Item
2. Management's Discussion and Analysis of Financial Condition and Results of Operations
As
used herein, the terms the “Company,” “Generex,” “we,” “us,” or “our”
refer to Generex Biotechnology Corporation, a Delaware corporation. The following discussion and analysis by management provides
information with respect to our financial condition and results of operations for the six-month period ended January 31, 2021
and 2020.
This
discussion should be read in conjunction with the information contained in Part I, Item 1A - Risk Factors and Part II, Item 8
- Financial Statements and Supplementary Data in our Annual Report on Form 10-K for the year ended July 31, 2020, and the information
contained in Part I, Item 1 - Financial Statements in this Quarterly Report on Form 10-Q for the six months ended January 31,
2021.
Forward-Looking
Statements
We
have made statements in this Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations and
elsewhere in this Quarterly Report on Form 10-Q of Generex Biotechnology Corporation for the fiscal quarter ended January 31,
2021 that may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform
Act of 1995 (the "Act"). The Act limits our liability in any lawsuit based on forward-looking statements that we have
made. All statements, other than statements of historical facts, included in this Quarterly Report that address activities, events
or developments that we expect or anticipate will or may occur in the future, including such matters as our projections, future
capital expenditures, business strategy, competitive strengths, goals, expansion, market and industry developments and the growth
of our businesses and operations, are forward-looking statements. These statements are based on currently available operating,
financial and competitive information. These statements can be identified by introductory words such as “may,” "expects,"
“anticipates,” "plans," "intends," "believes," "will," "estimates"
or words of similar meaning, and by the fact that they do not relate strictly to historical or current facts. Our forward-looking
statements address, among other things:
•
|
|
the
risks associated with international operations; (including pandemics and public health
problems, such as the outbreak of novel coronavirus (“COVID-19”);
|
•
|
|
our
expectations concerning product candidates for our technologies;
|
•
|
|
our
expectations concerning funding of obligations related to potential acquisitions and
generally completing acquisitions;
|
•
|
|
our
expectations concerning existing or potential development and license agreements for
third-party collaborations, acquisitions and joint ventures;
|
•
|
|
our
expectations concerning product candidates for our technologies;
|
•
|
|
our
expectations regarding the cost of raw materials and labor, consumer preferences, the
effect of government regulations on the Company’s business, the Company’s
ability to compete in its industry, as well as future economic and other conditions both
generally and in the Company’s specific geographic markets;
|
•
|
|
our
expectations of when regulatory submissions may be filed or when regulatory approvals
may be received; and
|
•
|
|
our
expectations of when commercial sales of our products in development may commence and
when actual revenue from the product sales may be received.
|
Any
or all of our forward-looking statements may turn out to be wrong. They may be affected by inaccurate assumptions that we might
make or by known or unknown risks and uncertainties. Actual outcomes and results may differ materially from what is expressed
or implied in our forward-looking statements. Among the factors that could affect future results are:
•
|
|
the
inherent uncertainties of product development based on our new and as yet not fully proven
technologies;
|
•
|
|
the
risks and uncertainties regarding the actual effect on humans of seemingly safe and efficacious
formulations and treatments when tested clinically;
|
•
|
|
the
inherent uncertainties associated with clinical trials of product candidates;
|
•
|
|
the
inherent uncertainties associated with the process of obtaining regulatory approval to
market product candidates;
|
•
|
|
the
inherent uncertainties associated with commercialization of products that have received
regulatory approval;
|
•
|
|
the
decline in our stock price; and
|
•
|
|
our
current lack of financing for operations and our ability to obtain the necessary financing
to fund our operations and effect our strategic development plan.
|
Additional
factors that could affect future results of our historical business are set forth in Part I, Item 1A Risk Factors of our Annual
Report on Form 10-K for the year ended July 31, 2020. We caution investors that the forward-looking statements contained in this
Quarterly Report must be interpreted and understood in light of conditions and circumstances that exist as of the date of this
Quarterly Report. We expressly disclaim any obligation or undertaking to update or revise forward-looking statements to reflect
any changes in management's expectations resulting from future events or changes in the conditions or circumstances upon which
such expectations are based.
Executive
Summary
Overview
of Business
Corporate
History
Generex
Biotechnology Corporation (the “Company,” “Generex,” “we,” “us” or “our”)
is based in Miramar, Florida, with offices in Toronto, Canada, Wellesley, Massachusetts and Phoenix, Arizona. The Company was
originally incorporated in the state of Delaware on September 4, 1997, for the purpose of acquiring Generex Pharmaceuticals Inc.,
a Canadian (Province of Ontario) corporation formed in November 1995 to engage in pharmaceutical and biotechnological research
and development and other activities. The Company’s acquisition of Generex Pharmaceuticals Inc. was completed in October
1997 in a transaction in which the holders of all outstanding shares of Generex Pharmaceuticals Inc. exchanged their shares for
shares of Generex common stock.
In
January 1998, Generex participated in a “reverse acquisition” with Green Mt. P.S., Inc, (“Green Mt.”),
an inactive Idaho corporation formed in 1983. As a result of this transaction, the shareholders of Generex (the former shareholders
of Generex Pharmaceuticals Inc.) acquired a majority (approximately 90%) of the outstanding capital stock of Green Mt., and Generex
became a wholly-owned subsidiary of Green Mt.; Green Mt. changed its corporate name to Generex Biotechnology Corporation ("Generex
Idaho"), and Generex changed its corporate name to GBC - Delaware, Inc. Because the reverse acquisition resulted in GBC -
Delaware, Inc. shareholders (formally Generex shareholders) becoming the majority holders of Generex Idaho, GBC Delaware, Inc.
was treated as the acquiring corporation in the transaction for accounting purposes. Thus, our, GBC - Delaware, Inc. (formally
Generex), historical financial statements, which essentially represented the historical financial statements of Generex Pharmaceuticals
Inc., were deemed to be the historical financial statements of Generex Idaho.
In
April 1999, we completed a reorganization in which GBC - Delaware, Inc. merged with Generex Idaho. In this transaction, all outstanding
shares of Generex Idaho were converted into shares of GBC - Delaware, Inc.; Generex Idaho ceased to exist as a separate entity,
and we, GBC - Delaware, Inc., changed our corporate name back to "Generex Biotechnology Corporation." This reorganization
did not result in any material change in our historical financial statements or current financial reporting.
Following
our reorganization in 1999, Generex Pharmaceuticals Inc., which was incorporated in Ontario, Canada, remained as our wholly owned
subsidiary. All of our Canadian operations are performed by Generex Pharmaceuticals Inc.; Generex Pharmaceuticals Inc. is the
100% owner of 1097346 Ontario Inc., which was also incorporated in Ontario, Canada. In August 2003, we acquired NuGenerex
Immuno-Oncology, Inc. (formerly Antigen Express, Inc.) (“NGIO”), a Delaware incorporated company. NGIO is
engaged in the research and development of technologies that regulate the immune system for the treatment of malignant, infectious,
autoimmune and allergic diseases. On February 28, 2019 Generex issued a dividend of NGIO to Generex shareholders in the amount
of 1 share of NGIO for every 4 shares of Generex common stock. Generex still maintains majority control of NGIO.
We
formed Generex (Bermuda), Inc., which is organized in Bermuda, in January 2001 in connection with a joint venture with Elan International
Services, Ltd., a wholly-owned subsidiary of Elan Corporation, plc, (“Elan”) to pursue the application of certain
of our and Elan's drug delivery technologies, including our platform technology for the buccal delivery of pharmaceutical products.
In December 2004, we and Elan agreed to terminate the joint venture. Under the termination agreement, we retained all of our intellectual
property rights and obtained full ownership of Generex (Bermuda), Inc.; Generex (Bermuda), Inc. does not currently conduct any
business activities. We have additional subsidiaries incorporated in the U.S. and Canada which are dormant and do not carry on
any business activities.
On
January 18, 2017, we acquired a majority of the equity interests in Hema Diagnostic Systems, LLC (“HDS”). In December
2018, we acquired the remaining interest in HDS. The company, now a wholly owned subsidiary of Generex, has been renamed NuGenerex
Diagnostics, LLC (NGDx).
