Ebola has created more fevers in the stock market than it has among Americans.
Every day, it seems another company receives press for working on a new vaccine or cure for Ebola that’s just around the corner – a breakthrough that promises untold riches for those savvy enough to invest before the world catches on.
Give me a break.
The media is terrific at turning non-stories into spectacular events, and whipping the masses into a frenzy with exaggeration.
This company proves my point perfectly…
Another Ebola “Wonder Drug”
On Monday, tiny biotech firm, Hemispherx Biopharma (HEB), was the latest to make some press.
The breathless announcement proclaimed that the company was working with the Army Medical Research Institute of Infectious Diseases (USAMRIID) and that its two drugs, Alferon(R) and Ampligen(R), have successfully protected human cells against Ebola.
You’d think shares would rocket higher on the news, right?
Well, the stock did pop by 10%. (But that’s only $0.03 on a $0.31 stock.)
So is this the one? The magical Ebola vaccine that’ll allow medical personnel to treat patients without fear of contracting the dreaded disease themselves? The one that will allow western African countries to protect their citizens from a bigger outbreak?
Not so much…
Based on the company’s past performance, this announcement won’t result in a useful vaccine, or even a useful adjunct to another vaccine. And it won’t result in any significant revenue for Hemispherx, either.
Calling All Gamblers
In short, Hemispherx is a classic penny stock in almost every way.
Its peak revenue in the last five years was in 2012, when the company generated the princely sum of $213,000. That’s less than a small corner store.
To further put that in perspective, the chairman’s salary last year was almost 10 times higher than annual revenue!
So how on Earth does a company like this survive?
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By selling its shares to hopeful gamblers.
They’re the ones paying some of the bills in stock, leaving vendors to sell shares on the open market to raise more cash. They’re all but paying the pizza guy with stock.
One way that Hemispherx sells its stock is by issuing press releases that promise great things from new breakthroughs… even though time and again, the company never follows through with a marketable product.
Take Alferon(R) and Ampligen(R) for example…
These drugs have actually been around for years… and at various points, Hemispherx has claimed that one or both of them were going to be effective treatments for influenza, HIV, arthritis, chronic fatigue syndrome (CFS), and who knows what else.
But that’s never happened.
In fact, just last year the FDA turned down the company’s application to market Ampligen for CFS. It cited a lack of data to support the safety or effectiveness of the treatment. Ouch.
So what about the firm’s relationship with USAMRIID? Namely, that “USAMRIID scientists have in-vitro data indicating that Alferon… successfully protected human cells against the Ebola virus. [And] low concentrations of Ampligen… also successfully protected human cells against the Ebola virus.”
Well, I’m skeptical.
Previous “successful” tests with its products have gone nowhere – and this is very likely to be the same.
The bottom line is that Hemispherx likes to put out press releases that mean very little. Last week, it was the company’s “strategic relationship” with big-shot lobbying firm, Squire Patton Boggs. Digging in to that press release, it looks more like they hired a law firm.
Don’t get us wrong… there’s nothing amiss or illegal about this approach. There’s no evidence of any fraud, and the company freely discloses everything – including its failure to commercialize its products profitably.
And no doubt, the executives and scientists believe strongly in their products, merely doing what they have to do to keep the lights on until a big application for their drugs (like Ebola) finally arrives.
But you don’t have to agree with them.