Thursday, March 31, 2011

GNBT: The Conference Call, Some Questions Answered, Others Remained

The Generex's presentation at the Nasdaq on Wednesday was followed just a couple of hours later by a conference call in which the retail investor stole the show and lobbed some hardballs - and some softballs - at now-permanent CEO Mark Fletcher and his Generex management team. 

Funny enough, the first question asked at the call was right in line with the thoughts I took away from the Nasdaq presentation, why the lack of attention and avoidance of anything related Oral-lyn during the presentation?

As I noted on Wednesday, it wasn't until minute twelve in the presentation that the supposed "flagship" product for Generex received mention, and after only a brief update where the FDA was identified as the reason for no updates, the Antigen Express road show was in full effect.

In response to the first question regarding the lack of any Oral-lyn updates, Mr. Fletcher noted that the presentation was a "strategic development plan," hence the lack of attention to Oral-lyn. 

To that I'd have to say that if the "flagship product" of your company is not a significant part of the strategic future, then there might be some trouble for the home team.

That said, Dr. Anderson did step up to the plate and provided the best Oral-lyn update that investors have heard in a while, noting that the company is waiting on the FDA in regards to whether or not the five hundred (or so) patients enrolled - out of an initially-expected 750 - would suffice for approval with the FDA.

The agency is expected to respond within a couple of weeks, but we all know how the FDA runs by their own clock, so who knows when a response will come.

It was also identified that the patients to last enroll have still not completed the full cycle of treatment and follow-up that would have Generex call the trial complete, although the trial is no longer enrolling.

Funny enough, but that simple update is all investors needed to hear.  The fact that the company had to be pressed to give that update, however, reverts me to the opinions that I expressed after the presentation - that the company is making plans to move on without any solid Oral-lyn developments for the near future.

Maybe they're playing the 'prepare for the worst while hoping for the best' strategy, but until we know something, then we know nothing.

For the company to pin the lack of an update or timeline on the FDA doesn't entirely hold water, either.  After all, a timeline for expected completion of the current trial - since it's been stated that the trial is no longer recruiting - should be pretty easy to ascertain. 

If the timeline changes because another trial will be required, then so be it - but the perception is that the company does not want to discuss Oral-lyn right now.

With that said, Antigen Express becomes the "centerpiece" of the strategic future.

The spin-off, the rights offering, the dividend - the company is pulling out all the stops to persuade investors to vote yes this time, but it's still far too early to make a decision, in my opinion, as the vote is not until June.

It could be a whole new ballgame by then.

One market-mover for GNBT could be a potential partnership.  Investors are wary that the products are as successful as claimed by management since there has been no big pharma interest.  Mr. Fletcher did state that the company is in consistent contact with big pharma, but thus far no serious negotiations have taken place.

It's fair to keep in mind that the failure of Pfizer's Exubera a few years back may be delaying any serious Oral-lyn discussions.  The main contributors to Exubera being pulled from market were safety concerns and the inconvenience of the inhaler, according to published reports.  If those concerns are alleviated in this late stage trial, then big pharma may be more willing to shell out the big bucks to bring O-L to market.

The new regime at Generex runs a different ship than the previous one, as noted on numerous occassions by Mark Fletcher.  For instance, this regime does not see the immediate need to push its products into second and third world markets just for the sake of claiming that the product is approvable - at least not investing the training and education that should accompany such approvals.

There's another factor that may be contributing to the company's hush-hush nature about Oral-lyn.

Almost a year ago Generex filed suit against for comments made on TheStreet's biotech blog.  There has to date been no public outcome of this suit and it's something to keep on the backburner.

Since the filing of the Generex suit, TheStreet's biotech blogger has slowly chipped away at his own credibility as an emotionally and drama-fueled blogger and recently reached a new low by immaturely identifying investors of a company that he doesn't like as "retards."

Generex still has a whole lot of risk/reward potential working in its favor, but there will have to be solid news and updates before the share price will recover.

The significant run from two dimes to over thirty cents just on news of a conference call demonstrates how quickly this one can run when it wants to.  If a conference call announcement can do that to this stock, then imagine what real news could do.

Back trading at a quarter, and likely to trickle downward again, GNBT should be on the watch list as a potential big mover as early as this year.

Disclosure:  Long GNBT.

Read VFC's Take on Generex's NASDAQ Presentation.

Zecco Holdings

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