AIM IMMUNOTECH INC. (AIM) Business

GENERAL

AIM ImmunoTech Inc. and its subsidiaries are an immuno-pharma company headquartered in Ocala, Florida, and focused on the research and development of therapeutics to treat multiple types of cancers, viral diseases and immune-deficiency disorders for which there are inadequate or unmet therapies. We have established a strong foundation of laboratory, pre-clinical and clinical data with respect to the development of nucleic acids and natural interferon to enhance the natural antiviral defense system of the human body, and to aid the development of therapeutic products for the treatment of certain cancers and chronic diseases.

AIM’s products are Ampligen (rintatolimod) and Alferon N Injection (Interferon alfa). The Company’s flagship product –Ampligen – is a double-stranded RNA (“dsRNA”) molecule being developed for globally important cancers, viral diseases and disorders of the immune system. Ampligen has not been approved by the FDA or marketed in the United States but is approved for commercial sale in the Argentine Republic for the treatment of severe Chronic Fatigue Syndrome (“CFS”).

The Company’s research and development of Ampligen has included a variety of diseases and health matters:

● Conducting clinical trials to evaluate the efficacy and safety of Ampligen for the treatment of pancreatic cancer. ● Evaluating Ampligen across multiple cancers as a potential therapy that modifies the tumor microenvironment with the goal of increasing anti-tumor responses to checkpoint inhibitors. ● Exploring Ampligen’s antiviral activities and potential use as a prophylactic or treatment for existing viruses, new viruses and the mutated viruses thereof. ● Evaluating Ampligen as a treatment for myalgic encephalomyelitis/chronic fatigue syndrome (“ME/CFS”) and fatigue and/or the Post-COVID condition of fatigue. ● Evaluating Ampligen as a vaccine adjuvant in the combination of Ampligen and AstraZeneca’s FluMist as an intranasal vaccine for influenza, including avian influenza.

Based on clinical success as to safety and efficacy in our pancreatic cancer Early Access Program and an ongoing Phase 2 trial, AIM has made the business decision to focus its efforts on the development of Ampligen for the treatment of late-stage pancreatic cancer, as we believe that – of all the opportunities a wide-spectrum therapeutic such as Ampligen has – pancreatic cancer treatment is the path that will potentially lead to the most lucrative outcome. While Ampligen showed positive safety and efficacy in trials involving other solid tumor types, we believe that pancreatic cancer presents the best business opportunity. Pancreatic cancer killed more than 100,000 people in the American and European Union markets and more than 450,000 people worldwide as recently as 2022. When AIM looks at the global health problem of pancreatic cancer, we see a large market in an unmet medical need and with relatively little clinical competition. This large unmet market is enhanced by our intellectual property program. We have a well-developed pancreatic cancer program with broad combination therapy patents in the United States, Japan and Europe, as well as market exclusivity provided by orphan drug designations in the United States and the European Union.

Oncology is an area of biotech which can produce multibillion-dollar mergers and acquisitions deals – large-market Phase 3 oncology clinical trials with positive data are a focus for acquisition. AIM strongly believes that such a Phase 3 study will be possible following the ongoing Phase 2 clinical study evaluating Ampligen in combination with AstraZeneca’s anti-PD-L1 immune checkpoint inhibitor Imfinzi (durvalumab) in the treatment of metastatic pancreatic cancer patients with stable disease post-FOLFIRINOX standard of care (the “DURIPANC” study). The DURIPANC study is an investigator-initiated, exploratory, open-label, single-center study expected to enroll up to 25 subjects in the Phase 2 portion. The primary objective of the study is the clinical benefit rate of the combination therapy. The secondary/exploratory objectives include assessing overall survival and progression-free survival; exploring immune-monitoring using available tissue biopsies and peripheral immune profiling; and assessing quality of life. Eighteen patients have been enrolled in the study. According to the Erasmus MC Cancer Institute, the promising progression-free survival and overall survival seen in Phase 1 of the study – which we believe supported advancement to the ongoing Phase 2 portion of the study – continue to be seen and that enrollment is ongoing. Erasmus MC expects that detailed data will be published later this year. According to Erasmus MC, there has also been no significant toxicity – an encouraging safety profile for a post-chemo setting – and Ampligen subjects are consistently reporting “high quality of life” during treatment.

In March 2026, we announced an agreement with the PPD clinical research business of Thermo Fisher Scientific to design AIM’s anticipated Phase 3 clinical trial in the use of Ampligen in the treatment of late-stage pancreatic cancer. Thermo Fisher Scientific is a global leader in scientific progress.

Immuno-Oncology

We are focused on pancreatic cancer because testing results to date — primarily conducted in the Netherlands — have been very promising. The Netherlands study generated statistically significant data indicating that Ampligen extended survival well beyond the Standard of Care (“SOC”), when compared to well-matched historical controls. These data support the proposition that Ampligen, when administered to either patients with locally advanced or metastatic pancreatic cancer after systemic chemotherapy, showed a statistically significant increase in survival rate. In October 2021, we and our Contract Research Organization, Amarex, submitted an IND application to the FDA for a planned Phase 2 study of Ampligen as a therapy for locally advanced or metastatic late-stage pancreatic cancer.

Ampligen appears in clinic testing to have potential for standalone efficacy in a number of other solid tumors. We have also seen success in increasing survival rates and efficacy in the treatment of animal tumors when Ampligen is used in combination with checkpoint blockade therapies. In November 2025, we detailed an abstract containing data from a completed Phase 2 advanced recurrent ovarian cancer clinical study utilizing Ampligen. We believe that data from the study, which was conducted by the University of Pittsburgh Medical Center and funded by a Merck grant, demonstrated that when combining three drugs – Ampligen and pembrolizumab, which are both immune therapies, with cisplatin, a chemotherapy – evidence of increased biomarkers associated with T cell chemotaxis and cytolytic function has been seen. Importantly, increases of these biomarkers in the tumor microenvironment have been correlated with favorable tumor responses. These successes in the field of immuno-oncology have guided our efforts toward the potential use of Ampligen as a combinational therapy for the treatment of a variety of solid tumor types. The first of our patent applications in this space was granted by the Netherlands on March 15, 2021.

Please see “Immuno-Oncology” below.

Ampligen as a Potential Antiviral

We have research and pre-clinical history that indicates the broad-spectrum antiviral capability of Ampligen in animals. We hope to demonstrate that it has the same effect in humans. To demonstrate this requires a population infected with a virus among other factors which is why our most recent antiviral focus has been on COVID-19 (the disease caused by SARS-CoV-2) and Long COVID. Previous animal studies yielded positive results utilizing Ampligen to treat numerous viruses, such as Western Equine Encephalitis Virus, Ebola, Vaccinia Virus (which is used in the manufacture of smallpox vaccine) and SARS-CoV-1. We have conducted experiments in SARS-CoV-2 showing Ampligen has a powerful impact on viral replication. The prior studies of Ampligen in SARS-CoV-1 animal experimentation may predict similar protective effects against SARS-CoV-2.

We announced in February 2025 our intention to pursue a study of a potential avian influenza combination therapy of Ampligen and AstraZeneca’s FluMist, a nasal spray vaccine that helps prevent seasonal influenza. The new proposed clinical trial would expand upon previous Company-sponsored clinical research at the University of Alabama-Birmingham (“UAB”), which indicated that intranasal delivery of Ampligen after the intranasal delivery of the FluMist seasonal influenza vaccine increased the immune response to seasonal variants in the vaccine by greater than four-fold and induced cross-reactive secretory Immunoglobulin A against highly pathogenic avian influenza virus strains H5N1, H7N9 and H7N3. We are seeking collaborative grants from government and industry to defray the cost of the study. We believe that this pre-clinical and clinical work to date – combined with the ever-growing threat of Avian influenza – strongly supports our decision to move forward with this second Ampligen and FluMist study in humans.

Please see “Ampligen as a Potential Antiviral” below.

Ampligen as a Treatment for ME/ CFS and Post-COVID Conditions

In July 2023, we enrolled and dosed the first patient in our Phase 2 study evaluating Ampligen® as a potential therapeutic for people with post-COVID conditions (“AMP-518”). We announced in August 2023 that the study had met the planned enrollment of 80 subjects ages 18 to 60 years who have been randomized 1:1 to receive twice-weekly intravenous infusions of Ampligen or placebo for 12 weeks, with a follow-up phase of two weeks. All patients have completed the study, with topline data reported in February 2024.

In January 2025, we announced that the final Clinical Study results from AMP-518 had been posted to ClinicalTrials.gov. The results support our belief in Ampligen as a potential therapeutic for people with the moderate-to-severe Post-COVID condition of fatigue, and that this would be the likely subject population for any follow-up clinical trial.

Please see “Ampligen as a Treatment for ME/CFS and Post-COVID Conditions” below.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure (“GAAP”) of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the reporting period. Actual results could differ from those estimates, and those differences may be material. Accounts requiring the use of significant estimates include determination of other-than-temporary impairment on securities, valuation of deferred taxes, patent and trademark valuations, stock-based compensation calculations, fair value of warrants, and contingency accruals.

Liquidity and Going Concern

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. The going concern basis of presentation assumes that the Company will continue in operation one year after the date these financial statements are issued and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business.

Pursuant to the requirements of the Financial Accounting Standards Board’s (the “FASB”) Accounting Standards Codification (“ASC”) Topic 205-40, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, management must evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year from the date these financial statements are issued. This evaluation does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented or are not within control of the Company as of the date the financial statements are issued. When substantial doubt about the Company’s ability to continue as a going concern exists, management evaluates whether the mitigating effect of its plans sufficiently alleviates the substantial doubt. The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued, and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued.

The Company’s principal source of liquidity is its cash and cash equivalents, marketable securities, and proceeds from financing activities to provide the necessary funding to meet its obligations as they become due. The Company incurred losses from operations and net cash used on operating activities for the years ended December 31, 2025, and 2024, and has a working capital deficit as of December 31, 2025, and 2024. Additionally, its stockholders’ equity was below the minimum requirements for continued listing on the New York Stock Exchange American (“the Exchange”). These factors raise substantial doubt regarding the Company’s ability to continue as a going concern for a period of at least one year from the date of issuance of these consolidated financial statements. Management evaluated the conditions and the significance in relation to the Company’s ability to meet its obligations and noted that a substantial portion of its outstanding debt is current as of December 31, 2025. If the Company is unable to implement sufficient mitigation efforts, it may need to limit its business activities or be unable to continue as a going concern, which would have a material adverse effect on its results of operations and financial condition. However, please see “Class E and Class F Warrant Reclassification” below.

On December 11, 2024, the Company received an official notice of noncompliance with the Exchange’s continued listing requirements. This includes the need for the Company to have stockholders’ equity of $6,000,000 or more. The Exchange’s review showed that the Company was not in compliance with that requirement. As required, the Company submitted a plan (the “Plan”) to the Exchange illustrating how it can regain compliance by June 11, 2026. The Exchange accepted the Plan on February 26, 2025, and the Company has submitted quarterly updates to the Exchange since that time. If the Company is not able to regain compliance by June 11, 2026, its common stock may be delisted from the Exchange. As of December 31, 2025, its stockholders’ deficit was approximately ($9,783,000). It must increase its stockholders’ equity to be at least $6,000,000 to regain compliance with this rule. If it is not able to raise sufficient capital as set forth in the Plan or by other means, it may be unable to regain compliance with the Exchange’s listing standards, and its securities could be subject to delisting. In addition, in the event that the price of the common stock drops to $0.10 per share, trading in the common stock will automatically be suspended and the common stock would be subject to delisting. The price dropped below $0.10 and on April 4, 2025, the Company received a delisting letter from the Exchange and trading in its common stock on the Exchange was suspended.

On April 30, 2025, the Company held a special meeting of stockholders and authorized the Company’s Board of Directors to effect a reverse split at its discretion on a basis of up to one for 100 outstanding shares of Common Stock. On May 29, 2025, the Board authorized the Reverse Split and on June 10, 2025, the Company filed an amendment to its Articles of Incorporation effecting a reverse split of its outstanding shares of Common Stock on a one for 100 basis (the “Reverse Split”). Stockholders were given cash in lieu of any fractional shares on a post-split basis.

On June 11, 2025, the Company was notified by the Exchange that the Company had regained compliance with Section 1003(f)(v) of the Exchange’s Company Guide (low selling price) and that trading in the Company’s Common Stock was reinstated on the Exchange on June 17, 2025.

During the third quarter of 2025, an agreement was reached with a vendor surrounding legal fees. The agreement provided that $3,041,000 of previously billed fees would be forgiven in exchange for payments totaling $1,875,000. The reduction was included as “other income” and accounts payable was reduced.

Class E and Class F Warrant Reclassification

On January 20, 2026, we distributed a stock dividend of one share of our common stock for every 1,000 shares of common stock issued and outstanding as of January 9, 2026, as well as one share of common stock for every 1,000 outstanding options or 1,000 warrants that has a right to receive stock dividends. The distribution was effected on January 20, 2026. This resulted in a reset of the terms of our Class E and Class F Warrants. Per the reset, the exercise price of these warrants dropped to $1.439, additional warrants were issued and a provision in these warrants that resulted in the classification of these warrants as a liability rather than equity was nullified. This will result in a significant increase in our stockholders’ equity.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND SUMMARY RISK FACTORS

Certain statements in this Report contain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act. All statements, other than statements of historical fact, included or incorporated herein regarding our strategy, future operations, financial position, future revenues, projected costs, plans, prospects and objectives are forward-looking statements. Words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate,” “think,” “may,” “could,” “will,” “would,” “should,” “continue,” “potential,” “likely,” “projected,” “opportunity” and similar expressions or variations of such words are intended to identify forward-looking statements but are not the exclusive means of identifying forward-looking statements and their absence does not mean that a statement is not forward-looking. Our forward-looking statements are not guarantees of performance, and actual results could vary materially from those contained in or expressed by such statements due to risks and uncertainties. These statements are based on our management’s current beliefs, expectations and assumptions about future events, conditions and results and on information currently available to us. Discussions containing these forward-looking statements may be found, among other places, in this Report in Part I, Item 1. “Business”; Part II, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations”; Part II, Item 1. “Legal Proceedings”; and Part II, Item 1A. “Risk Factors”. Among other things, for those statements, we claim the protection of safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Any forward-looking statements set forth in this presentation speak only as of the date of this presentation. We do not undertake to update any of these forward-looking statements to reflect events or circumstances that occur after the date hereof. We are in various stages of determining whether Ampligen® will be effective in the treatment of multiple types of viral diseases, cancers, and immune-deficiency disorders and the presentation sets forth our current and anticipated future activities. These activities are subject to change for a number of reasons. Significant additional testing and trials will be required to determine whether Ampligen® will be effective in the treatment of these conditions. Results obtained in animal models do not necessarily predict results in humans. Human clinical trials will be necessary to prove whether or not Ampligen® will be efficacious in humans. No assurance can be given as to whether current or planned clinical trials will be successful or yield favorable data and the trials are subject to many factors including lack of regulatory approval(s), lack of study drug, or a change in priorities at the institutions sponsoring other trials. Even if these clinical trials are initiated, we cannot assure that the clinical studies will be successful or yield any useful data or require additional funding. Among the studies are clinical trials that provide only preliminary data with a small number of subjects, and no assurance can be given that the findings in these studies will prove true or that the study or studies will yield favorable results. Some of the world’s largest pharmaceutical companies and medical institutions are working on a treatment for COVID-19. Even if Ampligen® proves effective in combating the virus, no assurance can be given that our actions toward proving this will be given first priority or that another treatment that eventually proves capable will not make our efforts ultimately unproductive, as multiple vaccines, and some treatments, are now available and major pharma companies are working to develop their own disease treatments. No assurance can be given that future studies will not result in findings that are different from those reported in the studies referenced in this Report. Operating in foreign countries carries with it a number of risks, including potential difficulties in enforcing intellectual property rights. In addition, many countries, including Argentina, are still dealing with COVID-19 outbreaks and have made that their primary focus. We believe that this — along with a massive devaluation of the Argentine peso — may be delaying our commercialization of Ampligen® in Argentina until COVID-19 is more under control. We cannot assure that our potential foreign operations will not be adversely affected by these risks.

Our filings are available at www.aimimmuno.com. The information found on our website is not incorporated by reference into this Report and is included for reference purposes only.

SUMMARY RISK FACTORS

Risks Related to Ownership of Our Securities

● We have a history of losses, expect to continue to incur losses in the near term and may not achieve or sustain profitability in the future, and as a result, there is a substantial doubt about our ability to continue as a going concern. ● We are currently not in compliance with the Exchange continued listing requirements. If we are unable to regain compliance with the Exchange’s listing requirements, our securities could be delisted, which could affect our common stock market price and liquidity and reduce our ability to raise capital. ● If we are not able to comply with the applicable continued listing requirements or standards of the NYSE American, our common stock could be delisted from the Exchange. ● We may seek to raise additional funds or develop strategic relationships by issuing securities that would dilute your ownership. Depending on the terms available to us, if these activities result in significant dilution, it may negatively impact the trading price of our common stock. ● An active, liquid and orderly trading market for our common stock may not develop, the price of our stock may be volatile, and you could lose all or part of your investment. ● If our shares of common stock become subject to the penny stock rules, it would become more difficult to trade our shares. ● If we were to dissolve, the holders of our securities may lose all or substantial amounts of their investments. ● If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they change their recommendations regarding our securities adversely, our stock price and trading volume could decline. ● We are a smaller reporting company, and the reduced disclosure requirements applicable to smaller reporting companies may make our common stock less attractive to investors.

Risk Associated with our Business

● We will require additional financing which may not be available. ● We may continue to incur substantial losses and our future profitability is uncertain. ● Our drug and related technologies are investigational and subject to regulatory approval. If we are unable to obtain regulatory approval in a timely manner, or at all, our operations will be materially harmed and our stock adversely affected. ● We may be subject to product liability claims from the use of Ampligen, Alferon N Injection, or other of our products which could negatively affect our future operations. We have limited product liability and clinical trial insurance. ● Uncertainty of health care reimbursement for our products exists. ● There are risks of liabilities associated with handling and disposing of hazardous materials. ● Failures of our information technology infrastructure could have a material adverse effect on operations. ● The loss of services of key personnel could hurt our chances for success. ● The accounting principles generally accepted in the United States of America (“GAAP”) requires estimates, judgements and assumptions which inherently contain uncertainties. ● We currently, and may in the future, have assets held at financial institutions that may exceed the insurance coverage offered by the Federal Deposit Insurance Corporation (“FDIC”), and the loss of such assets would have a severe negative effect on our operations and liquidity.

Risks Associated with Our Products

● The development of Ampligen is subject to significant risks. ● The development of Alferon N Injection is subject to significant risks. ● Possible side effects from the use of Ampligen or Alferon N Injection could adversely affect potential revenues and physician/patient acceptability of our product.

Risks Related to our activities associated with Ampligen’s potential effectiveness as a treatment for COVID-19 or Post-Covid Conditions

● It is not possible to predict the future of COVID-19, and related Post-COVID Conditions, as a global public health threat or the development of related therapies. No assurance can be given that Ampligen will aid in or be applied to the treatment of this virus. ● Operating in foreign countries carries with it many risks.

Risks Associated with Our Intellectual Property

● We may not be profitable unless we can protect our patents and/or receive approval for additional pending patents. ● The patent position of biotechnology and pharmaceutical firms is highly uncertain and involves complex legal and factual questions. ● There can be no assurance that we will be able to obtain necessary licenses if we cannot enforce patent license rights we may hold. In addition, the failure of third parties from whom we currently license certain proprietary information or from whom we may be required to obtain such licenses in the future, to adequately enforce their rights to such proprietary information, could adversely affect the value of such licenses to us. ● There is no guarantee that our trade secrets will not be disclosed or known by our competitors.

Risks Associated with Our R&D

● We cannot predict what additional studies and/or additional testing, or information may be required by the FDA. Accordingly, we are unable to estimate the nature, timing, costs and necessary efforts to complete these projects nor the anticipated completion dates. In addition, we have no basis for estimating when material net cash inflows may commence. We have yet to generate significant revenues from the sale of these developmental products.

Risks Associated with Our Manufacturing

● There are no long-term agreements with suppliers of required materials and services for Ampligen and there are a limited number of raw material suppliers. If we are unable to obtain the required raw materials and/or services, we may not be able to manufacture Ampligen. ● Our Alferon N Injection Commercial Sales were halted due to lack of finished goods inventory. If we are unable to gain the necessary FDA approvals related to Alferon N Injection, or if we are unable to identify a CMO or CMOs that meet our requirements, then our operations would most likely be materially and/or adversely affected. ● There are limited number of organizations in the United States available to provide the final manufacturing steps of formulation, fill, finish and packing sets for Ampligen and Alferon N Injection. ● There is no assurance that, upon success, manufacture of a drug on a limited-scale basis for investigational use would lead to a successful transition to commercial, large-scale production. ● We have limited manufacturing experience for Ampligen and Alferon N Injection. We may not be profitable unless we can produce Ampligen, Alferon N Injection or other products in commercial quantities at costs acceptable to us.

Risks Associated with Our Licensing/Collaborations/Joint Ventures

● If we are unable to achieve licensing, collaboration and/or joint ventures, our marketing strategy for Ampligen will be part of the differing health care systems around the world along with the different marketing and distribution systems that are used to supply pharmaceutical products to those systems.

Risks Associated with Our Marketing and Distribution

● We have limited marketing and sales capability. If we are unable to obtain additional distributors and our current and future distributors do not market our products successfully, we may not generate significant revenues or become profitable.

Risks Associated with Our Competition

● Rapid technological change may render our products obsolete or non-competitive. ● Our products may be subject to substantial competition.

Risks Associated with an Investment in Our Common Stock

● The market price of our stock may be adversely affected by market volatility. ● Sales of a significant number of shares of our common stock in the public markets, or the perception that such sales could occur, could depress the market price of our common stock. ● Provisions of our Certificate of Incorporation and Delaware law could defer a change of our Management, which could discourage or delay offers to acquire us. ● Our business, financial condition and operating results could be negatively affected as a result of actions by activist investors.

AVAILABLE INFORMATION

We file electronically with the United States Securities and Exchange Commission, or SEC, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended. We make available on our website at www.aimimmuno.com free of charge, copies of these reports as soon as reasonably practicable after filing these reports with, or furnishing them to, the SEC. We are subject to the information and periodic reporting requirements of the Exchange Act and, in accordance therewith, we file periodic reports, proxy statements and other information with the SEC. Such periodic reports, proxy statements and other information are available for inspection and copying at the website of the SEC www.sec.gov. You also may obtain a free copy of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and amendments to those reports on the day of filing with the SEC on our website at http://www.aimimmuno.com under the Investor Relations tab for SEC Filings or by contacting the Investor Relations Department by calling (833) 475-8247 or (352) 448-7797 or sending an e-mail message to [email protected]. Our Internet website and the information contained on that website, or accessible from our website, is not intended to be incorporated into this Annual Report on Form 10-K (this “Annual Report”) or any other filings we make with the SEC.

OUR PRODUCTS

Our primary pharmaceutical product platform consists of Ampligen (rintatolimod), a first-in-class drug of large macromolecular double-stranded (ds) RNA (ribonucleic acid) molecules. Ampligen is the only known TLR3 agonist to avoid helicase activation of NF-κB. Natural dsRNAs and poly IC which activate NF-κB in the tumor microenvironment (TME) and have the potential to enhance cancer cell proliferation. Alferon Injection is an FDA-approved natural alpha-interferon product.

Ampligen®

Ampligen is approved for sale in Argentina (to 2026) for severe CFS and is an experimental drug in the United States currently being developed for the treatment of late-stage pancreatic cancer, a lethal and unmet global health problem. Over its developmental history, Ampligen has received various designations, including Orphan Drug Product Designation (FDA and EMA), Treatment protocol (e.g., “Expanded Access” or “Compassionate” use authorization) with Cost Recovery Authorization (FDA) and “promising” clinical outcome recognition based on the evaluation of certain summary clinical reports (“AHRQ” or Agency for Healthcare Research and Quality). Based on the results of published, peer-reviewed pre-clinical studies and clinical trials, we believe that Ampligen may have broad-spectrum antiviral and anti-cancer properties.

We believe that nucleic acid compounds represent a potential new class of pharmaceutical products designed to act at the molecular level for treatment of many human diseases. Ampligen represents the first drug in the class of large (macromolecular) dsRNA molecules to apply for NDA review. There are two forms of nucleic acids: deoxyribonucleic acid (“DNA”) and ribonucleic acid (“RNA”). DNA is a group of naturally occurring molecules found in chromosomes, the cell’s genetic machinery. RNA is a group of naturally occurring informational molecules which orchestrate a cell’s behavior which, in turn, regulates the action of groups of cells, including the cells which comprise the body’s immune system. RNA directs the production of proteins and regulates certain cell activities including the activation of an otherwise dormant cellular defense against viruses and tumors. Our drug technology utilizes specifically configured RNA and is a selective Toll-like Receptor 3 (“TLR3”) agonist that can be administered intravenously, intranasally and intraperitoneally. Ampligen has been assigned the generic name rintatolimod by the United States Adopted Names Council (“USANC”) and has the chemical designation poly(I):poly(C12U).

Expanded Access Program/Early Access Programs/clinical trials of Ampligen that have been conducted or that are ongoing include studies of the potential treatment of patients with pancreatic cancer, renal cell carcinoma, malignant melanoma, non-small cell lung cancer, ovarian cancer, breast cancer, colorectal cancer, prostate cancer, ME/CFS, Hepatitis B, HIV, COVID-19 and Post-COVID conditions.

We have received approval of our NDA from ANMAT for the commercial sale of Ampligen in the Argentine Republic for the treatment of severe CFS. The product would be marketed by GP Pharm – now Filaxis – our commercial partner in Latin America. Shipment of the drug product to Argentina was initiated in 2018 to complete the release testing by ANMAT needed for commercial distribution. In September 2019, we received clearance from the FDA to ship Ampligen to Argentina for the commercial launch and subsequent sales. In June 2020, we received import clearance from ANMAT to import the first shipment of commercial grade vials of Ampligen into Argentina. Collaboration with Filaxis continues for commercial launch of Ampligen in Argentina. To successfully bring this to market, several key steps are necessary, including building disease awareness, providing medical education, securing appropriate reimbursement, developing effective market strategies, and finalizing manufacturing preparations for launch.

The economic landscape in Argentina has changed dramatically since then, with the country experiencing significant hyper-inflation. As contracts in Argentina are U.S. dollar contracts, the parties must evaluate the impact of the devaluation on the relationship and the ability to go forward on a U.S.-dollar basis. The combination of the cost and frequency of treatments has rendered CFS treatments in Argentina cost prohibitive, at least for the time being. We will therefore focus our efforts with Filaxis on an approval in Argentina for pancreatic cancer.

In May 2016, we entered into a five-year agreement with myTomorrows, a Netherlands-based company, for the commencement and management of an Early Access Program (“EAP”) in Europe and Turkey related to ME/CFS. Pursuant to the agreement, as amended, myTomorrows also is managing all Early Access Programs and Special Access Programs in Europe, Canada, and Turkey to treat pancreatic cancer and ME/CFS patients. The agreement was automatically extended for a period of 12 months on May 20, 2021; has been automatically extended for 12 months on each subsequent May 20; and will continue to be automatically extended for periods of 12 months every May 20 until terminated or the terms of the agreement are met.

In June 2018, Ampligen was cited as outperforming two other TLR3 agonists — poly IC and natural double stranded RNA — in creating an enhanced tumor microenvironment for checkpoint blockade therapy in the journal of Cancer Research. In a head-to-head study in explant culture models, Ampligen activated the TLR3 pathway and promoted an accumulation of killer T cells but, unlike the other two TLR3 agonists, it did so without causing regulatory T cell (Treg) attraction. These findings were considered important because they indicate that Ampligen selectively reprograms the tumor microenvironment by inducing the beneficial aspects of tumor inflammation (attracting killer T cells), without amplifying immune-suppressive elements such as regulatory T cells. The study was conducted at the University of Pittsburgh and Roswell Park as a part of the NIH-funded P01 CA132714 and Ovarian Cancer Specialized Program of Research Excellence (“SPORE”).

In 2018, we completed production of two commercial-size batches of more than 16,000 vials of Ampligen, following its “Fill & Finish” at Jubilant HollisterStier, the Contract Manufacturing Organization. These lots passed all required testing for regulatory release for human use and are being used for multiple programs, including the treatment of ME/CFS in the United States and the treatment of pancreatic cancer in the Netherlands. These lots will be used for ongoing and future clinical studies in oncology. Additional lots of Ampligen were manufactured in December 2019, January 2020 and December 2023.

As to the production of additional Ampligen when and if needed, the validation of the polymer production process with Sterling Pharma Solutions (“Sterling”) is ongoing. This will need to be completed before we can manufacture more polymer, and thus more Ampligen.

Alferon N Injection®

Alferon N Injection is the registered trademark for our injectable formulation of natural alpha interferon. Alferon N Injection is the only natural-source, multi-species alpha interferon currently approved for sale in the United States and Argentina for the intralesional (within lesions) treatment of refractory (resistant to other treatment) or recurring external genital warts in patients 18 years of age or older. Alferon N Injection is also approved in Argentina for the treatment of refractory patients that failed or were intolerant to treatment with recombinant interferons. Argentina has experienced hyper-inflation and devaluation of its currency compared to the U.S. dollar. Contracts with GP Pharm (Filaxis) are U.S. dollar contracts and the parties must evaluate the impact of the recent devaluation on its relationship. Certain types of human papilloma viruses (“HPV”) cause genital warts, a sexually transmitted disease (“STD”). According to the CDC, HPV is the most common sexually transmitted infection, with approximately 79 million Americans — most in their late teens and early 20s — infected with HPV. In fact, the CDC states that “HPV is so common that nearly all sexually active men and women get the virus at some point in their lives.” Although they do not usually result in death, genital warts commonly recur, causing significant morbidity and entail substantial health care costs.

Interferons are a group of proteins produced and secreted by cells to combat diseases. Researchers have identified four major classes of human interferon: alpha, beta, gamma and omega. Alferon N Injection contains a multi-species form of alpha interferon. The worldwide market for injectable alpha interferon-based products has experienced rapid growth and various alpha interferon injectable products are approved for many major medical uses worldwide. Alpha interferons are manufactured commercially in three ways: by genetic engineering, by cell culture, and from human white blood cells. All three of these types of alpha interferon are or were approved for commercial sale in the United States. Our natural alpha interferon is produced from human white blood cells. The potential advantages of natural alpha interferon over recombinant (i.e., synthetic) interferon produced and marketed by other pharmaceutical firms may be based upon their respective molecular compositions. Natural alpha interferon is composed of a family of proteins containing many molecular species of interferon. In contrast, commercial recombinant alpha interferon products each contain only a single species. Researchers have reported that the various species of interferons may have differing antiviral activity depending upon the type of virus. Natural alpha interferon presents a broad complement of species, which we believe may account for its higher activity in laboratory studies. Natural alpha interferon is also glycosylated (i.e., partially covered with sugar molecules). Such glycosylation is not present on the currently U.S.-marketed recombinant alpha interferons. We believe that the absence of glycosylation may be in part responsible for the production of interferon-neutralizing antibodies seen in patients treated with recombinant alpha interferon. Although cell culture-derived interferon is also composed of multiple glycosylated alpha interferon species, the types and relative quantity of these species are different from our natural alpha interferon.

Alferon N Injection [Interferon alfa-n3 (human leukocyte derived)] is a highly purified, natural-source, glycosylated, multi-species alpha interferon product. There are essentially no neutralizing antibodies observed against Alferon N Injection to date and the product has a relatively low side-effect profile. The recombinant DNA derived alpha interferon formulations have been reported to have decreased effectiveness after one year of treatment, probably due to neutralizing antibody formation (See “Manufacturing” and “Marketing/Distribution” sections below for more details on the manufacture and marketing/distribution of Alferon N Injection). The production of new Alferon N Injection Active Pharmaceutical Ingredient, or API, is currently on hold. We do not know when, if ever, our products will be generally available for commercial sale for any indication. Additionally, on May 9, 2023, we were granted a U.S. Patent for a method for preventing or reducing antigenic drift or viral reassortment in a host animal comprising determining if a host animal has been exposed to or infected by an avian influenza virus and administering to the exposed host animal alpha-interferon. Given our focus on developing Ampligen as an oncology therapy and antiviral, alone and in combination with other drugs, at this time we are not focusing on developing Alferon N Injection.

PATENTS AND NON-PATENT EXCLUSIVITY RIGHTS

We consider patent exclusivity as a crucial component of our business. As of December 31, 2025, we had 28 patents worldwide with 22 additional pending patent applications comprising our intellectual property.

We continually review our patents to determine if they have continuing value. Please see “Note 4: Patents, and Trademark Rights, Net” under Notes to the Consolidated Financial Statements for more information on these patents.

There are no current patent litigation proceedings involving us.

Orphan drug designation

U.S. Orphan drug designation qualifies sponsors for incentives including:

● Tax credits for qualified clinical trials ● Exemption from user fees ● Potential seven years of market exclusivity after FDA approval

We have received Orphan Drug Designation (ODD) from the FDA for Ampligen used in the treatment of Chronic Fatigue Syndrome, HIV, Metastatic Melanoma, Renal Cell Carcinoma, Pancreatic Adenocarcinoma and Ebola Virus Disease.

In the European Union, ODD carries ten years of market exclusivity after receiving marketing authorization. We have received ODD from the EU for Ampligen used in the treatment of Ebola Virus Disease and Pancreatic Adenocarcinoma, and for Alferon used in the treatment of Middle East Respiratory Syndrome.

RESEARCH AND DEVELOPMENT (“R&D”)

Our general focus during the past several fiscal years has been on expanding the market potential of Ampligen through investigation of efficacy (in vitro and in vivo) in different immune-based disorders including cancer and CFS. We also have focused on research and development of potential prophylactic and therapeutic applications for the treatment of COVID-19, including the long-term effects of COVID-19.

Immuno-Oncology

The potential of Ampligen as an immuno-oncology therapeutic has been a major focus of AIM since our current leadership took over in 2016. We have been working with the University of Pittsburgh’s chemokine modulation research initiative, which includes the use of Ampligen as a potential adjuvant to modify the tumor microenvironment (“TME”) with the goal of increasing anti-tumor responses to check point inhibitors (“CPI”). As part of this collaboration, we have supplied Ampligen to the University. The study, under the leadership of Robert P. Edwards, MD, chair of gynecologic services at Magee-Women’s Hospital of the University of Pittsburgh School of Medicine (“UPMC”) and Professor of Surgery Pawel Kalinski, M.D., Ph.D., at Roswell Park, Buffalo, N.Y., (who joined UPMC) involved the chemokine modulatory regimen developed by Dr. Kalinski’s group and successfully completed the Phase 1 dose escalation in patients with resectable colorectal cancer.

Multiple Ampligen clinical trials are underway or recently completed at major university cancer centers testing whether tumor microenvironments can be reprogrammed to increase the effectiveness of cancer immunotherapy, including checkpoint inhibitors. The underway trials include:

Pancreatic Cancer Trials

● The DURIPANC Study is a Phase 1b/2 clinical trial combining Ampligen with AstraZeneca’s anti-PD-L1 immune checkpoint inhibitor Imfinzi® (durvalumab) for the treatment of late-stage pancreatic cancer. The primary objective of the Phase 1b portion was to determine the safety of combination treatment. Investigators at Erasmus Medical Center (“Erasmus MC”) in the Netherlands have completed the safety evaluation of subjects enrolled in the first dose level of the dose escalation design, finding the combination therapy to be generally well-tolerated with no severe treatment-related adverse events or dose-limiting toxicities. In February 2025, we announced that the Erasmus MC Safety Committee had approved the clinical trial to move forward with Phase 2. In July 2025, we announced a positive mid-year safety and efficacy update that included treatment of 14 subjects. There has been no significant toxicity reported. Three of the 14 subjects (~21%) have progression free survival (PFS) >6 months with an additional 3 subjects (21%) not yet progressed. Overall survival (OS) of >6 months in majority of eligible subjects (64%). In December 2025, we reported positive year-end interim clinical progress that included treatment of 18 subjects; promising PFS and OS continue to be seen. Up to 25 patients are expected to be enrolled in the Phase 2 portion of DURIPANC. Enrollment and dosing are ongoing in Phase 2. In March 2026, we announced an agreement with the PPD clinical research business of Thermo Fisher Scientific to design AIM’s anticipated Phase 3 clinical trial in the use of Ampligen in the treatment of late-stage pancreatic cancer. Thermo Fisher Scientific Inc. is a global leader in scientific progress. (https://clinicaltrials.gov/study/NCT05927142)

● The Phase 2 AMP-270 clinical trial is a randomized, open-label, controlled, parallel-arm study with the primary objective of comparing the efficacy of Ampligen in combination with standard of care (SOC) versus SOC alone following first-line therapy, such as FOLFIRINOX for subjects with locally advanced pancreatic adenocarcinoma. Secondary objectives include comparing safety and tolerability. AMP-270 is expected to enroll approximately 90 subjects in up to 30 centers across the U.S. and Europe. In March 2022, the FDA granted clearance to proceed with the study. In April 2022, we executed a work order with Amarex to manage the clinical trial. In August 2022, we received IRB approval of the trial protocol and so announced the trial’s commencement. The authorization to proceed with the Phase 2 pancreatic cancer clinical trial has been received with potential sites in the Netherlands at Erasmus MC, and also at major cancer research centers in the United States such as The Buffett Cancer Center at the University of Nebraska Medical Center (UNMC). We sought FDA guidance on the expansion of inclusion criteria and treatment arms, then subsequently amended the study protocol. In February 2025, we made a business decision to place screening/enrollment on hold and suspend the study. The study may be redesigned or amended, pending additional data from the ongoing DURIPANC clinical trial. (https://clinicaltrials.gov/ct2/show/NCT05494697).

Advanced Recurrent Ovarian Cancer

● Results of the Phase 1 portion of a Phase 1/2 study of intraperitoneal chemo-immunotherapy in advanced recurrent ovarian cancer were published in the American Association for Cancer Research publication, Clinical Cancer Research (Clin Cancer Res January 19, 2022 DOI: 10.1158/1078-0432.CCR-21-3659). The study results represent an important extension of prior studies using human tumor explants that showed Ampligen’s potentially important role as a TLR3 agonist acting synergistically with high-dose IFNα and celecoxib to selectively enhance Teff cell-attractants while suppressing Treg-attractants in the tumor microenvironment with a concomitant increase in the Teff/Treg ratio. The importance of boosting the Teff/Treg ratio in the tumor microenvironment is that it is associated with the conversion of ‘cold’ tumors into ‘hot’ tumors, which have an increased sensitivity to chemo-immunotherapy and an improved chance of showing tumor regression. The Phase 1 portion was designed to establish intraperitoneal safety. The Phase 2 portion of the study has been terminated due to lack of funding. https://clinicaltrials.gov/ct2/show/NCT02432378 ● A Phase 2 study of advanced recurrent ovarian cancer using cisplatin, pembrolizumab, plus Ampligen; up to 45 patients to be enrolled; enrollment has commenced, and numerous patients have commenced treatment. In April 2024, researchers released topline data that saw an Objective Response Rate (“ORR”) of 45% in platinum-sensitive subjects with recurrent ovarian cancer. ORR includes complete response (“CR”) and partial response (“PR”) to treatment. There was a total Clinical Benefit Rate (“CBR”) of 55% when including patients who experienced stable disease (“SD”). Researchers also reported a median Progression-Free Survival (“PFS”) of 7.8 months. In July 2024, results posted online indicated 24 patients treated in the study saw an ORR of 50% and no patients had a dose-limiting toxicity reported. Based on these results and other research suggesting a similar effect in other solid tumor types, AIM sees an Ampligen combination therapy as having potential across multiple types of cancers. Additional clinical studies are being planned in these tumor types to further confirm these effects.” https://clinicaltrials.gov/ct2/show/NCT03734692.

We hold multiple patents related to the use of Ampligen as part of a combination therapy when combined with checkpoint inhibitors for the treatment of cancer. The combination of these compounds is designed to work synergistically to enhance the effectiveness of the treatment. AIM’s “synergistic” patents include a U.S. patent (expires August 9, 2039) for methods involving use of Ampligen as part of a combination oncology therapy when paired with an anti-PD-L1 antibody; a patent in Japan (expires December 20, 2039) for the use of Ampligen in combination with checkpoint inhibitors (anti-PD-1 or anti-PD-L1 antibodies) for the treatment of cancer; and a patent in the Netherlands (expires December 19, 2039) for the use of Ampligen as a combination cancer therapy with checkpoint blockade inhibitors, such as Keytruda (pembrolizumab), Opdivo (nivolumab) and Imfinzi (durvalumab). Additional “synergistic” patent applications are pending and AIM will promptly announce when any such patent is issued. Additionally, in June 2025 we received a patent (expires January 25, 2041) covering methods involving the manufacture of a range of therapeutic double-stranded RNA (dsRNA) products, of which Ampligen is included. Combined with our multiple compositions and methods patents involving Ampligen, this manufacturing patent, along with our other issued patents, further secures our control over the synthesis and use of the first-in-class drug.

Stage 4 Metastatic Triple Negative Breast Cancer - Phase 1 study of metastatic triple-negative breast cancer using chemokine modulation therapy, including Ampligen and pembrolizumab. Eight patients were enrolled and 6 patients were evaluable. https://www.clinicaltrials.gov/ct2/show/NCT03599453. The key findings announced first in April 2022, and later published in November 2023, included:

● The pre-determined primary endpoint of efficacy was met (increase in CD8 in TME). ● Uniform increase of immune markers upon treatment was observed: CD8 mRNA (6.1-fold; p-0.034), GZMB mRNA (3.5-fold; p=0.058), ratios of CD8 /FOXP3 and GZMB/FOXP3 (5.7-fold; p=0.036, and 7.6-fold; p=0.024 respectively), thus successfully meeting the pre-determined primary endpoint in the study (increase in CD8 in TME). ● In addition, an increase in CTL attractants CXCL10 (2.6-fold; p=0.104) and CCL5 (3.3-fold; p=0.019) was observed. In contrast, Treg marker FOXP3 or Treg attractants CCL22 or CXCL12 were not enhanced. ● Three patients had stable disease lasting 2.4, 2.5 and 3.8 months, as of data cut off September 1, 2021. ● An additional patient (non-evaluable) had a partial response (breast tumor autoamputation) with massive tumor necrosis in the post-CKM biopsy.

Stage 4 Colorectal Cancer Metastatic to the Liver - Phase 2a study of Ampligen as a component of chemokine modulatory regimen on colorectal cancer metastatic to liver; recruitment has been completed; 19 patients were enrolled and 12 patients were evaluable for the primary endpoint https://clinicaltrials.gov/ct2/show/NCT03403634. The key findings announced in April 2022 included:

● The study’s primary endpoint was met, evidenced by increased CD8a expression post-treatment (p=0.046). ● Saw increase in the CD8a/CD4 (p=0.03), CD8a/FOXP3 (p<0.01) and GZMB/FOXP3 (p<0.01) ratios. ● The expression of CTL-attracting chemokines CCL5 (p=0.08), CXCL9 (p=0.05), and CXCL10 (p=0.06) were increased, while expression of the Treg/MDSC attractant CXCL12 (p=0.07) was decreased post-treatment. ● Median OS was 10.5 (90% CI 2.2-15.2) months, and the median PFS was 1.5 (90% CI 1.4, 1.8) months. ● No tumor responses were seen. The treatment was well tolerated. Of all enrolled patients (N=19), adverse events were noted in 74% of patients, with the most common being fatigue (58%). Grade 3 or higher adverse events were rare (5%).