On
October 3, 2018, our wholly owned subsidiary, NuGenerex Distribution Solutions, LLC (“NuGenerex”), entered into an
asset purchase agreement (the “Veneto Asset Purchase Agreement”) with Veneto Holdings, L.L.C. (“Veneto”),
pursuant to which NuGenerex purchased certain assets of Veneto and its subsidiaries (the “Assets”). The Veneto Asset
Purchase Agreement contains provisions regarding payment terms, confidentiality and indemnification, as well as other customary
provisions.
Effective
October 3, 2018, NuGenerex assigned the Veneto Asset Purchase Agreement to NuGenerex Distribution Solutions 2, LLC. The
sole member of NuGenerex Distribution Solutions 2, LLC is NuGenerex Management Services, Inc., a wholly owned subsidiary of Generex
Biotechnology Corporation.
Also,
on October 3, 2018, we acquired certain assets from Veneto (the “First Closing Assets”), primarily consisting of the
operating assets of (a) system dispensing pharmacies, (b) a central adjudicating pharmacy, (c) a wholesale pharmaceutical purchasing
company, and (d) an in-network laboratory.
On
November 1, 2018, we consummated the acquisition of Veneto assets (the “Second Closing Assets”), consisting primarily
of Veneto’s management services organization business and other assets. The aggregate price for the First Closing Assets
and the Second Closing Assets was $30,000,000. We issued a promissory note in the principal amount of $35,000,000 (the “New
Note”) consisting of the $30,000,000 purchase price and a $5,000,000 original issue discount, as the sole consideration
payable on the Second Closing Date. On January 15, 2019, the parties entered into an amendment to the Asset Purchase Agreement
(the “Amendment”) restructuring payment of the New Note.
On
March 28, 2019, the Company entered into an amendment, a “Restructuring Agreement” with Veneto and the equity owners
of Veneto to restructure the payment of the New Note that provided, in lieu of any cash payments, the Company delivered on May
23, 2019 11,760,000 shares of our common stock; plus an aggregate 5,500,000 shares of the common stock of our subsidiary, NGIO.
The Veneto assets acquired by Generex included management services operations, systems, facilities, and other services.
On
January 7, 2019, we acquired a majority interest in Regentys Corporation (“Regentys”) for an aggregate of $15,000,000,
among which $400,000 was paid in cash and the remainder was paid by the issuance of a promissory note with a fair value of $14,342,414
for a total net purchase price of $14,742,414. The total fair value of the assets acquired totaled $907,883 and goodwill of $13,834,581.
Installments payable under the note were tied to specific business development objectives and dates. During the six months ended
January 31, 2021, an additional $719,525 was paid for a total of $1,887,790 against the note. Regentys is developing a non-surgical
treatment for inflammatory bowel diseases such as ulcerative colitis and Crohn’s disease.
On
January 7, 2019, we acquired a majority interest in Olaregen Therapeutix Inc. (“Olaregen”) for an aggregate of $12,000,000,
among which $400,000 was paid in cash and the remainder was paid by the issuance of a promissory note with a fair value of $11,472,334
for a total net purchase price of $11,872,663. The total fair value of the assets acquired totaled $2,461,439 and goodwill of
$9,411,224. During the six months ended January 31, 2021, an additional $94,227 was paid for a total of $1,858,027 of principal
payments in addition to the $400,000 initial payment. Olaregen is launching an FDA-510(k) cleared wound care product.
On
May 10, 2019, we acquired from a third party the outstanding Series A Preferred Stock in Olaregen in exchange for 4 million shares
of the Company’s common stock, plus the issuance of a $2 million promissory note increasing our interest in Olaregen to
approximately 62% of Olaregen’s outstanding voting shares, and an additional 900,000 shares. On August 16, 2019 further
increased our interest in Olaregen to approximately 76% and on February 14, 2020 acquired the remaining interests in Olaregen
and Generex owns 100% of the outstanding shares of Olaregen.
On
August 1, 2019, as amended on October 10, 2019, the Company, through its wholly owned subsidiary NDS, closed on Asset Purchase
Agreements (the “APAs”) for the purchase of substantially all the operating assets of MediSource Partners, LLC (“MediSource”)
and Pantheon Medical – Foot & Ankle, LLC (“Pantheon”). Pantheon Medical is a manufacturer of orthopedic
foot & ankle surgery kits that offer physician friendly “all-in-one,” integrated surgical kits that include plates,
screws, and tools required for orthopedic surgeons and podiatrists conducting foot and ankle surgeries. Generex will issue 400,000
shares of common stock in exchange for the Pantheon assets, and 560,000 shares of common stock in exchange for the MediSource
assets, plus additional amounts paid as an earn-out based upon Pantheon and MediSource exceeding specified EBIDTA earnings. At
closing, the Company also entered into an 18-month consulting agreement with NDS (the “Travis Bird Consulting Agreement”).
As compensation, Travis Bird was to receive $250,000 of Generex common stock, as well as monthly payments equaling $97,222. The
monthly payments were to be paid from any available cash from the operations of Pantheon and MediSource. Any remaining balance
of such monthly payments was to consist of common stock. The agreement specified the shares are to be freely tradeable. In addition,
Travis Bird will agree to fully assign and exchange any ownership rights in any new technology he develops with the Company, in
exchange for a payment of $500,000 in value of common stock for each completed item submitted to the FDA.
On
July 20, 2020, Travis Bird terminated the Consulting Agreement and Travis Bird is no longer entitled to commissions from future
net sales. In total, Mr. Bird earned $1,404,915 under this agreement and has been paid $773,366, leaving a balance of $631,549
as of January 31, 2021. As a result, the operations have been curtailed and goodwill and intangibles were fully impaired. As a
result of the termination of the Travis Bird Consulting Agreement and the ongoing COVID-19 pandemic, the operations of MediSource
and Pantheon have been significantly curtailed resulting in no sales for during the current quarter ending January 31, 2021 with
no expectation that such sales will resume in the near future.
On
August 16, 2019, the Company entered into a Share Exchange Agreement to purchase an additional 900,000 shares of common stock
in Olaregen from other shareholders of Olaregen in exchange for 1,905,912 shares of Generex common stock and 476,478 shares of
NGIO common stock which increased our interest in Olaregen to approximately 77% of the Olaregen’s outstanding voting shares.
In September 2019, the Company converted all of the Series A Preferred Stock of Olaregen into common stock of Olaregen.
On
February 14, 2020, Olaregen exchanged all of its outstanding shares for 5,950,000 shares of Generex common stock and 2,765,000
shares of NGIO. After this transaction, Generex owns 100% of the outstanding shares of Olaregen.
On
August 25, 2020, Generex Biotechnology Corporation’s wholly owned subsidiary NuGenerex Health LLC, (“NuGenerex Health”),
entered into a strategic joint venture with Worldwide Digitech, LLC (“WWDT”) by signing an Operating Agreement to
form NuGenHealth LLC (“NuGenHealth”). Under the agreement profits shall be distributed equally; 50% to NuGenerex Health
LLC and 50% to WWDT.
WWDT
will provide the software powered by the HealthKOS framework and back-end support for the NuGenHealth SaaS system, while NuGenerex
Health LLC shall be responsible for the day-to-day management and oversight of business operations along with operating capital
totaling approximately $1,500,000.
On
September 24, 2020, NuGenHealth, LLC, a subsidiary of Generex Biotechnology Corporation, signed a services agreement with Paradise
Valley Family Medicine, P.C. an Arizona professional corporation (“PVFM”) to provide a software and services solution
for patient engagement, Remote Patient Monitoring (RPM) and Chronic Care Management (CCM) services that are recommended and reimbursed
by the Centers of Medicare and Medicaid Services (CMS).
On
October 5, 2020, the Company and its parent Generex Biotechnology Corporation, (collectively “Generex”) entered into
a Distribution and Licensing Agreement with Bintai Healthcare SDN BHD, a subsidiary of Bintai Kinden Corporation Berhad of Malaysia
(“Bintai”) for the exclusive rights to distribute, sell, develop and commercialize the Generex Ii-Key-SARS-CoV-2 coronavirus
vaccine (the “Vaccine”) in Malaysia and South East Asia countries, with right of first refusal to commercialize the
Vaccine within New Zealand, Australia and the Global Halal markets (the “Territory”). The agreement, among other things,
consists of Bintai providing 100% funding for U.S. clinical development, manufacturing and commercial registration of the Vaccine
for the Territory.
