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Emerging Market Biotech.

|About: Generex Biotechnology Corp. (GNBT), Includes: BMY, GNBT, JNJ, MRK

(OTCQB:GNBT)"Generex Biotechnology Corporation is a Canada-based Company, which develops drug delivery systems and technologies for the treatment of diabetes. The Company has developed a proprietary platform technology for the delivery of drugs into the human body through the oral cavity. Its buccal insulin spray product, Generex Oral-lyn is in Phase III clinical trials at several sites around the world. The Company's proprietary liquid formulations allow drugs typically administered by injection to be absorbed into the body by the lining of the inner mouth using the Company's proprietary RapidMist device."

There are three main catalysts in the near future which could send this stock higher.

  1. Oral-lyn™, is the company's flagship insulin inhaler. It is intended to be a viable alternative to injected insulin for the treatment of type 1 and type 2 patients as well as pre-diabetes, and potential therapeutics for reducing the complications of diabetes. This has been a, "hurry up and wait" project that I have been following since 2004. They seemed to be very busy accomplishing nothing for most of that period. I will not pretend to be an expert on the length of clinical trials etc, so perhaps all this delay was necessary. The timing does now seem to be right and I anticipate them achieving some major milestones through the end of the year.

From a company press release Sept 27th 2013

Earlier this year, the Company announced that its Indian licensee, Shreya Life Sciences Pvt. Ltd. (, had completed a local Phase III trial of the buccal insulin product (branded as Oral Recosulin® in India) and submitted the dossier to the Drugs Controller General (India) (DCGI), Central Drugs Standard Control Organization, Director General of Health Services, Ministry of Health and Family Welfare, Government of India.

In conjunction with its review of the dossier, the DCGI recently requested that the submission be augmented by the inclusion of some stability data from previous studies undertaken by Generex. The Company is in the process of collecting and formatting that data and expects to provide it to Shreya within the next two weeks.

The market in India could be huge as it has a population of almost 1.3 billion.

According to the India Diabetes Research Foundation (IDRF),

"The World Health Organization (WHO) has projected that the prevalence of diabetes is increasing in epidemic proportions especially in developing countries. India has the highest number of people with Diabetes in the World."

In May of this year Mark Bergen had an article in Time Magazine entitled, "No Answers in Sight for India's Diabetes Crisis". Please take time to read the full article, but here is a quick taste.

"Research on diabetes in India has meanwhile been scant, making it hard to build up a true picture of the crisis and, in turn, formulate an adequate national response. The first comprehensive study was not published until December 2011. The report, produced by Mohan and his colleagues at the MDRF, estimated that there were 62.4 million diabetics across the country - a 65% leap from their 2004 estimate. The study also hypothesized that an additional 77.2 million Indians could be prediabetic and that by 2030, 100 million Indians could suffer from the disease. The World Health Organization predicts that by 2015, India's losses from diabetes and other noncommunicable diseases will top $236 billion, just $73 billion less than this year's national budget."

Oral-lyn, should play a significant part in the battle against diabetes in India. It is just a much more robust product than many of the alternatives. This is especially important when you are shipping stuff around remote rural areas with dirt roads. There are no needles involved, in developing countries patients are more apt to reuse needles which can lead to obvious complications. The simplicity of the product should make it a clear winner.

2. The Spinoff of Antigen Express,

"On March 30, 2011, Generex announced its intention to spinout Antigen Express, Inc. as a stand-alone public company and to provide Antigen Express stock dividends to the Generex stockholders following a reverse split of the Generex stock. That reverse stock split was approved by the Generex stockholders on June 8, 2011."

This has not happened yet! If Generex gains approval for Oral-lyn in India, the time would also be right for the spin out. The anticipated proceeds from India should be enough to support Generex going forward. They could then afford to have Antigen Express stand alone.

3. "Antigen Express, Inc. is a wholly owned subsidiary of Generex. The core platform technologies of Antigen Express comprise immunotherapeutic vaccines for the treatment of malignant, infectious, allergic, and autoimmune diseases. Antigen Express has pioneered the use of specific CD4+ T-helper stimulation technologies in immunotherapy."

The Antigen Express AE37 vaccine is designed to stimulate the immune system to target HER2 on breast cancer cells at low levels independent of immune type of the person. AE37 targets an early breast cancer patient population of unmet need several times larger than those treated with Herceptin. In particular, 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 recognize and kill cancer cells in this larger low HER2 expressing early breast cancer population. An additional potential advantage is that the immunological memory induced by AE37 means the immune system may continue to scan for and kill HER2 cancer cells long after AE37 treatment has been completed.

Herceptin is approved for metastatic and early stage breast cancer patients. Its 2010 annual sales were nearly $6 Billion. Given that the initial target population for AE37 in early stage breast cancer patients is twice that of Herceptin, the market potential for AE37 is clear. source Generex press release.

They are currently looking for partnership opportunities for Phase III clinical trials. They have also completed Phase I trials of AE37 for the treatment of prostate cancer. Although the prostate cancer trials are still in their infancy, the idea of a single vaccine to treat both types of cancer is very attractive.

Conclusion: The upside potential for Generex should now be obvious, but there are concerns also.

If they do not get approval in India, how long do we have to wait for anything to happen? I have no idea. I have been following the story for about 9 years now, and yet, I still have no idea.

The small market cap of 18 million, and current share price of $0.03 does not inspire confidence. The possibility of this company going to zero is always there. Anyone starting any position should be extremely careful and start very small.

On the other hand, they have a couple of high demand products near to completion. Perhaps this makes them a good target for a buyout. Lets face it 18 million is a drop in the ocean for companies like Merk (NYSE:MRK), Bristol-Myers Squibb Company (NYSE:BMY) or Johnson & Johnson (NYSE:JNJ).

There are many others who could make good use of the Generex patents, so perhaps that is how this will end.

I am long GNBT $0.035, with a twelve month price target of $1.47

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

Additional disclosure: This article covers a micro-cap stocks. Please be aware of the risks associated with these stocks.