Early-Stage Prostate Cancer - Phase 2 study investigating the effectiveness and safety of aspirin and Ampligen with or without interferon-alpha 2b (Intron A) compared to no drug treatments in a randomized three-arm study of patients with prostate cancer before undergoing radical prostatectomy. Patient enrollment was initiated in this study designed for up to 45 patients. The study was temporarily suspended due to the Merck discontinuation of Intron-A production. Roswell Park has had a Type-C meeting with the FDA and has performed the necessary experiments to replace Intron-A with a generic alpha-interferon. As of August 2025, the study is no longer recruiting patients. A total of 12 patients were enrolled. (See https://clinicaltrials.gov/ct2/show/NCT03899987).

Early-Stage Triple Negative Breast Cancer - The objective of this Phase 1 study is to evaluate the safety and tolerability of a combination of Ampligen, celecoxib with or without Intron A, when given along with chemotherapy in patients with early-stage triple negative breast cancer. The now completed (as of September 2022) topline results from the study confirm the positive findings that were previously presented at the 2022 Society for Immunotherapy of Cancer (SITC) 37th Annual Meeting in a poster presentation titled Safety and efficacy of de-escalated neoadjuvant chemoimmunotherapy of triple negative breast cancer (TNBC) using chemokine-modulating regimen (rintatolimod, IFN-α2b, celecoxib). The primary endpoint of the study was safety and tolerability. The results demonstrated that treatment was well-tolerated with mostly grade 1 or 2 treatment-related adverse events (TRAEs) without dose-limiting toxicities (DLTs) or delayed or immune-related toxicities. DLT was defined as grade 3 or higher toxicities within the first 3 weeks. Secondary endpoints included pCR rate where 5/9 (56%) of patients attained pCR and 1 more patient attained ypTmic. Tumor and blood biomarkers were also analyzed in exploratory studies. (See https://clinicaltrials.gov/ct2/show/NCT04081389).

Refractory Melanoma — Roswell Park Comprehensive Cancer Center (“Roswell Park”), in a clinical trial fully funded by the National Cancer Institute (NCI), has commenced patient enrollment in its Phase 2 study in subjects with primary PD-1/PD-L1 resistant melanoma. The Phase 2 study will evaluate type-1 polarized dendritic cell (αDC1) vaccine in combination with tumor-selective chemokine modulation (“CKM”) comprised of Interferon alpha 2b, Ampligen (rintatolimod) and Celecoxib. Up to 24 patients are to be enrolled. The study was temporarily suspended due to the Merck discontinuation of Intron-A production but has since resumed recruitment. In June 2025, the study was terminated with 1 patient enrolled, funding completed. (See: https://www.clinicaltrials.gov/show/NCT04093323).

Metastatic or Unresectable Triple Negative Breast Cancer – This phase 1/2a trial tests the safety, side effects, and best dose of chemokine modulation therapy (CKM) (rintatolimod, celecoxib, and interferon alpha 2b) in combination with pembrolizumab for the treatment of patients with triple negative breast cancer that has spread from where it first started (primary site) to other places in the body (metastatic) or that cannot be removed by surgery (unresectable). In June 2025, the study was terminated with 5 patients enrolled, funding ended. (See: https://clinicaltrials.gov/study/NCT05756166).

Additional Progress and Analysis Related to Pancreatic Cancer

In January 2017, the EAP established under our agreement with myTomorrows to enable access of Ampligen to ME/CFS patients was extended to pancreatic cancer patients beginning in the Netherlands. myTomorrows is our exclusive service provider in Europe and Turkey and will manage all EAP activities relating to the pancreatic cancer extension of the program. In February 2018, the agreement with myTomorrows was extended to cover Canada to treat pancreatic cancer patients, pending government approval. There have been no physician requests to date that would cause the program to move forward with the approval process.

A total of 42 pancreatic cancer patients initially received treatment with Ampligen immuno-oncology therapy under the EAP program at Erasmus MC in the Netherlands, with more than 50 patients ultimately receiving treatment. Prof. C.H.J. van Eijck, MD, was the lead investigator. In March 2024, the team at Erasmus MC published a thorough data analysis in an article titled “Rintatolimod in Advanced Pancreatic Cancer enhances Anti-Tumor Immunity through Dendritic Cell-Mediated T Cell Responses” in the journal Clinical Cancer Research. The positive clinical findings relate to changes in the tumor microenvironment after Ampligen use. We are working with our Contract Research Organization, Amarex Clinical Research LLC, to seek FDA “fast-track.” We have applied for fast-track status; have received denials to date; and are currently working through the FDA process to provide all the materials and information required to achieve fast-track status.

A manuscript titled “Rintatolimod in Advanced Pancreatic Cancer enhances Anti-Tumor Immunity through Dendritic Cell-Mediated T Cell Responses,” was published in the print version of the journal Clinical Cancer Research in August 2024. Researchers at the Erasmus University Medical Center (“Erasmus MC”) found that Ampligen treatment in pancreatic cancer patients enhances peripheral immune activity at the transcriptomic and proteomic levels, particularly involving type 1 conventional dendritic cells (cDC1s) and T cells. Post-Ampligen, the increased peripheral abundance of BTLA+XCR1+ cDC1s and CD4+SELL+ T cells correlated with improved clinical outcomes. Patients with stable disease exhibited pronounced overexpression of genes related to DC and T cell activation. Notably, the expression of immune checkpoints PD-L1 and PD-L2 decreased post-Ampligen across all patients.

Additionally:

● In December 2020, the FDA granted Ampligen Orphan Drug Designation status for the treatment of pancreatic cancer. The Orphan Drug Designation program provides orphan status to drugs and biologics which are defined as those intended for the treatment, prevention or diagnosis of a rare disease or condition, which is one that affects less than 200,000 persons in the United States or meets cost recovery provisions of the act. The status helps incentivize the treatment of therapies to treat unmet medical needs by providing a company with seven years of exclusivity rights once a drug reaches market. ● In February 2021, our subsidiary, NV Hemispherx Biopharma Europe (now AIM ImmunoTech Europe N.V./S.A.), received formal notification from the European Commission (“EC”) granting Orphan Medicinal Product Designation for Ampligen as a treatment for pancreatic cancer. Orphan products, once commercially approved in the European Union (“EU”), receive benefits including up to ten years of protection from market competition from similar medicines with similar active component and indication for use that are not shown to be clinically superior.

In June 2021, Ampligen was featured in a publication containing state-of-the-art methodologies in the peer-reviewed medical journal Cancers as a potential treatment option for cancer patients who are infected with SARS-CoV-2. The study’s authors stated that Ampligen has the potential to reduce the severity of the deadly respiratory disease COVID-19. According to laboratory data presented in the publication, “Rintatolimod [Ampligen] activated the innate and the adaptive immune systems by activating a cascade of actions in human pancreatic cancer cells”, including:

● Stimulation of interferon regulatory factors and activation of the interferon signaling pathway, ● Production of immunomodulatory activity and ● Induction of the expression of MHC class I and II histocompatibility

The full journal article is titled: “Rintatolimod Induces Antiviral Activities in Human Pancreatic Cancer Cells: Opening for an Anti-COVID-19 Opportunity in Cancer Patients?” Cancers is a peer-reviewed, open access journal of oncology published semimonthly online by MDPI. The study’s authors include Prof. C.H.J. van Eijck, MD, PhD, the lead investigator at Erasmus Medical Center in the Netherlands.

In October 2021, we and Amarex submitted an IND application with the FDA for a planned Phase 2 study of Ampligen as a therapy for locally advanced or metastatic late-stage pancreatic cancer. In December 2021, the FDA responded with a Clinical Hold on the proposed study. We submitted our response to the FDA in February 2022. In March 2022, we received notification from the FDA that the Clinical Hold was released and cleared, meaning that we are now able to proceed with the study specifically to treat locally advanced pancreatic cancer patients. In August 2022, we received IRB approval of the trial protocol and so announced the trial’s commencement.

A Type D meeting package seeking the FDA guidance on expansion of inclusion criteria and treatment arms to be included was submitted to the FDA. We subsequently amended the study protocol. In February 2025, we made a business decision to place screening/enrollment on hold and suspend the study.

Positive data was published in March 2022 in a manuscript titled, “Rintatolimod (Ampligen®) enhances numbers of peripheral B cells and is associated with longer survival in patients with locally advanced and metastasized pancreatic cancer pre-treated with FOLFIRINOX: a single-center named patient program,” in Cancers Special Issue: Combination and Innovative Therapies for Pancreatic Cancer. In the single-center, named-patient program, patients with locally advanced pancreatic cancer (LAPC) or metastatic disease were treated with Ampligen for 6 weeks, at 2 doses per week with 400 mg per infusion. The study found that Ampligen improved the median survival of these patients. The study’s primary endpoints were the Systemic Immune-Inflammation Index (SIII), the Neutrophils to Lymphocyte Ratio (NLR), and absolute counts of 18 different populations of circulating immune cells as measured by flow cytometry. Secondary endpoints were progression-free survival (PFS) and overall survival (OS). The median overall survival in the Ampligen group was 19 months, compared to a historical control group and subgroup (7.5 and 12.5, respectively) that did not receive Ampligen.

Also in March 2022, we announced that study data evaluating the direct effects of Ampligen on human pancreatic ductal adenocarcinoma (PDAC) cells was accepted for presentation at the 15th Annual International Hepato-Pancreato-Biliary Association World Congress in New York, NY. For the study, three PDAC cell lines (CFPAC-1, MIAPaCa-2, and PANC-1) were treated with various concentrations of Ampligen and their corresponding vehicle control. The proliferation and migration effects were examined using in-vitro assays and the molecular effect was examined by targeted gene expression profiling. Additionally human PDAC samples were used to validate the expression of toll-like receptor 3 (TLR3) by immunohistochemistry. Results from the study demonstrated Ampligen decreased the proliferation and migration ability of CFPAC-1 cells. In addition, it decreased the proliferation of MIAPaCa-2 cells and the migration of PANC-1 cells. However, it did not have a dual effect in MIAPaCa-2 and PANC-1 cells. Interestingly, TLR3 was highly expressed in CFPAC-1 cells, low expressed in MIAPaCa-2 and not expressed in PANC-1. Gene expression analysis revealed the upregulation of interferon-related genes, chemokines, interleukins and cell cycle regulatory genes. The heterogeneity of TLR3 expression was confirmed in human PDAC samples. Based on these results, treating pancreatic cancer with Ampligen may have a direct anti-tumor effect in pancreatic cancer cells expressing TLR-3.

Ampligen as a Potential Antiviral

Following the SARS-CoV-1 outbreak in 2002-03, Ampligen exhibited excellent antiviral properties and protective survival effect in NIH-contracted studies of SARS-CoV-1-infected mice, which is very similar to SARS-CoV-2, the novel virus that causes COVID-19.

● The Barnard 2006 study (https://journals.sagepub.com/doi/abs/10.1177/095632020601700505) found that Ampligen reduced virus lung levels to below detectable limits. ● The Day 2009 study (https://www.sciencedirect.com/science/article/pii/S0042682209005832) found that, instead of 100% mortality, there was 100% protective survival using Ampligen.

We compared key transcription regulatory sequences of SARS-CoV-1 to SARS-CoV-2 and found significant similarities, suggesting highly probable extension of the antiviral effects of Ampligen in the earlier NIH-contracted SARS experiments to COVID-19. The SARS-CoV-2 virus – which causes COVID-19 – shares important genomic and pathogenic similarities with SARS-CoV-1 (hence its name). Since Ampligen has shown antiviral activity against more distantly related coronaviruses, there was a reasonable probability that the antiviral effects of Ampligen against SARS-CoV-1 will likely extend to SARS-CoV-2, and as discussed below, recently, Ampligen has demonstrated ex vivo antiviral activity against SARS-CoV-2. We believe that this creates a compelling case for clinical trials to evaluate Ampligen as a potential tool in the fight against COVID-19.

Since the late 2019 outbreak of SARS-CoV-2, we have worked to determine whether Ampligen could be an effective treatment for this virus or could be part of a vaccine. We believe that Ampligen has the potential to be both an early-onset treatment for and prophylaxis against SARS-CoV-2. We believe that prior studies of Ampligen in SARS-CoV-1 animal experimentation may predict similar protective effects against the new virus.

In February 2020, we filed three provisional patent applications related to Ampligen in our efforts toward joining the global health community in the fight against the deadly coronavirus (See: https://aimimmuno.com/press-release/aim-immunotech-files-provisional-patent-application-for-the-use-of-ampligenr-as-a-potential-therapy-for-covid-19-induced-chronic-fatigue/). Our three provisional patent applications include: 1) Ampligen as a therapy for the coronavirus; 2) Ampligen as part of a proposed intranasal universal coronavirus vaccine that combines Ampligen with inactivated coronavirus, conveying immunity and cross-protection and; 3) a high-volume manufacturing process for Ampligen. Under the Patent Cooperation Treaty of 1970, which provides international protections for patents, these three provisional patent applications were converted into two international patent applications based on the date of their filings.

In May 2020, the FDA authorized an IND for Roswell Park to conduct a Phase 1/2a study of a regimen of Ampligen and interferon alpha in cancer patients with COVID-19 infections. This clinical trial, sponsored by Roswell Park in collaboration with us, will test the safety of this combination regimen in patients with cancer and COVID-19, and the extent to which this therapy will promote clearance of the SARS-CoV-2 virus from the upper airway. Several subjects have been treated. It is planned that the phase 1/2a study will enroll up to 44 patients in two stages. Phase 1 will see 12-24 patients receiving both Ampligen and interferon alpha-2b at escalating doses. Once that initial phase is complete, further study participants will be randomized to two arms: one receiving the two-drug combination and a control group who will not receive Ampligen or interferon alpha but will receive best available care. We are a financial sponsor of the study and will provide Ampligen at no charge for this study. In November 2020, the first patient in the study had been enrolled and treated. This study was amended to add 20 patients, with 10 randomized to receive a single dose of Ampligen and 10 patients to receive current best therapies. (See clinicaltrials.gov/NCT04379518). Roswell reported partial results from the study.

We also entered into a specialized services agreement with Utah State University and have supplied Ampligen to support the University’s Institute for Viral Research in its research into SARS-CoV-2. The Utah State results show that Ampligen was able to decrease SARS-CoV-2 infectious viral yields by 90% at clinically achievable intranasal Ampligen dosage levels.

In October 2020, we received IRB approval for the expansion of the AMP-511 Expanded Access Program clinical trial for ME/CFS to include patients previously diagnosed with SARS-CoV-2, but who still demonstrate chronic fatigue-like symptoms. Eight Long-COVID patients have been treated with Ampligen in AMP-511 since January 2021. One patient is still receiving treatment.

In January 2021, we entered into a Sponsor Agreement with CHDR to manage a Phase 1 randomized, double-blind study to evaluate the safety and activity of repeated intranasal administration of Ampligen. AIM funded and sponsored the study. This study was designed to assess the safety, tolerability and biological activity of repeated administration of Ampligen intranasally. A total of 40 healthy subjects received either Ampligen or a placebo in the trial, with the Ampligen given at four escalating dosages across four cohorts, to a maximum level of 1,250 micrograms. The study was completed, and the Final Safety Report reported no Serious or Severe Adverse Events at any dosage level. We believe that the trial is a critical step in our efforts to develop Ampligen as a potential prophylaxis or treatment for COVID-19 and other respiratory viral diseases. Amarex provided us with monitoring support during the trial.

Additionally, we filed two COVID-19-related provisional patent applications in the third quarter of 2021. In August, we filed an application for Ampligen as both an intranasal and an intravenous therapy for what we describe as Post-COVID conditions. The people suffering from Post-COVID conditions, including some young adults, can be afflicted with severe difficulties in concentrating; serious memory problems; and the inability to live an active lifestyle, to work and even to perform everyday tasks. Early data has demonstrated that patients with symptoms of Post-COVID conditions being treated with Ampligen in the ongoing AMP-511 Expanded Access Program have reported improvements in fatigue symptoms. Similarly, in ME/CFS, data supports the claim that Ampligen improves fatigue symptoms. Then in September 2022, we filed a patent application for Ampligen as a potential early-onset intranasal therapy designed to enhance and expand infection-induced immunity, epitope spreading, cross-reactivity and cross-protection in patients exposed to a wide range of RNA respiratory viruses, such as influenza, Rhinoviruses and SARS-CoV-2.

In addition to securing these two provisional patent applications, we also moved forward with proposed studies in these areas and with Pre-Investigational New Drug Applications in September 2021. One pre-IND was for a Phase 2, two-arm, randomized, double-blind, placebo-controlled, multicenter study to evaluate the efficacy and safety of Ampligen in patients experiencing Post-COVID conditions (originally referred to as Post-COVID Cognitive Dysfunction (PCCD) and has been revised to Post-COVID conditions).

We believe that Ampligen has the potential to be both an early-onset treatment for, and prophylaxis against, SARS-CoV-2. We believe that prior studies of Ampligen in SARS-CoV-1 animal experimentation may predict similar protective effects against the newer virus.

Ampligen as a Treatment for ME/CFS and Post-COVID Conditions

In July 2023, we enrolled and dosed the first patient in our Phase 2 study evaluating Ampligen® as a potential therapeutic for people with post-COVID conditions (“AMP-518”). We announced in August 2023 that the study had met the planned enrollment of 80 subjects ages 18 to 60 years who have been randomized 1:1 to receive twice-weekly intravenous infusions of Ampligen or placebo for 12 weeks, with a follow-up phase of two weeks. All patients have completed the study, and topline data was reported in February 2024.

In January 2025, we announced that the final Clinical Study results from AMP-518 had been posted to ClinicalTrials.gov. The results support our belief in Ampligen as a potential therapeutic for people with the moderate-to-severe Post-COVID condition of fatigue, and that this would be the likely subject population for AIM’s planned follow-up clinical trial. Study subjects with Long COVID were, on average, able to walk farther in a Six-Minute Walk Test (“6MWT”) when compared to subjects who received a placebo. The 6MWT measured the distance a subject was able to walk in six minutes as a baseline and then again at 13 weeks. A clear signal of significant potential (p <0.02, two-tailed T-test) was observed in Ampligen-treated subjects with a baseline 6MWT less than 205 meters, who saw a mean improvement of 139 meters, compared to a mean improvement of 91 meters in the corresponding part of the group who received the placebo. AIM therefore believes that any future trial design should focus on Ampligen’s therapeutic potential for subjects whose Long COVID-related fatigue can be categorized as moderate or worse.

Myalgic Encephalomyelitis/Chronic Fatigue Syndrome (ME/CFS), also known as Chronic Fatigue Immune Dysfunction Syndrome (“CFIDS”) and Chronic Fatigue Syndrome (CFS), is a serious and debilitating chronic illness and a major public health problem. ME/CFS is recognized by both the government and private sector as a significant unmet medical need, including the U.S. National Institutes of Health (“NIH”), FDA and the CDC.

Many severe ME/CFS patients become completely disabled or totally bedridden and are afflicted with severe pain and mental confusion even at rest. ME/CFS is characterized by incapacitating fatigue with profound exhaustion and extremely poor stamina, sleep difficulties and problems with concentration and short-term memory. It is also accompanied by flu-like symptoms, pain in the joints and muscles, tender lymph nodes, sore throat and new headaches. A distinctive characteristic of the illness is a worsening of symptoms following physical or mental exertion, which do not subside with rest.

The high number of younger people being hospitalized for COVID-19 suggests considerable numbers of people in the prime of their lives may have a COVID-induced ME/CFS-like illness in their future. According to a 2016 journal article, the estimated annual cost of lost productivity related to ME/CFS was $9-37 billion in the United States, and for direct medical costs it was $9-14 billion.

In June of 2020, we filed a provisional patent application for, among other discoveries, the use of Ampligen as a potential early-onset therapy for the treatment of COVID-19-induced chronic fatigue.

Many survivors of the first SARS-CoV-1 epidemic in 2003 continued to report chronic fatigue, difficulty sleeping and shortness of breath months after recovering from the acute illness. “After one year, 17% of patients had not returned to work and 9% more had not returned to their pre-SARS work levels,” according to Simmaron Research. Now there is increasing evidence that patients with COVID-19 can develop a similar, ME/CFS-like illness. These patients are commonly referred to as “Long Haulers.”

The FDA has authorized the AMP-511 Expanded Access Program (“AMP-511”), an open-label expanded access treatment protocol (AMP-511) allowing patient access to Ampligen in a study under which severely debilitated CFS patients have the opportunity to receive Ampligen to treat this serious and chronic condition. The AMP-511 protocol started in the 1990s and is ongoing. The data collected from the AMP-511 protocol through clinical sites provide safety information regarding the use of Ampligen in patients with CFS. We are establishing an enlarged database of clinical safety information which we believe will provide further documentation regarding the absence of autoimmune disease associated with Ampligen treatment. We believe that continued efforts to understand existing data, and to advance the development of new data and information, will ultimately support our future filings for Ampligen and/or the design of future clinical studies that the FDA requested in a CRL. The FDA approved an increased reimbursement level from $200 to $345 per 200 mg vial of Ampligen, due to increased production costs; which was re-authorized in 2021, 2022, 2023, 2024 and 2025. At this time, we do not plan on passing this adjustment along to the patients in this program. In October 2020, we received IRB approval for the expansion of the AMP-511 Expanded Access Program clinical trial for ME/CFS to include patients previously diagnosed with SARS-CoV-2 following clearance of the virus, but who still demonstrate chronic fatigue-like symptoms known as Post-COVID conditions. As of December 31, 2025, there were 4 patients enrolled in this open-label expanded access treatment protocol (including one patient with Post-COVID Conditions). In July 2022, AIM reported positive preliminary results based on data from the first four Post-COVID Condition patients enrolled in the study. The data show that, by week 12, compared to baseline, the investigators observed what they considered a clinically significant decrease in fatigue-related measures. To date, there have been eight such Post-COVID patients treated in this study.

In November 2020, we announced the publication of statistically significant data detailing how Ampligen could have a considerable positive impact on people living with ME/CFS when administered in the early stages of the disease. The data were published in PLOS ONE, a peer-reviewed open access scientific journal published by the Public Library of Science. AIM researchers found that the TLR3 agonist Ampligen substantially improved physical performance in a subset of ME/CFS patients.

We are holding off on further research and development in ME/CFS/Long-COVID until the ongoing DURIPANC clinical study in pancreatic ductal adenocarcinoma is complete.

Other Diseases

In Europe, the EMA has approved the Orphan Medicinal Products Designation for Ampligen as a potential treatment of Ebola virus disease and for Alferon N Injection as a potential treatment of MERS.

We concluded our series of collaborations designed to determine the potential effectiveness of Ampligen and Alferon N Injection as potential preventive and/or therapeutic treatments for Ebola-related disorders. Although we believe that the threat of both MERS and Ebola globally may reemerge in the future, it appears that the spread of these disorders has diminished.

In April 2021, we entered into an MTA with the University of Cagliari Dipartimento di Scienze della Vita e dell’Ambiente (“UNICA”), an educational institution, under the laws of Italy, located in Monserrato (Cagliari), Italy. The MTA relates to the research and development of the effects of Ampligen and its ability to induce interferon production in several cell lines, and also on the ability of the Ebola virus protein VP35 to bind to viral dsRNA and impede interferon’s upregulation and activity, and on Ampligen’s ability to reverse VP35 inhibition of interferon production in biological systems. The data analysis was published in the peer-reviewed journal Antiviral Research, in a manuscript titled “Ebola virus disease: In vivo protection provided by the PAMP restricted TLR3 agonist rintatolimod and its mechanism of action.” We believe that the analysis supports a dual mechanism of action when Ampligen is used as a prophylactic therapy against Ebola Virus Disease.

In May 2021, we filed a U.S. Provisional Patent Application for Ampligen as a potential therapeutic to possibly slow, halt, or reverse the progression of Alzheimer’s disease.

In November 2022, we received notice that the FDA had granted Orphan Drug Designation to Ampligen for the treatment of Ebola virus disease.

In October 2024, we were granted U.S. patent No. 12,102,649, covering both compositions and methods comprising a range of TRL3 agonist, within the drug Ampligen, in the treatment of endometriosis, a painful chronic condition in which tissue similar to the lining of the uterus grows outside the uterus, causing severe pelvic pain and making it difficult or impossible to become pregnant. The patented method involves the administration of a therapeutically effective amount of a pharmaceutical composition containing our proprietary double-stranded RNA products. The versatile administration options offer flexibility for patient-specific needs and care. The patent also covers treatments targeting recurrent endometriosis and includes options for co-administration with interferons, including well-known types such as alpha and beta interferons.

We announced in February 2025 our intention to pursue a study of a potential avian influenza combination therapy of Ampligen and AstraZeneca’s FluMist, a nasal spray vaccine that helps prevent seasonal influenza. The new proposed clinical trial would expand upon previous Company-sponsored clinical research at the University of Alabama-Birmingham (“UAB”), which indicated that intranasal delivery of Ampligen after the intranasal delivery of the FluMist seasonal influenza vaccine increased the immune response to seasonal variants in the vaccine by greater than four-fold and induced cross-reactive secretory Immunoglobulin A against highly pathogenic avian influenza virus strains H5N1, H7N9 and H7N3. We are seeking collaborative grants from government and industry to defray the cost of the study. We believe that pre-clinical and clinical work to date – combined with the ever-growing threat of Avian influenza – strongly supports our decision to move forward with this second Ampligen and FluMist study in humans

MANUFACTURING

ANMAT in Argentina approved Ampligen for commercial distribution for the treatment of CFS in 2016. Shipment of the drug product to Argentina was initiated in 2018 to complete the release testing by ANMAT needed for commercial distribution. In September 2019, we received clearance from the FDA to ship Ampligen to Argentina for the commercial launch and subsequent sales. In June 2020, we received import clearance from ANMAT to import the first shipment of commercial grade vials of Ampligen into Argentina. We are collaborating with GP Pharm, now Filaxis, on the commercial launch of Ampligen in Argentina (See “Our Products; Ampligen” above).

Following our approval in Argentina, in 2017 we engaged Jubilant HollisterStier (“Jubilant”) to be our authorized CMO for Ampligen. Two lots of Ampligen consisting of more than 16,000 units were manufactured and released in 2018; these lots have been designated for human use in the United States in the cost recovery CFS program and for expanded oncology clinical trials. The production of additional polymer (Ampligen intermediates) took place in 2019 at our New Brunswick facility. Additionally, Jubilant manufactured three more lots of Ampligen in December 2019, January 2020 and December 2023. In addition, we have supplied GP Pharm, now Filaxis, with the Ampligen required for testing and ANMAT release under the agreement that GP Pharm, now Filaxis, would be the eventual distributor in Argentina.

In June 2022 we entered into a lease agreement with the New Jersey Economic Development Authority for a 5,210 square-foot, state-of-the-art R&D facility at the New Jersey Bioscience Center (NJBC), primarily consisting of two separate laboratory suites. The lease commenced on July 1, 2022, and runs through August 31, 2027, but can be extended for an additional five-year period. The facility is AIM’s operations, research and development center.

Our business plan calls for the utilization of one or more CMOs to produce Ampligen API. While we believe we have sufficient Ampligen API to meet our current needs, we are also continually exploring new efficiencies so as to maximize our ability to fulfill future obligations. In this regard, on December 5, 2022, we entered into a Master Service Agreement and a Quality Agreement with Sterling Pharma Solutions (“Sterling”) for the manufacture of our Poly I and Poly C12U polynucleotides and transfer of associated test methods at Sterling’s Dudley, UK location to produce the polymer precursors to manufacture the drug Ampligen. We are utilizing Sterling’s expertise to refine our approach to polymer production; the validation of the polymer production process with Sterling is ongoing.

Our second product, Alferon N Injection, is approved by the FDA for commercial sales in the United States for the treatment of genital warts. It is also approved by ANMAT in Argentina for commercial sales for the treatment of genital warts and in patients who are refractory to treatment with recombinant interferons. Commercial sales of Alferon N Injection in the United States will not resume until new batches of commercial filled and finished product are produced and released by the FDA. We will need the FDA’s approval to release commercial product once we have identified our new manufacturing approach and submitted satisfactory stability and quality release data. Currently, we are not manufacturing Alferon N Injection and there is no definitive timetable to resume production.

Licensing/Collaborations/Joint Ventures

To enable potential availability of Ampligen to patients on a worldwide basis, we have embarked on a strategy to license the product and/or to collaborate and/or create a joint venture with companies that have the demonstrated capabilities and commitment to successfully gain approval and commercialize Ampligen in their respective global territories of the world. Ideal partners would have the following characteristics: well-established global and regional experience and coverage; robust commercial infrastructure; a strong track record of successful development and registration of in-licensed products; and a therapeutic area fit (e.g., ME/CFS, immuno-oncology).

As Filaxis has now turned its focus to oncology, we are exploring the potential for the use of Ampligen in Argentina for the treatment of pancreatic cancer as either a monotherapy or in combination with immunotherapies.

MARKETING/DISTRIBUTION

In May 2016, we entered into a five-year, exclusive Renewed Sales, Marketing, Distribution and Supply Agreement (the “Agreement”) with GP Pharm, now Filaxis. Under this Agreement, GP Pharm was responsible for gaining regulatory approval in Argentina for Ampligen to treat severe CFS in Argentina and for commercializing Ampligen for this indication in Argentina. We granted GP Pharm the right to expand rights to sell this experimental therapeutic into other Latin America countries based upon GP Pharm achieving certain performance milestones. We also granted GP Pharm an option to market Alferon N Injection in Argentina and other Latin America countries. They have since decided to discontinue this effort with Alferon, but we continue to search for other partners in Argentina to continue this project. The contract was extended in May 2021 with an end date of May 24, 2024. While we are in discussions with Filaxis to extend the agreement, we are also open to the possibility of looking for a new partner. In August 2021, ANMAT granted a five-year extension to a previous approval to sell and distribute Ampligen to treat severe CFS in Argentina. This extends the approval until 2026.

In May 2016, we entered into a five-year agreement (the “Impatients Agreement”) with Impatients, N.V. (“myTomorrows”), a Netherlands-based company, for the commencement and management of an EAP in Europe and Turkey (the “Territory”) related to ME/CFS. Pursuant to the agreement, myTomorrows, as our exclusive service provider and distributor in the Territory, is performing EAP activities. These activities will be directed to (a) the education of physicians and patients regarding the possibility of early access to innovative medical treatments not yet the subject of a Marketing Authorization (regulatory approval) through named-patient use, compassionate use, expanded access and hospital exemption, (b) patient and physician outreach related to a patient-physician platform, (c) the securing of Early Access Approvals (exemptions and/or waivers required by regulatory authorities for medical treatments prior to Marketing Authorization) for the use of such treatments, (d) the distribution and sale of such treatments pursuant to such Early Access Approvals, (e) pharmacovigilance (drug safety) activities and/or (f) the collection of data such as patient-reported outcomes, doctor-reported experiences and registry data. We are supporting these efforts and have supplied Ampligen to myTomorrows at a predetermined transfer price. In the event that we receive Marketing Authorization in any country in the Territory, we will pay myTomorrows a royalty on products sold. Pursuant to the Impatients Agreement, the royalty would be a percentage of Net Sales (as defined in the Impatients Agreement) of Ampligen sold in the Territory where Marketing Authorization was obtained. The formula to determine the percentage of Net Sales will be based on the number of patients that are entered into the EAP. We believe that disclosure of the exact maximum royalty rate and royalty termination date could cause competitive harm. However, to assist the public in gauging these terms, the actual maximum royalty rate is somewhere between 2% and 10% and the royalty termination date is somewhere between five and fifteen years from the First Commercial Sale of a product within a specific country. The parties established a Joint Steering Committee comprised of representatives of both parties to oversee the EAP. No assurance can be given that activities under the EAP will result in Marketing Authorization or the sale of substantial amounts of Ampligen in the Territory. The agreement was automatically extended for a period of 12 months on May 20, 2021; has been automatically extended for 12 months on each subsequent May 20; and will continue to be automatically extended for periods of 12 months every May 20 until terminated or the terms of the agreement are met.

In January 2017, ANMAT granted a five-year extension to a previous approval to sell and distribute Alferon N Injection (under the brand name “Naturaferon”) in Argentina. This extended the approval until 2022. A request to extend the approval beyond 2022 has been filed and is still under review. In February 2013, we received ANMAT approval for the treatment of refractory patients that failed or were intolerant to treatment with recombinant interferon. GP Pharm now renamed Filaxis has decided not to move forward with this project and has sent us a notice of termination for this project. However, as there are numerous companies in Argentina now providing patients treatment with recombinant interferon, we believe these companies and their patients would benefit greatly from having the opportunity to treat those refractory patients with Naturaferon. We are continuing to seek out potential partners to move this project forward in the near future.

In January 2017, the EAP through our agreement with myTomorrows designed to enable access of Ampligen to ME/CFS patients was extended to pancreatic cancer patients beginning in the Netherlands. myTomorrows is our exclusive service provider in the Territory and will manage all EAP activities relating to the pancreatic cancer extension of the program.

In August 2017, we extended our agreement with Asembia LLC, formerly Armada Healthcare, LLC, to undertake the marketing, education and sales of Alferon N Injection throughout the United States. This agreement has expired. We were in discussions with Asembia about the possibility of continuing the relationship, while also exploring the possibility of working with other similar companies. However, we still do not foresee an immediate need for this service and continue to push this search further out in our expected timeline.

In February 2018, we signed an amendment to the EAP with myTomorrows. This amendment extended the Territory to cover Canada to treat pancreatic cancer patients, pending government approval. In March 2018, we signed an amendment to the EAP with myTomorrows, pursuant to which myTomorrows will be our exclusive service provider for special access activities in Canada for the supply of Ampligen for the treatment of ME/CFS.

In December 2020, we entered into a signed Letter of Agreement with myTomorrows for the delivery of Ampligen for the treatment of up to 16 pancreatic cancer patients. In November 2021, we entered into a signed Letter of Agreement with myTomorrows for the delivery of Ampligen for the treatment of up to an additional 5 pancreatic cancer patients. In March 2022, we entered into a signed Letter of Agreement with myTomorrows for the delivery of Ampligen for the treatment of up to an additional 10 pancreatic cancer patients. In November 2022, we entered into a signed Letter of Agreement with myTomorrows for the delivery of Ampligen for the treatment of up to an additional 10 pancreatic cancer patients.

COMPETITION

The major pharmaceutical competitors for Ampligen include Pfizer, GlaxoSmithKline, Merck & Co., Novartis and AstraZeneca. Biotech competitors include Revolution Medicines, Baxter International, Fletcher/CSI, AVANT Immunotherapeutics, AVI BioPharma and Genta. These potential competitors are among the largest pharmaceutical companies in the world, are well known to the public and the medical community, and have substantially greater financial resources, product development, and manufacturing and marketing capabilities than we have. Although we believe our principal advantage is the unique mechanism of action of Ampligen on the immune system, we cannot assure that we will be able to compete.

GOVERNMENT REGULATION

Regulation by governmental authorities in the U.S. and foreign countries is and will be a significant factor in the manufacture and marketing of our products and our ongoing research and product development activities. Ampligen and other products developed from the ongoing research and product development activities will require regulatory clearances prior to commercialization. In particular, new drug products for humans are subject to rigorous pre-clinical and clinical testing as a condition for clearance by the FDA and by similar authorities in foreign countries. The process of seeking these approvals, and the ongoing process of compliance with applicable statutes and regulations, has and will continue to require the expenditure of substantial resources. Any failure by us or our collaborators or licensees to obtain, or any delay in obtaining, regulatory approvals could materially adversely affect the marketing of any products developed by us and our ability to receive product or royalty revenue. We have received Orphan Drug designation for certain therapeutic indications, which we believe might under certain conditions help to accelerate the process of drug development and commercialization. Alferon N Injection is only approved for use in intralesional treatment of refractory or recurring external genital warts in patients 18 years of age or older. Use of Alferon N Injection for other applications requires regulatory approval.

We are subject to various federal, state and local laws, regulations and recommendations relating to such matters as safe working conditions, laboratory and manufacturing practices, the experimental use of animals and the use of and disposal of hazardous or potentially hazardous substances, including infectious disease agents, used in connection with our research work.

For more information about the current status of Alferon N Injection and Ampligen, please see “Our Products” above. See also, “Our drug and related technologies are investigational and subject to regulatory approval. If we are unable to obtain regulatory approval in a timely manner, or at all, our operations will be materially harmed and our stock adversely affected” in “Risk Factors”.

HUMAN CAPITAL

As of December 31, 2025, we had personnel consisting of 19 full-time employees and two part-time employees. Five of the combined personnel are engaged in our research, development, clinical and manufacturing efforts, with 16 performing regulatory, general administration, data processing, including bio-statistics, financial and investor relations functions. We have no union employees.

Employee Engagement

Our business results depend in part on our ability to successfully manage our human capital resources, including attracting, identifying, and retaining key talent. Factors that may affect our ability to attract and retain qualified employees include employee morale, our reputation, competition from other employers, and availability of qualified individuals. We believe our commitment to our human capital resources is an important component of our mission. We provide all employees with the opportunity to share their opinions in open dialogues with our human resources department and senior management.

Compensation, Benefits and Wellness

We offer fair, competitive compensation and benefits that support our employees’ overall wellness. Further, the health and wellness of our employees are critical to our success. While we have been successful in attracting skilled and experienced scientific personnel, there can be no assurance that we will be able to attract or retain the necessary qualified employees and/or consultants in the future.

GENERAL

We are a specialty pharmaceutical company based in Philadelphia, Pennsylvania and engaged in the clinical development of new drug therapies based on natural immune system enhancing technologies for the treatment of viral and immune based chronic disorders. We were founded in the early 1970s doing contract research for the National Institutes of Health. Since that time, we have established a strong foundation of laboratory, pre-clinical and clinical data with respect to the development of natural interferon and nucleic acids to enhance the natural antiviral defense system of the human body and to aid the development of therapeutic products for the treatment of certain chronic diseases. We have three domestic subsidiaries BioPro Corp., BioAegean Corp., and Core BioTech Corp., all of which are incorporated in Delaware and are dormant. Our foreign subsidiary is Hemispherx Biopharma Europe N.V./S.A. established in Belgium in 1998, which has minimal activity. All significant intercompany balances and transactions have been eliminated in consolidation.

Our current strategic focus is derived from four applications of our two core pharmaceutical technology platforms Ampligen® and Alferon N Injection®. The commercial focus for Ampligen® includes application as a treatment for CFS and as an influenza vaccine enhancer (adjuvant) for both therapeutic and preventative vaccine development. Alferon N Injection® is a FDA approved product with an indication for refractory or recurring genital warts. Alferon® LDO (Low Dose Oral) is a formulation under development targeting influenza.

We own and operate a 43,000 sq. ft. FDA approved facility in New Brunswick, NJ that produces Alferon® and Ampligen®. In December 2011, our Board of Directors (the “Board”) reevaluated the facility enhancement project to focus on upgrading the facility to provide for a high volume, more cost effective manufacturing process for Alferon N Injection®, Alferon® LDO and Ampligen®. In this regard, the Board increased the funding allocated to this project from $4.4 million to $6.5 million, and then again in June 2012 to $7.2 million. The facility enhancement project is in its final stage with construction complete and a Certificate of Approval issued by the Construction Official of New Brunswick, NJ for the work completed. Approximately $7,051,000 has been spent to date through December 31, 2012 and financed through a Margin Account with an effective interest rate of approximately 2.75%, as compared to $1,695,000 at December 31, 2011. While facility upgrades are being undertaken to the Alferon® manufacturing process, this project has not impacted our capability to manufacture the Ampligen® drug substance intermediates needed for the final production steps. The production of new Alferon® Active Pharmaceutical Ingredient (“API”) inventory will not commence until the capital improvement and validation phases are complete. Due to the necessity to redirect our resources to the Ampligen® NDA application process and efforts towards the pre-approval inspection for Ampligen® manufacturing, the validation phase of the Alferon® manufacturing project had been delayed but is now underway. While the facility had been granted approval of its Biological License Application (“BLA”) by the FDA for Alferon®, this status will need to be reaffirmed upon the completion of the facility’s enhancements prior to commercial sale of newly produced Alferon®. Once we have obtained a reaffirmation of FDA BLA status and have begun production of new Alferon® API, the FDA will be required to provide approval as to the quality and stability of the final product. We anticipate that it will take until the second half of 2014 before we will have newly produced Alferon® that can be commercially sold. We outsource certain components of our research and development, manufacturing, marketing and distribution while maintaining control over the entire process through our quality assurance group and our clinical monitoring group. We cannot provide any guarantee that the facility will necessarily pass a pre-approval inspection for Ampligen® or Alferon® manufacture, which are conducted in separately dedicated areas within the overall New Brunswick manufacturing complex.

On February 1, 2013, we received a Complete Response Letter (“CRL”) from the FDA declining to approve our new drug application (“NDA”) for Ampligen® for CFS. The FDA said Hemispherx should conduct at least one additional clinical trial, complete various nonclinical studies and perform a number of data analyses. In its CRL, the FDA set forth the reasons for this action and provided recommendations to address certain of the outstanding issues. The Agency stated that the submitted data do not provide substantial evidence of efficacy of Ampligen® for the treatment of CFS and that the data does not provide sufficient information to determine whether the product is safe for use in CFS due to the limited size of the safety database and multiple discrepancies within the submitted data.

In the two randomized double-blind, placebo-controlled clinical studies that form the basis of the Ampligen® NDA, AMP-502 and AMP-516, Hemispherx believes that the primary efficacy endpoints were met and that they showed a statistically significant improvement (i.e., with a p-value of less than 0.05). The FDA and Hemispherx agree that in clinical study AMP-502, the primary endpoint was met (p=0.02). In clinical study AMP-516, the FDA’s analysis resulted in a p-value of 0.10, while Hemispherx’ calculation resulted in a p-value of <0.05, and yet both analyses suggest that those patients on Ampligen® improved over those on placebo. With regard to safety, we have provided data from the 845 subjects who have received Ampligen®, including 589 subjects suffering from severe CFS and over 100 CFS patients who have received Ampligen® for at least one year or longer. The Company believes that these data are sufficient to determine the safety profile of Ampligen®. At the December 20, 2012, FDA Advisory Committee meeting, 8 of the 13 members voted “yes” on the question of “Is the safety profile of Ampligen® adequate for approval for the treatment of CFS?” though the majority of the Advisory Committee members did not vote in favor of the other questions presented.

We plan to request an end-of-review conference with the FDA as a precursor to a possible submission of a formal appeal to the Office of New Drugs in the FDA’s Center for Drug Evaluation and Research regarding the Agency's decision. The purpose of the conference would be to review all of the issues raised in the Agency’s CRL as well as to discuss the corroborating data and experiences of clinicians and patients who have seen the benefits of Ampligen® therapy.

Our principal executive office is located at One Penn Center, 1617 JFK Boulevard, Philadelphia, Pennsylvania 19103, and our telephone number is 215-988-0080.

AVAILABLE INFORMATION

We file our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K pursuant to Section 13(a) or 15(d) of the Exchange Act electronically with the Securities and Exchange Commission, or SEC. The public may read or copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that site is http://www.sec.gov.

You may obtain a free copy of our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and amendments to those reports on the day of filing with the SEC on our website on the World Wide Web at http://www.hemispherx.net under the Investor Relations tab for SEC Filings or by contacting the Investor Relations Department by calling (518) 398-6222 or sending an e-mail message to [email protected].

OUR PRODUCTS

Our primary pharmaceutical product platform consists of our experimental compound, Ampligen®, our FDA approved natural interferon product, Alferon N Injection® and, our experimental liquid natural interferon for oral administration, Alferon® LDO (Low Dose Oral).

