(HEB - Get Report) lied to investors and to the Securities and Exchange Commission by failing to disclose serious concerns raised by the U.S. Food and Drug Administration about its chronic fatigue syndrome drug Ampligen.
An FDA advisory panel convenes Thursday to review Ampligen and vote on whether or not recommend the drug as a new therapy for chronic fatigue syndrome. On Tuesday, FDA made public a sharply critical clinical review of Ampligen in which agency staff raised "multiple concerns" with the efficacy and safety of the drug.
Hemispherx knew as early as this past summer that FDA wasn't likely to approve Ampligen, according to new information released Tuesday by the FDA. Hemispherx withheld this significant information from investors and the SEC.
During a meeting held in June between Hemispherx and FDA officials, the agency noted the following regarding Ampligen:
propose new post-hoc analyses of data from Trial 516 and a post-marketing trial (AMP-520) to support approval. It would be unusual for this type of data to provide adequate evidence of efficacy. However, the adequacy of the data will ultimately be a review issue, and it is reasonable for you to submit a complete response. This complete response needs to address all of the issues defined in the complete response letter dated November 25, 2009. As Ampligen is a new molecular entity, we anticipate that the data submitted in your NDA would be presented at a public Advisory Committee meeting... The standards for approval require the same evidence of efficacy and safety, regardless of approval pathway."
The bolded sentence is the Hemispherx lie. This important nugget of information from the June meeting with FDA was omitted from the company's press releases and SEC filings.
Here is how Hemispherx describes the same June meeting with FDA in its most recently filed 10-Q:
On June 8, 2012, the Company and its consultants met with the FDA to discuss certain aspects of the CRL
Complete Response Letter
relating to its NDA for Ampligen for the treatment of severely debilitated patients with CFS. Upon our review of the FDA Minutes from this meeting that we received on July 6, 2012, we believe the key points from the meeting to be undertaken by the Company in conjunction with its complete response include the following:
The FDA agreed to accept, for review, in Hemispherx's complete response new analyses of data from the AMP-516 Trial. Whether these data provide adequate evidence of efficacy will ultimately be a review issue, and there can be no assurance the FDA will conclude the data are adequate to support approval of the Ampligen NDA..."
Hemispherx makes no mention of FDA's warning, which is clearly material information for investors:
"It would be unusual for this type of data to provide adequate evidence of efficacy."
Instead, Hemispherx spun the outcome of June FDA meeting as much more positive, even suggesting to investors that FDA was more willing to review and possibly approve Ampligen due to new federal regulations -- the so-called FDASIA legislation -- aimed at accelerating the approval of drug for serious diseases without treatment options.
Hemispherx issued a press release on July 11, claiming the company and FDA "reached an agreement" on new filing requirements for Ampligen. Hemispherx shares were valued at 34 cents on July 11, rising to a high of 89 cents in late September -- a 161% increase. During this period, Hemispherx sold 10.7 million shares of stock through an "At The Market" equity financing facility, netting $9.3 million.
It's hard to imagine a scenario under which Hemispherx's stock would have almost tripled in value and $9 million could have been raised from investors had the company disclosed publicly the FDA's warning that Ampligen data submitted wasn't likely sufficient to get the drug approved.
Hemispherx deceived investors and the SEC, then raised money on this lie of omission.
On Tuesday, Hemispherx shares plunged 32% to 43 cents per share as the truth about Ampligen was finally told.
-- Reported by Adam Feuerstein in Boston.