Analyzing Generex and Throwing Darts with Pfizer's Craig Eagle, M.D.

In July, my friend TC and I attended Generex's (GNBT) Annual Meeting of Shareholders. While at the meeting, I had the opportunity to meet Joseph Moscato, the managing partner at Seahawk Capital based in New York City, a consultant of Generex's who has advised them on strategic planning and business development opportunities over the past year and a half. He is also quite a colorful character and we enjoyed talking to him about his consultancy role at the company. Near the end of our trip at Generex's hometown of Toronto, TC and I spoke to Joe about catching up near his NYC office since we both live nearby.

Last week, TC and I made our way to the Capital Grille in downtown NYC to join Joe and to learn about his company. I was mainly interested in gauging Joe's long term sentiment for Generex and to determine if it matched my own. While spending time with Joe, I found it very comforting that he knew in great detail many aspects of the company and that his vision is long term with hopes to help them reach their full potential. I realize that is an easy sentiment for him to portray, but it takes deep due diligence to talk with the depth of knowledge about Oral-lyn and AE37 that we shared while standing near the bar. We appreciated learning that Joe shares in our belief that Generex is headed for great success.

To our surprise, we learned from Joe that Dr. Craig Eagle, Vice President of Strategic Alliances and Partnerships for the Oncology business unit at Pfizer (PFE) and recent addition to Generex's oncology scientific advisory board, would also join us later in the evening for an informal introduction. To be able spend time with a professional involved with guiding small biotechs in their financial and business opportunities, as well as a true pharma expert that leads them on the proper scientific course, is an unique opportunity for a couple of retail shareholders. Many NYC based brokers stood near us at the bar, and we felt like we had a glimpse of life with the movers and shakers. As Joe's Blackberry buzzed all night, TC and I joked that our phones must be broken.

The Eagle Has Landed

I was primed to talk more with Dr. Eagle about Generex's active pipeline of diabetes drugs and cancer vaccines, and when he arrived, I wasted no time. He was a friendly guy with no hint of arrogance, and he was surprisingly open to numerous topics of discussion. Fresh beers in our hands, we were the only guys in a NYC bar talking about peptides the way others talk about the Yankees or Mets. TC and I listened, as Dr. Eagle began by telling us the scientific promise he sees in Generex as a whole. To show how amateurish I am, I placed down a copy of a recent analysis I had written about Antigen Express and their AE37 HER2/neu peptide-based breast cancer vaccine. Later, I noticed Dr. Eagle use the paper as a coaster for his beer.

Dr. Eagle explained why he felt that Generex contains great scientific value in its pipeline; from the the potential for revenue streams from the Rapidmist delivery system, to a positive opinion about prospects for Oral-lyn, to how AE37 could have the potential to completely change how breast cancer is treated. Dr. Eagle's words reminded me of similar sentiment given earlier in the year by one of the original founders of Amgen (AMGN), Dr. Joseph Rubinfeld, who joined Generex in mid-2009 to act as the company's chief scientific advisor. You can read Dr. Rubinfeld's words here where he talks about the vast potential he envisions for the technologies and science of Generex and Antigen Express.

We must have talked to Dr. Eagle for an hour straight, the poor guy, as I delved into Ii-Key hybrids, CD4 T Helper Cells, and other peptide based vaccines such as E75 and GP2. To look cool, I mentioned other vaccine researchers I admire, such as the Mayo Clinic's Keith Knutson and UW's Mary Disis. To be honest, that didn't make me look any cooler. He fluently discussed numerous details of the research I mentioned, as I tried to relate this to Generex's Ii-Key hybrid technology. I believe that he appeared equally passionate. Our discussions led me to feel that there is some sort of pharma interest in AE37, and that this interest was born from the positive interim results from the ongoing multi-center Phase II HER2/neu breast cancer vaccine study being conducted with the United States Military Cancer Institute.

We know that in December 2009, AE37 data as a preventative HER2/neu breast cancer vaccine (see the actual poster here) was presented at the San Antonio Breast Cancer Symposium. Lead researcher from the USMCI, Col George Peoples, reported to the symposium that at a median follow-up of 13 months, there were NO relapses in 49 patients receiving the AE37 vaccine for breast cancer while relapses were observed in 5 of 71 patients in the control group. Col. Peoples also reported data regarding a significant increase in DTH levels which illustrated that AE37 was providing the desired immunological effect, and that there were no serious levels of toxicity reported for any of the subjects receiving AE37. Generex's management has publicly stated that they have begun discussions with pharma companies in light of this data, and I feel this is the reason they signed on Dr. Eagle as a scientific advisor.