On
October 30, 2020, Generex Biotechnology Corporation and its majority owned public company NuGenerex Immuno- Oncology, Inc.,
(collectively “Generex”) signed a Framework Agreement on Cooperative Development of Coronavirus Peptide Vaccine with
Beijing Youfeng International Consulting Co., Ltd, Chinese Centre for Disease Control and Prevention National Institute for Viral
Disease Control and Prevention (NIVDC) and Beijing Guoxin Haixiang Equity Investment Partnership (Limited Partnership) (collectively
referred to as “China Partners”) to jointly develop and commercialize the Generex Ii-Key-SARS-CoV-2 coronavirus peptide
vaccine (the “Vaccine”) in the People’s Republic of China (“China”). The agreement, among other
things, consists of the China Partners providing 100% funding for the clinical development, manufacturing and commercial registration
of the Vaccine for China and paying Generex fees that shall be negotiated and agreed upon in subsequent agreements.
On
November 13, 2020, Generex and the China Partners entered into the Ii-Key Innovative Vaccine Development Agreement (the “Covid
Agreement”) to set up a joint research team and a joint entity in China (the “Joint Entity”) that shall jointly
develop and industrialize the Vaccine in China. The Covid Agreement provides that Generex will provide the Joint Entity with (i)
Ii-Key-SARS-CoV-2 technology; (ii) technical know-how; (iii) preclinical and clinical data and (iv) background material on the
Ii-Key platform pertaining to its Ii-Key peptide vaccine technology (collectively, the “Covid Vaccine Technology”).
Pursuant to the Covid Agreement, Generex provided the Joint Entity with a perpetual sole and exclusive license to use the Covid
Vaccine Technology in China. Generex shall negotiate separately with the Joint Entity with respect to the sale of such technology
in other countries outside of China. Under the Covid Agreement Guoxin will provide the funding for the clinical development, manufacturing
and commercial registration of the Vaccine for China and the Joint Entity will provide Generex with the following:
1.
Licensing Fee: $5,000,000 upfront fee due upon the execution of the Agreement.
2.
Royalty Fee: Once the Vaccine comes on to market for the first commercial sale, then the Joint Entity shall:
a.
|
|
Offer
Generex 20% of the equity interests in the Joint Entity; NGIO shall be the 100% owner
of any equity consideration provided to Generex pursuant to the February 19, 2021 “Work,
Cost and Fee Sharing Agreement,” disclosed below; or
|
b.
|
|
Cash
payments to Generex in a price equal to $2 per dose for the COVID-19 vaccine of which,
Generex shall pay NGIO 90% of all fees derived from the Covid Agreement, as a result
of using NGIO technology.
|
3.
Equity Distributions: the net profits of the Joint Entity shall paid first to Generex until Generex receives $20 million, then
the China Partners will receive the next $80 million in net profits from the Joint Entity and thereafter Generex and the China
Partners will receive net profits from the Joint Entity in accordance with their pro rate equity interests.
If
the Vaccine fails in its clinical trials, Generex will compensate the Joint Entity through one of two methods:
1.
Generex will grant the Joint Entity sole and exclusive use of its technology and related intellectual property in Excellagen for
a license fee of $10 million less the $5 million paid to Generex pursuant to the Covid Agreement and the remaining $5 million
will be paid to Generex following NMPA approval; or
2.
Generex will grant the Joint Entity with a sole and exclusive license for the whole Ii-Key platform which includes infectious
diseases and cancer for a $50 million license fee less the $5 million license fee paid to Generex pursuant to the Covid Agreement.
The
Covid Agreement also provides for the Joint Entity having a right of first refusal for the Ii-Key vaccine technology for oncology,
infectious disease, and autoimmune diseases for an upfront license fee of $50 million.
On
November 13, 2020, Generex and the China Partners entered into the Ii-Key Innovative Flu Vaccine Development Agreement (the “Swine
Flu Agreement”). Pursuant to the Swine Flu Agreement, the parties agreed that upon the successful development of the flu
vaccine and receipt of approval from NMPA for the product launch, the Joint Entity shall have a sole and exclusive world-wide
license for swine flu and shall pay Generex a license fee of $2.5 million less certain costs estimated at $500,000
Historical
Business
Historically,
we have been a research and development company focused on the commercialization of Oral-lyn buccal insulin spray for diabetes.
Additionally, through NGIO, we have a deep intellectual property portfolio of immunotherapy assets relating to the “Ii-Key”
technology that activates the immune response for the treatment of cancer and infectious diseases. We completed a Phase IIb clinical
trial of AE37 immunotherapeutic peptide vaccine with the Ii-Key technology in over 300 women with breast cancer on November 15,
2019.
In
2017, we acquired HDS (now NuGenerex Diagnostics) and their diagnostic product portfolio of rapid point-of-care EXPRESS test kits
and cassettes for infectious disease testing.
Treatment
of Legacy Assets
Generex
and its subsidiary companies have extensive patent portfolios, with intellectual property for composition of matter, formulation,
design, and use in a number of therapeutic areas, across multiple indications. As described, we plan to build our legacy assets
with the ultimate goal to spin-out such assets at the appropriate time, which have been incorporated into NuGenerex subsidiary
companies in an effort to unlock the potential unrealized value of the intellectual property and commercial opportunities for
these development companies in major markets for immuno-oncology, diabetes, and infectious disease testing:
|
•
|
NuGenerex
Therapeutics: Oral-lyn (Buccal Insulin) and RapidMist Buccal delivery technology
|
|
•
|
NuGenerex
Immuno-Oncology: Phase II AE37 + Keytruda in TNBC; NGIO (Ii-Key), Licensing, Partnerships, investor dividend paid (1:4) for
spin-out
|
|
•
|
NuGenerex
Diagnostics: NGDx Express II rapid diagnostic tests for infectious disease.
|
We
believe that these legacy diagnostics, diabetes and cancer assets are may have significant value which is not being recognized
due to missteps in the clinical development process by previous management, resulting inability to raise capital necessary to
fund further development. We think the products and IP portfolio retain significant value. A recently signed co-development deal
with a major pharmaceutical company for AE37 in triple negative breast cancer, and a licensing deal in China for AE37 in prostate
cancer illustrate the potential for AE37 immunotherapeutic vaccine. Additionally, Oral-lyn has been reformulated to enter clinical
trials for Type II diabetes. The NGDx EXPRESS diagnostic technology has been expanded with the new, patent pending EXPRESS II
technology and a new product pipeline. We filled our first international commercial order for 40,000 units of its NGDx -Malaria
PF/PV Cassette Test Kit to Imres, BV, a Netherlands-based medical distribution company, and were recently granted a CE Mark Certification
under the European Medical Devices Directive (MDD) for its The Express II Syphilis Treponemal Assay, a rapid point-of-care diagnostic
assay for the detection of syphilis antibodies in primary and secondary syphilis. As part of the reorganization plan, we placed
our legacy assets into separate subsidiaries under the NuGenerex family of companies, including NuGenerex Diagnostics, NGIO, and
NuGenerex Therapeutics (Oral-Lyn and RapidMist buccal delivery technology). Our strategy is to reignite the Oral-Lyn development
program with a reformulated buccal insulin spray, and to build out the diagnostics business, as detailed in the following paragraphs,
however there are no assurances that we will be able to accomplish our strategic objectives.
NuGenerex
Therapeutics
NuGenerex
Therapeutics houses the legacy diabetes assets, Oral-Lyn and RapidMist buccal delivery technology. We believe that our buccal
delivery technology is a platform technology that has application to many large molecule drugs and designed to provide a convenient,
non-invasive, accurate and cost-effective way to administer such drugs.
