Long Ideas | Healthcare
A Planned Spinoff Of Cancer Vaccines At Generex
Jan. 14, 2019 11:32 AM ET | About: Generex Biotechnology Corp. (GNBT), Includes: BMY, CELG, GILD, LLY, LOXO, MRK, NKTR
Thomas Barnard
Thomas Barnard
Special situations, Deep Value, long/short equity, Growth
(190 followers)
Summary
Generex subsidiary Antigen Express working on breast cancer trial with Merck's Keytruda.
Generex subsidiary Antigen Express in prostate cancer trial with Shenzhen in China.
On Friday, Generex announced a plan to spin out its immuno-oncology unit as a separate company.
On Friday, Bristol-Myers Squibb announced plans to acquire Celgene for $74 billion in part for its cancer vaccines, which supports a re-evaluation of Generex's own cancer vaccine properties.
On Monday, Eli Lilly and Co. agreed to buy Loxo Oncology for $8 billion.
In my recent piece, The New Generex: Unlocking the Value, I assigned no value whatever in the current valuation of Generex's (OTCQB:GNBT) stock to its cancer vaccine technology, although cancer vaccine companies are not usually valued at zero. And the likes of Kite Pharma and Juno Therapeutics were ultimately each acquired at prices around $10 billion by Gilead (GILD) and Celgene (CELG) respectively, and were valued at a billion well before they had positive test results.
In that piece, I cited that as far as the Nobel committee was concerned, 2018 was the year of cancer vaccines. I quote from my recent piece:
2018, The Year The Nobel Prize in Medicine Goes to Cancer Vaccine Research
This is the year that the Nobel committee gave the Medicine award to researchers in cancer vaccines. It is the year of checkpoint inhibitors. The problem is that cancer cells disguise themselves as the body's own cells. And the killer T-cells will not attack cells it recognizes as those of the body. Checkpoint inhibitors are what prevent T-cells from attacking "self" cells. James T. Allison studied one of them, called CTLA-4, which is one of the checkpoint proteins that brake T-cells. And Tasuku Honjo discovered another checkpoint inhibitor, PD-1. And if the brakes are put on both checkpoint inhibitors, even better results can be obtained.
It turns out this is exactly where the Generex (OTCQB:GNBT) subsidiary, Antigen Express, and its primary researcher, Eric von Hofe, have been working on lo these many years. It has done studies both against on breast cancer and prostate cancer with success. These are studies in which patients have been treated to the point where no cancer can be detected; the vaccine is given to prevent recurrence. The breast cancer study was done against triple negative cancer, the worst. Merck (MRK), having some luck with its Keytruda, a checkpoint inhibitor, looked around for drugs that it might use in a combination attack. It found the Antigen Express study on triple negative breast cancer and decided in July of 2017 to partner on a Phase II study.
Kite and Juno employ CAR T technology, which is a laborious and expensive treatment where they take the patient's white blood cells and insert the CAR T gene, grow them, and then re-insert them back into the patient's body. Therapy can be half a million a year. Very expensive. Now, I repair back to the profile and interview of Generex's chief scientist in the immuno-oncology area, Eric von Hofe.
Eric von Hofe, Ph.D. University of South California, post-doc University Hospital of Zurich, Switzerland, post-doc Harvard; President, Antigen Express
Eric von Hofe has spent his whole career in cancer oncology, potentially a depressing area to be in. While he was an Assistant Professor at the University of Massachusetts Medical School, "I became acquainted with Bob Humphreys, who also did a post-doc at Harvard, who was making key discoveries." Eric then moved on to biotech, first at an antisense company in Worcester and then moving on to Millennium Pharmaceuticals. Meanwhile, Humphreys was continuing to get by with SBIR (Small Business Innovation Research) grants, and making progress. Eric consulted with him for a while in 1999, and kept in email contact. Eventually, Humphreys went on to start Antigen Express, and Eric joined Humphreys. In 2003, Antigen Express was bought out by Generex.
