustment shall be made whenever such rights, options or warrants are issued, and shall become effective immediately after the record date for the determination of stockholders entitled to receive such rights, options or warrants.
4.3. Pro Rata Distributions . If the Company, at any time while a Warrant is outstanding, shall distribute to all holders of Common Stock (and not to the registered holders of the Warrants) evidences of its indebtedness or assets (including cash and cash dividends) or rights or warrants to subscribe for or purchase any security, then in each such case the Exercise Price shall be adjusted by multiplying the Exercise Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the VWAP determined as of the record date mentioned above, and of which the numerator shall be such VWAP on such record date less the then per share fair market value at such record date of the portion of such assets or evidence of indebtedness or rights or warrants so distributed applicable to one outstanding share of the Common Stock as determined by the Board of Directors of the Company in good faith. In either case the adjustments shall be described in a statement provided to the registered holder of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above.
4.4. Fundamental Transaction . If, at any time while a Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person (other than a merger with a wholly-owned subsidiary of the Company for purposes of offering a corporate name change), (ii) the Company, directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a “ Fundamental Transaction ”), then, upon any subsequent exercise of a Warrant, the registered holders each shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of each registered holder (without regard to any limitation in Section 3.3.10 on the exercise of a Warrant), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “ Alternate Consideration ”) receivable as a result of such Fundamental Transaction by a holder of the number of shares of Common Stock for which a Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 3.3.10 on the exercise of a Warrant). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then each registered holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of a Warrant following such Fundamental Transaction.
Notwithstanding the foregoing, in the event of a Fundamental Transaction, at the request of the registered holder delivered before the 90th day after such Fundamental Transaction, the Company (or the Successor Entity (as defined below) shall purchase a Warrant from the registered holder by paying to the registered holder, within five business days after such request (or, if later, on the effective date of the Fundamental Transaction), cash in an amount equal to the Black Scholes Value of the remaining unexercised portion of a Warrant on the date of such Fundamental Transaction. “ Black Scholes Value ” means the value of a Warrant based on the Black and Scholes Option Pricing Model obtained from the “OV” function on Bloomberg, L.P. (“ Bloomberg ”) determined as of the day of consummation of the applicable Fundamental Transaction for pricing purposes and reflecting (i) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the remaining term of a Warrant as of the date of the public announcement of the applicable Fundamental Transaction; (ii) an expected volatility equal to the lesser of 100% and the 60-day volatility obtained from the HVT function on Bloomberg as of the Trading Day immediately following the public announcement of the applicable Fundamental Transaction; (iii) the underlying price per share used in such calculation shall be the sum of the price per share being offered in cash, if any, plus the value of any non-cash consideration, if any, being offered in such Fundamental Transaction; and (iv) a remaining option time equal to the remaining term of a Warrant as of the date of the public announcement of the applicable Fundamental Transaction.
The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “ Successor Entity ”) to assume in writing all of the obligations of the Company under this Warrant Agreement and the other documents governing the transaction in accordance with the provisions of this Section 4.4 pursuant to written agreements in form and substance reasonably satisfactory to the registered holder and approved by the registered holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the registered holder, deliver to the registered holder in exchange for a Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this registered holder which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon exercise of a Warrant (without regard to any limitations on the exercise of a Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of a Warrant immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the registered holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of a Warrant and the other documents governing the transaction referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under a Warrant and the other documents governing the transaction with the same effect as if such Successor Entity had been named as the Company herein.
4.5. Notices .
4.5.1. Adjustment to Exercise Price . Whenever the Exercise Price is adjusted pursuant to any provision of this Section 4, the Company shall give reasonable written notice thereof to the Warrant Agent, which notice shall set forth the Exercise Price after such adjustment and set forth a brief statement of the facts requiring such adjustment. The Company agrees that it will provide the Warrant Agent with any new or amended exercise terms. The Warrant Agent shall have no obligation under any Section of this Warrant Agreement to determine whether an adjustment made hereunder has occurred or are scheduled or contemplated to occur or to calculate any of the adjustments set forth in this Warrant Agreement.
4.5.2. Notices of Certain Events to Allow Exercise . If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be mailed to each registered holder at its last address as it shall appear upon the Warrant Register of the Company, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding the Company or any of the subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The registered holder shall remain entitled to exercise a Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.
4.6. Form of Warrant . The form of Warrant need not be changed because of any adjustment pursuant to this Section 4, and Warrants issued after such adjustment may state the same Warrant Price and the same number of shares as is stated in the Warrants initially issued pursuant to this Warrant Agreement. However, the Company may at any time in its sole discretion make any change in the form of Warrant that the Company may deem appropriate and that does not affect the substance thereof, and any Warrant thereafter issued or countersigned, whether in exchange or substitution for an outstanding Warrant or otherwise, may be in the form as so changed.
4.7. Calculations . All calculations under this Section 4 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 4, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.
5. Transfer and Exchange of Warrants .
5.1. Registration of Transfer . The Warrant Agent shall register the transfer, from time to time, of any outstanding Warrant upon the Warrant Register, upon surrender of such Warrant for transfer, properly endorsed with signatures properly guaranteed and accompanied by appropriate instructions for transfer. Upon any such transfer, a new Warrant representing an equal aggregate number of Warrants shall be issued and the old Warrant shall be cancelled by the Warrant Agent. The Warrants so cancelled shall be delivered by the Warrant Agent to the Company from time to time upon request.
5.2. Procedure for Surrender of Warrants . Warrants may be surrendered to the Warrant Agent, together with a written request for exchange or transfer, and thereupon the Warrant Agent shall issue in exchange therefor one or more new Warrants as requested by the registered holder of the Warrants so surrendered, representing an equal aggregate number of Warrants; provided, however, that except as otherwise provided herein or in any Book-Entry Warrant Certificate, each Book-Entry Warrant Certificate may be transferred only in whole and only to the Depository, to another nominee of the Depository, to a successor depository, or to a nominee of a successor depository; provided further, however, that in the event that a Warrant surrendered for transfer bears a restrictive legend, the Warrant Agent shall not cancel such Warrant and issue new Warrants in exchange therefor until the Warrant Agent has received an opinion of counsel for the Company stating that such transfer may be made and indicating whether the new Warrants or Warrant Shares must also bear a restrictive legend. Upon any such registration of transfer, the Company shall execute, and the Warrant Agent shall countersign and deliver, in the name of the designated transferee a new Warrant Certificate or Warrant Certificates of any authorized denomination evidencing in the aggregate a like number of unexercised Warrants.
A party requesting transfer of Warrants must provide any evidence of authority that may be required by the Warrant Agent, including but not limited to, a signature guarantee from an eligible guarantor institution participating in a signature guarantee program approved by the Securities Transfer Association.

5.3. Fractional Warrants . The Warrant Agent shall not be required to effect any registration of transfer or exchange which will result in the issuance of a warrant certificate for a fraction of a warrant.
5.4. Service Charges . No service charge shall be made for any exchange or registration of transfer of Warrants.
5.5. Warrant Execution and Countersignature . The Warrant Agent is hereby authorized to countersign and to deliver, in accordance with the terms of this Warrant Agreement, the Warrants required to be issued pursuant to the provisions of this Section 5, and the Company, whenever required by the Warrant Agent, will supply the Warrant Agent with Warrants duly executed on behalf of the Company for such purpose.
6. Other Provisions Relating to Rights of Registered Holders of Warrants .
6.1. No Rights as Stockholder . Except as otherwise specifically provided herein, a registered holder, solely in its capacity as a holder of a Warrant, shall not be entitled to vote or receive dividends or be deemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant Agreement be construed to confer upon a registered holder, solely in its capacity as the registered holder of a Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise, prior to the issuance to the registered holder of the Warrant Shares which it is then entitled to receive upon the due exercise of a Warrant. In addition, nothing contained in this Warrant Agreement shall be construed as imposing any liabilities on a registered holder to purchase any securities (upon exercise of a Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company. A Warrant does not entitle the registered holder thereof to any of the rights of a stockholder.
6.2. Lost, Stolen or Destroyed Warrants . The Warrant Agent shall issue replacement Warrants in a form mutually agreed to by Warrant Agent and the Company for those certificates alleged to have been lost, stolen or destroyed, upon receipt by Warrant Agent of an open penalty surety bond satisfactory to it and holding it and Company harmless, absent notice to Warrant Agent that such certificates have been acquired by a bona fide purchaser. Warrant Agent may, at its option, issue replacement Warrants for mutilated certificates upon presentation thereof without such indemnity.
6.3. Authorized Shares . The Company covenants that, during the period the Warrants are outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under a Warrant. The Company further covenants that its issuance of the Warrants shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary Warrant Shares upon the exercise of the purchase rights under the Warrants. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by a Warrant will, upon exercise of the purchase rights represented by a Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).
Except and to the extent as waived or consented to by a registered holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of a Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of a registered holder as set forth in this Warrant Agreement against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of a Warrant and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant Agreement. Before taking any action which would result in an adjustment in the number of Warrant Shares for which a Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.
7. Concerning the Warrant Agent and Other Matters .
7.1. Payment of Taxes . The Company will from time to time promptly pay all taxes and charges that may be imposed upon the Company or the Warrant Agent in respect of the issuance or delivery of shares of Common Stock upon the exercise of Warrants, but the Company or the Warrant Agent shall not be obligated to pay any transfer taxes in respect of the Warrants or such shares. The Warrant Agent shall not register any transfer or issue or deliver any Warrant Certificate(s) unless or until the persons requesting the registration or issuance shall have paid to the Warrant Agent for the account of the Company the amount of such transfer tax, if any, or shall have established to the reasonable satisfaction of the Company and the Warrant Agent that such transfer tax, if any, has been paid.
7.2. Resignation, Consolidation, or Merger of Warrant Agent .
7.2.1. Appointment of Successor Warrant Agent . The Warrant Agent, or any successor to it hereafter appointed, may resign its duties and be discharged from all further duties and liabilities hereunder after giving thirty (30) days’ notice in writing to the Company pursuant to the notice provisions in Section 8.2 hereof. If the office of the Warrant Agent becomes vacant by resignation or incapacity to act or otherwise, the Company shall appoint in writing a successor Warrant Agent in place of the Warrant Agent. If the Company shall fail to make such appointment within a period of 30 days after it has been notified in writing of such resignation or incapacity by the Warrant Agent or by the holder of the Warrant (who shall, with such notice, submit his Warrant for inspection by the Company), then the holder of any Warrant may apply to the Supreme Court of the State of New York for the County of New York for the appointment of a successor Warrant Agent at the Company’s cost. Any successor Warrant Agent, whether appointed by the Company or by such court, shall be authorized under applicable laws to exercise the powers of a transfer agent and subject to supervision or examination by federal or state authorities. After appointment, any successor Warrant Agent shall be vested with all the authority, powers, rights, immunities, duties, and obligations of its predecessor Warrant Agent with like effect as if originally named as Warrant Agent hereunder, without any further act or deed; but if for any reason it becomes necessary or appropriate, the predecessor Warrant Agent shall execute and deliver, at the expense of the Company, an instrument transferring to such successor Warrant Agent all the authority, powers, and rights of such predecessor Warrant Agent hereunder; and upon request of any successor Warrant Agent the Company shall make, execute, acknowledge, and deliver any and all instruments in writing for more fully and effectually vesting in and confirming to such successor Warrant Agent all such authority, powers, rights, immunities, duties, and obligations.
7.2.2. Notice of Successor Warrant Agent . In the event a successor Warrant Agent shall be appointed, the Company shall give notice thereof to the predecessor Warrant Agent and the transfer agent for the Common Stock not later than the effective date of any such appointment.
7.2.3. Merger or Consolidation of Warrant Agent . Any corporation into which the Warrant Agent may be merged or converted or with which it may be consolidated or any corporation resulting from any merger, conversion, or consolidation to which the Warrant Agent shall be a party, or any corporation succeeding to the business of the Warrant Agent, shall be the successor Warrant Agent under this Warrant Agreement without any further act.
7.3. Fees and Expenses of Warrant Agent .
7.3.1. Remuneration . The Company agrees to pay the Warrant Agent reasonable remuneration for its services as such Warrant Agent hereunder and will reimburse the Warrant Agent upon demand for all expenditures that the Warrant Agent may reasonably incur in the execution of its duties hereunder.
7.3.2. Further Assurances . The Company shall perform, acknowledge and deliver or cause to be performed, acknowledged and delivered all such further and other acts, documents, instruments and assurances as may be reasonably required by the Warrant Agent for the carrying out or performing by the Warrant Agent of the provisions of this Warrant Agreement.
 