Buccal
Delivery Technology and Products
Our
buccal delivery technology involves the preparation of proprietary formulations in which an active pharmaceutical agent is placed
in a solution with a combination of absorption enhancers and other excipients classified “generally recognized as safe”
("GRAS") by the U.S. Food and Drug Administration (“FDA”) when used in accordance with specified quantities
and other limitations. The resulting formulations are aerosolized with a pharmaceutical grade chemical propellant and are administered
to patients using our proprietary RapidMist™ brand metered dose inhaler. The device is a small, lightweight, hand-held,
easy-to-use aerosol applicator comprised of a container for the formulation, a metered dose valve, an actuator and dust cap. Using
the device, patients self-administer the formulations by spraying them into the mouth. The device contains multiple applications,
the number being dependent, among other things, on the concentration of the formulation. Absorption of the pharmaceutical agent
occurs in the buccal cavity, principally through the inner cheek walls. In clinical studies of our flagship oral insulin product
Generex Oral-lyn™, insulin absorption in the buccal cavity has been shown to be efficacious and safe.
Buccal
Insulin Product – Generex Oral-Lyn™
Insulin
is a hormone that is naturally secreted by the pancreas to regulate the level of glucose, a type of sugar, in the bloodstream.
The term “diabetes” refers to a group of disorders that are characterized by the inability of the body to properly
regulate blood glucose levels. When glucose is abundant, it is converted into fat and stored for use when food is not available.
When glucose is not available from food, these facts are broken down into free fatty acids that stimulate glucose production.
Insulin acts by stimulating the use of glucose as fuel and by inhibiting the production of glucose. In a healthy individual, a
balance is maintained between insulin secretion and glucose metabolism.
According
to the Centers for Disease Control (CDC), there are two major types of diabetes. Type 1 diabetes (juvenile onset diabetes or insulin
dependent diabetes) refers to the condition where the pancreas produces little or no insulin. Type 1 diabetes accounts for 5-10
percent of diabetes cases (CDC). It often occurs in children and young adults. Type 1 diabetics must take daily insulin injections,
typically three to five times per day, to regulate blood glucose levels. Generex Oral-lyn™ provides a needle-free means
of delivering insulin for these patients.
According
to the American Diabetes Association, in Type 2 diabetes (adult onset or non-insulin dependent diabetes mellitus), the body does
not produce enough insulin, or cannot properly use the insulin produced. Type 2 diabetes is the most common form of the disease
and accounts for 90-95 percent of diabetes cases, according to the American Diabetes Association. In addition to insulin therapy,
Type 2 diabetics may take oral drugs that stimulate the production of insulin by the pancreas or that help the body to more effectively
use insulin. Generex Oral-lyn™ provides a simple means of delivering needed insulin to this major cohort of individuals.
Studies
in diabetes have identified a condition closely related to and preceding diabetes, called impaired glucose tolerance (IGT). People
with IGT do not usually meet the criteria for the diagnosis of diabetes mellitus. They have normal fasting glucose levels but
two hours after a meal their blood glucose level is far above normal. With the increase use of glucose tolerance tests the number
of people diagnosed with this pre-diabetic condition is expanding exponentially. Per the 2017 Diabetes Atlas Update, published
by the International Diabetes Federation (IDF), approximately 40 million people in the United States and more than 425 million
people world-wide suffer from IGT. Generex Oral-lyn™ is an ideal solution to providing meal-time insulin to the millions
of IGT sufferers. This therapeutic area is currently being investigated.
There
is no known cure for diabetes. The IDF estimates that there are currently approximately 382 million diabetics worldwide per their
2017 Diabetes Atlas Update and is expected to affect over 592 million people by the year 2035. There are estimated to be over
37 million people suffering from diabetes in North America alone and diabetes is the second largest cause of death by disease
in North America.
A
substantial number of large molecule drugs (i.e., drugs composed of molecules with a high molecular weight and fairly complex
and large spatial orientation) have been approved for sale in the United States or are presently undergoing clinical trials as
part of the process to obtain such approval, including various proteins, peptides, monoclonal antibodies, hormones and vaccines.
Unlike small molecule drugs, which generally can be administered by various methods, large molecule drugs historically have been
administered predominately by injection. The principal reasons for this have been the vulnerability of large molecule drugs to
digestion and the relatively large size of the molecule itself, which makes absorption into the blood stream through the skin
inefficient or ineffective. The RapidMist technology provides a recognized and proven drug delivery system for the delivery of
large molecules directly into the blood stream with the attendant advantages.
Oral-lyn
History
In
May 2005, we received approval from the Ecuadorian Ministry of Public Health for the commercial marketing and sale of Generex
Oral-lyn™ for treatment of Type 1 and Type 2 diabetes. We have successfully completed the delivery and installation of a
turnkey Generex Oral-lyn™ production operation at the facilities of PharmaBrand in Quito, Ecuador. The first commercial
production run of Generex Oral-lyn™ in Ecuador was completed in May 2006. While Ecuador production capability may be sufficient
to meet the needs of South America, it is believed to be insufficient for worldwide production for future commercial sales and
clinical trials.
On
the basis of the test results in Ecuador and other pre-clinical data, we made an Investigational New Drug (“IND”)
submission to Health Canada (Canada's equivalent to the FDA) in July 1998 and received permission from the Canadian regulators
to proceed with clinical trials in September 1998. We filed an IND application with the FDA in October 1998 and received FDA approval
to proceed with human trials in November 1998.
We
began our clinical trial programs in Canada and the United States in January 1999. Between January 1999 and September 2000, we
conducted clinical trials of our insulin formulation involving approximately 200 subjects with Type 1 and Type 2 diabetes and
healthy volunteers. The study protocols in most trials involved administration of two different doses of our insulin formulation
following either a liquid Sustacal meal or a standard meal challenge. The objective of these studies was to evaluate our insulin
formulation's efficacy in controlling post-prandial (meal related) glucose levels. These trials demonstrated that our insulin
formulation controlled post-prandial hyperglycemia in a manner comparable to injected insulin. In April 2003, a Phase II-B clinical
trial protocol was approved in Canada. In September 2006, a Clinical Trial Application relating to our Generex Oral-lyn™
protocol for late-stage trials was approved by Health Canada. The FDA’s review period for the protocol lapsed without objection
in July 2007.
In
late April 2008, we initiated Phase III clinical trials in North America for Generex Oral-lyn™ with the first subject screening
in Texas. Other clinical sites participating in the study were located in the United States (Texas, Maryland, Minnesota and California),
Canada (Alberta), European Union (Romania, Poland and Bulgaria), Eastern Europe (Russia and Ukraine),) and Ecuador. Approximately
450 subjects were enrolled in the program at approximately 70 clinical sites around the world. The Phase III protocol called for
a six-month trial with a six-month follow-up with the primary objective to compare the efficacy of Generex Oral-lyn™ and
the RapidMist™ Diabetes Management System with that of standard regular injectable human insulin therapy as measured by
HbA1c, in patients with Type-1 diabetes mellitus. The final subjects completed the trial in August 2011. After appropriate validation,
the data from approximately 450 patients was tabulated, reviewed and analyzed. Those results from the Phase III trial along with
a comprehensive review and supplemental analyses of approximately 40 prior Oral-lyn clinical studies were compiled and submitted
to the FDA in late December 2011 in a comprehensive package including a composite metanalysis of all safety data. We do not currently
plan to expend significant resources on additional clinical trials of Oral-lyn™ until after such time that we secure additional
financing. However, we have undertaken a formulation enhancement project with the University Health Network at the University
of Toronto and the University of Guelph, Ontario to increase the amount of insulin reaching the blood stream. We believe that
the preliminary results from an animal study are encouraging.
In
the past, we engaged a global clinical research organization to provide many study related site services, including initiation,
communication with sites, project management and documentation; a global central lab service company to arrange for the logistics
of kits and blood samples shipment and testing; an Internet-based clinical electronic data management company to assist us with
global data entry, project management and data storage/processing of the Phase III clinical trial and regulatory processes. In
the past, we have contracted with third-party manufacturers to produce sufficient quantities of the RapidMist™ components,
the insulin, and the raw material excipients required for the production of clinical trial batches of Generex Oral-lyn™.
Future
Plans
We
have reformulated the original Oral-Lyn buccal insulin as a new patentable Oral-Lyn 2 that requires only 2 - 3 pre-prandial (before
meal) sprays for the treatment of Type II diabetes. The reformulated Oral-lyn 2 was made possible by new techniques in protein
chemistry and pharmaceutical formulation science, that with minimal changes in the production process and content of the components,
allow the development of a new and improved, concentrated insulin formulation for improved diabetes management.
