Generex Biotechnology Corp. (NASDAQ:GNBT)(D*)

* Financial status indicator is deficient: Issuer failed to meet NASDAQ continued listing requirements.

Generex Biotechnology Corporation (GNBT) is engaged in the research, development and commercialization of drug delivery systems and technologies. The Company focuses on its technology for the administration of formulations of large molecule drugs to the oral (buccal) cavity using a hand-held aerosol applicator. Its wholly owned subsidiaries include Generex Pharmaceuticals Inc., Antigen Express Inc., Generex (Bermuda) Inc., Generex Pharmaceuticals (USA) LLC and Generex Marketing & Distribution

Inc. The Company is in development stage. In September 2009, the Company announced the incorporation of SIA Generex Biotechnology BALTIC as a wholly owned subsidiary. The Company’s products include Generex Oral-lyn, an insulin spray formulation used for the treatment of Type-1 and Type-2 diabetes; Glucose RapidSpray, which provides an alternative for people who require additional glucose in their diet, as well as delivers glucose formulation directly into the mouth; BaBOOM! Energy Spray, an instant energy spray designed to increase energy levels for sports, work, study, travel and overall fatigue; and Crave-NX, a fat-free glucose spray that is used as an aid for dieters.

GNBT’s under development products include medicinal chewing gum for the treatment of type-2 diabetes mellitus and obesity; morphine and fentanyl products for breakthrough and postoperative pain; and AE37, an immunotherapeutic vaccine that is in phase II clinical trials for patients with HER-2/neu positive breast cancer. The company markets its products through distributors and retail chains in Ecuador, Canada and the United States.

The Company was founded in 1983 and is based in Toronto, Canada.

Share Statistics Oct-27-09			2007	2008	%Chg	Q2 2008	Q2 2009	% Chg
Symbol	GNBT	Revenue, Mn	0.2M	0.1M	100%	N/A	0.4M	N/A
Current price	$0.59	Gross margin	65.6%	58.4%	7.2	N/A	25.0%	N/A
52wk Range:	$0.08-$1.14	Oper. margin	-13,952.2%	-26,756%	12,803.8	N/A	-1450.0%	N/A
Avg Vol (3m):	6,189,720	Net margin	-11,750.0%	-36,200%	24,450.0	N/A	-3000.0%	N/A
Market Cap.	145.70M
Dil. Shares Outst.	246.9M	EPS, $	-0.22	-0.33	33.3%	-0.06	-0.08	25.0%

Source: http://www.reuters.com/finance/stocks/incomeStatement?stmtType=INC&perType=INT&symbol=GNBT.W , https://trading.scottrade.com/quotesresearch/ScottradeResearch.aspx?symbol=GNBT , http://www.generex.com/

Financial Summary

GNBT’s net loss for the fiscal year ended July 31, 2009 (fiscal 2009), was $45,812,228 versus $36,228,991 in the fiscal year ended July 31, 2008 (fiscal 2008). The increase in net loss in fiscal 2009 versus fiscal 2008 is primarily due to the increase in interest expense to $20,114,595 from $4,280,558, which related mainly to the non-cash interest expense related to the amortization of the discount on the secured convertible notes issued in March 2008 of $15,931,481. The increase in interest expense was offset by decreases in research and development expenses of $2,797,349 and decreases in general and administrative expenses of $4,432,696, as the Company opted to conserve cash during parts of the year, until such time as it could raise additional funding in the volatile equity markets. GNBT’s operating loss for fiscal 2009 decreased to $26,256,160 compared to $33,445,470 in fiscal 2008. The decrease resulted primarily from the reduction in research and development expenses and general and administrative expenses described above and an increase in revenue to $1,118,509 from $124,891, which was partially offset by an increase in selling expense to $2,120,903 from $1,562,258. The increase in net revenue is attributable to a non-refundable license fee relating to the signing of a licensing and distribution agreement in Korea for Generex Oral-lyn^TM and more than $460,000 in revenue generated through GNBT’s Generex MENA branch office in Dubai in fiscal 2009. This compared to $124,891 of revenue related to the Company’s over-the-counter confectionary products in North America in fiscal 2008.