Eric informed me that Merck with its Keytruda drug had made progress with checkpoint inhibitors, which stop the immune system from going after the body's own cells. If you can get past the checkpoints, then you can kill the cancer cells, which employ a human disguise. He said, "It's a blunt tool. Merck noticed that it only worked in about 25% or 30% of patients, so they started looking around for other drugs that could work with it." Merck culled the studies, and found that Antigen Express had had some luck in triple negative breast cancer. AE37 vaccine stimulates the immune system to recognize a protein expressed on cancer cells (HER2); more importantly, the immune system can recognize this protein at lower levels than even the very successful drug Herceptin, which targets the same protein. And a key advantage of AE37 is that it is practically non-toxic. And this was the basis for the partnership with Merck. It was similar story with Shenzhen and the trial for prostate cancer. Antigen Express had done a Phase I study on prostate cancer that looked promising.
A lot of the work in the immune space has been in the CAR T cell area, where T cells are taken from the patient's body and tinkered with. Then they grow a lot of them, and then re-introduce them into the body. Von Hofe explained to me that this was a very expensive procedure that can cost as much as half a million per patient per year.
Image result for car t images dana farber
Source: Dana-Farber Cancer Institute
I asked him if the Ii-key would be any less expensive, and this is what he told me: "Yes, the fragment of the protein or pathogen only needs to be around 15 amino acids long, to which the Ii-Key (4 amino acids) are added. This peptide can be produced synthetically by a machine that is fed the appropriate amino acids; it simply adds one amino acid after the other to produce the peptide. When produced in bulk it's very cost effective. Anything that is not an off-the-shelf product and needs to be biologically produced, like CAR T cells, are much more labor intensive and costly."
He said the main difference between CAR T and Ii-key was that Ii-key provides a cue to alert the body's immune system to the cancer, much like a virus, then the T-cells come in and inject the cancer with enzymes that kill the cell. In CAR T, they are not relying so much on the body's own system, but act to directly change the DNA of the T-cells. It is expensive. As I have said, they collect the white blood cells, use an altered virus to inject the CAR T sequence into the T-cell DNA, grow the cells, and then they are injected back into the body. It is expensive, hence the high price the cancer vaccines companies are commanding.
I asked him if Ii-key would be more effective, and he replied that it would probably work better on solid tumors than for leukemias and lymphomas, where CAR T has been "amazingly" successful.
For in-depth investors, I recommend that they look for the October 2011 issue of Scientific America and Eric von Hofe's article there entitled "A New Ally Against Cancer." In the article, von Hofe gives a history of cancer and immune response, and brings it from the 19th century all the way up to the date of the article.
Here's the logic of a much higher stock price for Generex and/or the spin-off of its cancer vaccines:
1. The cancer vaccines of Generex are valued at zero, or near zero. In fact, during the summer, the whole company was valued at about $3 million (next to nothing). Generex's recent stock gains are pretty much based on the Veneto acquisition. But the cancer vaccines are not worth zero. Why?
2. Generex's scientist on point, Eric von Hofe, has had extensive training, including a Harvard post doc, and it was he who wrote the update of immuno-oncology for Scientific America.
3. Phase I studies for triple negative breast cancer and prostate cancer went well, and that is the basis for the collaboration with Merck on breast cancer, and Shenzhen in China for prostate cancer. Immuno-oncology published this article on Generex's breast cancer results in 2014, and the article points to these results for a Phase II trial. Prostate Phase I results were described in a company press release here.
4. The company's spin out announcement quotes from CEO Joseph Moscato that Generex ran "the largest breast cancer vaccine study ever conducted."
5. The technology is revolutionary. Ii-Key technology of Generex's Antigen Express (and now NuGenerex Immuno-Oncology) only requires a relatively inexpensive stringing together of 19 peptides. CAR T, which was explained above, is a very expensive technology used by both Kite Pharma, bought by Gilead, and Juno Therapeutics, bought by Celgene. Each acquisition in the $10 billion range, and valued at a billion long before they achieved results.