NuGenerex
has engaged the University of Toronto’s Center for Molecular Design and Pre-formulations (CMDP) through the University Health
Network with the goal of enhancing the Oral-lyn™ 2 formulation to make it more attractive to patients and prospective commercialization
partners by increasing the bioavailability of insulin in the product and reducing the number of sprays required to achieve effective
prandial metabolic control for patients with diabetes. Under the supervision of NuGenerex consultant Dr. Lakshmi P. Kotra, B.Pharm.
(Hons), Ph.D., of CMDP, preliminary efforts succeeded in increasing the insulin concentration in the product by approximately
400 - 500% as confirmed by a variety of in vitro testing procedures, while preserving the solubility, stability,
biologic activity, and potency of the insulin in the formulation.
NuGenerex
subsequently entered into a Research Services Agreement with the University of Guelph pursuant to which Dr. Dana Allen, DVM, MSc.
and Dr. Ron Johnson, DVM, Ph.D. of the Ontario Veterinary College of the University of Guelph conducted a study of the relative
bioavailability of the enhanced formulation in dogs in the University’s Comparative Clinical Research Facility. The University
had previously conducted the studies of the original formulation of Generex Oral-lyn™ for proof of concept, safety, and
toxicity.
In
the new studies, the enhanced NuGenerex Oral-lyn 2 formulation was compared with the original formulation in a blinded, parallel
controlled study involving fasted, awake, healthy mature beagle dogs. Each dog received three sprays of either the enhanced formulation
or the original formulation. Each dog was observed with assessments of serum insulin and glucose measured over a two-hour period.
There were no adverse events observed in any of the animals.
In
the dogs given the enhanced Generex Oral-lyn formulation (5X), there was a greater than 20-fold increase in serum insulin at 15
minutes (excluding one dog who had little response at any time point; (with dog included it was greater than 5-fold)) and
almost 500% greater absorption of insulin over the two-hour test period compared to dogs given the original formulation (1X).
There was a 33% decrease in serum glucose at 30 minutes in dogs treated with the enhanced Generex Oral-lyn™ formulation,
compared to a 12% increase in serum glucose in dogs treated with the original formulation.
The
results of the dog studies coupled with the positive findings from the in vitro work provide support and confidence
to move forward with the remaining clinical and regulatory work necessary to achieve FDA approval of the enhanced NuGenerex Oral-lyn
formulation through a 505(b)2 NDA.
The
combined results provide evidence that the enhanced NuGenerex Oral-lyn 2 will be able to be used by people with either type 1
or type 2 diabetes mellitus as a safe, simple, fast, flexible, and effective alternative to pre-prandial insulin injections with
dosing of only two to four sprays required before meals.
The
Oral-lyn Safety Database contains information on 1,496 subjects. Eight hundred sixty-nine (869) subjects were exposed to Oral-lyn,
while 627 served as Control subjects and were exposed to commercially available oral antihyperglycemics, injected insulin, or
Oral-lyn placebo. There were 695 subjects in pK/pD studies (368, Oral-lyn; 327, Control) and 801 subjects in efficacy trials (501,
Oral-lyn; 300, Control).
Two
hundred seventy-two (272) Oral-lyn subjects reported at least one adverse event (132 in pK/pD studies; 140 in efficacy studies)
while 278 Control subjects reported at least one adverse event (111 in pK/pD studies; 167 in efficacy studies). With respect to
adverse events by Maximum Severity there appeared to be no significant differences between Oral-lyn and the Control groups in
either the Efficacy or the pK studies.
In
summary, there appear to be no indications of any significant unexpected adverse events. The expected events of hypoesthesia oral,
throat irritation, dry throat, and cough were for the most part mild and could be consistent with the Oral-lyn therapy especially
during the learning phase of administration. There was an indication of overlap of some of these events with multiple event terms
in the constellation of upper respiratory tract infection that appeared to be balanced across therapy groups.
Our
strategy is to revitalize our diabetes program by advancing the reformulated buccal spray Oral-lyn 2 for the treatment of Type
II diabetes, and to integrate Oral-Lyn 2 therapy into our end-to-end solution for disease management through our MSO model.
Beyond
Oral-lyn 2 for Type II diabetes, we will advance the RapidMist buccal delivery technology with additional small and large molecule
drugs which will benefit from an alternative route of administration.
NuGenerex
Immuno-Oncology (NGIO, formerly Antigen Express)
NuGenerex
Immuno-Oncology is a public company, majority owned by Generex that is focused on the modulation of the immune system and activation
of T cells to treat cancer. To that end, we are developing immunotherapeutic products and vaccines based on our proprietary, patented
platform technology, Ii-Key. The Ii-Key is a peptide derived from the major histocompatibility complex (“MHC”) Class
II associated invariant chain (Ii) that regulates the formation, trafficking, and antigen-presenting functions of MHC class II
complexes, essential for the activation of T cells in the immune response.
The
patented NGIO Ii-Key technology uses synthetic peptides that mimic antigenic protein regions from a virus or tumor biomarker that
are chemically linked to the 4-amino acid Ii-Key to ensure robust immune system activation. In particular, the Ii-Key ensures
potent activation of CD4+ T cells, which in turn facilitates antibody production to ward off infection. This Ii-Key modification
can be applied to any protein fragment of any pathogen to increase the potency of immune stimulation.
NGIO
was created not only to advance the Ii-Key core technology, but also to expand our portfolio in the field of immunotherapy, infectious
disease vaccines and personalized medicine through partnerships and acquisitions.
NGIO
has developed a number of Ii-Key Hybrid peptides for the immunotherapeutic targeting of tumor associated antigens (TAAs) in cancer
and for vaccines against infectious diseases.
AE37
– Ii-Key/HER2/neu Hybrid Immunotherapeutic Vaccine
Our
most advanced immunotherapy vaccine is AE37, an Ii-Key-Hybrid molecule that contains the HER2/neu antigenic peptide linked to
the Ii-Key to enhance immune stimulation against HER2, which is expressed in numerous cancers, including breast, prostate, and
bladder cancers. We have completed a Phase I clinical trial of AE37 in breast cancer: A phase Ib safety and immunology study of
AE37 and GM-CSF in 16 breast cancer patients who had completed all first-line therapies and who were disease-free at the time
of enrollment to the study (Holmes et al. Results of the first phase I clinical trial of the novel Ii-Key hybrid preventive
HER-2/neu peptide (AE37) vaccine. J Clin Oncol 2008;26:3426-33). Furthermore, we completed a Phase IIb trial of AE37 in the
prevention of cancer recurrence in women who were at high risk of recurrence after undergoing successful primary standard of care
breast cancer therapies and were disease free at time of enrollment.
The
final results of the Phase IIb clinical trial of AE37 +/- GM-CSF vaccine for the prevention of recurrence of breast cancer have
been published in the peer-reviewed journal, Breast Cancer Research & Treatment. In the AE37 arm of this trial, the investigators
found that patients with advanced stage, HER2 under-expression, and TNBC may benefit from AE37 vaccination, and those with both
advanced stage and HER2 under expression have a significant clinical
benefit
to AE37 vaccination, demonstrating earlier DFS plateau that was maintained for up to the ten years of follow-up. The study showed
that AE37 induces CD4+ T helper cell stimulation which is required for the effective generation of long-term cell-mediated immunity,
and postulates that the AE37 vaccine may have more of an immunoadjuvant effect to augment a vaccine-induced CD8+ T-Lymphocyte
(CTL) response. Further, AE37 is able to directly stimulate the HLA-DR alleles with epitopes present in the HER2 protein, increasing
interferon gamma (IFN-γ) and CD4+ T-helper (Th1) cells which in turn assist in strong in vivo autologous lysing of tumor
cells by CD8+ cells. Thus, the addition of the Ii-Key in AE37 specifically enhances immune responses via the MHC class I pathway.
Additionally, the study shows that the Ii-Key acts as an immune system adjuvant, activating both the CD4+ response and the CD8+
response against the HER2 antigenic epitope to which it is attached. The authors point out the benefit of such a complete immune
response that combines CD8+ and CD4+ activation may not only induce an immediate cell mediated cytolytic response versus tumor
cells but may also induce T-Helper cell mediated long-term immunity to protect against tumor recurrence.