Ampligen®

Ampligen® is an experimental drug currently undergoing clinical development for the treatment of Chronic Fatigue Syndrome (“CFS”). As noted above and discussed below, the FDA in its recent CRL declined to approve our NDA for the treatment of CFS with Ampligen®. Over its developmental history, Ampligen® has received various designations, including Orphan Drug Product Designation (FDA), Treatment IND (e.g., treatment investigational new drugs, or “Emergency” or “Compassionate” use authorization) with Cost Recovery Authorization (FDA) and “promising” clinical outcome recognition based on the evaluation of certain summary clinical reports (“AHRQ” or Agency for Healthcare Research and Quality). Ampligen® represents the first drug in the class of large (macromolecular) RNA (nucleic acid) molecules to apply for NDA review. Based on the results of published, peer reviewed pre-clinical studies and clinical trials, we believe that Ampligen® may have broad-spectrum anti-viral and anti-cancer properties.

We believe that nucleic acid compounds represent a potential new class of pharmaceutical products as they are designed to act at the molecular level for treatment of human diseases. There are two forms of nucleic acids, DNA and RNA. DNA is a group of naturally occurring molecules found in chromosomes, the cell’s genetic machinery. RNA is a group of naturally occurring informational molecules which orchestrate a cell’s behavior which, in turn, regulates the action of groups of cells, including the cells which compromise the body’s immune system. RNA directs the production of proteins and regulates certain cell activities including the activation of an otherwise dormant cellular defense against viruses and tumors. Our drug technology utilizes specifically-configured RNA. Our double-stranded RNA drug product, trademarked Ampligen®, is an experimental, unapproved drug, that would be administered intravenously. Ampligen® has been assigned the generic name rintatolimod by the United States Adopted Names Council (USANC) and has the chemical designation poly(I) poly(C12U).

Clinical trials of Ampligen® already conducted by us include studies of the potential treatment of CFS, Hepatitis B, HIV and cancer patients with renal cell carcinoma and malignant melanoma. All of these potential uses will require additional clinical trials to generate the safety and effectiveness data necessary to support regulatory approval.

In May 1997, the FDA approved an open-label treatment protocol, (“AMP 511”), allowing patient access to Ampligen® for treatment in an open-label safety study under which severely debilitated CFS patients have the opportunity to be on Ampligen® to treat this very serious and chronic condition. The data collected from the AMP 511 protocol through a consortium group with active clinical sites in New York City, NY, Charlotte, NC, Miami, FL, Incline Village, Nevada, and Salt Lake City, UT, provide safety information regarding the use of Ampligen® in patients with CFS. As of December 31, 2012, we had twenty-eight patients participating in this open label treatment protocol with twenty taking treatment and eight on drug holiday. We are establishing an enlarged data base of clinical safety information which we believe will provide further documentation regarding the absence of autoimmune disease associated with Ampligen® treatment. We believe that continued efforts to understand existing data, and to advance the development of new data and information, will ultimately support our filings of the Ampligen® NDA and/or the design of future clinical studies.

In July 2008, the FDA accepted for review our NDA for Ampligen® to treat CFS, originally submitted in October 2007. We continue to seek marketing approval for the first-ever treatment for CFS, and the NDA for Ampligen® is the first-ever NDA accepted for review by the FDA for systemic use of a toll-like receptor 3 (“TLR-3”) therapy to treat any condition. In November 2009, we received a CRL from the FDA which described specific additional recommendations related to the Ampligen® NDA. In accordance with its 2008 Complete Response procedure, the FDA reviewers determined that they could not approve the application in its present form and provided specific recommendations to address the outstanding issues.

On June 8, 2012, we and our consultants met with the FDA to discuss certain aspects of the CRL. At that meeting, the FDA agreed to accept, for review, in Hemispherx’ complete response new analyses of data from the AMP-516 Trial. However, the FDA noted that whether the new analyses provide adequate evidence of Ampligen®’s efficacy in treating CFS would ultimately be an issue to be resolved during the review.

As a result of the FDA meeting, Hemispherx redirected many of its resources to the Ampligen® NDA submission and our preparation for the FDA pre-approval inspections by reassigning personnel, hiring additional staff, consultants and various independent contractors. The Company submitted the complete response to the FDA on July 31, 2012.

On December 20, 2012, the FDA held a meeting of its Arthritis Advisory Committee (“AAC”) to discuss the Ampligen® NDA. The AAC questions and the results of the members’ voting thereon were as follows:

· “Considering the totality of the data, is there substantial evidence of efficacy for Ampligen for the treatment of patients with chronic fatigue syndrome (CFS)?” The AAC voted 9 no, 4 yes and 1 AAC member did not vote;

· “Has the safety of Ampligen been adequately assessed and characterized for the treatment of chronic fatigue syndrome (CFS)?” The AAC voted 9 no, 4 yes and 1 AAC member did not vote;

· “Is the safety profile of Ampligen adequate for approval for the treatment of CFS?” The AAC voted 8 yes, 5 no and 1 non-vote; and

· “Based on the information included in the briefing materials and presentations, has the applicant provided sufficient efficacy and safety data to support marketing of Ampligen for the treatment of CFS?” The AAC voted 8 no, 5 yes and 1 non-vote.

The AAC based its voting on a review of data from the Ampligen® clinical development program included as part of our NDA submission. This submission included data on nine studies conducted in patients with CFS, including two randomized double-blind, placebo-controlled studies and seven open-label studies. The trials were designed to evaluate safety, tolerability and efficacy in the approximately 845 patients (589 unique subjects suffering from severely debilitating CFS) who received Ampligen®.

On February 1, 2013, we received a CRL from the FDA declining to approve Hemispherx’ NDA for Ampligen® for CFS. In its CRL, the FDA communicated that Hemispherx should conduct at least one additional clinical trial, complete various nonclinical studies and perform a number of data analyses. The additional clinical study should address, among other things, Ampligen®’s efficacy in treating CFS patients, be of sufficient size and duration to assess the safety of Ampligen® and be sufficient to determine appropriate dosing. The FDA set forth the reasons for this action and provided recommendations to address certain of the outstanding issues. The FDA stated that the submitted data do not provide substantial evidence of efficacy of Ampligen® for the treatment of CFS and that the data do not provide sufficient information to determine whether the product is safe for use in CFS due to the limited size of the safety database and multiple discrepancies within the submitted data. In addition to the safety and effectiveness issues recommended to be addressed in at least one additional clinical trial, the CRL states that Hemispherx should conduct complete rodent carcinogenicity studies in two species prior to approval and also conduct additional animal toxicology studies providing more comprehensive evaluation of Ampligen® fragments and degradation products. The CRL also requests evaluation of variation between lots of Ampligen® tested in the development process and recommends tighter control of the Ampligen® manufacturing process.

In response to the CRL, we plan to avail ourselves of the opportunity for an “end-of-review” meeting with representatives of the Office of Drug Evaluation II which issued the CRL, in order to clarify and seek to narrow the outstanding issues regarding the further development of Ampligen® for the treatment of CFS.

FDA regulations provide a formal dispute resolution process to obtain review of any FDA decision, including a decision not to approve an NDA, by raising the matter with the supervisor of the FDA office that made the decision. The formal dispute resolution process exists to encourage open, prompt discussion of scientific (including, medical) disputes and procedural (including, administrative) disputes that arise during the drug development, new drug review, and post-marketing oversight processes of the FDA. Depending on the results of the “end-of-review” meeting, we will determine whether or not to submit a formal appeal regarding the FDA’s decision under applicable FDA regulations and guidance. Please see “Risks Associated With Our Business” in Item 1A. Risk Factors below.

Until we undertake the end-of-review conference(s) with the FDA, we are unable to reasonably estimate the nature, costs, necessary efforts to obtain FDA clearance or anticipated completion dates of any additional clinical study or studies. Utilizing the industry norms for undertaking a Phase III clinical study, we estimate upon acceptance of the study’s design that it would take approximately 18 months to three years to complete a new well-controlled Ampligen® clinical study for resubmission to the FDA. Industry norms suggest that it will require three to six months to initiate the study, one to two years to accrue and test patients, three to six months to close-out the study and file the necessary documents with the FDA. The actual duration to complete the clinical study may be different based on the final design of an acceptable Phase III clinical study design, availability of suitable participants and clinical sites along with other factors that could impact the implementation of the study, analysis of results or requirements of the FDA and/or other governmental organizations. The actual duration to complete the clinical study may be different based on the length of time it takes to design the study and obtain FDA’s acceptance of the design, the final design of an acceptable Phase III clinical study design, availability of suitable participants and clinical sites along with other factors that could impact the implementation of the study, analysis of results or requirements of the FDA and/or other governmental organizations.

There are multiple reasons for fatigue and the accurate diagnosis of CFS remains one of exclusion and adherence to strict diagnostic guidelines. In that regard, we have evaluated a blood test for CFS using a new technology being developed by Chronix Biomedical and continue to be interested in such diagnostic platform that may include next generation sequencing, gene expression or immune assays of dysfunction. While we believe that finding an accurate diagnostic for CFS is useful, we do not believe that development of new diagnostic tools is a prerequisite to FDA approval of a CFS treatment or design of a successful clinical study.

On July 12, 2012, we filed a new drug application for Ampligen® with the ANMAT (Administracion Nacional de Medicamentos, Alimentos y Tecnologia Medica), the agency responsible for the national regulation of drugs, foods and medical technology in Argentina, under the ANMAT’s Orphan Drug regulations. We believe that the approval of Ampligen® as an Orphan Drug may allow reimbursement by the Health Services Authority (SSS), the central health authority in Argentina for patients seeking treatment for CFS.

Alferon N Injection®

Alferon N Injection® is the registered trademark for our injectable formulation of natural alpha interferon, which is approved by the FDA in 1989 for the treatment of certain categories of genital warts. Alferon® is the only natural-source, multi-species alpha interferon currently approved for sale in the U.S. for the intralesional (within lesions) treatment of refractory (resistant to other treatment) or recurring external genital warts in patients 18 years of age or older. Certain types of human papilloma viruses (“HPV”) cause genital warts, a sexually transmitted disease (“STD”). The U.S. Centers for Disease Control and Prevention (“CDC”) estimates that “approximately twenty million Americans are currently infected with HPV with another six million becoming newly infected each year. HPV is so common that at least 50% of sexually active men and women get it at some point in their lives.” Although they do not usually result in death, genital warts recurrence is common, cause significant morbidity and entail substantial health care costs.

Interferons are a group of proteins produced and secreted by cells to combat diseases. Researchers have identified four major classes of human interferon: alpha, beta, gamma and omega. Alferon N Injection® contains a multi-species form of alpha interferon. The world-wide market for injectable alpha interferon-based products has experienced rapid growth and various alpha interferon injectable products are approved for many major medical uses worldwide. Alpha interferons are manufactured commercially in three ways: by genetic engineering, by cell culture, and from human white blood cells. All three of these types of alpha interferon are or were approved for commercial sale in the U.S. Our natural alpha interferon is produced from human white blood cells.

The potential advantages of natural alpha interferon over recombinant (synthetic) interferon produced and marketed by other pharmaceutical firms may be based upon their respective molecular compositions. Natural alpha interferon is composed of a family of proteins containing many molecular species of interferon. In contrast, commercial recombinant alpha interferon products each contain only a single species. Researchers have reported that the various species of interferons may have differing antiviral activity depending upon the type of virus. Natural alpha interferon presents a broad complement of species, which we believe may account for its higher activity in laboratory studies. Natural alpha interferon is also glycosylated (partially covered with sugar molecules). Such glycosylation is not present on the currently U.S. marketed recombinant alpha interferons. We believe that the absence of glycosylation may be, in part, responsible for the production of interferon-neutralizing antibodies seen in patients treated with recombinant alpha interferon. Although cell culture-derived interferon is also composed of multiple glycosylated alpha interferon species, the types and relative quantity of these species are different from our natural alpha interferon.

Alferon N Injection® [Interferon alfa-n3 (human leukocyte derived)] is a highly purified, natural-source, glycosylated, multi-species alpha interferon product. There are essentially no antibodies observed against natural interferon to date and the product has a relatively low side-effect profile.

The recombinant DNA derived alpha interferon formulations have been reported to have decreased effectiveness after one year, probably due to neutralizing antibody formation. Neutralizing antibody formation has not been reported with the use of Alferon N Injection®.

Commercial sales of Alferon N Injection® were halted in March 2008 when our finished goods inventory expired. The production of Alferon N Injection® from the Work-In-Process Inventory was restarted in May 2010, continued into January 2011 with its conversion into API and is completed for the related Final Lot Release Test. To formulate, fill, finish and package (“fill and finish”) Alferon N Injection® Drug Product, we require a FDA approved third party Contract Manufacturing Organization (“CMO”). In January 2012, we agreed to a Technology, Transfer, Validation and Commercial Supply Agreement with Althea Technologies, Inc. (“Althea”) of San Diego, CA, regarding the fill and finish process for Alferon N Injection®. In April 2012, FDA reviewers raised certain questions about the status of our existing lots of older Work-In-Process Alferon® materials and Alferon® “API”, which would need to be released by the FDA before those materials could be used in commercial product.

As of December 31, 2012, all of our existing lots of Alferon® Work-In-Process Inventory have completed the fill, finish and packaging process with the need to undertake product quality and stability tests, the results of which would be submitted to the FDA for review. We are unable to provide any assurances that the FDA will approve the fill and finish product lots produced by Althea. In the absence of FDA approvals for commercial sale of product manufactured from existing Work-In-Process inventory, commercial sales of Alferon® will not resume until new batches of API can be produced and released by the FDA (see “MANUFACTURING” and “MARKETING/DISTRIBUTION” below for more information).

The production of new Alferon® API inventory will not commence until the capital improvement and validation phases are complete at our New Brunswick, NJ manufacturing facility. Due to the necessity to redirect resources to the Ampligen® NDA application process, the validation phase of the Alferon® manufacturing project had been delayed but is currently underway. While the facility had been granted approval of its Biological License Application (“BLA”) by the FDA for Alferon®, this status will need to be reaffirmed upon the completion of the facility’s enhancements prior to commercial sale of newly produced inventory product. Once we have obtained a reaffirmation of FDA BLA status and have begun production of new Alferon® API, we will need FDA approval as to the quality and stability of the final product. We anticipate that it will take until the second half of 2014 before we will have newly produced Alferon® that can be commercially sold (see “MANUFACTURING” below for more information).

Alferon® LDO (Low Dose Oral)

Alferon® LDO [Low Dose Oral Interferon Alfa-n3 (Human Leukocyte Derived)] is an experimental low-dose, oral liquid formulation of Natural Alpha Interferon and like Alferon N Injection®, should not cause antibody formation, which is a problem with recombinant interferon. It is an experimental immunotherapeutic believed to work by stimulating an immune cascade response in the cells of the mouth and throat, enabling it to bolster systemic immune response through the entire body by absorption through the oral mucosa. Oral interferon could be economically feasible for patients and logistically manageable in development programs in third-world countries primarily affected by influenza and other emerging viruses. Oral administration of Alferon® LDO, with its anticipated affordability, low toxicity, no production of antibodies, and broad range of potential bioactivity, could be a breakthrough treatment or prevention for viral diseases.

In December 2010, the FDA authorized a protocol to conduct a Phase II, double-blind, adaptive-design, randomized, placebo-controlled, dose-ranging study of Alferon® LDO for the prophylaxis and treatment of seasonal and pandemic influenza of more than 200 subjects. Our Phase II study has been delayed as we have redirected many of our resources to the Ampligen® NDA submission.

HISTORICAL COSTS RELATED TO OUR PRODUCTS

The following table sets forth the costs related to our major products for each of the prior three years. Our aggregate expenses from the time that we first started developing nucleic acid pharmaceutical technology in the mid 1980’s through March 2003 were substantially related to the development of Ampligen®, and from that date through the current period were substantially related to Ampligen® and Alferon®.

(dollars in thousands) Year Ended December 31, 2012 Costs and Expenses Ampligen® NDA Alferon N Injection® Alferon® LDO Other Total Production/cost of goods sold $ 0 $ 1,989 $ 0 $ 0 $ 1,989 Research and development 6,775 0 2,245 488 9,508 General and administrative 5,337 1,567 1,768 384 9,056 Total $ 12,112 $ 3,556 $ 4,013 $ 872 $ 20,553

(dollars in thousands) Year Ended December 31, 2011 Costs and Expenses Ampligen® NDA Alferon N Injection® Alferon® LDO Other Total Production/cost of goods sold $ 0 $ 1,043 $ 0 $ 0 $ 1,043 Research and development 2,310 0 4,080 332 6,722 General and administrative 1,990 899 3,516 286 6,691 Total $ 4,300 $ 1,942 $ 7,596 $ 618 $ 14,456

(dollars in thousands) Year Ended December 31, 2010 Costs and Expenses Ampligen® NDA Alferon N Injection® Alferon® LDO Other Total Production/cost of goods sold $ 0 $ 1,341 $ 0 $ 0 $ 1,341 Research and development 2,787 0 4,658 168 7,613 General and administrative 2,356 1,133 3,937 142 7,568 Total $ 5,143 $ 2,474 $ 8,595 $ 310 $ 16,522

PATENTS AND NON-PATENT EXCLUSIVITY RIGHTS

As of December 31, 2012, we had 20 patents worldwide with 70 additional pending patent applications comprising our intellectual property. Please see “Note 7: Patents, Trademark Rights and Other Intangibles (FASB ASC 350 General Intangibles Other than Goodwill)” under Notes To Consolidated Financial Statements for more information on these patents.

We continually review our patents’ rights to determine whether they have continuing value. Such review includes an analysis of the patent’s ultimate revenue and profitability potential. In addition, Management’s review addresses whether each patent continues to fit into our strategic business plans for Ampligen®, Alferon N Injection® and Alferon® LDO. The U.S. patents relating to our Alferon® products expire April 2, 2013 (#5,503,828), October 14, 2014 (#5,676,942) and December 22, 2017 (#5,989,441). In 2012, we were granted two new patents, one in Australia and the other in New Zealand, both for the use of Ampligen to initiate innate immunity and to treat or prevent viral infections and tumors. In December 2011, we were granted two new United States Patents for the use of Alferon® LDO for the treatment in a number of different human diseases.

Alferon® composition patent #5,503,828 relates to the manufacturing process for Alferon® Active Pharmaceutical Ingredient (“API”), a complex mixture of natural interferon species that ismanufactured from human leukocytes obtained from human blood donors. In addition, while it is the current standard by the FDA to treat biological drug products like interferon as “Well Characterized” biologics, a process for which chemical entities can have their identity, purity, impurities, potency, and quality controlled by chemical testing, Alferon®, as a natural interferon, does not lend itself well to such testing. Moreover, FDA continues to require that each lot or Alferon we produce be tested and released by the FDA before it can distributed for commercial sales. Because of the complexity of the Alferon manufacturing process and these additional regulatory requirements, we believe that potential manufacturers of generic, or so-called “bio-similar,” drug products are focused on developing recombinant interferon products, rather than natural interferon products. For these reasons, we believe the expiration of this Alferon® composition patent in April 2013 should have no or little impact on the Company. Additionally at the completion of the facility enhancement and receipt of the FDA certification for the revised Alferon® manufacturing process and techniques in New Brunswick, NJ, it is our intention to file for additional patent protection.

Alferon® patent #5,676,942 relates to a manufacturing methodology which is no longer in use.

With respect to Ampligen®, the main U.S. CFS treatment patent (#6,130,206) expires October 10, 2017. Our main patents covering HIV treatment (#4,820,696, #5,063,209, and #5,091,374) expired on April 11, 2006, November 5, 2008, and February 25, 2009, respectively; Hepatitis treatment coverage is conveyed by U.S. patent #5,593,973 which expires on January 14, 2014. Our U.S. Ampligen® Trademark (#73/617,687) has been renewed through December 6, 2018. New therapeutic use patent applications are pending including new patent applications for composition of alternative matter.

In addition to our patent rights relating to Ampligen®, the FDA has granted “orphan drug status” to the drug for CFS, HIV/AIDS, and renal cell carcinoma and malignant melanoma. Orphan drug status grants us protection against the potential subsequent approval of other sponsors’ versions of the drug for these uses for a period of seven years following FDA approval of Ampligen® for each of these designated uses. The first NDA approval for Ampligen® as a new chemical entity will also qualify for four or five years of non-patent exclusivity during which abbreviated new drug applications seeking approval to market generic versions of the drug cannot be submitted to the FDA. (See “GOVERNMENT REGULATION” below.)

In July 2011, a new United States Patent was granted for the use of Ampligen® as a vaccine adjuvant for use with seasonal influenza vaccine to induce an enhanced immune response against H5N1 avian influenza.

RESEARCH AND DEVELOPMENT (“R&D”)

Our general focus during the past three fiscal years has been on developing drugs for use in treating viral and immune based chronic disorders and diseases such as CFS, HIV, HPV, Cancer and Influenza. Our current R&D projects are targeting treatment therapies for CFS, various cancers (as adjunctive therapy) and other viral diseases such as prevention and treatment of seasonal and pandemic H1N1 or influenza.

The following table summarizes our research and development costs for the years 2012, 2011 and 2010 by project:

2012 2011 2010 Ampligen® New Drug Application for the treatment of Chronic Fatigue Syndrome $ 6,775 $ 2,310 $ 2,787 Alferon® LDO for influenza 2,245 4,080 4,658 Alferon N Injection® for influenza 0 0 168 Other projects 488 332 0 Total research and development $ 9,508 $ 6,722 $ 7,613

Due to the inherent uncertainty involved in the design and conduct of clinical trials and the applicable regulatory requirements, including the factors discussed above in “OUR PRODUCTS”, we cannot predict what additional studies and/or additional testing or information may be required by the FDA. Accordingly, we are unable to estimate the nature, timing, costs and necessary efforts to complete these projects nor the anticipated completion dates. In addition, we have no basis for estimating when material net cash inflows may commence. We have yet to generate significant revenues from the sale of these developmental products. As of December 31, 2012, we had approximately $43,953,000 in Cash, Cash Equivalents and Marketable Securities, (inclusive of approximately $14,500,000 in Marketable Securities collateralizing certain debts). Please see ITEM 1A. Risk Factors; “We may require additional financing which may not be available” below.

In its CRL, the FDA communicated that Hemispherx should conduct at least one additional clinical trial, complete various nonclinical studies and perform a number of data analysis. Until we undertake the end-of-review conference(s) with the FDA, we are unable to reasonably estimate the nature, costs, necessary efforts to obtain FDA clearance or anticipated completion dates of any additional clinical study or studies. Utilizing the industry norms for undertaking a Phase III clinical study, we estimate upon acceptance of the study’s design that it would take approximately 18 months to three years to complete a new well-controlled Ampligen® clinical study for resubmission to the FDA. It can be reasonably anticipated that the time and cost to undertake clinical trial(s), studies and data analysis are beyond our current financial resources without gaining access to additional funding. The actual duration to complete the clinical study may be different based on the length of time it takes to design the study and obtain FDA’s acceptance of the design, the final design of an acceptable Phase III clinical study design, availability of suitable participants and clinical sites along with other factors that could impact the implementation of the study, analysis of results or requirements of the FDA and/or other governmental organizations. Please see “We most likely will require additional financing which may not be available. The limitation on the number of shares of common stock available for financing without prior stockholder approval eventually may hinder our ability to raise additional funding.” in Item 1A. Risk Factors below.

Chronic Fatigue Syndrome ("CFS")

Chronic Fatigue Syndrome (“CFS”), also known as Chronic Immune Dysfunction Syndrome (“CFIDS”) and Myalgic Encephalomyelitis (“ME”) is a serious and debilitating chronic illness and a major public health problem. CFS is recognized by both the government and private sector as a major health problem, including the U.S. National Institutes of Health (“NIH”), FDA and the CDC. The CDC states on its website at http://www.cdc.gov/cfs/index.html that “Chronic fatigue syndrome, or CFS, is a devastating and complex disorder characterized by overwhelming fatigue that is not improved by bed rest and that may be worsened by physical or mental activity. People with CFS most often function at a significantly lower level of activity than they were capable of before the onset of illness.”

Many severe CFS patients become completely disabled or totally bedridden and are afflicted with severe pain and mental confusion even at rest. CFS is characterized by incapacitating fatigue with profound exhaustion and extremely poor stamina, sleep difficulties and problems with concentration and short-term memory. It is also accompanied by flu-like symptoms, pain in the joints and muscles, tender lymph nodes, sore throat and new headaches. A distinctive characteristic of the illness is a worsening of symptoms following physical or mental exertion which do not subside with rest.

For their Case Definition, the CDC states that the cause or causes of CFS have not been identified and no specific diagnostic tests are available. Therefore, in order to be diagnosed with chronic fatigue syndrome, a patient must satisfy three criteria:

1. The individual has had severe chronic fatigue for six or more consecutive months that is not due to ongoing exertion or other medical conditions associated with fatigue (these other conditions need to be ruled out by a doctor after diagnostic tests have been conducted;

2. The fatigue significantly interferes with daily activities and work; and

3. The individual concurrently has four or more of the following eight symptoms:

· post-exertion malaise lasting more than twenty-four hour;

· unrefreshing sleep;

· significant impairment of short-term memory or concentration;

· muscle pain;

· pain in the joints without swelling or redness;

· headaches of a new type, pattern, or severity;

· tender lymph nodes in the neck or armpit; or

· a sore throat that is frequent or recurring.

These symptoms should have persisted or recurred during six or more consecutive months of illness and they cannot have first appeared before the fatigue.

Because no cause for CFS has been identified, current treatment programs are directed at relieving symptoms, with the goal of the patient regaining some level of function and well-being. Diagnosis of CFS is a time-consuming and challenging process for which there is no FDA approved diagnostic test or biomarker to clearly identify the disorder. Diagnosis is primarily arrived at by taking a patient's medical history, completing a physical exam and lab tests to rule out other conditions and excluding other illnesses with similar symptoms and comparing a patient's symptoms with the case definition. Overlapping symptoms can occur with several diseases, such as fibromyalgia, Gulf War Illnesses, chronic Lyme disease and multiple chemical sensitivities. Many diseases have similar symptoms including Lupus and Lyme disease which may closely mimic CFS that need to be considered when making a diagnosis to rule them out. If there are no abnormal test results or other physical ailments identified, clinicians can use standardized tests to quantify the level of fatigue and evaluate symptoms. Diagnosis can be complicated by the fact that the symptoms and severity of CFS vary considerably from patient to patient. New diagnostic approaches to possibly accelerate the identification of CFS are being developed.

When she served as director of the CDC, Dr. Julie Gerberding stated that "The CDC considers Chronic Fatigue Syndrome to be a significant public health concern and we are committed to research that will lead to earlier diagnosis and better treatment of the illness." A variety of studies by the CDC and others have shown that between 1 and 4 million Americans suffer from CFS. In June 2012, U.S. Senators Robert P. Casey, Richard Blumenthal and Kay R. Hagan sent a letter to Health and Human Services Secretary Kathleen Sebelius requesting the FDA hold a stakeholders meeting on CFS. Senators Casey and Hagan serve on the Committee on Health, Education, Labor & Pensions, which has Congressional oversight responsibility for FDA. The letter stated, “CFS/ME represents a significant unmet medical need, one that confers on patients a lifetime of illness. A stakeholder meeting would be of great benefit, as it would offer an opportunity to examine existing treatment protocols known to FDA, address how risk/benefit determinations should be made in relation to CFS/ME treatments and identify a path forward for regulatory science in this area.”

Accordingly, the FDA’s Center for Drug Evaluation and Research has announced a public workshop on April 25 and 26, 2013, to discuss how best to facilitate and expedite the development of safe and effective drug therapies to treat signs and symptoms related to CFS and ME. On April 25, 2013, as part of FDA’s Patient-Focused Drug Development initiative, patients will provide feedback to FDA on issues like the disease impact on quality of life and individual experiences with current treatment options. On April 26, 2013, there will be discussions with academic and government experts, patient advocates, patients, and clinicians on how to identify sound, quantitative outcome measures that can be used in clinical trials to determine whether disease symptoms improve with specific drug interventions. For more information, see http://www.fda.gov/Drugs/NewsEvents/ucm319188.htm.

While CFS strikes people in all age, racial, ethnic, and socioeconomic groups, it is most prevalent amongst women. Research has shown that CFS is about three times as common in women as men, a rate similar to that of many autoimmune diseases, such as multiple sclerosis and lupus. To put this into perspective, CFS is over four times more common than HIV infection in women, and the rate of CFS in women is considerably higher than a woman's lifetime risk of getting lung cancer as published by the CFIDS Association of America.

Other Viral Diseases

In July 2011, we received FDA authorization to proceed with the initiation of a new clinical trial of intranasal Ampligen® to be used in conjunction with commercially approved seasonal influenza vaccine. On April 16, 2012, a clinical trial was initiated in which Ampligen® is being nasally administered in conjunction with FluMist® to healthy human volunteers at the University of Alabama at Birmingham under the auspices of Dr. Paul Goepfert, Associate Professor of Medicine in the Division of Infectious Diseases and Director of the Alabama Vaccine Research Clinic. This study is a first use of Ampligen® with a seasonal vaccine in humans to assess the safety of Ampligen® when nasally delivered as a vaccine adjuvant. Another objective of this study is to determine the extent to which Ampligen® mobilizes potential protections against pandemic influenza by utilization of a seasonal flu vaccine. The study will evaluate the potential immunologic enhancement of Ampligen® by comparing immune parameters in the group receiving Ampligen® plus FluMist® with another group receiving FluMist® plus placebo. We intend to conduct a broad array of immune tests to compare the immune response for both its magnitude and breadth. It is our objective to qualify and enroll 72 patients for this clinical trial. As of December 31, 2012, eight subjects have participated in this study. As required by the study’s protocol, a Data Monitoring Committee has reviewed the safety data on these subjects and approved the study to proceed at the next higher dosage level.

In April 2010, we began the process to undertake a clinical placebo-controlled study with Max Neeman International, a leading and large clinical research organization in India. This collaborative clinical research effort is intended to utilize Alferon N Injection® for treatment of seriously ill patients hospitalized with either seasonal influenza or pandemic influenza. The Indian site selection process was initiated and we obtained approval to begin the study from the Indian Drugs Controller General on July 13, 2010. As of June 2012, we had ten operational Clinical Investigative Sites. Thirty patients, of the planned total of sixty, have completed the study. Our study has progressed at a rate slower than originally projected due to difficulties encountered in the process of screening for subjects with influenza, rather than other illnesses with symptoms similar to influenza, along with India experiencing an unusually mild flu season during the past year. Due to the unexpectedly slow enrollment rate for this study, on June 20, 2012, we notified Max Neeman International that this study was suspended, pending an interim analysis of results to date on the thirty completed patients of the planned sixty patient study. Our interim analysis of results has been delayed as we have redirected many of our resources to the Ampligen® NDA submission. Upon completion of the Ampligen® NDA effort, we intend to undertake this analysis.

In June 2011, we entered into a Material Transfer and Research Agreement with the University of Pennsylvania’s School of Medicine to provide Ampligen® for testing as a vaccine adjuvant in a human clinical study in ovarian cancer. This study is a Phase I/II randomized clinical trial for subjects with recurring ovarian, fallopian tube or primary peritoneal cancer to determine the feasibility and safety as well as immunogenicity of a vaccine comprised of autologous oxidized tumor cell lysate (“OC-L”) administered by intradermal/subcutaneous injection in combination with intravenous Ampligen®. The OC-L vaccine is an experimental cancer immunotherapy under development by the University of Pennsylvania. This study represents the first use of Ampligen® as a cancer vaccine adjuvant in a randomized clinical study with and without Ampligen®. As of December 31, 2012, three patients have participated in this study. Further treatment of the existing three patients, as well as new enrollment into this study, are currently suspended pending additional data analyses and non-clinical experimentation by the University of Pennsylvania’s School of Medicine in an attempt to modify the immune response elicited by the vaccine adjuvant combination. To date, this treatment has been generally well-tolerated with no tumor regression seen in the first three patients.

In August 2011, a study utilizing Ampligen® was initiated by investigators from the Tumor Vaccine Group (“TVG”) at the University of Washington in Seattle, WA. As of December 31, 2012, forty patients have enrolled in this ninety-eight patient Phase I-II Study of HER2 vaccination with Ampligen® as an adjuvant in optimally treated breast cancer patients. The goal of this study is to see how well the combination works in treating patients with Stage II-IV human epidermal growth factor receptor 2 (“HER2”)-positive breast cancer. Vaccines made from synthetic HER2/neu peptides may help the body build an effective immune response to kill tumor cells that express HER-2/neu. The TVG has developed vaccines against several cancer proteins, and in this study, they are researching a new approach in an attempt to make the immune response to the vaccine even better. Compounds that specifically stimulate TLR receptors are promising immune stimulators, and Ampligen® has the potential to provide a profile of immune stimulation that could be clinically beneficial.

MANUFACTURING

We own and operate a 43,000 sq. ft. FDA approved facility in New Brunswick, NJ that produces Alferon® and Ampligen®. In December 2011, our Board of Directors (the “Board”) reevaluated the facility enhancement project to focus on upgrading the facility to provide for a high volume, more cost effective manufacturing process for Alferon N Injection®, Alferon® LDO and Ampligen®. In this regard, the Board increased the funding allocated to this project from $4.4 million to $6.5 million, and then again in June 2012 to $7.2 million. The facility enhancement project is in its final stage with construction complete and a Certificate of Approval issued by the Construction Official of New Brunswick, NJ for the work completed. Approximately $7,051,000 has been spent to date through December 31, 2012 and financed through a Margin Account with an effective interest rate of approximately 2.75%, as compared to $1,695,000 at December 31, 2011. While facility upgrades are being undertaken to the Alferon® manufacturing process, this project has not impacted our capability to manufacture the Ampligen® drug substance intermediates needed for the final production steps.

An element of the June 8, 2012 meeting with the FDA was the requirement that our New Brunswick manufacturing facility would be ready for the FDA to undertake a cGMP pre-approval inspection related to Ampligen® at the time of submission of our complete response submission. The FDA did not complete the inspection before the February 1, 2013 CRL and, as a result of the CRL, we do not anticipate a preapproval inspection at this time. We cannot provide any guarantee that the facility will pass a FDA pre-approval inspection for Ampligen® or Alferon® manufacture, which are conducted in separately dedicated areas within the overall New Brunswick manufacturing complex (see “Risks Associated With Our Business” in Item 1A. Risk Factors below for more information).

We outsource certain components of our research and development, manufacturing, marketing and distribution while maintaining control over the entire process through our quality assurance group and our clinical monitoring group. Accordingly in September 2011 and similar to our prior agreements, we executed an amendment to the Supply Agreement that will extend through March 11, 2014 with Jubilant Hollister-Stier Laboratories LLC of Spokane, Washington (“Hollister-Stier”). Pursuant to this agreement, Hollister-Stier will formulate, fill, finish and package (“fill and finish”) Ampligen® from the key raw materials that we would supply. Hollister-Stier would have the right of first refusal to manufacture certain Ampligen® related products.

Commercial sales of Alferon N Injection® were halted in March 2008 when our finished goods inventory expired. The production of Alferon N Injection® from the Work-In-Process Inventory was restarted in May 2010, continued into January 2011 with its conversion into API and is completed for the related Final Lot Release Test. We have manufactured purified drug concentrate utilized in the formulation of Alferon N Injection® in our New Brunswick, New Jersey facility. To formulate, fill, finish and package (“fill and finish”) Alferon N Injection® API that we have already produced, we require an FDA approved third-party CMO. In June 2011, our designated CMO reported to us that they had received an FDA 483 form that identified production issues that needed to be addressed prior to resumption of production. As a result, we evaluated alternative CMOs to undertake the fill and finish process.

On January 26, 2012, we agreed to a Technology, Transfer, Validation and Commercial Supply Agreement with Althea regarding the fill and finish process for Alferon N Injection®. The Technology Transfer process with Althea was completed in May 2012 and included the evaluation of manufacturing and technology transfer feasibility, equipment and/or equipment modification requirements, engineering runs, process definition along with development and approval of the Master Batch Record. As of December 31, 2012, all of our lots of Alferon® Work-In-Process Inventory have completed the fill, finish and packaging process. With the completion of the fill, finish and packaging protocol, Process Validation of Alferon® Work-In-Process lots need to be completed. With our redirection of resources to the Ampligen® NDA submission, this process had been delayed but is now underway. A minimum of three months of stability tests is required in a Pre-Approval Supplement (“PAS”). Upon submission of the PAS, the data would then be subjected to FDA review. The FDA could take up to six months to render an opinion as to the quality of the product as suitable for commercial sales. We are unable to provide any assurances that the FDA will approve the existing inventory finish product lots produced by Althea (see “MARKETING/DISTRIBUTION” below for more information).

The production of new Alferon® API inventory will not commence until the capital improvement and validation phases are complete at the New Brunswick, NJ manufacturing facility. Due to the necessity to redirect our resources to the Ampligen® NDA application process and efforts towards the pre-approval inspection for Ampligen® manufacturing, the validation phase of the Alferon® manufacturing project had been delayed, but we are now again dedicated to this process. While the facility had been granted approval of its Biological License Application (“BLA”) by the FDA for Alferon®, this status will need to be reaffirmed upon the completion of the facility’s enhancements prior to commercial sale of newly produced inventory product. Once we have obtained a reaffirmation of FDA BLA status and have begun production of new Alferon® API, we will be required to obtain FDA approval as to the quality and stability of the final product. We anticipate that it will take until the second half of 2014 before we will have newly produced Alferon® that can be commercially sold to meet potential patient demand in the Unites States and abroad.

While at December 31, 2011 and 2012, the Work-In-Process Inventory had no manufacturing steps to be undertaken at our New Brunswick, NJ facility, it will not be classified as Finished Goods unless and until the FDA confirms that the product can be commercially sold. We are unable to provide any assurances that the FDA will approve the finish product lots produced by Althea. In the absence of FDA approvals for commercial sale of product manufactured from existing Work-In-Process inventory, commercial sales of Alferon® will not resume until new batches of Alferon® API can be produced and formulated in order that finished product can be filled, finished, packaged and released by the FDA for commercial sale (see “Risks Associated With Our Business” in Item 1A. Risk Factors below for more information).

In the absence of FDA approvals for commercial sale of product manufactured from existing Work-In-Process inventory, commercial sales of Alferon® in the United States will not resume until new batches of Alferon® API can be produced and formulated in order that finished product can be filled, finished, packaged and released by the FDA for commercial sale.

MARKETING/DISTRIBUTION

Our marketing strategy for Ampligen® reflects the differing health care systems around the world along with the different marketing and distribution systems that are used to supply pharmaceutical products to those systems. We expect that, subject to receipt of FDA, ANMAT and/or other regulatory approval, Ampligen® may be utilized in four medical arenas: physicians’ offices; clinics; hospitals; and the home treatment setting. In preparation for the FDA’s consideration of our Ampligen® NDA, we undertook early stage development of pre-launch and launch driven marketing plans focusing on audience development, medical support and payor reimbursement initiatives which could facilitate product acceptance and utilization at the time of regulatory approval, if obtained. Similarly, we continued to consider distribution scenarios for the Specialty Pharmacy/Infusion channel which could provide market access, offer 3PL (third party logistics) capabilities and provide the requisite risk management control mechanisms. It is our intent to utilize third party service providers to execute elements of both the marketing/sales and distribution plans. As a possible option, we considered a plan to utilize a small group of Managed Market account managers to introduce the product to payor, employer and government account audiences. We believe that this approach could establish a market presence and facilitate the generation of revenue without incurring the substantial costs associated with a traditional sales force. Furthermore, Management believes that any approach considered should enable us to retain multiple options for future marketing strategies.

In December 2011, we entered into a Second Amended Adviser’s Agreement for twenty-four months with The Sage Group, Inc. ("Sage"), effective June 15, 2011, that amends and supersedes all other agreements and arrangements between the parties. Pursuant to this agreement, Sage is to assist us to identify, qualify, negotiate and close one or more licensing, partnering, alliance or similar transactions pertaining to our products and technology including, but not limited to, any and all uses of Ampligen®, Alferon® and related intellectual property as well as acquisition of companies in whole or in part and the sale or the merger of our Company (“Transactions”). In consideration for services performed or attributed to Sage resulting in Transactions, Sage is entitled to a monthly “Adviser’s Fee” of $20,000, reimbursement of preapproved expense, a one-time distribution of 200,000 Options that vest proportionately over 18 months with an exercise price of 110% of the closing price of our Stock on the NYSE MKT at the close of the day preceding the execution date of the agreement. The Agreement also allows us at our sole discretion to award a bonus for extraordinary performance or special projects not to exceed $250,000 per year, and provides for a “Success Fee” of five percent (5%) of all consideration that is capped at $5,000,000 per annum for Transactions introduced to us by Sage. A Transaction can occur during the term of the agreement or 18 months thereafter. This Agreement may be terminated by us for cause after we deliver written notice to Sage of a failure to perform and such failure is not cured within 15 days.

In January 2010, we engaged an Argentinean regulatory and business design entity to explore the possibility of initiating clinical trials of Alferon N Injection®, Ampligen® and Alferon® LDO during the influenza season in Argentina. On June 14, 2010, we executed a five year exclusive Sales, Marketing, Distribution and Supply Agreement for Argentina with GP Pharm Latinoamerica (“GP Pharm”), an affiliate company of Spanish GP Pharm SA. Under this Agreement, GP Pharm will be responsible for gaining regulatory approval in Argentina for Ampligen® to treat CFS in Argentina and for commercializing Ampligen® for this indication in Argentina. We granted GP Pharm the right to expand rights to sell this experimental therapeutic into other Latin America countries based upon GP Pharm achieving certain performance milestones. We also granted GP Pharm an option to market Alferon N Injection® in Argentina and other Latin America countries. Under these agreements, we will manufacture and supply Ampligen® and Alferon N Injection® to GP Pharm. On November 15, 2010, we amended our June 15, 2010 agreement with GP Pharm to include Mexico in the Territory under the Sales, Marketing, Distribution and Supply Agreement. Under this Agreement, GP Pharm Mexico will be responsible for seeking regulatory approval in Mexico for Ampligen®, an experimental therapeutic, to treat CFS in Mexico and, if approval is obtained, for commercializing Ampligen® for this indication in Mexico. We have granted GP Pharm the right to expand rights to sell this experimental therapeutic into other Latin America countries based upon GP Pharm achieving certain performance milestones.

Also on November 15, 2010, we executed a five year exclusive Alferon N Injection® Sales, Marketing, Distribution and Supply Agreement for Argentina and other Latin American countries with GP Pharm. The ANMAT (Administracion Nacional de Medicamentos, Alimentos y Tecnologia Medica) is the agency responsible for the national regulation of drugs, foods and medical technology in Argentina. In December 2010, GP Pharm exercised this right and in July 2011 GP Pharm submitted an application for approval to ANMAT. As a result of the efforts of GP Pharm, in January 2012 the ANMAT approved the sale and distribution of Alferon N Injection® (under the brand name “Naturaferon”) in Argentina. The receipt of the ANMAT approval is the first step of a regulatory process towards the commercial sales of Naturaferon. In February 2013, the ANMAT approved the use of Naturaferon for any patient in Argentina who fails or becomes intolerant to treatment with recombinant interferon (see “MANUFACTURING” above for more information).

On September 6, 2011 we executed an amended agreement with Armada Healthcare, LLC (“Armada”), effective August 15, 2011 through August 14, 2012, to undertake the marketing, education and sales of Alferon N Injection® throughout the United States. On August 14, 2012, the agreement with Armada was extended for one year under the same terms and conditions. Armada will also provide us with start-up and ongoing sales and marketing support.

Also on September 6, 2011, we executed a new agreement with licensed specialty distributor, BioRidge Pharma, LLC (”BioRidge”) to warehouse, ship and distribute Alferon N Injection® on an exclusive basis in support of U.S. sales. The term of this Agreement shall begin on the Effective Date and shall expire one (1) year thereafter unless earlier terminated in accordance with this Agreement. On August 14, 2012, the agreement with Bio Ridge was extended for one year under the same terms and conditions.