7.4. Liability of Warrant Agent .
7.4.1. Reliance on Company Statement . Whenever in the performance of its duties under this Warrant Agreement, the Warrant Agent shall deem it necessary or desirable that any fact or matter be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a statement signed by the Chief Executive Officer, Chief Financial Officer, President or Chairman of the Board of Directors of the Company and delivered to the Warrant Agent. The Warrant Agent may rely upon, and be held harmless for such reliance, such statement for any action taken or suffered in good faith by it pursuant to the provisions of this Warrant Agreement, and shall not be held liable in connection with any delay in receiving such statement.
7.4.2. Indemnification . The Company covenants and agrees to indemnify and to hold the Warrant Agent harmless against any costs, expenses (including reasonable fees of its legal counsel), losses or damages, which may be paid, incurred or suffered by or to which it may become subject, arising from or out of, directly or indirectly, any claims or liability resulting from its actions as Warrant Agent pursuant hereto; provided, that such covenant and agreement does not extend to, and the Warrant Agent shall not be indemnified with respect to, such costs, expenses, losses and damages incurred or suffered by the Warrant Agent as a result of, or arising out of, its gross negligence, bad faith, or willful misconduct. This Section 7.4.2 shall survive termination of this Warrant Agreement or any removal of the Warrant Agent.
7.4.3. Instructions . From time to time, Company may provide Warrant Agent with instructions concerning the services performed by the Warrant Agent hereunder. In addition, at any time Warrant Agent may apply to any officer of Company for instruction, and may consult with legal counsel for Warrant Agent or Company with respect to any matter arising in connection with the services to be performed by the Warrant Agent under this Warrant Agreement. Warrant Agent and its agents and subcontractors shall not be liable and shall be indemnified by Company for any action taken or omitted by Warrant Agent in reliance upon any Company instructions or upon the advice or opinion of such counsel. Warrant Agent shall not be held to have notice of any change of authority of any person, until receipt of written notice thereof from Company. This Section 7.4.3 shall survive termination of this Warrant Agreement or any removal of the Warrant Agent.
7.4.4. Exclusions . The Warrant Agent shall have no responsibility with respect to the validity of this Warrant Agreement or with respect to the validity or execution of any Warrant (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Warrant Agreement or in any Warrant; nor shall it be responsible to make calculations under Section 3.3.8 or any adjustments required under the provisions of Section 4 hereof or responsible for the manner, method, or amount of any such adjustment or the ascertaining of the existence of facts that would require any such adjustment; nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any shares of Common Stock to be issued pursuant to this Warrant Agreement or any Warrant or as to whether any shares of Common Stock will when issued be valid and fully paid and nonassessable.
7.4.5. Rights and Duties of Warrant Agent. (a) The Warrant Agent may consult with legal counsel (who may be legal counsel for the Company), and the opinion of such counsel shall be full and complete authorization and protection to the Warrant Agent as to any action taken or omitted by it in accordance with such opinion.
(b) The Warrant Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Warrant Agreement or in the Warrant Certificates (except its countersignature thereof) or be required to verify the same, and all such statements and recitals are and shall be deemed to have been made by the Company only.
(c) The Warrant Agent shall not have any duty or responsibility in the case of the receipt of any written demand from any holder of Warrants with respect to any action or default by the Company, including, without limiting the generality of the foregoing, any duty or responsibility to initiate or attempt to initiate any proceedings at law or otherwise or to make any demand upon the Company.
(d) The Warrant Agent and any stockholder, director, officer or employee of the Warrant Agent may buy, sell or deal in any of the Warrants or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Warrant Agent under this Warrant Agreement. Nothing herein shall preclude the Warrant Agent from acting in any other capacity for the Company or for any other legal entity.
(e) The Warrant Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorney or agents, and the Warrant Agent shall not be answerable or accountable for any act, default, neglect or misconduct of any such attorney or agents or for any loss to the Company resulting from any such act, default, neglect or misconduct, absent gross negligence, bad faith or willful misconduct (each as determined by a final judgment of a court of competent jurisdiction) in the selection and continued employment thereof.

(f) The Warrant Agent may rely on and shall be held harmless and protected and shall incur no liability for or in respect of any action taken, suffered or omitted to be taken by it in reliance upon any certificate, statement, instrument, opinion, notice, letter, facsimile transmission, telegram or other document, or any security delivered to it, and believed by it to be genuine and to have been made or signed by the proper party or parties, or upon any written or oral instructions or statements from the Company with respect to any matter relating to its acting as Warrant Agent hereunder.
(g) The Warrant Agent shall not be obligated to expend or risk its own funds or to take any action that it believes would expose or subject it to expense or liability or to a risk of incurring expense or liability, unless it has been furnished with assurances of repayment or indemnity satisfactory to it.
(h) The Warrant Agent shall not be liable or responsible for any failure of the Company to comply with any of its obligations relating to any registration statement filed with the Commission or this Warrant Agreement, including without limitation obligations under applicable regulation or law.
(i) The Warrant Agent shall not be accountable or under any duty or responsibility for the use by the Company of any Warrants authenticated by the Warrant Agent and delivered by it to the Company pursuant to this Warrant Agreement or for the application by the Company of the proceeds of the issue and sale, or exercise, of the Warrants.
(j) The Warrant Agent shall act hereunder solely as agent for the Company, and its duties shall be determined solely by the express provisions hereof (and no duties or obligations shall be inferred or implied). The Warrant Agent shall not assume any obligations or relationship of agency or trust with any of the owners or holders of the Warrants.
(k) The Warrant Agent may rely on and be fully authorized and protected in acting or failing to act upon (a) any guaranty of signature by an “eligible guarantor institution” that is a member or participant in the Securities Transfer Agents Medallion Program or other comparable “signature guarantee program” or insurance program in addition to, or in substitution for, the foregoing; or (b) any law, act, regulation or any interpretation of the same even though such law, act, or regulation may thereafter have been altered, changed, amended or repealed.
(l) In the event the Warrant Agent believes any ambiguity or uncertainty exists hereunder or in any notice, instruction, direction, request or other communication, paper or document received by the Warrant Agent hereunder, the Warrant Agent, may, in its sole discretion, refrain from taking any action, and shall be fully protected and shall not be liable in any way to Company, the holder of any Warrant Certificate or Book-Entry Warrant Certificate or any other person or entity for refraining from taking such action, unless the Warrant Agent receives written instructions signed by the Company which eliminates such ambiguity or uncertainty to the satisfaction of Warrant Agent.
7.5. Acceptance of Agency . The Warrant Agent hereby accepts the agency established by this Warrant Agreement and agrees to perform the same upon the terms and conditions herein set forth and among other things, shall account promptly to the Company with respect to Warrants exercised and concurrently account for, and pay to the Company, all moneys received by the Warrant Agent for the purchase of shares of Common Stock through the exercise of Warrants.
7.6. Limitation on Liability of Warrant Agent . Notwithstanding anything contained herein to the contrary, the Warrant Agent’s aggregate liability during any term of this Warrant Agreement with respect to, arising from, or arising in connection with this Warrant Agreement, or from all services provided or omitted to be provided under this Warrant Agreement, whether in contract, or in tort, or otherwise, is limited to, and shall not exceed, the amounts paid hereunder by the Company to Warrant Agent as fees and charges, but not including reimbursable expenses, during the twelve (12) months immediately preceding the event for which recovery from Warrant Agent is being sought. This Section 7.6 shall survive termination of this Warrant Agreement or any removal of the Warrant Agent.
7.7. Opinion of Counsel . The Company shall provide an opinion of counsel prior to the Issuance Date to set up a reserve of Warrants and related Common Stock. The opinion shall state that all Warrants or Common Stock, as applicable, are:
(1) registered under the Act, or are exempt from such registration, and all appropriate state securities law filings have been made with respect to the warrants or shares; and
(2) validly issued, fully paid and non-assessable.

