>> Hemispherx Biopharma, Inc. Announces Delay in Filing Its Form 10-K for the Fiscal Year Ended December 31, 2005
Monday April 3, 9:27 am ET PHILADELPHIA--(BUSINESS WIRE)--April 3, 2006--Hemispherx Biopharma, Inc. (AMEX:HEB ; the "Company") announced today that it would not be filing its annual report on Form 10-K for the fiscal year ended December 31, 2005, on March 31, 2006, the extended due date.
During the preparation of the Company's annual report on Form 10-K for the fiscal year ended December 31, 2005, after discussions with the audit committee and BDO Seidman, LLP, the Company's Independent Registered Public Accounting Firm, and after doing additional analysis on guidelines set forth in EITF 00-27: Application of Issue No. 98-5 to Certain Convertible Instruments, it was determined that an incorrect accounting principle was applied to certain Debentures and Warrants issued between March 2003 and August 2005, which impacted the Company's financial statements between March 2003 and September 2005, specifically, the initial recording of the embedded conversion feature of the Debentures and the related fair value of related warrants as well as certain Debenture and Warrant price resets.
All of the above issues relate to accounting for convertible debt, additional paid-in capital and related non-cash financing charges. These non-cash charges do not affect the Company's revenues, cash flows from past or future operations, or its liquidity.
After discussions with the audit committee and BDO Seidman, LLP, the Company's Independent Registered Public Accounting Firm, the Audit Committee agreed with management's recommendations and concluded that the previously issued financial statements included in the Forms 10-Q and Forms 10-K for the periods ended from March 31, 2003 to December 31, 2005, should not be relied upon.
The Company has filed its Form 10-K for the year ended December 31, 2005 (the "Report") without audited financial statements. The anticipated restatements of the Company's financial statements for the years ended December 31, 2003 and 2004 are contained therein. As audited financial statements are not contained in the Report, the Report does not satisfy all requirements under the Securities Exchange Act and, therefore, is deficient. Based on representations from BDO Seidman, LLP, the Company anticipates that it will file an amendment to the Report containing audited financial statements within the next 30 days, and file its Forms 10-Q for the quarters ended March 31, 2005 and 2004, June 30, 2005 and 2004, and September 30, 2005 and 2004 as soon as practicable thereafter.
About Hemispherx Biopharma
Hemispherx Biopharma, based in Philadelphia, is a biopharmaceutical company engaged in the manufacture and clinical development of new drug entities for treatment of viral and immune-based chronic disorders. Hemispherx Biopharma's flagship products include Alferon® and the experimental immunotherapeutics/antivirals Ampligen® and Oragens(TM). Alferon® is approved for a category of STD infection, and Ampligen® and Oragens(TM) represent experimental nucleic acids being developed for globally important viral diseases and disorders of the immune system. Hemispherx's platform technology includes large and small agent components for potential treatment of various chronic viral infections. Hemispherx has in excess of 140 patents comprising its core intellectual property estate, a fully commercialized product (Alferon® N) and GMP certified manufacturing facilities for its novel pharma products. For more information please visit www.hemispherx.net <<
I would like to take this opportunity to review what has been accomplished in the 1st Quarter of 2006 and lay out for you some of the objectives targeted for the rest of the year.
The initial results of three avian influenza related studies initiated in the summer of 2005 were presented at two conferences, the ASM Biodefense Research Meeting in Washington, D.C. and the VIII International Symposium on Respiratory Viral Infections in Hawaii.
• New tests provided further evidence that Alferon LDO (Low Dose Oral), a new delivery for an anti-viral with prior regulatory approval for a category of sexually transmitted diseases, offers tremendous potential in resisting the spread of avian flu by stimulating genes that induce the production of immune compounds that are key building blocks in the body's defense system. • Additional research suggests that the activity of Tamiflu and Relenza, the only two drugs formally recognized for combating bird flu, can be boosted up to 100 times when co-administered with Ampligen. Lab studies reveal that 50 to 100 times less Tamiflu may be used in conjunction with Ampligen® to achieve full inhibition with no multiplication of the virus, and no host cell damage. • Finally, in animal studies conducted in collaboration with the National Institute of Infectious Diseases in Japan, it was found that the co-administration of our experimental immunostimulant Ampligen, a specifically configured double-stranded RNA, may help enable substantial reductions in an H5N1 vaccine dose, as well as provide cross-protection against mutated strains of the H5N1 virus.