COMPETITION

RNA based products and toll-like receptors (“TLRs”) have demonstrated great promise in preclinical and limited clinical applications resulting in active research and development by large pharmaceutical companies and emerging Biotech firms. As such, our potential competitors are among the largest pharmaceutical companies in the world, are well known to the public and the medical community, and have substantially greater financial resources, product development, and manufacturing and marketing capabilities than we have.

These companies and their competing products may be more effective and less costly than our products. In addition, conventional drug therapy, surgery and other more familiar treatments will offer competition to our products. Furthermore, our competitors have significantly greater experience than we do in pre-clinical testing and human clinical trials of pharmaceutical products and in obtaining FDA (in the US), European Medicines Agency (“EMA”) and Health Protection Branch ("HPB") (in Canada), and other regulatory approvals of products. Accordingly, our competitors may succeed in obtaining FDA, EMEA and HPB product approvals before we do. If any of our products receive regulatory approvals and we commence commercial sales of our products, we will also be competing with respect to manufacturing efficiency and marketing capabilities, areas in which we have no experience. Our competitors may possess or obtain patent protection or other intellectual property rights that prevent, limit or otherwise adversely affect our ability to develop or exploit our products.

The major pharmaceutical competitors with biotech capabilities/vaccine franchises include Pfizer, GlaxoSmithKline, Merck & Co., Novartis and AstraZeneca. Biotech competitors include Baxter International, Fletcher/CSI, AVANT Immunotherapeutics, AVI BioPharma and Genta. When we recommence sales of Alferon N Injection®, it will compete with Intron® A, an injectable from Merck & Co. that attempts to kill virus and prevent reproduction along with topical treatments that are normally applied by a doctor that have a risk of damaging the skin around the wart, such as:

· Aldara®, also known as Imiquimod®, is a cream which is marketed to boost the immune systems in an attempt to rid itself of genital warts;

· Veregen® is a herbal product made from green tea leaves which is self-administered as an ointment and is used to treat external genital warts in adult patients;

· Condylox® Solution (podofilox) and Podofin® (podophyllin resin) are liquids applied externally using a cotton applicator or finger which attempts to destroy genital warts by halting cell growth; and

· Trichloroacetic acid (TCA) or Bichloroacetic acid (BCA) are chemical treatments which attempt to externally burn off genital warts.

GOVERNMENT REGULATION

Regulation by governmental authorities in the U.S. and foreign countries is and will be a significant factor in the manufacture and marketing of Alferon® products and our ongoing research and product development activities. Ampligen® and other products developed from the ongoing research and product development activities will require regulatory clearances prior to commercialization. In particular, new drug products for humans are subject to rigorous preclinical and clinical testing as a condition for clearance by the FDA and by similar authorities in foreign countries. The lengthy process of seeking these approvals, and the ongoing process of compliance with applicable statutes and regulations, has and will continue to require the expenditure of substantial resources. Any failure by us or our collaborators or licensees to obtain, or any delay in obtaining, regulatory approvals could materially adversely affect the marketing of any products developed by us and our ability to receive product or royalty revenue. We have received Orphan Drug designation for certain therapeutic indications, which we believe might under certain conditions, help to accelerate the process of drug development and commercialization. Alferon N Injection® is only approved for use in intra-lesional treatment of refractory or recurring external genital warts in patients 18 years of age or older. Use of Alferon N Injection® for other applications requires regulatory approval.

We are subject to various federal, state and local laws, regulations and recommendations relating to such matters as safe working conditions, laboratory and manufacturing practices, the experimental use of animals and the use of and disposal of hazardous or potentially hazardous substances, including radioactive compounds and infectious disease agents, used in connection with our research work. Prior to our construction phase, our laboratory and production facility in New Brunswick, New Jersey was approved for the manufacture of Alferon N Injection®. While our facility had been granted approval of its BLA by the FDA for the manufacture of Alferon®, this status will need to be reaffirmed upon the completion of the facility’s enhancements. Upon completion of our enhanced manufacturing process, we believe it will again be able to obtain FDA approval. However, there can be no assurance that this facility, or facilities owned and operated by third parties that are utilized in the manufacture of our products, will obtain and/or continue to maintain FDA approval. For information about the current status of our Ampligen® NDA please see “Our Products; Ampligen®” above.

HUMAN RESOURCES

As of February 1, 2013, we had personnel consisting of 34 full-time employees and 3 part-time employees. Our employees are supported by 30 full-time and 11 part-time consultants, mostly undertaking regulatory, research and/or medical projects. Part-time personnel are paid on a per diem or monthly basis. Consultants are independent contractors that are paid on an hourly basis. 58 of the combined personnel are engaged in our research, development, clinical, and manufacturing effort with 20 performing regulatory, general administration, data processing, including bio-statistics, financial and investor relations functions. We have no union employees.

While we have been successful in attracting skilled and experienced scientific personnel, there can be no assurance that we will be able to attract or retain the necessary qualified employees and/or consultants in the future.

SCIENTIFIC ADVISORY BOARD AND DATA MONITORING COMMITTEE

Although we had a Scientific Advisory Board to conduct periodic meetings as needed, as previously disclosed, no Scientific Advisory Board meetings were held in the last four years. We do meet with experts from time to time in areas of clinical and scientific interest.

In May 2010, we formed a Data Monitoring Committee (“DMC”) that consists of two independent regulatory and medical experts along with a Biostatistics expert. The function of the DMC is to perform independent safety and efficacy analyses on our clinical trials. During 2011 and 2012, the DMC focused its attention on the clinical trial (AMP-600) in which Ampligen® is being nasally administered in conjunction with FluMist® to healthy human volunteers at the University of Alabama at Birmingham under the auspices of Dr. Paul Goepfert. As of December 31, 2012, eight subjects have participated in this study. As required by the study’s protocol, the DMC held two meetings and has reviewed the safety data on these subjects and approved the study to proceed at the next higher dosage level.

We are a specialty pharmaceutical company based in Philadelphia, Pennsylvania and engaged in the clinical development of new drug therapies based on natural immune system enhancing technologies for the treatment of viral and immune based chronic disorders. We were founded in the early 1970s doing contract research for the National Institutes of Health. Since that time, we have established a strong foundation of laboratory, pre-clinical and clinical data with respect to the development of natural interferon and nucleic acids to enhance the natural antiviral defense system of the human body and to aid the development of therapeutic products for the treatment of certain chronic diseases. We have three domestic subsidiaries BioPro Corp., BioAegean Corp., and Core BioTech Corp., all of which are incorporated in Delaware and are dormant. Our foreign subsidiary is Hemispherx Biopharma Europe N.V./S.A. established in Belgium in 1998, which has minimal activity. All significant intercompany balances and transactions have been eliminated in consolidation.

Our current strategic focus is derived from four applications of our two core pharmaceutical technology platforms Ampligen® and Alferon N Injection®. The commercial focus for Ampligen® includes application as a treatment for Chronic Fatigue Syndrome (“CFS”) and as an influenza vaccine enhancer (adjuvant) for both therapeutic and preventative vaccine development. Alferon N Injection® is a Food and Drug Administration (“FDA”) approved product with an indication for refractory or recurring genital warts. Alferon® LDO (Low Dose Oral) is a formulation currently under development targeting influenza.

We own and operate a 43,000 sq. ft. FDA approved facility in New Brunswick, NJ that produces Alferon® and Ampligen®. In December 2011, our Board of Directors (the “Board”) reevaluated its facility enhancement project to focus on converting the facility to provide for a high volume, more cost effective manufacturing process for Alferon N Injection®, Alferon® LDO and Ampligen®. In this regard, the Board increased the funding allocated to this project from $4.4 million to $6.5 million. The project is in an active construction phase with approximately $1,695,000 spent to date and financed through a Margin Account with an effective interest rate of 2.75%. As of December 31, 2011, construction in progress on this project was $1,484,000 as compared to $485,000 at December 31, 2010. While facility enhancements are being undertaken, this project has not impacted our capability to manufacture Ampligen®. The production of new Alferon® inventory product will not commence until the capital improvement phase is completed, which is projected for mid-2012. While the facility had been granted approval of its Biological License Application (“BLA”) by the FDA for Alferon®, this status will need to be reaffirmed upon the completion of the facility’s enhancements. Provided we receive a Release Approval from the FDA as to quality and consistency of our existing inventory and final product, we believe that our current lots of Active Pharmaceutical Ingredient (“API”) will be sufficient to meet the short-term patient demand for Alferon N Injection® until production of an FDA approved product can recommence. We outsource certain components of our research and development, manufacturing, marketing and distribution while maintaining control over the entire process through our quality assurance group and our clinical monitoring group.

Our principal executive office is located at One Penn Center, 1617 JFK Boulevard, Philadelphia, Pennsylvania 19103, and our telephone number is 215-988-0080.

We file our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K pursuant to Section 13(a) or 15(d) of the Exchange Act electronically with the Securities and Exchange Commission, or SEC. The public may read or copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that site is http://www.sec.gov.

You may obtain a free copy of our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and amendments to those reports on the day of filing with the SEC on our website on the World Wide Web at http://www.hemispherx.net under the Investor Relations tab or by contacting the Investor Relations Department by calling (518) 398-6222 or sending an e-mail message to [email protected].

Our primary pharmaceutical product platform consists of our experimental compound, Ampligen®, our FDA approved natural interferon product, Alferon N Injection® and, our experimental liquid natural interferon for oral administration, Alferon® LDO (Low Dose Oral).

Ampligen® is an experimental drug currently undergoing clinical development for the treatment of Myalgic Encephalomyelitis/Chronic Fatigue Syndrome (“ME/CFS”). Over its developmental history, Ampligen® has received various designations, including Orphan Drug Product Designation (FDA), Treatment IND (e.g., treatment investigational new drugs, or “Emergency” or “Compassionate” use authorization) with Cost Recovery Authorization (FDA) and “promising” clinical outcome recognition based on the evaluation of certain summary clinical reports (“AHRQ” or Agency for Healthcare Research and Quality). Ampligen® represents the first drug in the class of large (macromolecular) RNA (nucleic acid) molecules to apply for New Drug Application (“NDA”) review. Based on the results of published, peer reviewed pre-clinical studies and clinical trials, we believe that Ampligen® may have broad-spectrum anti-viral and anti-cancer properties. Over 1,000 patients have participated in the Ampligen® clinical trials representing the administration of more than 90,000 doses of this drug.

Nucleic acid compounds represent a potential new class of pharmaceutical products that are designed to act at the molecular level for treatment of human diseases. There are two forms of nucleic acids, DNA and RNA. DNA is a group of naturally occurring molecules found in chromosomes, the cell’s genetic machinery. RNA is a group of naturally occurring informational molecules which orchestrate a cell’s behavior which, in turn, regulates the action of groups of cells, including the cells which compromise the body’s immune system. RNA directs the production of proteins and regulates certain cell activities including the activation of an otherwise dormant cellular defense against viruses and tumors. Our drug technology utilizes specifically-configured RNA. Our double-stranded RNA drug product, trademarked Ampligen®, is an experimental, unapproved drug, that would be administered intravenously. Ampligen® has been assigned the generic name rintatolimod by the United States Adopted Names Council (USANC) and has the chemical designation poly(I) poly(C12,U).

Clinical trials of Ampligen® already conducted by us include studies of the potential treatment of ME/CFS, Hepatitis B, HIV and cancer patients with renal cell carcinoma and malignant melanoma. All of these potential uses will require additional clinical trials to generate the safety and effectiveness data necessary to support regulatory approval.

In July 2008, the FDA accepted for review our NDA for Ampligen® to treat CFS, originally submitted in October 2007. We are seeking marketing approval for the first-ever treatment for CFS. At present, only supportive, symptom-based care is available for CFS patients. The NDA for Ampligen® is also the first ever accepted for review by the FDA for systemic use of a toll-like receptor therapy to treat any condition. In November 2009, we received a Complete Response Letter (“CRL”) from the FDA which described specific additional recommendations related to the Ampligen® NDA. In accordance with its 2008 Complete Response procedure, the FDA reviewers determined that they could not approve the application in its present form and provided specific recommendations to address the outstanding issues. We intend to take the appropriate steps to seek approval and commercialization of Ampligen®. Most notably, the FDA stated that the two primary clinical studies submitted with the NDA did not provide credible evidence of efficacy of Ampligen® and recommended at least one additional clinical study which shows convincing effect and confirms safety in the target population. The FDA indicated that the additional study should be of sufficient size and sufficient duration (six months) and include appropriate monitoring to rule out the generation of autoimmune disease. In addition, patients in the study should be on more than one dose regimen, including at least 300 patients on dose regimens intended for marketing. We are examining those two major studies for further insight into efficacy and safety. In the Non-Clinical area, the FDA recommended among other things that we complete rodent carcinogenicity studies in two species. While as part of the NDA submission we had requested that these studies be waived, this waiver had not been granted by the FDA in their CRL.

Under the Product Quality section of the CRL, the FDA recommended that we submit additional data and complete various analytical procedures. The collection of these data and the completion of these procedures is already part of our ongoing Quality Control, Quality Assurance program for Ampligen® manufacturing under current Good Manufacturing Practice (“cGMP”) guidelines and our manufacturing enhancement program. On January 14, 2010, we submitted reports of new preclinical data regarding Ampligen® to the FDA that we believed to be sufficient to address certain preclinical issues in the FDA’s CRL. We do not anticipate receiving feedback until we submit our complete response to the CRL. The preclinical studies discussed in these reports were the combined work-product of the staffs at Hemispherx and Lovelace Respiratory Research Institute in Albuquerque, New Mexico, and included pharmacokinetic analyses in two lower animal species (primate and rodent). The new preclinical data showed no evidence of antibodies against Ampligen® in primates nor evidence of an increase in certain undesirable cytokines (specific modulators of the immune system) at clinically used doses of Ampligen® for CFS. Although most other experimental immunomodulators have been associated with one or more features of aberrant immune activity, including toll-like receptor activators (of which Ampligen® is one), this was specifically not seen with Ampligen® in primates.

The FDA also commented on Ampligen® manufacturing noting the need to resolve outstanding inspection issues at the facilities producing Ampligen®. These include our New Brunswick facility and one of our third-party subcontractor manufacturing facilities, Jubilant HollisterStier LLC of Spokane, Washington (“Hollister-Stier”). We believe that these issues have been resolved.

It would take approximately 18 months to three years to complete new well-controlled Ampligen® clinical studies for resubmission to the FDA under the industry norm of three to six months to initiate the study, one to two years to accrue and test patients, three to six months to close-out the study and file the necessary documents with the FDA. The actual duration to complete the clinical study may be different based on the final design of an accepted FDA clinical Phase III study, availability of suitable participants, clinical sites, when the study commences and any other factors that could impact the implementation of the study, analysis of results, or requirements of the FDA and other governmental organizations.

In 2009, we had estimated that the approximate cost to undertake the Ampligen® Phase III clinical study could range from $12,000 to $18,500 per each of the 600 participating patients, for an estimated range of total incremental costs of $7,200,000 to $11,100,000. Our estimate is based on the belief that our experience from the prior Phase III study and established teams (e.g., Medical, Data Processing, Clinical Monitors, Statisticians, Medical Reporting) along with existing inventory and investigational protocol, could produce financial efficiencies. We believe that these efficiencies could permit our costs of undertaking a Phase III CFS study to be discounted as compared to a potential $28,500 per patient cost approximated as an industry average for running a Phase III study from scratch, as estimated and adjusted for inflation, utilizing data from the business intelligence firm Cutting Edge Information. The actual costs of a Phase III investigation study for CFS may differ based on final design of an accepted FDA Phase III clinical study, prevailing costs to undertake clinical studies, qualification and access to CFS patients, insurance and government requirements along with other potential costs or reimbursements unknown at this time. Aside from the foregoing, we cannot estimate what additional studies and/or additional testing or information that the FDA may require. Accordingly, as of this time, we are unable to estimate the nature, timing, costs and necessary efforts to obtain FDA clearance, the anticipated completion dates or whether we will obtain FDA clearance.

In December 2010, the FDA granted us a one year extension to file a response to the CRL based on the submission of new data concerning the potential viral etiology of CFS. In January 2012, the FDA granted an additional extension to file a response to the CRL. Unless communicated otherwise by the FDA, our extension will remain open while we continue to amend the NDA. We are currently conducting an open-label treatment protocol in the U.S. and evaluating new diagnostic modalities to provide additional insights into the CFS disorder. It is our plan that the new analyses and other insights will supplement the original study findings. We believe that continued efforts to understand existing data and to advance the development of new data and information, will ultimately support a re-filing of the NDA. Thus, the Company is pursuing the filing of an amended NDA in response to FDA comments in the CRL.

In our original request to the FDA for an extension of time to respond to the CRL, we submitted a protocol to prospectively analyze samples from our Phase III study, AMP-516, for markers of the retrovirus commonly called XMRV (xenotropic murine leukemia related virus). During the course of this past year, the results of a number of studies by experts in this area have been unable to duplicate the original findings published in Sciencexpress on XMRV. Our current understanding of the science is that there may be the detection of some type of gamma retrovirus, however, some of the labs found a contamination that may have marred their contribution, therefore it is a route we are no longer pursuing. As with many in the CFS community, it was a disappointing turn of events, however, it does not change the positive effects of Ampligen® in many CFS patients.

We have dedicated our efforts to pursuing a CFS testing program in association with Chronix Biomedical (“Chronix”). On March 2, 2011, we jointly filed a provisional United States patent application on a potential blood test for CFS with Chronix reported at the IACFS/ME Biennial Conference held on September 22-25, 2011, in Ottawa, Ontario, Canada. This experimental approach utilized in the Chronix test analyzes fragments of DNA released into the bloodstream during the process of apoptosis or programmed cell death to measure alterations in specific regions of the chromosome, which can be detected as distinctive "signatures" in cell-free blood-borne DNA as a function of disease process. Hemispherx and Chronix continue to collaborate in the utilization of this process towards the development of a diagnostic tool for CFS and to extend the technology to more powerful Massively Parallel Sequencing Platforms in order to increase the statistical power per sample analyzed and to explore whether the technology can be used to identify how different persons with CFS will respond to Ampligen® as compared to placebo. While we believe that finding an accurate diagnostic for CFS is useful, it is not essential for an FDA approval of any CFS treatment including Ampligen®.

In May 1997, the FDA approved an open-label treatment protocol, (“AMP 511”), allowing patient access to Ampligen® for treatment in an open-label safety study under which severely debilitated CFS patients have the opportunity to be on Ampligen® to treat this very serious and chronic condition. The data collected from the AMP 511 protocol through a consortium group with active clinical sites in New York City, NY, Charlotte, NC, Miami, FL, Incline Village, Nevada, and Salt Lake City, UT, provides safety data on the use of Ampligen® in patients to identify adverse events that occur in a patient to determine if it is related to the drug being tested or other health problems identified in trial participants. We are currently enlisting new sites and continue to enroll patients for this study. As of December 31, 2011, we had thirty patients participating in this open label treatment protocol with twenty-six taking treatment and four on drug holiday. We are establishing an enlarged data base on clinical safety profiles, including the absence of data of any evidence of autoimmune disease.

Alferon N Injection® is the registered trademark for our injectable formulation of natural alpha interferon, which is approved by the FDA in 1989 for the treatment of certain categories of genital warts. Alferon® is the only natural-source, multi-species alpha interferon currently approved for sale in the U.S. for the intralesional (within lesions) treatment of refractory (resistant to other treatment) or recurring external genital warts in patients 18 years of age or older. Certain types of human papilloma viruses (“HPV”) cause genital warts, a sexually transmitted disease (“STD”). The CDC estimates that approximately twenty million Americans are currently infected with HPV with another six million becoming newly infected each year. The CDC states that HPV is so common, that at least 50% of sexually active men and women get it at some point in their lives. According to a World Health Organization report on HPV, “Genital warts are very common and are highly infectious, and between 90% and 100% are caused by HPV genotypes 6 and 11. Although they do not usually result in death, genital warts cause significant morbidity and entail substantial health care costs. Recurrence is common.”

Interferons are a group of proteins produced and secreted by cells to combat diseases. Researchers have identified four major classes of human interferon: alpha, beta, gamma and omega. Alferon N Injection® contains a multi-species form of alpha interferon. The world-wide market for injectable alpha interferon-based products has experienced rapid growth and various alpha interferon injectable products are approved for many major medical uses worldwide. Alpha interferons are manufactured commercially in three ways: by genetic engineering, by cell culture, and from human white blood cells. All three of these types of alpha interferon are or were approved for commercial sale in the U.S. Our natural alpha interferon is produced from human white blood cells.

The potential advantages of natural alpha interferon over recombinant (synthetic) interferon produced and marketed by other pharmaceutical firms may be based upon their respective molecular compositions. Natural alpha interferon is composed of a family of proteins containing many molecular species of interferon. In contrast, commercial recombinant alpha interferon products each contain only a single species. Researchers have reported that the various species of interferons may have differing antiviral activity depending upon the type of virus. Natural alpha interferon presents a broad complement of species, which we believe may account for its higher activity in laboratory studies. Natural alpha interferon is also glycosylated (partially covered with sugar molecules). Such glycosylation is not present on the currently U.S. marketed recombinant alpha interferons. We believe that the absence of glycosylation may be, in part, responsible for the production of interferon-neutralizing antibodies seen in patients treated with recombinant alpha interferon. Although cell culture-derived interferon is also composed of multiple glycosylated alpha interferon species, the types and relative quantity of these species are different from our natural alpha interferon.

Alferon N Injection® [Interferon alfa-n3 (human leukocyte derived)] is a highly purified, natural-source, glycosylated, multi-species alpha interferon product. There are essentially no antibodies observed against natural interferon to date and the product has a relatively low side-effect profile.

The recombinant DNA derived alpha interferon formulations have been reported to have decreased effectiveness after one year, probably due to antibody formation and other severe toxicities. These detrimental effects have not been reported with the use of Alferon N Injection®.

In January 2012, the Administracion Nacional de Medicamentos, Alimentos y Tecnologia Medica (“ANMAT”), the agency responsible for the national regulation of drugs, foods and medical technology in Argentina approved the sale and distribution of Alferon N Injection® (under the brand name “Naturaferon”) in Argentina. In June 2010, Hemispherx agreed to provide GP Pharm an option to market Alferon N Injection®, its FDA-approved natural interferon, in Argentina and other Latin America countries. The receipt of the ANMAT approval is the first step of a regulatory process towards the commercial sales of Naturaferon.

Commercial sales of Alferon N Injection® were halted in March 2008 when our finished goods inventory expired. The production of Alferon N Injection® from the Work-In-Process Inventory was restarted in May 2010, continued into January 2011 with its conversion into Active Pharmaceutical Ingredient (“API”) and is completed for the related Final Lot Release Test. To formulate, fill, finish and package (“fill and finish”) Alferon N Injection® Drug Product, we require a FDA approved third party Contract Manufacturing Organization (“CMO”). The Work-In-Process Inventory has expiration dates of September 30, 2012 through March 10, 2013. Upon the expected mid-2012 completion of the fill and finish process, it is projected that the Alferon N Injection® will then have an expected shelf life of 42 months. In January 2012, we agreed to a Technology, Transfer, Validation and Commercial Supply Agreement with Althea Technologies, Inc. (“Althea”) regarding the fill and finish process for Alferon N Injection®. Provided we receive a Release Approval from the FDA as to quality and consistency of our current inventory and final product as well as Althea is successful in the fill and finish process, we estimate that commercial sales of Alferon N Injection® could commence in the later part of 2012. [Please see “MANUFACTURING” below for more information].

In September 2011, we entered into an agreement with Armada Health Care, LLC (“Armada”) for the sales, marketing and education of Alferon N Injection®. Under this agreement, we will manufacture and supply Alferon N Injection® to Bio Ridge Pharma, LLC (”Bio Ridge”), an Armada authorized distributor that distributes specialty pharmaceuticals and which will warehouse and ship Alferon N Injection® on an exclusive basis for U.S. sales. Additionally, Armada will provide start up and ongoing sales and marketing support.

The production of new Alferon® inventory product will not commence until the capital improvement phase is completed, at our New Brunsick, NJ facility which is projected for mid-2012. While the facility had been granted approval of its BLA by the FDA for Alferon®, this status will need to be reaffirmed upon the completion of the facility’s enhancements. Provided we receive a Release Approval from the FDA as to quality and consistency of our existing inventory and final product, we believe that our current lots of API will be sufficient to meet the short-term patient demand for Alferon N Injection® until production of an FDA approved product can recommence.

Alferon® LDO [Low Dose Oral Interferon Alfa-n3 (Human Leukocyte Derived)] is an experimental low-dose, oral liquid formulation of Natural Alpha Interferon and like Alferon N Injection® should not cause antibody formation, which is a problem with recombinant interferon. It is an experimental immunotherapeutic believed to work by stimulating an immune cascade response in the cells of the mouth and throat, enabling it to bolster systemic immune response through the entire body by absorption through the oral mucosa. Oral interferon could be economically feasible for patients and logistically manageable in development programs in third-world countries primarily affected by influenza and other emerging viruses. Oral administration of Alferon® LDO, with its anticipated affordability, low toxicity, no production of antibodies, and broad range of potential bioactivity, could be a breakthrough treatment or prevention for viral diseases.

In October 2009, we originally submitted a protocol to the FDA proposing to conduct a Phase II, double-blind, adaptive-design, randomized, placebo-controlled, dose-ranging study of Alferon® LDO for the prophylaxis and treatment of seasonal and pandemic influenza of more than 200 subjects. In December 2010, the FDA authorized this Phase II. Our Phase II study has been delayed as we are undertaking a confirmatory study using gene expression measures to identify the systemic gene activation effects in peripheral blood leukocytes following treatment with Alferon® LDO. The outcome of this confirmatory study will allow us to evaluate better the potential effectiveness of this product and to proceed with this study of seasonal and pandemic influenza.

The following table sets forth the costs related to our major products for each of the prior three years. Our aggregate expenses from the time that we first started developing nucleic acid pharmaceutical technology in the mid 1980’s through March 2003 were substantially related to the development of Ampligen®, and from that date through the current period were substantially related to Ampligen® and Alferon®.

(dollars in thousands) Year Ended December 31, 2011 Costs and Expenses Ampligen® NDA Alferon N Injection® Alferon® LDO Other Total Production/cost of goods sold $ 0 $ 1,043 $ 0 $ 0 $ 1,043 Research and development 2,310 0 4,080 332 6,722 General and administrative 1,990 899 3,516 286 6,691 Total $ 4,300 $ 1,942 $ 7,596 $ 618 $ 14,456

(dollars in thousands) Year Ended December 31, 2010 Costs and Expenses Ampligen® NDA Alferon N Injection® Alferon® LDO Other Total Production/cost of goods sold $ 0 $ 1,341 $ 0 $ 0 $ 1,341 Research and development 2,787 0 4,658 168 7,613 General and administrative 2,356 1,133 3,937 142 7,568 Total $ 5,143 $ 2,474 $ 8,595 $ 310 $ 16,522

(dollars in thousands) Year Ended December 31, 2009 Costs and Expenses Ampligen® NDA Alferon N Injection® Alferon® LDO Other Total Production/cost of goods sold $ 0 $ 584 $ 0 $ 0 $ 584 Research and development 5,026 0 1,784 185 6,995 General and administrative 3,844 447 1,364 141 5,796 Total $ 8,870 $ 1,031 $ 3,148 $ 326 $ 13,375

On March 1, 2012, we had 16 patents worldwide with 85 additional pending patent applications comprising our intellectual property. Please see “Note 7: Patents, Trademark Rights and Other Intangibles (FASB ASC 350 General Intangibles Other than Goodwill)” under Notes To Consolidated Financial Statements for more information on these patents.

We continually review our patents’ rights to determine whether they have continuing value. Such review includes an analysis of the patent’s ultimate revenue and profitability potential. In addition, Management’s review addresses whether each patent continues to fit into our strategic business plans for Ampligen®, Alferon N Injection® and Alferon® LDO. The U.S. patents relating to our Alferon® products expire April 2, 2013 (5,503,828) October 14, 2014 (5,676,942) and December 22, 2017 (5,989,441). In December 2011, the Company was granted two new United States Patents for the use of Alferon® LDO for the treatment in a number of different human diseases. We believe that oral administration of Alferon® LDO, with its anticipated affordability, low toxicity, expected non-production of antibodies, and broad range of potential bioactivity, could be a breakthrough treatment for prevention for viral diseases including influenza. New therapeutic use patent applications are pending.

With respect to Ampligen®, the main U.S. ME/CFS treatment patent (#6130206) expires October 10, 2017. Our main patents covering HIV treatment (#4820696, #5063209, and #5091374) expired on April 11, 2006, November 5, 2008, and February 25, 2009, respectively; Hepatitis treatment coverage is conveyed by U.S. patent #5593973 which expires on January 14, 2014. Our U.S. Ampligen® Trademark (#73/617,687) has been renewed through December 6, 2018. New therapeutic use patent applications are pending including new patent applications for composition of alternative matter.

In addition to our patent rights relating to Ampligen®, the FDA has granted “orphan drug status” to the drug for ME/CFS, HIV/AIDS, and renal cell carcinoma and malignant melanoma. Orphan drug status grants us protection against the potential approval of other sponsors’ versions of the drug for these uses for a period of seven years following FDA approval of Ampligen® for each of these designated uses. The first NDA approval for Ampligen® as a new chemical entity will also qualify for four or five years of non-patent exclusivity during which abbreviated new drug applications seeking approval to market generic versions of the drug cannot be submitted to the FDA. (See “GOVERNMENT REGULATION” below.)

In July 2011, a new United States Patent was granted for the use of Ampligen® as a vaccine adjuvant for use with seasonal influenza vaccine to induce an enhanced immune response against H5N1 avian influenza. The patent describes a method using intranasal administration of Ampligen® along with a seasonal influenza vaccine to enhance an immune response against a H5N1 avian influenza infection compared to the administration of seasonal influenza vaccine alone.

Our general focus during the past three fiscal years has been on developing drugs for use in treating viral and immune based chronic disorders and diseases such as ME/CFS, HIV, HPV and West Nile Virus, Cancer and Influenza. Our current R&D projects are targeting treatment therapies for ME/CFS, various cancers (as adjunctive therapy) and other viral diseases such as prevention and treatment of seasonal and pandemic H1N1 or influenza.

The following table summarizes our research and development costs for the years 2011, 2010 and 2009 by project:

2011 2010 2009 Ampligen® New Drug Application for the treatment of Chronic Fatigue Syndrome $ 2,310 $ 2,787 $ 5,026 Alferon® LDO for influenza 4,080 4,658 1,784 Alferon N Injection® for influenza 0 168 0 Other projects 332 0 185 Total research and development $ 6,722 $ 7,613 $ 6,995

Due to the inherent uncertainty involved in the design and conduct of clinical trials and the applicable regulatory requirements, including the factors discussed above in “OUR PRODUCTS”, we cannot predict what additional studies and/or additional testing or information may be required by the FDA. Accordingly, we are unable to estimate the nature, timing, costs and necessary efforts to complete these projects nor the anticipated completion dates. In addition, we have no basis for estimating when material net cash inflows may commence. We have yet to generate significant revenues from the sale of these developmental products. As of December 31, 2011, we had approximately $34.4 million in Cash, Cash Equivalents and Marketable Securities. Based upon our current anticipated financial needs, absent unexpected circumstances or new opportunities, we anticipate, but cannot assure, that we will be able to fund operations for at least the next three years. However, if we are unable to timely commercialize and sell Ampligen® for the treatment of CFS or Alferon® LDO and/or recommence material sales of Alferon N Injection®, our operations, financial position and liquidity may be adversely affected (see ITEM 1A. Risk Factors; “We may require additional financing which may not be available” below).

Chronic Fatigue Syndrome (“CFS”), also known as Chronic Immune Dysfunction Syndrome (“CFIDS”) and, Myalgic Encephalomyelitis (“ME”) is a serious and debilitating chronic illness and a major public health problem. ME/CFS is recognized by both the government and private sector as a major health problem, including the National Institutes of Health, FDA and the U.S. Centers for Disease Control and Prevention (“CDC”). The CDC states on its website at http://www.cdc.gov/cfs/index.html that “Chronic fatigue syndrome, or CFS, is a devastating and complex disorder characterized by overwhelming fatigue that is not improved by bed rest and that may be worsened by physical or mental activity. People with CFS most often function at a significantly lower level of activity than they were capable of before the onset of illness.”

Many severe ME/CFS patients become completely disabled or totally bedridden and are afflicted with severe pain and mental confusion even at rest. ME/CFS is characterized by incapacitating fatigue with profound exhaustion and extremely poor stamina, sleep difficulties and problems with concentration and short-term memory. It is also accompanied by flu-like symptoms, pain in the joints and muscles, tender lymph nodes, sore throat and new headaches. A distinctive characteristic of the illness is a worsening of symptoms following physical or mental exertion which do not subside with rest.

For their Case Definition, the CDC states that the cause or causes of CFS have not been identified and no specific diagnostic tests are available. Therefore, in order to be diagnosed with chronic fatigue syndrome, a patient must satisfy two criteria:

1. Have severe chronic fatigue for at least six months or longer that is not relieved by rest and not due to medical or psychiatric conditions associated with fatigue as excluded by clinical diagnosis; and

2. Concurrently have four or more of the following symptoms:

· self-reported impairment in short-term memory or concentration severe enough to cause substantial reduction in previous levels of occupational, educational, social, or personal activities;

· sore throat that is frequent or recurring;

· tender cervical or axillary lymph nodes;

· muscle pain;

· multi-joint pain without swelling or redness;

· headaches of a new type, pattern, or severity;

· unrefreshing sleep; and

· post-exertional malaise (extreme, prolonged exhaustion and sickness following physical or mental activity) lasting more than 24 hours.

Because no cause for ME/CFS has been identified, current treatment programs are directed at relieving symptoms, with the goal of the patient regaining some level of function and well-being. Diagnosis of ME/CFS is a time-consuming and challenging process for which there is no FDA approved diagnostic test or biomarker to clearly identify the disorder. Diagnosis is primarily arrived at by taking a patient's medical history, completing a physical exam and lab tests to rule out other conditions excluding other illnesses with similar symptoms and comparing a patient's symptoms with the case definition. Overlapping symptoms can occur with several diseases, such as fibromyalgia, Gulf War Illnesses, chronic Lyme disease and multiple chemical sensitivities. Many diseases have similar symptoms including Lupus and Lyme disease which may closely mimic ME/CFS that they need to be considered when making a diagnosis to rule them out. If there are no abnormal test results or other physical ailments identified, clinicians can use standardized tests to quantify the level of fatigue and evaluate symptoms. Diagnosis can be complicated by the fact that the symptoms and severity of CFS vary considerably from patient to patient. New diagnostic approaches to possibly accelerate the identification of ME/CFS are being developed.

Dr. Julie Gerberding, former director of the CDC and current president at Merck Vaccines, had stated that "The CDC considers Chronic Fatigue Syndrome to be a significant public health concern and we are committed to research that will lead to earlier diagnosis and better treatment of the illness." A variety of studies by the CDC and others have shown that between 1 and 4 million Americans suffer from CFS. While those with the disease are seriously impaired and at least a quarter are unemployed or on disability because of CFS, only about half have consulted a physician for their illness. Equally important, about 40% of people in the general population who report symptoms of ME/CFS have a serious, treatable, previously unrecognized medical or psychiatric condition (such as diabetes, thyroid disease, substance abuse). ME/CFS is a serious illness and poses a dilemma for patients, their families and health care providers.

While ME/CFS strikes people of all age, racial, ethnic, and socioeconomic groups, it is most prevalent amongst women. Research has shown that ME/CFS is about three times as common in women as men, a rate similar to that of many autoimmune diseases, such as multiple sclerosis and lupus. To put this into perspective, ME/CFS is over four times more common than HIV infection in women, and the rate of ME/CFS in women is considerably higher than a woman's lifetime risk of getting lung cancer as published by the CFIDS Association of America.

We are engaged in ongoing, experimental studies assessing the efficacy of Ampligen®, Alferon N Injection® and Alferon® LDO against influenza viruses.

A Phase II Trial for intramuscular administration of Ampligen® for seasonal influenza was conducted in Australia through St. Vincent’s Hospital with the final patient completing the study in September 2008. This open-label study (Phase IIa Trial) utilized Ampligen® as a potential immune-enhancer in Australia with thirty-eight subjects age 60 or greater with the standard trivalent seasonal influenza vaccines. We continue in good faith to work towards obtaining the clinical data and retrieve the study samples from St. Vincent’s recently restructured Clinical Trials Centre and related Clinical Network Services. As a prerequisite of payment, we had requested the confirmation that samples were properly maintained utilizing cGCP and Good Laboratory Practice (“cGLP”) for the controlled environment as per our agreement. On February 5, 2010, our Counsel advised representatives of St. Vincent’s business units in correspondence that, due to the failure to meet the condition precedent to payment, we had no choice but to declare them in breach of the study agreement and that it was our intention to terminate the relationship between the parties. Since February 18, 2010, various offers and counteroffers have been made between us and Clinical Trials Centre and/or Clinical Network Services, to permit us to retrieve the data by making certain payments to each organization or a third party escrow account with funds equal to the disputed amount placed in escrow. Upon agreement of the payment terms, we would then be granted access to review some or all of the data. Following our satisfaction that the clinical study was conducted utilizing cGCP along with samples properly maintained utilizing cGLP, the escrow funds could be released to Clinical Trials Centre and Clinical Network Services so that pathology samples could be collected by us. The proposals for data collection and the dollar value of the disputed fees continue to be reviewed by the respective parties.

Ampligen® as a mucosal adjuvant with vaccine had been studied at Japan’s National Institute of Infectious Disease (“NIID”) and at Biken (the for profit operational arm of the Foundation for Microbial Diseases of Osaka University). Investigators from Japan’s NIID had conducted studies in animals that suggested that Ampligen® could stimulate a sufficiently broad immune response to provide cross-protection against a range of virus genetic types, including H5N1 and derivative clades. Japan’s Council for Science & Technology Policy (“CSTP”), a cabinet level position, awarded funds from Japan’s CSTP to advance research with influenza vaccines utilizing Ampligen®.

A Material Evaluation Agreement (“MEA”) regarding Ampligen® with Biken that was initiated on August 19, 2009, effectively expired on September 1, 2010. Pursuant to the MEA, we supplied Biken with proprietary information related to Ampligen® and Biken purchased Ampligen® from us for use solely in connection with evaluating Ampligen® as a candidate for adjuvant incorporated into potential influenza virus vaccines in the form of intranasal mucosal administration, including conducting further animal studies of intranasal prototype vaccines containing antigens from various influenza sub-types, including H5N1, H1N1, H3N2 and B.

In April 2011, we received correspondence from Biken confirming that the MEA had expired without completion of the Evaluation Program along with their intention not to extend or replace the expired MEA with another agreement. Biken noted in that correspondence that it previously had concluded that “it was possible that Ampligen® would not satisfy the requirements for safety as an adjuvant for influenza vaccines” in Japan and that, after rechecking Hemispherx’ basis for disagreement with that finding, it concluded that it could not reconcile the differences between Hemispherx’ and its interpretation of experimental results regarding the evaluation of Ampligen® as a candidate adjuvant in influenza vaccines. Biken’s primary concern was related to a single intravenous high dose study in rats that resulted in an apparent toxicity when doses of Ampligen® were combined with a whole viron influenza vaccine and Carboxyl Vinyl Polymer (“CVP”) or CVP alone. Additionally in both cases of Ampligen® being combined with other product(s), the dosage utilized was several hundred times higher than the intended dosage for humans by body weight and delivered intravenously, rather than the prescribed mucosal (nasal) method. More specifically, we communicated the following points to refute Biken’s interpretation of Ampligen® safety data:

· The safety of Ampligen® has been demonstrated by the large body of safety data in humans and in relevant pre-clinical models that were generated to support Hemispherx’ NDA for CFS, which was filed with the FDA;

· The single unfavorable rat toxicity study contained in the Biken report must be considered in the context of the rest of safety and efficacy data generated with Ampligen® and we believe that evidence indicates that the results were generated due to flaws in material handling and compounding;

· Hemispherx demonstrated by photographs and other evidences that the toxicity observed at Biken was due to aggregation caused by the CVP additive deployed by Biken to increase attachment of the vaccine/Ampligen® mixture to the nasal mucosa. Numerous experiments performed by the NIID indicated that in both rodents and primates that the additive was unnecessary to achieve the desired antiviral/vaccine enhancement effects of Ampligen®; and

· There are large anomalies between the efficacy data presented in the internal Biken report as compared to the results obtained by Dr. Hasegawa, and thereafter published in peer reviewed articles.

As a result of Biken’s intension not to extend or replace the MEA or complete the related Evaluation Program, we have concluded that our association with Biken has come to a conclusion with no expected future association.

Dr. Hideki Hasegawa, M.D., Ph.D., Chief of Laboratory of Infectious Disease Pathology for the Department of Pathology for the NIID, undertook studies in 2009 and 2010 that focused on mucosal immunity and the inherent advantages of a vigorous immune response to respiratory pathogens. Dr. Hasegawa has published data that the formulation of pandemic vaccine mixed with Ampligen® increases immuno-genicity and may demonstrate cross protection against mutated strains. Dr. Hasegawa has expressed a desire to continue preclinical development of this concept, and as such, he continues to organize and participate in meetings with other qualified corporate vaccine partners in Japan who have intranasal vaccines under development along with necessary facilities to test, develop and commercialize the vaccine enhancement utilizing Ampligen® in an attempt to achieve cross-protection against pandemic strains in a commercial environment.

In July 2011, we received FDA authorization to proceed with the initiation of a new clinical trial of intranasal Ampligen® to be used in conjunction with commercially approved seasonal influenza vaccine. This study is similar to the initial studies of influenza application conducted at Japan’s NIID noted above. The primary objective of this study is to evaluate the safety of three cycles of intranasal Ampligen® administered three days following each intranasal dose of seasonal influenza vaccine. Secondary objectives of this study include evaluation of various immune responses to the trivalent seasonal influenza vaccine administered intranasally with and without Ampligen®. We have selected a clinical site that has the resources to support the implementation of this study and are proceeding with obtaining the documentation necessary to be able to initiate the clinical trial.

In April 2010, we began the process to undertake a clinical study with Max Neeman International, a leading and large clinical research organization in India. This collaborative clinical research effort is intended to utilize Alferon N Injection® for treatment of seriously ill patients hospitalized with either seasonal influenza or pandemic influenza. The Indian site selection process was initiated and we obtained approval to begin the study from the Indian Drugs Controller General on July 13, 2010. We continue to enroll subjects with expectation of greater patient participation in the upcoming flu season. As of December 31, 2011, we have eight operational Clinical Investigative Sites, with the intention of adding additional sites. Twenty-five patients have completed the study. Our study has progressed at a rate slower than originally projected due to difficulties encountered in the process of screening for subjects with influenza, rather than other illnesses with symptoms similar to influenza, along with India currently experiencing an unusually mild flu season. In an attempt to expedite the process to qualify study subjects, we added a second “point of care” screening test which has been implemented at the sites as we attempt to qualify subjects for the upcoming flu season. It is our objective to qualify and enroll sixty patients for the study.