8. Miscellaneous Provisions .
8.1. Successors . Subject to applicable securities laws, this Warrant Agreement and the Warrants and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of each registered holder. The provisions of this Warrant Agreement are intended to be for the benefit of any holder from time to time of this Warrant Agreement and shall be enforceable by the holder or holder of Warrant Shares.
8.2. Notices . Any notice, statement or demand authorized by this Warrant Agreement to be given or made by the Warrant Agent or by the holder of any Warrant to or on the Company shall delivered by hand or sent by registered or certified mail or overnight courier service addressed (until another address is filed in writing by the Company with the Warrant Agent), as follows:
Galena Biopharma, Inc.
4640 SW Macadam Avenue, Suite 270
Portland, Oregon, 97239
Attn: Ryan Dunlap
Any notice, statement or demand authorized by this Warrant Agreement to be given or made by the holder of any Warrant or by the Company to or on the Warrant Agent shall be delivered by hand or sent by registered or certified mail or overnight courier service addressed (until another address is filed in writing by the Warrant Agent with the Company), as follows:
Computershare Inc.
Computershare Trust Company, N.A.
250 Royall Street
Canton, MA 02021
Attn: Scott Travis
with a copy in each case to:
Kelley Drye & Warren LLP
101 Park Avenue
New York, NY 10178
Attn: Merrill Stone, Esq.
and
Raymond James & Associates, Inc.
880 Carillon Parkway
St. Petersburg, Florida 33716
Attention: Equity Capital Markets
8.3. Jurisdiction . The validity, interpretation, and performance of this Warrant Agreement and of the Warrants shall be governed in all respects by the laws of the State of Delaware, without giving effect to conflicts of law principles that would result in the application of the substantive laws of another jurisdiction. The Company hereby agrees that any action, proceeding or claim against it arising out of or relating in any way to this Warrant Agreement shall be brought and enforced in the courts of the State of Delaware or the United States District Court for the District of Delaware, and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive. The Company hereby waives any objection to such exclusive jurisdiction and that such courts represent an inconvenience forum. Any such process or summons to be served upon the Company may be served by transmitting a copy thereof by registered or certified mail, return receipt requested, postage prepaid, addressed to it at the address set forth in Section 8.2 hereof. Such mailing shall be deemed personal service and shall be legal and binding upon the Company in any action, proceeding or claim.
8.4. Persons Having Rights under this Warrant Agreement . Nothing in this Warrant Agreement expressed and nothing that may be implied from any of the provisions hereof is intended, or shall be construed, to confer upon, or give to, any person or corporation other than the parties hereto and the registered holders of the Warrants, any right, remedy, or claim under or by reason of this Warrant Agreement or of any covenant, condition, stipulation, promise, or agreement hereof. All covenants, conditions, stipulations, promises, and agreements contained in this Warrant Agreement shall be for the sole and exclusive benefit of the parties hereto and their successors and assigns and of the registered holders of the Warrants.

8.5. Examination of the Warrant Agreement . A copy of this Warrant Agreement shall be available at all reasonable times at the office of the Warrant Agent, for inspection by the registered holder of any Warrant. The Warrant Agent may require any such holder to submit his Warrant for inspection by it.
8.6. Counterparts . This Warrant Agreement may be executed in any number of original or facsimile counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. A signature to this Warrant Agreement transmitted electronically shall have the same authority, effect, and enforceability as an original signature.
8.7. Effect of Headings . The Section headings herein are for convenience only and are not part of this Warrant Agreement and shall not affect the interpretation thereof.
8.8 Amendments . This Warrant Agreement may be amended by the parties hereto without the consent of any registered holder: (i) for the purpose of curing any ambiguity or (ii) of curing, correcting or supplementing any defective provision contained herein or (iii) adding or for the purpose of changing any other provisions with respect to matters or questions arising under this Warrant Agreement as the parties may deem necessary or desirable and that the parties deem shall not materially adversely affect the interest of the registered holders. Any modifications or amendments to Section 3.3.10 shall require the written consent of all the registered holders. All other modifications or amendments, including any amendment to increase the Warrant Price or shorten the Exercise Period, shall require the written consent of the registered holders of Warrants equal to at least 67% of the Warrant Shares issuable upon exercise of all then outstanding Warrants. As a condition precedent to the Warrant Agent’s execution of any amendment, the Company shall deliver to the Warrant Agent a certificate from a duly authorized officer of the Company that states that the proposed amendment is in compliance with the terms of this Section 8.8. No consideration shall be offered or paid to any person to amend or consent to a waiver or modification of any provision of this Warrant Agreement unless the same consideration is also offered to all holders of the Warrants.
8.9 Severability . Wherever possible, each provision of this Warrant Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant Agreement.
8.10 Restrictions . Each registered holder acknowledges that the Warrant Shares acquired upon the exercise of a Warrant, if not registered, and the registered holder does not utilize cashless exercise, will have restrictions upon resale imposed by state and federal securities laws.
8.11. Nonwaiver and Expenses . No course of dealing or any delay or failure to exercise any right hereunder on the part of a registered holder shall operate as a waiver of such right or otherwise prejudice such a registered holder’s rights, powers or remedies. Without limiting any other provision of this Warrant Agreement or the Underwriting Agreement, if the Company willfully and knowingly fails to comply with any provision of this Warrant Agreement or the Warrants, which results in any material damages to a registered holder, the Company shall pay such registered holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by the registered holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.
8.12. Limitation of Liability . No provision hereof, in the absence of any affirmative action by the registered holder to exercise a Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of a registered holder, shall give rise to any liability of each registered holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.
8.13. Remedies . The registered holders, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant Agreement. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant Agreement and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.

8.14. Confidentiality . The Warrant Agent and the Company agree that all books, records, information and data pertaining to the business of the other party, including inter alia, personal, non-public warrant holder information, which are exchanged or received pursuant to the negotiation or the carrying out of this Warrant Agreement including the fees for services set forth in the attached schedule shall remain confidential, and shall not be voluntarily disclosed to any other person, except as may be required by law, including, without limitation, pursuant to subpoenas from state or federal government authorities (e.g., in divorce and criminal actions).
8.15. Consequential Damages . Neither party to this Warrant Agreement shall be liable to the other party for any consequential, indirect, special or incidental damages under any provisions of this Warrant Agreement or for any consequential, indirect, penal, special or incidental damages arising out of any act or failure to act hereunder even if that party has been advised of or has foreseen the possibility of such damages.
8.16 Force Majeure . Notwithstanding anything to the contrary contained herein, the Warrant Agent will not be liable for any delays or failures in performance resulting from acts beyond its reasonable control including, without limitation, acts of God, terrorist acts, shortage of supply, breakdowns or malfunctions, interruptions or malfunction of computer facilities, or loss of data due to power failures or mechanical difficulties with information storage or retrieval systems, labor difficulties, war, or civil unrest.
9. Certain Definitions . For purposes of this Warrant Agreement, the following terms shall have the following meanings:
9.1 “ Business Day ” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law or executive order to remain closed.
9.2 “ Common Stock ” means (i) the Company’s shares of Common Stock and (ii) any share capital into which such Common Stock shall have been changed or any share capital resulting from a reclassification of such Common Stock.
9.3 “ Control ” (including the terms “ controlling ”, “ controlled by ” or “ under common control with ”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.
9.4 “ Expiration Date ” means the date that is the five-year anniversary of the Issuance Date (or March 18, 2020) or, if such date falls on a day other than a Business Day or on which trading does not take place on the Principal Market (a “ Holiday ”), the next date that is not a Holiday, as the same may be extended pursuant to Section 3.3.7.
9.5 “ Person ” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and a government or any department or agency thereof.
9.6 “Principal Market” means the principal securities exchange or securities market on which the Common Shares are then traded.
[ Remainder of page intentionally left blank. Signature page follows. ]

IN WITNESS WHEREOF, this Warrant Agreement has been duly executed by the parties hereto as of the day and year first above written.

	

GALENA BIOPHARMA, INC.	
 	 	
By:	 	 /s/ Mark W. Schwartz	
Name:	 	Mark W. Schwartz, Ph.D.	
Title:	 	President and CEO	
 	
COMPUTERSHARE INC.	
 	 	
By:	 	 /s/ Neda Sheridan	
Name:	 	Neda Sheridan	
Title:	 	Vice President	
 	
COMPUTERSHARE TRUST COMPANY, N.A.	
 	 	
By:	 	/s/ Neda Sheridan	
Name:	 	Neda Sheridan	
Title:	 	Vice President	

EXHIBIT A
WARRANT NUMBER:     
GALENA BIOPHARMA, INC.
WARRANT CERTIFICATE

	

THIS CERTIFIES THAT, for value received	 	 	

is the registered holder of a Warrant or Warrants (the “ Warrant ”) expiring on March 18, 2020, subject to extension in certain events (“ Expiration Date ”), to purchase [                    ] fully paid and non-assessable shares (“ Shares ”) of Common Stock, par value $0.0001 per share (“ Common Stock ”), of Galena Biopharma, Inc., a Delaware corporation (the “ Company ”). The Warrant entitles the holder thereof to purchase from the Company such number of shares of Common Stock at the price of $2.08 per share (subject to adjustment), upon surrender of this Warrant Certificate and payment of the Warrant Price to Computershare Inc. and Computershare Trust Company, N.A. (collectively, the “ Warrant Agent ”), at its corporate trust department, but only subject to the conditions set forth herein and in the Warrant Agreement between the Company and the Warrant Agent (as may be amended from time to time, the “ Warrant Agreement ”). The Warrant Agreement provides that upon the occurrence of certain events, the Warrant Price and the number of Shares purchasable hereunder, set forth on the face hereof, may, subject to certain conditions, be adjusted. The term “ Warrant Price ” as used in this Warrant Certificate refers to the price per share of Common Stock at which Shares may be purchased at the time the Warrant is exercised. Capitalized terms used and not defined herein shall have the meanings set forth in the Warrant Agreement.
No fraction of a Share will be issued upon any exercise of a Warrant. If the holder of a Warrant would be entitled to receive a fraction of a Share upon any exercise of a Warrant, the Company shall, at its election, either pay a cash adjustment in respect of such fraction in an amount equal to such fraction multiplied by the Exercise Price or round up such fraction to the next whole share.
Upon any exercise of the Warrant for less than the total number of full Shares provided for herein, there shall be issued to the registered holder hereof or the registered holder’s assignee a new Warrant Certificate covering the number of Shares for which the Warrant has not been exercised, provided that such holder has previously surrendered this Warrant to the Warrant Agent.
Upon surrender of the Warrant Certificate for transfer, properly endorsed with signatures properly guaranteed and accompanied by appropriate instructions for transfer, the Warrant Agent shall register the transfer. A new Warrant Certificate or Warrant Certificates evidencing in the aggregate a like number of Warrants shall be issued and the old Warrant Certificate shall be canceled.
Warrant Certificates, when surrendered to the Warrant Agent, may be transferred or exchanged in the manner and subject to the limitations provided in the Warrant Agreement, but without payment of any service charge, for another Warrant Certificate or Warrant Certificates evidencing in the aggregate a like number of Warrants.
The Company and the Warrant Agent may deem and treat the registered holder as the absolute owner of this Warrant Certificate (notwithstanding any notation of ownership or other writing hereon made by anyone), for the purpose of any exercise hereof, and for all other purposes, and neither the Company nor the Warrant Agent shall be affected by any notice to the contrary.
This Warrant Certificate does not entitle the registered holder to any of the rights of a stockholder of the Company.
[ Remainder of page intentionally left blank. Signature page follows. ]

	

GALENA BIOPHARMA, INC.	
 	 	
