Hemispherx Biopharma (NYSEAMERICAN: HEB) is having a great day in the market today after announcing positive clinical data. While the data was what brought the stock to my attention, with a little digging, I quickly found several reasons to be excited.
Aside from today’s data release, the company has commercial stage products that are just waiting on manufacturing approval from the FDA. Moreover, the company has an impressive pipeline. With a market cap of just over $16 million, I believe that this stock represents a compelling opportunity. Here’s why:
What Is Hemispherx Biopharma?
Hemispherx Biopharma is an immuno-pharma company based in Florida. The company’s primary focus is in the oncology space, developing treatments for a wide array of cancer as well as treatments for immune-deficiency disorders.
The company’s claim to fame is its work in the development of nucleic acids and natural interferon to enhance the natural antiviral defense system of the human body. The company currently has two flagship products. These include:
- Ampligen (Rintatolimod) – Ampligen is a first-in-class drug that consists of large macromolecular RNA (ribonucleic acid) molecules. It is currently being developed as an option for cancer, viral diseases and disorders of the immune system. The treatment is also being evaluated as a potential option for myalgic encephalomyelitis/chronic fatigue syndrome.
- Alferon N Injection (Interferon Alfa-N3) – Alferon N Injection is currently approved for a category of STD infection in patients that are intolerant to recombinant interferon in Argentina. It is also the only natural-source, multi-species alpha interferon currently approved for sale in the United States for the intralesional treatment of refractory or recurring external Condylomata Acuminata, also known as genital warts, in patients 18 years of age or older.
Today’s News Is A Significant Step Forward
As mentioned above, Hemispherx Biopharma is grabbing the attention of investors today after announcing news with regard to one of its flagship candidates, Ampligen. In a press release, Hemispherx Biopharma announced that it has made significant progress in its Ampligen recurrent ovarian cancer program.
The program is taking plans at the University of Pittsburgh Medical Center (UPMC) under the leadership of Robert Edwards, MD. Dr. Edwards is the chair of gynecologic services as Magee-Women’s Hospital of the University of Pittsburgh School of Medicine, Professor of Obstetrics, Gynecology & Reproductive Services at the school, a world-class expert in ovarian cancer, and a pioneer in Ampligen research.
The ovarian cancer program that HEB is referring to here is being funded partly by an Ovarian Cancer Specialized Program of Research Excellence (SPORE) grant from the National Institutes of Health (NIH).
In the release, the company said that it has received an interim report that summarizes results related to some of the laboratory objectives of this Phase 1/2 clinical study. In particular, the data shows charactarization of the local immune responses during chemo-induced cell death as measured by serial assessment of peritoneal fluid cellular phenotypes and chemokine patterns.
In a statement, Dr. Edwards had the following to offer:
Ampligen has the potential to be clinically significant because a robust killer T-cell population in the tumor microenvironment without attracting Treg cells is important to help optimize checkpoint blockade induced tumor shrinkage.
The Hemispherx Pipeline Is An Impressive One
While Hemispherx Biopharma has a very small market cap, you wouldn’t expect that to be the case by looking at the company’s pipeline of both commercial-stage and clinical-stage products. Here are the assets in the company’s pipeline at the moment:
Hemispherx Biopharma has two commercial stage products under its belt. However, the value of the stock doesn’t quite reflect this as it is waiting on export and manufacturing approvals. Nonetheless, when these approvals take place, the stock has the potential to climb. Here are the current commercial-stage products at Hemispherx Biopharma:
- Ampligen – Ampligen has been approved in the United States as a sterile solution to be used for the treatment of severely debilitated patients with chronic fatigue syndrome (CFS) who have been diagnosed for longer than one year. While the treatment is currently approved by the FDA, it is awaiting FDA export authorization for a commercial launch of the product in the United States.
- Alferon N Injection – Alferon N Injection is currently approved as a treatment for refractory or recurrent external condylomata acuminata (genital warts). The treatment is also indicated for patients who initially responded to recombinant interferon alfa, including pegylated recombinant alpha interferon, but that the treatment subsequently failed due to the presence of neutralizing antibodies or the intolerance of patients to these treatments. However, the launch of this treatment is being held up as the company is waiting on Manufacturing Approval from the United States FDA.
Considering the fact that both of these treatments have been approved in the United States and both are awaiting either export authorization or manufacturing approval, these assets could start generating meaningful revenue in the relatively near term.
Clinical Development Programs
It’s also worth taking some time to look at the clinical development programs that the company is working on.
While Ampligen is approved for CFS, it is also in the midst of a Phase 2 clinical study for the treatment of ovarian, breast, and colorectal cancers as well as renal cell carcinoma and melanoma. The company is also studying the treatment in a Phase 1 trial as an option for pancreatic cancer and is in the midst of pre-clinical work in the bladder cancer indication.
Alferon N Injection
The company’s Alferon N Injection, is approved for genital warts in the United States and refractory to recombinant IFN and intolerant to recombinant IFN in Argentina. The treatment is also in preclinical development as a potential option for MERS and Influenza A Virus.
The Market Potential Is Incredible
With such a wide array of indications being targeted by Ampligen and Alferon N Injection, the market potential here is massive. The ovarian cancer market is expected to grow to be worth $4.5 billion by the year 2022. The breast cancer market is expected to be worth $38.4 billion by 2025 and the prostate cancer market is expected to grow to be worth $12 billion by 2025.
When we move into the chronic disease indications, the genital warts market is expected to grow to be worth more than $3 billion by 2025 with growing markets in all other indications. With a company that is valued at just over $16 million even taking a very small percentage of any of these markets would lead to meaningful growth in value for investors.
Risks To Consider
Any time an investment is made, there are going to be risks to consider. An investment in HEB is no different. In this case, the most pressing risks in my opinion are as follows:
- Cash Strapped – Until the FDA either provides export authorization for Ampligen or manufacturing approval for Alferon N Injection, the company’s hands are tied when it comes to revenue generation. At the end of the 2018 year, the company only had $1.825 million in cash, cash equivalents and marketable securities. Although the company received about $5.3 million from a rights offering in March before costs, that only brings the total to just over $7 million. Considering 2018 losses, this isn’t enough money to get through 2019. So, either something is going to have to happen quickly with commercialization or the company will need to lean on the investing or lending communities to get to that point.
- Losses Widening – It’s also worth mentioning that losses are widening. While this is normal to see at this stage in the game, it does point to added risk. Net losses in 2018 came to $9.813 million. In 2017, losses were only $8.259 million. Nonetheless, much of the growth in net losses comes from manufacturing expenses associated with about 16,000 vials of Ampligen that were filled and finished in 2018. Once the export authorization takes place, the company will be ready to commercialize the product in the United States with plenty on hand to meet demand.
- Noncompliance – In late March, HEB received written notice from the NYSE American. The noticed informed the company that it is not in compliance with rules for continued listing as the price per share has been low for a substantial period of time. Therefore, the company is likely to move forward with a reverse stock split if natural growth doesn’t lead the price higher, and quickly. Reverse splits are rarely seen as a good thing by the investing community, but may be necessary to buy the company time to commercialize its treatments.
At the end of the day, small biotechnology companies can be risky plays. However, they can also yield incredible returns when the right moves are made. I believe that Hemispherx Biopharma represents one of these moves.
Although the company is cash strapped that the moment, it is on the verge of a commercial breakthrough in the largest market in the United States. Moreover, the company has plenty of Ampligen now on hand and ready to meet demand once the US export authorization takes place.
With a strong pipeline and commercialization likely right around the corner, I believe that HEB is trading at a significant discount, representing a strong long-run opportunity!