In further collaboration with the National Institute of Infectious Disease in Japan, we have commenced primate studies in the co-administration of Ampligen® with H5N1 vaccines in Japan. The studies are uniquely focused on the cross protection that Ampligen® provides to vaccines across mutated strains. These studies should be concluded and results presented in the 2nd Quarter of 2006. Our collaboration with our Japanese associates has proven to be highly productive. Our ambition is to continue and expand upon this relationship over time.
Studies are continuing along each of the three paths regarding avian influenza and progressing to what we anticipate will be NDA filings. If expedited guidelines are implemented by the FDA in response to the avian influenza threat, our time line to an NDA for this indication could be moved up significantly.
Irrespective of the threatened avian influenza pandemic or anticipated expedited approval guidelines, the ongoing trials have heightened the awareness of our drugs' activity as immunostimulants. Recognition of our drugs' capabilities as stand-alone antivirals and activity when co-administered with a vaccine have highlighted the broad spectrum of opportunities in our future.
While we have and are pursuing the extremely promising avian influenza studies through the efforts of our contract partners, our primary internal resources have been, and continue to be, focused on completing and filing our NDA for CFS. In the 1st Quarter we completed the construction of a facility within our New Brunswick plant to produce raw materials for the manufacture of Ampligen®. This in house capability will aid in fulfilling the manufacturing requirements of the Ampligen® CFS NDA. The pre-clinical section of the Ampligen® CFS NDA is on schedule to be completed by the end of this month. We anticipate having a pre NDA meeting with the FDA in late June of this year to obtain FDA input and thoughts on our Ampligen® CFS NDA filing and thereby allow us to maximize the presentation of our filing, which is on target to be completed and filed by year end.
The audited results of our Phase III trials with Ampligen® for Chronic Fatigue Syndrome (CFS) will be presented at the 5th International Conference on HHV-6&7 in Barcelona, Spain, April 30 - May 6, 2006.
The status of our trials and our path to commercialization will be presented at Rodman and Renshaw conferences in Monaco (May 15 and 16) and in New York City (June 9).
Our balance sheet and liquidity are stronger than ever. No small part of this accomplishment is due to our July 2005 financing agreement with Fusion Capital. We completed our $20 million agreement with Fusion in the first quarter of 2006. In addition to strengthening our balance sheet, access to this capital allowed us to enhance our manufacturing capabilities in compliance with federal guidelines. We have entered into a new financing agreement with Fusion Capital that provides us with the option to obtain up to an additional $50 million. We feel very fortunate to have the availability of this financing at the very time we are on the cusp of commercialization as it will provide us with significant flexibility in pursuing optimal commercial success. The Fusion Capital $50 million financing agreement will be on the agenda for approval by stockholders at the annual stockholders meeting on June 21, 2006.
During the preparation of our annual report on Form 10-K for 2005, it was determined that the 2003 interpretation of the accounting guidelines to account for our convertible debentures was incorrect resulting in financials that should not be relied on. As a result, the filing of our 10-K with audited financial statements has been delayed and we are restating our historical financial statements to account for non-cash expenses reflected in our interim financial statements from 2003 through 2005 and our annual financial statements for 2003 and 2004. This accounting problem reflected a weakness in our internal control process pursuant to Section 404 of the Sarbanes Oxley Act.
These non-cash charges do not affect our revenues, cash flows, or liquidity. We emphasize that the delayed filing in no way reflects upon our financial stability or accounting ethics and, based upon the representations of our independent accountants expect to complete the 10-K filing with audited financial statements within 30 days of April 3, 2006. We have always adhered to the most conservative and ethical standards of accounting and governance.
Our focus has firmly been upon building solid science that will deliver peer support, regulatory approval and lead to commercial, revenue generating relationships. We are well on the path to accomplishing our objectives.
Sincerely,
William A. Carter, M.D.
Chairman of the Board and Chief Executive Officer <<
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