A well-connected company with close ties to a key Obama Administration official may be running afoul of the SEC by failing to report to its investors material events that significantly impact its bottom line. Just another day in Barack Obama’s Washington, DC “favor factory.”
Capital Confidential has in the past covered the saga of PharmAthene, a company that produces “medical countermeasures to biological and chemical weapons” and its great fortune to have been awarded the sole-source contract from the Biomedical Advanced Research and Development Authority (BARDA). We have also learned that the firm has very close ties to Tara O’Toole, the Department of Homeland Security Under Secretary for Science and Technology, who, as it happens, was once a lobbyist for an industry association that is essentially funded and run by PharmAthene.
All this has been covered and, to be cynically frank, is somewhat familiar behavior from Washington, DC. But what is not so familiar (though it is becoming more so every week) is for well-heeled companies who essentially exist due only to government contracts, connections, loans or bailouts to play fast and loose with laws and regulations designed to protect taxpayers and investors. And here is where PharmAthene reenters the picture.
PharmAthene is publicly traded (NYSE amex: PIP) and therefore has an obligation to publicly disclose material events that might reasonably be expected to affect the company’s stock price. Nevertheless, important pieces of information are missing from recent press releases issued by PharmAthene and posted to the Investor Relations section of its website; information that the company had included in previous releases.
PharmAthene is developing a potential Anthrax therapy called Valortim. This experimental product has been funded by the U.S. government, as has its anthrax vaccine development program. As such, PharmAthene disclosed the following in an October press release: “PharmAthene’s rPA anthrax vaccine program has been funded in whole or in part with Federal funds from the National Institute of Allergy and Infectious Disease, National Institutes of Health and the Biomedical Advanced Research and Development Authority.”
That information is missing from a press release PharmAthene issued about Valortim less than two months later, though. If PharmAthene has lost federal funding for a major product, well, this constitutes a material event, and therefore is something it must disclose to its investors.
Has PharmAthene in fact lost funding for its Anthrax program? That’s unclear. Yet we know that a different company, Elusys, has been awarded funding for its rival product and, according to a recent presentation from BARDA that it has only “one enhanced monoclonal in development” to combat Anthrax, again suggesting the U.S. government is no longer interested in Valortim. The silence from PharmAthene is deafening.
Also, the National Defense Authorization Act signed by President Obama does in fact reduce funding for the Chemical and Biological Defense Program. According to Alex Philippidis, writing in Genetic Engineering & Biotechnology News:
More quietly, however, NDAA also set levels of funding for several biodefense programs. The funding authorization for the Chemical and Biological Defense Program was reduced by 5%, or $67.5 million, to $1.14 billion from $1.2 billion. The reduction reflected delays in several programs. The largest cut was $50 million following a delay in issuing a request for proposals for the Medical Countermeasures Initiative (MCMI). Delays to the Bioscavenger program, designed to create MCMs that protect military members specifically from nerve agents, resulted in a $24 million reduction.
PharmAthene has also recently celebrated another of its products in a separate press release, a bioscavenger called Protexia, which purportedly combats injuries from chemical weapons. The release contains no information that it has lost government funding for the development and commercialization of this product. It would appear that Protexia, like Valortim, is out of the picture, though it would take a PharmAthene investor a good deal of research time to piece together the facts.
Has PharmAthene failed to disclose to its investors its loss of funding for two of its major products? And if so, will the SEC take appropriate action against this well connected drug company with close ties to the Obama administration?