Legal Troubles At Hemispherx
Now that we finally started to see some light at the end of the New Drug Application (NDA) tunnel for Hemispherx Biopharma (HEB – $1.00) , they seem to have sailed into murky legal waters. Since its November 2 press release, in which the Company gave an update on its NDA for Ampligen, several law firms have filed a class action lawsuit against HEB for “misleading investors regarding the status of the NDA”.
These law firms claim that “[Hemispherx] 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.” They seek to recover damages on behalf of people who purchased HEB stock between February 18, 2009 and October 30, 2009.
Because we received quite a lot of questions from investors who were uncertain and didn’t know what to do, we will try to answer them as good as possible in this post.
Q: Did Hemispherx mislead investors regarding the status of its NDA? In other words Is the Company guilty?
Only a judge can decide that. We feel that the information that was provided in the Company’s official SEC documents was clear. But…
Q: Could this have been avoided?
Although it’s always easy to look back on things in hindsight and say it went wrong there or because of that, we do feel that the Company should have communicated more openly about the open issues with the FDA and not only disclose this information in SEC documents.
The number one communication rule is to always be open and honest about all matters you can disclose. That way, you can always tell the same story and you don’t have to explain yourself later on.
Q: Will this hurt the Company’s NDA process for Ampligen with the U.S. Food and Drug Administration (FDA)?
We don’t believe so. If someone at Hemispherx would have said something publicly about the ongoing filing, which they weren’t allowed to say, the FDA would have sent a warning letter a long time ago. So we believe the FDA will continue to check off the boxes, make sure that all the requested information and data is there and then come to a conclusion.
Q: If so many law firms have filed a lawsuit, there really must be something wrong.
Well, you have to understand that these are relatively small law firms that represent investors who feel they have been the victim of securities fraud and other corporate corruption. There are so many law firms out there doing the same thing, that you can be certain, if one of them files a lawsuit against a company, the others will follow because they all want a piece of the pie.
And talking about the pie, it helps of course that Hemispherx has over $60 million in cash and cash equivalents. If this was a company with only a handful of dollars in the bank, we doubt that these law firms would have bothered to file a lawsuit.
Q: Will this cost money to Hemispherx?
This is the one answer we’re 100% certain about, YES it will cost them money. In fact, it’s already costing them money at this moment. Although the company hasn’t officially responded, their attorneys have undoubtedly been studying these lawsuits. And we all know attorneys don’t come cheap. So no matter what the outcome will be of these trials (if it will ever come to a trial) it will cost money.
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