BaBOOM! or Bust?
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? ;)
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