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August 22, 2010 – Comments (11) | RELATED TICKERS: GNBT , PFE , MNKD

      I have been watching biopharmaceutical company Generex (GNBT) lately. If you have spent 5 minutes researching this stock you know that it is the center of much controversy. I have never seen a company that invokes so much emotion in investors - people either hate it with a passion or love it to death. There doesn't seem to be a middle ground. The management is questionable at best (the CEO anyway), but their product line does seem to show promise if you look past some of the "WTF were you guys thinking?!? Did you let an intern get baked in the janitorial closet and come up with the craziest products they could?" - products. Heated blog posts aside, in my opinion there doesn't seem like there is much to lose if you have a small position in GNBT. The upside could be huge and the company does make 2 steps forward for every 1 step backwards. Below, as always, I aim to provide a well-balanced, well-researched view of this pharma company.

 Management                                                                                                                                  

    The CEO doesn't really have an impressive resume and she doesn't own any shares outside of her contract. Not such a good thing considering all of the talk about a reverse split. Understandably the company is desperate to raise funds either via investments, a Big Pharma partner, or the split. Recent nominations such as Dr. Eagle from Pfizer seems to give them an inside to Big Pharma. Pfizer pulled an inhalable insulin drug after it didn't catch on, so I'm sure they would love to recapture some of the $2 billion they wrote off as a result. The Seaside88 investing group doesn't have a great history of picking winners. And lastly, investors shot down the most recent attempt at a reverse split.

    It seems like management is simply keeping all options on the table. Many investors wish they would do it a little differently aka more professionally, but they're new at this too. I see this playing out as a 'whatever happens first' scenario. If their trials are going well and they present good data in September then they shouldn't have a problem landing a partner. This will ease expenses and give them some much needed credibility. Otherwise the split is their next option. One would have to question why they would pursue a split in the first place if they truely had the stellar products they insist they posess...Maybe they want a partner AND some extra investors buying in?

Product Line

    They have two big product candidates: Oral-lyn and AE37. Oral-lyn is a spray insulin that is absorbed by the body's buccal membranes in the cheek. Seems promising. I'm sure many diabetics would much rather spray insulin into their mouths than whip out a needle and jab it into their arm. TONS of controversy over this drug in developing markets. Management lied about sales in India and a luckluster showing in South America maybe isn't the best start for this drug. It has passed preliminary safety guidelines set by the FDA in early trials. The best thing about Oral-lyn is its advantage over the other 2 inhalable insulin products on the market. Both Pfizer and Mankind have or had insulin products that were absorbed into the patients lungs. This triggered an insulin resistance (although reversible over time) within the patient. Oral-lyn does not make its way into the lungs and did not show insulin resistance. The insulin market is pretty large, so if GNBT markets this drug correctly, they could gradually eat up considerable market share.

    AE37 has a little further to go in its product development. It is a cancer drug somewhat similar to RHHBY's blockbuster drug. It has proven to be more effective than its predecessor in that it can treat a wider range of cancer stages (RHHBY's drug has raked in $2.4 billion so far this year). The recent hiring of Dr. Eagle has to do with the development of AE37. Any ties between GNBT and PFE for Oral-lyn are simpy speculation at this point. If Oral-lyn does not produce results or fails to catch on, AE37 may be the drug worth watching with this company. Remember though, it is further out.

   Just for kicks have a looksy at their website. Energy spray? Diet spray? WTF?! Should this make us worry or are they just trying to get some quick cash? http://www.generex.com/products.php

 I recently threw $500 into this stock at 0.3999 for a long term play. We'll see how it goes.

   Alright Fools thats all I have for now. Hopefully I didn't forget anything (I most likely did). I would love to hear your thoughts and feedback. Let's try to keep this a little more respectable than, say, a Yahoo Blog? ;) 

                BlacknGold

11 Comments – Post Your Own

#1) On August 22, 2010 at 10:29 PM, justpassnthru (< 20) wrote:

A fair article.  This is a highly speculative stock that should only be a tiny part of a diversified portfolio, but it is highly intriguing.  If they can get past the reserve split (without splitting), exciting times could lie ahead.  I have also put a bet on it.  It will be fun to hang on for the ride ahead.

