Generex Taps Former Eli Lilly Senior Medical Director to Strengthen Clinical and Regulatory Efforts for Oral-lyn

"Having worked with the Generex team in the fledgling stage of Generex Oral-lyn development while at Eli Lilly, I believed then that the product had the potential to become a first-in-class therapeutic insulin treatment even though the companies ultimately headed in different directions as is often the case with early stage collaborations." - Dr. James H Anderson Jr on December 9, 2010

Generex Biotechnology (GNBT) announced on Thursday the appointment of Former Eli (LLY) Lilly Senior Medical Director Dr. James H. Anderson, Jr., MD, FFPM, FACE to the company's Scientific Advisory Board. While such news is not often met with much fanfare, there is an unique element to this announcement when considering the history between Generex and Eli Lilly. A look back may help us realize where we are today as we wait for Oral-lyn's future to unfold.

In September 2000, Generex and Eli Lilly entered into a Development and License Agreement for Oral-lyn buccal insulin. In May 2003, the companies mutually agreed to end the deal. During that two and a half year time period, Lilly did not conduct a single clinical trial to assess either the safety or efficacy of Generex's buccal insulin, while they were actively spending their resources developing the AIR inhaled insulin system, as part of a developmental agreement with Alkermes (ALKS) that was signed in 2001. Lilly had held rights to separate buccal and inhalable insulin programs, and like many large pharmas at the time, they were placing their bet that inhalable insulin was the right path to take.

Like clowns jumping into the same car, many pharma companies were competing with one another to develop inhalable forms of insulin. Pfizer, with partner Nektar (NKTR) Therapeutics, led the foray, and in 2006 they were the first inhalable insulin to win FDA approval. The Exubera story is well known, and I won't repeat the entire saga. Pfizer's failure to earn commercial success with Exubera led to their costly decision in late 2007 to abandon the product and return rights to Nektar. Pfizer recorded a $2.8 billion pretax hit on the product, one of the drug industry's costliest failures. Industry giant Novo (NVO) Nordisk followed Pfizer's lead, and in January 2008 they decided to end development of the AERx inhaled insulin system while the product was deep into costly Phase III testing.

Later in 2008, Lilly terminated their agreement with Alkermes to develop inhalable insulin. Their first quarter results for that year reveal the asset impairment and exit costs associated with betting on the wrong non-invasive insulin to be $132.6 million. Today's news reminds me that sometimes large pharma places the wrong bet, and in this case quite a few found themselves racing down the same dead end. Mannkind is the sole surviving biotech developing a promising form of inhalable insulin, they have a PDUFA date for Afrezza inhalable insulin later this month. This comes after they received a Complete Response Letter a few months ago. Their product offers definite advantages over the failed inhalable insulins such as Exubera, and I actually have come to hope they succeed so diabetics later have greater choices for administering their required insulin.

While thinking of all the money the large pharmas lost while following each other into development of inhalable insulin, I recall a quote attributed to Generex representative Todd Falls in 2003 after Lilly terminated their agreement to develop buccal insulin. He remarked at the time that Lilly "didn't want to put the money into us. Lilly felt, I guess, they had some other interests, and didn't want to be the lead on the project." That decision didn't work out very well for Lilly, and Generex is still here with Oral-lyn being studied in a worldwide Phase III trial, and conditionally approved by the FDA in the first Treatment IND awarded to a diabetes drug.

I continue to believe that Oral-lyn, a tasteless liquid aerosol mist formulation that is administered to the buccal mucosa using a proprietary delivery system, has many advantages over inhalable and injectable forms of insulin, although they must be further proven in the Phase III study. These include the small and simple hand held metered dose device, significantly lowered risk of postprandial hypoglycemia, lack of insulin resistance amongst subjects, an actual decrease in Body Mass Index, with no absorption into the lungs. One spray equals one unit of meal time insulin, and this provides greater flexibility in usage, as well as the ability to take small dose sprays before a snack when a treat simply can not be resisted. The unique time action profile for Oral-lyn may be its greatest advantage, with its ability to mimic the first-phase insulin response seen in a healthy person.

Dr James H Anderson was involved with Oral-lyn when Eli Lilly held developmental rights, and has returned all these years later to talk so optimistically about its development. His statement that he believed even then that Oral-lyn had the potential to become a first-in-class therapeutic insulin treatment even though the companies ultimately headed in different directions helps erase doubt formed by the demise of the deal between the two companies. Since we know that Lilly did not conduct a single test to evaluate Oral-lyn, we can see that a business decision was made void of negative data and full of faulty strategy. Dr Anderson is surely needed to assist Generex, and his background is proven. After all, he was a key player in getting Lilly's blockbuster Lispro approved. That is the type of experience the team at Generex needs to help get Oral-lyn to the finish line.