By:	 	 	
Name:	 	 	
Title:	 	 	
 	
COUNTERSIGNED:	
 	
COMPUTERSHARE INC.
as Warrant Agent	
 	 	
By:	 	 	
Authorized Officer	
 	
COMPUTERSHARE TRUST COMPANY, N.A.
as Warrant Agent	
 	 	
By:	 	 	
Authorized Officer	

[ Signature page to Warrant Certificate ]

ELECTION TO PURCHASE FORM
(to be executed by the registered holder in order to exercise Warrants)
The undersigned registered holder irrevocably elects to exercise Warrants to purchase                  shares of Common Stock represented by this Warrant Certificate and to purchase such shares of Common Stock issuable upon the exercise of such Warrants, and requests that such shares shall be issued in the name of

	

(PLEASE TYPE OR PRINT NAME AND ADDRESS)	

 

 

(SOCIAL SECURITY OR TAX IDENTIFICATION NUMBER)
and be delivered to:

	

(PLEASE PRINT OR TYPE NAME AND ADDRESS)	
and, at the sole election of the registered holder, if such number of Warrants shall not be all the Warrants evidenced by this Warrant Certificate, that a new Warrant Certificate for the balance of such Warrants be registered in the name of, and delivered to, the registered holder at the address stated below:

	

Dated:	 	 	

	

(SIGNATURE)	

 	
 	
(ADDRESS)	

 	
 	
(TAX IDENTIFICATION NUMBER)	

ASSIGNMENT
(to be executed by the registered holder in order to assign Warrants)
For Value Received,                                          hereby sells, assigns, and transfers unto

	

(PLEASE TYPE OR PRINT NAME AND ADDRESS)	

 

 

(SOCIAL SECURITY OR TAX IDENTIFICATION NUMBER)
and be delivered to

	

(PLEASE PRINT OR TYPE NAME AND ADDRESS)	
Warrants to purchase                  shares of Common Stock represented by this Warrant Certificate, and hereby irrevocably constitutes and appoints                                          Attorney to transfer this Warrant Certificate on the books of the Company, with full power of substitution in the premises.

	

Dated:	 	 	 	 	 	 	 	 	
(SIGNATURE)	 	 	
The signature to the assignment of the Subscription Form must correspond to the name written upon the face of this Warrant Certificate in every particular, without alteration or enlargement or any change whatsoever, and must be guaranteed by a commercial bank or trust company or a member firm of the American Stock Exchange, New York Stock Exchange, Pacific Stock Exchange or Chicago Stock Exchange.

40259621v.2

1
- .

Form of Incentive Stock Option
Granted Under Galena Biopharma 2007 Incentive Plan

1.    Grant of Option.
This certificate evidences an incentive stock option (this “Stock Option”) granted by Galena Biopharma, Inc., a Delaware corporation (the “Company”), on DATE OF GRANT (the “Date of Grant”) to NAME , an employee of the Company (the “Participant”) pursuant to the Company’s 2007 Incentive Plan (as from time to time in effect, the “Plan”). Under this Stock Option, the Participant may purchase, in whole or in part, on the terms herein provided, a total of NUMBER OF SHARES shares of common stock of the Company (the “Shares”) at STRIKE PRICE per Share, which is not less than the fair market value of the Shares on the Date of Grant. The latest date on which this Stock Option, or any part thereof, may be exercised is 10 YEARS FROM DATE OF GRANT (the “Final Exercise Date”). The Stock Option evidenced by this certificate is intended to be an incentive stock option as defined in section 422 of the Internal Revenue Code of 1986, as amended from time to time (the “Code”).

•	This Stock Option shall vest and become exercisable in equal quarterly installments over four years beginning three months after the Grant Date.	

Notwithstanding the foregoing, upon termination of the Participant’s Employment, any portion of this Stock Option that is not then exercisable will immediately expire and the remainder of this Stock Option will remain exercisable for three months (unless termination of the Participant’s Employment resulted from reasons that in the determination of the Administrator cast such discredit on the Participant as to justify immediate forfeiture of this Stock Option, in which case this entire Option shall immediately expire and no portion thereof shall remain exercisable); provided , that any portion of this Stock Option held by the Participant immediately prior to the Participant’s death, to the extent then exercisable, will remain exercisable for one year following the Participant’s death; and further provided , that in no event shall any portion of this Stock Option be exercisable after the Final Exercise Date.   

2.    Exercise of Stock Option.
Each election to exercise this Stock Option shall be in writing, signed by the Participant or the Participant’s executor, administrator, or legally appointed representative (in the event of the Participant’s incapacity) or the person or persons to whom this Stock Option is transferred by will or the applicable laws of descent and distribution (collectively, the “Option Holder”), and received by the Company at its principal office, accompanied by this certificate and payment in full as provided in the Plan. Subject to the further terms and conditions provided in the Plan, the purchase price may be paid as follows: (i) by delivery of cash or check acceptable to the Administrator; (ii) upon and following an initial public offering of the Company and to the extent permitted by applicable law (as determined by the Administrator), through a broker-assisted exercise program acceptable to the Administrator; or (iii) through any combination of the foregoing. In the event that this Stock Option is exercised by an Option Holder other than

1    

the Participant, the Company will be under no obligation to deliver Shares hereunder unless and until it is satisfied as to the authority of the Option Holder to exercise this Stock Option.

3.    Notice of Disposition.
The person exercising this Stock Option shall notify the Company when making any disposition of the Shares acquired upon exercise of this Stock Option, whether by sale, gift or otherwise.

4.    Restrictions on Transfer of Shares.
If at the time this Stock Option is exercised the Company or any of its stockholders is a party to any agreement restricting the transfer of any outstanding shares of the Company’s common stock, the Administrator may provide that this Stock Option may be exercised only if the Shares so acquired are made subject to the transfer restrictions set forth in that agreement (or if more than one such agreement is then in effect, the agreement or agreements specified by the Administrator).
If requested by the Corporation and the managing underwriter of an offering by the Corporation of Common Stock pursuant to a registration statement under the Securities Act of 1933, as amended, each stockholder who acquires shares by exercise of this Option shall agree, by executing and delivering such form of agreement as the Company and such underwriter shall reasonably request, not to sell publicly or otherwise transfer or dispose of any shares held by such stockholder or other securities of the Corporation held by such stockholder for a specified period of time (not to exceed 180 days) immediately following the effective date of such registration statement; provided , that such agreement shall apply only to the initial public offering of the Corporation’s securities.
5.    Withholding Agreement to Provide Security.

If at the time this Stock Option is exercised the Company determines that under applicable law and regulations it could be liable for the withholding of any federal or state tax upon exercise or with respect to a disposition of any Shares acquired upon exercise of this Stock Option, this Stock Option may not be exercised unless the person exercising this Stock Option remits to the Company any amounts determined by the Company to be required to be withheld upon exercise (or makes other arrangements satisfactory to the Company for the payment of such taxes) and gives such security as the Company deems adequate to meet its potential liability for the withholding of tax upon a disposition of the Shares and agrees to augment such security from time to time in any amount reasonably determined by the Company to be necessary to preserve the adequacy of such security.

2    

6.    Nontransferability of Stock Option.

This Stock Option is not transferable by the Participant otherwise than by will or the laws of descent and distribution and is exercisable during the Participant’s lifetime only by the Participant (or in the event of the Participant’s incapacity, the person or persons legally appointed to act on the Participant’s behalf).
7.    Provisions of the Plan.

This Stock Option is subject to the provisions of the Plan, which are incorporated herein by reference. A copy of the Plan as in effect on the date of the grant of this Stock Option has been furnished to the Participant. By exercising all or any part of this Stock Option, the Participant agrees to be bound by the terms of the Plan and this certificate. All initially capitalized terms used herein will have the meaning specified in the Plan, unless another meaning is specified herein.

3    

IN WITNESS WHEREOF, the Company has caused this instrument to be executed by its duly authorized officer.

Galena Biopharma

By
    Mark W. Schwartz, President & CEO

Dated:  [_________________]

Acknowledged and agreed:

_________________________________
NAME

Dated:  [_________________]

4

5

Form of Nonstatutory Stock Option
Granted Under Galena Biopharma, Inc. 2007 Incentive Plan

1.    Grant of Option; Vesting.
This certificate evidences a nonstatutory stock option (this “Stock Option”) granted by Galena Biopharma, Inc., a Delaware corporation (the “Company”), on DATE OF GRANT (the “Date of Grant”) to NAME , (the "Participant") pursuant to the Company's 2007 Incentive Plan (as from time to time in effect, the "Plan"). Under this Stock Option, the Participant may purchase, in whole or in part, on the terms herein provided, a total of NUMBER OF SHARES shares of common stock of the Company (the "Shares") at STRIKE PRICE per share, which is not less than the fair market value of the Shares on the Date of Grant. The latest date on which this Stock Option, or any part thereof, may be exercised is the earlier of (i) the date two years following the termination of the Participant’s service on the Board or (ii) 10 YEARS FROM DATE OF GRANT (the "Final Exercise Date"). The Stock Option evidenced by this certificate is intended to be, and is hereby designated, a nonstatutory option, that is, an option that does not qualify as an incentive stock option as defined in section 422 of the Internal Revenue Code of 1986, as amended from time to time (the "Code").
 
