Hemispherx Biopharma's (HEB) CEO Thomas Equels on Q4 2015 Results - Earnings Call Transcript

| About: Hemispherx Biopharma, (HEB)
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Hemispherx Biopharma, Inc. (NYSEMKT:HEB) Q4 2015 Earnings Conference Call March 30, 2016 2:00 PM ET

Executives

Thomas Equels - President and CEO

William Mitchell - Chairman

Dianne Will - Investor Relations

Analysts

Operator

Good afternoon, ladies and gentlemen and welcome to the Hemispherx Biopharma Conference Call. At this time all lines have been placed on a listen-only mode. Before management begins speaking, the company has the following statement. To the extent that statements on this conference call are not strictly historical, all such statements are forward-looking, are based upon the current beliefs and expectations of the company’s management, are subject to significant risks and uncertainties and are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Words such as intends, plans, potential, beliefs, potentially, possible and similar expressions are intended to identify forward-looking statements. The inclusion of forward-looking statements should not be regarded as a representation by Hemispherx that any of its plans will be achieved. These forward-looking statements are neither promises nor organic keys of future performance and are subject to a variety of risks and uncertainties, many of which are beyond Hemispherx’s control, which could cause actual results to differ materially from these contemplated in these forward-looking statements.

Examples of such risks and uncertainties include the risk described in Hemispherx’s filings with the Securities and Exchange Commission including the most recent reports on Forms 10-K, 10-Q and 8-K. You are cautioned not to place undue reliance on forward-looking statements which speak only as of the date hereof, and Hemispherx undertakes no obligations to update or revise the information discussed on this conference call, whether as a result of new information, future events or circumstances or otherwise revised or update this release to reflect events or circumstances after date hereof.

No evidence is suggested that applicant will ever be commercially approved for any treatment or that Alferon N Injection will ever be commercially approved for potential new treatment indications or for new manufacturing procedures.

With that covered, it’s now my pleasure to turn the floor over to your host Mr. Thomas Equels, President and Chief Executive Officer of Hemispherx Biopharma. Sir the floor is yours.

Thomas Equels

Thank you, John. Good afternoon ladies and gentlemen, thank you for joining our call. My name is Tom Equels. I am Hemispherx’s new President and CEO. I would like to begin this call by telling you a little bit about who I am and why I am here. My background is straightforward. I was a military pilot and served in Vietnam. I obtained my Bachelor of Science Degree summa cum laude and then a Master of Science and finally a Juris Doctorate.

For three decades I specialized as a lawyer in complex business and financial litigation matters. I was one of the first ones to try and win a case against Bear Stearns demonstrating the fraud behind the collateralized mortgage obligations commonly known as CMOs which are a facet of the current hit movie The Big Short.

Just months after my victory in court, Bear Stearns folded. I have managed over the years a number of businesses. I am pleased to have as a part of our management team, Dr. David Strayer, our Chief Science Officer; Adam Pascale, our Chief Financial Officer; one of our Senior Vice Presidents, Wayne Springate in Operations; and we have a great and I got to say well versed deep team to work on these projects.

Now I have been working with Hemispherx for over 10 years, first as a lawyer and most recently as an Executive. I have over that time acquired shares in the company, shares I have never once sold, why? Because I am a true believer in the future of Ampligen. I believe in Ampligen not just for its commercial potential but more importantly in Ampligen’s potential to become a significant player in the future of medicines.

Now early on I had the opportunity to meet Dr. Dan Peterson of Incline Village, Nevada and also Dr. Charles Lapp of Charlotte, North Carolina. These are two of the nations’ foremost experts on ME/CFS. I heard from them directly how critically important they believe Ampligen is to their clinical programs and future therapies. I met many of the subjects who participate in the ongoing FDA approved open-label Ampligen study for ME/CFS.

If you listen to these patients testify at the FDA Advisory Committee Meeting, one could not help but be moved. I remember seeing a young FDA doctor with tears in her eyes as she heard the stories of the ME/CFS victims unfold. There are thousands of Americans totally disabled by this disease and there is no approved treatment. Ampligen is the only late-stage experimental therapeutic in the regulatory pipeline.

I think the moment when I decided to make getting Ampligen approved by the FDA as a part of my life’s work came on that day. I recall vividly as Dr. Steven [Chilenski][ph] testified before the FDA’s Advisory Committee, not just as a skilled emergency room medical doctor which he is, but as a man who was felled in the prime of his life my ME/CFS. He became housebound by a very little understood disease at the time. He ended up having to leave his home and family and to travel over a thousand miles to enroll in Dr. Dan Peterson Incline Village Ampligen Clinical program.