In June 2011, we entered into a Material Transfer and Research Agreement with the University of Pennsylvania’s School of Medicine to provide Ampligen® for testing as a vaccine adjuvant in a human clinical study in ovarian cancer. This study is a Phase I/II randomized clinical trial for subjects with recurring ovarian, fallopian tube or primary peritoneal cancer to determine the feasibility and safety as well as immunogenicity of a vaccine comprised of autologous oxidized tumor cell lysate (“OC-L”) administered by intradermal/subcutaneous injection in combination with intravenous Ampligen®. The OC-L vaccine is an experimental cancer immunotherapy under development by the University of Pennsylvania. This study represents the first use of Ampligen® as a cancer vaccine adjuvant in a randomized clinical study with and without Ampligen®. As of December 31, 2011, three patients have participated in this study.

In August 2011, a study utilizing Ampligen® was initiated by investigators from the Tumor Vaccine Group (“TVG”) at the University of Washington in Seattle, WA. As of December 31, 2011, twenty-four patients have enrolled in this eighty-eight patient Phase I-II Study of HER2 Vaccination with Ampligen® as an adjuvant in optimally treated Breast Cancer patients. The goal of this study is to see how well the combination works in treating patients with Stage II-IV human epidermal growth factor receptor 2 (“HER2”)-positive breast cancer. Vaccines made from synthetic HER2/neu peptides may help the body build an effective immune response to kill tumor cells that express HER-2/neu. The TVG has developed vaccines against several cancer proteins, and in this study, they are researching a new approach in an attempt to make the immune response to the vaccine even better. Compounds that specifically stimulate TLR receptors are promising immune stimulators, and Ampligen® has the potential to provide a profile of immune stimulation that could be clinically beneficial. As a result of medical staff limitations at the site, this study is not currently enrolling additional patients.

MANUFACTURING

We own and operate a 43,000 sq. ft. FDA approved facility in New Brunswick, NJ that produces Alferon® and Ampligen®. In December 2011, our Board of Directors (the “Board”) reevaluated its facility enhancement project to focus on converting the facility to provide for a high volume, more cost effective manufacturing process for Alferon N Injection®, Alferon® LDO and Ampligen®. In this regard, the Board increased the funding allocated to this project from $4.4 million to $6.5 million. The project is in an active construction phase with approximately $1,695,000 spent to date and financed through a Margin Account with an effective interest rate of 2.75%. As of December 31, 2011, construction in progress on this project was $1,484,000 as compared to $485,000 at December 31, 2010. As expected in any construction project, we had experienced some delay due to permit issues, demolition concerns and design revisions. Accordingly, we had used this time to pursue cost savings where possible, including locating and acquiring equipment from major U.S. pharmaceutical manufacturers that have recently curtailed or eliminated certain manufacturing activities or plants. As a result, we have estimated a cost savings of approximately $827,000 to date for the project as compared to acquiring the equipment directly from the original manufacturer. While facility enhancements are being undertaken, this project has not impacted our capability to manufacture Ampligen®.

The production of new Alferon® inventory product will not commence until the capital improvement phase is completed, which is projected for mid-2012. While the facility had been granted approval of its BLA by the FDA for Alferon®, this status will need to be reaffirmed upon the completion of the facility’s enhancements. Provided we receive a Release Approval from the FDA as to quality and consistency of our existing inventory and final product, we believe that our current lots of Active Pharmaceutical Ingredient (“API”) will be sufficient to meet the short-term patient demand for Alferon N Injection® until production of an FDA approved product can recommence.

We outsource certain components of our research and development, manufacturing, marketing and distribution while maintaining control over the entire process through our quality assurance group and our clinical monitoring group.

In September 2011 and similar to our prior agreements, we executed an amendment to the Supply Agreement that will extend through March 11, 2014 with Jubilant Hollister-Stier Laboratories LLC of Spokane, Washington (“Hollister-Stier”). Pursuant to this agreement, Hollister-Stier will formulate, fill, finish and package (“fill and finish”) Ampligen® from the key raw materials that we would supply. Hollister-Stier would have the right of first refusal to manufacture certain Ampligen® related products.

Commercial sales of Alferon N Injection® were halted in March 2008 when our finished goods inventory expired. The production of Alferon N Injection® from the Work-In-Process Inventory was restarted in May 2010, continued into January 2011 with its conversion into API and is completed for the related Final Lot Release Test. We have manufactured purified drug concentrate utilized in the formulation of Alferon N Injection® in our New Brunswick, New Jersey facility. To formulate, fill, finish and package (“fill and finish”) Alferon N Injection® API that we have already produced, we require an FDA approved third-party CMO. In June 2011, our designated CMO reported to us that they had received an FDA 483 form that identified production issues that needed to be addressed prior to resumption of production. As a result, we evaluated alternative CMOs to undertake the fill and finish process. On January 26, 2012, we agreed to a Technology, Transfer, Validation and Commercial Supply Agreement with Althea regarding the fill and finish process for Alferon N Injection®. Althea shall commence production of Alferon N Injection® and Hemispherx shall provide a twelve-month forecast of the quantities of the product in each month beginning with the date scheduled for commencement of Production. Althea shall ship all Alferon N Injection® finished product to Hemispherx or designated consignee (i.e., Bio Ridge Pharma, LLC). As of March 1, 2012, we are diligently working with Althea in the Technology Transfer phase of the process that includes evaluation of manufacturing and technology transfer feasibility, equipment and/or equipment modification requirements, engineering runs, process definition along with development and approval of the Master Batch Record. Provided we receive a Release Approval from the FDA as to quality and consistency of our current inventory and final product, as well as Althea is successful in the fill and finish process, we estimate that commercial sales of Alferon N Injection® could commence in the later part of 2012.

Our marketing strategy for Ampligen® reflects the differing health care systems around the world along with the different marketing and distribution systems that are used to supply pharmaceutical products to those systems. In the U.S., we expect that, subject to receipt of regulatory approval, Ampligen® may be utilized in four medical arenas: physicians’ offices; clinics; hospitals; and the home treatment setting. We remain in the process of developing pre-launch and launch driven marketing plans focusing on audience development, medical support and payor reimbursement initiatives which will facilitate product acceptance and utilization at the time of regulatory approval. Similarly, we continue to develop distribution scenarios for the Specialty Pharmacy/Infusion channel which will insure market access, offer 3PL (third party logistics) capabilities and provide the requisite risk management control mechanisms. It is our intent to utilize third party service providers to execute elements of both the marketing/sales and distribution plans. We currently plan to utilize a small group of Managed Market account managers to introduce the product to payor, employer and government account audiences. We believe that this approach will establish a market presence and facilitate the generation of revenue without incurring the substantial costs associated with a traditional sales force. Furthermore, Management believes that the approach will enable us to retain many options for future marketing strategies.

For example, our commercialization strategy for Ampligen®-CFS may include licensing/co-marketing agreements utilizing the resources and capacities of a strategic partner(s). We are seeking world-wide marketing partner(s), with the goal of having a relationship in place before approval is obtained. In parallel to partnering discussions, appropriate pre-marketing activities will be undertaken. We intend to control manufacturing of Ampligen® on a world-wide basis.

In December 2011, we entered into a Second Amended Adviser’s Agreement for twenty-four months with The Sage Group, Inc. ("Sage"), effective June 15, 2011, that amends and supersedes all other agreements and arrangements between the parties. Pursuant to this agreement, Sage is to assist us to identify, qualify, negotiate and close one or more licensing, partnering, alliance or similar transactions pertaining to our products and technology including, but not limited to, any and all uses of Ampligen®, Alferon® and related intellectual property as well as acquisition of companies in whole or in part and the sale or the merger of our Company (“Transactions”). In consideration for services performed or attributed to Sage resulting in Transactions, Sage is entitled to a monthly “Adviser’s Fee” of $20,000, a one-time distribution of 200,000 Options that vest proportionately over 18 months with an exercise price of 110% of the closing price of the Company Stock on the NYSE Amex on the closing price of the day preceding the execution date of the agreement plus preapproved expenses along with the potential for a “Success Fee” of five percent (5%) of all consideration that is capped at $5,000,000 per annum for Transactions introduced to us by Sage. A Transaction can occur during the term of the agreement or 18 months thereafter. This Agreement may be terminated by us for cause after we deliver written notice to Sage of a failure to perform and such failure is not cured within 15 days.

In January 2010, we engaged an Argentinean regulatory and business design entity to explore the possibility of initiating clinical trials of Alferon N Injection®, Ampligen® and Alferon® LDO during the influenza season in Argentina. On June 14, 2010, we executed an exclusive Sales, Marketing, Distribution and Supply Agreement for Argentina with GP Pharm Latinoamerica (“GP Pharm”), an affiliate company of Spanish GP Pharm SA. Under this Agreement, GP Pharm will be responsible for gaining regulatory approval in Argentina for Ampligen® to treat CFS in Argentina and for commercializing Ampligen® for this indication in Argentina. We granted GP Pharm the right to expand rights to sell this experimental therapeutic into other Latin America countries based upon GP Pharm achieving certain performance milestones. We also granted GP Pharm an option to market Alferon N Injection® in Argentina and other Latin America countries. Under these agreements, we will manufacture and supply Ampligen® and Alferon N Injection® to GP Pharm. On November 15, 2010, we amended our June 15, 2010 agreement with GP Pharm to include Mexico in the Territory under the Sales, Marketing, Distribution and Supply Agreement. Under this Agreement, GP Pharm Mexico will be responsible for gaining regulatory approval in Mexico for Ampligen®, an experimental therapeutic, to treat CFS in Mexico and for commercializing Ampligen® for this indication in Mexico. We have granted GP Pharm the right to expand rights to sell this experimental therapeutic into other Latin America countries based upon GP Pharm achieving certain performance milestones. In December 2010, GP Pharm exercised this right and in July 2011 GP Pharm submitted an application for approval to ANMAT, the agency responsible for the national regulation of drugs, foods and medical technology in Argentina. As a result of the efforts of GP Pharm, in January 2012, ANMAT approved the sale and distribution of Alferon N Injection® (under the brand name “Naturaferon”) in Argentina. The receipt of the ANMAT approval is the first step of a regulatory process towards the commercial sales of Naturaferon.

On September 6, 2011 we executed an amended agreement with Armada Healthcare, LLC (“Armada”), effective August 15, 2011 through August 14, 2012, to undertake the marketing, education and sales of Alferon N Injection® throughout the United States. Armada will also provide us with start-up and ongoing sales and marketing support.

Also on September 6, 2011, we executed a new agreement with licensed specialty distributor, BioRidge Pharma, LLC (”BioRidge”) to warehouse, ship and distribute Alferon N Injection® on an exclusive basis in support of U.S. sales. The term of this Agreement shall begin on the Effective Date and shall expire one (1) year thereafter unless earlier terminated in accordance with this Agreement.

COMPETITION

RNA based products and toll-like receptors (“TLRs”) have demonstrated great promise in preclinical and limited clinical applications resulting in active research and development by large pharmaceutical companies and emerging Biotech firms. As such, our potential competitors are among the largest pharmaceutical companies in the world, are well known to the public and the medical community, and have substantially greater financial resources, product development, and manufacturing and marketing capabilities than we have.

These companies and their competing products may be more effective and less costly than our products. In addition, conventional drug therapy, surgery and other more familiar treatments will offer competition to our products. Furthermore, our competitors have significantly greater experience than we do in pre-clinical testing and human clinical trials of pharmaceutical products and in obtaining FDA (in the US), European Medicines Agency (“EMA”) and Health Protection Branch ("HPB") (in Canada), and other regulatory approvals of products. Accordingly, our competitors may succeed in obtaining FDA, EMEA and HPB product approvals more rapidly than us. If any of our products receive regulatory approvals and we commence commercial sales of our products, we will also be competing with respect to manufacturing efficiency and marketing capabilities, areas in which we have no experience. Our competitors may possess or obtain patent protection or other intellectual property rights that prevent, limit or otherwise adversely affect our ability to develop or exploit our products.

The major pharmaceutical competitors with biotech capabilities/vaccine franchises include Pfizer, GlaxoSmithKline, Merck, Novartis and AstraZeneca. Biotech competitors include Baxter International, Fletcher/CSI, AVANT Immunotherapeutics, AVI BioPharma and Genta. When we recommence sales of Alferon N Injection®, it will compete with Intron® A, an injectable from Merck that attempts to kill virus and prevent reproduction along with topical treatments that are normally applied by a doctor that have a risk of damaging the skin around the wart, such as:

· Aldara®, also known as Imiquimod®, is a cream which is marketed to boost the immune systems in an attempt to rid itself of genital warts;

· Veregen®, which utilizes Sinecatechins that is a natural substance found in certain green tea leaves, is a self-administered ointment used to treat the symptoms or infection of the warts;

· Condylox® (podoflox) and Podofin® (podophyllin resin) attempt to destroy the genital warts by halting cell growth; and

· Trichloroacetic acid (TCA) or Bichloroacetic acid (BCA) are chemical treatments which attempt to burn off genital warts.

Regulation by governmental authorities in the U.S. and foreign countries is and will be a significant factor in the manufacture and marketing of Alferon® products and our ongoing research and product development activities. Ampligen® and other products developed from the ongoing research and product development activities will require regulatory clearances prior to commercialization. In particular, new drug products for humans are subject to rigorous preclinical and clinical testing as a condition for clearance by the FDA and by similar authorities in foreign countries. The lengthy process of seeking these approvals, and the ongoing process of compliance with applicable statutes and regulations, has and will continue to require the expenditure of substantial resources. Any failure by us or our collaborators or licensees to obtain, or any delay in obtaining, regulatory approvals could materially adversely affect the marketing of any products developed by us and our ability to receive product or royalty revenue. We have received Orphan Drug designation for certain therapeutic indications, which might under certain conditions, help to accelerate the process of drug development and commercialization. Alferon N Injection® is only approved for use in intra-lesional treatment of refractory or recurring external genital warts in patients 18 years of age or older. Use of Alferon N Injection® for other applications requires regulatory approval.

We are subject to various federal, state and local laws, regulations and recommendations relating to such matters as safe working conditions, laboratory and manufacturing practices, the experimental use of animals and the use of and disposal of hazardous or potentially hazardous substances, including radioactive compounds and infectious disease agents, used in connection with our research work. Prior to our construction phase, our laboratory and production facility in New Brunswick, New Jersey was approved for the manufacture of Alferon N Injection®. While our facility had been granted approval of its BLA by the FDA for the manufacture of Alferon®, this status will need to be reaffirmed upon the completion of the facility’s enhancements. Upon completion of our enhanced manufacturing process, we believe it will again be able to obtain FDA approval. However, there can be no assurance that this facility, or facilities owned and operated by third parties that are utilized in the manufacture of our products, will obtain and/or continue to maintain FDA approval.

As of March 1, 2012, we had 59 personnel consisting of 47 full-time employees or consultants and 12 regulatory/research medical personnel on a part-time basis. Part-time personnel are paid on a per diem or monthly basis. 41 personnel are engaged in our research, development, clinical, and manufacturing effort. 18 of our personnel perform regulatory, general administration, data processing, including bio-statistics, financial and investor relations functions. We have no union employees and we believe our relationship with our employees is good.

While we have been successful in attracting skilled and experienced scientific personnel, there can be no assurance that we will be able to attract or retain the necessary qualified employees and/or consultants in the future.

SCIENTIFIC ADVISORY BOARD AND DATA MONITORING COMMITTEE

With the unfortunate June 2011 passing of Dr. James Rahal, formally Director of the Infectious Disease Section of New York Hospital Queens and one of the nation's foremost experts on the West Nile Virus, our Scientific Advisory Board is presently being reorganized. It is the role of this Board to advise us about current and long-term scientific planning including research and development. The Scientific Advisory Board conducts periodic meetings as needed. No Scientific Advisory Board meetings were held in the last three years, primarily due to fewer active scientific projects. Individual Scientific Advisory Board Members may informally consult with and/or meet with our employees or Board Members. Members of the Scientific Advisory Board could be employed by others and may have commitments to and/or consulting agreements with other entities, including our potential competitors.

In May 2010, we formed a Data Monitoring Committee (“DMC”) that consists of two independent regulatory and medical experts along with a Biostatistics expert. The function of the DMC is to perform independent safety and efficacy analyses on our clinical trials.

We are a specialty pharmaceutical company based in Philadelphia, Pennsylvania and engaged in the clinical development of new drug therapies based on natural immune system enhancing technologies for the treatment of viral and immune based chronic disorders. We were founded in the early 1970s doing contract research for the National Institutes of Health. Since that time, we have established a strong foundation of laboratory, pre-clinical and clinical data with respect to the development of natural interferon and nucleic acids to enhance the natural antiviral defense system of the human body and to aid the development of therapeutic products for the treatment of certain chronic diseases. We have three domestic subsidiaries BioPro Corp., BioAegean Corp., and Core BioTech Corp., all of which are incorporated in Delaware and are dormant. Our foreign subsidiary is Hemispherx Biopharma Europe N.V./S.A. established in Belgium in 1998, which has minimal activity. All significant intercompany balances and transactions have been eliminated in consolidation.

Our current strategic focus is derived from four applications of our two core pharmaceutical technology platforms Ampligen® and Alferon N Injection®. The commercial focus for Ampligen® includes application as a treatment for Chronic Fatigue Syndrome (“CFS”) and as an influenza vaccine enhancer (adjuvant) for both therapeutic and preventative vaccine development. Alferon N Injection® is a Food and Drug Administration (“FDA”) approved product with an indication for refractory or recurring genital warts. Alferon® LDO (Low Dose Oral) is a formulation currently under development targeting influenza.

We own and operate a 43,000 sq. ft. FDA approved facility in New Brunswick, NJ that was primarily designed to produce Alferon®. On September 16, 2009, our Board of Directors approved up to $4.4 million for full engineering studies, capital improvements, system upgrades and introduction of building management systems to enhance production of three products: Alferon N Injection®, Alferon® LDO and Ampligen®. As of December 31, 2010, construction in progress on this project was $485,000 as compared to $135,000 at December 31, 2009. We outsource certain components of our research and development, manufacturing, marketing and distribution while maintaining control over the entire process through our quality assurance group and our clinical monitoring group. Please see “Manufacturing” below for more information.

Our principal executive offices are located at One Penn Center, 1617 JFK Boulevard, Philadelphia, Pennsylvania 19103, and our telephone number is 215-988-0080.

We file our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 electronically with the Securities and Exchange Commission, or SEC. The public may read or copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that site is http://www.sec.gov.

You may obtain a free copy of our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and amendments to those reports on the day of filing with the SEC on our website on the World Wide Web at http://www.hemispherx.net or by contacting the Investor Relations Department by calling (518) 398-6222 or sending an e-mail message to ir@hemispherx.

Our primary pharmaceutical product platform consists of our experimental compound, Ampligen®, our FDA approved natural interferon product, Alferon N Injection® and, our experimental liquid natural interferon for oral administration, Alferon® LDO (low dose oral).

Ampligen® is an experimental drug currently undergoing clinical development for the treatment of Myalgic Encephalomyelitis/Chronic Fatigue Syndrome (“ME/CFS”). Over its developmental history, Ampligen® has received various designations, including Orphan Drug Product Designation (FDA), Treatment IND (e.g., treatment investigational new drugs, or “Emergency” or “Compassionate” use authorization) with Cost Recovery Authorization (FDA) and “promising” clinical outcome recognition based on the evaluation of certain summary clinical reports (“AHRQ” or Agency for Healthcare Research and Quality). Ampligen® represents the first drug in the class of large (macromolecular) RNA (nucleic acid) molecules to apply for New Drug Application (“NDA”) review. Based on the results of published, peer reviewed pre-clinical studies and clinical trials, we believe that Ampligen® may have broad-spectrum anti-viral and anti-cancer properties. Over 1,000 patients have participated in the Ampligen® clinical trials representing the administration of more than 90,000 doses of this drug.

Nucleic acid compounds represent a potential new class of pharmaceutical products that are designed to act at the molecular level for treatment of human diseases. There are two forms of nucleic acids, DNA and RNA. DNA is a group of naturally occurring molecules found in chromosomes, the cell’s genetic machinery. RNA is a group of naturally occurring informational molecules which orchestrate a cell’s behavior which, in turn, regulates the action of groups of cells, including the cells which compromise the body’s immune system. RNA directs the production of proteins and regulates certain cell activities including the activation of an otherwise dormant cellular defense against viruses and tumors. Our drug technology utilizes specifically-configured RNA. Our double-stranded RNA drug product, trademarked Ampligen®, is an experimental, unapproved drug, that would be administered intravenously. Ampligen® has been assigned the generic name rintatolimod by the United States Adopted Names Council (USAN) and has the chemical designation poly(I) poly(C12,U).

Clinical trials of Ampligen® already conducted by us include studies of the potential treatment of ME/CFS, Hepatitis B, HIV and cancer patients with renal cell carcinoma and malignant melanoma. All of these potential uses will require additional clinical trials to generate the safety and effectiveness data necessary to support regulatory approval.

On July 7, 2008, the FDA accepted for review our NDA for Ampligen® to treat CFS, originally submitted in October 2007. We are seeking marketing approval for the first-ever treatment for CFS. At present, only supportive, symptom-based care is available for CFS patients. The NDA for Ampligen® is also the first ever accepted for review by the FDA for systemic use of a toll-like receptor therapy to treat any condition. In November 2009, we received a Complete Response Letter (“CRL”) from the FDA which described specific additional recommendations related to the Ampligen® NDA. In accordance with its 2008 Complete Response procedure, the FDA reviewers determined that they could not approve the application in its present form and provided specific recommendations to address the outstanding issues.

We have carefully reviewed the CRL and will seek a meeting with the FDA to discuss its recommendations upon the compilation of necessary data to be used in our response. We intend to take the appropriate steps to seek approval and commercialization of Ampligen®. Most notably, the FDA stated that the two primary clinical studies submitted with the NDA did not provide credible evidence of efficacy of Ampligen® and recommended at least one additional clinical study which shows convincing effect and confirms safety in the target population. The FDA indicated that the additional study should be of sufficient size and sufficient duration (six months) and include appropriate monitoring to rule out the generation of autoimmune disease. In addition, patients in the study should be on more than one dose regimen, including at least 300 patients on dose regimens intended for marketing. In designing and implementing these additional trials, we believe that it would be very valuable to first have the capability of utilizing a reliable diagnostic test to better identify potential participants. We are therefore pursuing efforts to identify and validate such a test (see “Progress In Search For CFS Test” below). In the Non-Clinical area, the FDA recommended among other things that we complete rodent carcinogenicity studies in two species. While as part of the NDA submission we had requested that these studies be waived, this waiver had not been granted by the FDA in their CRL.

Under the Product Quality section of the CRL, the FDA recommended that we submit additional data and complete various analytical procedures. The collection of these data and the completion of these procedures is already part of our ongoing Quality Control, Quality Assurance program for Ampligen® manufacturing under current Good Manufacturing Practice (“cGMP”) guidelines and our manufacturing enhancement program. On January 14, 2010, we submitted reports of new preclinical data regarding Ampligen® to the FDA that we believe should be sufficient to address certain preclinical issues in the FDA’s CRL. We do not anticipate receiving feedback until we submit our complete response to the CLR. The preclinical studies discussed in these reports were the combined work-product of the staffs at Hemispherx and Lovelace Respiratory Research Institute in Albuquerque, New Mexico, and included pharmacokinetic analyses in two lower animal species (primate and rodent). The new preclinical data showed no evidence of antibodies against Ampligen® in primates nor evidence of an increase in certain undesirable cytokines (specific modulators of the immune system) at clinically used doses of Ampligen® for CFS. Although most other experimental immunomodulators have been associated with one or more features of aberrant immune activity, including toll-like receptor activators (of which Ampligen® is one), this was specifically not seen with Ampligen® in primates.

The FDA also commented on Ampligen® manufacturing noting the need to resolve outstanding inspection issues at the facilities producing Ampligen®. These include our New Brunswick facility and one of our third-party subcontractor manufacturing facilities, Hollister-Stier Laboratories of Spokane, Washington (“Hollister-Stier”). As discussed in “Manufacturing” below, we believe that these issues have been resolved.

We estimate that it could take approximately 18 months to three years to complete an Ampligen® clinical study for resubmission to the FDA under the industry norm of three to six months to initiate the study, one to two years to accrue and test patients, three to six months to close-out the study and file the necessary documents with the FDA. The actual duration to complete the clinical study may be different based on the final design of an accepted FDA clinical Phase III study, availability of participants, clinical sites, when the study commences and any other factors that could impact the implementation of the study, analysis of results, or requirements of the FDA and other governmental organizations.

Additionally, we estimate that the approximate cost to undertake the Ampligen® Phase III clinical study could range from $12,000 to $18,500 per each of the 600 participating patients, for an estimated range of total incremental costs of $7,200,000 to $11,100,000. Our estimate is based on the belief that our experience from the prior Phase III study and established teams (e.g., Medical, Data Processing, Clinical Monitors, Statisticians, Medical Reporting) along with existing inventory and investigational protocol, could produce financial efficiencies. We believe that these efficiencies could permit our costs of undertaking a Phase III CFS study to be discounted as compared to a potential $28,500 per patient cost approximated as an industry average for running a Phase III study from scratch, as estimated and adjusted for inflation, utilizing data from the business intelligence firm Cutting Edge Information. The actual costs of a Phase III investigation study for CFS may differ based on final design of an accepted FDA Phase III clinical study, prevailing costs to undertake clinical studies, qualification and access to CFS patients, insurance and government requirements along with other potential costs or reimbursements unknown at this time.

Aside from the foregoing, we cannot estimate what additional studies and/or additional testing or information that the FDA may require. Accordingly, as of this time, we are unable to estimate the nature, timing, costs and necessary efforts to obtain FDA clearance, the anticipated completion dates or whether we will obtain FDA clearance.

Notwithstanding the foregoing, we believe that it is important to find a reliable diagnostic test for CFS before committing greater resources to Phase III study (see “Progress In Search For CFS Test” below) since the identification of suitable participants is critical in the undertaking of a Phase III study. In addition, a reliable test would allow for an enhanced means to evaluate the effectiveness of Ampligen® on CFS.

In December 2010, the FDA granted us a one year extension to file a response to the CRL. While the Company remains committed to undertaking the Ampligen® Phase III clinical study, it is diligently working to address the diagnostic challenges related to CFS before commencing the requisite study.

As stated on the CDC website, diagnosing CFS can be complicated by a number of factors:

1. There is no diagnostic laboratory test or biomarker for CFS;

2. Fatigue and other symptoms of CFS are common to many illnesses;

3. CFS is an invisible illness and many patients don't look sick;

4. The illness has a pattern of remission and relapse;

5. Symptoms vary from person to person in type, number and severity.

These factors have contributed to a very low diagnosis rate in which of the up to four million Americans estimated to have CFS, less than 20 percent of those stricken are being properly diagnosed. Because currently there is no FDA approved blood test, brain scan or other lab test to diagnose CFS, it's a diagnosis of exclusion. If a patient has had six or more consecutive months of severe fatigue that is reported to be unrelieved by sufficient bed rest and that is accompanied by nonspecific symptoms, including flu-like symptoms, generalized pain and memory problems, the patient may have CFS.

In the October 8, 2009 issue of Science Express, a consortium of researchers from the Whittemore Peterson Institute (“WPI”), the National Cancer Institute and the Cleveland Clinic reported a new retrovirus, xenotropic murine leukemia related virus (“XMRV”) in the blood cells of 67% of CFS patients and 3.7% in healthy control subjects. The infectious virus was also greater than 99% identical to that previously detected in prostate cancer. Retrospective analyses of patient samples from the completed Phase III trial of Ampligen® in potential treatment of CFS continues in collaboration with WPI. While an updated agreement is being finalized with WPI, we continue to collaborate with WPI under the terms of an “Evaluation Agreement” that expired on July 23, 2010, to evaluate Hemispherx’ patient samples for XMRV using WPI’s flow cytometry assay. We believe that these studies may provide a new perspective on the design of an additional confirmatory Phase III study in this disorder.

In addition, on March 2, 2011, we jointly filed a provisional United States patent application on a blood test for CFS with Chronix Biomedical ("Chronix"). This experimental approach analyzes fragments of DNA often released into the bloodstream during the process of apoptosis or programmed cell death to measure alterations in specific regions of the chromosome, which can be detected as distinctive "signatures" in cell-free blood-borne DNA. The patient-unique signatures captured by Chronix’ technology may prove useful as a companion diagnostic and to provide information about the disease process to help pharmaceutical companies select the most efficacious drug candidates. The use of this diagnostic technology for CFS diagnosis will be evaluated in a study being planned by Chronix and Hemispherx.

Alferon N Injection® is the registered trademark for our injectable formulation of natural alpha interferon, which is approved by the FDA in 1989 for the treatment of certain categories of genital warts. Alferon® is the only natural-source, multi-species alpha interferon currently approved for sale in the U.S. for the intralesional (within lesions) treatment of refractory (resistant to other treatment) or recurring external genital warts in patients 18 years of age or older.

Interferons are a group of proteins produced and secreted by cells to combat diseases. Researchers have identified four major classes of human interferon: alpha, beta, gamma and omega. Alferon N Injection® contains a multi-species form of alpha interferon. The worldwide market for injectable alpha interferon-based products has experienced rapid growth and various alpha interferon injectable products are approved for many major medical uses worldwide. Alpha interferons are manufactured commercially in three ways: by genetic engineering, by cell culture, and from human white blood cells. All three of these types of alpha interferon are or were approved for commercial sale in the U.S. Our natural alpha interferon is produced from human white blood cells.

The potential advantages of natural alpha interferon over recombinant (synthetic) interferon produced and marketed by other pharmaceutical firms may be based upon their respective molecular compositions. Natural alpha interferon is composed of a family of proteins containing many molecular species of interferon. In contrast, commercial recombinant alpha interferon products each contain only a single species. Researchers have reported that the various species of interferons may have differing antiviral activity depending upon the type of virus. Natural alpha interferon presents a broad complement of species, which we believe may account for its higher activity in laboratory studies. Natural alpha interferon is also glycosylated (partially covered with sugar molecules). Such glycosylation is not present on the currently U.S. marketed recombinant alpha interferons. We believe that the absence of glycosylation may be, in part, responsible for the production of interferon-neutralizing antibodies seen in patients treated with recombinant alpha interferon. Although cell culture-derived interferon is also composed of multiple glycosylated alpha interferon species, the types and relative quantity of these species are different from our natural alpha interferon.

Alferon N Injection® [Interferon alfa-n3 (human leukocyte derived)] is a highly purified, natural-source, glycosylated, multi-species alpha interferon product. There are essentially no antibodies observed against natural interferon to date and the product has a relatively low side-effect profile.

The recombinant DNA derived alpha interferon formulations have been reported to have decreased effectiveness after one year, probably due to antibody formation and other severe toxicities. These detrimental effects have not been reported with the use of Alferon N Injection®.

The FDA approved Alferon N Injection® in 1989 for the intralesional (within lesions) treatment of refractory (resistant to other treatment) or recurring external genital warts in patients 18 years of age or older. Certain types of human papilloma viruses (“HPV”) cause genital warts, a sexually transmitted disease (“STD”). The Centers for Disease Control and Prevention (“CDC”) estimates that approximately twenty million Americans are currently infected with HPV with another six million becoming newly infected each year. The CDC states that HPV is so common, that at least 50% of sexually active men and women get it at some point in their lives.

Commercial sales of Alferon N Injection® were halted in March 2008 when our finished goods inventory expired. We are in the process of upgrading our manufacturing capability for Alferon N Injection® at our New Brunswick facility. As a result, we expect to be in a position to resume manufacture of Alferon N Injection® [Please see “Alferon® Low Dose Oral (LDO)” and “Manufacturing” below for more information].

Alferon® Low Dose Oral (LDO)

Alferon® LDO [Low Dose Oral Interferon Alfa-n3 (Human Leukocyte Derived)] is an experimental low-dose, oral liquid formulation of Natural Alpha Interferon and like Alferon N Injection® should not cause antibody formation, which is a problem with recombinant interferon. It is an experimental immunotherapeutic believed to work by stimulating an immune cascade response in the cells of the mouth and throat, enabling it to bolster systemic immune response through the entire body by absorption through the oral mucosa. Oral interferon could be economically feasible for patients and logistically manageable in development programs in third-world countries primarily affected by influenza and other emerging viruses. Oral administration of Alferon® LDO, with its anticipated affordability, low toxicity, no production of antibodies, and broad range of potential bioactivity, could be a breakthrough treatment or prevention for viral diseases.

In October 2009, we submitted a protocol to the FDA proposing to conduct a Phase II, double-blind, adaptive-design, randomized, placebo-controlled, dose-ranging study of Alferon® LDO for the prophylaxis and treatment of seasonal and pandemic influenza of more than 200 subjects. Following a teleconference with the FDA in November 2009, the FDA placed the proposed study on “Clinical Hold” because the protocol was deemed by the FDA to be deficient in design, and because of the need for additional information to be submitted in the area of chemistry, manufacturing and controls (“CMC”). Thereafter in December 2009, we submitted additional information by an Amendment with respect to both the clinical protocol design issues and the CMC items. In January 2010, the FDA acknowledged that our responses to the clinical study design issues were acceptable; however, removal of the Clinical Hold was not warranted because the FDA believed that certain CMC issues had not been satisfactorily resolved. In this regard, the FDA communicated concern regarding the extended storage of Alferon® LDO drug product clinical lots which had been manufactured from an active pharmaceutical ingredient (“API”) of Alferon N Injection® manufactured in year 2001. While the biological (antiviral) potency of the product had remained intact, we learned through newly conducted physico-chemical tests (the “new tests” of temperature, pH, oxidation and light on the chemical stability of the active API), that certain changes in the drug over approximately nine storage years (combined storage of Alferon N Injection® plus storage of certain LDO sachets) had introduced changes in the drug which might adversely influence the human safety profile. These “new tests” are part of recent FDA requirements for biological products, such as interferon, which did not exist at the time of the original FDA approval of Alferon N Injection® for commercialization and at the time of FDA approval of the ”Product License” and “Establishment License” for the Alferon N Injection® product. Based on the recent FDA request, we have now established and implemented the “new test” procedures. As a result, we have found that certain Alferon N Injection® lots with extended storage (i.e., approximately eight to nine years) do appear to demonstrate some altered physico-chemical properties. However we have also observed that more recent lots, including those manufactured beginning in the year 2006, are superior with respect to the enhanced scrutiny of these tests and, in our view, could be considered appropriate for clinical trials in the Alferon® LDO sachet format. Upon their review, the FDA has been responsive to these new findings and requested additional stability data on the lots proposed for use in this clinical study utilizing the new test methods. The proposed clinical lots were manufactured on June 24, 2010 and placed on stability on June 28, 2010. The FDA had requested three months of stability data on the proposed clinical lots which was compiled, analyzed and submitted to the FDA on November 12, 2010. On December 22, 2010, the FDA informed us that the Agency had completed its review of our complete response to the Clinical Hold and lifted the Clinical Hold, allowing our Phase II Study to proceed.

The following table sets forth the costs related to our major products for each of the prior three years. Our aggregate expenses from the time that we first started developing nucleic acid pharmaceutical technology in the mid 1980’s through March 2003 were substantially related to the development of Ampligen®, and from that date through the current period were substantially related to Ampligen® and Alferon.

(dollars in thousands) Year Ended December 31, 2010 Costs and Expenses Ampligen® NDA Alferon N Injection® Alferon® LDO Other Total Production/cost of goods sold $ - $ 1,341 $ - $ - $ 1,341 Research and development 2,787 - 4,658 168 7,613 General and administrative 2,356 1,133 3,937 142 7,568 Total $ 5,143 $ 2,474 $ 8,595 $ 310 $ 16,522

(dollars in thousands) Year Ended December 31, 2009 Costs and Expenses Ampligen® NDA Alferon N Injection® Alferon® LDO Other Total Production/cost of goods sold $ - $ 584 $ - $ - $ 584 Research and development 5,026 - 1,784 185 6,995 General and administrative 3,844 447 1,364 141 5,796 Total $ 8,870 $ 1,031 $ 3,148 $ 326 $ 13,375

(dollars in thousands) Year Ended December 31, 2008 Costs and Expenses Ampligen® NDA Alferon N Injection® Alferon® LDO Other Total Production/cost of goods sold $ - $ 798 $ - $ - $ 798 Research and development 5,491 - - 309 5,800 General and administrative 5,392 783 - 303 6,478 Total $ 10,883 $ 1,581 $ - $ 612 $ 13,076

At March 1, 2011, we had 20 patents worldwide with 78 additional pending patent applications pending comprising our intellectual property. In 2006, we obtained the global patent rights for a compound that enhances DNA vaccination by the efficient intracellular delivery of immunogenic DNA (i.e., DNA that can produce antigenic proteins that simulate an acute viral infection with a resultant humoral and cell-mediated immune response). Please see “Note 5: Patents, Trademark Rights and Other Intangibles” under Notes To Consolidated Financial Statements for more information on these patents.

We continually review our patents’ rights to determine whether they have continuing value. Such review includes an analysis of the patent’s ultimate revenue and profitability potential. In addition, Management’s review addresses whether each patent continues to fit into our strategic business plans for Ampligen®, Alferon N Injection® and Alferon® LDO.

With respect to Ampligen®, the main U.S. ME/CFS treatment patent (#6130206) expires October 10, 2017. Our main patents covering HIV treatment (#4820696, #5063209, and #5091374) expired on April 11, 2006, November 5, 2008, and February 25, 2009, respectively; Hepatitis treatment coverage is conveyed by U.S. patent #5593973 which expires on January 14, 2014. Our U.S. Ampligen® Trademark (#73/617,687) has been renewed through December 6, 2018.

In addition to our patent rights relating to Ampligen®, the FDA has granted “orphan drug status” to the drug for ME/CFS, HIV/AIDS, and renal cell carcinoma and malignant melanoma. Orphan drug status grants us protection against the potential approval of other sponsors’ versions of the drug for these uses for a period of seven years following FDA approval of Ampligen® for each of these designated uses. The first NDA approval for Ampligen® as a new chemical entity will also qualify for four or five years of non-patent exclusivity during which abbreviated new drug applications seeking approval to market generic versions of the drug cannot be submitted to the FDA. (See “Government Regulation” below.)

The U.S. patents relating to our Alferon® products expire April 2, 2013 (5,503,828) October 14, 2014 (5,676,942) and December 22, 2017 (5,989,441).

In 1999, we acquired a series of patents on Oragens®, potentially a set of oral broad spectrum antivirals and immunological enhancers, through a licensing agreement with Temple University (“Temple”) in Philadelphia, PA. For a $30,000 annual minimum royalty payment and costs to maintain the patents, we were granted an exclusive worldwide license from Temple for the Oragens® products. These compounds had been evaluated in various academic laboratories for application to chronic viral and immunological disorders.

In the 2009 review of our patent rights to determine whether they have continuing value, we undertook an analysis of the Oragen® patents prior to renewing the licensing agreement with Temple. This review included a cost/benefit analysis of the patents’ ultimate revenue and profitability potential in consideration of their remaining life. In addition, management studied the rights as to whether each patent continues to fit into our strategic business plans for Ampligen®, Alferon N Injection® and Alferon® LDO. As a result of this process, we proposed a patent renewal agreement that significantly discounted the prior agreement’s annual minimum royalty payment. In February 2010, it was formally communicated by Temple that they had elected not to pursue our proposal to renew the series of patents on Oragens®. Accordingly as of December 2009, we wrote-off the remaining value of these patents from Patent and Trademark Rights resulting in a net expense for Patents Abandoned of $114,000.

Our general focus is on developing drugs for use in treating viral and immune based chronic disorders and diseases such as ME/CFS, HIV, HPV and West Nile Virus, Cancer and Influenza. Our current R&D projects are only targeting treatment therapies for ME/CFS and other viral diseases such as prevention and treatment of seasonal and pandemic H1N1 or influenza.

Our primary focus during the past three fiscal years has been on our Ampligen® New Drug Application for the treatment of CFS. In 2009, we also began to develop Alferon® Low Dose Oral for treatment of viral diseases including influenza.

The following table summarizes our research and development costs for the years 2008, 2009 and 2010 by project:

(in thousands) 2008 2009 2010 Ampligen® New Drug Application for the treatment of Chronic Fatigue Syndrome $ 5,491 $ 5,026 $ 2,787 Alferon® LDO for influenza - 1,784 4,658 Alferon N Injection® for influenza - - 168 Other projects 309 185 - Total research and development $ 5,800 $ 6,995 $ 7,613

On December 22, 2010, the FDA lifted a clinical hold on our Phase II Study for Alferon® LDO, which is the initial stages of development. See “Our Products” above. Due to the inherent uncertainty involved in the design and conduct of clinical trials and the applicable regulatory requirements, including the factors discussed above in “Our Products; Ampligen®”, we cannot predict what additional studies and/or additional testing or information may be required by the FDA. Accordingly, we are unable to estimate the nature, timing, costs and necessary efforts to complete these projects nor the anticipated completion dates. In addition, we have no basis for estimating when material net cash inflows may commence. We have yet to generate any revenues from the sale of these developmental products. As of December 31, 2010, we had approximately $44.4 million in Cash, Cash Equivalents and Marketable Securities. Based upon our current anticipated financial needs, absent unexpected circumstances or new opportunities, we anticipate, but cannot assure, that we will be able to fund operations for at least the next four years. However, if we are unable to timely commercialize and sell Ampligen® for the treatment of CFS or Alferon® LDO and/or recommence material sales of Alferon N Injection®, our operations, financial position and liquidity will be adversely affected (see Item 1A. Risk Factors; “We may require additional financing which may not be available” below).

Chronic Fatigue Syndrome (“CFS”), also known as Chronic Immune Dysfunction Syndrome (“CFIDS”) and, Myalgic Encephalomyelitis (“ME”) is a serious and debilitating chronic illness and a major public health problem. ME/CFS is recognized by both the government and private sector as a major health problem, including the National Institutes of Health, FDA and the U.S. Centers for Disease Control and Prevention (“CDC”). The CDC listed ME/CFS as a priority disease, causing severe health and financial problems for patients, their family, and the community. ME/CFS is endemic in the population, but occasionally seen in clusters suggesting an infectious basis. A variety of immunological, endocrine, autonomic nervous system, and metabolic abnormalities have been documented.

Dr. Julie Gerberding, former director of the CDC and current president of Merck & Company’s vaccine division, has stated that "The CDC considers Chronic Fatigue Syndrome to be a significant public health concern and we are committed to research that will lead to earlier diagnosis and better treatment of the illness." A variety of studies by the CDC and others have shown that between 1 and 4 million Americans suffer from CFS. While those with the disease are seriously impaired and at least a quarter are unemployed or on disability because of CFS, only about half have consulted a physician for their illness. Equally important, about 40% of people in the general population who report symptoms of ME/CFS have a serious, treatable, previously unrecognized medical or psychiatric condition (such as diabetes, thyroid disease, substance abuse). ME/CFS is a serious illness and poses a dilemma for patients, their families and health care providers.

The CDC has launched a national public education and awareness campaign in which CFS is described as a debilitating and complex disorder characterized by profound fatigue that is not improved by bed rest and that may be worsened by physical or mental activity. Persons with CFS most often function at a substantially lower level of activity than they were capable of before the onset of illness. The campaign provides information regarding the diagnosis and treatment of CFS, and is designed to raise awareness of the disease among patients and clinicians. A CDC sponsored website at www.cdc.gov/cfs provides easy to understand, downloadable educational sources for patients, their families and health care professionals including a “CFS Toolkit” that offers a quick and easy-to-use resource for patients and healthcare providers regarding best practices for diagnosing, treating, and managing CFS.

While ME/CFS strikes people of all age, racial, ethnic, and socioeconomic groups, it is most prevalent amongst women. Research has shown that ME/CFS is about three times as common in women as men, a rate similar to that of many autoimmune diseases, such as multiple sclerosis and lupus. To put this into perspective, ME/CFS is over four times more common than HIV infection in women, and the rate of ME/CFS in women is considerably higher than a woman's lifetime risk of getting lung cancer as published by the CFIDS Association of America.

