Hollis Eden Pharmaceuticals-Ego and Mismanagement-Part I

HollisEden Pharmaceuticals, Inc. (Symbol:HEPH) is a sad tale of a once promising biotech company that has been mismanaged and severely weakened by a lack of adherence to fundamental management principles. The company was founded in March 26, 1997 when Hollis-Eden, Inc. was merged into Initial Acquisition Corporation (Reverse Merger into a Public Shell) and changed its name to Hollis-Eden Pharmaceuticals, Inc. The Co-Founders, Richard B. Hollis and Dr. Patrick T. Prendergast, formed the company to commercialize Prendergast’s work on small molecule metabolites branching off from DHEA(Dehydropiadivesterone), a multi functional steroid produced by adrenal glands. Later, it was found that Prendergast didn't even have a doctorate.

Their early work focused primarily on a drug compound named HE2000 subsequently called Immunitin. This compound showed tremendous promise in eliminating malaria parasites from malaria sufferers. In early Phase I/II testing, HE 2000 cleared malaria parasites from 17 out of 21 patients. Testing was done in South Africa and Thailand where patients were plentiful and where malaria was becoming resistant to current therapies. The Company’s scientific team lead by James Frincke found that the drug worked by boosting the patient’s immune system such that it could naturally fight off the parasites. In addition, Immunitin was also tested in rhesus monkeys that were given the Shiv Virus (a close substitute to the AIDS virus) to see if Immunitin could boost the monkeys immune system so they could fight off the advanced AIDS virus. The monkeys did well and survived for up to and past the trial end point of six months. Because the trials were conducted in South Africa, Richard Hollis made many trips down to South Africa and became friendly with Prime Ministers Nelson Mandela and Thabo Mbeki to see if he could get the South African government to sponsor HE 2000 in large scale Phase II/III human trials. The Company also courted the World Health Organization and The Gates Foundation to get funding. After years of working in that country, it became apparent that funding would be difficult due to the fact that the South African government would not guarantee that Hollis-Eden’s patent rights would be protected. HE 2000 was also tested in Singapore for patients fighting Hepatitis B.

Meanwhile, Hollis-Eden scientists were also testing and building up a huge patent library of other metabolites that showed promise for curing other autoimmune diseases. They learned a lot about how the immune system worked in regulating inflammation, which is the leading cause of many common immune diseases such as Diabetes, Rheumatoid Arthritis, Ulcerative Colitis and Crohn’s Disease.

In Mid 2001, the Company was approached by an research agency of the Department of Defense that was seeking to test compounds that might be effective as radioprotectants. When the terrorists attacked the World Trade Towers and the Pentagon on 9/11, this defense agency came to HollisEden within two weeks of the attack to speed things along. HEPH worked with thm on HE2100 (subsequently called Neumune) to see if they would be a suitable compound. In February 2002, the company received research funds from AFRRI (Armed Forces Radiology Research Institute) under a Cooperative Research and Development Agreement (CRADA). AFRRI team members indicated that they had been looking for a suitable radioprotectant for over 40 years and were encouraged by testing with Neumune. From 2001-2005, the Company tested Neumune on over 30 rhesus macaques using AFRRI research dollars and raised more money to continue testing monkeys. Richard Hollis and his management team pushed hard for the government to set up new procurement procedures. Project BioShield was conceived and passed by Congress in July 2004 to streamline government procurement of various drugs that would protect Americans against anthrax, dirty bombs and other terror agents. Hollis-Eden was viewed by many to be the "poster child" for BioShield. Little did any investors know what would ultimately happen.

Disclaimer: It should be noted that the author has held postions in Hollis-Eden since 1997 and currently holds stock in the Company today.