He testified that as a result of that participation, he was now able to do limited hiking, mountain biking, skiing and was preparing to go back to work again. There were over a dozen similar witnesses to the devastation of ME/CFS and how they related the importance of Ampligen on their lives, making it clear to me that I must do everything in my power, and that we, this team at Hemispherx must do everything in our power to make Ampligen available to all who are in need.

So I am here today, a true believer. I’m now the CEO of Hemispherx. Why is that? Well under our prior administration, the stock plunged to a low of $0.07, any lower and we were subject to delisting which of course is problematic. We’ve been warned by the New York Stock Exchange that our stock price must rise over the next six months or the listing is at risk.

We are addressing this issue by seeking stockholder approval at our annual meeting of a reverse split. However, the de-listing issue can also resolve itself by modestly incremental and sustained increases in the market price of our stock. As the price goes up, the problem can go away.

Based on these and other issues, our Board of Directors took a highly critical look at the company’s past efforts, and its failures to achieve key goals for commercial success. As the great Albert Einstein has reputed to have said, the definition of insanity is doing the same thing over and over again and expecting different results. The Board determined it was time for change, big change. First, strict financial austerity measures were adopted. Next, a dramatic shift from the old management view that Hemispherx can do it all and become the next Pfizer to a new plan of co-developing our existing technologies with existing, established pharma industry partners, who can maximize our chances of expedited commercial success. And most importantly, more quickly bring Ampligen to those in need, to those suffering from dire unmet medical needs.

I believe in this new plan. Our Board believes in this new plan, our team believes in this new plan. Those who do not believe, those who were ineffectual, they are gone. We intend to make Hemispherx a great success. We intend to get commercial approvals for Ampligen. We intend to get Alferon manufacturing restarted and approved.

Before I go in to the specifics of our plan, I want to say a few words about out stock and our stockholders. I am the largest insider employee stock holder, and certainly I am one of the largest individual stockholders in Hemispherx. As I have told you, I have never sold a share of this stock. I am as long as long gets in this stock, and I have vowed to myself not to sell until we get an approval for Ampligen.

It is important to note that our stockholder base also includes large numbers of day traders, high frequency traders and other short term traders. The company commissioned a study and found that it was not uncommon to find 40% plus of our stockholders engaged in high frequency trading. While we appreciate and we respect all of our stockholders, the fact is short term traders care little about the people Ampligen and Alferon could help, they invest for the sake of temporary often daily gains.

Starting right now, I want all of you to be on notice that we at Hemispherx are playing a long game and we intend to win. We will not be denied, because for us this is not just about money, this is about changing the lives of thousands mired in abject suffering. This is about bringing hope and treatment to the tens of thousands, who have completely unmet medical needs.

Now this is not just about money for us. The new management of Hemispherx looks at the job before us and knows it is a critically important mission and failure is not an option. Moving forward, we plan on keeping you well informed. We plan on holding a call such as this every quarter following our filing of reports on Form 10-K or 10-Q. And we intend to use these calls as a mechanism to address both our problems as well as our progress so that you’re as informed as possible.

Let me now take a moment to discuss the mechanics of our plan. First, the austerity aspect; we have through reorganization and the elimination of several highly compensated executives and contractors, as well as through the implementation of various employee incentive plans and cut backs of non-essential personnel, achieved massive reductions in the burn rate. This is a critical measure for a company primarily involved in research and development.

Austerity will become the cornerstone of how this company is managed going forward. Financial conservation will be the foundation of our success, and rest assured as we have success and as money flows in, we will not depart from our austerity program. We are going to be financially conservative and as a matter of conservation, we are going to treat our capital pool of treasury stock with the utmost respect as well.

I’d like to discuss the ATM; the Hemispherx’s ATM has not been used at all in the last several months, except for a few test runs to assure operational effectiveness. My goal is to use the ATM only when needed and only in a way that has the chance of having a positive impact overall on the company.

Next I would like to discuss our strategy for commercial success. We will be focusing on a new plan of seeking and developing senior co-development partners. No aspect of our technology will be ignored. The criteria will be first, can this partner expedite commercial approval and next is the benefit to stockholders great enough to warrant the partnership. We have begun to aggressively seek responsible partners in ME/CFS and in oncology, two of the huge market areas where Ampligen has a well-developed, late stage clinical base, and extensive safety profiles. And we will strive to make the Ampligen dream become the Ampligen reality.