Many severe ME/CFS patients become completely disabled or totally bedridden and are afflicted with severe pain and mental confusion even at rest. ME/CFS is characterized by incapacitating fatigue with profound exhaustion and extremely poor stamina, sleep difficulties and problems with concentration and short-term memory. It is also accompanied by flu-like symptoms, pain in the joints and muscles, tender lymph nodes, sore throat and new headaches. A distinctive characteristic of the illness is a worsening of symptoms following physical or mental exertion which do not subside with rest.

The case definition for ME/CFS criteria calls for certain symptoms to be present along with fatigue that interferes with physical, mental, social and educational activities. Both the fatigue and symptoms must have occurred for (at least) a six month period. People with ME/CFS may experience many more than the symptoms named in the case definition, so knowledgeable physicians will take this fact into consideration when making a diagnosis (after other possible reasons for symptoms have been ruled out).

Most ME/CFS patients are treated symptomatically with traditional treatments geared toward treating symptoms of the disease, such as improving quality of sleep, reducing pain and treatment of depression. Clinically, a number of different therapeutic approaches have been pursued, but with no significant clinical success.

Because no cause for ME/CFS has been identified, current treatment programs are directed at relieving symptoms, with the goal of the patient regaining some level of function and well-being. Diagnosis of ME/CFS is a time-consuming and challenging process for which there is no FDA approved diagnostic test or biomarker to clearly identify the disorder. Diagnosis is primarily arrived at by taking a patient's medical history, completing a physical exam and lab tests to rule out other conditions excluding other illnesses with similar symptoms and comparing a patient's symptoms with the case definition. Overlapping symptoms can occur with several diseases, such as fibromyalgia, Gulf War Illnesses, chronic Lyme disease and multiple chemical sensitivities. Many diseases have similar symptoms including Lupus and Lyme disease which may closely mimic ME/CFS that they need to be considered when making a diagnosis to rule them out. If there are no abnormal test results or other physical ailments identified, clinicians can use standardized tests to quantify the level of fatigue and evaluate symptoms. Diagnosis can be complicated by the fact that the symptoms and severity of CFS vary considerably from patient to patient. New diagnostic approaches to possibly accelerate the identification of ME/CFS are being developed (see “Our Products; Ampligen®; Progress In Search For CFS Test” above concerning experimental approaches to possible CFS diagnostic tests).

Other Viral Diseases

We are engaged in ongoing, experimental studies assessing the efficacy of Ampligen®, Alferon N Injection® and Alferon® LDO against influenza viruses.

A Phase II Trial for intramuscular administration of Ampligen® for seasonal influenza was conducted in Australia through St. Vincent’s Hospital with the final patient completing the study in September 2008. This open-label study (Phase IIa Trial) utilized Ampligen® as a potential immune-enhancer in Australia with thirty-eight subjects age 60 or greater with the standard trivalent seasonal influenza vaccines. We continue in good faith to work towards obtaining the clinical data and retrieve the study samples from St. Vincent’s recently restructured Clinical Trials Centre and related Clinical Network Services. As a prerequisite of payment, we had requested the confirmation that samples were properly maintained utilizing cGCP and Good Laboratory Practice (“cGLP”) for the controlled environment as per our agreement. On February 5, 2010, our Counsel advised representatives of St. Vincent’s business units in correspondence that, due to the failure to meet the condition precedent to payment, we had no choice but to declare them in breach of the study agreement and that it was our intention to terminate the relationship between the parties. Since February 18, 2010, various offers and counteroffers have been made between us and Clinical Trials Centre and Clinical Network Services, to permit us to retrieve the data by making certain payments to each organization with funds equal to the disputed amount placed in escrow. We would then be granted access to review the data during a two day visit to their sites in Australia. Following our satisfaction that the clinical study was conducted utilizing cGCP along with samples properly maintained utilizing cGLP, the escrow funds would be released to Clinical Trials Centre and Clinical Network Services so that pathology samples could be collected by us. The proposals for data collection and the dollar value of the disputed fees are currently being reviewed by the respective parties.

Ampligen® as a mucosal adjuvant with vaccine has been studied at Japan’s National Institute of Infectious Disease (“NIID”) and at Biken (the for profit operational arm of the Foundation for Microbial Diseases of Osaka University). Investigators from Japan’s NIID have conducted studies in animals that suggest that Ampligen® can stimulate a sufficiently broad immune response to provide cross-protection against a range of virus genetic types, including H5N1 and derivative clades. Japan’s Council for Science & Technology Policy (“CSTP”), a cabinet level position, awarded funds from Japan’s CSTP to advance research with influenza vaccines utilizing Ampligen. The Principal Investigator, Dr. Hideki Hasegawa, M.D., Ph.D., Chief of Laboratory of Mucosal Vaccine Development Virus Research Center, undertook studies in 2009 and continued in 2010 that focus on mucosal immunity and the inherent advantages of a vigorous immune response to respiratory pathogens. Dr. Hasegawa has published data that the formulation of pandemic vaccine mixed with Ampligen® increases immuno-genicity and may demonstrate cross protection against mutated strains.

Initial data from findings in mice exposed to the most virulent forms of pandemic influenza (H5N1) suggest that standard human seasonal influenza vaccines given alone, and having no benefit on H5N1 influenza virus pathology and clinical status, were nonetheless effective against pandemic virus when combined with Ampligen® when applied intranasally in very small doses in a prophylactic treatment setting. In July 2010, we released a report prepared by Dr. Hasegawa summarizing the results of the three year Japanese government funded program through the Japanese Minister of Health Labor and Welfare (“MHLW”) to develop and test on non-human primates a nasally delivered H5N1 (Avian Flu) vaccine which, when coupled with Ampligen®, produced positive results in a preclinical testing environment showing that the combination provided a more robust and longer lasting immune response as compared to the vaccine used alone. The researchers concluded that their results could be applied to develop intranasally delivered vaccines for influenza virus prophylaxis focused on protection of the mucosal immune system against virus mutations. We had expected that the clinical testing phase of Ampligen®, used in conjunction with a H5N1 (Avian Flu) vaccine, in Japan would begin in 2011. However, the occurrence and timing of clinical testing is dependent upon the successful conclusion of our negotiations with Biken along with their timely filing and approval of an Investigatory New Drug (“IND”) application for Ampligen® in Japan. A Material Evaluation Agreement (“MEA”) regarding Ampligen® with Biken that was initiated on August 19, 2009, effectively expired on September 1, 2010. Pursuant to the agreement, we supplied Biken with proprietary information related to Ampligen® and Biken purchased Ampligen® from us for use solely in connection with evaluating Ampligen® as a candidate for adjuvant incorporated into potential influenza virus vaccines in the form of intranasal mucosal administration, including conducting further animal studies of intranasal prototype vaccines containing antigens from various influenza sub-types, including H5N1, H1N1, H3N2 and B. Hemispherx and Biken are in correspondence concerning both the possibility of extending or replacing the expired agreement and reconciling the interpretation of experimental results. However until such time that a new agreement can be established, no collaboration is being undertaken between the respective companies.

In April 2010, we began the process to undertake a clinical study with Max Neeman International, a leading and large clinical research organization in India. This collaborative clinical research effort is intended to utilize Alferon N Injection® for treatment of seriously ill patients hospitalized with either seasonal influenza or pandemic influenza. The Indian site selection process was initiated and we obtained approval to begin the study from the Indian Drugs Controller General on July 13, 2010. We began enrolling subjects in September 2010 and will continue to enroll subjects through the winter’s flu season and the spring’s rainy season. As of March 1, 2011, we have five operational Clinical Investigative Sites, with the potential to add additional sites. Our Study has progressed at a rate slower than originally projected with difficulties encountered in the process of screening for subjects who were strickened only with influenza. In an attempt to expedite the process to qualify study subjects, we have added a second “point of care” screening test which we believe will broaden our range of detection for of influenza viruses. Our objective is to qualify and enroll sixty patients for the study.

Collaboration studies in non-human primates conducted by ViroClinics in the Netherlands suggested a potential role for Alferon® LDO as another novel therapeutic approach to viral pandemics. In these studies, Alferon® LDO treatment appeared to be more effective than published results for a neuraminidase inhibitor (Relenza®), which is a current standard for care of seasonal influenza along with a similar drug (Tamiflu®). In October 2009, we submitted a protocol to the FDA proposing to conduct a Phase II, well-controlled, clinical study using Alferon® LDO for the prophylaxis and treatment of seasonal and pandemic influenza of more than 200 subjects.

We own and operate a 43,000 sq. ft. FDA approved facility in New Brunswick, NJ that was originally designed to produce Alferon N Injection®. On September 16, 2009, our Board of Directors approved up to $4.4 million for engineering studies, capital improvements, system upgrades and building management systems. Construction in progress on this project was $485,000 and $135,000 at December 31, 2010 and 2009, respectively. The major capital improvement program is to enhance our manufacturing capability for Alferon N Injection® along with the possibility to produce Alferon® LDO and Ampligen®. The planned capital improvements include an upgrade to the air handling system, building new changing rooms and the purchase of necessary equipment to manufacture Alferon N Injection®. As a result of these manufacturing enhancements, provided we can either promptly renew our prior agreement with a third-party vendor or find another vendor that can provide the needed cGMP formulation, packaging and labeling services, we expect to be able to complete the manufacture of Alferon N Injection® for potential commercial sales by mid to late 2011.

The New Jersey District Office of the FDA conducted an inspection of the New Brunswick, New Jersey facility in late January and early February 2009 in connection with review of the Ampligen® NDA. A one-page Form FDA 483 was issued citing a need to re-perform four method validations to generate data in the New Brunswick Laboratories. These validations had been performed at another site also owned and operated by us prior to transferring the equipment to New Brunswick. The validations have been completed and the reports were forward to the FDA in April 2009 for review. As a result, the New Jersey office of the FDA has indicated that there are no more preapproval review issues at that time. In addition to having addressed all known FDA Form 483 issues, we reported to the regional office of the FDA that the New Brunswick facility is in progress of validating certain manufacturing steps and compiling data that will be sent to the FDA after NDA approval or as required.

The FDA, in its November 25, 2009 CRL, noted that its field investigators had conveyed deficiencies to us at our New Jersey facility that needed to be resolved before the NDA could be approved. We believe these issues to be the same as those on the Form FDA 483 discussed above. At our expected meeting with the FDA to review the CRL, we intend to communicate that it is our understanding that these manufacturing issues have been addressed. The FDA also described specific recommendations related to the Ampligen® NDA in the “Product Quality” section of the CRL which identified additional analytic procedures to be submitted to the FDA. We believe that these procedures are already part of our ongoing Quality Control, Quality Assurance program for Ampligen® manufacturing under cGMP requirements. We continue to plan to complete the remaining tests needed to address the issues identified in the CRL as part of our originally scheduled post-approval testing prior to any commercial sales of Ampligen®.

We outsource certain components of our research and development, manufacturing, marketing and distribution while maintaining control over the entire process through our Quality Assurance Group and our Clinical Monitoring Group. We had a Supply Agreement through March 1, 2011 with Hollister-Stier Laboratories LLC of Spokane, Washington (“Hollister-Stier”), pursuant to which Hollister-Stier would formulate and package Ampligen® from the key raw materials that we would supply to Hollister-Stier. We currently are negotiating with Hollister-Stier to renew the agreement for two years under terms similar to those in the expired Supply Agreement. Pursuant to the expired agreement, at least 90 days prior to our first order, we would be required to provide a written 12 month rolling forecast of our initial requirements for the product and, every 90 days thereafter, provide an extended 12 month forecast of the number of batches we anticipate will be needed and the requested delivery dates. Our baseline cost would be set in the agreement and increases annually based on any percentage increase in the Producer Price Index - Pharmaceutical Preparations. Payment would be due 30 days after our acceptance of the Product. Hollister-Stier would have the right of first refusal to manufacture certain Ampligen® related products. The agreement was terminable by either party upon a material breach by the other party of the agreement that is not cured within 60 days or upon the other party’s insolvency or certain filings under the U.S. Bankruptcy Code. If we are unable to renew our agreement with Hollister-Stier on acceptable terms, we will need to find another vendor.

The FDA, in its CRL, also noted the need to resolve outstanding inspection issues at the Hollister-Stier facility. On December 11, 2009 via Hollister-Stier, we submitted comprehensive new data to the District Office (“DO”) of the FDA in Seattle, WA, which we believed demonstrated that certain manufacturing issues noted in the pre-approval inspections at the facility had been fully addressed. On February 2, 2010, Hollister-Stier received a favorable response from the FDA’s Seattle DO in which they noted that certain manufacturing issues noted in the pre-approval inspection at this facility had been fully addressed and that they had forwarded a recommendation to the FDA’s CDER for approval of Hollister-Stier as a manufacturing site under the Ampligen® NDA. The DO recommendations are not binding on the FDA and pertain only to the specific manufacturing issues cited in the Ampligen® manufacturing response and to the subcontractor site.

The production of Alferon N Injection® from our existing Work-In-Progress Inventory, which has an approximate expiration date of 2012, had remained on hold for conversion due to the dedication of resources to prepare the New Brunswick facility for the FDA preapproval inspection with respect to Ampligen® NDA. Since adequate financial resources were obtained to commence upgrades to the Ampligen® and Alferon® manufacturing process, the conversion of existing Alferon N Injection® Work-In-Progress inventory was started up in May 2010 towards the manufacture of new Finished Goods. Provided we can either promptly renew our prior agreement with a third-party vendor or find another vendor that can provide the needed cGMP formulation, packaging and labeling services, we expect to be able to complete the manufacture of Alferon N Injection® for potential commercial sales by mid to late 2011.

We have manufactured purified drug concentrate utilized in the formulation of Alferon N Injection® in our New Brunswick, New Jersey facility. With the initial manufacturing stages of new Alferon® Work-In-Progress underway, we are seeking new vendors that can provide the needed cGMP formulation, packaging and labeling services for this product. It is our intension to utilize this new Alferon® Work-In Progress Inventory for clinical studies and commercial sales.

Our marketing strategy for Ampligen® reflects the differing health care systems around the world along with the different marketing and distribution systems that are used to supply pharmaceutical products to those systems. In the U.S., we expect that, subject to receipt of regulatory approval, Ampligen® may be utilized in four medical arenas: physicians’ offices; clinics; hospitals; and the home treatment setting. We remain in the process of developing pre-launch and launch driven marketing plans focusing on those audience development, medical support and payor reimbursement initiatives which will facilitate product acceptance and utilization at the time of regulatory approval. Similarly, we continue to develop distribution scenarios for the Specialty Pharmacy/Infusion channel which will insure market access, offer 3PL (third party logistics) capabilities and provide the requisite risk management control mechanisms. It is our intent to utilize third party service providers to execute elements of both the marketing/sales and distribution plans. We currently plan to utilize a small group of Managed Market account managers to introduce the product to payor, employer and government account audiences. We believe that this approach will establish a market presence and facilitate the generation of revenue without incurring the substantial costs associated with a traditional sales force. Furthermore, Management believes that the approach will enable us to retain many options for future marketing strategies.

For example, our commercialization strategy for Ampligen®-CFS may include licensing/co-marketing agreements utilizing the resources and capacities of a strategic partner(s). We are seeking world-wide marketing partner(s), with the goal of having a relationship in place before approval is obtained. In parallel to partnering discussions, appropriate pre-marketing activities will be undertaken. We intend to control manufacturing of Ampligen on a world-wide basis.

On July 15, 2010, we entered into an amended adviser's agreement (the "Sage Agreement") with The Sage Group, Inc. ("Sage") that amends and supersedes all other agreements and arrangements between the parties. Sage was instrumental in securing our relationship with Biken. Pursuant to the Sage Agreement, we have retained Sage to assist us in finding and consummating licensing, partnering, distribution, alliance or other similar transactions pertaining to and promoting the sale of our products and technologies ("Transactions"). Transactions do not include agreements that are non-revenue producing such as research arrangements or feasibility studies. The Sage Agreement runs for 18 months and automatically renews for an additional 18 months unless terminated on 180 days notice prior to the expiration of the term. For its services, Sage is entitled to a monthly fee of $15,000. Should we enter into a Transaction during the term of the Sage Agreement or within 18 months thereafter, Sage is entitled to a success fee equal to five percent of all Consideration (as defined in the Sage Agreement) received by us and our affiliates as a result of the Transaction. The Success Fee is capped at $5,000,000 per year. At the sole discretion of our Board, Sage may receive an additional bonus for extraordinary performance or special projects up to $250,000 per year. Upon execution of the Sage Agreement, we issued an aggregate of 545,000 10 year options to Sage personnel.

In January 2010, we engaged an Argentinean regulatory and business design entity to explore the possibility of initiating clinical trials of Alferon N Injection®, Ampligen® and Alferon® LDO during the influenza season in Argentina. On June 14, 2010, we executed an exclusive Sales, Marketing, Distribution and Supply Agreement for Argentina with GP Pharm Latinoamerica (“GP Pharm”), an affiliate company of Spanish GP Pharm SA. Under this Agreement, GP Pharm will be responsible for gaining regulatory approval in Argentina for Ampligen® to treat CFS in Argentina and for commercializing Ampligen® for this indication in Argentina. We granted GP Pharm the right to expand rights to sell this experimental therapeutic into other Latin America countries based upon GP Pharm achieving certain performance milestones. We also granted GP Pharm an option to market Alferon N Injection®, in Argentina and other Latin America countries as well. Under this Agreement, we will manufacture and supply Ampligen® to GP Pharm. On November 15, 2010, we amended our June 15, 2010 agreement with GP Pharm to include Mexico in the Territory under the Sales, Marketing, Distribution and Supply Agreement. Under this Agreement, GP Pharm Mexico will be responsible for gaining regulatory approval in Mexico for Ampligen®, an experimental therapeutic, to treat CFS in Mexico and for commercializing Ampligen® for this indication in Mexico. The Company has granted GP Pharm the right to expand rights to sell this experimental therapeutic into other Latin America countries based upon GP Pharm achieving certain performance milestones.

RNA based products and toll-like receptors (“TLRs”) have demonstrated great promise in preclinical and limited clinical applications resulting in active research and development by large pharmaceutical companies and emerging Biotech firms. As such, our potential competitors are among the largest pharmaceutical companies in the world, are well known to the public and the medical community, and have substantially greater financial resources, product development, and manufacturing and marketing capabilities than we have.

These companies and their competing products may be more effective and less costly than our products. In addition, conventional drug therapy, surgery and other more familiar treatments will offer competition to our products. Furthermore, our competitors have significantly greater experience than we do in pre-clinical testing and human clinical trials of pharmaceutical products and in obtaining FDA (in the US), Agency for the Evaluation of Medicinal Products (“EMEA”) (in Europe) and Health Protection Branch ("HPB") (in Canada), and other regulatory approvals of products. Accordingly, our competitors may succeed in obtaining FDA, EMEA and HPB product approvals more rapidly than us. If any of our products receive regulatory approvals and we commence commercial sales of our products, we will also be competing with respect to manufacturing efficiency and marketing capabilities, areas in which we have no experience. Our competitors may possess or obtain patent protection or other intellectual property rights that prevent, limit or otherwise adversely affect our ability to develop or exploit our products.

The major pharmaceutical competitors with biotech capabilities/vaccine franchises include Pfizer, GSK, Wyeth (now part of Pfizer), Merck, Novartis, Gilead Pharmaceutical, and Schering-Plough Corp (now part of Merck). Biotech competitors include Baxter, Fletcher/CSI, AVANT Immunotherapeutics, AVI Biopharma and GENTA. When we recommence sales of Alferon N Injection®, it will again compete with products produced by Schering-Plough Corp. and others for treating genital warts. 3M Pharmaceutical also markets its immune response modifier product, Aldera®, for the treatment of genital and perianal warts. We believe the approval and marketing of this product is the main reason that past sales of Alferon N Injection® have not met our expectations since acquisition. In November 2006, the botanical drug, Veregen® (marketed by Bradley Pharmaceuticals) was also approved for the topical treatment of genital and perianal warts. In addition, because certain competitive products are not dependent on a source of human blood cells, such products may be able to be produced in greater volume and at a lower cost than Alferon N Injection®. Our wholesale price on a per unit basis of Alferon N Injection® is higher than that of the competitive recombinant alpha and beta interferon products.

Regulation by governmental authorities in the U.S. and foreign countries is and will be a significant factor in the manufacture and marketing of Alferon® N products and our ongoing research and product development activities. Ampligen® and other products developed from the ongoing research and product development activities will require regulatory clearances prior to commercialization. In particular, new drug products for humans are subject to rigorous preclinical and clinical testing as a condition for clearance by the FDA and by similar authorities in foreign countries. The lengthy process of seeking these approvals, and the ongoing process of compliance with applicable statutes and regulations, has and will continue to require the expenditure of substantial resources. Any failure by us or our collaborators or licensees to obtain, or any delay in obtaining, regulatory approvals could materially adversely affect the marketing of any products developed by us and our ability to receive product or royalty revenue. We have received Orphan Drug designation for certain therapeutic indications, which might under certain conditions, help to accelerate the process of drug development and commercialization. Alferon N Injection® is only approved for use in intra-lesional treatment of refractory or recurring external genital warts in patients 18 years of age or older. Use of Alferon N Injection® for other applications requires regulatory approval.

We are subject to various federal, state and local laws, regulations and recommendations relating to such matters as safe working conditions, laboratory and manufacturing practices, the experimental use of animals and the use of and disposal of hazardous or potentially hazardous substances, including radioactive compounds and infectious disease agents, used in connection with our research work. Our laboratory and production facility in New Brunswick, New Jersey is approved for the manufacture of Alferon N Injection® and we believe it is in substantial compliance with all material regulations. However, there can be no assurance that this facility, or facilities owned and operated by third parties that are utilized in the manufacture of our products, will be considered by the FDA to be in substantial compliance at the present time or in the future.

As of March 1, 2011, we had 56 personnel consisting of 29 full-time employees or consultants and 27 regulatory/research medical personnel on a part-time basis. Part-time personnel are paid on a per diem or monthly basis. 37 personnel are engaged in our research, development, clinical, and manufacturing effort. 19 of our personnel perform regulatory, general administration, data processing, including bio-statistics, financial and investor relations functions. We have no union employees and we believe our relationship with our employees is good.

While we have been successful in attracting skilled and experienced scientific personnel, there can be no assurance that we will be able to attract or retain the necessary qualified employees and/or consultants in the future.

Our Scientific Advisory Board presently consists of two individuals who we believe have particular scientific and medical expertise in Virology, Cancer, Immunology, Biochemistry and related fields. Dr. James Rahal, Director of the Infectious Disease Section of New York Hospital Queens, is one of the nation's foremost experts on the West Nile Virus. Professor Luc Montagnier of the Institut Pasteur in Paris has devoted his career to the study of viruses and is perhaps best known for the 2008 receipt of the Nobel Prize in Medicine related to his discovery of the Human Immunodeficiency Virus (“HIV”). It is the role of this Board to advise us about current and long-term scientific planning including research and development. The Scientific Advisory Board conducts periodic meetings as needed. No Scientific Advisory Board meetings were held in 2010 or 2009, primarily due to fewer active scientific projects. However, individual Scientific Advisory Board Members sometime consult with and meet informally with our employees or Board Members. Members of the Scientific Advisory Board are employed by others and may have commitments to and/or consulting agreements with other entities, including our potential competitors.

In May 2010, we formed a Data Safety Monitoring Board (“DSMB”) that consists of two independent regulatory and medical experts along with a Biostatistics expert. The function of the DSMB is to perform independent safety and efficacy analyses on our clinical trials with Alferon® LDO. However with Alferon® LDO study Phase II, double-blind, randomized, placebo controlled, dose-ranging study only released us from Clinical Hold on December 22, 2010, the DSMD has yet to take action.

We are a specialty pharmaceutical company based in Philadelphia, Pennsylvania and engaged in the clinical development of new drug therapies based on natural immune system enhancing technologies for the treatment of viral and immune based chronic disorders. We were founded in the early 1970s doing contract research for the National Institutes of Health. Since that time, we have established a strong foundation of laboratory, pre-clinical and clinical data with respect to the development of natural interferon and nucleic acids to enhance the natural antiviral defense system of the human body and to aid the development of therapeutic products for the treatment of certain chronic diseases. We have three domestic subsidiaries BioPro Corp., BioAegean Corp., and Core BioTech Corp., all of which are incorporated in Delaware and are dormant. Our foreign subsidiary is Hemispherx Biopharma Europe N.V./S.A. established in Belgium in 1998, which has no activity. All significant intercompany balances and transactions have been eliminated in consolidation.

Our current strategic focus is derived from four applications of our two core pharmaceutical technology platforms Ampligen® and Alferon N Injection®. The commercial focus for Ampligen® includes application as a treatment for Chronic Fatigue Syndrome (“CFS”) and as an influenza vaccine enhancer (adjuvant) for both therapeutic and preventative vaccine development. Alferon N Injection® is a Food and Drug Administration (“FDA”) approved product with an indication for refractory or recurring genital warts. Alferon® LDO (Low Dose Oral) is a formulation currently under development targeting influenza.

We own and operate a 43,000 sq. ft. FDA approved facility in New Brunswick, NJ that was primarily designed to produce Alferon®. On September 16, 2009, our Board of Directors approved up to $4.4 million for full engineering studies, capital improvements, system upgrades and introduction of building management systems to enhance production of three products: Alferon N Injection®, Alferon® LDO and Ampligen®. (Please see “Manufacturing” in Item 1. Business for more information.)

Our principal executive offices are located at One Penn Center, 1617 JFK Boulevard, Philadelphia, Pennsylvania 19103, and our telephone number is 215-988-0080.

We file our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 electronically with the Securities and Exchange Commission, or SEC. The public may read or copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that site is http://www.sec.gov.

You may obtain a free copy of our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and amendments to those reports on the day of filing with the SEC on our website on the World Wide Web at http://www.hemispherx.net or by contacting the Investor Relations Department by calling (518) 398-6222 or sending an e-mail message to [email protected].

Our primary pharmaceutical product platform consists of our experimental compound, Ampligen®, our FDA approved natural interferon product, Alferon N Injection® and Alferon® LDO (low dose oral), our experimental liquid natural interferon for oral administration.

Ampligen® is an experimental drug currently undergoing clinical development for the treatment of Myalgic Encephalomyelitis / Chronic Fatigue Syndrome (“ME/CFS”). Over its developmental history, Ampligen® has received various designations, including Orphan Drug Product Designation (FDA), Treatment IND (e.g., treatment investigational new drugs, or “Emergency” or “Compassionate” use authorization) with Cost Recovery Authorization (FDA) and “promising” clinical outcome recognition based on the evaluation of certain summary clinical reports (“AHRQ” or Agency for Healthcare Research and Quality). Ampligen® represents the first drug in the class of large (macromolecular) RNA (nucleic acid) molecules to apply for New Drug Application (“NDA”) review. Based on the results of published, peer reviewed pre-clinical studies and clinical trials, we believe that Ampligen® may have broad-spectrum anti-viral and anti-cancer properties. Over 1,000 patients have participated in the Ampligen® clinical trials representing the administration of more than 90,000 doses of this drug.

Nucleic acid compounds represent a potential new class of pharmaceutical products that are designed to act at the molecular level for treatment of human diseases. There are two forms of nucleic acids, DNA and RNA. DNA is a group of naturally occurring molecules found in chromosomes, the cell’s genetic machinery. RNA is a group of naturally occurring informational molecules which orchestrate a cell’s behavior which, in turn, regulates the action of groups of cells, including the cells which compromise the body’s immune system. RNA directs the production of proteins and regulates certain cell activities including the activation of an otherwise dormant cellular defense against viruses and tumors. Our drug technology utilizes specifically-configured RNA. Our double-stranded RNA drug product, trademarked Ampligen®, an experimental, unapproved drug, that would be administered intravenously.

Clinical trials of Ampligen® already conducted by us include studies of the potential treatment of ME/CFS, Hepatitis B, HIV and cancer patients with renal cell carcinoma and malignant melanoma. All of these potential uses will require additional clinical trials to generate the safety and effectiveness data necessary to support regulatory approval.

On July 7, 2008, the FDA accepted for review our NDA for Ampligen® to treat CFS, originally submitted in October 2007. We are seeking marketing approval for the first-ever treatment for CFS. At present, only supportive, symptom-based care is available for CFS patients. The NDA for Ampligen®, whose chemical designation is Poly I: Poly C12U, is also the first ever accepted for review by the FDA for systemic use of a toll-like receptor therapy to treat any condition. On February 11, 2009, we were notified by the FDA that the originally scheduled Prescription Drug User Fee Act (“PDUFA”) date of February 25, 2009 has been extended to May 25, 2009. On May 22, 2009, we were notified by the FDA that it may require additional time to take action beyond the scheduled PDUFA action date of May 25, 2009. Between March 9, 2009 and September 15, 2009, we issued six new reports to the FDA spanning various subjects including clinical safety assessments, specialized pre-clinical toxicology reports and abbreviated chemistry and manufacturing control reports.

On November 25, 2009, we received a Complete Response Letter (“CRL”) from the FDA which described specific additional recommendations related to the Ampligen® NDA. In accordance with its 2008 Complete Response procedure, the FDA reviewers determined that they could not approve the application in its present form and provided specific recommendations to address the outstanding issues.

We are carefully reviewing the CRL and will seek a meeting with the FDA to discuss its recommendations upon the compilation of necessary data to be used in our response. We intend to take the appropriate steps to seek approval and commercialization of Ampligen®. Most notably, the FDA stated that the two primary clinical studies submitted with the NDA did not provide credible evidence of efficacy of Ampligen® and recommended at least one additional clinical study which shows convincing effect and confirms safety in the target population. The FDA indicated that the additional study should be of sufficient size and sufficient duration (six months) and include appropriate monitoring to rule out the generation of autoimmune disease. In addition, patients in the study should be on more than one dose regimen, including at least 300 patients on dose regimens intended for marketing. We continue to plan a confirmatory clinical study of 600 patients each, in which we intend to utilize the same primary endpoints as our earlier studies but with an enlarged number of subjects to potentially achieve a more representative statistical model. Lastly, additional data including a well-controlled QT interval study (i.e., a measurement of time between the start of the Q wave and the end of the T wave in the heart’s electrical cycle) and pharmacokinetic evaluations of dual dosage regiments were requested. Other items required by the FDA include certain aspects of Non-Clinical safety assessment and Product Quality. In the Non-Clinical area, the FDA recommended among other things that we complete rodent carcinogenicity studies in two species. As part of the NDA submission, we had requested that these studies be waived, but the waiver had not been granted.

In September 2008, we engaged Lovelace Respiratory Research Institute (“Lovelace”) in Albuquerque, New Mexico, to perform certain animal toxicity studies in support of our Ampligen® NDA.

On January 14, 2010, we submitted reports of new preclinical data regarding Ampligen® to the FDA that we believe should be sufficient to address certain preclinical issues in the FDA’s CRL. The preclinical studies discussed in these reports were the combined work-product of the staffs at Hemispherx and Lovelace regarding pharmacokinetic analyses in two lower animal species (primate and rodent). The new preclinical data showed no evidence of antibodies against Ampligen® in primates nor evidence of an increase in certain undesirable cytokines (specific modulators of the immune system) at clinically used doses of Ampligen® for CFS. Although most other experimental immunomodulators have been associated with one or more features of aberrant immune activity, including toll-like receptor activators (of which Ampligen® is one), this was specifically not seen with Ampligen® in primates.

Under the Product Quality section of the CRL, the FDA recommended that we submit additional data and complete various analytical procedures. The collection of these data and the completion of these procedures is already part of our ongoing Quality Control, Quality Assurance program for Ampligen® manufacturing under cGMP (“current Good Manufacturing Practice”) guidelines and our manufacturing enhancement program.

The FDA also commented on Ampligen® manufacturing noting the need to resolve outstanding inspection issues at the facilities producing Ampligen®. These include our facility located in New Brunswick, NJ and one of our third-party subcontractor manufacturing facilities, Hollister-Stier Laboratories of Spokane, Washington (“Hollister-Stier”). On December 11, 2009 via Hollister-Stier, we submitted comprehensive new data, from the combined work-product of both staffs, to the District Office (“DO”) of the FDA in Seattle, WA which we believed demonstrated that certain manufacturing issues noted in the pre-approval inspections at the facility had been fully addressed. On February 2, 2010, Hollister-Stier received a favorable response from the FDA’s Seattle DO in which they noted that certain manufacturing issues noted in the pre-approval inspection at this facility had been fully addressed and made a recommendation to the FDA’s Center for Drug Evaluation and Research (“CDER”) for approval of our subcontractor as a manufacturing site under the Ampligen® NDA. The DO recommendations are not binding on the FDA and pertain only to the specific manufacturing issues cited in the Ampligen® manufacturing response and to the subcontractor site. See “Manufacturing” below.

We are also engaged in ongoing, experimental studies assessing the efficacy of Ampligen® against influenza viruses. The status of our initiative for Ampligen® as an adjuvant for preventative vaccine development includes the pre-clinical studies in seasonal and pandemic influenza for intranasal administration being conducted by Japan’s National Institute for Infectious Diseases (“NIID”). A three year program targeting regulatory approval for pandemic influenza and seasonal influenza in Japan has been funded by the Japanese Ministry of Health with the NIID and Biken (operational arm of the non-profit Foundation for Microbial Disease of Osaka University) in which Ampligen® is used as a mucosal adjuvant with vaccine. Our arrangement with Biken is part of a process to develop an effective nasal administered vaccine for Japan utilizing the resources of the NIID, varied vaccines and Hemispherx supplied Ampligen®. See “Research and Development (R&D); Other Viral Diseases” below.

A Phase II Trial for intramuscular administration of Ampligen® for seasonal influenza was conducted in Australia through St. Vincent’s Hospital. We have attempted in good faith to obtain the clinical data and retrieve the study samples from St. Vincent’s recently restructured Clinical Trials Centre. As a prerequisite of payment, we requested the confirmation that samples were properly maintained utilizing current Good Clinical Practice (“cGCP”) and Good Laboratory Practice (“cGLP”) for the controlled environment as per our agreement. On February 5, 2010, our Counsel advised them in correspondence that, due to the failure to meet the condition precedent to payment, we had no choice but to declare them in breach of the agreement and our intention to terminate the relationship between parties. Due to the termination of this agreement, we are not able to test the samples taken for this study for efficacy (i.e., the capacity for beneficial change or therapeutic effect from a given treatment).

A study was published in the December 20, 2009 issue of “Virology” by a consortium of researchers at Utah State University and the University of North Carolina, regarding a newly developed animal model of Severe Acute Respiratory Disease Syndrome (“SARS”) which, according to the authors, “…largely mimicked human disease”. SARS emerged in 2002 in the Guangdong province of Southern China as a new infectious respiratory disease characterized by influenza-like symptoms with a very high mortality rate. The researchers characterized and adapted a new strain of the SARS virus (SARS-CoV) to mice that was 100% lethal and was associated with the overproduction of cytokines and severe lung pathology (Day CW, et al. Virology, 395:210-222, 2009). Multiple agents with purported antiviral activity were evaluated for activity in this unique mouse model of the human disease, including Ampligen®. The researchers found that, unique among the agents tested, Ampligen®, “…protected against death and gross damage to the lungs in the presence of lethal SARS-CoV” and was associated with a reduction in IL-6 concentration in which high levels of the cytokine correlated with the mortality of SARS-CoV infection. Mortality was high, under the conditions tested, for all the other antiviral agents examined that have previously been used extensively in humans with SARS without definitive evidence of efficacy (Stockman LJ, et al. PLoS Med 3 (9),e 343). To date, there are no approved agents for treating SARS. Animal experiments do not necessarily predict safety or efficacy in man. Encouraged by these results, we are now in preliminary discussions with Chinese clinical research organizations in an attempt to initiate clinical antiviral programs in China.

We estimate that it could take approximately 18 months to three years to complete an Ampligen® clinical study for resubmission to the FDA under the industry norm of three to six months to initiate the study, one to two years to accrue and test patients, three to six months to close-out the study and file the necessary documents with the FDA. The actual duration to complete the clinical study may be different based on the final design of an accepted FDA clinical Phase III study, availability of participants, clinical sites and any other factors that could impact the implementation of the study, analysis of results, or requirements of the FDA and other governmental organizations.

Additionally, we estimate that the approximate cost to undertake the Ampligen® Phase III clinical study could range from $12,000 to $18,500 per each of the 600 participating patients, for an estimated range of total costs of $7,200,000 to $11,100,000. Our estimate is based on the belief that our experience from the prior Phase III study and established teams (e.g., Medical, Data Processing, Clinical Monitors, Statisticians, Medical Reporting) along with existing inventory and investigational protocol, could produce financial efficiencies. We believe that these efficiencies could permit our costs of undertaking a Phase III CFS study to be discounted as compared to a potential $28,500 per patient cost approximated as an industry average for running a Phase III study from scratch, as estimated and adjusted for inflation, utilizing data from the business intelligence firm Cutting Edge Information. The actual costs of a Phase III investigation study for CFS may differ based on final design of an accepted FDA Phase III clinical study, prevailing costs to undertake clinical studies, qualification and access to CFS patients, insurance and government requirements along with other potential costs or reimbursements unknown at this time.

As discussed below in “Research And Development (“R&D”); Myalgic Encephalomyelitis/ Chronic Fatigue Syndrome” in the October 8, 2009 issue of Science Express, a consortium of researchers from the Whittemore Peterson Institute (“WPI”), the National Cancer Institute and the Cleveland Clinic reported a new retrovirus - XMRV (xenotropic murine leukemia related virus) - in the blood cells of 67% of Chronic Fatigue Syndrome (“CFS”) patients and 3.7% in healthy control subjects. We believe that our collaboration with WPI could determine if there is a correlation between patient samples from our previously completed Phase III trial of Ampligen® for CFS and XMRV. If a positive correlation can be determined, it may provide a new perspective on the design of the additional Phase III study as required by the FDA. However, until it can be determined if XMRV can be recognized and used as a potential validation marker to better identify potential CFS patients, we have delayed finalizing the design of the Phase III clinical study’s protocol. Therefore, the timing to begin and projection to complete the Phase III study are unknown at this time.

Aside from the foregoing, we cannot estimate what additional studies and/or additional testing or information that the FDA may require. Accordingly, as of this time, we are unable to estimate the nature, timing, costs and necessary efforts to obtain FDA clearance, the anticipated completion dates or whether we will obtain FDA clearance.

Alferon N Injection® is the registered trademark for our injectable formulation of natural alpha interferon, which is approved by the FDA for the treatment of certain categories of genital warts. Alferon® is the only natural-source, multi-species alpha interferon currently approved for sale in the U.S.

Interferons are a group of proteins produced and secreted by cells to combat diseases. Researchers have identified four major classes of human interferon: alpha, beta, gamma and omega. Alferon N Injection® contains a multi-species form of alpha interferon. The worldwide market for injectable alpha interferon-based products has experienced rapid growth and various alpha interferon injectable products are approved for many major medical uses worldwide. Alpha interferons are manufactured commercially in three ways: by genetic engineering, by cell culture, and from human white blood cells. All three of these types of alpha interferon are or were approved for commercial sale in the U.S. Our natural alpha interferon is produced from human white blood cells.

The potential advantages of natural alpha interferon over recombinant (synthetic) interferon produced and marketed by other pharmaceutical firms may be based upon their respective molecular compositions. Natural alpha interferon is composed of a family of proteins containing many molecular species of interferon. In contrast, commercial recombinant alpha interferon products each contain only a single species. Researchers have reported that the various species of interferons may have differing antiviral activity depending upon the type of virus. Natural alpha interferon presents a broad complement of species, which we believe may account for its higher activity in laboratory studies. Natural alpha interferon is also glycosylated (partially covered with sugar molecules). Such glycosylation is not present on the currently U.S. marketed recombinant alpha interferons. We believe that the absence of glycosylation may be, in part, responsible for the production of interferon-neutralizing antibodies seen in patients treated with recombinant alpha interferon. Although cell culture-derived interferon is also composed of multiple glycosylated alpha interferon species, the types and relative quantity of these species are different from our natural alpha interferon.

Alferon N Injection® [Interferon alfa-n3 (human leukocyte derived)] is a highly purified, natural-source, glycosylated, multi-species alpha interferon product. There are essentially no antibodies observed against natural interferon to date and the product has a relatively low side-effect profile.

The recombinant DNA derived alpha interferon are now reported to have decreased effectiveness after one year, probably due to antibody formation and other severe toxicities. These detrimental effects have not been reported with the use of Alferon N Injection®.

The FDA approved Alferon N Injection® in 1989 for the intralesional (within lesions) treatment of refractory (resistant to other treatment) or recurring external genital warts in patients 18 years of age or older. Certain types of human papillomaviruses (“HPV”) cause genital warts, a sexually transmitted disease (“STD”). The Centers for Disease Control and Prevention (“CDC”) estimates that approximately twenty million Americans are currently infected with HPV with another six million becoming newly infected each year.

Commercial sales of Alferon N Injection® were halted in March 2008 as the current expiration date of our finished goods inventory expired. We are undertaking a major capital improvement program to upgrade our manufacturing capability for Alferon N Injection® at our New Brunswick facility that will continue throughout 2010. As a result, Alferon N Injection® could be available for commercial sales in mid to late 2011. (Please see “Alferon® Low Dose Oral (LDO)” and “Manufacturing” below in Item 1. Business for more information.)

It is our belief that the use of Alferon® N in combination with Ampligen® has the potential to increase the positive therapeutic responses in chronic life threatening viral diseases. While Alferon N Injection® remains in clinical development for treating West Nile Virus, the ability to continue this study has been hampered by the significant reduction in confirmed cases. We also are planning trials of Alferon N Injection® for seriously ill, hospitalized influenza patients in Argentina and potentially other countries. (Please see “Alferon® Low Dose Oral (LDO)” below for more information.)

Alferon® Low Dose Oral (LDO)

Alferon® LDO [Low Dose Oral Interferon Alfa-n3 (Human Leukocyte Derived)] is an experimental low-dose, oral liquid formulation of Natural Alpha Interferon and like Alferon N Injection® should not cause antibody formation, which is a problem with recombinant interferon. It is an experimental immunotherapeutic believed to work by stimulating an immune cascade response induced by cells through absorption in the oral mucosa, enabling it to bolster systemic antiviral responses. Oral interferon could be economically feasible for patients and logistically manageable in development programs in third-world countries primarily affected by avian or swine influenza and other emerging viruses. Oral administration of Alferon® LDO, with its anticipated affordability, low toxicity, no production of antibodies, and broad range of potential bioactivity, may provide a low cost treatment or prevention for a broad spectrum of viral diseases.

We have conducted early stage clinical trials as part of an evaluation of the experimental bio-therapeutic Alferon® LDO as a potential new experimental therapy against influenza viruses and other lethal viral diseases, which have high acute death rates. Clinical trials in human volunteers were designed to determine whether Alferon®, delivered in this new, experimental oral drug delivery format, can resuscitate the broad-spectrum antiviral and immunostimulatory genes. While adequate samples were retrieved from the clinical trials sites, the next phase of the study was delayed due to funding considerations and has recently been reinitiated. Potential facilities to undertake the gene expression analysis phase of the study are currently being identified with the intention to complete the clinical trial.

Alferon® LDO is undergoing pre-clinical testing for possible prophylaxis against influenza. Subject to FDA authorization and/or authorization of regulatory authorities in other countries, the finished goods inventory of Alferon N Injection® 5ml vials could be used to produce approximately 11,000,000 sachets of Alferon® Low Dose Oral (“LDO”) for clinical trials. However, no assurance can be given that this inventory will be permitted to be used in future clinical trials or for any other clinical use. While the studies to date have been encouraging, preliminary testing in the laboratory and animals is not necessarily predictive of successful results in clinical testing or human treatment. No assurance can be given that similar results will be observed in clinical trials. Use of Alferon® as a possible treatment of any influenza or other viral infection requires prior regulatory approval and there can be no assurance that such approval can be obtained either for clinical trial use or commercial sale.