So, to reiterate, the thing I get out of this is that inserting genes into white blood cells or T-cells (CAR T) is a heck of a lot more expensive than synthetically producing a sequence of peptides. This would have to be a revolutionary improvement in the cost of treating those cancers on which this technique will work. Though there may be room for both technologies. Generex's Eric von Hofe reported above that CAR T has had quite a bit of luck with leukemia and lymphomas. He thinks that Ii-key will work well on solid tumors. But if they end up competing on the same cancer, and if both are successful, I expect Generex to carry the day because their technology will be less expensive.
6. On Friday, Bristol-Myers Squibb (BMY) announced the acquisition of Celgene in a transaction of about $74 billion, which appears to be the fourth largest biotech deal on record. Bristol-Myers had already made a deal in February with Nektar (NKTR) for over $1 billion simply for rights to another anti-cancer technology. So, with cancer clearly in BMY's sights, it appears obvious that one of the things they want is the CAR T technology of Juno Therapeutics which Celgene had acquired.
7. On Monday, Eli Lilly and Co. (LLY) agreed to buy Loxo Oncology (LOXO) for $8 billion. Loxo Oncology is focused on inhibiting genes that cause cancer. The obvious thing is that cancer therapies are heating up.
The thing that might be concerning to investors in BMY and LLY is that they have bet on quite expensive technologies, whereas, if cancers can be vanquished with a relatively inexpensive technology, it may turn out that they have grossly overpaid. Though, to its credit, CAR T has seen FDA approval, and Ii-key, in part because Generex went into a coma for years, has been much slower out of the gate.
Of course, trials will ultimately determine the value of all of these technologies, but one can say that Generex's Ii-key technology looks very promising. And buyers may be willing to pay a premium for such a promising technology.
Harmonic Convergence
I am dredging up this old expression from the hippies of the 1970s to bring home to investors the unique opportunity that Generex now, and its possible spin-off, provides to investors. I am suggesting that a small subsidiary of a company whose stock price had dropped to the levels of the Mariana trench, seemingly valueless, is worth possibly even today a billion dollars (or billions, for that matter). It seems fantastic.
I will try to put it in one sentence: In a year that the Nobel committee awarded the Medicine prize to two researchers working in the cancer vaccine area, a tested, efficacious, and safe cancer vaccine technology seems to have bubbled up from the deep (but is actually years and years in the making), inexpensive and disruptive, now progressing toward two Phase II trials, at a time when Big Pharma, especially, Bristol-Myers, has decided cancer vaccines will be a big part of its future, and is willing to pay the big money to get them. Can other Big Pharma firms be far behind? Not Eli Lilly, which just cut a deal for $8 billion Monday.
There may be too many technologies within Generex for the cancer vaccines to get their proper due. That was my as yet unstated impression when I wrote my recent article, linked above. A spin-off of Generex's cancer vaccines has been a subject of the message boards for years, but as the cancer vaccine area powers up, this appears as a particularly pregnant time for Generex CEO Joseph Moscato to spin out its cancer vaccines.
= = = = = = =
There are significant risks with all small biotechs, one of the principal ones is that they will run out of money, from which developed the expression burn rate: how long will the cash last? If this is your perspective, avoid this stock, there is no cash to speak of.
And so, you ask, what are they doing instead of cash? This is a question you should be asking yourself. The answer is a variety of things. The key people are getting no regular pay. Some are retired, some have other day jobs. And although they may not be getting regular pay, some bonuses have been awarded.
And how is this company buying all these companies? Veneto, Regentys, Olaregen, Pantheon Medical, and now Medisource Partners. A little bit of cash, some have taken corporate promissory notes. A few shares have been used for acquisitions, but not much. All must be aware of the poverty of cash, nevertheless, they have proceeded.
