Research, Consulting and Supply Agreements

12 Months Ended

Dec. 31, 2011

Research, Consulting and Supply Agreements

Research, Consulting and Supply Agreements

(11) Research, Consulting and Supply Agreements

On June 6, 2008, the Company engaged the services of Warren C. Bogard, Jr., Ph.D. as a consultant for Business and Product. Dr. Bogard had agreed to spend at least 70% of his time working on product and business development matters. His compensation from the agreement included $5,000 per work week and 100,000 stock options with a five year term exercisable at $0.68 per share. Dr. Bogard was a participant in the Goal Achievement Incentive Award Program and consistent with the Company's "Employee Wage Or Hours Reduction Program", he elected to receive 50% of his fee in Incentive Rights on a three-to-one conversion basis for the period of January 1 to May 31, 2009. His agreement expired May 31, 2009 and had been extended by informal mutual consent through March 2011. The Company incurred approximately $132,000, $307,000 and $365,000 in fees for the years ended December 31, 2011, 2010 and 2009.

The Biken Material Evaluation Agreement ("MEA") concluded on September 1, 2010 and had been effectively extended through December 1, 2010 in order to determine whether the parties could agree on the next phase of the collaboration, which included, without limitation, a proposed clinical trial. In April 2011, the Company 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 (the for profit operational arm of the Foundation for Microbial Diseases of Osaka University) had purchased Ampligen® for use in conducting animal studies of intranasal prototype vaccines containing antigens from influenza sub-types H1N1, H3N2 and B. The Company sold approximately $-0-, $-0- and $45,000, of specially formulated Ampligen® to Biken for the years ended December 31, 2011, 2010 and 2009, respectively.

Since October 2005, the Company has engaged the Sage Group, Inc. ("Sage"), a health care, technology oriented, strategy and transaction advisory firm, to assist the Company in obtaining a strategic alliance in Japan for the use of Ampligen® in treating Chronic Fatigue Syndrome ("CFS"). On December 14, 2011, the Company agreed to 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. Further, this Agreement may be terminated by the Company for cause after the Company delivers written notice to Adviser of a failure to perform and such failure is not cured within fifteen (15) days. Sage will assist the Company to identify, qualify, negotiate and close one or more licensing, partnering, alliance or similar transactions pertaining to the Company's 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 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 the Company by Sage. However, it is the intention of the parties that Sage be an active participant in all material Transactions of the Company. A Transaction can occur during the Term of the agreement or 18 months thereafter. The Company incurred approximately $314,000, $290,000 and $507,000 in fees to Sage for the years ended December 31, 2011, 2010 and 2009 respectively, pursuant to this and earlier agreements. R. Douglas Hulse, the Company's former President and Chief Operating Officer, is a member and an Executive Director of Sage.

On October 2, 2011, the Company finalized their Fourth Amendment to a Supply Agreement, effective through March 11, 2014, with Jubilant 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 Hemispherx would supply to them. The Company incurred approximately $-0-, $-0- and $225,000 in fees for the years ended December 31, 2011, 2010 and 2009, respectively, pursuant to this agreement.

On September 6, 2011 the Company executed an amended agreement with Armada Healthcare, LLC ("Armada") to undertake the marketing, education and sales of Alferon N Injection® throughout the United States. Armada will also provide start up and ongoing sales and marketing support to the Company. The Company incurred no fees for the years ended December 31, 2011, 2010 and 2009, pursuant to original and amended agreements.

On September 6, 2011 the Company executed a new agreement with 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 Company incurred approximately $5,250 fees for the year ended December 31, 2011, pursuant to the agreement.

The Company has entered into agreements for consulting services, which are performed at medical research institutions and by medical and clinical research individuals. The Company's obligation to fund these agreements can be terminated after the initial funding period, which generally ranges from one to three years or on an as-needed monthly basis. During the years ending December 31, 2011, 2010 and 2009, the Company incurred approximately $1,580,000, $1,607,000 and $801,000 respectively, of consulting service fees under these agreements. These costs are charged to research and development expense as incurred.