In October 2009, we submitted a protocol to the FDA proposing to conduct a Phase II Trial, well-controlled, clinical study using Alferon® LDO for the prophylaxis and treatment of seasonal and pandemic influenza of more than 200 subjects. Following a teleconference with the FDA in November 2009, the FDA placed the proposed study on “Clinical Hold” because the protocol was deemed by the FDA to deficient in design, and because of the need for additional information to be submitted in the area of chemistry, manufacturing and controls (“CMC”). Thereafter in December 2009, we submitted additional information by Amendment with respect to both the clinical protocol design issues and the CMC items. In January 2010, the FDA acknowledged that our responses to the clinical study design issues were acceptable; however, removal of the Clinical Hold was not warranted because the FDA believed that certain CMC issues had not been satisfactorily resolved. In this regard, the FDA communicated concern regarding the extended storage of Alferon® LDO drug product clinical lots which had been manufactured from an active pharmaceutical ingredient (“API”) of Alferon N Injection® manufactured in year 2001. While the biological (antiviral) potency of the product had remained intact, we learned through newly conducted physico-chemical tests (the “new tests” of temperature, pH, oxidation and light on the chemical stability of the active API), that certain changes in the drug over approximately nine storage years (combined storage of Alferon N Injection® plus storage of certain LDO sachets) had introduced changes in the drug which might adversely influence the human safety profile. These “new tests” are part of recent FDA requirements for biological products, such as interferon, which did not exist at the time of the original FDA approval of Alferon N Injection® for commercialization and at the time of FDA approval of the “Establishment License” for Hemispherx’ manufacturing facility. Based on the recent FDA request, we have now established and implemented the “new test” procedures. As a result, we have found that certain Alferon N Injection® lots with extended storage (i.e., approximately eight to nine years) do appear to demonstrate some altered physico-chemical properties. However we have also observed that more recent lots, including those manufactured beginning in the year 2006, are superior with respect to the enhanced scrutiny of these tests and, in our view, could be considered appropriate for clinical trials in the Alferon® LDO sachet format. Due to the capital improvements and enhancements to the manufacturing process at our New Brunswick facility, we intend to submit new data to the FDA in late 2010 utilizing more current Raw Materials and/or Work In Progress inventory. We believe that the full Clinical Hold could be thereafter lifted if the FDA concurs that these data address the outstanding CMC issues cited in the January 2010 FDA recommendations.

In 1999, we acquired a series of patents on Oragens®, potentially a set of oral broad spectrum antivirals and immunological enhancers, through a licensing agreement with Temple University in Philadelphia, PA. For a $30,000 annual minimum royalty payment and costs to maintain the patents, we were granted an exclusive worldwide license from Temple for the Oragens® products. These compounds had been evaluated in various academic laboratories for application to chronic viral and immunological disorders.

In the 2009 review of our patent rights to determine whether they have continuing value, we undertook an analysis of the Oragen® patents prior to renewing the licensing agreement with Temple University. This review included a cost/benefit analysis of the patents’ ultimate revenue and profitability potential in consideration of their remaining life. In addition, management studied the rights as to whether each patent continues to fit into our strategic business plans for Ampligen®, Alferon N Injection® and Alferon® LDO. As a result of this process, we proposed a patent renewal agreement that significantly discounted the prior agreement’s annual minimum royalty payment. In February 2010, it was formally communicated by Temple University that they had elected not to pursue our proposal to renew the series of patents on Oragens®. Accordingly as of December 2009, we wrote-off the remaining value of these patents from Patent and Trademark Rights resulting in a net expense for Patents Abandoned of $114,000.

The following table sets forth the costs related to our major products for each of the prior three years. Our aggregate expenses from the time that we first started developing nucleic acid pharmaceutical technology in the mid 1980s through March 2003 were substantially related to the development of Ampligen®, and from that date through the current period were substantially related to Ampligen® and Alferon

(dollars in thousands) Costs and Expenses Year Ended December 31, 2009 Ampligen® NDA Alferon N Injection® Alferon ® LDO Other Total Production/cost of goods sold $ - $ 584 $ - $ - $ 584 Research and development 5,026 - 1,784 185 6,995 General and administrative 3,844 447 1,364 141 5,796 Total $ 8,870 $ 1,031 $ 3,148 $ 326 $ 13,375

(dollars in thousands) Costs and Expenses Year Ended December 31, 2008 Ampligen® NDA Alferon N Injection® Alferon ® LDO Other Total Production/cost of goods sold $ - $ 798 $ - $ - $ 798 Research and development 5,491 - - 309 5,800 General and administrative 5,392 783 - 303 6,478 Total $ 10,883 $ 1,581 $ - $ 612 $ 13,076

(dollars in thousands) Costs and Expenses Year Ended December 31, 2007 Ampligen® NDA Alferon N Injection® Alferon® LDO Other Total Production/cost of goods sold $ - $ 930 $ - $ - $ 930 Research and development 10,283 - - 161 10,444 General and administrative 8,113 784 - 127 8,974 Total $ 18,396 $ 1,664 $ - $ 288 $ 20,348

We have 38 patents worldwide with 46 additional pending patent applications pending comprising our intellectual property. In 2006, we obtained the global patent rights for a compound that enhances DNA vaccination by the efficient intracellular delivery of immunogenic DNA (i.e., DNA that can produce antigenic proteins that simulate an acute viral infection with a resultant humoral and cell-mediated immune response). Please see “Note 4: Patents, Trademark Rights and Other Intangibles” under Notes To Consolidated Financial Statements for more information on these patents.

We continually review our patents rights to determine whether they have continuing value. Such review includes an analysis of the patent’s ultimate revenue and profitability potential. In addition, management’s review addresses whether each patent continues to fit into our strategic business plans for Ampligen®, Alferon N Injection® and Alferon® LDO.

With respect to Ampligen®, the main U.S. ME/CFS treatment patent (#6130206) expires October 10, 2017. Our main patents covering HIV treatment (#4820696, #5063209, and #5091374) expired on April 11, 2006, November 5, 2008, and February 25, 2009, respectively; Hepatitis treatment coverage is conveyed by U.S. patent #5593973 which expires on January 14, 2014. Our U.S. Ampligen® Trademark (#73/617,687) has been renewed through December 6, 2018.

In addition to our patent rights relating to Ampligen®, the FDA has granted “orphan drug status” to the drug for ME/CFS, HIV/AIDS, and renal cell carcinoma and malignant melanoma. Orphan drug status grants us protection against the potential approval of other sponsors’ versions of the drug for these uses for a period of seven years following FDA approval of Ampligen® for each of these designated uses. The first NDA approval for Ampligen® as a new chemical entity will also qualify for four or five years of non-patent exclusivity during which abbreviated new drug applications seeking approval to market generic versions of the drug cannot be submitted to the FDA. See “Government Regulation” below.

The U.S. patents relating to our Alferon® products expire April 2, 2013 (5,503,828) October 14, 2014 (5,676,942) and December 22, 2017 (5,989,441).

Our general focus is on developing drugs for use in treating viral and immune based chronic disorders and diseases such as ME/CFS, HIV, HPV, SARS and West Nile Virus. Our current R&D projects are only targeting treatment therapies for ME/CFS and other viral diseases such as prevention and treatment of seasonal and pandemic H1N1 or Avian influenza.

Our primary focus during the past three fiscal years has been on our Ampligen® New Drug Application for the treatment of CFS. In 2009, we also began to develop Alferon® Low Dose Oral for treatment of viral diseases.

The following table summarizes our research and development costs for the years 2007, 2008 and 2009 by project.

(in thousands) 2007 2008 2009 Ampligen® New Drug Application for the treatment of Chronic Fatigue Syndrome $ 10,283 $ 5,491 $ 5,026 Alferon® LDO - - 1,784 Other projects 161 309 185 Total research and development $ 10,444 $ 5,800 $ 6,995

In November 2009, we received a CRL from the FDA which indicated, among other things, that an additional study would be needed to confirm safety and our Alferon® LDO is in the initial stages of development. See “Our Products” above. Aside from our discussion above in “Our Products; Ampligen®”, we cannot estimate what additional studies and/or additional testing or information that may be required by the FDA. Accordingly, as of this time, we are unable to estimate the nature, timing, costs and necessary efforts to complete these projects nor the anticipated completion dates. In addition, we have no basis to estimate when material net cash inflows are expected to commence. We have yet to generate any revenues from the sale of these products. As of December 31, 2009, we had approximately $58.1 million in Cash and Cash Equivalents and, based upon our current anticipated financial needs, absent unexpected circumstances or new opportunities, we anticipate, but cannot assure, that we will be able to fund operations for at least the next five years. However, if we are unable to timely commercialize and sell Ampligen® for the treatment of CFS or Alferon® LDO and/or recommence material sales of Alferon N Injection®, our operations, financial position and liquidity will be adversely effected (see Item 1A. Risk Factors; “We may require additional financing which may not be available” below).

Chronic Fatigue Syndrome (“CFS”), also known as Chronic Immune Dysfunction Syndrome (“CFIDS”) and, Myalgic Encephalomyelitis (“ME”) is a serious and debilitating chronic illness and a major public health problem. ME/CFS is recognized by both the government and private sector as a major health problem, including the National Institutes of Health, FDA and the U.S. Centers for Disease Control and Prevention (“CDC”). The CDC listed ME/CFS as a priority disease, causing severe health and financial problems for patients, their family, and the community. ME/CFS is endemic in the population, but occasionally seen in clusters suggesting an infectious basis. A variety of immunological, endocrine, autonomic nervous system, and metabolic abnormalities have been documented.

Dr. Julie Gerberding, former director of the CDC and current president of Merck & Company’s vaccine division, has stated that "The CDC considers Chronic Fatigue Syndrome to be a significant public health concern and we are committed to research that will lead to earlier diagnosis and better treatment of the illness." A variety of studies by the CDC and others have shown that between 1 and 4 million Americans suffer from CFS. While those with the disease are seriously impaired and at least a quarter are unemployed or on disability because of CFS, only about half have consulted a physician for their illness. Equally important, about 40% of people in the general population who report symptoms of ME/CFS have a serious, treatable, previously unrecognized medical or psychiatric condition (such as diabetes, thyroid disease, substance abuse). ME/CFS is a serious illness and poses a dilemma for patients, their families and health care providers.

The CDC has launched a national public education and awareness campaign on CFS. The campaign, called "Get Informed. Get Diagnosed. Get Help." is designed to increase awareness among clinicians and the public because 80 percent of Americans afflicted with CFS illness may not know they have it. The campaign provides information regarding the diagnosis and treatment of CFS, and is designed to raise awareness of the disease among patients and clinicians. A CDC sponsored website at www.cdc.gov/cfs provides easy to understand, downloadable educational tools for patients, their families and health care professionals.

While ME/CFS strikes people of all age, racial, ethnic, and socioeconomic groups, it is most prevalent amongst women. Research has shown that ME/CFS is about three times as common in women as men, a rate similar to that of many autoimmune diseases, such as multiple sclerosis and lupus. To put this into perspective, ME/CFS is over four times more common than HIV infection in women, and the rate of ME/CFS in women is considerably higher than a woman's lifetime risk of getting lung cancer as published by the CFIDS Association of America.

Many severe ME/CFS patients become completely disabled or totally bedridden and are afflicted with severe pain and mental confusion even at rest. ME/CFS is characterized by incapacitating fatigue with profound exhaustion and extremely poor stamina, sleep difficulties and problems with concentration and short-term memory. It is also accompanied by flu-like symptoms, pain in the joints and muscles, tender lymph nodes, sore throat and new headaches. A distinctive characteristic of the illness is a worsening of symptoms following physical or mental exertion which do not subside with rest.

The case definition for ME/CFS criteria calls for certain symptoms to be present along with fatigue that interferes with physical, mental, social and educational activities. Both the fatigue and symptoms must have occurred for (at least) a six month period. People with ME/CFS may experience many more than the symptoms named in the case definition, so knowledgeable physicians will take this fact into consideration when making a diagnosis (after other possible reasons for symptoms have been ruled out).

Most ME/CFS patients are treated symptomatically with traditional treatments geared toward treating symptoms of the disease, such as improving quality of sleep, reducing pain and treatment of depression. Clinically, a number of different therapeutic approaches have been pursued, but with no significant clinical success.

Because no cause for ME/CFS has been identified, current treatment programs are directed at relieving symptoms, with the goal of the patient regaining some level of function and well-being. Diagnosis of ME/CFS is a time-consuming and challenging process for which there is no FDA approved diagnostic test or biomarker to clearly identify the disorder. Diagnosis is primarily arrived at by taking a patient's medical history, completing a physical exam and lab tests to rule out other conditions excluding other illnesses with similar symptoms and comparing a patient's symptoms with the case definition. Overlapping symptoms can occur with several diseases, such as fibromyalgia, Gulf War Illnesses and multiple chemical sensitivities. Many diseases have similar symptoms including Lupus and Lyme disease which may closely mimic ME/CFS that they need to be considered when making a diagnosis to rule them out. If there are no abnormal test results or other physical ailments identified, clinicians can use standardized tests to quantify the level of fatigue and evaluate symptoms. Diagnosis can be complicated by the fact that the symptoms and severity of CFS vary considerably from patient to patient. New diagnostic approaches to possibly accelerate the identification of ME/CFS are being developed (see below in this section regarding the Whittemore Peterson Institute).

The leading model of ME/CFS pathogenesis is thought to be rooted in abnormalities in the immune system and brain (central nervous system), each of which affects and alters the function of the other. Because some cases of CFS begin with a flu-like infection, several viruses have been studied as possible causes because all are relatively common in the general population, including Human Herpesvirus (“HHV”) 6 and 7, Retroviruses, Epstein-Barr Virus, Enteroviruses, as well as, Mycoplasmas, etc. The etiology is likely to be related to a collection of factors, including viral, hormonal, stress, and other triggers for the illness in genetically, environmentally or otherwise susceptible individuals and continues to be a subject of discussion.

In the October 8, 2009 issue of Science Express, a consortium of researchers from the Whittemore Peterson Institute (“WPI”), the National Cancer Institute and the Cleveland Clinic report a new retrovirus in the blood cells of 67% of CFS patients and 3.7% in healthy control subjects. The infectious virus was also greater than 99% identical to that previously detected in prostate cancer. Patients with CFS are known to display various abnormalities in immune system functions and experience both higher cancer rates and neurological pathology, which have been associated with the human retroviruses HIV and HTLV-1. While an updated agreement is being finalized, we continue to collaborate with WPI under the terms of an Evaluation Agreement that expired on July 23, 2010 to evaluate Hemispherx patient samples for XMRV using WPI’s proprietary flow cytometry assay. Immunosuppression is often seen in CFS patients and may be a feature of many retroviruses in animal and man. We are presently also collaborating with the Institute with respect to the potential roles of the novel retrovirus more generally found in CFS. These studies are taking the form of both retrospective analysis from stored samples of CFS patients, with and without Ampligen® treatment, along with prospective clinical studies.

We are engaged in ongoing, experimental studies assessing the efficacy of Ampligen®, Alferon N Injection® and Alferon® LDO against influenza viruses. Ampligen® as a mucosal adjuvant with vaccine has been studied at Japan’s National Institute of Infectious Disease (“NIID”) and at Biken (the for profit operational arm of the Foundation for Microbial Diseases of Osaka University). We have been focusing our resources on the studies being undertaken in Japan and the United States along with the design of new Alferon® LDO studies for both prevention and treatment of seasonal or pandemic influenza.

We had a material evaluation agreement with Biken which expired on September 1, 2010. We are in active discussions with Biken to extend the agreement. Pursuant to the agreement, we supplied Biken with proprietary information related to Ampligen® and Biken purchased Ampligen® from us for use solely in connection with evaluating Ampligen® as a candidate for adjuvant incorporated into potential influenza virus vaccines in the form of intranasal mucosal administration, including conducting further animal studies of intranasal prototype vaccines containing antigens from various influenza sub-types, including H5N1, H1N1, H3N2 and B. This collaboration may progress to human studies and has received the support of the Japanese Health Ministry.

Investigators from Japan’s NIID have conducted studies in animals that suggest that Ampligen® can stimulate a sufficiently broad immune response to provide cross-protection against a range of virus genetic types, including H5N1 and derivative clades. Japan’s Council for Science & Technology Policy (“CSTP”), a cabinet level position, has awarded funds from Japan’s CSTP to advance research with influenza vaccines utilizing Ampligen. The Principal Investigator, Dr. Hideki Hasegawa, M.D., Ph.D., Chief of Laboratory of Mucosal Vaccine Development Virus Research Center, undertook studies in 2009 and plans to continue these studies throughout 2010 that focus on mucosal immunity and the inherent advantages of a vigorous immune response to respiratory pathogens. Dr. Hasegawa has published data that the formulation of pandemic vaccine mixed with Ampligen® increases immuno-genicity and may demonstrate cross protection against mutated strains. Initial data from findings in mice exposed to the most virulent forms of pandemic influenza (H5N1) suggest that standard human seasonal influenza vaccines given alone, and having no benefit on H5N1 influenza virus pathology and clinical status, were nonetheless effective against pandemic virus when combined with Ampligen® when applied intranasally in very small doses in a prophylactic treatment setting. Clinical trials emanating from successful primate (monkey) studies are anticipated to begin in 2010.

Dr. Hasegawa expanded the data on Ampligen® in an October 23, 2009, issue of “Vaccine” (Vol. 27, issue 45, pp 6276-6279) to include the conveyance of cross-protective immunity against various variants of the pandemic influenza virus. In this article, jointly published by researchers at NIID and Yale University, it was communicated that Ampligen® may convey two additional biological properties, in addition to the above referenced cross-protection, when co-administered intranasally with pandemic influenza vaccines: 1) the enhancement of immunity with higher IgA and IgG levels, which may convey a survival/therapeutic advantage in animal model systems, and 2) the potential to widen the therapeutic (preventative) profile (“heterosubtypic immunity”) by protecting against a phenomenon known as “antigenic drift” in which the pandemic virus may escape the preventative effect of the vaccine; this phenomenon is well-established with avian H5N1 virus and mitigated the potential effectiveness of various influenza vaccines manufactured several years ago in the U.S.A. Animal model experiments do not necessarily predict biological behavior in man.

We received notice of an Annual Report (April 2008-March 2009) prepared by a Director of the NIID to the governing organization of the Japanese Ministry of Health (“MHLW”) reporting a series of successful preclinical studies in new pandemic vaccines which rely on Ampligen® (Poly I: Poly C12U). Efficacy in these studies was shown both within the airways themselves as well as systemically. As a result, the program is expected to be accelerated from animal studies into human volunteers promptly under supervision of NIID staff. The project is officially titled “Clinical Application of the Influenza Virus Vaccine in the Intranasal Dosage Form for Mucosal Administration”. To date, only very few pharmaceutical companies world-wide have achieved regulatory authorizations to sell intranasally administered influenza vaccines versus many companies receiving approval for intramuscular vaccine delivery routes.

Concurrently, Biken successfully completed in co-operation with NIID a series of animal/preclinical tests on new pandemic vaccines with Ampligen® as a mucosal adjuvant. Biken is expected to undertake studies for regulatory requirements such as safety, stability and formulation to be shared with NIID. Successful studies in animal models, including the monkey studies conducted to date under auspices of the NIID, do not necessarily predict human safety and efficacy of any investigational product including Ampligen®. To support preclinical studies, Ampligen® especially formulated for intranasal use had been manufactured and on August 17, 2009 we shipped Ampligen® to Biken for use in the preclinical studies they are conducting prior to initiating human clinical trials.

The emergence of a new H1N1 Swine Flu strain provides additional significance to the Japanese studies. The original studies by Dr. Hasegawa and his colleagues provided the basis for the expanded preclinical trials that demonstrated cross-clade protection against H5N1 isolates following vaccination with a seasonal influenza vaccine (J Infect Dis.196:1313-1320, 2007). With this in mind, Biken is concentrating its efforts to proceed on a regulatory path for the registration of H5N1 intranasal vaccine combined with Ampligen® in Japan.

On July 15, 2010, we entered into an amended adviser's agreement (the "Sage Agreement") with The Sage Group, Inc. ("Sage") that amends and supersedes all other agreements and arrangements between the parties. Sage was instrumental in securing our relationship with Biken. Pursuant to the Sage Agreement, we have retained Sage to assist us in finding and consummating licensing, partnering, distribution, alliance or other similar transactions pertaining to and promoting the sale of our products and technologies ("Transactions"). Transactions do not include agreements that are non-revenue producing such as research arrangements or feasibility studies. The Sage Agreement runs for 18 months and automatically renews for an additional 18 months unless terminated on 180 days notice prior to the expiration of the term. For its services, Sage is entitled to a monthly fee of $15,000. Should we enter into a Transaction during the term of the Sage Agreement or within 18 months thereafter, Sage is entitled to a success fee equal to five percent of all Consideration (as defined in the Sage Agreement) received by us and our affiliates as a result of the Transaction. The Success Fee is capped at $5,000,000 per year. At the sole discretion of our Board, Sage may receive an additional bonus for extraordinary performance or special projects up to $250,000 per year. Upon execution of the Sage Agreement, we issued an aggregate of 545,000 10 year options to Sage personnel.

In January 2010, we engaged an Argentinean regulatory and business design entity to explore the possibility of initiating clinical trials of Alferon N Infection®, Ampligen® and Alferon® LDO during the influenza season in Argentina.

A clinical trial for intramuscular administration of Ampligen® for seasonal influenza conducted in Australia through St. Vincent’s Hospital utilized Ampligen® administered intramuscularly (“IM”) in combination with seasonal influenza vaccine. This open-label study (Phase IIa Trial) utilized Ampligen® (Poly I: Poly C12U) as a potential immune-enhancer in Australia with thirty-eight subjects age 60 or greater with the standard trivalent seasonal influenza vaccines. We have attempted in good faith to obtain the clinical data and retrieve the study’s samples from St. Vincent’s recently restructured Clinical Trials Centre. As a prerequisite of payment, we requested the confirmation that samples were properly maintained utilizing current Good Clinical Practice (“cGCP”) and Good Laboratory Practice (“cGLP”) for the controlled environment as required by our agreement. In February 2010, our General Counsel advised them in correspondence that due to the failure to meet the condition precedent for payment, we had no choice but to declare them in breach of the agreement and our intention to terminate the relationship between parties. Due to the termination of this agreement, we are not able to test the samples collected in this study for efficacy (i.e., the capacity for beneficial change or therapeutic effect from a given treatment).

A peer-reviewed article providing study data on Ampligen® was published in a recent issue of the “American Journal of Obstetrics and Gynecology” (January 15, 2010, vol. 202). The report, whose lead author is Dr. Jonathan S. Berek, Professor and Chair, Obstetrics and Gynecology, Stanford University School of Medicine, discussed the value of stimulating a periodic “danger signal” with a TLR3 agonist such as poly(I)•poly(C12U) as part of immunotherapeutic cancer treatment regimens, and suggested such regimens may have broad potential application to boost the effects of many immunotherapies of cancer. The authors concluded that poly(I)•poly(C12U) “shows promise as a potential agent for selective enhancement of effect with currently available and future cancer immunotherapies”. According to the authors, “immunotherapy of cancer holds the promise of disease-specific intervention without the toxicity that is associated with traditional therapeutic modalities”. This reported study was supported by an Ovarian Cancer Research Fund COGI Grant, Advanced Immune Therapeutics, Hemispherx Biopharma, and grants from the National Institute of Health (Grants CA 33399, CA 34233), the Ruth Kirschstein Award (Grant 5 T32 AI07290, and the Ruth L. Kirschstein Award (Grant F32 DKO78416).

Collaboration studies in non-human primates conducted by ViroClinics in the Netherlands suggest a potential role for Alferon® LDO as another novel therapeutic approach to viral pandemics. In these studies, Alferon® LDO treatment appeared to be more effective than published results for a neuraminidase inhibitor (Relenza®), which is a current standard for care of seasonal influenza along with a similar drug (Tamiflu®). The opportunity for Alferon® LDO is reinforced by new reports of severe side effects secondary to Tamiflu®, by both the FDA and Japanese health authorities. Also, Tamiflu® resistant strains of influenza virus are now raising serious concerns on a world-wide basis. We are planning to expand this Alferon® LDO effort into H1N1 Swine Flu preclinical models in the United States and preclinical laboratory studies are initially underway.

We own and operate a 43,000 sq. ft. FDA approved facility in New Brunswick, NJ that was primarily designed to produce Alferon®. On September 16, 2009, our Board of Directors approved up to $4.4 million for engineering studies, capital improvements, system upgrades and building management systems. In 2008, production of Alferon N Injection® from our Work-In-Progress Inventory had been put on hold due to the resources needed to prepare our New Brunswick facility for the FDA preapproval inspection with respect to our Ampligen® NDA.

We are currently undertaking a major capital improvement program to enhance our manufacturing capability for Alferon N Injection®, Alferon® LDO and Ampligen®. The planned capital improvements include upgrade to the ventilation and electrical distribution systems; upgrade of the high pressure boiler to support process equipment and battery management system; building a utility mezzanine to support the installation of a new water and waste treatment process. In addition, we have increased our manufacturing staff with the addition of Directors for Quality Assurance and Quality Control. As a result, Alferon N Injection® could be available for commercial sales in mid to late 2011.

The New Jersey District Office of the FDA conducted an inspection of the New Brunswick, New Jersey facility in late January and early February 2009 in connection with review of the Ampligen® NDA. A one-page Form FDA 483 was issued citing a need to re-perform four method validations to generate data in the New Brunswick Laboratories. These validations had been performed at another site also owned and operated by us prior to transferring the equipment to New Brunswick. The validations have been completed and the reports were forward to the FDA in April 2009 for review. As a result, the New Jersey office of the FDA has indicated that there are no more preapproval review issues at that time. In addition to having addressed all known FDA Form 483 issues, we reported to the regional office of the FDA that the New Brunswick facility is in progress of validating certain manufacturing steps and compiling data that will be sent to the FDA after NDA approval or as required.

The FDA, in its November 25, 2009 CRL, noted that its field investigators had conveyed deficiencies to us at our New Jersey facility that needed to be resolved before the NDA could be approved. We believe these issues to be the same as those on the Form FDA 483 discussed above. At our expected meeting with the FDA to review the CRL, we intend to communicate that it is our understanding that these manufacturing issues had been previously addressed.

The FDA described specific recommendations related to the Ampligen® NDA in the “Product Quality” section of the CRL which identified additional analytic procedures to be submitted to the FDA. We believe that these procedures are already part of our ongoing Quality Control, Quality Assurance program for Ampligen® manufacturing under current Good Manufacturing Practice (“cGMP”) requirements. We are currently undertaking the majority of the tests needed for the validation phase to address the issues identified in the CRL as part of our originally scheduled post-approval testing prior to any commercial sales of Ampligen®.

We outsource certain components of our research and development, manufacturing, marketing and distribution while maintaining control over the entire process through our quality assurance group and our clinical monitoring group. We have a Supply Agreement with Hollister-Stier Laboratories LLC (“Hollister-Stier”) of Spokane, Washington, related to the manufacture of Ampligen®. Pursuant to the agreement, we are required to supply the key raw materials and Hollister-Stier formulates and bottles Ampligen®. At least 90 days prior to our first order, we are required to provide a written 12 month rolling forecast of our initial requirements for the product and, every 90 days thereafter, provide an extended 12 month forecast of the number of batches we anticipate will be needed and the requested delivery dates. Our baseline cost was set in the agreement and increases annually based on any percentage increase in the Producer Price Index - Pharmaceutical Preparations. Payment is due 30 days after our acceptance of the Product. Hollister-Stier has a right of first refusal to manufacture certain Ampligen® related products. The Supply Agreement was entered into in December 2005 and had a five year term unless terminated earlier. The agreement is terminable by either party upon a material breach by the other party of the agreement that is not cured within 60 days or upon the other party’s insolvency or certain filings under the U.S. Bankruptcy Code. In February 2010, the agreement was extended through the earlier of the date upon which the parties execute a revised supply agreement or March 1, 2011.

The FDA, in its CRL, also noted the need to resolve outstanding inspection issues at the Hollister-Stier facility. On December 11, 2009 via Hollister-Stier, we submitted comprehensive new data to the District Office (“DO”) of the FDA in Seattle, WA, which we believed demonstrated that certain manufacturing issues noted in the pre-approval inspections at the facility had been fully addressed. On February 2, 2010, Hollister-Stier received a favorable response from the FDA’s Seattle DO in which they noted that certain manufacturing issues noted in the pre-approval inspection at this facility had been fully addressed and that they had forwarded a recommendation to the FDA’s CDER for approval of Hollister-Stier as a manufacturing site under the Ampligen® NDA. The DO recommendations are not binding on the FDA and pertain only to the specific manufacturing issues cited in the Ampligen® manufacturing response and to the subcontractor site.

We have manufactured purified drug concentrate utilized in the formulation of Alferon N Injection® in our New Brunswick, New Jersey facility. With manufacturing of Alferon® expected to take place in 2011, we are seeking new vendors that can provide the needed cGMP formulation, packaging and labeling services for this product.

Our marketing strategy for Ampligen® reflects the differing health care systems around the world along with the different marketing and distribution systems that are used to supply pharmaceutical products to those systems. In the U.S., we expect that, subject to receipt of regulatory approval, Ampligen® may be utilized in four medical arenas: physicians’ offices, clinics, hospitals and the home treatment setting. We remain in the process of developing pre-launch and launch driven marketing plans focusing on those audience development, medical support and payor reimbursement initiatives which will facilitate product acceptance and utilization at the time of regulatory approval. Similarly, we continue to develop distribution scenarios for the Specialty Pharmacy/Infusion channel which will insure market access, offer 3PL (third party logistics) capabilities and provide the requisite risk management control mechanisms. It is our intent to utilize third party service providers to execute elements of both the marketing/sales and distribution plans. We currently plan to utilize a small group of Managed Market account managers to introduce the product to payor, employer and government account audiences. We believe that this approach will establish a market presence and facilitate the generation of revenue without incurring the substantial costs associated with a traditional sales force. Furthermore, Management believes that the approach will enable us to retain many options for future marketing strategies.

For example, our commercialization strategy for Ampligen®-CFS may include licensing/co-marketing agreements utilizing the resources and capacities of a strategic partner(s). We are seeking world-wide marketing partner(s), with the goal of having a relationship in place before approval is obtained. In parallel to partnering discussions, appropriate pre-marketing activities will be undertaken. We intend to control manufacturing of Ampligen on a world-wide basis.

RNA based products and toll-like receptors (TLRs) have demonstrated great promise in preclinical and limited clinical applications resulting in active research and development by large pharmaceutical companies and emerging Biotech firms. As such, our potential competitors are among the largest pharmaceutical companies in the world, are well known to the public and the medical community, and have substantially greater financial resources, product development, and manufacturing and marketing capabilities than we have.

These companies and their competing products may be more effective and less costly than our products. In addition, conventional drug therapy, surgery and other more familiar treatments will offer competition to our products. Furthermore, our competitors have significantly greater experience than we do in pre-clinical testing and human clinical trials of pharmaceutical products and in obtaining FDA (in the US), Agency for the Evaluation of Medicinal Products (“EMEA”) (in Europe) and Health Protection Branch ("HPB") (in Canada), and other regulatory approvals of products. Accordingly, our competitors may succeed in obtaining FDA, EMEA and HPB product approvals more rapidly than us. If any of our products receive regulatory approvals and we commence commercial sales of our products, we will also be competing with respect to manufacturing efficiency and marketing capabilities, areas in which we have no experience. Our competitors may possess or obtain patent protection or other intellectual property rights that prevent, limit or otherwise adversely affect our ability to develop or exploit our products.

The major pharmaceutical competitors with biotech capabilities/vaccine franchises include Pfizer, GSK, Wyeth (now part of Pfizer), Merck, Novartis, Gilead Pharmaceutical, and Schering-Plough Corp (now part of Merck). Biotech competitors include Baxter, Fletcher/CSI, AVANT Immunotherapeutics, AVI Biopharma and GENTA. When we recommence sales of Alferon N Injection®, it will again compete with products produced by Schering-Plough Corp. and others for treating genital warts. 3M Pharmaceutical also markets its immune response modifier product, Aldera®, for the treatment of genital and perianal warts. We believe the approval and marketing of this product is the main reason that past sales of Alferon N Injection® have not met our expectations since acquisition. In November 2006, the botanical drug, Veregen® (marketed by Bradley Pharmaceuticals) was also approved for the topical treatment of genital and perianal warts. In addition, because certain competitive products are not dependent on a source of human blood cells, such products may be able to be produced in greater volume and at a lower cost than Alferon N Injection®. Our wholesale price on a per unit basis of Alferon N Injection® is higher than that of the competitive recombinant alpha and beta interferon products.

Regulation by governmental authorities in the U.S. and foreign countries is and will be a significant factor in the manufacture and marketing of Alferon® N products and our ongoing research and product development activities. Ampligen® and other products developed from the ongoing research and product development activities will require regulatory clearances prior to commercialization. In particular, new drug products for humans are subject to rigorous preclinical and clinical testing as a condition for clearance by the FDA and by similar authorities in foreign countries. The lengthy process of seeking these approvals, and the ongoing process of compliance with applicable statutes and regulations, has, and will continue to require the expenditure of substantial resources. Any failure by us or our collaborators or licensees to obtain, or any delay in obtaining, regulatory approvals could materially adversely affect the marketing of any products developed by us and our ability to receive product or royalty revenue. We have received Orphan Drug designation for certain therapeutic indications, which might, under certain conditions, help to accelerate the process of drug development and commercialization. Alferon N Injection® is only approved for use in intra-lesional treatment of refractory or recurring external genital warts in patients 18 years of age or older. Use of Alferon N Injection® for other applications requires regulatory approval.

We are subject to various federal, state and local laws, regulations and recommendations relating to such matters as safe working conditions, laboratory and manufacturing practices, the experimental use of animals and the use of and disposal of hazardous or potentially hazardous substances, including radioactive compounds and infectious disease agents, used in connection with our research work. Our laboratory and production facility in New Brunswick, New Jersey is approved for the manufacture of Alferon N Injection® and we believe it is in substantial compliance with all material regulations. However, there can be no assurance that this facility, or facilities owned and operated by third parties that are utilized in the manufacture of our products, will be considered by the FDA to be in substantial compliance at the present time or in the future.

As of March 1, 2010, we had 44 personnel consisting of 32 full-time employees or consultants and 12 regulatory/research medical personnel on a part-time basis. Part-time personnel are paid on a per diem or monthly basis. 25 personnel are engaged in our research, development, clinical, and manufacturing effort. 19 of our personnel perform regulatory, general administration, data processing, including bio-statistics, financial and investor relations functions. We have no union employees and we believe our relationship with our employees is good.

While we have been successful in attracting skilled and experienced scientific personnel, there can be no assurance that we will be able to attract or retain the necessary qualified employees and/or consultants in the future.

Our Scientific Advisory Board presently consists of two individuals who we believe have particular scientific and medical expertise in Virology, Cancer, Immunology, Biochemistry and related fields. Dr. James Rahal, Director of the Infectious Disease Section of New York Hospital Queens, is one of the nation's foremost experts on the West Nile Virus. Professor Luc Montagnier of the Institut Pasteur in Paris has devoted his career to the study of viruses and is perhaps best known for the 2008 receipt of the Nobel Prize in Medicine related to his discovery of the Human Immunodeficiency Virus (HIV). It is the role of this Board to advise us about current and long-term scientific planning including research and development. The Scientific Advisory Board conducts periodic meetings as needed. No Scientific Advisory Board meetings were held in 2008 or 2009 primarily due to fewer active scientific projects. However, individual Scientific Advisory Board Members sometime consult with and meet informally with our employees or Board Members. Members of the Scientific Advisory Board are employed by others and may have commitments to and/or consulting agreements with other entities, including our potential competitors.

In May 2010, we formed a Data Safety Monitoring Board (“DSMB”) that consists of two independent regulatory and medical experts along with a Biostatistics expert. The function of the DSMB is to perform independent safety and efficacy analyses on our clinical trials, including those with Alferon® LDO. However with Alferon® LDO study on FDA Clinical Hold, the DSMD has yet to take action.

We are a specialty pharmaceutical company based in Philadelphia, Pennsylvania and engaged in the clinical development of new drug therapies based on natural immune system enhancing technologies for the treatment of viral and immune based chronic disorders. We were founded in the early 1970s doing contract research for the National Institutes of Health. Since that time, we have established a strong foundation of laboratory, pre-clinical and clinical data with respect to the development of natural interferon and nucleic acids to enhance the natural antiviral defense system of the human body and to aid the development of therapeutic products for the treatment of certain chronic diseases. We have three domestic subsidiaries BioPro Corp., BioAegean Corp., and Core BioTech Corp., all of which are incorporated in Delaware and are dormant. Our foreign subsidiary is Hemispherx Biopharma Europe N.V./S.A. established in Belgium in 1998, which has no activity. All significant intercompany balances and transactions have been eliminated in consolidation.

Our current strategic focus is derived from four applications of our two core pharmaceutical technology platforms Ampligen® and Alferon N Injection®. The commercial focus for Ampligen® includes application as a treatment for Chronic Fatigue Syndrome (“CFS”) and as an influenza vaccine enhancer (adjuvant) for both therapeutic and preventative vaccine development. Alferon N Injection® is a Food and Drug Administration (“FDA”) approved product with an indication for refractory or recurring genital warts. Alferon® LDO (Low Dose Oral) is a formulation currently under development targeting influenza.

We own and operate a 43,000 sq. ft. FDA approved facility in New Brunswick, NJ that was primarily designed to produce Alferon®. On September 16, 2009, our Board of Directors approved up to $4.4 million for full engineering studies, capital improvements, system upgrades and introduction of building management systems to enhance production of three products: Alferon N Injection®, Alferon® LDO and Ampligen®. (Please see “Manufacturing” in Item 1. Business for more information.)

Our principal executive offices are located at One Penn Center, 1617 JFK Boulevard, Philadelphia, Pennsylvania 19103, and our telephone number is 215-988-0080.

We file our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 electronically with the Securities and Exchange Commission, or SEC. The public may read or copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The address of that site is http://www.sec.gov.

You may obtain a free copy of our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and amendments to those reports on the day of filing with the SEC on our website on the World Wide Web at http://www.hemispherx.net or by contacting the Investor Relations Department by calling (518) 398-6222 or sending an e-mail message to [email protected].

Our primary pharmaceutical product platform consists of our experimental compound, Ampligen®, our FDA approved natural interferon product, Alferon N Injection® and Alferon® LDO (low dose oral), our experimental liquid natural interferon for oral administration.

Ampligen® is an experimental drug currently undergoing clinical development for the treatment of Myalgic Encephalomyelitis / Chronic Fatigue Syndrome (“ME/CFS”). Over its developmental history, Ampligen® has received various designations, including Orphan Drug Product Designation (FDA), Treatment IND (e.g., treatment investigational new drugs, or “Emergency” or “Compassionate” use authorization) with Cost Recovery Authorization (FDA) and “promising” clinical outcome recognition based on the evaluation of certain summary clinical reports (“AHRQ” or Agency for Healthcare Research and Quality). Ampligen® represents the first drug in the class of large (macromolecular) RNA (nucleic acid) molecules to apply for New Drug Application (“NDA”) review. Based on the results of published, peer reviewed pre-clinical studies and clinical trials, we believe that Ampligen® may have broad-spectrum anti-viral and anti-cancer properties. Over 1,000 patients have participated in the Ampligen® clinical trials representing the administration of more than 90,000 doses of this drug.

Nucleic acid compounds represent a potential new class of pharmaceutical products that are designed to act at the molecular level for treatment of human diseases. There are two forms of nucleic acids, DNA and RNA. DNA is a group of naturally occurring molecules found in chromosomes, the cell’s genetic machinery. RNA is a group of naturally occurring informational molecules which orchestrate a cell’s behavior which, in turn, regulates the action of groups of cells, including the cells which compromise the body’s immune system. RNA directs the production of proteins and regulates certain cell activities including the activation of an otherwise dormant cellular defense against viruses and tumors. Our drug technology utilizes specifically-configured RNA. Our double-stranded RNA drug product, trademarked Ampligen®, an experimental, unapproved drug, is administered intravenously.

Clinical trials of Ampligen® already conducted by us include studies of the potential treatment of ME/CFS, Hepatitis B, HIV and cancer patients with renal cell carcinoma and malignant melanoma. All of these potential uses will require additional clinical trials to generate the safety and effectiveness data necessary to support regulatory approval.

On July 7, 2008, the FDA accepted for review our NDA for Ampligen® to treat CFS, originally submitted in October 2007. We are seeking marketing approval for the first-ever treatment for CFS. At present, only supportive, symptom-based care is available for CFS patients. The NDA for Ampligen®, whose chemical designation is Poly I: Poly C12U, is also the first ever accepted for review by the FDA for systemic use of a toll-like receptor therapy to treat any condition. On February 11, 2009, we were notified by the FDA that the originally scheduled Prescription Drug User Fee Act (“PDUFA”) date of February 25, 2009 has been extended to May 25, 2009. On May 22, 2009, we were notified by the FDA that it may require additional time to take action beyond the scheduled PDUFA action date of May 25, 2009. Between March 9, 2009 and September 15, 2009, we issued six new reports to the FDA spanning various subjects including clinical safety assessments, specialized pre-clinical toxicology reports and abbreviated chemistry and manufacturing control reports.

On November 25, 2009, we received a Complete Response Letter (“CRL”) from the FDA which described specific additional recommendations related to the Ampligen® NDA. In accordance with its 2008 Complete Response procedure, the FDA reviewers determined that they could not approve the application in its present form and provided specific recommendations to address the outstanding issues.

We are carefully reviewing the CRL and will seek a meeting with the FDA to discuss its recommendations upon the compilation of necessary data to be used in our response. We intend to take the appropriate steps to seek approval and commercialization of Ampligen®. Most notably, the FDA stated that the two primary clinical studies submitted with the NDA did not provide credible evidence of efficacy of Ampligen® and recommended at least one additional clinical study which shows convincing effect and confirms safety in the target population. The FDA indicated that the additional study should be of sufficient size and sufficient duration (six months) and include appropriate monitoring to rule out the generation of autoimmune disease. In addition, patients in the study should be on more than one dose regimen, including at least 300 patients on dose regimens intended for marketing. We are presently planning a confirmatory clinical study which will utilize the same primary endpoints as our earlier studies but with an enlarged number of subjects to potentially achieve a more representative statistical model. Lastly, additional data including a well-controlled QT interval study (i.e., a measurement of time between the start of the Q wave and the end of the T wave in the heart’s electrical cycle) and pharmacokinetic evaluations of dual dosage regiments were requested. Other items required by the FDA include certain aspects of Non-Clinical safety assessment and Product Quality. In the Non-Clinical area, the FDA recommended among other things that we complete rodent carcinogenicity studies in two species. As part of the NDA submission, we had requested that these studies be waived, but the waiver has not been granted as of March 1, 2010.

On January 14, 2010, we submitted reports of new preclinical data regarding Ampligen® to the FDA that we believe should be sufficient to address certain preclinical issues in the FDA’s CRL. The preclinical studies discussed in these reports were the combined work-product of the staffs at Hemispherx and our subcontractor, Lovelace Respiratory Research Institute (“LRRI”), Albuquerque, New Mexico, regarding pharmacokinetic analyses in two lower animal species (primate and rodent). The new preclinical data showed no evidence of antibodies against Ampligen® in primates nor evidence of an increase in certain undesirable cytokines (specific modulators of the immune system) at clinically used doses of Ampligen® for CFS. Although most other experimental immunomodulators have been associated with one or more features of aberrant immune activity, including toll-like receptor activators (of which Ampligen® is one), this was specifically not seen with Ampligen® in primates.

