On September 23, 1998, Dr. William A. Carter, Chairman of Hemispherx Biopharma, Inc., (AMEX symbols: HEB and HEBWS) (Price: $6.00) hosted a conference call. Dr. Carter devoted a large portion of this call to an attempt to discredit and criticize our Hemispherx September 22, 1998 research report. We disagree with his assertions that our report was in any way incomplete or inaccurate. In fact, we believe that Dr. Carter’s criticism of our report was purposely misleading. Dr. Carter attributed statements to us that were not in our report. He simply created statements and ideas that had nothing to do with the content or meaning of our report. We believe Dr. Carter’s criticisms of our report were made for the sole purpose of attempting to perpetuate Hemispherx’s fraudulent stock promotion.
The conference call lasted for approximately two and a half hours. It was recorded and is available for playback nationally at (800) 475-6701 and internationally at (320) 365-3844 under the code 408590. It speaks for itself. Investors should listen to the call for themselves. Here we address only two points that we believe show clear and convincing evidence of Dr. Carter’s intent to defraud investors. First, Dr. Carter insinuated that his use of Stratton Oakmont, Inc. (“Stratton”) to take Hemispherx public was not a basis for legitimate investor concern. Second, Dr. Carter claims that the E.I du Pont de Nemours & Co. (“DuPont”) settlement vindicated Hemispherx. Both of these representations are absurd and false.
At the time of Hemispherx’s IPO, Stratton was already the subject of a permanent injunction and an SEC Administrative Order for securities laws violations. It had also been suspended from doing business in sixteen states. The SEC had found that Stratton conducted fraudulent sales practices, made material misrepresentations and omissions, and manipulation of stock prices. We believe it is reasonable to assume that no legitimate company with any real value or demonstrable business prospects would agree or need to procure financing from such a fraudulent underwriter. Stratton and its private investors used Hemispherx before and immediately after its IPO for their gain. We believe that Hemispherx’s dealings with Stratton provide clear evidence of its lack of value and willingness to defraud investors. Dr. Carter’s attempt to make investors believe otherwise can only be considered as misleading.
The second issue is the DuPont settlement. Dr. Carter cited Hemispherx’s settlement with DuPont as a vindication of his position. In the settlement DuPont paid $2.75 million to Hemispherx, returned its 2.7 million shares back to Hemispherx and returned any rights to Ampligen. This settlement is extraneous to the issue that Ampligen did not work as an HIV treatment and that its pre-clinical tests proved false.
Hemispherx claimed that the reason their initial trial succeeded and DuPont’s major effort failed was because DuPont used plastic bags to hold and transport the Ampligen. During the pre-clinical trials, Hemispherx stored the Ampligen in glass bottles. Hemispherx claims that this difference caused the Ampligen to become ineffective. We believe that if this was true and Ampligen was effective for HIV, then there would have been additional trials done with glass bottles. Instead, Dupont ended its consideration of Ampligen as an HIV treatment. We believe that Hemispherx’s lawsuit against DuPont was baseless and the settlement has no bearing on the key issues. We believe that the Ampligen HIV tests that Hemispherx used to defraud DuPont were not valid and DuPont’s trials proved that these early “experimental” results were false. In addition, after the DuPont trials had failed, Hemispherx continued to mislead the public by including HIV claims in their November 2, 1995, IPO prospectus.
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