I have owned Generex (OTCQB:GNBT) for years. And was resigned to the proposition that it was a doggedy dog dog dog, and I’d have to figure out when I could take the loss. In my mind I had written down the tens of thousands I had invested in it. I have written on it number times here in Seeking Alpha, but not for years as it drifted into the suspended animation.
I have always liked their technologies. The buccal drug delivery system delivers drugs by means of a couple of puffs of an aerosol into the inside of the cheek (not the lung). Their test case was for delivery of insulin to Type I diabetes patients. They did the Phase I, Phase II, and Phase III studies. There was no rejection or failure, but the FDA wanted yet more research, and they ran out of money and the company slipped into a diabetic coma.
I figured that once this delivery system powered up, the entire diabetic population would turn on a dime, and switch over to this system in short order. I based this entirely on my own perception that if I could avoid sticking myself with a needle (even if the advertising guys tried to soft soap it by calling the needle a “pen”), I would do it. I don’t think I’m wrong.
After all, Pfizer had written down $2.8 billion on another system to avoid the needle. I think that that alone is a strong argument that I cannot be far off. Pfizer’s drug, called Exubera, was designed to be inhaled into the lung. It turned out that patients, and some doctors, were not comfortable with the lung involvement. And that was that.
So now comes Joe Moscato, who was a marketing executive for Pfizer on the Exubera drug roll out. That drug failed to win a following, but he was still attracted to the idea of replacing the needle, and the buccal system seemed like the ideal solution. I spoke with him as fellow shareholders five or six years back, both of us enamored with the idea of getting away from the needle. We thought doctors would glom on to the buccal system, and their patients, not fearing the needle, would comply with their recommendations. Out of the blue, I learn that a year ago Joe was made the CEO.
When I spoke with him after he took over, he revealed an essential fact, the kind of fact that a marketing guy would point to, which is, that 95% of diabetic patients are Type II, and that’s where the money is. And he said that was where the new Generex was headed. (To make the point absolutely clear that there is new management, they are changing the name to NuGenerex).
In the meantime, the elves at Generex, working through its somnolent winter, found a researcher who was able to amp the formulation, and make it more potent. Instead of a user having to spritz up to ten puffs in the mouth, they have it down to one or two. Things are coming together. (I call them elves because no one at Generex is making any fortune on this company so far.)
After all, Generex just suffered one of the most devastating share reductions I have ever witnessed in my life. On March 14, 2017, shareholders received just 1 share for every 1,000 shares they owned. This has reduced the number of shares to just over a million. My million shares became a mere 1,000.
Serious investors will have to throw more money on the fire to build their positions. Painful for investors who took the hit on the reverse split. On the other hand, investors like myself feel that the spring has been wound to its maximum.
The Man with a Plan
Joe Muscato’s plan is to develop a pharmacy operation that will throw off enough cash to pay for any studies required for the diabetic product, Ora-lyn. The initial steps have already taken place. His ideas all have a very practical and sensible tilt. He has what I would call “nice” judgment.
But there are other parts to this company. It is not a one trick pony. I have not discussed the company’s subsidiary, Antigen Express, which is developing vaccines for breast cancer and prostate cancer. I have not discussed the company’s other subsidiary, Hema Diagnostic Systems, which has developed quick tests for tuberculosis and the STD’s (sexually transmitted diseases), diseases which seem to be coming back, and which I expect will used widely in the third world.
Nor have I discussed that the buccal delivery system could be used for other drugs, as Joe says, if they are of a certain molecule size, and taste is another issue. Nor have I discussed the other possible uses for Antigen Express’s technology, other cancers or infectious diseases, or the other tests that Hema Diagnostic has developed and will develop. Or the pharmacy operation.
My conclusion is that this company, which is now down to 1 million shares has the best chances of any company in America. The insulin buccal delivery system and the vaccines for prostate and breast cancer are each possibly billion dollar businesses. If I had to pick one stock for the coming year, this would be it.
Disclosure: I am/we are long gnbt.
Additional disclosure: I have owned shares since 2008.