Based
on the results from this trial, NuGenerex has entered into a collaborative agreement with Merck Sharpe & Dohme B.V. (Merck)
and the National Surgical Adjuvant Breast and Prostate Program (NSABP) to conduct a Phase II trial to evaluate the safety
and efficacy of AE37 in combination with the anti-PD-1 therapy, KEYTRUDA (pembrolizumab) in patients with metastatic triple-negative
breast cancer. The trial is scheduled to begin enrolling patients in the second quarter of 2019. As the clinical trial continues,
NGIO will be obligated to pay NSABP, pursuant to the Clinical Trial Agreement, additional amounts during each completed phase
in the increments and at the times set forth in the agreement up to $2,118,461 upon NASBP achieving certain milestones in four
primary phases: Start-Up Activities, Accrual and Treatment Period, Follow-up Period and Primary Endpoint. As of January 31, 2021,
we have incurred $352,063 of expenses against this commitment.
In
addition to the breast cancer program, NuGenerex has conducted a Phase I clinical trial in prostate cancer, enrolling thirty-two
HER-2/neu+, castrate-sensitive, and castrate-resistant prostate cancer patients to demonstrate safety and strong immunological
response to AE37. The results of a three-year follow-up analysis revealed that vaccinated patients had immune memory to the HER-2/neu
epitope of the Ii-Key-HER-2 vaccine, AE37, and these patients had improved clinical outcomes as compared to the control group.
These results demonstrate the ability of ii-Key vaccines to generate targeted, long-lasting immune responses against target epitopes
of tumor biomarkers.
We
are advancing AE37 for the treatment of prostate cancer through a licensing and research agreement with Shenzhen BioScien Pharmaceuticals
Co., Ltd., for which NuGenerex has received a $700,000 upfront payment which was recognized as revenue during the Company’s
fiscal year ended July 31, 2018, with additional future milestone and royalty payments.
In
exchange for exclusive rights to AE37 for prostate cancer in China, Shenzhen is financing and conducting the Phase II trials in
the European Union and Phase III trials globally under ICH guidelines, with NuGenerex retaining the rights to all clinical data
for regulatory submissions and commercialization in the rest of the world outside China.
Since
the start of the COVID-19 pandemic, NGIO has been working to develop an Ii-Key vaccine against the new coronavirus SARS-CoV-2
using the company’s proprietary and patented Ii-Key immune system regulation technology.
Generex
has signed an exclusive licensing deal with our partners at EpiVax who have identified such protein fragments or epitopes to generate
Ii-Key-SARS 2 peptide vaccines. The peptides and Ii-Key are made from naturally occurring amino acids, ensuring an excellent safety
profile for Ii-Key vaccines. We have manufactured the Ii-Key epitopes at laboratory scale and have conducted testing of their
immune regulating activities in a blood screening program using convalescent blood and serum samples from COVID-19 recovered patients.
The
blood screening program is being conducted through a research grant to the University of California San Diego and the Scripps
Institute that provides convalescent COVID-19 patient samples and antibody testing, and a commercial contract laboratory, CTL
that is conducting the T cell assays of immune modulation. This work will support the filing of an IND with the FDA for human
clinical trials.
Generex
signed a Licensing & Distribution Agreement with Bintai Kinden Corporation of Malaysia for the development and commercialization
of the Ii-Key-SARS-CoV-2 coronavirus vaccine. Under the terms of the
Agreement,
Bintai will have an exclusive license to distribute the Ii-Key-SARS-CoV-2 vaccine in Southeast Asia, including Malaysia (pop.
32.4 million), Vietnam (pop. 95.5 million), Indonesia, (pop. 69.4 million) and the Philippines (pop. 106.7 million). Additionally,
Bintai was given an option, which they have exercised for distribution in Australia (pop. 25.5 million) and New Zealand (pop.
4.8 million) using its extensive connections to secure contracts in the region. The Licensing & Distribution agreement for
Australia and New Zealand is currently being finalized.
In
exchange for the license and distribution exclusivity, Bintai has paid a refundable advance of $2 million and has committed
to funding 100% of the commercial development costs for the Ii-Key-CoV-2 vaccine including laboratory and pre-clinical work, GMP
manufacturing in the U.S., U.S. and global Phase I, Phase II, and Phase III clinical trials, and all clinical and regulatory work
required for approval. If the Company fails to secure FDA approvals within 6 months of execution of the agreement, or a reasonable
time thereafter, the advance must be returned to Bintai.
The
company has signed a potential $50 million Licensing and Development Agreement with the China CDC, Beijing Guoxin Haixiang Equity
Investment Partnership, and Beijing Youfeng International Consulting Co., Ltd for the Ii-Key vaccine platform technology from
NuGenerex Immuno-Oncology (NGIO). The agreement incorporates the first Ii-Key platform project for the development and commercialization
of the Ii-Key-SARS-CoV-2 coronavirus vaccine in China, with a $5 million upfront licensing fee, 100% funding for manufacturing,
development and commercial registration, and the first $20 million of profit on sales of Ii-Key- SARS-CoV-2 vaccine in China,
plus royalty payments for COVID vaccine sales in China with the potential to reach several billion dollars. The Agreement incorporates
provisions to advance the development of other Ii-Key vaccines for infectious diseases and cancer under separate contracts that
are currently being finalized. Under the terms of the platform deal, Generex will receive a licensing fee of up to $50 million
for the exclusive use of the Ii-Key vaccine platform for infectious disease and cancer in China and its territories. For each
product developed using the Ii-Key technology under the platform license, Generex will receive an upfront payment, full funding
for product development, regulatory approval, and commercialization in China, a success fee upon product approval, and a royalty
to be determined on a case-by-case basis.
Generex
has signed a worldwide Licensing and Development Agreement with a consortium of partners in China to utilize the Ii-Key vaccine
platform technology from Generex subsidiary NuGenerex Immuno-Oncology (NGIO) for developing a vaccine against the G4 EA H1N1 swine
influenza that is rapidly emerging in China. Under the terms of the deal, Generex will receive an upfront payment of $2.5 million
to initiate the Ii-Key vaccine development work to identify swine flu epitopes for a new Ii-Key vaccine. The partnership will
provide full funding for product development, regulatory approval, and commercialization worldwide. The current plan is to incorporate
the Ii-Key-H1 vaccine into the seasonal influenza vaccine to create a Complete Vaccine across influenza strains. Upon commercialization,
Generex will receive a royalty on sales of the influenza vaccine.
Future
Plans
NGIO
has been established to not only to advance the NuGenerex Immuno-Oncology core technology, but also to expand our portfolio in
the field of immunotherapy and personalized medicine through partnerships and acquisitions. As part of our strategy, we spun-out
NuGenerex Immuno-Oncology as a separate, public entity to unlock the true value of the Ii-Key technology for our stockholders
as it creates a pure play in immunotherapy, which will foster investment and collaboration.
As of January
31, 2021, NGIO had 750,000,000 authorized shares of common stock.
On
February 2, 2021, NGIO issued one hundred thousand 100,000 shares of the Company’s Series A Super Voting Preferred Stock
(the “Super Voting Preferred Stock”) to Generex in exchange for three hundred million 300,000,000 shares of the Company’s
common stock, which were immediately cancelled upon such exchange. As of March 14, 2021, NGIO has 100,300,000 shares of common
stock outstanding of which Generex owns 64,153,151 shares. The Super Voting Preferred Stock votes with the common stock and is
entitled to 3,000 votes per share. The Super Voting Preferred Stock has no dividend, liquidation, conversion or redemption rights.
The 300,000,000 shares cancelled by Generex will be available for future issuance.
The
Company believes that NGIO’s most value is its internally developed intellectual property. However, the internally developed
intellectual property has not met the criteria for capitalization and accordingly, the Company has not recorded any such costs
on its balance sheet.
On
March 12, 2020, NGIO filed a Form 10 with the Securities and Exchange Commission, which has become effective and NGIO is subject
to Exchange Act reporting requirements. NGIO has filed an application to have its common stock listed on the NASDAQ Capital Market.