As Generex continues to align the company with expert talent to strengthen the company's clinical/regulatory efforts, the news always strikes me as sort of a validation of the state of the pipeline. New additions to the Scientific Advisory Board, such as Amgen (AMGN) co-founder Dr Joseph Rubinfeld, Pfizer's (PFE) Vice President of Strategic Alliances and Partnerships Dr Craig Eagle, and now Former Eli Lilly Senior Medical Director Dr. James H. Anderson Jr, also have their own reputations on the line, yet they are quoted making remarks that speak volumes about the hidden worth of Oral-lyn, as well as the company's immunotherapeutic cancer vaccines. Generex's faithful shareholders sure hope some of that hidden worth soon comes into vision.

Talking Big Pharma, Vaccines and Baseball with Generex's Dr. Eric von Hofe

Last week, Generex (GNBT) Biotechnology held a live web cast from Nasdaq's Market Place in NYC, and the event served as an optimistic reminder of the potential of their pipeline, and highlighted the strong group of scientists united in seeing their top drugs and vaccines find eventual commercialization. One day before the Nasdaq web cast took place, I had the opportunity to meet with the top scientist leading their vaccine efforts.

Dr. Eric von Hofe is the President of Worcester-based Antigen Express, a wholly owned subsidiary of Generex. Antigen Express is building an impressive pipeline of next generation synthetic peptide based therapeutics aimed at a variety of major diseases, including cancer and infectious diseases. Dr. von Hofe and I settled in a small NYC deli, and we talked about corporate developments, his background, large pharma, the future he envisions for their platform technology, and my disdain for the Red Sox. Antigen Express is currently evaluating its leading candidate, the novel Ii-key hybrid HER2/neu peptide AE37 vaccine, in a multi-center Phase II trial for patients with breast cancer.

I have followed Dr. von Hofe's career for the last five years, and had briefly met him on two prior occasions. This was the first time I was able to speak with him for an extended time frame, or in an informal setting. I began by asking Dr. von Hofe his thoughts about the vast amount of corporate related changes that have taken place since we last met during Generex's Annual Meeting of Shareholders in July. Beyond the stock related issues, the Board of Directors terminated the employment of long serving CEO Anna Gluskin. Dr. von Hofe appreciated Ms. Gluskin's efforts, and said that working in the biotechnology field comes with the realization that there will often be changes that come rather quick. He recalled his own background, when he was working for Hybridon, where he coordinated research that critically validated gene targets for novel antisense medicines, and one day during a tough financial cycle he suddenly found himself unemployed. He quickly gained work consulting for other firms, and being able to adapt to change brought fun and learning experiences that helped him later.

With Generex's stock on less stable ground, questions about the company's financial condition come into play. I asked Dr. von Hofe if he was confident that interim CEO Mark Fletcher would be able to win enough funds to funnel to Antigen Express to finish the ongoing Phase II study for AE37 with HER2/neu expressing breast cancer patients. He quickly responded "yes, and with help from Joe". Joe is Joe Moscato from Seahawk Capital based in NYC, who is playing a pivotal role in Generex's business development and financing activities. I smiled and told Dr. von Hofe that I knew Joe, and that as a shareholder I tried to help him secure votes for last week's failed reverse split. The vote was actually supported by a strong majority of the shareholders that participated in the vote, but a unique law in Delaware required that 51% of all outstanding shares needed to to vote in favor of the proposal in order for it to pass. The final tally fell just under 3% short of that daunting hurdle. Dr. von Hofe stated that funding will not be an issue and he is not concerned.

Dr. von Hofe confidently said that their "is large pharma interest" in the AE37 vaccine for HER2/neu expressing breast cancer patients. Interim results were released at the San Antonio Breast Cancer Symposium in December 2009. As a reminder about the study, two hundred disease-free, high risk, breast cancer patients who had completed standard adjuvant therapy are being enrolled and randomized to receive six monthly inoculations of either the AE37 peptide vaccine or the adjuvant GM-CSF alone to compare their ability to prevent cancer recurrence. The December interim analysis followed the first 49 patients in the AE37 group and the first 71 for the control group. At a median follow up of 13 months, there were no (0.0%) recurrences in the AE37 group of patients, 0/49, compared to 7.0%, 5/71, in the control group. Dr.von Hofe stated that he hopes more significantly powered interim results will be available by mid-2011, although a public release of those results may not be made until later that year. Often, abstracts of results are submitted months in advance to prestigious events, like SABCS, and the general public may have to wait to see what an interested pharma company can see right away. The goal is for a large pharma to join the effort in funding a large scale Phase III study.

