D-Day is fast-approaching for Hemispherx Biopharma's (NYSEMKT:HEB) New Drug Application for Ampligen, an anti-viral treatment indicated for use in patients suffering from chronic fatigue syndrome (CFS). The drug is slated to go before the FDA's Arthritis Advisory Committee on December 20th, 2012. Yesterday, HEB shares plunged upon the release of the FDA's briefing documents on Ampligen, which many investors viewed as overtly negative. Personally, I believe investors dramatically overreacted to the briefing documents, and will outline why in this article.
Investors and numerous media outlets alike panned the briefing documents, suggesting that the FDA has basically rejected HEB's claims of safety and efficacy for Ampligen. Moreover, there were various statements made after the official release that HEB somehow "misled", "lied", or "falsified trial data", and the briefing documents are proof of this willful deceit.
I believe this is a fundamental misunderstanding of CFS, and the inherent difficulties clinical trials for this disease pose. But I guess it makes a more sensationalistic story to call the company a "liar" publicly. While there were certainly some critical reporting issues in terms of the company's coding of serious adverse events (see briefing documents), one has to keep in mind that the FDA itself has stated that they do not have a clear understanding of how to measure efficacy in a meaningful way for a proposed CFS treatment. The problems facing Ampligen-or any putative therapy for CFS for that matter, is that the underlying cause(s) are unknown. As a result, there are quite possibly distinct sub-groups within any potential CFS study population with markedly distinct pathophysiologies, and hence efficacy measures would need to be tailored to the sub-group.
Ampligen's trials had no way to account for this meta-population problem beyond looking for interesting trends within the data set. And that is what they did. In the briefing documents, the FDA referred to these statistical tests as a means for "hypothesis generating", not efficacy testing. As you can see this is a circular argument. No one seems to know what an appropriate biomarker for the general CFS population is, but the FDA is holding Ampligen up to an unrealistic standard nonetheless. In the end, HEB did find statistical support that Ampligen provides a biologically meaningful impact on the lives of at least some patients with CFS.
Even so, it is important to keep in mind that the FDA's briefing documents were drawn up by a statistician and a clinical trial expert with little expertise of the actual disease. Their only concern was taking a close look at the data, without much insight from the biological end. I've read dozens of these documents, and they are always skewed towards negativity. Scientists are trained to be rigorous, and that rigor is oft-mistaken for negativity. Although the statisticians didn't care for HEB's reanalysis, the only real world alternative was to do nothing at all due to the complex pathophysiology of CFS. Hemispherx is thus being penalized for the scientific community's willful ignorance on CFS for decades, and not being rewarded for taking a major risk of pushing Ampligen through clinical trials.
Despite all this negativity, I firmly believe Ampligen will receive an accelerated approval with the requirement of a post-marketing study. Besides the reasons outlined in my previous article, my belief was reaffirmed upon the official release of the committee's voting members. Here is the list:
1. Lisa Gualtieri, PhD, ScM(Consumer Representative)
2. Irwin J. Russell, MD, PhD
3. Robert Lahita, MD, PhD
4. Larry Borish, MD
5. Lenore Buckley, MD, MPH(Acting Chairperson)
6. Ralph B. D'Agostino, Sr., PhD
7. Alaine Perry, MPH (Patient Representative)
8. Jacqueline Gardner, MPH, PhD
9. Matthew Rudorfer, MD
10. Sean Hennessy, PharmD, PhD
11. Elizabeth Unger, PhD, MD
12. Anthony Komaroff, MD, MA
13. James H. Ware, PhD
14. Gailen D. Marshall, Jr., MD, PhD
According to the FDA's documents, there will be 14 voting members come December 20th, 2012. I would highly recommend investors spend some time researching the academic background of each member as it pertains to CFS. My research suggests that we are going to see a very close, but positive vote. I am expecting at best a 10-4 vote in favor of approval, and a worst case being 8-6, also in favor. The composition of this committee is rather intriguing, with many members having a long, sympathetic past with CFS. That said, I fully expect the statistical experts, and those with little connection to the affliction to vote no.
In conclusion, I never believed Ampligen was going to be a slam dunk approval, but the truth is that little has changed in terms of the drug's chances. If you were keeping up with this story, the FDA's negativity shouldn't be surprising, and the composition of this panel should also not be surprising. The major risk is how the FDA would deal with a slightly positive vote, which appears to be the most likely scenario. Overall, Ampligen is going to shock a lot of people come December 20th, 2012, and investors with the insight to buy at these levels should be richly rewarded.
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.