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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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Wednesday, June 8, 2011

Generex Shareholders Approve Reverse Stock Split, Antigen Express to be Spun Out

Generex held their Annual Meeting of shareholders on Wednesday, June 8, 2011. The meeting was held in NYC, and I attended the event with my friends TC and JVF. At the meeting, the Board of Directors was broadened to include the CEO Mark Fletcher, Dr. James H. Anderson, and Dr. Eric von Hofe, who will join with the three current independent members. The most important item on the day's agenda was the vote for a proposal to enable the Board Of Directors to enact a future reverse stock split.

A remarkable 75% of of Generex's issued stock voted on the reverse split proposal, with 80% of votes cast in favor of the proposal. CEO Mark Fletcher stated that that "this vote is an endorsement of the new Generex management team and Board of Directors, and provides a clear mandate to proceed with the development plan unveiled by the Company on March 30, 2011". Personally, I feel the vote reflects shareholder sentiment that a reverse split and planned spin out of Antigen Express present the most optimal path towards success, more than anything else.

Credit for having the proposal passed should start with Seahawk Capital's Joseph Moscato (pictured above to the right of CEO Mark Fletcher), and include what must have been hard work by Mark Fletcher. While credit belongs with the CEO and Joe in winning such large support for a reverse stock split, much goes to Generex's retail shareholders. Mark informed that Generex has more than 37,000 stockholders, none of whom hold in excess of 5% of the outstanding stock, with than 295 million shares outstanding, while the Annual Meeting saw a huge turnout of 223,546,649 shares represented at the meeting. Generex's extraordinarily large retail shareholder base responded in force to this challenge.

With the reverse stock split proposal approved, Generex can now move forward with their stated plans to spin out their wholly owned subsidiary Antigen Express. I would advise all shareholders to listen to the Annual Meeting webcast that is available on Generex's website, since I will not repeat all of the details that Mr Fletcher outlined. Items concerning the reverse split and spin out of Antigen Express are complex, and I do not want to misrepresent any aspect. The items that are easy to understand are that the spin out will occur before Generex's reverse split, as Mr Fletcher responded to me during the question and answer period. Generex shareholders will freely win dividends in the new Antigen Express after a reverse stock split of GNBT shares is implemented.

Generex Oral-lyn

Since the Annual Meeting is available to be heard on Generex's website, I won't give a play by play of the entire proceeding. I'll just note a couple of interesting tidbits of information. The first item of interest comes from Generex's top metabolic Scientific Advisor, Dr Jospeh Anderson, who previously served as Eli Lilly's Senior Medical Director. He informed shareholders that the current Phase III study in Type 1 patients will not be "sufficient for an NDA that would provide shareholders the maximum value that should be obtained with Oral-lyn, because of the fact that the FDA approves drugs not for specific indications, but for therapeutic areas. So the drug would be approved for diabetes mellitus. Type 1 patients represent less than 10% of people with diabetes. And we want to make sure we include patients with Type 2 diabetes. So there is a necessity for an additional Phase III study that will include Type 2 patients".

This is a disappointment to Generex shareholders, who have been led to believe by the prior management team that the current Phase III in Type 1 patients would be suffice to anable a submission for that particular indication. The thought was that approval in Type 1 patients would improve the standing of Oral-lyn amongst the endocrinological community, increase shareholder value, and then open the door for treatment of Type 2 patients. However, both the investment and diabetes communities thought that plan was whimsical. It is refreshing to have Oral-lyn in the hands of a proven industry leader, such as Dr Anderson with his 25 years of experience, tell shareholders a more realistic and comprehensive plan that brings a potential submission within a 36 month time frame, while including Type 2 patients.

Dr Anderson presentation contained positive interim data regarding Oral-lyn's Phase III. One slide, which I photographed from the audience, shows early data in well controlled Type 1 patients from the Phase III study. These patients, with HbA1C levels under 7, were well under the optimal levels outlined by the American Diabetes Association. The graph Dr Anderson used was a close up of that optimal HbA1C level, so even the slight uptick seen in patients that went from levels at 6.3 to 6.8 appear as a concerning trend, yet the uptick is clinically and statistically insignificant. Imagine yourself standing at a dart board, with your nose touching the bullseye. All darts within the red circle are near perfect, but as you stand close you see variations. This is the case with this graph, which actually shows Oral-lyn keeping this group of Type 1 patients below the ADA guidelines associated with optimal control. The graph clearly shows that patients switched from sc injectable insulin to Oral-lyn remained well controlled throughout the duration of the study.