The decrease in research and development expenses, as well as general and administrative expenses in fiscal 2009, reflects GNBT’s efforts to conserve cash during parts of the year, until it is able to successfully raise additional capital in the fourth quarter of fiscal 2009. The increase in selling expenses to $2,120,903 from $1,562,258 is primarily associated with the opening of the Company’s Generex MENA branch office in Dubai with the intent of securing product licensing for Generex Oral-lyn^TM in the Middle East and North Africa, as well as Asia and Eastern Europe, and increasing the revenues from its over-the-counter confectionary products in the same regions.

GNBT’s interest income decreased to $237,977 in fiscal 2009 compared to $1,166,439 in the last fiscal year primarily due to a combination of lower cash balances and lower market interest rates. The Company received slightly lower income from rental operations (net of expense) of $320,547 in fiscal 2009 compared to $330,533 in fiscal 2008.

For the year ended July 31, 2009, GNBT used $22,647,516 in cash to fund its operating activities. The use for operating activities included a net loss of $45,812,228. Cash increased due to a net decrease in inventory and inventory deposits of $147,591, a $14,146 decrease in accounts receivable, an increase of $462,520 in accounts payable and accrued expenses and an increase of $13,325 in deferred revenue, which were offset by an increase in other current assets of $379,487.

The use of cash was offset by non-cash increases of approximately $805,806 related to depreciation and amortization, $243,546 in stock-based compensation to employees, $1,547,431 in stock-based compensation for services to consultants, $717,694 in amortization of the loan origination fee and deferred debt issuance cost, $473,055 related to issuances of common stock as interest payments on the secured convertible notes, $15,931,481 of amortization of debt discount related to the secured convertible notes and $3,198,604 in warrant re-pricing costs.

GNBT had net cash flows from investing activities of $8,698,681 in the year ended July 31, 2009, primarily consisting of $8,852,214 in proceeds from maturity of short term investments. This was offset by payments for property and equipment of $1,385 and costs incurred for patents of $152,148.

The Company had net cash flows from financing activities of $10,993,821 in the year ended July 31, 2009. Net proceeds from the issuance of common stock were $15,453,234 and proceeds from the exercise of stock options and warrants were $165,170. GNBT made payments on its capital leases and long-term debt of $117,916, and made repayments of its convertible debentures in the amount of $4,506,667.

The Company’s net working capital at July 31, 2009, decreased from July 31, 2008, by $6,816,378 to $7,561,375, which was attributed largely to its fiscal 2009 loss offset by the net cash flows from financing activities.

GNBT has no products approved for commercial sale at the present time with the exception of Generex Oral-lyn^TM in Ecuador, Lebanon, Algeria and India and the Company’s glucose sprays which are available over-the-counter in certain retail outlets in the United States and Canada and in the Middle East. To be profitable, GNBT must not only successfully research, develop and obtain regulatory approval for its products under development, but also manufacture, introduce, market and distribute them once development is completed. The Company has yet to manufacture, market and distribute these products on a large-scale commercial basis, and it expects to receive only modest revenues from product sales in fiscal year 2010. The Company may not be successful in one or more of these stages of the development or commercialization of its products, and/or any of the products it develops may not be commercially viable. Until the Company can establish that it can produce commercially viable products, it will not receive significant revenues from ongoing operations.

Source: http://investor.generex.com/sec.cfm

Analyst Consensus

Buy

Outperform

Hold

Underperform

Sell

No Opinion

This is the consensus forecast amongst 1 polled investment analysts. Against the Generex Biotechnology Corp.

Analyst Detail	Buy	Outperform	Hold	Underperform	Sell	No Opinion
Latest	0	0	1	0	0	0
4 weeks ago	0	0	1	0	0	0
2 months ago	0	0	1	0	0	0
3 months ago	0	0	1	0	0	0
Last year	0	1	0	0	0	0

The one analyst offering a 12-month price target expects GNBT share price to rise to 6.00 in the next year from the last price of 0.615.

Source: Financial Times.com

No consensus estimate analysis available.

Source: http://www.reuters.com/finance/stocks/estimates?symbol=GNBT.W

Investment Highlights

GNBT last week announced it has received its first purchase order for Generex Oral-lyn(TM) from Continental Pharm Laboratories, a pharmaceutical products distributor in Algeria. The order consists of 10,000 canisters of Generex Oral-lyn(TM), which will be filled by the Company’s Middle Eastern branch office, Generex MENA (Middle East and Northern Africa), located in Dubai Healthcare City. Generex MENA is responsible for more than 20 countries and has relationships with more than 31 distributors for each of the various product lines and territories who have already begun commercializing the Company’s confectionary product lines, and out of those countries, eight are actively pursuing regulatory approval for Generex Oral-lyn(TM), the Company’s proprietary oral insulin spray product, and have filed the Generex Oral-lyn(TM) dossier with their respective regulatory authorities.