This Stock Option is exercisable as to X shares upon each of QUARTERLY VESTING DATES such that this stock option will be fully exercisable as of FINAL VESTING DATE .

Notwithstanding any other provision of this Stock Option, if the Participant's service as a member of the Board of Directors is terminated for cause, this entire Stock Option shall immediately expire and no portion thereof shall remain exercisable. In addition, in no event shall any portion of this Stock Option be exercisable after the Final Exercise Date.
2.    Exercise of Stock Option.
Each election to exercise this Stock Option shall be in writing, signed by the Participant or the Participant's executor, administrator, or legally appointed representative (in the event of the Participant’s incapacity) or the person or persons to whom this Stock Option is transferred by will or the applicable laws of descent and distribution (collectively, the "Option Holder"), and received by the Company at its principal office, accompanied by this certificate and payment in full as provided in the Plan. Subject to the further terms and conditions provided in the Plan, the purchase price may be paid as follows: (i) by delivery of cash or check acceptable to the Administrator; (ii) upon and following the registration of the common stock of the Company under the Securities and Exchange Act of 1934 and to the extent permitted be applicable law (as determined by the Administrator), through a broker-assisted exercise program acceptable to the Administrator; or (iii) through the delivery of shares of common stock of the Company that have been outstanding for at least six months and that have a fair market value equal to the exercise price; or (iv) through any combination of the foregoing. In the event that this Stock Option is exercised by an Option Holder other than the Participant, the Company will be under no obligation to deliver Shares hereunder unless and until it is satisfied as to the authority of the Option Holder to exercise this Stock Option.

3.    Restrictions on Transfer of Shares.
If at the time this Stock Option is exercised the Company or any of its shareholders is a party to any agreement restricting the transfer of any outstanding shares of the Company’s common stock, the Administrator may provide that this Stock Option may be exercised only if the Shares so acquired are made subject to the transfer restrictions set forth in that agreement (or if more than one such agreement is then in effect, the agreement or agreements specified by the Administrator).
4.    Withholding Agreement to Provide Security.
If at the time this Stock Option is exercised the Company determines that under applicable law and regulations it could be liable for the withholding of any federal or state tax upon exercise or with respect to a disposition of any Shares acquired upon exercise of this Stock Option, this Stock Option may not be exercised unless the person exercising this Stock Option remits to the Company any amounts determined by the Company to be required to be withheld upon exercise (or makes other arrangements satisfactory to the Company for the payment of such taxes) and gives such security as the Company deems adequate to meet its potential liability for the withholding of tax upon a disposition of the Shares and agrees to augment such security from time to time in any amount reasonably determined by the Company to be necessary to preserve the adequacy of such security.
5.    Nontransferability of Stock Option.
This Stock Option is not transferable by the Participant otherwise than by will or the laws of descent and distribution, and is exercisable during the Participant's lifetime only by the Participant (or in the event of the Participant's incapacity, the person or persons legally appointed to act on the Participant's behalf).
6.    Provisions of the Plan.
This Stock Option is subject to the provisions of the Plan, which are incorporated herein by reference. A copy of the Plan as in effect on the date of the grant of this Stock Option has been furnished to the Participant. By exercising all or any part of this Stock Option, the Participant agrees to be bound by the terms of the Plan and this certificate. All initially capitalized terms used herein will have the meaning specified in the Plan, unless another meaning is specified herein.

IN WITNESS WHEREOF, the Company has caused this instrument to be executed by its duly authorized officer.

Galena Biopharma, Inc.

By :      1
Mark W. Schwartz, President and CEO

Dated: _________________  

Acknowledged

   
    NAME

Dated:  _________________

THIS SEPARATION AND CONSULTING AGREEMENT (this “ Agreement ”) is entered into on June 24, 2015 by and between the Parties.
R E C I T A L S
WHEREAS, the Parties desire to provide for the termination of Kivinski’s employment with the Company on the terms and subject to the conditions set forth herein; and
WHEREAS, in connection with such termination, the Parties desire that Kivinski be retained to provide consulting services to the Company as provided herein; and
WHEREAS, the Parties desire to fully and finally resolve, without litigation, any and all claims and disputes between them concerning Kivinski’s employment by the Company, the termination of her employment and all related matters on the terms set forth herein;
AGREEMENTS
NOW, THEREFORE, in consideration of the foregoing and the mutual promises contained in this Agreement, the Parties agree as follows:
1. Definitions . Unless otherwise defined herein, capitalized terms used herein shall have the meanings indicated in paragraph 7.
2.      Termination of Employment; Resignation .
(a)      Kivinski’s employment with the Company terminated on the Separation Date, and the Employment Agreement, together with any of Kivinski’s previous employment arrangements with the Company, is terminated as of the Separation Date, except that the terms of the Employment Agreement that continue beyond the termination of such employment, including, but not limited to Exhibit 1 thereof ( i.e. , Employee Confidentiality, Non-Competition, and Proprietary Information Agreement) shall not be affected by this Agreement (provided, however, that the governing law and arbitration provisions of the Employment Agreement, paragraph 12 thereof, are superseded by this Agreement and have no force or effect after the Separation Date).
(b)      Kivinski hereby resigns as of the Separation Date from all offices and positions at the Company and any of its subsidiaries or affiliates.
3.      Separation Arrangements .
(a)      To the extent it shall not have done so previously, upon the execution and delivery of this Agreement, the Company shall pay Kivinski any accrued and unpaid base salary, any and all accrued and unpaid vacation pay, any other paid time off as of the Separation Date.

(b)      To the extent it shall not have done so previously, upon presentation by Kivinski on or after the Separation Date, the Company shall reimburse Kivinski for any previously unreimbursed business expenses incurred by her prior to the Separation Date in accordance with the Company’s usual expense reimbursement policies.
(c)      Kivinski acknowledges and agrees that the foregoing compensation is all of the compensation and benefits payable or otherwise to be provided to Kivinski by the Company on and after the Separation Date in connection with or as a result of Kivinski’s employment, or termination of employment, with the Company, and that Kivinski is not entitled to any other compensation, benefits or perquisites from the Company.
(d)      In consideration of this Agreement, including the Release, the Company shall pay Kivinski the following compensation:
(i)      Upon the Effective Date, the Company shall pay Kivinski $100,000, which equals four months of Kivinski’s annual salary under the Employment Agreement.
(ii)      The Company shall pay or reimburse Kivinski for up to $2,000 of reasonable, documented, out-of-pocket expenses incurred by her in relocating her residence from Oregon to her home in California following the Separation Date.
(iii)      Kivinski agrees that all compensation payable under this Subparagraph 3(d) is in addition to any compensation she is otherwise entitled to under her Employment Agreement or otherwise as a result of any obligation arising from her employment with the Company.
(e)      Kivinski agrees that all compensation payable under this Paragraph 3 shall be paid after withholding for taxes that, in the Company’s reasonable good faith judgment, are required to be withheld by the Company.
4.      Company Property . Kivinski hereby acknowledges and agrees that, to the extent she has not previously done so, on the date of this Agreement Kivinski shall return to the Company all Company property, including, but not limited to, all keys, credit cards, documents, equipment (including computer and telephone equipment) files, data, and records of any kind whatsoever that she has, or has had, in her possession or control.
5.      Consulting Agreement .
(a)      The Company hereby agrees that, commencing on the Separation Date, the Company shall engage Kivinski as a consultant, and Kivinski hereby accepts such engagement with the Company, upon the terms hereinafter set forth.

(b)      During the Term, Kivinski shall make herself reasonably available during the Company’s normal business hours to consult with the officers, directors, employees and other agents and representatives of the Company and its affiliates on all legal aspects of the business, operations and activities of the Company and its affiliates. Kivinski shall make herself so available by telephone, via the Internet or other remote access, as the Company deems reasonably necessary in the performance of her consulting services hereunder. During the Term, Kivinski shall devote such of her business time and attention as is reasonably necessary hereunder. Kivinski shall do so to the best of her abilities and in a professional and diligent manner. During the Term and subject to the performance of her duties under this paragraph 5(b), Kivinski may engage on a full-time or part-time basis in any other business activities, provided that nothing in this paragraph shall be construed as permitting Kivinski to engage in any activities expressly prohibited by the other terms and provisions of this Agreement.
(c)      Except as directed and authorized, in advance, in writing by the Chief Executive Officer of the Company, Kivinski shall have no authority, and shall not purport, to execute or agree to any contract, agreement or instrument on behalf of the Company.
(d)      Kivinski shall only provide those services that are requested of her by the Chief Executive Officer of the Company, or his designee.
(e)      As full consideration for all consulting services rendered hereunder by Kivinski, during the Term the Company shall (i) pay to Kivinski a consulting fee of $25,000 per month (prorated for any partial month), payable in accordance with the Company’s usual payroll practices, and (ii) pay or reimburse Kivinski for the premiums for continuation through COBRA or otherwise of Kivinski’s healthcare benefits as in effect prior to the Separation Date for herself and her family under the Company’s employee healthcare plans in effect from time to time; thereafter, Kivinski will be permitted to continue those benefits at her own expense through COBRA coverage, with additional materials on COBRA coverage to be provided to Kivinski by the Company at the appropriate time. Kivinski’s coverage under the Company’s plans shall be subject to the terms of the applicable plan documents and generally applicable Company policies. Nothing in this Agreement shall restrict or otherwise affect the Company’s right to alter, modify, add to or discontinue its employee healthcare benefits at any time as it may determine in its sole judgment.
(f)      Kivinski shall be fully responsible to pay any and all ordinary expenses and disbursements that she incurs in the performance of her consulting services, except to the extent Kivinski is requested to travel or incur extraordinary expense at the request of the Company in performance of her consulting services.
(g)      It is understood and agreed that, because Kivinski will not be an employee of the Company:

