Generex Biotechnology Corporation (OTC:GNBT) Cools Down After Spike

Yesterday Generex Biotechnology Corporation (OTC:GNBT) failed to restrain the slide it went into, following a spike last Thursday. The stock slipped another 21%, closing down in double-digits for the third day in a row, and settled at $0.031.

GNBT has not been promoted so last week’s spike can be largely attributed to the press releases issued recently by the company, regarding therapeutic indications of its products and the investor conference call held on the last day of January. The company announced it has two cancer-related products in the pipeline that are into clinical trials and have positive indications so far.

The conference call however was probably less than satisfactory for shareholders, with GNBT announcing their struggle with stock liquidity and securing capital. GNBT‘s management also expressed concern regarding the company’s authorized common stock, which would have to be increased. The company has been financing operations by the issuing of several series of preferred stock that is convertible into common shares, the latest batch constituting a $750 thousand investment announced in mid-December. As the current authorized number of common shares will not be sufficient to cover a conversion and exercise of attached warrants, GNBT has chosen March 28 for the next shareholder meeting, at which an increase of authorized common stock is planned – never a good bit of news for retail shareholders.

Despite the promise of its products, GNBT is still an entity that does not generate revenue. The company’s latest financial report is for the quarter ended October 2012 and contains the following numbers:

• $37 thousand in cash
• $8 million in current liabilities
• zero revenues
• $656 thousand net loss

The good news with GNBT seems to be that their products, unlike those of many other development stage biotech companies, are in clinical trials, even if the results are not flat out positive at this point. The bad news, on the other hand, seems to be the financial struggles and the possibility of future dilution for retail stockholders that may be brought about following an increase of authorized shares and preferred holders biting into millions of common stock, even if a planned reverse split is effected (that in turn would cost the company another $75 thousand according to its own estimations).

GNBT‘s current price is about 20% below the pre-spike levels of last week.