GNBT last week also announced that its consolidated financial statements for the fiscal year ended July 31, 2009, contained a going concern qualification from its independent registered public accounting firm. Nasdaq Marketplace Rule 5250(b)(2) requires separate public disclosure of a previously issued audit opinion that contains a going concern qualification. This announcement does not represent any change or amendment to the Company’s financial statements for the fiscal year ended July 31, 2009.

GNBT last month announced that it recieved U.S. Food and Drug Administration (FDA) approval for the treatment use of Generex Oral-lyn(tm) under the FDA’s Treatment Investigational New Drug (IND) program. The FDA’s Treatment IND program allows companies to provide early access to investigational drugs for patients with serious or life-threatening conditions for which there is no satisfactory alternative treatment. Drugs that are granted approval by the FDA for the Treatment IND program must demonstrate the prospect of efficacy through clinical testing. Under a structured Treatment IND protocol, Generex Oral-lyn(tm) will be provided to patients with serious or life-threatening type 1 or type 2 diabetes mellitus, with no satisfactory alternative therapy available for the treatment of diabetes, and who are not eligible to participate in the Company’s ongoing global phase III pivotal clinical trial. This Treatment IND will be open to eligible patients that comply with the inclusion/exclusion criteria of the protocol, including those who are taking currently approved anti-diabetic medications. There are no oral or injectable medications contraindicated for this IND program.

GNBT announced earlier this year that it has consummated a registered direct offering of 8,558,013 shares of its common stock to a select group of accredited investors at $0.6602 per share. In addition, the Company issued to the investors warrants to acquire up to 2,995,305 shares of the Company’s common stock at $0.79 per share. The warrants are exercisable for a period of five years commencing 183 days after the closing date. The offering resulted in gross proceeds of $5,650,000, and after deducting placement agent’s fees and estimated offering expenses, the Company received net proceeds of approximately $5,336,000. Midtown Partners & Co. LLC served as placement agent for the offering. The shares were offered by GNBT pursuant to a registration statement previously filed and declared effective by the Securities and Exchange Commission on February 23, 2007.

Source: Scottrade.com, Reuters.com, generex.com

Technical Analysis

Source: www.finance.yahoo.com

Moving Average Price Compare

GNBT is trading below its 50-day moving average. However, this moving average is trending higher which suggests that there has been buying interest in this stock.

Bollinger Bands

GNBT is trading within its Bollinger Bands. This is a normal condition and suggests that the stock is neither overbought nor oversold relative to the recent price action.

MACD

The MACD for GNBT currently indicates a strong bearish signal for two reasons. First, the MACD is below the signal line, a 9-day moving average. Second, the MACD is below the critical level of 0, which implies that the underlying moving averages are trending lower.

Comparative Analysis

Company Name	Ticker	Price per	Mrkt. Cap.	P/E		P/S
Oct-27-2009	symbol	Share, $	$ Mn	2009	2010	2009	2010
Gilead Sciences Inc.	GILD	43.43	39.57B	18.39	N/M	N/A	N/M
Biogen Idec Inc.	BIIB	44.13	12.78B	14.79	N/M	N/A	N/M
Genzyme Corp.	GENZ	51.70	14.13B	29.95	N/M	N/A	N/M
Amgen Inc.	AMGN	54.34	56.23B	12.07	N/M	N/A	N/M
Median		48.96	30.68B	18.85
Generex Biotechnologies Corp.	GNBT	0.59	153.2M	N/A	N/M	135.78	N/M

Source: Reuter.com, Nasdaq.com

Insider Trading Activity

Net Share Purchase Activity

Insider Purchases – Last 6 Months Shares Trans Purchases N/A 0 Sales N/A 0 Net Shares Purchased (Sold) N/A 0 Total Insider Shares Held 4.84M N/A % Net Shares Purchased (Sold) 0.0% N/A

Net Institutional Purchases – Prior Qtr to Latest Qtr Shares Net Shares Purchased (Sold) (4,224,120) % Change in Institutional Shares Held 187.9%

Data provided by Thomson Financial

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