Accusations are heating up in the drama involving Hemispherx Biopharma, Inc (AMEX:HEB) and the law firms trying to go after the well capitalized biotech on behalf of investors.
The latest of several law firms to jump on the company is led by Former Attorney General of Louisiana Charles C. Foti, Jr. and his law firm Kahn Swick & Foti, LLC. They are notifying Hemispherx investors that they would like to discuss their legal rights with them.
The firm says investors have only until January 11, 2010 to apply for lead plaintiff in a securities class action lawsuit filed in the United States District Court for the Eastern District of Pennsylvania, on behalf of all purchasers of the securities of Hemispherx Biopharma, Inc. ("Hemispherx" or the "Company") between February 18, 2009 and October 30, 2009 (the "Class Period"). No class has yet been certified in this action.
According to a press release sent out by the law firm Thursday morning, attorneys there feel that Hemispherx and certain of its executive officers are charged with making a series of materially false and misleading statements related to the Company's business and operations in violation of the Securities Exchange Act of 1934. Specifically, the complaint alleges that, during the Class Period, defendants misled investors regarding the status of Hemispherx's New Drug Application ("NDA") for Ampligen with the U.S. Food and Drug Administration ("FDA"). Including, that defendants failed to disclose and misrepresented the fact that the FDA had requested several reports from the Company before the NDA could even be considered, thus delaying the possible approval of Ampligen by several months at a minimum.
Others claim that the paperwork filed with the SEC was very clear as to which reports the FDA was/is expecting from the company as part of their application and that the lawsuits have been filed without enough legal justification.
The law firm says that on November 2, 2009, when the Company belatedly disclosed this information, the per share price of Hemispherx's common stock dropped from $1.45 on the previous day to $1.13, a drop of more than 20%. The following day, reporters on TheStreet.com stated that:
Hemispherx Biopharma issued an "update" to the regulatory status of its chronic fatigue syndrome drug Ampligen in which the company essentially admits that its prior public statements were false and misleading.
[The Company's CEO] made these statements both before and immediately after the FDA approval decision date for Ampligen on May 25, which came and went without any word from the agency. We now know that Carter's statements were demonstrably false. The FDA application for Ampligen was not complete because several items were outstanding, the company now states. These included FDA requests for data on Ampligen's safety both in humans and animals.
The FDA also required additional information about Ampligen's manufacturing.
Carter's public statements helped boost Hemispherx's stock price during the spring and early summer months and benefited the company when it went to raise money from investors.
BioMedReports conducted an interview with HEB's CEO, William A. Carter, in early October- prior to the November 2 date listed in the law firm's press release. During that interview, Carter was asked specifically about certain outstanding reports which were rumored to be due to the FDA and whose details were found in the company's last 10-Q quarterly report. Carter's comments about the FDA Application and it's status can be heard here.
Did the company meet its responsibility to disclose this information to investors without attempting to mislead them?
For now, the company has stated that it believes that the lawsuits have no merit and advises its shareholders to read carefully the recent company public releases regarding the FDA review process and status reports.
Going back through those records, it appears that HEB's application was accepted by FDA regulators and deemed sufficiently complete for formal review of Ampligen as a treatment for Chronic Fatigue Syndrome on July 08, 2008. That "complete for formal review" status could become a key issue if the lawsuits actually make it to court.
The FDA cannot comment on pending drug approvals or their applications, but during a conference call shortly after the NDA was accepted, Carter addressed the application and confirmed that the FDA had deemed the paperwork "complete."
"Several days ago the FDA acknowledged that our NDA was complete and ready for substantive review and they indicated to us that on or before February 25, 2009, they will have reached their final decisions," said Carter to investors.
Was that the truth?
On Feb 18th, The FDA notified the company of a formal 3 month extension pushing the PDUFA date to May 25, 2009. According to documents dealing with those actions, the FDA did not request new information be submitted by the company at either of those points in time.
On May 26th, one day after the already extended timeframe, the company announced that the FDA responded to them and that due to staff scheduling issues they might need more time. Regulators also indicated that it would likely take one to two weeks for them to respond with a decision.
Months later, the company is still dealing with what one Wall Street Analyst calls the "PDUFA Netherworld."
Looking back further into the past, the company originally attempted to submit their Ampligen NDA in the Fall of 2007 only to be met with a "refuse to file" letter from the agency in December of the same year. In that letter, the FDA noted deficiencies and the company requested a meeting with the FDA. Not long after that, the company re-filed the NDA, this time with amendments, and the decision process began.
Complicating the matter further is the fact that throughout its history, Ampligen has been, at one point or another, under review at four different departments within the FDA. During its run in development and through the clinical trials, so little was known about Chronic Fatigue Syndrome as an illness that there were questions and confusion about how Ampligen should be classified and under which department's jurisdiction. No other drug has ever been approved for the illness and the application document - comprised of tens of thousands of pages of complex data - deals with a double stranded RNA molecule. No such type of indication has ever been approved by the regulatory agency.
Holzer Holzer & Fistel, LLC, an Atlanta, Georgia law firm, announced Thursday that they have filed suit against the company. On the same day, after the market closed, the law firm of Izard Nobel LLP, has also jumped in to the ring announcing their own lawsuit. The Law Offices Bernard M. Gross, P.C. commenced a class action lawsuit on Wednesday and have posted a copy of their complaint on their website at www.bernardmgross.com. They join the law firm of Dyer & Berens LLP, which announced their suit on Tuesday.
Investors should expect that more law firms will attempt to pile on against HEB. Experts say the severity or merit of the suit should not be measured by the number of firms that jump on cases involving public companies. In a vast majority of these cases, the firms get together and consolidate the suits, with one or two of them finally agreeing to take the lead.
Disclosure: No positions