Dr. Eagle explained that in his role he helps get them up to snuff on protocols, and offers guidance to them in their next developmental and regulatory steps. His role, among others, is to get them ready for a potential partner to take the risk in partnering with them on, let's say, AE37 for their pending Phase III breast cancer study. He told us, upon questioning, that his obligation is to help them no matter which partner eventually emerges with the right pocket book. As a result of my own due diligence, from analyzing Roche (RHHBY.PK) and Genentech's (DNA) blockbuster breast cancer drug Herceptin, as well as Dendreon's (DNDN) metastatic prostate cancer vaccine Provenge, I feel AE37 as a preventative breast cancer vaccine should currently be valued over $1 billion. Yet, we see that Generex's market cap is currently in the low range of $100 million.

To give a brief on that analysis, consider that while only 25% of breast cancers have levels of HER-2/neu expression high enough to be candidates for treatment with Herceptin, those cancers expressing lower levels are expected to be good candidates for AE37. The advantage of this is that the immune system, once activated, is capable of detecting lower levels of the target protein than is Herceptin and that the anti-tumor activity lasts long after termination of AE37 treatment. And also consider that since AE37 is being developed to prevent cancer recurrence, I hope it will eventually make a vaccine such as Provenge, designed to treat metastatic cancer, one that stays in the back room of the pharmacy. AE37 may lead to longer and healthier lives, while Dendreon's significant advance has been shown to extend the last stage of life by a few precious months. I hope both may prove to be great medical advances that take us beyond this era of Herceptin, and they usher in a new era of immunotherapeutic vaccines that may revolutionize how cancer is treated.

Throwing Peptides As Darts

Throughout our discussion, Dr. Eagle would make an analogy to study data as being like throwing darts. Yes, he knows the seriousness of the disease being researched, but the analogy was to simplify a complex statistical metric to help TC and I understand. He said if one person in the bar throws a dart for a bullseye, that this would not be significant. The amount of times an attempt was made is very important, as well as other factors including the distance to the board. To establish the bulls eye as a trend among a group of people playing darts, it would then be important to know how many are actively involved. I asked if that meant the study has to be powered enough and with a properly defined endpoint. He said yes, and that this is an area that is very important.

I referred to the Phase I results for AE37 in both breast and prostate cancer patients as also being positive. For prostate cancer subjects in the Phase I, results were presented at the 25th Annual EAU Congress this past April. I talked about how out of 32 subjects, 23 patients had positive DTH responses following immunization, and the median progression-free survival for DTH responders was 18 months compared to 1 month for DTH non-responders. (You can see those results here.) He again reminded me of the analogy of throwing darts. I mildly protested that similar DTH responses have been found in AE37's Phase II breast cancer study. I guess I was trying to increase their score!

In reality, Generex and Antigen Express are not playing darts, but appear to be entering a transformative period of development where the goal is commercializing medical advancements that will better peoples lives. A partner for AE37 may or may not be close at hand, but I do feel the vaccine technology of Antigen Express is closer to gaining widespread attention based on all of the promising early results. I sure hope so, because like other Generex shareholders, I'd like the focus to return towards the pipeline and not NASDAQ or a reverse split of our shares.

In my opinion, a pharma could be watching for further AE37 data that is deeper into the Phase II breast cancer study and with a higher amount of patients included in order to make that judgement call. That would mean more darts need to be thrown by AE37 in order to establish the current trend as being significant. In the meantime, Dr. Eagle is helping them get ready. When that data can be made available is not something I can guess, and I've over speculated enough. Dr. Eagle gave no signal about big pharma's current interest in potentially partnering with Generex for AE37. I developed that opinion strictly on my own.

I also know these things can change in a heartbeat, and for the last week I have been conflicted about even writing this blog. However, I feel other shareholders may be interested in our discussions with Dr. Eagle. While speculating is a fool's game, it is hard not to notice that we were not only talking to Generex's scientific advisor, but also Pfizer's Vice President of Strategic Alliances and Partnerships for the Oncology business unit.

I'll never think of darts in the same way again.