Is Hemispherx BioPharma Undervalued?

| About: Hemispherx Biopharma, (HEB)

Comparing Hemispherx BioPharma, Inc.'s (NYSEMKT:HEB) fundamentals and PPS with Medivation, Inc. (MDV) (for example), one could conclude that there is either something wrong with HEB, with MDV or with the market.

HEB's experimental drug Ampligen completed a phase III for chronic fatigue syndrome [CFS] in 2004 and will file an NDA soon, says the company.

The Center for Disease Control [CDC] referred to CFS as a disabling disease, as disabling as other severe chronic conditions like MS, COPD and rheumatoid arthritis. This was in response to findings by a research team led by the CDC's Dr.s William Reeves and Suzanne Vernon, which published ground-breaking research that suggests a biological basis for CFS.

In recent weeks, the CDC has stepped up its public awareness campaign, broadcasting public service announcements on radio and television, as well raising the spotlight on its website. The Agency's new public service announcement states that CFS affects more than 1 million Americans annually.

While several of the multinational pharmaceutical companies have tackled the symptoms and causes of CFS, none to date have had measurable success in developing new drugs. Currently, there are no approved therapies for CFS.

In 2004 HEB completed the phase III clinical trial for use of Ampligen in the treatment of CFS. Clinical data on the primary endpoint exercise treadmill duration showed that patients receiving Ampligen for 40 weeks improved exercise treadmill performance by a medically and statistically significant amount compared to the placebo group. New data was presented on increases in exercise capacity with Ampligen and placebo which were correlated with an improved ability to utilize oxygen, so called, maximum oxygen consumption (or VO2max).

VO2max has been previously shown by others to be decreased with individuals with CFS. An abnormal exercise stress test, including a low VO2max, could help qualify CFS patients for disability under Social Security Administration rules. Additional data on subset analyses showed that both stratification cohorts (those with baseline exercise treadmill duration greater than or less than nine minutes) improved exercise capacity by over 6.5%, an amount considered medically significant in other chronic diseases.

Ampligen has received orphan drug product designation [FDA] (at a time when the real number of CFS patients was underestimated), emergency (compassionate) cost Recovery sales authorization [FDA] and "promising" clinical outcome recognition based on the evaluation of certain summary clinical reports (AHRQ, or the Agency Health Research Quality).

According to the latest annual report:

The main U.S. ME/CFS treatment patent (#6130206) expires October 10, 2017. The main patents covering HIV treatment (#4820696, #5063209, and #5091374) expired or expire on April 11, 2006, November 5, 2008, and February 25, 2009, respectively; Hepatitis treatment coverage is conveyed by U.S. patent #5593973 which expires on January 14, 2014. The U.S. Ampligen Trademark (#1,515,099) expires on December 6, 2008 and can be renewed thereafter for an additional 10 years. The FDA has granted us "orphan drug status" for our nucleic acid-derived therapeutics for ME/CFS, HIV, and renal cell carcinoma and malignant melanoma.

Orphan drug status grants them protection against competition for a period of seven years following FDA approval, as well as certain federal tax incentives, and other regulatory benefits. Patent coverage for the HIV indication following the expiration of patent #4820696, #5063209 and #5091374 is planned to be obtained from patent pending application #PCT/US 0239890. In the event that this patent application is not approved, they still have the marketing protection provided by the orphan drug designation for using Ampligen to treat HIV.

What's wrong with a company with these fundamentals and such a low PPS?

I don't know.

Can someone please tell me what I don't see?

By the way, on average it takes a biotech company 12 years after its IPO before it sees its first profit. (cf Science Business: the Promise, the Reality, and the Future of Biotech, Harvard business professor Gary P. Pisano).

Heb completed its IPO on November 2, 1995.

Disclosure: Author is long HEB.