Under the Product Quality section of the CRL, the FDA recommended that we submit additional data and complete various analytical procedures. The collection of these data and the completion of these procedures is already part of our ongoing Quality Control, Quality Assurance program for Ampligen® manufacturing under cGMP (“current Good Manufacturing Practice”) guidelines and our manufacturing enhancement program.

The FDA also commented on Ampligen® manufacturing noting the need to resolve outstanding inspection issues at the facilities producing Ampligen®. These include our facility located in New Brunswick, NJ and one of our third-party subcontractor manufacturing facilities, Hollister-Stier Laboratories of Spokane, Washington (“Hollister-Stier”). On December 11, 2009 via Hollister-Stier, we submitted comprehensive new data, from the combined work-product of both staffs, to the District Office (“DO”) of the FDA in Seattle, WA which we believed demonstrated that certain manufacturing issues noted in the pre-approval inspections at the facility had been fully addressed. On February 2, 2010, Hollister-Stier received a favorable response from the FDA’s Seattle DO in which they noted that certain manufacturing issues noted in the pre-approval inspection at this facility had been fully addressed and made a recommendation to the FDA’s Center for Drug Evaluation and Research (“CDER”) for approval of our subcontractor as a manufacturing site under the Ampligen® NDA. The DO recommendations are not binding on the FDA and pertain only to the specific manufacturing issues cited in the Ampligen® manufacturing response and to the subcontractor site.

We are also engaged in ongoing, experimental studies assessing the efficacy of Ampligen® against influenza viruses. The status of our initiative for Ampligen® as an adjuvant for preventative vaccine development includes the pre-clinical studies in seasonal and pandemic influenza for intranasal administration being conducted by Japan’s National Institute for Infectious Diseases (“NIID”). A three year program targeting regulatory approval for pandemic flu and seasonal flu in Japan has been funded by the Japanese Ministry of Health with the NIID and Biken (operational arm of the non-profit Foundation for Microbial Disease of Osaka University) in which Ampligen® is used as a mucosal adjuvant with vaccine. Our arrangement with Biken is part of a process to develop an effective nasal administered vaccine for Japan utilizing the resources of the NIID, varied vaccines and Hemispherx supplied Ampligen®.

A phase II study for intramuscular administration of Ampligen® for seasonal flu was conducted in Australia through St. Vincent’s Hospital. We have attempted in good faith to obtain the clinical data and retrieve the study samples from St. Vincent’s recently restructured Clinical Trials Centre. As a prerequisite of payment, we requested the confirmation that samples were properly maintained utilizing current Good Clinical Practice (“cGCP”) and Good Laboratory Practice (“cGLP”) for the controlled environment as per our agreement. On February 5, 2010, our Counsel advised them in correspondence that, due to the failure to meet the condition precedent to payment, we had no choice but to declare them in breach of the agreement and our intention to terminate the relationship between parties. Due to the termination of this agreement, we are not able to test the samples taken for this study for efficacy (i.e., the capacity for beneficial change or therapeutic effect from a given treatment).

A study was published in the December 20, 2009 issue of “Virology” by a consortium of researchers at Utah State University and the University of North Carolina, regarding a newly developed animal model of Severe Acute Respiratory Disease Syndrome (“SARS”) which, according to the authors, “…largely mimicked human disease”. SARS emerged in 2002 in the Guangdong province of Southern China as a new infectious respiratory disease characterized by influenza-like symptoms with a very high mortality rate. The researchers characterized and adapted a new strain of the SARS virus (SARS-CoV) to mice that was 100% lethal and was associated with the overproduction of cytokines and severe lung pathology (Day CW, et al. Virology, 395:210-222, 2009). Multiple agents with purported antiviral activity were evaluated for activity in this unique mouse model of the human disease, including Ampligen®. The researchers found that, unique among the agents tested, Ampligen®, “…protected against death and gross damage to the lungs in the presence of lethal SARS-CoV” and was associated with a reduction in IL-6 concentration in which high levels of the cytokine correlated with the mortality of SARS-CoV infection. Mortality was high, under the conditions tested, for all the other antiviral agents examined that have previously been used extensively in humans with SARS without definitive evidence of efficacy (Stockman LJ, et al. PLoS Med 3 (9),e 343). To date, there are no approved agents for treating SARS. Animal experiments do not necessarily predict safety or efficacy in man. Encouraged by these results, we are now in preliminary discussions with Chinese clinical research organizations in an attempt to initiate clinical antiviral programs in China.

Alferon N Injection® is the registered trademark for our injectable formulation of natural alpha interferon, which is approved by the FDA for the treatment of certain categories of genital warts. Alferon® is the only natural-source, multi-species alpha interferon currently approved for sale in the U.S.

Interferons are a group of proteins produced and secreted by cells to combat diseases. Researchers have identified four major classes of human interferon: alpha, beta, gamma and omega. Alferon N Injection® contains a multi-species form of alpha interferon. The worldwide market for injectable alpha interferon-based products has experienced rapid growth and various alpha interferon injectable products are approved for many major medical uses worldwide. Alpha interferons are manufactured commercially in three ways: by genetic engineering, by cell culture, and from human white blood cells. All three of these types of alpha interferon are or were approved for commercial sale in the U.S. Our natural alpha interferon is produced from human white blood cells.

The potential advantages of natural alpha interferon over recombinant (synthetic) interferon produced and marketed by other pharmaceutical firms may be based upon their respective molecular compositions. Natural alpha interferon is composed of a family of proteins containing many molecular species of interferon. In contrast, commercial recombinant alpha interferon products each contain only a single species. Researchers have reported that the various species of interferons may have differing antiviral activity depending upon the type of virus. Natural alpha interferon presents a broad complement of species, which we believe may account for its higher activity in laboratory studies. Natural alpha interferon is also glycosylated (partially covered with sugar molecules). Such glycosylation is not present on the currently U.S. marketed recombinant alpha interferons. We believe that the absence of glycosylation may be, in part, responsible for the production of interferon-neutralizing antibodies seen in patients treated with recombinant alpha interferon. Although cell culture-derived interferon is also composed of multiple glycosylated alpha interferon species, the types and relative quantity of these species are different from our natural alpha interferon.

Alferon N Injection® [Interferon alfa-n3 (human leukocyte derived)] is a highly purified, natural-source, glycosylated, multi-species alpha interferon product. There are essentially no antibodies observed against natural interferon to date and the product has a relatively low side-effect profile.

The recombinant DNA derived alpha interferon are now reported to have decreased effectiveness after one year, probably due to antibody formation and other severe toxicities. These detrimental effects have not been reported with the use of Alferon N Injection®.

The FDA approved Alferon N Injection® in 1989 for the intralesional (within lesions) treatment of refractory (resistant to other treatment) or recurring external genital warts in patients 18 years of age or older. Certain types of human papillomaviruses (“HPV”) cause genital warts, a sexually transmitted disease (“STD”). A published report estimates that approximately eight million new and recurrent cases of genital warts occur annually in the United States alone.

Commercial sales of Alferon N Injection® were halted in March 2008 as the current expiration date of our finished goods inventory expired. We are undertaking a major capital improvement program to upgrade our manufacturing capability for Alferon N Injection® at our New Brunswick facility that will continue throughout 2010. As a result, Alferon N Injection® could be available for commercial sales in mid to late 2011. (Please see “Alferon® Low Dose Oral (LDO)” and “Manufacturing” below in Item 1. Business for more information.)

It is our belief that the use of Alferon® N in combination with Ampligen® has the potential to increase the positive therapeutic responses in chronic life threatening viral diseases. While Alferon N Injection® remains in clinical development for treating West Nile Virus, the ability to continue this study has been hampered by the significant reduction in confirmed cases. We also are planning trials of Alferon N Injection® for seriously ill, hospitalized influenza patients in Argentina and potentially other countries. (Please see “Alferon® Low Dose Oral (LDO)” below in Item 1. Business for more information.)

Alferon® Low Dose Oral (LDO)

Alferon® LDO [Low Dose Oral Interferon Alfa-n3 (Human Leukocyte Derived)] is an experimental low-dose, oral liquid formulation of Natural Alpha Interferon and like Alferon N Injection® should not cause antibody formation, which is a problem with recombinant interferon. It is an experimental immunotherapeutic believed to work by stimulating an immune cascade response in the cells of the mouth and throat, enabling it to bolster systemic immune response through the entire body by absorption through the oral mucosa. Oral interferon could be economically feasible for patients and logistically manageable in development programs in third-world countries primarily affected by HIV and other emerging viruses (e.g., SARS, Ebola, bird and swine flu). Oral administration of Alferon® LDO, with its anticipated affordability, low toxicity, no production of antibodies, and broad range of potential bioactivity, could be a breakthrough treatment or prevention for viral diseases.

We have conducted early stage clinical trials as part of an evaluation of the experimental bio-therapeutic Alferon® LDO as a potential new experimental therapy against influenza viruses and other lethal viral diseases, which have high acute death rates. Clinical trials in human volunteers were designed to determine whether Alferon®, delivered in this new, experimental oral drug delivery format, can resuscitate the broad-spectrum antiviral and immunostimulatory genes. While adequate samples were retrieved from the clinical trials sites, the next phase of the study was delayed due to funding considerations and has recently been reinitiated. Potential facilities to undertake the gene expression analysis phase of the study are currently being identified with the intention to complete the clinical trial.

Alferon® LDO is undergoing pre-clinical testing for possible prophylaxis against influenza. Subject to FDA authorization and/or authorization of regulatory authorities in other countries, the finished goods inventory of Alferon N Injection® 5ml vials could be used to produce approximately 11,000,000 sachets of Alferon® Low Dose Oral (“LDO”) for clinical trials. However, no assurance can be given that this inventory will be permitted to be used in future clinical trials or for any other clinical use. While the studies to date have been encouraging, preliminary testing in the laboratory and animals is not necessarily predictive of successful results in clinical testing or human treatment. No assurance can be given that similar results will be observed in clinical trials. Use of Alferon® as a possible treatment of any flu or other viral infection requires prior regulatory approval and there can be no assurance that such approval can be obtained either for clinical trial use or commercial sale.

In October 2009, we submitted a protocol to the FDA proposing to conduct a Phase 2, well-controlled, clinical study using Alferon® LDO for the prophylaxis and treatment of seasonal and pandemic influenza of more than 200 subjects. Following a teleconference with the FDA in November 2009, the FDA placed the proposed study on “Clinical Hold” because the protocol was deemed by the FDA to deficient in design, and because of the need for additional information to be submitted in the area of chemistry, manufacturing and controls (“CMC”). Thereafter in December 2009, we submitted additional information by Amendment with respect to both the clinical protocol design issues and the CMC items. In January 2010, the FDA acknowledged that our responses to the clinical study design issues were acceptable; however, removal of the Clinical Hold was not warranted because the FDA believed that certain CMC issues had not been satisfactorily resolved. In this regard, the FDA communicated concern regarding the extended storage of Alferon® LDO drug product clinical lots which had been manufactured from an active pharmaceutical ingredient (“API”) of Alferon N Injection® manufactured in year 2001. While the biological (antiviral) potency of the product had remained intact, we learned through newly conducted physico-chemical tests (the “new tests” of temperature, pH, oxidation and light on the chemical stability of the active API), that certain changes in the drug over approximately nine storage years (combined storage of Alferon N Injection® plus storage of certain LDO sachets) had introduced changes in the drug which might adversely influence the human safety profile. These “new tests” are part of recent FDA requirements for biological products, such as interferon, which did not exist at the time of the original FDA approval of Alferon N Injection® for commercialization and at the time of FDA approval of the “Establishment License” for Hemispherx’ manufacturing facility. Based on the recent FDA request, we have now established and implemented the “new test” procedures. As a result, we have found that certain Alferon N Injection® lots with extended storage (i.e., approximately eight to nine years) do appear to demonstrate some altered physico-chemical properties. However we have also observed that more recent lots, including those manufactured beginning in the year 2006, are superior with respect to the enhanced scrutiny of these tests and, in our view, could be considered appropriate for clinical trials in the Alferon® LDO sachet format. We expect to submit these new data to the FDA in the Spring of 2010 and believe that the full Clinical Hold could be thereafter lifted if the FDA concurs that these data address the outstanding CMC issues cited in the January 2010 FDA recommendations.

In 1999, we acquired a series of patents on Oragens®, potentially a set of oral broad spectrum antivirals and immunological enhancers, through a 10 year licensing agreement with Temple University in Philadelphia, PA. For a $30,000 annual minimum royalty payment and costs to maintain the patents, we were granted an exclusive worldwide license from Temple for the Oragens® products. These compounds had been evaluated in various academic laboratories for application to chronic viral and immunological disorders.

In the 2009 review of our patent rights to determine whether they have continuing value, we undertook an analysis of the Oragen® patents prior to renewing the licensing agreement with Temple University. This review included a cost/benefit analysis of the patents’ ultimate revenue and profitability potential in consideration of their remaining life. In addition, management studied the rights as to whether each patent continues to fit into our strategic business plans for Ampligen®, Alferon N Injection® and Alferon® LDO. As a result of this process, we proposed a patent renewal agreement that significantly discounted the prior agreement’s annual minimum royalty payment. In February 2010, it was formally communicated by Temple University that they had elected not to pursue our proposal to renew the series of patents on Oragens®. Accordingly as of December 2009, we wrote-off the remaining value of these patents from Patent and Trademark Rights resulting in a net expense for Patents Abandoned of $114,000.

We have 38 patents worldwide with 46 additional pending patent applications pending comprising our intellectual property. In 2006, we obtained the global patent rights for a compound that enhances DNA vaccination by the efficient intracellular delivery of immunogenic DNA (i.e., DNA that can produce antigenic proteins that simulate an acute viral infection with a resultant humoral and cell-mediated immune response). Please see “Note 4: Patents, Trademark Rights and Other Intangibles” under Notes To Consolidated Financial Statements for more information on these patents.

We continually review our patents rights to determine whether they have continuing value. Such review includes an analysis of the patent’s ultimate revenue and profitability potential. In addition, management’s review addresses whether each patent continues to fit into our strategic business plans for Ampligen®, Alferon N Injection® and Alferon® LDO.

With respect to Ampligen®, the main U.S. ME/CFS treatment patent (#6130206) expires October 10, 2017. Our main patents covering HIV treatment (#4820696, #5063209, and #5091374) expired on April 11, 2006, November 5, 2008, and February 25, 2009, respectively; Hepatitis treatment coverage is conveyed by U.S. patent #5593973 which expires on January 14, 2014. Our U.S. Ampligen® Trademark (#73/617,687) has been renewed through December 6, 2018.

In addition to our patent rights relating to Ampligen®, the FDA has granted “orphan drug status” to the drug for ME/CFS, HIV/AIDS, and renal cell carcinoma and malignant melanoma. Orphan drug status grants us protection against the potential approval of other sponsors’ versions of the drug for these uses for a period of seven years following FDA approval of Ampligen® for each of these designated uses. The first NDA approval for Ampligen® as a new chemical entity will also qualify for four or five years of non-patent exclusivity during which abbreviated new drug applications seeking approval to market generic versions of the drug cannot be submitted to the FDA. See “Government Regulation” below.

The U.S. patents relating to our Alferon® products expire April 2, 2013 (5,503,828) October 14, 2014 (5,676,942) and December 22, 2017 (5,989,441).

Our focus is on developing drugs for use in treating viral and immune based chronic disorders and diseases such as ME/CFS, HIV, HPV, SARS and West Nile Virus. Our current R&D projects are only targeting treatment therapies for ME/CFS and other viral diseases such as prevention and treatment of seasonal and pandemic H1N1 or Avian influenza.

Chronic Fatigue Syndrome (“CFS”), also known as Chronic Immune Dysfunction Syndrome (“CFIDS”) and, Myalgic Encephalomyelitis (“ME”) is a serious and debilitating chronic illness and a major public health problem. ME/CFS is recognized by both the government and private sector as a major health problem, including the National Institutes of Health, FDA and the U.S. Centers for Disease Control and Prevention (“CDC”). The CDC listed ME/CFS as a priority disease, causing severe health and financial problems for patients, their family, and the community. ME/CFS is endemic in the population, but occasionally seen in clusters suggesting an infectious basis. A variety of immunological, endocrine, autonomic nervous system, and metabolic abnormalities have been documented.

Dr. Julie Gerberding, former director of the CDC and current president of Merck & Company’s vaccine division, has stated that "The CDC considers Chronic Fatigue Syndrome to be a significant public health concern and we are committed to research that will lead to earlier diagnosis and better treatment of the illness." A variety of studies by the CDC and others have shown that between 1 and 4 million Americans suffer from CFS. While those with the disease are seriously impaired and at least a quarter are unemployed or on disability because of CFS, only about half have consulted a physician for their illness. Equally important, about 40% of people in the general population who report symptoms of ME/CFS have a serious, treatable, previously unrecognized medical or psychiatric condition (such as diabetes, thyroid disease, substance abuse). ME/CFS is a serious illness and poses a dilemma for patients, their families and health care providers.

The CDC has launched a national public education and awareness campaign on CFS. The campaign, called "Get Informed. Get Diagnosed. Get Help." is designed to increase awareness among clinicians and the public because 80 percent of Americans afflicted with CFS illness may not know they have it. The campaign provides information regarding the diagnosis and treatment of CFS, and is designed to raise awareness of the disease among patients and clinicians. A CDC sponsored website at www.cdc.gov/cfs provides easy to understand, downloadable educational tools for patients, their families and health care professionals.

While ME/CFS strikes people of all age, racial, ethnic, and socioeconomic groups, it is most prevalent amongst women. Research has shown that ME/CFS is about three times as common in women as men, a rate similar to that of many autoimmune diseases, such as multiple sclerosis and lupus. To put this into perspective, ME/CFS is over four times more common than HIV infection in women, and the rate of ME/CFS in women is considerably higher than a woman's lifetime risk of getting lung cancer as published by the CFIDS Association of America.

Many severe ME/CFS patients become completely disabled or totally bedridden and are afflicted with severe pain and mental confusion even at rest. ME/CFS is characterized by incapacitating fatigue with profound exhaustion and extremely poor stamina, sleep difficulties and problems with concentration and short-term memory. It is also accompanied by flu-like symptoms, pain in the joints and muscles, tender lymph nodes, sore throat and new headaches. A distinctive characteristic of the illness is a worsening of symptoms following physical or mental exertion which do not subside with rest.

The case definition for ME/CFS criteria calls for certain symptoms to be present along with fatigue that interferes with physical, mental, social and educational activities. Both the fatigue and symptoms must have occurred for (at least) a six month period. People with ME/CFS may experience many more than the symptoms named in the case definition, so knowledgeable physicians will take this fact into consideration when making a diagnosis (after other possible reasons for symptoms have been ruled out).

Most ME/CFS patients are treated symptomatically with traditional treatments geared toward treating symptoms of the disease, such as improving quality of sleep, reducing pain and treatment of depression. Clinically, a number of different therapeutic approaches have been pursued, but with no significant clinical success.

Because no cause for ME/CFS has been identified, current treatment programs are directed at relieving symptoms, with the goal of the patient regaining some level of function and well-being. Diagnosis of ME/CFS is a time-consuming and challenging process for which there is no FDA approved diagnostic test or biomarker to clearly identify the disorder. Diagnosis is primarily arrived at by taking a patient's medical history, completing a physical exam and lab tests to rule out other conditions excluding other illnesses with similar symptoms and comparing a patient's symptoms with the case definition. Overlapping symptoms can occur with several diseases, such as fibromyalgia, Gulf War Illnesses and multiple chemical sensitivities. Many diseases have similar symptoms including Lupus and Lyme disease which may closely mimic ME/CFS that they need to be considered when making a diagnosis to rule them out. If there are no abnormal test results or other physical ailments identified, clinicians can use standardized tests to quantify the level of fatigue and evaluate symptoms. Diagnosis can be complicated by the fact that the symptoms and severity of CFS vary considerably from patient to patient. New diagnostic approaches to possibly accelerate the identification of ME/CFS are being developed (see below in this section regarding the Whittemore Peterson Institute).

The leading model of ME/CFS pathogenesis is thought to be rooted in abnormalities in the immune system and brain (central nervous system), each of which affects and alters the function of the other. Because some cases of CFS begin with a flu-like infection, several viruses have been studied as possible causes because all are relatively common in the general population, including Human Herpesvirus (“HHV”) 6 and 7, Retroviruses, Epstein-Barr Virus, Enteroviruses, as well as, Mycoplasmas, etc. The etiology is likely to be related to a collection of factors, including viral, hormonal, stress, and other triggers for the illness in genetically, environmentally or otherwise susceptible individuals and continues to be a subject of discussion.

In the October 8, 2009 issue of Science Express, a consortium of researchers from the Whittemore Peterson Institute, the National Cancer Institute and the Cleveland Clinic report a new retrovirus in the blood cells of 67% of CFS patients and 3.7% in healthy control subjects. The infectious virus was also greater than 99% identical to that previously detected in prostate cancer. Patients with CFS are known to display various abnormalities in immune system functions and experience both higher cancer rates and neurological pathology, which have been associated with the human retroviruses HIV and HTLV-1. While an updated agreement is being finalized, we continue to collaborate with the Whittemore Peterson Institute under the terms of a “Material Transfer And Research Agreement” that had expired on September 1, 2009, to evaluate the potential role of Ampligen®, in the clinical treatment of CFS patients who have a specific deficiency in Natural Killer (“NK”) cell activity. Immunosuppression is often seen in CFS patients and may be a feature of many retroviruses in animal and man. We are presently also collaborating with the Institute with respect to the potential roles of the novel retrovirus more generally found in CFS. These studies are taking the form of both retrospective analysis from stored samples of CFS patients, with and without Ampligen® treatment, along with prospective clinical studies.

Other Viral Diseases

We are engaged in ongoing, experimental studies assessing the efficacy of Ampligen®, Alferon N Injection® and Alferon® LDO against influenza viruses. Ampligen® as a mucosal adjuvant with vaccine is being studied at Japan’s National Institute of Infectious Disease (“NIID”) and at Biken (the for profit operational arm of the Foundation for Microbial Diseases of Osaka University). We have been focusing our resources on the studies being undertaken in Japan and the United States along with the design of new Alferon® LDO studies for both prevention and treatment of seasonal or pandemic influenza.

Pursuant to the current Biken material evaluation agreement which concludes in August 2010 or when the evaluation program is completed, which ever is earlier, Biken purchases Ampligen® for use in conducting further animal studies of intranasal prototype vaccines containing antigens from influenza sub-types H1N1, H3N2 and B. This collaboration may progress to human studies and is supported by the Japanese Health Ministry.

Investigators from Japan’s NIID have conducted studies in animals that suggest that Ampligen® can stimulate a sufficiently broad immune response to provide cross-protection against a range of virus genetic types, including H5N1 and derivative clades. Japan’s Council for Science & Technology Policy (“CSTP”), a cabinet level position, has awarded funds from Japan’s CSTP to advance research with influenza vaccines utilizing Ampligen. The Principal Investigator, Dr. Hideki Hasegawa, M.D., Ph.D., Chief of Laboratory of Mucosal Vaccine Development Virus Research Center, undertook studies in 2009 and plans to continue these studies throughout 2010 that focus on mucosal immunity and the inherent advantages of a vigorous immune response to respiratory pathogens. Dr. Hasegawa has published data that the formulation of pandemic vaccine mixed with Ampligen® increases immuno-genicity and may demonstrate cross protection against mutated strains. Initial data from findings in mice exposed to the most virulent forms of pandemic influenza (H5N1) suggest that standard human seasonal influenza vaccines given alone, and having no benefit on H5N1 influenza virus pathology and clinical status, were nonetheless effective against pandemic virus when combined with Ampligen® when applied intranasally in very small doses in a prophylactic treatment setting. Clinical trials emanating from successful primate (monkey) studies are anticipated to begin in 2010.

Dr. Hasegawa expanded the data on Ampligen® in an October 23, 2009, issue of “Vaccine” (Vol. 27, issue 45, pp 6276-6279) to include the conveyance of cross-protective immunity against various variants of the pandemic influenza virus. In this article, jointly published by researchers at NIID and Yale University, it was communicated that Ampligen® may convey two additional biological properties, in addition to the above referenced cross-protection, when co-administered intranasally with pandemic flu vaccines: 1) the enhancement of immunity with higher IgA and IgG levels, which may convey a survival/therapeutic advantage in animal model systems, and 2) the potential to widen the therapeutic (preventative) profile (“heterosubtypic immunity”) by protecting against a phenomenon known as “antigenic drift” in which the pandemic virus may escape the preventative effect of the vaccine; this phenomenon is well-established with avian H5N1 virus and mitigated the potential effectiveness of various influenza vaccines manufactured several years ago in the U.S.A. Animal model experiments do not necessarily predict biological behavior in man.

We received notice of an Annual Report (April 2008-March 2009) prepared by a Director of the NIID to the governing organization of the Japanese Ministry of Health (“MHLW”) reporting a series of successful preclinical studies in new pandemic vaccines which rely on Ampligen® (Poly I: Poly C12U). Efficacy in these studies was shown both within the airways themselves as well as systemically. As a result, the program is expected to be accelerated from animal studies into human volunteers promptly under supervision of NIID staff. The project is officially titled “Clinical Application of the Influenza Virus Vaccine in the Intranasal Dosage Form for Mucosal Administration”. To date, only very few pharmaceutical companies world-wide have achieved regulatory authorizations to sell intranasally administered influenza vaccines versus many companies receiving approval for intramuscular vaccine delivery routes.

Concurrently, Biken successfully completed in co-operation with NIID a series of animal/preclinical tests on new pandemic vaccines with Ampligen® as a mucosal adjuvant. Biken is expected to undertake studies for regulatory requirements such as safety, stability and formulation to be shared with NIID. Successful studies in animal models, including the monkey studies conducted to date under auspices of the NIID, do not necessarily predict human safety and efficacy of any investigational product including Ampligen®. To support preclinical studies, Ampligen® especially formulated for intranasal use had been manufactured and on August 17, 2009 we shipped Ampligen® to Biken for use in the preclinical studies they are conducting prior to initiating human clinical trials.

The emergence of a new H1N1 Swine Flu strain provides additional significance to the Japanese studies. The original studies by Dr. Hasegawa and his colleagues provided the basis for the expanded preclinical trials that demonstrated cross-clade protection against H5N1 isolates following vaccination with a seasonal influenza vaccine (J Infect Dis.196:1313-1320, 2007). With this in mind, Biken is concentrating its efforts to proceed on a regulatory path for the registration of H5N1 intranasal vaccine combined with Ampligen® in Japan.

On January 1, 2010, we entered into an Advisory Agreement with Bio-Starting Latam, an Argentinean regulatory and business design entity, with the goal to explore the possibility of initiating clinical trials of Alferon N Infection®, Ampligen® and Alferon® LDO during the 2010 influenza season in Argentina.

The clinical trial in Australia utilized Ampligen® administered intramuscularly (“IM”) in combination with seasonal flu vaccine. This open-label study (Phase IIa) utilized Ampligen® (Poly I: Poly C12U) as a potential immune-enhancer in Australia with thirty-eight subjects age 60 or greater with the standard trivalent seasonal influenza vaccines. We have attempted in good faith to obtain the clinical data and retrieve the study’s samples from St. Vincent’s recently restructured Clinical Trials Centre. As a prerequisite of payment, we requested the confirmation that samples were properly maintained utilizing current Good Clinical Practice (“cGCP”) and Good Laboratory Practice (“cGLP”) for the controlled environment as required by our agreement. In February 2010, our General Counsel advised them in correspondence that due to the failure to meet the condition precedent for payment, we had no choice but to declare them in breach of the agreement and our intention to terminate the relationship between parties. Due to the termination of this agreement, we are not able to test the samples collected in this study for efficacy (i.e., the capacity for beneficial change or therapeutic effect from a given treatment).

A peer-reviewed article providing study data on Ampligen® was published in a recent issue of the “American Journal of Obstetrics and Gynecology” (January 15, 2010, vol. 202). The report, whose lead author is Dr. Jonathan S. Berek, Professor and Chair, Obstetrics and Gynecology, Stanford University School of Medicine, discussed the value of stimulating a periodic “danger signal” with a TLR3 agonist such as poly(I)•poly(C12U) as part of immunotherapeutic cancer treatment regimens, and suggested such regimens may have broad potential application to boost the effects of many immunotherapies of cancer. The authors concluded that poly(I)•poly(C12U) “shows promise as a potential agent for selective enhancement of effect with currently available and future cancer immunotherapies”. According to the authors, “immunotherapy of cancer holds the promise of disease-specific intervention without the toxicity that is associated with traditional therapeutic modalities”. This reported study was supported by an Ovarian Cancer Research Fund COGI Grant, Advanced Immune Therapeutics, Hemispherx Biopharma, and grants from the National Institute of Health (Grants CA 33399, CA 34233), the Ruth Kirschstein Award (Grant 5 T32 AI07290, and the Ruth L. Kirschstein Award (Grant F32 DKO78416).

Collaboration studies in non-human primates conducted by ViroClinics in the Netherlands suggest a potential role for Alferon® LDO as another novel therapeutic approach to viral pandemics. In these studies, Alferon® LDO treatment appeared to be more effective than published results for a neuraminidase inhibitor (Relenza®), which is a current standard for care of seasonal flu along with a similar drug (Tamiflu®). The opportunity for Alferon® LDO is reinforced by new reports of severe side effects secondary to Tamiflu®, by both the FDA and Japanese health authorities. Also, Tamiflu® resistant strains of flu virus are now raising serious concerns on a world-wide basis. We are planning to expand this Alferon® LDO effort into H1N1 Swine Flu preclinical models in the United States and preclinical laboratory studies are initially underway.

We own and operate a 43,000 sq. ft. FDA approved facility in New Brunswick, NJ that was primarily designed to produce Alferon®. On September 16, 2009, our Board of Directors approved up to $4.4 million for engineering studies, capital improvements, system upgrades and building management systems. In 2008, production of Alferon N Injection® from our Work-In-Progress Inventory had been put on hold due to the resources needed to prepare our New Brunswick facility for the FDA preapproval inspection with respect to our Ampligen® NDA.

We are currently undertaking a major capital improvement program to enhance our manufacturing capability for Alferon N Injection®, Alferon® LDO and Ampligen®. The planned capital improvements include upgrade to the ventilation and electrical distribution systems; upgrade of the high pressure boiler to support process equipment and battery management system; building a utility mezzanine to support the installation of a new water and waste treatment process. In addition, we have increased our manufacturing staff with the addition of Directors for Quality Assurance and Quality Control. As a result, Alferon N Injection® could be available for commercial sales in mid to late 2011.

The New Jersey District Office of the FDA conducted an inspection of the New Brunswick, New Jersey facility in late January and early February 2009 in connection with review of the Ampligen® NDA. A one-page Form FDA 483 was issued citing a need to re-perform four method validations to generate data in the New Brunswick Laboratories. These validations had been performed at another site also owned and operated by us prior to transferring the equipment to New Brunswick. The validations have been completed and the reports were forward to the FDA in April 2009 for review. As a result, the New Jersey office of the FDA has indicated that there are no more preapproval review issues at that time. In addition to having addressed all known FDA Form 483 issues, we reported to the regional office of the FDA that the New Brunswick facility is in progress of validating certain manufacturing steps and compiling data that will be sent to the FDA after NDA approval or as required.

The FDA, in its November 25, 2009 CRL, noted that its field investigators had conveyed deficiencies to us at our New Jersey facility that needed to be resolved before the NDA could be approved. We believe these issues to be the same as communicated by the New Jersey District Office of the FDA in a one-page Form FDA 483 issued in early 2009 that cited a need to reperform four method validations to generate data in the New Brunswick Laboratories. These validations had been completed and the reports forward to the FDA on April 28, 2009 for their review. As a result, the New Jersey office of the FDA indicated that there are no more preapproval review issues at that time. At our expected meeting with the FDA to review the CRL, we intend to communicate that it is our understanding that these manufacturing issues had been previously addressed.

The FDA described specific recommendations related to the Ampligen® NDA in the “Product Quality” section of the CRL which identified additional analytic procedures to be submitted to the FDA. We believe that these procedures are already part of our ongoing Quality Control, Quality Assurance program for Ampligen® manufacturing under current Good Manufacturing Practice (“cGMP”) requirements. We are currently undertaking the majority of the tests needed for the validation phase to address the issues identified in the CRL as part of our originally scheduled post-approval testing prior to any commercial sales of Ampligen®.

We outsource certain components of our research and development, manufacturing, marketing and distribution while maintaining control over the entire process through our quality assurance group and our clinical monitoring group. We have a Supply Agreement through March 1, 2011 with Hollister-Stier Laboratories LLC (“Hollister-Stier”) of Spokane, Washington related to the manufacture of Ampligen. Pursuant to the agreement, we supply the key raw materials and Hollister-Stier formulates and bottles Ampligen®. On November 25, 2009, we received a Complete Response Letter (“CRL”) from the FDA which commented on Ampligen® manufacturing noting the need to resolve outstanding inspection issues at the facilities producing Ampligen®. These include our facility located in New Brunswick, NJ and Hollister-Stier. On December 11, 2009 via Hollister-Stier, we submitted comprehensive new data to the District Office (“DO”) of the FDA in Seattle, WA, which we believed demonstrated that certain manufacturing issues noted in the pre-approval inspections at the facility had been fully addressed. On February 2, 2010, Hollister-Stier received a favorable response from the FDA’s Seattle DO in which they noted that certain manufacturing issues noted in the pre-approval inspection at this facility had been fully addressed and that they had forwarded a recommendation to the FDA’s CDER for approval of Hollister-Stier as a manufacturing site under the Ampligen® NDA. The DO recommendations are not binding on the FDA and pertain only to the specific manufacturing issues cited in the Ampligen® manufacturing response and to the subcontractor site.

We have manufactured purified drug concentrate utilized in the formulation of Alferon N Injection® in our New Brunswick, New Jersey facility. On February 8, 2006, we executed a Manufacturing and Safety Agreement with Hyaluron, Inc. of Burlington, Massachusetts, for the formulation, packaging and labeling of Alferon N Injection®. This agreement has been permitted to expire primarily as a result of our decision to suspend Alferon N Injection® production in 2008. With manufacturing of Alferon® expected to take place in 2011, we are seeking new vendors that can provide the needed cGMP formulation, packaging and labeling services for this product.

Our marketing strategy for Ampligen® reflects the differing health care systems around the world along with the different marketing and distribution systems that are used to supply pharmaceutical products to those systems. In the U.S., we expect that, subject to receipt of regulatory approval, Ampligen® may be utilized in four medical arenas: physicians’ offices, clinics, hospitals and the home treatment setting. We remain in the process of developing pre-launch and launch driven marketing plans focusing on those audience development, medical support and payor reimbursement initiatives which will facilitate product acceptance and utilization at the time of regulatory approval. Similarly, we continue to develop distribution scenarios for the Specialty Pharmacy/Infusion channel which will insure market access, offer 3PL (third party logistics) capabilities and provide the requisite risk management control mechanisms. It is our intent to utilize third party service providers to execute elements of both the marketing/sales and distribution plans. We currently plan to utilize a small group of Managed Market account managers to introduce the product to payor, employer and government account audiences. We believe that this approach will establish a market presence and facilitate the generation of revenue without incurring the substantial costs associated with a traditional sales force. Furthermore, Management believes that the approach will enable us to retain many options for future marketing strategies.

For example, our commercialization strategy for Ampligen®-CFS may include licensing/co-marketing agreements utilizing the resources and capacities of a strategic partner(s). We are seeking world-wide marketing partner(s), with the goal of having a relationship in place before approval is obtained. In parallel to partnering discussions, appropriate pre-marketing activities will be undertaken. We intend to control manufacturing of Ampligen on a world-wide basis.

In 1998, we entered into a strategic alliance with Accredo to develop certain marketing and distribution capacities for Ampligen® in the United States. Accredo, a division of MEDCO, is one of the nation's largest Specialty Pharmacy providers. Pursuant to the agreement, Accredo assumed certain responsibilities for distribution of Ampligen® for which they received a fee. Through this arrangement, we may mitigate the necessity of incurring certain up-front costs. Accredo has also worked with us in connection with the Amp 511 ME/CFS cost recovery treatment program, Amp 516 ME/CFS Phase III clinical trial and the Amp 719 (combining Ampligen® with other antiviral drugs in HIV-salvage therapy and Amp 720 HIV Phase IIb clinical trials now under way). There can be no assurances that this alliance will develop a significant commercial position in any of its targeted chronic disease markets. The agreement had an initial one year term from February 9, 1998 with successive additional one year terms unless either party notifies the other not less than 180 days prior to the anniversary date of its intent to terminate the agreement. Also, the agreement may be terminated for uncured defaults, or bankruptcy, or insolvency of either party and will automatically terminate upon our receiving an NDA for Ampligen® from the FDA, at which time, a new agreement will need to be negotiated with Accredo or another major drug distributor. This agreement offers the potential to provide some marketing and distribution capacity in the United States. There has been no communication or activity under this agreement for the past few years.

In 2007, we had executed a marketing strategy for Alferon N Injection® by relaunching the product via a collaborative marketing initiative between Hemispherx and Armada Healthcare, a Specialty Pharmacy network encompassing specialty pharmacists, pharmacies, distributors and targeted physician specialists. This effort was intended to direct our efforts in the most appropriate and productive market fully exposing our product in the indicated market. This initiative had a positive impact on Alferon® revenues in 2007 by focusing on direct, non-personal selling efforts to targeted physician audiences. It was our intent to promote Alferon® to those dermatologists, OB GYNs and Family practice/IMs who are involved in the treatment of patients with refractory or recurring external genital warts and who currently utilize both injectable interferons as well as topical therapeutic agents. While this marketing initiative has been put on hold due to lack of commercially marketable product, the agreement remains in place and we expect to reactivate Alferon® N production along with its marketing program in 2011.

RNA based products and toll-like receptors (TLRs) have demonstrated great promise in preclinical and limited clinical applications resulting in active research and development by large pharmaceutical companies and emerging Biotech firms. As such, our potential competitors are among the largest pharmaceutical companies in the world, are well known to the public and the medical community, and have substantially greater financial resources, product development, and manufacturing and marketing capabilities than we have.

These companies and their competing products may be more effective and less costly than our products. In addition, conventional drug therapy, surgery and other more familiar treatments will offer competition to our products. Furthermore, our competitors have significantly greater experience than we do in pre-clinical testing and human clinical trials of pharmaceutical products and in obtaining FDA (in the US), Agency for the Evaluation of Medicinal Products (“EMEA”) (in Europe) and Health Protection Branch ("HPB") (in Canada), and other regulatory approvals of products. Accordingly, our competitors may succeed in obtaining FDA, EMEA and HPB product approvals more rapidly than us. If any of our products receive regulatory approvals and we commence commercial sales of our products, we will also be competing with respect to manufacturing efficiency and marketing capabilities, areas in which we have no experience. Our competitors may possess or obtain patent protection or other intellectual property rights that prevent, limit or otherwise adversely affect our ability to develop or exploit our products.

The major pharmaceutical competitors with biotech capabilities/vaccine franchises include Pfizer, GSK, Wyeth (now part of Pfizer), Merck, Novartis, Gilead Pharmaceutical, and Schering-Plough Corp (now part of Merck). Biotech competitors include Baxter, Fletcher/CSI, AVANT Immunotherapeutics, AVI Biopharma and GENTA. When we recommence sales of Alferon N Injection®, it will again compete with products produced by Schering-Plough Corp. and others for treating genital warts. 3M Pharmaceutical also markets its immune response modifier product, Aldera®, for the treatment of genital and perianal warts. We believe the approval and marketing of this product is the main reason that past sales of Alferon N Injection® have not met our expectations since acquisition. In November 2006, the botanical drug, Veregen® (marketed by Bradley Pharmaceuticals) was also approved for the topical treatment of genital and perianal warts. In addition, because certain competitive products are not dependent on a source of human blood cells, such products may be able to be produced in greater volume and at a lower cost than Alferon N Injection®. Our wholesale price on a per unit basis of Alferon N Injection® is higher than that of the competitive recombinant alpha and beta interferon products.

Regulation by governmental authorities in the U.S. and foreign countries is and will be a significant factor in the manufacture and marketing of Alferon® N products and our ongoing research and product development activities. Ampligen® and other products developed from the ongoing research and product development activities will require regulatory clearances prior to commercialization. In particular, new drug products for humans are subject to rigorous preclinical and clinical testing as a condition for clearance by the FDA and by similar authorities in foreign countries. The lengthy process of seeking these approvals, and the ongoing process of compliance with applicable statutes and regulations, has, and will continue to require the expenditure of substantial resources. Any failure by us or our collaborators or licensees to obtain, or any delay in obtaining, regulatory approvals could materially adversely affect the marketing of any products developed by us and our ability to receive product or royalty revenue. We have received Orphan Drug designation for certain therapeutic indications, which might, under certain conditions, help to accelerate the process of drug development and commercialization. Alferon N Injection® is only approved for use in intra-lesional treatment of refractory or recurring external genital warts in patients 18 years of age or older. Use of Alferon N Injection® for other applications requires regulatory approval.

We are subject to various federal, state and local laws, regulations and recommendations relating to such matters as safe working conditions, laboratory and manufacturing practices, the experimental use of animals and the use of and disposal of hazardous or potentially hazardous substances, including radioactive compounds and infectious disease agents, used in connection with our research work. Our laboratory and production facility in New Brunswick, New Jersey is approved for the manufacture of Alferon N Injection® and we believe it is in substantial compliance with all material regulations. However, there can be no assurance that this facility, or facilities owned and operated by third parties that are utilized in the manufacture of our products, will be considered by the FDA to be in substantial compliance at the present time or in the future.

Please see “Note 9: Research, Consulting and Supply Agreements” under Notes to Consolidated Financial Statements.

As of March 1, 2010, we had 44 personnel consisting of 32 full-time employees or consultants and 12 regulatory/research medical personnel on a part-time basis. Part-time personnel are paid on a per diem or monthly basis. 25 personnel are engaged in our research, development, clinical, and manufacturing effort. 19 of our personnel perform regulatory, general administration, data processing, including bio-statistics, financial and investor relations functions. We have no union employees and we believe our relationship with our employees is good.

While we have been successful in attracting skilled and experienced scientific personnel, there can be no assurance that we will be able to attract or retain the necessary qualified employees and/or consultants in the future.

Our Scientific Advisory Board presently consists of two individuals who we believe have particular scientific and medical expertise in Virology, Cancer, Immunology, Biochemistry and related fields. Dr. James Rahal, Director of the Infectious Disease Section of New York Hospital Queens, is one of the nation's foremost experts on the West Nile Virus. Professor Luc Montagnier of the Institut Pasteur in Paris has devoted his career to the study of viruses and is perhaps best known for the 2008 receipt of the Nobel Prize in Medicine related to his discovery of the Human Immunodeficiency Virus (HIV). It is the role of this Board to advise us about current and long-term scientific planning including research and development. The Scientific Advisory Board conducts periodic meetings as needed. No Scientific Advisory Board meetings were held in 2008 or 2009 primarily due to fewer active scientific projects. However, individual Scientific Advisory Board Members sometime consult with and meet informally with our employees or Board Members. Members of the Scientific Advisory Board are employed by others and may have commitments to and/or consulting agreements with other entities, including our potential competitors.

We are in the process of forming a Data Safety Monitoring Board (“DSMB”) that is projected to consist of independent regulatory and medical experts and a Biostatistics expert. The expected function of the DSMB would be to perform independent safety and efficacy analyses on our clinical trials, including those with Alferon® LDO.