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#2) On August 23, 2010 at 12:54 PM, mike83wvu (< 20) wrote:

Great pattern on this one for a trader!

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#3) On August 23, 2010 at 11:25 PM, beauars (< 20) wrote:

I don't believe that MannKind's product had "insulin resistance (although reversible over time) within the patient."  Please explain where you got this information.  You may be right, but I follow the MNKD stock pretty carefully and have not heard that before. 

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#4) On August 24, 2010 at 12:12 AM, JPG101 (< 20) wrote:

I am one of those who are more in the 'hate' camp if you could call it that.

I have been following this company for a few years and lost money on them a few years back. I've learnt a lot through this bad investment. The first thing I now look at is quality of management and they fail big time on this. I've talked to management in person and they are at best shady. I've seen them lie straight faced to investors and the press about India. They even defended their India story when any reader with an internet connection knew they were making false statements that the SEC would probably find criminal if they had the time to go after these small fish.

As for their 'studies'. Read them and pay attention to time frames of randomisation, blinding, number of patients. who they were done by and where. 

 As for insulin resistance: it's not resistance but antibodies which are a very different thing. I know the company seems to spin it differently but look up insulin resistance with different insulins and look up insulin antibodies. Very different. Maybe Generex doesn't get antibodies because their insulin doesn't work...

Another thing: the insulin market is large because of type 2 diabetics. How long would the average cannister of Generex insulin last for the average type 2? How many 'puffs' would the average type 2 need for every dose? Try finding this out and you will have a pretty good idea at the probability of Generex ever getting anywhere.

The puzzling thing to me is the FDA giving patients access to this insulin under special considerations. Again this might not really be true? I've heard the CEO publicly say she would start selling this product (to make a profit) against every FDA guideline. This was at the same conference she lied and lied about the India fiasco.

 I think someone at Generex has simply choosen a really dumb CEO to become the fall-women when this house of cards falls starts crumbling. 

Has anyone ever noticed that the Generex bulls seem to have not so great track records in biotech? Look at the other biotech holdings of Generex bulls. Almost always companies that live off the small investors dime.  It can be argued that few people have good track records in biotech. Then again a company that has almost 0 insider or institutional buyers has by definition an all small investor basis to it and is most likely not a good investment. Big investors are not dumb and would not all miss this 'gem' which is far from being unknown. The advantage big investors have are huge. One their many advantages is that they can spenf the time and money to rally look into management and the company they are interested in. With Generex they will not have to spend to much time before they start running (or laughing). Management is that bad... 

Generex might be a day traders stock but then again why not day trade a real company not about to go bancrupt? 

As a 'long term' stock pick: go to the casino instead... Much better odds and a lot safer.

I skipped their AE37 whatever. Look at what they have done over the years with whatever that thing 'Antigen Express' or whatever does. Fibromyalgia will be next...

 

JPG

Long Mannkind. No position in Generex (just mad at having been fooled by these amateurs). Kind of on a mission to protect fellow small investors from getting burnt by this sham... 

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#5) On August 24, 2010 at 8:19 AM, TMFBlacknGold (98.51) wrote:

Thanks for the comments. As I mentioned, its a love hate thing.

beauars - there were several studies done about insulin being taken up through the lungs and this leading to, as JPG corrected me, insulin antibodies. This leads to the body becoming more tolerant of insulin, which requires a higher dose however. Easy to see how it could be swung as "resistance"

JPG - I'm with you on this one. Their management can't be taken seriously and it starts with their CEO. The scapegoat theory is one I think anyone can get behind. As for "how many pumps", I work in a pharmaceutical services lab that specializes in inhalables. I'm not sure what the dosing levels are for a canister of Oral-Lyn, but the average nasal spray can last up to 120 pumps at ~32mcg. Of course, one dose of insulin could easly be double this, so great point.

    Most people involved in this one are small traders. I think everyone gets all hyped up that this could be the next DNDN, but they forget that $0.00 is a lot closer to the stock price than $20.00.

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#6) On August 24, 2010 at 12:37 PM, blindtrader (< 20) wrote:

@JPG101 is just rambling incoherently and without any scientific knowledge at all.

#1. "different insulins" --  this is just dumb. insulin is a hormone, like estrogen. are there different "estrogens"?