Dr Anderson gave a further review of Oral-lyn, talking about the positive benefits of the time profile of buccal insulin, a status update in India, and remarks about IGT patients, and of course the Treatment IND. Dr Anderson also made mention about the prior formulations of Oral-lyn that were studied in earlier years, and it appears that the FDA requires that some of that data needs to be updated in a pending study(ies) with the current formulation that Generex has determined to be optimal.

One item not mentioned, which I found at the ADA Annual Meeting web page, is that final results for Oral-lyn's Prevoral Phase II study with IGT patients will be revealed at the upcoming ADA Scientific Sessions.

Antigen Express

If you look to the upper right corner of the blog website, you will see videos that I uploaded from my Droid. The top video shows Antigen Express' President Dr Eric von Hofe's closing remarks during the Annual Meeting. Dr von Hofe's presentation was highly anticipated, since Generex plans a spin out of Antigen Express, their wholly owned subsidiary, in approximately 30 days. Antigen Express will be spun out as as a separate, DTC-eligible, SEC-registered company, that will be listed on a national exchange.

Dr von Hofe began his presentation by mentioning the approval of Dendreon's Provenge as ushering in the new era of immunotherapeutics. Antigen Express is developing the next generation of immunotherapeutic peptide vaccines, which have the advantage of being off the shelf, self potentiating, and are fully synthetic. The focus is on unmet medical needs, and Antigen has a promising technology platform. Dr von Hofe continued to explain the importance of activating CD4+ T helper cells, as I explained in my latest blog.

The most exciting update from Dr von Hofe had to due with a prospective partnership for AE37 in HER2/new expressing breast cancer patients. Dr von Hofe stated that the company should be in position to announce a partner later this year. He also informed that a large scale SPA Phase III for AE37 for breast cancer patients is being prepared to commence in the first quarter of 2012. The study population in the Phase III study will include 1000 node positive or high risk node negative HER2 expressing patients, with FISH scores as low as HER2 1, which are not eligible for Roche's Herceptin. A large scale study of this size can cost upwards of $100 million, so the company must be confident that they will secure a partner to help with the costs. Interim data from the ongoing Phase II study for breast cancer patients will be presented in the third quarter of this year, as well as in December at the San Antonio Breast Cancer Symposium.

Dr von Hofe also mentioned that a Phase II study for prostate cancer patients will begin later this year. All of these items illustrate the exciting near term milestones that Antigen Express will reach just as they begin trading as a separate stand alone biotech company. With Generex shareholders earning dividends in the future company, liquidity will be in the new stock, and GNBT shareholders will directly benefit from Antigen Express' success.


During the Annual Meeting, and after the formal session, Generex's management team and Board of Directors made themselves available to all shareholders that had questions or concerns. In the past, Generex's management team would also respond to questions, but many of the answers appeared to be more of a dance, as opposed to reliable guidance. This has been the most obvious change under Mark Fletcher's regime. Shareholders that I attended the meeting with had numerous queries, and the team at Generex patiently responded to each one. We all were highly impressed.

Since the meeting, the company has announced a new CEO for Antigen Express following the spin out into a separate company. Mr Jos van der Woert, who has a long executive management history at companies such as Schering-Plough, where he last served as General Manager and Group Vice-President of Global Oncology and Virology, as well as Vice President positions at Pfizer and Bristol-Myers Squibb. Antigen Express will be well positioned and in very experienced hands.

Generex has also outlined a clinical and regulatory program for Oral-lyn. The company has planned a pharmokinetic and glucodynamic study using the final formulation of Oral-lyn. Also planned are a series of small, well-designed Phase 3 studies, which may potentially conducted as one study with multiple arms. Generex anticipates that these studies would be completed during the 2013 calender year. Generex informed that a consensus meeting with the FDA to obtain agreement with the clinical plan and submission data package is planned this year to insure timely regulatory agency review and positive marketing approval. Generex shareholders have never had such a comprehensive offering of guidance to properly understand what is required for Oral-lyn to gain FDA approval, with timelines that the company anticipates if all goes according to plan.

Mark Fletcher's tenure as CEO is in its earliest stages, yet he has brought the company a long way in reorganizing and redefining their goals. He also has redefined how the company communicates to their broad base of shareholders. I hope all shareholders are patient in giving him adequate time to complete the reorganization, as both Generex and Antigen Express appear to rapidly be heading in a promising direction.