Nano-Cap Biotech Focus: Hemispherx BioPharma (HEB)’s Turnaround

Hemispherx BioPharma, Inc (NYSEMKT:HEB) is a nano-cap biopharmaceutical company focused on the treatment of seriously debilitating disorders. Its flagship products include Alferon N Injection, and experimental therapeutics Ampligen (an experimental RNA nucleic acid) and Alferon LDO.

The company faced some controversy in the past, but a management team reshuffle, a manufacturing facility overhaul (including new bioreactors), and a renewed focus on fiscal transparency and responsibility seem to be helping it stage a turnaround – the stock has gained more than 21% year-to-date.

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Having said this, it should be noted the business is still not profitable. For the second quarter, the company posted a net loss of $0.01 per share on revenue of $15,000. After the report, the company’s management announced that, in order to regain the listing requirements for inclusion on the NYSE MKT, it would execute a 1:12 reverse split of its common stock, which reduced the number of shares outstanding from roughly 249 million to 20.7 million. Currently, the company’s market cap stands at around $28.15 million.

Just a week later, Ampligen was approved for the treatment of severe myalgic encephalomyelitis/chronic fatigue syndrome (ME/CFS) and other refractory uses in Argentina, making it the first drug in the world to gain regulatory approval for the treatment of this condition. With the aim of further funding the manufacturing of the drug, Hemispherx inked a private equity placement valued at $5 million with two institutional investors.

“ME/CFS is a disease which in its severe form is both physically and mentally disabling, at great personal cost to the victims and their families and at great social costs to governments around the world who serve as a safety net for both medical and social welfare issues. Ampligen has just been approved in Argentina for the severe form of ME/CFS.  The first approved drug ever for ME/CFS.  In the U.S. we are the only known drug, late stage, in the development pipeline. In Europe there are no approved therapies but we are pursuing efforts to supply Ampligen through E.U. Early Access Programs.  Because no other drug targeted for CFS has advanced as far as Ampligen, once approved for commercial sales, we believe that there may be no competitive therapies,” the company’s President and CEO, Thomas K. Equels, explained.

A couple of weeks ago, the company finally settled all pending material litigation, freeing “substantial funds and management time” for business, CEO Tom Equels added.

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Institutional Investors

As of the end of the second quarter of 2016, the company counted the support of more than 25 13F-filing institutional investors, including Jim Simons’ Renaissance Technologies and Ken Griffin’s Citadel Advisors.

Other Ampligen Milestones

Back in July, Hemispherx shipped its first order of Ampligen (rintatolimod) for an Early Access Program (EAP). Later that month, the company closed an agreement with California-based Avrio Biopharmaceuticals, which will serve as an additional contract manufacturer of the drug.

Talking With Management

Small Cap Nation’s Jane King recently sat down with Hemispherx’s relatively- new CEO Tom Equels to discuss the future of the company.

Over his first six months, Equels managed to drive a large appreciation of the stock through several initiatives including partnerships, monetization of underutilized assets and financial austerity measures.

Going forward, the management team will focus on raising capital “through co-development partnerships and licensing [and] if necessary… through a traditional equity raise” that will help bring the drugs to the market, the Chief Executive explained.

Other Players

A couple other players in the HPV field are GlaxoSmithKline plc (ADR) (NYSE:GSK) and Merck & Co., Inc. (NYSE:MRK). Chronic fatigue syndrome, for its part, still lacks a scientific cure. However, products from Roche Holding Ltd. (ADR) (OTCMKTS:RHHBY) and Biogen Inc (NASDAQ:BIIB) have also been evaluated.

Considering An Investment

Although this article does not constitute a recommendation, I do believe in the importance of supporting small biopharmaceutical and biotech companies that focus on treatments for rare or untreated deceases. Large profitable pharmaceutical companies often lack the incentives to develop treatments for populations of patients with unmet needs, especially since price gouging became an issue of public interest.

This does not mean companies should charge as much as they wish for much-needed drugs, but that we should not put all of them in the same bag. There is such a thing as fair and unfair drug prices. But the fact is that developing medicines is expensive, and one of the best ways of supporting this activity is by buying into smaller companies working on not-so-widespread conditions.

That being said, investors should be aware of the risks implied in buying into a nano-cap company which has seen its stock experience plenty of volatility over time. I would advise further due diligence before making any decision.

Disclosures: Javier Hasse holds no interest in any of the securities or entities mentioned above. The statements above do not constitute recommendations.

Hemispherx is a client of Small Cap Nation, so conflict of interest cannot be discarded.