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Generex Biotechnology, and their wholly owned subsidiary Antigen Express, are developing promising new drugs to treat diabetes, as well as synthetic peptide vaccines targeting HER2/neu cancer and pandemic flu. The flagship product for Generex is Oral-lyn buccal insulin. Antigen Express' leading vaccine is the AE37 HER2/neu synthetic peptide vaccine to prevent breast cancer recurrence. I am not qualified to offer investment or medical advice, and make no claims that I am an expert in these areas. I am a layman and a shareholder in this company. The left side of Pipeline Review holds blogs regarding Generex and Antigen Express, while the right side offers items of due diligence mixed with my analysis which may be of interest to others seeking to learn about Generex's pipeline. If the left side only shows the latest blog, click on the word home to view them all.

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Saturday, June 7, 2008

Generex Biotechnology: Oral-lyn Buccal Insulin Takes center Stage

The first three blogs I'll bring here were my first publications at Seeking Alpha. This was published April 10th, 2008.

about stocks: ALKS / GNBT / MNKD / NKTR / PFE

Insulin was discovered in Toronto in 1921 and arrived on the market in 1922. Since that time there have been episodic attempts to escape the inevitability of injection.

The race for developing a successful needle-less insulin delivery system has taken some recent nasty turns as the inhalable efforts of large pharma companies have all come to an end. The latest news that Pfizer (PFE) is adding a new warning label to Exubera regarding instances of lung cancer in clinical trials may prove to be the final nail in the coffin for hopes of any inhalable insulin winning the hearts and minds of needle suffering diabetics.

The news caused a devastating effect on shares of Mannkind (MNKD) as analysts cried "SELL" and investors obeyed the call. In essence, it appears Mannkind's "Technosphere Inhalable Insulin" somehow was seen as failing a Pfizer/ Nektar (NKTR) "Exubera" Phase III trial. Call it "guilt by association", or even call it unfair, but it will be impossible for Mannkind to win those hearts and minds of diabetics when they are afraid of serious damage to their lungs.
And with the FDA issuing a hardened approach towards approving diabetes drugs that may present any adverse health effect, consider the odds of Technosphere ever gaining FDA approval to now be seriously in doubt. However, diabetics' hopes for freedom from needles may not be over.

Generex Biotechnology (GNBT) is developing a needle-less insulin delivery system that does not enter the lungs and is delivered to the inner cheek wall as a metered dose buccal insulin spray. Ironically, this small microcap biotech, incorporated in Delaware, originally partnered early in the decade with Eli Lilly (LLY) for development of Oral-lyn buccal insulin spray. But Eli Lilly was already financially committed to a developmental agreement with Alkermes (ALKS) for the development of their Air Inhalable Insulin. In two years of nothing, Lilly never conducted a single trial for Oral-lyn buccal spray.

The biotech rumor mills were running rampant that Eli Lilly simply stalled Generex's development of Oral-lyn Buccal. In 2003, Generex and Lilly mutually agreed to end the agreement and Lilly left tiny Generex for dead. But Generex did not die. The management team, led by founders CEO Anna Gluskin and COO Rose Perri, hung strong and continued Oral-lyn buccal spray's development with a new found independent spirit and successfully raised enough financing to survive.

Oral-lyn buccal spray was back in the clinic in 2004 and 2005 and, as Generex fought its way back from potential bankruptcy, positive results for safety and efficacy began to filter through. In 2005, Oral-lyn buccal spray was approved for commercial marketing and sales in Ecuador, which was the location of many of the Phase I and Phase II clinical trials. In the latest Phase II trial for Oral-lyn buccal spray, the investigators concluded that Oral-lyn illustrated a “superior effect” vs. Eli Lilly’s HumalinR as measured by the patients A1C levels (6.1) after 99 days.

In 2006, Generex completed a positive Pre-NDS with Health Canada. In November of 2007, Oral-lyn buccal spray was approved for marketing and sale in India- which is home to 1/3 of the world's diabetics. In April 2008, Generex announced the initiation of the North American sites (USA and Canada) for their worldwide Phase III trial of Oral-lyn buccal spray in Type 1 patients. The company has announced that this six month study will be modeled after the Phase II study where "superior effect" was illustrated, and that all of the major regulatory bodies, including Health Canada and the FDA, have approved the Phase III study protocol. Generex is hoping for Canadian approval of Oral-lyn buccal spray within 18 months and shortly after in the USA.

Can this small biotech accomplish what large pharma could not? Perhaps the difference is in the Oral-lyn formulation and device, termed Rapidmist, which is a small handheld metered spray whose doses measure exactly 1 unit. The onset of action is quicker than what was reported for Exubera. Also, Oral-lyn requires no refrigeration. That is another positive unique feature, for a diabetic can simply keep the small spray device (the size of an asthma inhaler) in their front pants pocket or purse and spray doses as needed before and after a meal or snack.

I guess since Generex's market cap is below $200,000,000, large investors have yet to pay attention. However, if sales of Oral-lyn in India, home to 40 million diabetics, are healthy, then Generex will certainly be a biotech that jumps to the spotlight. After all, safety and efficacy must be crystal clear for Oral-lyn buccal spray since it is winning some early regulatory approvals before the first patients have been dosed in the Phase III. Dr. Gerald Bernstein, former President of the American Diabetes Association, is a member of Generex's executive management team and is named in the company's press releases as the expert traveling the globe raising awareness of Oral-lyn at endroclonogical events.

Non-compliance is a serious issue complicating the conditions caused by diabetes and it is fair to say that I am rooting for the little team to help bring this growing epidemic under control. After all, with all the safety issues involving not only inhalable insulin, but the new class of Type 2 oral pills (i.e. Avandia), a simple 1 unit buccal insulin spray may prove to be the winning solution to the puzzle of needle-less delivery.

Finding a successful needle-less option has been called the 'Holy Grail of diabetes research' and this small biotech may actually have developed the next paradigm of diabetic care. As the current spotlight shines on the questionable safety problems of inhalable insulin, investors may be wise in paying attention to Generex and their Oral-lyn buccal spray. The positive safety profile and positive Phase II efficacy results are encouraging to GNBT shareholders in a time when the diabetic epidemic is growing and its needle-less competitors are all falling.

Generex recently completed new financing that brings their cash holding to just above $40 million. Generex's burn rate has been approximately $7 million per quarter and it would be wise to note that this burn rate should move higher with the manufacturing needed for the Indian market and the continuation of the worldwide Phase III trial. Shreya Life Sciences, the 4th largest insulin distributer in India, is Generex's marketing and distribution partner for the region. Last month, Shreya placed a purchase order for 210,000 units of Oral-lyn to be used in the marketing launch. Generex's marketing and distribution partner in the China region is Scigen Ltd of Singapore. The principle shareholder of SciGen is Bioton SA, an insulin crystal manufacturer in Poland.

Perhaps in 2008 we are bearing witness to the first safe and effective achievement of this elusive goal. Generex Biotechnology, whose headquarters are based in Toronto, may be the first to redesign and improve one of the world's most vital drugs. Biotech investing is ripe with risks coupled with the prospects for large rewards. All investors need to carefully weigh the potential and realities facing any biotech and especially a microcap. Due diligence is always a necessary ingredient to wise investing. Carefully investigate my opinions and then form your own.