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In what has definitely not been its finest week, Hemispherx Biopharma (NYSEMKT:HEB) has seen its shares fall heavily after being forced to admit that there were still several issues outstanding with its NDA filing for lead drug, Ampligen, that would mean essential paper work for getting approval in chronic fatigue syndrome (CFS) would not be completed until December.

While delays are a normal part of the long and difficult process of getting a drug approved, what the market is punishing Hemispherx for, and rightly so, is the fact that the company had previously made statements that appeared to support the idea that the drug would win a marketing license in May, rather than the truth that its NDA filing was incomplete. What has added insult to injury is that Hemispherx took the opportunity to raise money not once but twice in May, bagging $34.4 million after the shares more than doubled as investors became increasingly excited as the ‘PDUFA decision’ approached (Event - Hemispherx shares liven up ahead of chronic fatigue drug PDUFA date May 19, 2009).

Confession Good for the Soul, Not the Shares

After a wait of almost six months, the group has finally and formally informed the market that there are outstanding matters, including manufacturing issues, that it needs to sort out before there is any hope of approval.

Given the nature of the issues it is clear that these would have existed as the group was approaching the May PDUFA date, making the chances of approval almost non-existent, a material event that the Hemispherx management team neglected to mention. In fact, the group issued a statement on May 26 claiming that approval would only be delayed by one to two weeks.

However, since May there has been some impressive back peddling, and in August the group gave the first indication that all was not rosy in the garden, after it admitted it was working with its contract manufacturer, Hollister-Stier Laboratories, to sort out problems in the final part of the manufacturing process, which are now expected to be completed by the end of 2009.

More Doubts

Perhaps last week’s events should not have come as too much of a surprise, as Hemispherx has a history of badly filed NDAs. In December 2007, the product got a refusal to file letter from the FDA, which claimed that the application was substantially incomplete, with an impressive 14 outstanding items.

Over the last week, shares in the company have fallen by 16% as a result of the revised filing date. But investors should not hold out too much hope of a recovery any time soon.

The discovery of a potential viral link to CFS has cast doubt on whether Ampligen will eventually be successful as a treatment for the disorder. This was made more questionable by the drug's uncertain performance as an anti-viral and retroviral, as testified by the lack of news on the HIV and hepatitis C and B programs where Ampligen is being studied.

If Ampligen is found not to be effective in CFS, it is hard to see where the drug will go next. Hemispherx’s own scatter gun approach to developing the drug, which has seen it in trials for West Nile Virus, Sars, as well as melanoma and kidney cancer, indicates that the group is also uncertain of the real potential of Ampligen.