But something I can call attention to, since I interviewed - Joseph Moscato, Terry Thompson, James Anderson, Eric von Hofe, Harold Haines, and Jason Terrell (in no particular order) is that they all see Joe Moscato as the means to their ends - helping to get their products through testing and into the marketplace. This holds for those that are on the team, and those who want to join the team.
So, that's a risk. If Joe disappeared from the scene - well, as the commercial goes, your results may vary. Terry Thompson, the COO, has a wealth of experience, and can certainly see things through. (See my interview embedded in my previous piece). But Joe Moscato is a resourceful guy - I'm not saying he's a Bugs Bunny who could paint himself into a corner, and then paint a tunnel, and then walk through it, but you get the idea.
My impression is that Moscato has assembled a team, and even though they are located throughout the country, they seem to know what all the others are up to. And it is my further impression is that they will work together as a team to solve problems and achieve success. All are motivated and achievement-oriented people. But this is an impression, and should be so categorized.
It should be noted that major shareholders are also a part of the team, and they have given Joe a vote of confidence because they placed their dividend shares into a Stock Control Agreement. Joe gets to vote the shares, which are a majority of the shares in the company, and this agreement may turn out to be a source of cash because after the shareholders get their investment back, and the cash to pay taxes, they have agreed to contribute to the company the remaining proceeds. How often does that happen?
I would expect some dilution, but I would expect that Moscato will be very careful in the use of stock. All politics is local, and I expect Moscato to pay attention to his constituents - shareholders, scientists, management, and employees. He says there are 60 million shares outstanding, and that this may increase to 70 million shares in a recent interview.
All warnings apply. This is a small biotech, and funding is always an issue for microcaps like Generex. Investors should only purchase what they can afford to lose. The risks are great, but then the rewards may also be great.
Disclosure: I am/we are long 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.
Additional disclosure: I have owned shares continuously since 2008. I have interviewed Generex CEO Joseph Moscato, and president of Antigen Express, Eric von Hofe within the last year.
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A Planned Spinoff Of Cancer Vaccines At Generex
Jan. 14, 2019 11:32 AM ET | About: Generex Biotechnology Corp. (GNBT), Includes: BMY, CELG, GILD, LLY, LOXO, MRK, NKTR
Thomas Barnard
Thomas Barnard
Special situations, Deep Value, long/short equity, Growth
(190 followers)
Summary
Generex subsidiary Antigen Express working on breast cancer trial with Merck's Keytruda.
Generex subsidiary Antigen Express in prostate cancer trial with Shenzhen in China.
On Friday, Generex announced a plan to spin out its immuno-oncology unit as a separate company.
On Friday, Bristol-Myers Squibb announced plans to acquire Celgene for $74 billion in part for its cancer vaccines, which supports a re-evaluation of Generex's own cancer vaccine properties.
On Monday, Eli Lilly and Co. agreed to buy Loxo Oncology for $8 billion.
In my recent piece, The New Generex: Unlocking the Value, I assigned no value whatever in the current valuation of Generex's (OTCQB:GNBT) stock to its cancer vaccine technology, although cancer vaccine companies are not usually valued at zero. And the likes of Kite Pharma and Juno Therapeutics were ultimately each acquired at prices around $10 billion by Gilead (GILD) and Celgene (CELG) respectively, and were valued at a billion well before they had positive test results.
In that piece, I cited that as far as the Nobel committee was concerned, 2018 was the year of cancer vaccines. I quote from my recent piece:
2018, The Year The Nobel Prize in Medicine Goes to Cancer Vaccine Research
This is the year that the Nobel committee gave the Medicine award to researchers in cancer vaccines. It is the year of checkpoint inhibitors. The problem is that cancer cells disguise themselves as the body's own cells. And the killer T-cells will not attack cells it recognizes as those of the body. Checkpoint inhibitors are what prevent T-cells from attacking "self" cells. James T. Allison studied one of them, called CTLA-4, which is one of the checkpoint proteins that brake T-cells. And Tasuku Honjo discovered another checkpoint inhibitor, PD-1. And if the brakes are put on both checkpoint inhibitors, even better results can be obtained.