The discrete areas for co-development are graphically set forth in our recently filed 10-K. We believe each area has mirror based upon the experimental or clinical activity that it relates to. For stockholders who have waited over a decade for commercial success, we believe this plan is the formula your management team will work hard to be good partners in co-development. Remember that old adage; a nice piece of pie is better than no pie at all.

Any co-development deal creates revenue in the short term, and increases the chances for a meaningful long term revenue streams. For potential co-development partners who may be listening, there are certain analogies that are relevant. Consider the role of AVT and the subsequent inhibitors of the virus in transforming HIV infection from a death sentence to a manageable chronic disease. Ampligen may play that same type of a role with ME/CFS.

In oncology, Ampligen is a unique TLR agonist with a well-tolerated safety record in FDA approved clinical trials. Consider the huge deal a large pharma company recently made for a similar TLR product that we believe is less effective and lacks the years of safety data in humans. Under our new management, you will find a team committed to cooperating for the mutual success of any co-development deal.

On behalf of our new management team at Hemispherx, on behalf of all the employees here who are engaged in this important undertaking, we promise you we will give our maximum effort to make this work. We promise our unwavering devotion to creating long term value for each of your as stock holders, and for those suffering from ME/CFS, we promise you we will not give up, we will not give in until Ampligen has been approved for treatment.

I ask each of you listening to work with me to make this company a great success. We will be working for you, but we cannot do it alone. We cannot do it without your support. Take the long term view; help me to guide us to a bright future for Hemispherx.

With that said, I would like to now introduce our new Chairman of the Board, Dr. William Mitchell.

William Mitchell

Thank you Tom. I also have never sold a single share of Hemispherx’s stock, although I have had opportunities for significant profit. As a physician scientist, I can bet that Ampligen has unrealized potential, not only in the Chronic Fatigue Syndrome, but in cancer, emerging bowel diseases which have the potential for highly lethal level of pandemics and acute trauma induced immunodeficiency. Ampligen’s effect on its recipient is as an inducer when the nigh immune responses are the modulation of hundreds of functional genes that governances the body’s response to a variety of stressful stimuli such as cancer, infection and acute or chronic immunodeficiencies.

Several decades ago, the FDA requested that Hemispherx provide Ampligen for Chronic Fatigue Syndrome patients. Dr. Strayer the Hemispherx’s Medical Director responded to that request and travelled to Lake Tahoe to initiate a compassionate trial of Ampligen. The results were so dramatic that the company did a small trial at Lake Tahoe that replicated that of the index patient. The rest is history. Despite significant results in early cancer indication clinical trials, the company devoted its resources to Chronic Fatigue Syndrome at a time it was considered a real disease by many of the medical community.

Chronic Fatigue Syndrome is now recognized as a human disease of unknown cause that reduces the quality of life for significant numbers of our fellow humans. Originally labeled yuppie flu by the press, we now understand that the syndrome primarily affects females that knows no boundaries of age, ethnicity, job or education. Clinical trials of Ampligen are very difficult to do with endpoints upon which experts have different opinions. The pure review published data has demonstrated the relative safety of Ampligen and indicates that it should be of benefit to a substantial number of Myalgic Encephalomyelitis Chronic Fatigue Syndrome patients.

With the yield of experts in the field, the copy will devote major efforts to bring regulatory approval for this remarkable drug to Myalgic Encephalomyelitis Chronic Fatigue Syndrome patients. With partnership help Ampligen should be able to demonstrate its value to human health and other indications as well.

I’ll now turn the call over to Dianne for the question-and-answer portion.

Question-and-Answer Session

Q - Dianne Will

We have selected written questions from our stockholders and interested parties. To the extent that the presentation of Mr. Equels and Dr. Mitchell have already provided answers, the questions will not be addressed. Because several questions address the same issues, we have grouped the questions by topic and will answer the most appropriate questions by topic. The first question is, where does Hemispherx stand regarding ANMAT?

Thomas Equels

Thank you, Dianne. This is a question from one of our Belgian interested parties of Mr. [Bruel] [ph]. ANMAT is the regulatory authority in Argentina, similar to the FDA in the United States. We have made two discrete applications before ANMAT, one for Alferon which in Argentina is known as Naturaferon and the other for Ampligen as a therapy for ME/CFS. Argentina has granted our application for Alferon in two respects, one, the FDA approved usage which is for refractory genital warts, and two, a broader approval which is for any patient who was utilizing recombinant alpha interferon as a part of a therapy who became refractory to the recombinant alpha interferon.

So we’re pleased with those approvals. Now with regard to Ampligen for ME/CFS, our application in Argentina is complete. There have been a number of follow-up questions and request for information all of which we have diligently and timely responded to, and we have every hope that we’ll have a favorable result in Argentina for Ampligen, however, it’s a decision by a governmental entity and we can make no assurance of that, neither can we predict when they will make that determination. So we’re somewhat in their hands in that respect, but we’re doing everything we can do to get that approval as quickly as possible.

