Ampligen: The Political Calculus Has Changed

Dec.12.12 | About: Hemispherx Biopharma, (HEB)

Hemispherx Biopharma (NYSEMKT:HEB) and its anti-viral drug Ampligen, currently under FDA review, have grabbed my full attention. I cover a wide diversity of stocks as a freelance writer, and thus can only devote considerable attention to stocks in which I have a large position. Until recently, I did not have a core position in HEB, and only traded the stock based on technical indicators. In fact, when I first began writing about Hemispherx, I fully admit that it was purely out of interest in its potential as a so-called 'bio run-up' play (i.e., biopharmas that gain positive momentum prior to a catalyst). Like many financials writers before me, I took a cursory look at the company, the drug, and thought HEB should only be viewed as a quick momentum play. Ampligen, after all, was doomed to receive another Complete Response Letter from the FDA.

After reading the transcript to the FDA's September 13th, 2012 Myalgic Encephalomyelitis (ME) stakeholder's meeting, however, I am a convert. Well, it wasn't quite that simple, but this was the initial catalyst that led to my firm belief that the FDA is indeed going to give Ampligen an "accelerated approval status" under the new FDA Safety and Innovation Act (FDASIA) signed into law last July. I could go through a litany of facts backing this claim, but this excellent post has already done so. Indeed, I highly recommend investors read that post to understand the logic behind the remainder of this article.

As of today, I have decided to considerably increase my position in HEB, and go long the stock. With a monopoly on a potential multi-billion dollar market, HEB will undoubtedly triple, at a minimum, from current levels upon an FDA approval of Ampligen. And once you have read through the publicly available info on Ampligen and the U.S. Government's current position on ME, there can only be one conclusion: the FDA is going to use the newly enacted FDASIA to push through a conditional approval of Ampligen. The politics of ME have changed dramatically since Ampligen last went before an FDA review panel in 2009. Patient advocacy groups now have the ear of President Obama, and several U.S. Senators helped arrange the stakeholder's meeting with the FDA last September. In fact, President Obama pushed the National Institutes of Health to significantly increase the research priority of ME this year, showing the significant political will fomenting behind this debilitating disease.

So here is the political calculus facing the FDA regarding Ampligen. Patient advocacy groups, U.S. Senators, and the U.S President have all pushed for an FDA approved therapeutic option for ME. Let's be clear on this: there is no alternative to Ampligen at this time nor will there be any time soon. Hence, this could be the last chance to get an ME therapy approved for several years. It's also important to note that upon accepting Hemispherx's New Drug Application last July, the FDA agreed that the review will focus on the drug's efficacy, not safety. So the FDA does feel comfortable with the drug's safety profile, and this will have a major impact on the final outcome.

At first glance, the FDA appears to be facing a serious regulatory problem. The agency already made it clear in 2009 that they were less than enthusiastic about the previous clinical trial, and wanted new trials to address their efficacy concerns. However, Ampligen has now picked up some very powerful political allies, backing the agency into a proverbial corner. The beauty of the new FDASIA, however, is that the FDA can deal with both issues simultaneously. And I believe they are eager to do so. Specifically, the FDA can give Ampligen accelerated approval and subsequently require an extensive post-marketing study to deal with the efficacy issue.

This is the point in the story where the safety issue becomes a factor. A major issue that will weigh heavily on the Advisory Committee come December 20th is Ampligen's risk vs. reward profile. Now that the drug is viewed as safe, the calculus becomes rather simple. Putting this all together, there are no alternative treatment options for a "serious and life-threatening" condition, the drug in question is "safe", and the agency can require the company to perform an extensive post-marketing study to handle efficacy concerns under new legislation. Simply put, the scales are tipping heavily in favor of an approval for Ampligen this time around.

In conclusion, I've read the publicly available clinical trial results on Ampligen, read through numerous patient testimonials, the stakeholder meeting transcript, and cannot imagine the FDA issuing another CRL. In fact, an accelerated approval, coupled to a hefty post-marketing study, is the only reasonable course of action. Shares of HEB are thus tremendously undervalued at current levels, reflecting the extreme pessimism surrounding Ampligen due to its long and dark past. The past is the past, however. And the political calculus finally favors an Ampligen approval.

Disclosure: I am long HEB. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.