(i)      The Company shall not withhold any taxes from amounts paid to Kivinski pursuant to paragraph 5(e);
(ii)      Kivinski shall not be eligible to participate in any benefits or programs sponsored or financed by the Company for its employees; and
(iii)      Kivinski shall be solely liable and responsible for paying any and all taxes relating to all amounts paid to Kivinski under paragraph 5(e) or paragraph 6(c).
(h)      All systems, inventions, discoveries, apparatus, techniques, methods, know-how, formulae or improvements made, developed or conceived by the consultant during consultant’s engagement by the Company whenever or wherever made, developed or conceived, and whether or not during business hours, which constitute an improvement, on those heretofore, now or at any during consultant’s engagement, developed, manufactured or used by the Company in connection with the manufacture, process or marketing of any product heretofore or now or hereafter developed or distributed by the Company, or any services to be performed by the Company or of any product which shall or could reasonably be manufactured or developed or marketed in the reasonable expansion of the Company’s business, shall be and continue to remain the Company’s exclusive property, without any added compensation or any reimbursement for expenses to consultant, and upon the conception of any and every such invention, process, discovery or improvement and without waiting to perfect or complete it, consultant promises and agrees that consultant will immediately disclose it to the Company and to no one else and thenceforth will treat it as the property and secret of the Company. Consultant will also execute any instruments requested from time to time by the Company to vest in it complete title and ownership to such invention, discovery or improvement and will, at the request of the Company, do such acts and execute such instrument as the Company may require, but at the Company’s expense to obtain Letters of Patent, trademarks or copyrights in the United States and foreign countries, for such invention, discovery or improvement and for the purpose of vesting title thereto in the Company, all without any reimbursement for expenses (except as provided above) and without any additional compensation of any kind to consultant.
6.      Termination .
(a)      The Company shall have the right to terminate this Agreement only for Cause upon notice to Kivinski.
(b)      Kivinski shall have the right to terminate this Agreement upon not less than 10 days' notice to the Company at any time.
(c)      Upon termination of this Agreement by the Company or Kivinski, the Company shall pay any accrued and unpaid consulting fees and payments or reimbursements under paragraph 5(e) through the date of termination. The terms of paragraphs 7 and 8(b) and, to

the extent necessary to construe or enforce such paragraphs, paragraph 10 hereof shall survive the expiration or termination of the Agreement.
7.      Confidentiality; Non-Disparagement .
(a)      Kivinski agrees that, other than as required by law, she will never disclose any information whatsoever concerning the Company, her employment by the Company (except the fact and nature of her employment), or the business, clinical trials, technologies or other aspect of the Company or its business. Further, Kivinski agrees that, other than as required by law, she will never disclose any information concerning the termination of such employment, this Agreement or any of its terms or provisions, directly or by implication, except to members of her immediate family and to her legal and financial advisors, and then only on condition that they agree never to further disclose any such information to others. Kivinski further agrees that she will never disparage or criticize the Company, its business, management, affiliates or product candidates, products or technology, and that she will not otherwise do or say anything that could disrupt the good morale of Company employees or harm their interests or reputation, in each case, except in connection with any legal proceeding by Kivinski to enforce her rights under this Agreement.
(b)      The Company agrees that, other than as required by law, including, without limitation, the requirement of Form 8‑K under the Securities Exchange Act of 1934, as amended, it will never, and will never permit its officers to, disclose any information concerning Kivinski's employment by the Company, the circumstances surrounding the termination of that employment, this Agreement or any of its terms or provisions, directly or by implication, except to their respective legal and financial advisors, and then only on condition that they agree not to further disclose any such information to others. The Company further agrees that it will never make any disparaging statements concerning Kivinski in authorized corporate communications to third parties, except that the Company may provide to prospective employers of Kivinski upon their request the Company’s standard reference check and except in connection with any legal proceeding by the Company to enforce its rights under this Agreement. In any authorized corporate communications in this regard, the Company will say only that Kivinski was employed as the Company’s Vice President and General Counsel until the termination of her employment as described in the Form 8‑K referred to above.
(c)      The Parties acknowledge and agree that nothing in this Agreement constitutes an acknowledgement of wrongdoing by either of the Parties. The Parties agree not to represent or imply to any third party that the Agreement in any way reflects an admission by any of the other Parties of wrongdoing or illegal conduct.
8.      Release; Further Assurances .
(a)      In further consideration of the Company entering into this Agreement, and its promise to make payments and to provide benefits hereunder to which Kivinski is otherwise

not entitled, Kivinski shall, concurrently with her execution and delivery of this Agreement, execute and deliver to the Company the Release.
(b)      The Parties hereby agree to make, execute and deliver such other instruments or documents, and to do or cause to be done such further or additional acts, as may be reasonably necessary to effectuate the purposes or to implement the terms of this Agreement.
9.      Definitions .
(a)      As used in this Agreement, the following capitalized terms shall have the meanings indicated:
(i)      “ Agreement ” means, collectively, this Separation and Consulting Agreement, as it may be amended as provided herein, and the Release.
(ii)      “ Cause ” means the consultant’s conviction of, or plea of guilty or nolo contendere to, any felony or other crime of moral turpitude, or the consultant’s act of fraud or material dishonesty injurious to the Company or its reputation.
(iii)      The “ Company ” means Galena Biopharma, Inc., a Delaware corporation.
(iv)      “ Effective Date ” has the meaning set forth in the Release.
(v)      “ Employment Agreement ” means the employment agreement between the Company and Kivinski entered into on or about July 28, 2014.
(vi)      “ Kivinski ” means Margaret Kivinski.
(vii)      “ Parties ” means Kivinski and the Company, collectively.
(viii)      “ Release ” means the General Release in the form attached hereto as Exhibit 1 .
(ix)      “ Separation Date ” means June 18, 2015.
(x)      “ Term ” means the period commencing on the Separation Date and ending on the six-month anniversary of the Separation Date.
10.      Miscellaneous .
(a)      This Agreement may be amended only by a subsequent writing executed by the Parties.

(b)      This Agreement and the other agreements referred to in this Agreement set forth the entire understanding of the Parties regarding this subject matter and supersede all prior contracts, agreements, arrangements, communications, discussions, representations and warranties, whether oral or written, between the Parties regarding this subject matter.
(c)      Each section and subsection of this Agreement constitutes a separate and distinct provision of this Agreement. It is the intent of the Parties that the provisions of this Agreement be enforced to the fullest extent permissible under the laws and public policies applicable in each jurisdiction in which enforcement is sought. Accordingly, if any provision of this Agreement is adjudicated to be invalid, ineffective or unenforceable, the remaining provisions will not be affected by such adjudication. The invalid, ineffective or unenforceable provision will, without further action by the Parties, be automatically amended to effect the original purpose and intent of the invalid, ineffective or unenforceable provision; provided, however, that such amendment will apply only with respect to the operation of such provision in the particular jurisdiction with respect to which such adjudication is made.
(d)      None of the terms of this Agreement will be deemed to be waived or amended by either Party unless such a waiver or amendment specifically references this Agreement and is in writing signed by an authorized representative of the Party to be bound. Any such signed waiver will be effective only in the specific instance and for the specific purpose for which it was made or given.
(e)      The headings in this Agreement are solely for convenience of reference and are not to be given any effect in the construction or interpretation of this Agreement.
(f)      This Agreement may be executed in counterparts, including counterparts transmitted by electronic mail or facsimile transmission, each of which will be deemed to be an original and all of which together will constitute one and the same instrument.
(g)      Kivinski acknowledges that her failure to comply with any of the provisions of paragraph 7 of this Agreement will irreparably harm the business and that the Company will not have an adequate remedy at law in the event of such non-compliance. Therefore, Kivinski acknowledges that the Company will be entitled to injunctive relief and specific performance without the posting of bond or other security, in addition to whatever other remedies it may have, at law or in equity, in any court of competent jurisdiction against any acts of non-compliance by Kivinski under this Agreement.
(h)      The prevailing Party in any litigation relating to an alleged breach of this Agreement shall be entitled to an award of its reasonable attorneys’ fees and costs to the extent permitted by law.

(i)      This Agreement shall be governed by and construed in accordance with the substantive laws of the State of Oregon without regard to any conflict or choice of law rules that would result in the application of any other state’s law.
(j)      The Parties to this Agreement acknowledge that they have entered into this Agreement voluntarily, without coercion and based upon their judgment and not in reliance upon any representation or promises made by the other Party other than those contained or referred to herein.
(k)      This Agreement shall be binding upon and inure to the benefit of the Parties and their respective heirs, legal representatives, successors and assigns.
[Signature Page Follows]

IN WITNESS WHEREOF, the Parties have caused this Separation and Consulting Agreement to be executed as of the date first set forth above.

	

 	 	
 	/s/ Margaret Kivinski	
 	MARGARET KIVINSKI	

 	 	
 	GALENA BIOPHARMA, INC.	