Dianne Will

And our next question is, what is the company’s strategy for the sale of its underutilized assets?

Thomas Equels

First, I would like to say that Dianne was kind enough that we had a number of questions that dealt with similar topics and there were some questions that related to this that seem to confuse our partnering efforts in our technology with our statements related to asset sales. The asset sales that we’re talking about in terms of underutilized assets relate to real estate that the company owns in New Jersey.

In New Jersey we have two separate lots and two separate buildings. One of those pieces of land and buildings is our manufacturing facility where we manufacture Ampligen as well as Alferon. While we would consider some form of a lease-back type of a sale of that real estate, it would have to be with a long term lease where we continue to manufacture at that facility.

However, the second building and piece of real estate is being used for storage and we’ve listed that for sale for I believe $2 million and we’re hopeful to sell it because it’s not a good use of that asset. We can store things much cheaper and more effectively utilizing storage warehouses.

Dianne Will

And our next question is, what is the status of the New Brunswick facility after the recent flood?

Thomas Equels

This is the question from Mr. [Lavie] [ph] and with regard to this answer, there were a few other questions. I’d like to explain a little bit what happened, this building being a hi-tech manufacturing facility has a sprinkler system. The sprinkler system is fed by water supply lines which has the ability to transmit a large volume of water at very high pressure. Unfortunately, in the bioreactor room one of the large supply lines burst and that caused a significant amount of water and flooding and we were in the process of a cleanup there which requires special action because of the need to keep that room sterile and the need to certify that all the equipment that was exposed or submerged is operating correctly and without bio-burden as a result of water intrusion.

Now this is something where we have insurance, claims have been submitted and we are working with the insurance company in terms of the cleanup and any repairs that have to be made. The thing that we have to keep in mind is we’re going to have to restart that facility and we will have funding issues that have to be dealt with as well.

I think that until we have the work completed, we are not going to be able to make any kind of a prediction as to when we will be able to restart and complete the approval processes.

Dianne Will

Next question is, what is the company’s plan for the Ampligen technology?

Thomas Equels

As I mentioned in the K, you’ll see a graphic representation of the Ampligen clinical indications, all of which we believe are strongly supported by our experimental and clinical activities. They consist of five separate categories ME/CFS, cancer, as a vaccine adjuvant especially for flu and for therapeutic cancer vaccines, as an early onset broad spectrum antiviral, and for burns, traumatic injury, severe burns, severe trauma and serious surgery where immune suppression naturally occurs and an immune modulator is required to restore the immune system.

Now, these five components of our Ampligen technology all have commercial value. Dr. Mitchell explained how Ampligen works and that’s why it’s able to do so many things. It works at the innate immune system level and it’s a host based therapy, and it provides a significant immune response involving interferon cascades and the activation of a large number of genes that have an impact on therapeutic recovery.

So we have these five areas, we intend to find partners in as many of those five areas as possible. We intend to use the funds from those partnerships to facilitate our research and development in the areas where we don’t find partners. As I said, we’re not giving up and we’re not giving in. We’re moving towards success.

Dianne Will

And our last question is a question and a comment. May I please ask a question on when you’ll apply for approval of Ampligen. I’m able to walk, think more clearly, fight further infection and volunteer my doctors’ research organization nine hours per week. I am begging you to appropriately seek approval of this most wonderful and valuable therapeutic for ME/CFS.

Thomas Equels

I want to thank Ms. [Patton] for that question. She is one of the subjects in our Ampligen clinical program. I think that for old adage I’m peddling as fast as I can. Here it is our intention to get Ampligen approved for ME/CFS as fast as we can. We either have to find a co-development partner or raise funds that will allow us to complete the last stages of the process that’s before us.

We’re seeking both private and public partners in this endeavor. We leave no stone unturned, and as I said, we are here to get the job done, because we treat, such as we treat the creation of long term value for our stockholders is a paramount priority. We treat the bringing of this important growth to the patients who need it as a sacred duty. Thank you.

I appreciate all of you listening, we hope you will be a part of the Hemispherx team as we move forward towards a bright future for Ampligen and Alferon, and we hope you’ll participate in future quarterly home conference such as this. Remember if you have questions before the phone conference, email your questions and we’ll try to answer all questions that are available that aren’t answered otherwise in the discussion. Thank you.

Operator

Thank you ladies and gentlemen; this does conclude today’s conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.

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