NuGenerex
Diagnostics (formerly Hema Diagnostic Systems LLC)
Our
wholly owned subsidiary, NuGenerex Diagnostics is in the business of developing, manufacturing, and distributing rapid point-of-care
in-vitro medical diagnostics for infectious diseases. These are commonly referred as rapid diagnostic tests (“RDTs”).
We manufacture and sell RDTs based upon our own proprietary EXPRESS platforms as well as standard “cassette” devices.
Since
its founding, NuGenerex Diagnostics has been developing an expanding line of RDTs for infectious disease diagnosis. These include
products for human immunodeficiency virus (HIV), tuberculosis, malaria, hepatitis B, hepatitis C, syphilis, and others. These
assays are all qualitative in nature and provide a simple positive or negative result directly at the clinical site. They can
be used for definitive diagnosis, triage or in combination with other assays depending on which disease is being considered.
Each
device incorporates a test strip containing reagent lines (stripes) that have been impregnated with specific antigens or antibodies
that detect the target molecules specific to an infectious disease. The test strips are incorporated into our proprietary EXPRESS
platforms which are easy-to-use and user-friendly diagnostic devices. There are two EXPRESS platforms: the EXPRESS and the EXPRESS
II. The EXPRESS II is an upgraded version of the original EXPRESS and its use involves fewer operator steps, making it of higher
clinical utility value. The Express II platform is designed to be used in a broad range of clinical and laboratory medical settings
and for direct use by consumers in the home. It is simple to use, with fewer steps of operation than other rapid point-of-care
tests. A single drop of blood taken by a simple finger stick is added directly to the device and the assay is activated by placing
a pod of buffer solution onto the device. Results can be read in as early as 5 minutes, and no longer than 30 minutes. The accuracy
of the Express II Syphilis Treponemal Assay is equal to or better than standard laboratory assays for syphilis antibodies with
sensitivities and specificities of over 99%.
We
believe that each system delivers its own advantages which enhance the use, application and performance of each diagnostic. This
ease of use in the EXPRESS delivery systems is designed to ensure that our RDTs perform efficiently and effectively providing
the most accurate and repeatable test results available while, at the same time, minimizing the transference of a potentially
infected blood sample. The EXPRESS and cassette diagnostic kits for infectious disease testing are designed for use in resource-poor
countries throughout the world, especially in sub-Saharan Africa, where the World Health Organization coordinates population screening
for infectious diseases. We recently filled our first international commercial order for 40,000 units of its NGDx -Malaria
PF/PV Cassette Test Kit to Imres, BV, a Netherlands-based medical distribution company.
NuGenerex
Diagnostics was recently granted a CE Mark Certification under the European Medical Devices Directive (MDD) for its The Express
II Syphilis Treponemal Assay, a rapid point-of-care diagnostic assay for the detection of syphilis antibodies in primary
and secondary syphilis. The assay is based upon NuGenerex Diagnostic’s innovative patent pending point-of-care diagnostic
platform, the Express II. The accuracy of the Express II Syphilis Treponemal Assay is equal to or better than standard laboratory
assays for syphilis antibodies with sensitivities and specificities of over 99%.
With
the receipt of the CE Mark Certification for its rapid point-of-care Express II Syphilis Treponemal Assay, we believe NuGenerex
Diagnostics is well situated to enter into this growing syphilis testing market and will now pursue marketing efforts in Europe
and, in parallel, begin plans for the filing of a 510k application with the United States FDA for marketing clearance in the United
States. To this end, NuGenerex Diagnostics is fully qualified as a diagnostic test developer and manufacturer under FDA Good Manufacturing
Procedures (GMP) and is certified by the International Standards Organization for the manufacture of medical devices under ISO
13485-2016 regulations.
NuGenerex
Diagnostics has just begun a new initiative which revolves around the development of quantitative rapid diagnostic assays. These
assays allow laboratory personnel and clinicians to assess the absolute amount of specific target molecules in blood or serum
samples as opposed to “yes” or “no” results of qualitative RDTs. The first assay to be developed is a
multiplex biomarker test for the diagnosis of sepsis and the potential differentiation of infectious sepsis from systemic immune
response syndrome (SIRS).
We
maintain an FDA registered facility in Miramar, Florida and are certified under both ISO9001 and ISO13485 for the Design, Development,
Production and Distribution of the in-vitro devices. Approval of our HIV rapid test has been issued by the United States Agency
for International Development (USAID). Additionally, some of our products qualified for and carry the European Union “CE”
Mark, which allows us to enter into CE Member countries subject to individual country requirements. Currently, we have two malaria
rapid tests approved under World Health Organization (WHO) guidelines. This process allows expedited approval of rapid tests,
reducing the current 24 -30-month process down to approximately 6-9 months. WHO approval is necessary for our products to be used
in those countries which rely upon the expertise of the WHO, as well as for non-governmental organizations (“NGO”)
funding for the purchase of diagnostic products. NuGenerex Diagnostics had planned to initiate the development of rapid testing
for COVID-19, but due to lack of funding has not been able to initiate this development as planned.
We
maintain current U.S. Certificates of Exportability that are issued by two FDA divisions-CBER and CDRH. CBER (Center for Biologicals
Evaluation and Research) is the FDA regulatory division that oversees infectious disease diagnostic devices, including our HIV,
Hepatitis B and Hepatitis C EXPRESS and EXPRESS II kits. The other division, Center for Devices and Radiological Health (CDRH),
is responsible for the oversight of other HDS devices which include Tuberculosis, Syphilis, and the remaining product line. Our
HDS facility maintains FDA Establishment Registration status and is in accord with GMP (Good Manufacturing Practice) as confirmed
by the FDA.
We
do not currently have FDA clearance to sell our products in the United States. We intend to submit selected devices to the FDA
under a Pre-Market Approval Application (PMA) or through the 510K process. The 510K would require the appropriate regulatory administrative
submissions as well as a limited scientific review by the FDA to determine completeness (acceptance and filing reviews); in-depth
scientific, regulatory, and Quality System review by appropriate FDA personnel (substantive review); review and recommendation
by the appropriate advisory committee (panel review); and final deliberations, documentation, and notification of the FDA decision.
The PMA process is more extensive, requiring clinical trials to support the application. We expect to apply to the FDA for clearance
of our first RDT (Express II Syphilis Treponemal Assay) for FDA 510K approval in early 2020. We anticipate the FDA process will
be completed within 9 months after submission. During this timeline, we will be preparing documentation for additional rapid tests
to undergo either the FDA PMA or 510k process.
We
plan to use the NuGenerex Diagnostics subsidiary to build a multi-faceted diagnostics business focused on personalized medicine.
To that end, we are exploring opportunities in multiplex assays for point-of-care infectious disease testing, pharmacogenomic
testing for medication management, and biomarker analysis for personalized cancer treatment, including immunotherapy.
The
“New” Generex & The NuGenerex Family of Subsidiary Companies
Through
reorganization and acquisition, we are building the family of NuGenerex subsidiary companies to provide end-to-end solutions for
physicians and patients. We have acquired 100% of Olaregen Therapeutix Inc. (“Olaregen”), a regenerative medicine
company that has recently launched Excellagen wound conforming gel, which is FDA-cleared for the management of 17 wound healing
indications, and Regentys Corporation (“Regentys”), a clinical-stage development company with regenerative medicine
technology for the treatment of inflammatory bowel diseases Additionally, upon funding, NDS plans to launch a new software as
a service (SaaS) business called DME-IQ that enables orthopedic surgeons to manage in house programs for orthopedic durable medical
equipment, including inventory controls, insurance adjudication, and patient billing. We plan to roll out beyond our Arizona Startup
of NugenHealth, LLC an RPM and CCM offering to our broader MSO network. Together, under the banner of these subsidiary companies
offer a range of products and services to meet the needs of our proprietary distribution channels. Cross selling of products and
services will enhance the revenue opportunities for the entire family of NuGenerex subsidiaries. Our management continues to search
for value added services we can offer to physician relationships.
