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Recosulin's Wild Ride

|About: Generex Biotechnology Corp. (GNBT), Includes: GNBT, MNKD, SLS

While looking for binary events on the horizon one company was identified which truly stands out. This company has been beaten down and left for dead over the years, it has been painted as a company with broken leadership. The company in question is Generex (TICKER: OTCQB:GNBT) and the binary event on the horizon is the approval of Oral-lyn marketed as Oral Recosulin by Generex's Indian licensee Shreya Life Sciences Ltd. Generex has two items in their pipeline and from a financial perspective this company is on the ropes. At the helm is Mark Fletcher the firms previous General Counsel. The current CEO placement sounds like something United Airlines did in 2001, bringing on John W Creighton as CEO someone who knows nothing about running an airline but everything about restructuring a firm. The other item besides Oral-lyn in the pipeline is AE37, developed by wholly owned subsidiary Antigen Express. AE37 is a cancer immunotherapy product designed to target HER2 on breast cancer cells. The advantage of the drug is that it targets a population that Herceptin does not, while Herceptin is approved for use in roughly 25% of early stage breast cancer patients with high expression of HER2, it is not approved for the larger group of women (50% of women with early breast cancer) who have lower levels of expression of the target for Herceptin (HER2). Rather than attacking HER2 cancer cells directly as does Herceptin, AE37 works by stimulating the immune system to recognize HER2. The greater sensitivity of the immune system can thereby be brought to bear to recognize and kill cancer cells in this larger low HER2 expressing early breast cancer population. If you're wondering how much this item is worth check out Galena Biopharma (TICKER: GALE), GALE's like product E75 (currently in phase III) commands a market cap of $160 million. E75 is an HLA class I restricted stimulated CD8+ T cells while AE37 is a peptide. To learn more about the difference in peptides between AE37 and E75 see the Comparison of Different HER2/neu vaccines in Adjuvant Breast Cancer Trails.


It is a proprietary liquid formulation of human regular insulin that delivers insulin directly to the buccal mucosa utilizing the rapid mist technology. The formulation is placed in a delivery device along with a propellant. The RapidmistTM device sprays insulin directly into the mouth towards the throat, where it is rapidly absorbed by the buccal mucosa into the systemic circulation. The device delivers the aerosol (with large micellar size >7 microns) at a high velocity (~100mph) into the mouth. The entry of micelles is precluded into the lung. The deposition of the drug on the buccal mucosa also allows the developers to bypass earlier concerns about any risks to lung tissue that have been raised regarding investigative inhaled insulin formulation Exubera. Insulin spray is delivered in a metered dose, with each puff delivering 10U insulin into the mouth. The absorption is 10%, so that each puff delivers only one unit insulin into the bloodstream. Advantages offered by this formulation are as follows:

· Fast access to the circulatory system - Rapid absorption within 15 mins.

· Precise dosing control

· Simple, self-administration procedure

· Simple delivery of drug

The product is not a new drug but rather a method for drug delivery. This style of technology may remind you of other actors in the insulin delivery space. Mannkind (TICKER: MNKD) is a prominent actor in this space; Afrezza is an inhaled insulin product and as the street looks for a NDA submission sometime in 2013 speculators are bidding up the price in anticipation.

The Market

India presents an interesting market place for a product like Oral-lyn. According to IDF Atlas data there are 371 million people with diabetes. India has 63 million diabetics; United States only has 38 million. The data also suggests that 90% are cases of type 2, caused by insufficient amounts of insulin for the reduction of blood glucose levels. The acceptance rate of new delivery devices in India is trending in a direction that suggests we could see room for inhalable or oral based products. The trend I am referring to is the migration from your standard needles to the rise of products like insulin pens. As global big pharma entities clamor for a piece of the Indian diabetes management market, which is growing by 22% a year the focus is on local production. Generex is currently working with Shreya to transfer the technology to facilitate the local manufacturing of Oral-lyn, this suggests potential pricing value to the massive imported insulin model.


We feel confident in the approval for Oral-lyn and our sentiment matches that of Ram Shelat, Shreya's CEO as he is quoted here in a PR from Generex announcing the submission of Oral-lyn to the Indian Government for marketing approval. "We are most pleased with the results of our Phase III study," commented Ram Shelat, Shreya's CEO. "In anticipation of the DCGI's approval, we have begun working with Generex to facilitate the commercialization of Oral Recosulin™ in India."

The phase three detailed results have not been released and per the recent conference call the full details have been submitted to an international journal of clinical diabetes and these details are embargoed until publication. The color we do have is that was a statistically significant improvement in the hemoglobin A1c of those patients using Oral-lyn compared to injected insulin. Another reason for our conviction is that Oral-lyn was already approved in India in 2007 only to be pulled in March 2009. The reason for the removal was the lack of human clinical trial data. Now Shreya Life has worked with Oral-lyn since 2007 and has engaged in the necessary human clinical trials citing success with a 12 week open label, parallel group, comparative, multicentric phase III with 209 subjects.


Now lets go into BINARY MODE. The press release from Generex cites a summer 2013 approval date. While reviewing the New Drug Advisory Committee schedule at CDSCO we arrive at only one summer slot for the Metabolism & Endocrinology meeting to take place , 8/14/2013. We feel this will be the review slot for Oral-lyn and given the current market valuation of $14.7 million dollar market cap it could be that this upcoming binary event presents an interesting risk reward situation. In regards to price projections we should see anywhere between $300-$350 million dollar market cap. Think these numbers are lofty? See ticker MNKD and let me remind you this company is commanding a market cap of $900+ million for an inhalable insulin product with a target audience of 38 million diabetics, NDA submission is expected sometime 2013. From our internal analysis of bio run-up's for binary events we often see a stock reaching its cruising altitude 30 trading sessions leading into the event. If this model holds up for Generex then we expect to see price appreciation as soon as early July.

Disclosure: I am long OTCQB:GNBT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.