It turns out this is exactly where the Generex (OTCQB:GNBT) subsidiary, Antigen Express, and its primary researcher, Eric von Hofe, have been working on lo these many years. It has done studies both against on breast cancer and prostate cancer with success. These are studies in which patients have been treated to the point where no cancer can be detected; the vaccine is given to prevent recurrence. The breast cancer study was done against triple negative cancer, the worst. Merck (MRK), having some luck with its Keytruda, a checkpoint inhibitor, looked around for drugs that it might use in a combination attack. It found the Antigen Express study on triple negative breast cancer and decided in July of 2017 to partner on a Phase II study.
Kite and Juno employ CAR T technology, which is a laborious and expensive treatment where they take the patient's white blood cells and insert the CAR T gene, grow them, and then re-insert them back into the patient's body. Therapy can be half a million a year. Very expensive. Now, I repair back to the profile and interview of Generex's chief scientist in the immuno-oncology area, Eric von Hofe.
Eric von Hofe, Ph.D. University of South California, post-doc University Hospital of Zurich, Switzerland, post-doc Harvard; President, Antigen Express
Eric von Hofe has spent his whole career in cancer oncology, potentially a depressing area to be in. While he was an Assistant Professor at the University of Massachusetts Medical School, "I became acquainted with Bob Humphreys, who also did a post-doc at Harvard, who was making key discoveries." Eric then moved on to biotech, first at an antisense company in Worcester and then moving on to Millennium Pharmaceuticals. Meanwhile, Humphreys was continuing to get by with SBIR (Small Business Innovation Research) grants, and making progress. Eric consulted with him for a while in 1999, and kept in email contact. Eventually, Humphreys went on to start Antigen Express, and Eric joined Humphreys. In 2003, Antigen Express was bought out by Generex.
Eric informed me that Merck with its Keytruda drug had made progress with checkpoint inhibitors, which stop the immune system from going after the body's own cells. If you can get past the checkpoints, then you can kill the cancer cells, which employ a human disguise. He said, "It's a blunt tool. Merck noticed that it only worked in about 25% or 30% of patients, so they started looking around for other drugs that could work with it." Merck culled the studies, and found that Antigen Express had had some luck in triple negative breast cancer. AE37 vaccine stimulates the immune system to recognize a protein expressed on cancer cells (HER2); more importantly, the immune system can recognize this protein at lower levels than even the very successful drug Herceptin, which targets the same protein. And a key advantage of AE37 is that it is practically non-toxic. And this was the basis for the partnership with Merck. It was similar story with Shenzhen and the trial for prostate cancer. Antigen Express had done a Phase I study on prostate cancer that looked promising.
A lot of the work in the immune space has been in the CAR T cell area, where T cells are taken from the patient's body and tinkered with. Then they grow a lot of them, and then re-introduce them into the body. Von Hofe explained to me that this was a very expensive procedure that can cost as much as half a million per patient per year.
Image result for car t images dana farber
Source: Dana-Farber Cancer Institute
I asked him if the Ii-key would be any less expensive, and this is what he told me: "Yes, the fragment of the protein or pathogen only needs to be around 15 amino acids long, to which the Ii-Key (4 amino acids) are added. This peptide can be produced synthetically by a machine that is fed the appropriate amino acids; it simply adds one amino acid after the other to produce the peptide. When produced in bulk it's very cost effective. Anything that is not an off-the-shelf product and needs to be biologically produced, like CAR T cells, are much more labor intensive and costly."