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

 	 	

 	 	

 	 	

 	 	

 	 	

 	 	

 	 	

 	 	

 	 	
[Signature Page of Separation and Consulting Agreement]	

EXHIBIT 1

GENERAL RELEASE

1.    For and in consideration of the payments and other benefits provided in the Separation and Consulting Agreement, dated June 24, 2015 (the “ Separation Agreement ”), by and between Galena Biopharma, Inc. (the “ Company ”) and myself, and other good and valuable consideration, I, for and on behalf of myself and my heirs, administrators, executors, and assigns, effective the date hereof, do hereby fully and forever Release, remise and discharge the Company, its successors and assigns, and the direct and indirect parents, subsidiaries and affiliates of the Company, together with their respective officers, directors, partners, shareholders, members, managers, employees and agents (collectively, the “ Group ”), from any and all Claims (as defined below) which I had, may have had, or now have against the Company or any other member of the Group, for or by reason of any matter, cause or thing whatsoever, including any claim arising out of or attributable to my employment or the termination of my employment with the Company, including but not limited to Claims of retaliation, specifically including, but not limited to Claims arising from any complaints or disagreements with Company management, breach of contract, breach of the Employment Agreement, wrongful termination, unjust dismissal, defamation, libel or slander, or under any federal, state or local law dealing with discrimination based on age, race, sex, national origin, handicap, religion, disability or sexual preference. This Release includes, but is not limited to, all Claims arising under Title VII of the Civil Rights Act, the Americans with Disabilities Act, the Civil Rights Act of 1991, the Family Medical Leave Act, the Equal Pay Act, the ERISA, the Family and Medical Leave Act of 1993, the ADA, the Fair Labor Standards Act, and all other federal and Oregon and California state and local labor and anti-discrimination laws, the common law and any other purported restriction on an employer’s right to terminate the employment of employees. As used in this Release, the term “ Claims ” shall include all claims, covenants, warranties, promises, undertakings, actions, suits, causes of action, obligations, debts, attorneys’ fees, accounts, judgments, losses and liabilities, of whatsoever kind or nature, in law, equity or otherwise.
2.    I specifically release all Claims under the Age Discrimination in Employment Act (the “ ADEA ”) and Older Worker Benefit Protection Act relating to my employment and its termination.
3.    I understand and agree that this Release fully and finally releases and forever resolves the matters released and discharged in paragraph 1 and 2, including those which may be unknown, unanticipated and/or unsuspected, and hereby expressly waive all benefits under California Civil Code Section 1542, as well as under any other applicable state statutes or common law principles of similar effect, for the purpose of implementing a full and complete release. I expressly acknowledge that this Release is intended to include all Claims, including Claims, if any, which I do not know or suspect to exist in my favor and that this Release extinguishes those Claims to the extent that such benefits may contravene the release set forth in

this paragraph 3. I acknowledge that I have read and understand California Civil Code Section 1542, which provides as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.
4.    This Release does not release any rights which as a matter of law cannot be waived, including but not limited to the rights or claims Kivinski may have arising under any workers’ compensation statute or to vested accrued benefits earned under an employee benefit plan maintained by the Company and governed by the Employee Retirement Income Security Act of 1974. Nor is this Release intended to limit Kivinski from filing a charge with, or participating in an investigation conducted by, the Equal Employment Opportunity Commission (“EEOC”) or similar state or federal agency; provided, however, that Kivinski expressly waives and relinquishes any rights Kivinski might have to recover monetary damages or other relief, whether equitable or legal, in any such proceeding concerning events or actions that arose on or before the date Kivinski signed this Agreement and Release and Kivinski agrees to notify any such agency that this Release constitutes a full and final settlement by Kivinski of all claims released hereunder.
5.    I represent that I have not transferred or assigned, or purported to transfer or assign, any Claims or filed or permitted to be filed against the Group, individually or collectively, any lawsuits, claims, arbitrations, or proceedings and I covenant and agree that I will not do so at any time hereafter with respect to the subject matter of this Release and Claims released pursuant to this Release (including, without limitation, any Claims relating to the termination of my employment), except as may be necessary to enforce this Release, to obtain benefits described in or granted under this Release, or to seek a determination of the validity of the waiver of my rights under the ADEA. Except as otherwise provided in the preceding sentence, I will not voluntarily participate in any judicial or other proceeding of any nature or description against any member of the Group that in any way involves the allegations and facts that I could have raised against any member of the Group as of the date hereof, except as provided by law.
6.    I am specifically agreeing to the terms of this Release because the Company has agreed to pay to me money and other benefits to which I am not otherwise entitled and has provided such other good and valuable consideration as specified in the Separation Agreement. The Company has agreed to provide this money and other benefits because of my agreement to accept it in full settlement of all possible Claims I might have or ever had, and because of my execution of this Release.

7.    Notwithstanding any other provision of this Release, I will retain any rights that I have pursuant to the Separation Agreement.
8.    I acknowledge that I have read this Release in its entirety, fully understand its meaning and am executing this Release voluntarily and of my own free will with full knowledge of its significance. I acknowledge and warrant that I have had the opportunity to consider for twenty-one (21) days the terms and provisions of this Release, although I may execute the Agreement and Release before the expiration of that period, and that I have been advised by the Company to consult with an attorney prior to executing this Release. I shall have the right to revoke this Release for a period of seven (7) days following my execution of this Release, by giving written notice of such revocation to the Company. I understand that if I revoke this Release, the Separation Agreement shall be null and void ab initio and of no further force or effect and in such event I shall immediately pay and return to the Company the amount I received pursuant to paragraph 3(a)(i) of the Separation Agreement. This Release shall not become effective until the eighth day following my execution of it (the “ Effective Date ”).
9.    The Company shall be entitled to have the provisions of this Release specifically enforced through injunctive relief, without having to prove the inadequacy of the available remedies at law, and without being required to post bond or security, it being acknowledged and agreed that such breach will cause irreparable injury to the Company and that money damages will not provide an adequate remedy to the Company. Moreover, I understand and agree that if I breach any provisions of this Release, in addition to any other legal or equitable remedy the Company may have, I shall reimburse the Company for all its reasonable attorneys’ fees and costs incurred by it arising out of any such breach to the extent permitted by and as consistent with the law. The remedies set forth in this paragraph 9 shall not apply to any challenge to the validity of the waiver and Release of my rights under the ADEA. In the event I challenge the validity of the waiver and Release of my rights under the ADEA, then the Company’s right to attorneys’ fees and costs shall be governed by the provisions of the ADEA, so that the Company may recover such fees and costs if the lawsuit is brought by me in bad faith. Any such action permitted to the Company by this paragraph, however, shall not affect or impair any of my obligations under this Release, including without limitation, the Release of claims in paragraphs 1 through 3 hereof. I further agree that nothing herein shall preclude the Company from recovering attorneys’ fees, costs or any other remedies specifically authorized under applicable law.
10.    In the event that any one or more of the provisions of this Release is held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions will not in any way be affected or impaired thereby. Moreover, if any one or more of the provisions contained in this Release is held to be excessively broad as to duration, scope, activity or subject, such provisions will be construed by limiting and reducing them so as to be enforceable to the maximum extent compatible with applicable law.

11.    Nothing herein shall be deemed to constitute an admission of wrongdoing by the Company or any member of the Group. Neither this Release nor any of its terms shall be used as an admission or introduced as evidence as to any issue of law or fact in any proceeding, suit or action, other than an action to enforce this Release.
12.    The terms of this Release and all rights and obligations of the parties thereto, including its enforcement, shall be interpreted and governed by the laws of the State of Oregon, without regard to the choice of law provisions of Oregon law, to the extent such provisions require the application of the laws of any other jurisdiction.

		

 	 	
Dated: June 24, 2015	                  	
 	MARGARET KIVINSKI	

GENERAL RELEASE

1.    For and in consideration of the payments and other benefits provided in the Separation and Consulting Agreement, dated June 24, 2015 (the “ Separation Agreement ”), by and between Galena Biopharma, Inc. (the “ Company ”) and myself, and other good and valuable consideration, I, for and on behalf of myself and my heirs, administrators, executors, and assigns, effective the date hereof, do hereby fully and forever Release, remise and discharge the Company, its successors and assigns, and the direct and indirect parents, subsidiaries and affiliates of the Company, together with their respective officers, directors, partners, shareholders, members, managers, employees and agents (collectively, the “ Group ”), from any and all Claims (as defined below) which I had, may have had, or now have against the Company or any other member of the Group, for or by reason of any matter, cause or thing whatsoever, including any claim arising out of or attributable to my employment or the termination of my employment with the Company, including but not limited to Claims of retaliation, specifically including, but not limited to Claims arising from any complaints or disagreements with Company management, breach of contract, breach of the Employment Agreement, wrongful termination, unjust dismissal, defamation, libel or slander, or under any federal, state or local law dealing with discrimination based on age, race, sex, national origin, handicap, religion, disability or sexual preference. This Release includes, but is not limited to, all Claims arising under Title VII of the Civil Rights Act, the Americans with Disabilities Act, the Civil Rights Act of 1991, the Family Medical Leave Act, the Equal Pay Act, the ERISA, the Family and Medical Leave Act of 1993, the ADA, the Fair Labor Standards Act, and all other federal and Oregon and California state and local labor and anti-discrimination laws, the common law and any other purported restriction on an employer’s right to terminate the employment of employees. As used in this Release, the term “ Claims ” shall include all claims, covenants, warranties, promises, undertakings, actions, suits, causes of action, obligations, debts, attorneys’ fees, accounts, judgments, losses and liabilities, of whatsoever kind or nature, in law, equity or otherwise.
2.    I specifically release all Claims under the Age Discrimination in Employment Act (the “ ADEA ”) and Older Worker Benefit Protection Act relating to my employment and its termination.
3.    I understand and agree that this Release fully and finally releases and forever resolves the matters released and discharged in paragraph 1 and 2, including those which may be unknown, unanticipated and/or unsuspected, and hereby expressly waive all benefits under California Civil Code Section 1542, as well as under any other applicable state statutes or common law principles of similar effect, for the purpose of implementing a full and complete release. I expressly acknowledge that this Release is intended to include all Claims, including Claims, if any, which I do not know or suspect to exist in my favor and that this Release extinguishes those Claims to the extent that such benefits may contravene the release set forth in this paragraph 3. I acknowledge that I have read and understand California Civil Code Section 1542, which provides as follows:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.
4.    This Release does not release any rights which as a matter of law cannot be waived, including but not limited to the rights or claims Kivinski may have arising under any workers’ compensation statute or to vested accrued benefits earned under an employee benefit plan maintained by the Company and governed by the Employee Retirement Income Security Act of 1974. Nor is this Release intended to limit Kivinski from filing a charge with, or participating in an investigation conducted by, the Equal Employment Opportunity Commission (“EEOC”) or similar state or federal agency; provided, however, that Kivinski expressly waives and relinquishes any rights Kivinski might have to recover monetary damages or other relief, whether equitable or legal, in any such proceeding concerning events or actions that arose on or before the date Kivinski signed this Agreement and Release and Kivinski agrees to notify any such agency that this Release constitutes a full and final settlement by Kivinski of all claims released hereunder.
5.    I represent that I have not transferred or assigned, or purported to transfer or assign, any Claims or filed or permitted to be filed against the Group, individually or collectively, any lawsuits, claims, arbitrations, or proceedings and I covenant and agree that I will not do so at any time hereafter with respect to the subject matter of this Release and Claims released pursuant to this Release (including, without limitation, any Claims relating to the termination of my employment), except as may be necessary to enforce this Release, to obtain benefits described in or granted under this Release, or to seek a determination of the validity of the waiver of my rights under the ADEA. Except as otherwise provided in the preceding sentence, I will not voluntarily participate in any judicial or other proceeding of any nature or description against any member of the Group that in any way involves the allegations and facts that I could have raised against any member of the Group as of the date hereof, except as provided by law.
6.    I am specifically agreeing to the terms of this Release because the Company has agreed to pay to me money and other benefits to which I am not otherwise entitled and has provided such other good and valuable consideration as specified in the Separation Agreement. The Company has agreed to provide this money and other benefits because of my agreement to accept it in full settlement of all possible Claims I might have or ever had, and because of my execution of this Release.
7.    Notwithstanding any other provision of this Release, I will retain any rights that I have pursuant to the Separation Agreement.

