Generex Biotechnology Corporation (OTCMKTS:GNBT), the biotech player, is looking to make a comeback. The Yahoo Finance Forum, the iHub Forum, and Seeking Alpha stocktalks are full of comments about the news put out by the company.
Source: Facebook Group of GNBT
In March, 2017, a 1-for-1000 split was announced. In addition, a large amount of convertible debt and derivative liabilities were eliminated in February, 2017. Its announcement also made the share price jump, because the financial risk supported by the firm was drastically reduced. That’s not all. The company is not only restructuring itself, it is also acquiring other business to grow. On January 23, 2017, it put out a letter of intent for the acquisition of a controlling equity interest in Emmaus Life Sciences, Inc.. Finally, GNBT keeps sending information about its ongoing R&D operations. All these news are making the share price jump on high volume after a long period of a downward trend in the share price. Have a look at the price action.
Business history, R&D and M&A announcements
GNBT was founded in the State of Delaware on September 4, 1997. It is focused on the R&D of “formulations of large molecule drugs to the oral (buccal) cavity using a hand-held aerosol applicator“. Its day-to-day operations are run by its wholly-owned subsidiary; Antigen Express, Inc.
According to the last document released by GNBT, it has not obtained any FDA approvals. It is in the process of “submitting the devices to the FDA under a Pre-Market Approval Application (PMA) or through the 510K process“. The documents required to obtain the 510K approval will be submitted within the next 3 months. The market will be alert in the meantime, because any news about the process could create a share price reaction.
As mentioned earlier, the company is very active in the M&A markets. On January 18, 2017, it acquired a 51% interest in Hema Diagnostic Systems, LLC; a Florida company established in December, 2000. The acquisition will help GNBT “market and distribute rapid test devices including infectious diseases“. Hema Diagnostic has accumulated expertise in the business of rapid diagnostic tests. From now on, GNBT will be able to identify infectious diseases, such as Human Immunodeficiency Virus (HIV) – 1/2, tuberculosis, malaria, hepatitis, syphilis, typhoid, and dengue beside other infectious diseases.
Recent developments and market reaction
On March 14, 2017, Generex Biotechnology Corporation announced a reverse stock split. Joseph Moscato, President, and CEO of GNBT, explained the news as follows:
“Your management believes a reverse stock split to be in the best interests of the Company and its stockholders. Generex requires additional working capital to effectively enhance and monetize its extant valuable assets and to successfully execute its business plans, including the recently completed acquisition of a controlling interest in Hema Diagnostic Systems, LLC ” Source
What happened after the reverse stock split? Since it was a 1-for-1000 split, the price was multiplied by 1000x, and the amount of shares owned by shareholders was reduced. But, the move may help the company, as the stock may be more liquid now.
On February 15, 2017, the company put out that the company had decided to eliminate a significant amount of convertible debt and derivative liabilities. The following securities were affected in the following way:
- The company decided to modify the exercise price of the Warrants from $0.015 to $0.0074 in exchange for the immediate exercise of 100% of the Warrants on a cashless basis based on a VWAP of $0.011.
- Company’s Series G 9% Convertible Preferred Shares will be entitrely converted.
The market does not seem to be concerned about the share price dilution that the conversion of these securities may create in the common stock. If the company can grow its business, it will offset the dilution. Joseph Moscato, Generex President, and CEO of the company, celebrated the news:
“It is with great satisfaction that I report this important achievement to my fellow Generex stockholders. The implementation of these arrangements has resulted in a very substantial reduction of the size of the Company’s stock ‘overhang’, greatly reduced dilution, and improved our balance sheet. And, the elimination of the price protection provisions removes a significant impediment to future capital raising initiatives. Our market capitalization has been simplified and greatly improved.” Source
On January 23, 2017, it announced a letter of intent for the acquisition of a controlling equity interest in Emmaus Life Sciences, Inc. Some days later, it was put out that Emmaus had granted to Generex an extension of the payment date till February 16, 2017 for an interim cash consideration payment in the amount of $1,500,000. Emmaus is a biopharmaceutical company working on treatments for the Sickle Cell Disease (SCD); a genetic disorder. The most relevant about Emmaus is the following:
“On February 1, 2017, Emmaus announced the allowance by the U.S. Patent & Trade Office of its patent application covering the use of its lead investigative product, pharmaceutical grade L-glutamine (PGLG), for the treatment of diverticulosis. The application reported a significant reduction in the number of intestinal diverticula via therapeutic application of PGLG. No extant commercial therapies reduce intestinal diverticula.” Source
Why is that relevant? It helps explain a share price move seen on July 7, 2017. On that date, NBC news put out an article telling that a new drug had been approved by the FDA to treat the Sickle Cell Disease:
“The U.S. Food and Drug Administration approved a new drug on Friday that reduces the complications associated with sickle cell disease — the first drug approved for the blood disorder in more than 20 years. The drug, called Endari, consists of L-glutamine, which is an amino acid, and is approved for sickle cell patients five years and older.” Source
Emmaus also released the announcement on the company’s website.
“Emmaus Life Sciences Inc. announced today that the U.S. Food and Drug Administration (FDA) approved EndariTM (L-glutamine oral powder) to reduce the severe complications of sickle cell disease (SCD) in adult and pediatric patients age 5 and older. Endari reduces oxidant damage to red blood cells by improving the redox potential of nicotinamide adenine dinucleotide (NAD), a coenzyme that has been identified as the primary regulator of oxidation.” Source
The market pushed up the share price of Generex on the same date. Have a look:
Generex Biotechnology Corporation has been making many positive corporate announcements and it seems that the market is finally paying off. From the news seen, the fact that the company cancelled the derivative liabilities is very relevant. Thanks to this step, common stockholders will not suffer future share price dilution. Additionally, the deal signed with Emmaus Life Sciences, Inc. recently made the share price of the company jump. For what reasons? Emmaus Life Sciences Inc. put out that the FDA had approved its treatment for the sickle cell disease. To sum up, there’s a lot to like with the moves being made by GNBT.
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Disclosure: We have no position in GNBT and have not been compensated for this article.