Tuesday, February 22, 2011

Earnings Alert: Generex

With Generex Biotechnology set to report earnings and host a quarterly conference call within just a couple of weeks, expectations will be high as investors are awaiting updates on several fronts from this company.

For one, Generex is still without a permanent CEO.

Former CEO and co-founder of the company, Anna Gluskin, was removed from her position last fall, replaced by then Executive Vice President Mark Fletcher.  Gluskin remained with the company in a diminished capacity, until she left for good earlier this year.

Fletcher's appointment to the position was intended to be a temporary one, but there's been no developments regarding a permanent replacement, aside from a brief comment from the company that the search is ongoing.

While it's safe to assume that the intent is to advance the pipeline in an efficient manner no matter who is at the helm, without a standing CEO, there is no gauging the current 'mission statement' of the company. This becomes especially important when considering the prospects for partnerships.

The announcement of the intended majority acquisition of Global Medical Direct (GMD), also last fall, has fueled speculation that Generex may attempt to 'go it alone' with Oral-lyn, should the product make it to market. GMD would also offer the company another outlet to market its over-the-counter products, such as Crave-Nx and BaBoom.

However, without a CEO in place, there's no certainty on which direction this company will go.

Already the proposed GMD deal has been pushed back to June, although that probably has more to do with the failed reverse stock split than the lack of a CEO.

Investors will also be expecting to hear an update regarding Oral-lyn. Much has been made about the progress and potential of the product, which would be the first approved oral insulin spray where the insulin is absorbed through the inner lining of the cheek and not the lungs, but the general lack of relevant updates and focus on AE-37 has many wondering what is really going on with the Phase III trial.

Additionally, the product has been approved and commercialized in multiple countries for quite a few quarters now, but according to the most recent financial statements from Generex, it has yet to record any sales.

Oral-lyn is the short term backbone of this company, and a valid update is crucial to retaining investor interest moving forward.

There have been quite a few updates on the progress of AE-37 of late. It has been announced that new patents have been awarded for the product, and the amount of patients enrolled for the ongoing Phase II trial has been increased.

Additionally, an independent valuation firm specializing in pharmaceuticals has placed a $300 million value on AE-37, according to a recent Generex press release, well before the expected conclusion of the ongoing trial. Whether the valuation was an attempt to boost the interest of potential partners or an attempt to boost the share price is left to individual speculation, but it has raised some eyebrows that so much focus is being directed at AE-37 right now, and not Oral-lyn.

Is Generex looking to partner AE-37 to bring in enough up-front cash to fund the final stages of Oral-lyn's development, or will it ultimately be Oral-lyn that is partnered?

These are questions for which investors will be looking for answers, but they may not be able to be answered until a new CEO is in place.

Keep an eye and ear out for this conference call. With Mannkind now out of the picture for the short term, Generex has a chance to play catch-up, and should Oral-lyn pan out sooner rather than later, GNBT could become a game changer for 2011.

Disclosure:  Long GNBT, Long MNKD Options.

vfc@vfcsstockhouse.com

Posted earlier at VFC's NEW Stock House.

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