He said the main difference between CAR T and Ii-key was that Ii-key provides a cue to alert the body's immune system to the cancer, much like a virus, then the T-cells come in and inject the cancer with enzymes that kill the cell. In CAR T, they are not relying so much on the body's own system, but act to directly change the DNA of the T-cells. It is expensive. As I have said, they collect the white blood cells, use an altered virus to inject the CAR T sequence into the T-cell DNA, grow the cells, and then they are injected back into the body. It is expensive, hence the high price the cancer vaccines companies are commanding.
I asked him if Ii-key would be more effective, and he replied that it would probably work better on solid tumors than for leukemias and lymphomas, where CAR T has been "amazingly" successful.
For in-depth investors, I recommend that they look for the October 2011 issue of Scientific America and Eric von Hofe's article there entitled "A New Ally Against Cancer." In the article, von Hofe gives a history of cancer and immune response, and brings it from the 19th century all the way up to the date of the article.
Here's the logic of a much higher stock price for Generex and/or the spin-off of its cancer vaccines:
1. The cancer vaccines of Generex are valued at zero, or near zero. In fact, during the summer, the whole company was valued at about $3 million (next to nothing). Generex's recent stock gains are pretty much based on the Veneto acquisition. But the cancer vaccines are not worth zero. Why?
2. Generex's scientist on point, Eric von Hofe, has had extensive training, including a Harvard post doc, and it was he who wrote the update of immuno-oncology for Scientific America.
3. Phase I studies for triple negative breast cancer and prostate cancer went well, and that is the basis for the collaboration with Merck on breast cancer, and Shenzhen in China for prostate cancer. Immuno-oncology published this article on Generex's breast cancer results in 2014, and the article points to these results for a Phase II trial. Prostate Phase I results were described in a company press release here.
4. The company's spin out announcement quotes from CEO Joseph Moscato that Generex ran "the largest breast cancer vaccine study ever conducted."
5. The technology is revolutionary. Ii-Key technology of Generex's Antigen Express (and now NuGenerex Immuno-Oncology) only requires a relatively inexpensive stringing together of 19 peptides. CAR T, which was explained above, is a very expensive technology used by both Kite Pharma, bought by Gilead, and Juno Therapeutics, bought by Celgene. Each acquisition in the $10 billion range, and valued at a billion long before they achieved results.
So, to reiterate, the thing I get out of this is that inserting genes into white blood cells or T-cells (CAR T) is a heck of a lot more expensive than synthetically producing a sequence of peptides. This would have to be a revolutionary improvement in the cost of treating those cancers on which this technique will work. Though there may be room for both technologies. Generex's Eric von Hofe reported above that CAR T has had quite a bit of luck with leukemia and lymphomas. He thinks that Ii-key will work well on solid tumors. But if they end up competing on the same cancer, and if both are successful, I expect Generex to carry the day because their technology will be less expensive.
6. On Friday, Bristol-Myers Squibb (BMY) announced the acquisition of Celgene in a transaction of about $74 billion, which appears to be the fourth largest biotech deal on record. Bristol-Myers had already made a deal in February with Nektar (NKTR) for over $1 billion simply for rights to another anti-cancer technology. So, with cancer clearly in BMY's sights, it appears obvious that one of the things they want is the CAR T technology of Juno Therapeutics which Celgene had acquired.
7. On Monday, Eli Lilly and Co. (LLY) agreed to buy Loxo Oncology (LOXO) for $8 billion. Loxo Oncology is focused on inhibiting genes that cause cancer. The obvious thing is that cancer therapies are heating up.
The thing that might be concerning to investors in BMY and LLY is that they have bet on quite expensive technologies, whereas, if cancers can be vanquished with a relatively inexpensive technology, it may turn out that they have grossly overpaid. Though, to its credit, CAR T has seen FDA approval, and Ii-key, in part because Generex went into a coma for years, has been much slower out of the gate.
Of course, trials will ultimately determine the value of all of these technologies, but one can say that Generex's Ii-key technology looks very promising. And buyers may be willing to pay a premium for such a promising technology.
