Monday, March 7, 2011

Readers Respond: Generex, The Conference Call

"Readers Respond" is a forum where VFC interacts with the readers of VFC's Stock House.  Readers can leave comments on posted material at either of the blog sites, through Seeking Alpha or via email, vfc@vfcsstockhouse.com.  All stock opinions, tips and questions are welcomed, whether agreeable with VFC's opinions or not.  Thanks for the comments, because without interaction - this wouldn't be fun.

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A comment posted on VFC's NEW Stock House from Kim regarding the upcoming Generex conference call:

Do you think Generex will offer any substantial news during their upcoming conference which will fuel the price higher? ...or will it be an opportunity to load up on sub $.20 shares for a future run? This assumes positive news will ultimately be released. What do you think is the risk vs. reward ratio for the conference. Also, do you think the deal to buy a majority share of the distribution company will be consumated? What do you think the capitalization will be if Phase III comes in positive but prior to a NDA? Thanks so much, Kim

VFC's Take:  It's tough to tell what the Generex's game plan is right now, aside from the fact that the company is trying to stay alive and attractive new long term investors.  There's been relative silence from the company regarding Oral-lyn - the company's flagship product and the only hope for a short term movement of share price - since a flurry of encouraging articles posted around the net this past winter.

Aside from a press release last week announcing a new site for the Oral-lyn Expanded Access Program (EAP) there's been nothing - and that indicates to me that nothing is brewing for the conference call.

If the EAP program is the best this company can do regarding Oral-lyn right now, then we - as longs - might be in trouble.

I still like the risk/reward with Generex, however, but expectations must be tempered.

If the company surprises with a positive Phase III announcement for Oral-lyn, then there's good reason to believe that the stock would jump back up towards the dollar mark, if not higher, which would open the door for a dilutive financing deal that would net enough cash to consummate the purchase of Global Medical Direct.

Other than that, it'll take significant dilution at a low price or another attempt at a reverse split to raise enough cash to get that deal done. 

Another option would be a partner coming on board for AE37 that would be willing to shell out some up-front cash to Generex.  That would be the optimal path for shareholders as it would most likely alleviate the need for dilution and offer proof that someone other than Generex and an anonymous valuation company believes the product is worth a significant investment at this time.

As for the market cap, it depends on what the news is as to how high I believe the price could go.  A positive update showing that Oral-lyn is still alive would be enough, in my opinion, to send shares to the north side of fifty cents, while outright positive results from a completed Phase III trial could send shares to a few bucks in a hurry.

But it's too early to get carried away just yet, because management has been anything but predictable of late (and there's still no permanent CEO) and there's been no significant updates since last fall.

Again - I still like the risk/reward, and I'll add a few shares of GNBT here and there until we know one way or another how this story will end.

Disclosure:  Long GNBT.

vfc@vfcsstockhouse.com



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