8.    I acknowledge that I have read this Release in its entirety, fully understand its meaning and am executing this Release voluntarily and of my own free will with full knowledge of its significance. I acknowledge and warrant that I have had the opportunity to consider for twenty-one (21) days the terms and provisions of this Release, although I may execute the Agreement and Release before the expiration of that period, and that I have been advised by the Company to consult with an attorney prior to executing this Release. I shall have the right to revoke this Release for a period of seven (7) days following my execution of this Release, by giving written notice of such revocation to the Company. I understand that if I revoke this Release, the Separation Agreement shall be null and void ab initio and of no further force or effect and in such event I shall immediately pay and return to the Company the amount I received pursuant to paragraph 3(a)(i) of the Separation Agreement. This Release shall not become effective until the eighth day following my execution of it (the “ Effective Date ”).
9.    The Company shall be entitled to have the provisions of this Release specifically enforced through injunctive relief, without having to prove the inadequacy of the available remedies at law, and without being required to post bond or security, it being acknowledged and agreed that such breach will cause irreparable injury to the Company and that money damages will not provide an adequate remedy to the Company. Moreover, I understand and agree that if I breach any provisions of this Release, in addition to any other legal or equitable remedy the Company may have, I shall reimburse the Company for all its reasonable attorneys’ fees and costs incurred by it arising out of any such breach to the extent permitted by and as consistent with the law. The remedies set forth in this paragraph 9 shall not apply to any challenge to the validity of the waiver and Release of my rights under the ADEA. In the event I challenge the validity of the waiver and Release of my rights under the ADEA, then the Company’s right to attorneys’ fees and costs shall be governed by the provisions of the ADEA, so that the Company may recover such fees and costs if the lawsuit is brought by me in bad faith. Any such action permitted to the Company by this paragraph, however, shall not affect or impair any of my obligations under this Release, including without limitation, the Release of claims in paragraphs 1 through 3 hereof. I further agree that nothing herein shall preclude the Company from recovering attorneys’ fees, costs or any other remedies specifically authorized under applicable law.
10.    In the event that any one or more of the provisions of this Release is held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions will not in any way be affected or impaired thereby. Moreover, if any one or more of the provisions contained in this Release is held to be excessively broad as to duration, scope, activity or subject, such provisions will be construed by limiting and reducing them so as to be enforceable to the maximum extent compatible with applicable law.
11.    Nothing herein shall be deemed to constitute an admission of wrongdoing by the Company or any member of the Group. Neither this Release nor any of its terms shall be used as an admission or introduced as evidence as to any issue of law or fact in any proceeding, suit or action, other than an action to enforce this Release.

12.    The terms of this Release and all rights and obligations of the parties thereto, including its enforcement, shall be interpreted and governed by the laws of the State of Oregon, without regard to the choice of law provisions of Oregon law, to the extent such provisions require the application of the laws of any other jurisdiction.

		

 	 	
Dated: June 24, 2015	/s/ Margaret Kivinski	
 	MARGARET KIVINSKI	

June 23, 2015

Via Electronic Mail

Thomas J. Knapp

Dear Tom:

We are pleased to extend our offer of employment as interim General Counsel of Galena Biopharma, Inc. (the “ Company ”) on the terms set forth or referred to in this offer letter.

We understand that you have agreed to serve as a consultant to Sucampo Pharmaceuticals, Inc. through August of this year, but that such services will not interfere materially with your duties to the Company. Except for the performance of your consulting services to Sucampo, during your employment by the Company you will devote all of your business and professional time, energy, business judgment, knowledge, skill and best efforts to the performance of your employment duties with the Company. You will report directly to the Company’s President and Chief Executive Officer.

During your employment, you will commute as necessary to work at the Company’s offices in Portland, Oregon, or in the San Francisco Bay area to which the offices may be relocated, except for travel elsewhere from time to time as reasonably required in connection with your employment duties. Our present expectation is that you initially would work from the Company’s offices at least three days a week. On the days you are not working at the Company’s offices, you will make yourself available to work by remote access from your home in Maryland.

If you accept our offer, your employment will commence on Thursday, June 25, 2015 and end on December 31, 2015, unless your employment is sooner terminated as provided below in this officer letter or is extended by mutual agreement.

COMPENSATION AND CERTAIN BENEFITS

Your compensation and employee benefits will be as follows:

(a) During the term of your employment by the Company, you will be entitled to a salary of $27,083.33 per month (prorated for any period of less than a full month), payable in accordance with our standard payroll practices and subject to deductions for applicable federal, state and local withholding.

Thomas J. Knapp June 23, 2015

Page 2 of 4

(b) You will be entitled to reimbursement of your reasonable business expenses, including your reasonable travel and lodging expenses only incurred in connection with your commute to the Company’s offices and the reasonable telephone expenses and similar out-of- pocket expense incurred in working remotely, in accordance with our standard expense reimbursement practices.

(c) The Company will provide you the use of a Company computer, which you will be required to return to the Company upon termination of your employment.

(d) As a one-time signing bonus, upon the date your employment commences, the Company will grant to you under its 2007 Amended and Restated Incentive Plan, as amended (the “ 2007 Plan ”), a non-qualified stock option to purchase up to 40,000 shares of common stock of the Company. The option will have an exercise price equal to the closing price of our common stock on the date of grant, will be subject to vesting in six approximately equal monthly installments as of the end of each month during the period ending December 31, 2015, subject to your remaining in our continuous service through each monthly vesting date, and be on such other terms and provisions as are contained in the Company’s standard-form nonqualified stock option agreement under the 2007 Plan.

EMPLOYEE BENEFIT PLANS

During your employment with the Company, you will be entitled to paid time off in accordance with our standard policies and to participate in all group benefit plans made available generally to employees of the Company. The Company reserves the right to amend, modify or terminate its policies and benefit plans at any time.

EMPLOYEE HANDBOOK AND OTHER POLICIES

You will be bound by the employment terms contained in the Company’s Employee Handbook and other written policies of the Company in effect from time to time and be required to sign the Company’s standard-form Employee Confidentiality, Non-competition and Proprietary Information Agreement.

RIGHT TO WORK STATUS

Under the Immigration Reform and Control Act, the Company is required to verify identity and work authorization of all newly hired employees. Therefore, you will be required to complete the I-9 form upon hire. Within three business days of beginning your employment, you also will need to supply acceptable documentation (as noted on the I-9 Form) of your identity

Thomas J. Knapp June 23, 2015

Page 3 of 4

and work authorization. For your convenience, we have enclosed a copy of the I-9 form and List of acceptable documentation for your review.

BACKGROUND CHECK

This offer is subject to our completion of a customary background check satisfactory to us.

NATURE OF “AT WILL” EMPLOYMENT

If you accept this offer, your employment will be “at will,” which means that either you or the Company may terminate your employment relationship at any time, with or without cause, upon not less than 30 days’ advance written notice. This means, among other things, that upon termination of your employment relationship, the Company’s sole obligation to you will be to pay you any accrued and unpaid salary, plus any unreimbursed business expenses and accrued but unused paid time off as provided herein, through the termination date and any benefits in accordance with the Company’s employee benefit plans in which you are then participating as provided herein.

* * * * * *

If you require further clarification or information, please contact me.
If the terms of employment set forth in this offer letter are acceptable to you, please sign and date a copy of this offer letter where indicated below and return it to me. You can fax this page to me or sign, scan, and email it to me.

Upon execution by you, this offer letter will replace any prior or contemporaneous oral or written understanding or agreement concerning terms of employment between you and the Company.

This offer letter and any dispute concerning the validity, enforceability or interpretation of this offer letter or the terms of your employment will be governed by the internal laws of the State of Oregon without regard to conflict-of-law principles.

We look forward to you joining our team and to a mutually rewarding relationship.

Sincerely,

/s/ Mark W. Schwartz, Ph. D.

Thomas J. Knapp June 23, 2015
Page 4 of 4

President and Chief Executive Officer

I hereby accept the foregoing offer on the terms set forth above and acknowledge this agreement with the Company; and that no other terms, conditions or representations other than those contained herein form part of this agreement. I understand that my employment relationship is on an “at-will” basis and can be terminated by either the Company or myself at any time, with or without cause, or upon not less than 30 days’ advance written notice. I hereby represent and warrant to the Company that (a) I have the legal right to enter into this agreement and to perform my employment obligations hereunder and (b) am not a party to any agreement or understanding, and am not subject to any restriction, which, in either case, could prevent me from entering into this agreement or performing my employment duties hereunder.

	

 	 	
 	 	
Dated: June 24, 2015	/s/ Thomas J. Knapp	

Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Mark W. Schwartz, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q 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 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: August 6, 2015

	
		
 	/s/ Mark W. Schwartz	
 	Mark W. Schwartz	
 	President and Chief Executive Officer	

Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Ryan M. Dunlap, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q 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: August 6, 2015

	
		
 	/s/ Ryan M. Dunlap	
 	Ryan M. Dunlap	
 	Vice President, 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 Quarterly Report of Galena Biopharma, Inc., (the “Company”) on Form 10-Q for the quarter ended June 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned officers 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/ Mark W. Schwartz	 	/s/ Ryan M. Dunlap	
Mark W. Schwartz	 	Ryan M. Dunlap	
President and Chief Executive Officer	 	Vice President, Chief Financial Officer	
 	 	 	
August 6, 2015	 	August 6, 2015