Harmonic Convergence
I am dredging up this old expression from the hippies of the 1970s to bring home to investors the unique opportunity that Generex now, and its possible spin-off, provides to investors. I am suggesting that a small subsidiary of a company whose stock price had dropped to the levels of the Mariana trench, seemingly valueless, is worth possibly even today a billion dollars (or billions, for that matter). It seems fantastic.
I will try to put it in one sentence: In a year that the Nobel committee awarded the Medicine prize to two researchers working in the cancer vaccine area, a tested, efficacious, and safe cancer vaccine technology seems to have bubbled up from the deep (but is actually years and years in the making), inexpensive and disruptive, now progressing toward two Phase II trials, at a time when Big Pharma, especially, Bristol-Myers, has decided cancer vaccines will be a big part of its future, and is willing to pay the big money to get them. Can other Big Pharma firms be far behind? Not Eli Lilly, which just cut a deal for $8 billion Monday.
There may be too many technologies within Generex for the cancer vaccines to get their proper due. That was my as yet unstated impression when I wrote my recent article, linked above. A spin-off of Generex's cancer vaccines has been a subject of the message boards for years, but as the cancer vaccine area powers up, this appears as a particularly pregnant time for Generex CEO Joseph Moscato to spin out its cancer vaccines.
= = = = = = =
There are significant risks with all small biotechs, one of the principal ones is that they will run out of money, from which developed the expression burn rate: how long will the cash last? If this is your perspective, avoid this stock, there is no cash to speak of.
And so, you ask, what are they doing instead of cash? This is a question you should be asking yourself. The answer is a variety of things. The key people are getting no regular pay. Some are retired, some have other day jobs. And although they may not be getting regular pay, some bonuses have been awarded.
And how is this company buying all these companies? Veneto, Regentys, Olaregen, Pantheon Medical, and now Medisource Partners. A little bit of cash, some have taken corporate promissory notes. A few shares have been used for acquisitions, but not much. All must be aware of the poverty of cash, nevertheless, they have proceeded.
But something I can call attention to, since I interviewed - Joseph Moscato, Terry Thompson, James Anderson, Eric von Hofe, Harold Haines, and Jason Terrell (in no particular order) is that they all see Joe Moscato as the means to their ends - helping to get their products through testing and into the marketplace. This holds for those that are on the team, and those who want to join the team.
So, that's a risk. If Joe disappeared from the scene - well, as the commercial goes, your results may vary. Terry Thompson, the COO, has a wealth of experience, and can certainly see things through. (See my interview embedded in my previous piece). But Joe Moscato is a resourceful guy - I'm not saying he's a Bugs Bunny who could paint himself into a corner, and then paint a tunnel, and then walk through it, but you get the idea.
My impression is that Moscato has assembled a team, and even though they are located throughout the country, they seem to know what all the others are up to. And it is my further impression is that they will work together as a team to solve problems and achieve success. All are motivated and achievement-oriented people. But this is an impression, and should be so categorized.
It should be noted that major shareholders are also a part of the team, and they have given Joe a vote of confidence because they placed their dividend shares into a Stock Control Agreement. Joe gets to vote the shares, which are a majority of the shares in the company, and this agreement may turn out to be a source of cash because after the shareholders get their investment back, and the cash to pay taxes, they have agreed to contribute to the company the remaining proceeds. How often does that happen?
I would expect some dilution, but I would expect that Moscato will be very careful in the use of stock. All politics is local, and I expect Moscato to pay attention to his constituents - shareholders, scientists, management, and employees. He says there are 60 million shares outstanding, and that this may increase to 70 million shares in a recent interview.
All warnings apply. This is a small biotech, and funding is always an issue for microcaps like Generex. Investors should only purchase what they can afford to lose. The risks are great, but then the rewards may also be great.
Disclosure: I am/we are long 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.
Additional disclosure: I have owned shares continuously since 2008. I have interviewed Generex CEO Joseph Moscato, and president of Antigen Express, Eric von Hofe within the last year.
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