Someone told me you know about Biotech-- how about this HEB shorting?:
phillynews.com
Biotech firm alleges 'illegal' short-selling of stock
Center City-based Hemispherx BioPharma says manipulators are deliberately deriding an antiviral drug that is still being tested.
By Jeff Gelles
INQUIRER STAFF WRITER
Shares of a small Philadelphia biotechnology company fell sharply yesterday as the company alleged that market manipulators were trying to undermine its stock by deriding a drug it is testing to treat chronic fatigue syndrome.
In a statement, Hemispherx BioPharma said "illegal shorting" of the stock -- in which option traders, in effect, place bets that a company's share price will fall and benefit when it does -- "was orchestrated in conjunction with a purposefully erroneous and misleading report" published Thursday in the Sept. 28 issue of Business Week. The Center City company said it had reported its allegations to the Securities and Exchange Commission and the American and Nasdaq Stock Exchanges.
The Business Week report, in the magazine's Inside Wall Street column, quoted investment banker and broker Manuel Asensio as calling Hemispherx's antiviral compound, Ampligen, "a highly toxic, obsolete drug that is ineffective in the treatment of any disease."
In the Business Week column, Asensio is named as one of the short-sellers.
Hemispherx officials could not be reached yesterday for comment. But Business Week quoted Hemispherx's chief executive, William A. Carter, as saying that such assertions are "frivolous and wrong" and that the drug's safety and effectiveness have been well-established.
In a statement yesterday, Hemispherx said that ongoing studies in the United States, Canada and Europe "were demonstrating no clinically significant side-effects" to the drug as well as "substantial evidence of quantitative improvement" in patients.
A Business Week spokeswoman defended the column, noting that the criticism of Ampligen came from an analyst and was followed by Carter's defense of the drug.
"It was basically a story about activity in the market," said the spokeswoman, Christine Summerson. "We're offended and outraged at the allegation that we would purposefully manipulate a stock."
Yesterday, Hemispherx's shares closed at $8.38 on the American Stock Exchange, down $1.50 from Thursday's close and down 33 percent from their recent peak of $12.50 on Sept. 9. More than 1.7 million shares traded hands yesterday, more than six times its recent average daily volume of 269,000.
Hemispherx's statement said its stock "had been selected for the illegal manipulations solely due to its outstanding quantitative performance over the last several months." As recently as April 13, it traded at $2.75.
Officials at the SEC and at the exchanges said they could not comment on Hemispherx's allegations, or even confirm that the company had made a formal complaint.
SEC staff members "are not authorized to either confirm or deny either the existence or nonexistence of any kind of investigative activity," said spokesman John Heine.
Asensio yesterday defended his criticism of Hemispherx and dismissed its allegation that short-sellers were manipulating the stock price, although he refused to confirm Business Week's statement that he is among those shorting the stock.
"This is both a scientific fraud and a fraudulent stock promotion," Asensio said.
Asked what his evidence was of scientific fraud, Asensio replied:
"The representations by management made in their SEC filings and press releases are unsubstantiated by the information available on the safety and efficacy of the drug."
Susan Cruzan, a spokeswoman for the Food and Drug Administration, referred most questions about Ampligen to Hemispherx, saying that the agency does not reach conclusions about the safety or efficacy of a drug until the investigational stage is complete.
"Technically, it's not approved," she said, even when a drug has been authorized for phase-three human testing, as has Ampligen. But she said the agency does not authorize drug developers to begin such testing without evidence that the drug is reasonably safe at the dosages being studied.
"If we had a problem with it, what we do is place it on clinical hold until they address the questions or concerns," Cruzan said.
The FDA has already made concessions in Ampligen's testing.
Last year, after sufferers of chronic fatigue syndrome pressed to receive the drug on an experimental basis, the agency agreed to allow Hemispherx to charge enough to recover its costs. Otherwise, Hemispherx said, it could not afford to provide them the drug, which is made of living material and costs about $15,000 per year, per patient.
Under the agreement, only patients with the most severe cases of chronic fatigue syndrome are eligible. An FDA official said then that while the drug's usefulness remained unproven, "we have an open mind."
Although chronic fatigue syndrome has itself been controversial, and sometimes dismissed as "yuppie flu," the Centers for Disease Control and Prevention estimates that as many as 500,000 Americans have a CFS-like condition, which it describes as a debilitating disorder in which patients experience profound fatigue after even the slightest physical exertion.
Other symptoms include weakness, muscle pain, fever, sore throat, impaired memory and mental concentration, insomnia, and depression. It can persist for months or years, and is diagnosed only after similar illnesses have been ruled out.
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