Generex has been active in recruiting top oncology scientists to their newly formed Scientific Advisory board, and in August I had the pleasure of speaking to newly signed Dr. Craig Eagle. Dr. Eagle is the Vice President of Strategic Alliances and Partnerships for the Oncology business unit at Pfizer (PFE), and an account of our discussion can be found here. Dr. Joseph Rubinfeld, one of the original founders of Amgen (AMGN), has agreed to act as Generex's Chief Scientific Advisor, and Col. George E. Peoples, lead researcher of the United States Military Cancer Institute, is serving as a top consultant in the ongoing clinical and regulatory development of Generex's proprietary breast cancer vaccine.

In a related email exchange, Col. Peoples remarked that his "personal campaign has been to get vaccines into the adjuvant setting as opposed to the majority of trials that have been conducted in the metastatic setting". He said that "Big Pharma is not quite ready to invest given the dismal track record of previous therapeutic vaccines in the metastatic setting. Their oncology drug development strategy has always been to establish a market in metastatic patients, and then once there is a revenue stream, then go after the adjuvant market (ie, Herceptin)."

Dr. von Hofe said that he often has to remind himself to make people aware that the target for AE37 is well defined and the same as that for Herceptin, although AE37 may reach a much broader population base. Herceptin, which also zeroes in on cancer that is over-expressing HER-2/neu, can be used only in patients expressing the highest level of HER-2, or about 25 percent of breast cancer patients. In comparison, the AE37 peptide vaccine stimulates the immune system to recognize tumor cells in patients with a lower expression of HER-2, so that 75 percent of breast cancer patients may respond to Antigen's vaccine. Ovarian, prostate, lung, colon, stomach and pancreas cancers are also HER2/neu over expressing, and as such are potential targets for AE37.

Dr. von Hofe noted that Dendreon (DNDN) Corporation's approval for Provenge, the first ever therapeutic cancer vaccine approved by the FDA, ushered in a lot of new interest into the immunotherapy sector. Provenge is designed to treat metastatic prostate cancer, while Generex is gearing up for a Phase II study for AE37 in early stage prostate cancer patients. Dr. von Hofe stated that preparations are well underway, and clinical sites are currently being identified. The Phase I results for patients with prostate cancer were first announced at the 2009 ASCO Annual meeting, and are consistent with those of prior clinical trials of AE37 in patients with breast cancer. Results have shown the vaccine is targeted and effective, while causing very limited toxicity, with no patients experiencing toxicity over Grade 2.

I asked Dr. von Hofe about Apthera's E75 peptide vaccine, since I am aware that the immuno effects of this CD8 T Cell targeting vaccine are short lived. I had read previous preclinical data stating that a combined effect of E75 linked with AE37, which targets CD4 T Cells, may help E75 gain prolonged memory. Dr.von Hofe acknowledged the preliminary data suggests a combination may prove useful for E75, but that his interest is in proving AE37 is effective and safe on its own, and that AE37 is already long lasting. Also, AE37 is already the subject of a combined approach with another CD8 targeting peptide vaccine. To me, it sounds like Apthera, a private company, can figure out their problems on their own, because Generex has moved on to better opportunities.

Dr. von Hofe sat back and smiled while recalling his phone ringing and hearing of this combined peptide vaccine opportunity provided by the Mary Crowley Cancer Research Center in Dallas. Mary Crowley researchers proposed a Phase I study to assess the safety and immunological response in patients with either breast and/ or ovarian cancer with AE37 linked with GP2, a CD8 targeting T Cell peptide vaccine under research at the USMCI, and they wanted "no claims on IP". Dr. von Hofe called that a "no brainer", and said he was pleased that they recognized the potential of the AE37 vaccine. This particular study is ongoing, although Generex has no control over the slower pace of recruitment. I laughed and told Dr. von Hofe he would like more phone calls like that, and he quickly agreed.

My time with Dr. von Hofe was near complete, but I had to tell him one area I had of concern. I said that I see one problem with Antigen Express, and I asked if they were all Boston Red Sox fans? I told him that I am a Yankees fan, and he chuckled. He recalled reading a story in the newpaper of a bird in Boston that flew down and hit the head of a young girl. She was not hurt, and her named turned out to be the same as Alex Rodriguez's daughter. I mockingly protested that he would find that to be funny. It was nice to see a vaccine researcher whom I have followed and admired for so long act casual and at ease. He told me that his children were all happy when the Red Sox won the World Series, and in this case I'll make an exception to my rule. I have found a Red Sox fan that I acknowledge to be smarter than me. As he roots for the dreaded Red Sox, I root for Generex to revolutionize how early breast cancer is treated. There will be no stock exchange big enough for the company that follows in the footsteps of Herceptin and Provenge, only to potentially surpass them both.

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.