GNBT Manipuplunge
Unlike the NNVC plunge with seemed to have no reason to occur, GNBT had “bad news” on October 20th when it released a Going Concern notice as required by Nasdaq regulations. Before we discuss the going concern issue, I would like to visit the reasons I traded GNBT earlier in the year.
Generix has several products in the pipeline, but its biggest market potential lies with Oral-lyn. Oral-lyn allows Type-1 and Type-2 diabetics to administer insulin orally rather than injecting it with a shot. Should the drug prove its efficacy, my bet is that many diabetics will elect to forgo injections in favor of an oral application. MNKD is also developing an inhaled insulin application, but it delivers insulin to the lungs, whereas the GNBT solution allows the insulin to be delivered through the lining of the mouth. Not only is Oral-lyn currently in Phase III clinical trials, Oral-lyn is currently for sale in India, Lebanon, Algeria, and Ecuador. It is also available to patients in the United States as part of the FDA’s Treatment Investigational New Drug (IND) program. GNBT also has other products in the pipeline and has a wholly owned subsidiary, AntigenExpress, which is at work on proprietary vaccines formulations with products in Phase I and Phase II trials.
Explaining GNBT’s financial situation provides room for entertainment. On October 31st, a Motley Fool article entitled, “Don’t Go for the Goners” named GNBT directly. The article suggested that due to its going concern provision, GNBT would be a “goner.” GNBT’s General Counsel responded immediately in the comment section:
As our press releases and filings with the SEC indicate, between May 15 09 and Sep 14 09 GNBT raised almost $34,000,000. Of that amount, $17,900,000 was raised subsequent to the Jul 31 09 fiscal year end to which the auditor’s report relates. As of today, GNBT has in excess of $28,000,000 in cash-on-hand. Furthermore, the Jul 31 09 financial statements indicate nominal indebtedness. Clearly, you made public comment on the financial health of GNBT (implying that it is a “goner”) without undertaking even a basic review of publicly available information on that subject and without contacting GNBT management for comment. That was inappropriate and irresponsible. Your comments have conveyed the erroneous impression that GNBT is in a precarious financial condition when, on the contrary, GNBT’s financial condition is robust.
So after successfully accumulating and selling GNBT earlier in the year, I am ready to do so again. I made my first re-purchase last week. My theses behind the trade is that the company is reasonably sound at a fundamental level with significant upside potential and that the price is now in an area where the path of least resistance for market insiders will be to push the price up (I do not rule out a dip into the low .40s., even .30s). I know there is a seller around the .74 area in the past but that is a reasonable trade from .55 or under. So my plan, unless materially negative news emerges, is to add to my recent purchase should the price dip lower. The orders at lower prices are larger than the orders above. I didn’t spend a lot of time on the fundamentals on this play. Once I have concluded that GNBT is reasonably sound, my strategy is based on price movement. I would quickly add to the position if good news were to break. And I would take a loss if materially negative news made me reset my assumptions about the companies fundamentals.
Ora-Lyn is NOT inhaled. NO deposit in the lungs. It is an Oral Spray.
This is an important mistake that you should correct.
Thank you for posting the financial info.
Good point, I tightened up the text to remove ambiguity. Although the Generex product looks like an inhaler the drug is absorbed through the inner cheek inside the mouth. Generex position is that the lungs were designed to deliver gases rather than proteins to the bloodstream. You can read more about the distinction and possible safety issues in this NYT article.