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A drug company is a private figure for the purpose of a defamation case even though it received federal funding and was subject to peer review articles, a Philadelphia common pleas court judge has ruled. Philadelphia Court of Common Pleas Judge Albert W. Sheppard’s decision came in a legal battle between Delaware-based drug company Hemispherx Biopharma Inc. (HBI) and New York-based investment firm Asensio & Co. Inc. HBI’s principal place of business is in Philadelphia. HBI researches, develops and tests experimental drugs for regulatory approval and sale. Its primary focus has been the development and testing of the anti-viral drug Ampligen for the possible treatment of chronic fatigue syndrome and chronic hepatitis. HBI trades its common stock on the American Stock Exchange. Asensio & Co. is a registered broker and investment banking firm that publishes and distributes analytical research reports regarding publicly traded companies and trades securities of those companies for its own account. Manuel P. Asensio is the founder and chairman of Asensio & Co. Sheppard said HBI sued Manuel P. Asensio, Asensio & Co. Inc. (A&C) and Asensio.com Inc. for allegedly making defamatory statements in press releases and research reports to “illegally manipulate” the price of and short sell HBI’s stock. In August 1998, Sheppard said A&C started accumulating short positions in HBI and then in September of the same year, the company published “through means of interstate commerce including the Internet,” a research report and a press release that had a “strong sell recommendation” attached. The report and press release contained statements such as “Ampligen is ‘toxic’; and that “HBI has made ‘fraudulent misrepresentations about Ampligen’s FDA filing status and CFS earnings claims.’” The defendant also made statements that appeared in articles in Business Week and the Philadelphia Inquirer. “The publication of these statements allegedly caused the price of HBI’s common stock to decline precipitously, reduce the value of the company, and impaired HBI’s business relations with third parties,” Sheppard wrote. HBI sued first in federal court, but the case, Hemispherx Biopharma v. Asensio, was transferred to the Common Pleas Court’s Commerce Case Management Program in July 2000. HBI asserts four counts: defamation; disparagement; intentional interference with existing and prospective business relations; and civil conspiracy. A&C moved for summary judgment, asserting that the actions were not actionable since the statements were opinions based on facts and “substantially true.” A&C also asserted that HBI was a public figure and could not prove that the statements were made with actual malice. The defendants also assert several objections to HBI’s potential damages recovery. The court said the threshold issue to decide was whether Pennsylvania or New York law should apply. The court first had to determine whether HBI was a public or private figure because the choice of law would only be an issue if HBI were a private figure because New York and Pennsylvania have similar laws with regard to alleged defamation involving a public figure. A&C argued that HBI was a public figure because it had been involved in two public controversies — the effectiveness of Ampligen in treating high-profile diseases and the value of publicly traded stock. “In support of their position, defendants argue that HBI’s stock is traded on the AMEX, HBI promotes Ampligen in press releases, HBI has released the results of clinical trials regarding Ampligen that has resulted in over two hundred peer-review publications and articles, and HBI has solicited research grants from the federal government,” Sheppard wrote. “Plaintiff, in response, argues that it cannot be deemed a public figure simply because it received research grants for Ampligen.” The court said, however, that the company is not a public figure, nor is there evidence to show that public controversies exist around Ampligen. “Rather, it may well be that defendants created this ‘controversy’ by publishing its negative reports regarding HBI and its product, and such conduct may not constitute a defense,” Sheppard wrote. “Therefore, this court finds that HBI should be considered a private plaintiff and HBI need only prove that the alleged defamatory statements were negligently published.” Sheppard also said that it is unclear whether the statements made were opinions “which can reasonably be construed as implying undisclosed facts which may have a derogatory meaning.” Therefore, the court said, summary judgment was inappropriate because of genuine issues of material fact. Turning to the choice of law issue, the court having determined that HBI was a private figure, deemed that Pennsylvania law was the more appropriate guiding law because Pennsylvania has the greatest interest in protecting HBI’s interest. Margaret Manolakis of Stradley Ronon Stevens & Young in Philadelphia represents HBI and Lawrence G. McMichael of Philadelphia’s Dilworth Paxson represents A&C.

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