#2. "the insulin market is large because of type 2 diabetes" --  type 2 is also known as non-insulin-dependent diabetes mellitus (NIDDM). People who have it normally does NOT require external sources of insulin such as through an injection. It is type 1 diabetes thatwould require this treatment.

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#7) On August 24, 2010 at 1:13 PM, TMFBlacknGold (98.51) wrote:

Insulin is a hormone. And the only insulin a human being would put in their body would be that made from human genes. I would definately say that the people who hate this one the most are the ones who lost money in it. That's kinda why I hate ANPI

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#8) On August 24, 2010 at 1:23 PM, TMFBlacknGold (98.51) wrote:

beauars - Best I could find. I have read this several times, but I can't find the links that the authors discuss. Shady? Thanks for making me check my sources, always a good thing!

'There were no safety concerns cited by the FDA, according to publicly released information, but the administration is mainly interested in the commercial version of the MedTone inhaler that is used to deliver insulin.

Mannkind's Afrezza is inhaled via the MedTone inhaler and then absorbed into the system through the lungs. While the FDA has cited no safety concerns regarding absorption through the lungs, there has been some concern expressed by others in the medical field whom believe that the lungs could face long term damage as a result of the inhaled insulin.'

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#9) On August 24, 2010 at 4:56 PM, carlosdisarli (< 20) wrote:

A balanced piece.  I'm not sure about the lungs & insulin resistance, but RJ Steffens says there will be an article out next month - "No Generation of Insulin Antibodies in Subjects with Impaired Glucose Tolerance Treated with Buccal Spray Insulin".  I'm just an amateur, but if a needle generates antibodies and insulin resistance, doesn't this mean that Generex's buccal delivery will be the best way to get insulin?  If that pans out, and Phase III pans out, then stock goes through roof.

I am going to take it that Pfizer would not waste its time on the vaccine if there were not at least something to it.  If this pans out then stock goes to the sky.

But there are lots of nooks and crannies here.  Money probs, the CEO has credibility issues, a possible reverse split.

Nevertheless, I'm putting more than $500 in it.

 

 

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#10) On September 07, 2010 at 1:22 PM, JPG101 (< 20) wrote:

BlacknGold: Check out the track record of poster of the ref "some concern" you linked to. Check out past pumps by this authur. Anyone who follows his recs is probably bancrupt by now.

Find one scientific ref that states that Mannkind antibodies increase insulin needs in patients (ie: resistance). Theoretically antibodies would cause resistance and not tolerance. Most of the posters who spin antibody this or that are significantly misreading the data out of lack of scientific knowledge or for 'other' reasons. The antibody thing is just the last straw Generex is clinging to. As for the Pfizer thing: I just don't get this move if it really is by Pfizer and not some personel move by a guy who is about to loose his job at Pfizer. I tried finding info on the Pfizer website about this guy (but didn't call Pfizer) and on the internet: no luck. I didn't try very hard but any Generex bull should make a real effort to find out something about this guy!

 

Blintrader: look up the natural history of type 2 diabetics. Look up who uses more insulin: type 1 or type 2s.

And yes there are many different insulins... Many many... Look it up. And yes there are many many different estrogens. Look that up also. 

This basic info is so simple that anyone who doesn't get this and invests in biotech is just plain ignorant or a pumper. Which one of the 2 are you? If you are just ignorant: read a bit about type 1 and 2 on WIKI or any basic medical text book you can find in any library and be more polite to people who have 'a bit'  more knowledge about science then you! If you are a pumper well keep up the good and credible posts!

Why anyone would invest in a so badly run and scientifically not credible company is beyond my understanding?

JPG 

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#11) On September 15, 2010 at 2:24 PM, TMFBlacknGold (98.51) wrote:

Back to the management, if anyone has read public statements made by the company, even on something as important as the split, it would be hard to NOT find an error. There are always typos. On a recent statement about the upcoming split they actually messed up the ratios by saying 11-1 instead of 12-1 (the minimum split ratio was also screwed up). This company doesn't seem to be very professional and they definately are not trying very hard either.

Again, a small position doesn't seem so bad given their potential. I like their AE37 cancer drug more than Oral-yn, but who knows if that will work.

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