NuGenerex
Health, LLC
Generex
is in the process of building the final link in our corporate mission to provide physicians, hospitals, and all healthcare providers
with an end-to-end solution for patient centric care from rapid diagnosis through delivery of personalized therapies, streamlining
care processes, minimizing expenses, and delivering transparency for payers.
In
the future, and once the specialty practices are operational, NuGenerex Health plans to form an HMO to serve patients with Chronic
Special Needs Plans (C-SNP) and Dual-Eligible Special Needs Plans under Medicare Advantage and Medicare Part B and Part D. In
doing this, Generex intends to partner with an experienced HMO developer. Following the roadmap established by this partner in
building some of the most successful HMO companies in recent history, NuGenerex plans to generate significant membership growth
by developing patient centric engagement programs and building on our strong provider relationships.
NuGenerex
Health, LLC has entered into lease agreement in Phoenix, Arizona on January 13, 2021 for two premises of 892 sq ft. and 3,247
sq ft, respectively. The spaces are for the implementation of our clinic strategy beginning with our roll out of RPM CCM and then
our specialty practices of Podiatry and Ophthalmology. The lease term is for 77 Months and the expected payments start at $1,933
and $5,888 per month for each premise respectively. Although executed in January 2021, the lease is not expected to commence until
the third or fourth quarter of fiscal year 2021.
Contemplated
Product Positioning and HMO Plan Design
Medicare
Advantage Prescription Drug Plan (MAPD) HMO for individuals who have both Medicare Part A and Part B. This plan
caters to individuals that prefer an all-inclusive product that covers Part C, Part D, and additional supplemental benefits at
a low plan premium amount.
Chronic
Special Needs Plan (CSNP) HMO for individuals in addition to having Medicare Part A and Part B are faced with
the burden of living with diabetes or a cardiovascular disorder. This plan is offered to individuals that prefer an all-inclusive
product that covers Part C, Part D, and additional supplemental benefits at a low plan premium amount.
Dual
Eligible Special Needs Plan (DSNP) HMO for individuals that have both Medicare Part A and Part B and medical
assistance through their state of residence. This plan is offered to individuals that prefer an all-inclusive product that covers
Part C, Part D, and additional supplemental benefits with no monthly plan premium.
NuGenerex
Health D-SNP HMO Full will cover all Medicare-covered benefits at zero cost-sharing. In addition to the base
supplemental products, the plan also offers routine foot care, and transportation.
Medicare
Global Direct Medicare launched a pilot and will be issuing guidance on becoming a provider under the Global Direct
Pay program. This program would replace the idea of forming an HMO as it purportedly has the same benefits with much less bureaucracy
and expense. As soon as CMS releases final program details, we will compare the strategies of whether to go with an HMO or the
new Medicare Global Direct.
Services
and Products
NuGenHealth,
LLC
NuGenerex
Health LLC entered into a strategic joint venture with Worldwide Digitech, LLC (“WWDT”) by signing an Operating Agreement
to form NuGenHealth LLC. Under the agreement profits shall be distributed equally; 50% to NuGenerex Health LLC and 50% to WWDT.
WWDT will provide the software powered by the HealthKOS framework and back-end support for the NuGenHealth SaaS system, while
NuGenerex Health LLC shall be responsible for the day-to-day management and oversight of business operations.
On
September 24, 2020, NuGenHealth, LLC signed a services agreement with Paradise Valley Family Medicine, P.C. an Arizona professional
corporation (“PVFM”) to provide a software and services solution for patient engagement, Remote Patient Monitoring
(RPM) and Chronic Care Management (CCM) services that are recommended and reimbursed by the Centers of Medicare and Medicaid Services
(CMS).
This
services agreement allows us to launch the NuGenHealth Software as a Service (SaaS) business for Remote Patient Monitoring (RPM)
and Chronic Care Management (CCM), reimbursable services from CMS, to facilitate patient care coordination and healthcare collaboration.
Once the inaugural system is implemented at PVFM, we plan to expand the NuGenHealth SaaS system to other practices and chronic
care patient populations to rapidly grow revenues for the company. These practices and patient populations can form the foundation
that enables NuGenerex Health to establish a new HMO.
NuGenerex
Distribution Solutions
We
established NuGenerex Distribution Solutions in 2018 as the foundational piece in the transformation of the Company into an integrated
healthcare holding company that provides end-to-end solutions for physicians and patients. The NDS model repositions the physician-owned
Management Services Organization (MSO) model with a group purchasing model that is positioned to procure our new products and
services that can be delivered directly to physician partners, cutting out the middle-man. NDS will also continue to provide inventory
selection and management, as well as management services for legal and regulatory compliance, accounting, HR, IT and customer
support services through the physician networks.
NDS’s
corporate mission benefits the medical community by providing cost effective ancillary services that ultimately deliver better
outcomes and enhance the doctor-patient relationship. NDS will make available numerous best of class products and services using
a patient centric approach that enables ancillary service providers, physicians, and patients to better coordinate healthcare
services from diagnosis through treatment and follow-up.
NDS
Expansion
The
NuGenerex physician network has operated in five states and is configuring a roll out which will be compliant and reduce healthcare
costs through better outcomes. Those organizations which join us in our new partnership model will be aligned solely with our
shareholders and will receive discount codes to procure our products such as Excellagen.
DME-IQ
NDS
is planning to launch DME-IQ, a novel software as a service (SaaS) solution for physicians to manage in-office distribution of
durable medical equipment (DME). DME-IQ supports the development and management of compliant and profitable in-office DME programs.
DME-IQ focuses on several key areas which include negotiating on behalf of the physicians with key vendors to decrease the COGS
(Cost of Goods Sold), increasing insurance collections by providing oversight of the coding during the billing process, providing
the necessary personnel to manage the appeals processes, and ensuring compliance with state and federal regulations.
DME-IQ
will automate and provide the orthopedic practices with a proprietary, tablet-based software package that immediately verifies
patient benefits and eligibility. This unique system manages DME inventory, collects patient copays and deductibles, and links
patient information with the DME products and necessary patient forms all in one easy to use platform.
The
DME Market
The US
market for DME is large and growing, a result of several factors including the rising prevalence of chronic diseases requiring
long-term care, the rapidly growing geriatric population, and the trend toward home healthcare services. Chronic disorders such
as diabetes, diabetic foot & pressure ulcers, chronic pain, and cancer that require long-term patient care and postoperative
recovery are driving demand for DME. According to a 2018 market report
by
Grand View Research, Inc., the US DME market is expected to reach $70.8 billion by 2025, growing at a 6.0% CAGR during the forecast
period.
DME-IQ
tracks and maintains DME inventory to ensure an adequate supply and product mix for orthopedic patient populations, and the system
facilitates insurance claim submissions and adjudication to help achieve optimal reimbursements. With the DME-IQ system, the practice
gains control of their DME program from an operations and financial perspective, while patients gain access to a wider variety
of DME products that are custom fitted for their needs.
The
explosion of high deductible insurance plans has resulted in a dramatic increase of patient out-of-pocket payments for care, and
the subsequent requirement that physicians spend more time as collection agents rather than doctors. DME-IQ provides practice
workflow solutions for DME with custom, tablet-based software that removes the administrative burden from the practice, facilitating
patient eligibility review, collection of patient co-pay and deductibles, centralized insurance adjudication, DME product procurement,
and other support services that allow physician practices to increase revenue and service quality. The launch of DME-IQ advances
the mission of NDS to provide physicians with end-to-end solutions for patient centric care.”
NuGenerex
Regenerative Medicine
Olaregen
Therapeutix, Inc.
Our
wholly owned subsidiary, Olaregen Therapeutix, Inc. is a regenerative medicine company focused on the development, manufacturing
and commercialization of products that fill unmet needs in the current wound care market. We aim to provide advanced healing solutions
that substantially improve medical outcomes while lowering the overall cost of care. Olaregen’s first product, Excellagen®
(wound conforming matrix) is a topically applied product for dermal wounds and other indications. Excellagen is a FDA 510(k) cleared
device for of a broad array of dermal wounds, including partial and full thickness wounds, pressure ulcers, venous ulcers, diabetic
ulcers, chronic vascular ulcers, tunneled/undermined wounds, surgical wounds (donor sites/ grafts, post-Mohs surgery, post-laser
surgery, podiatric, wound dehiscence), trauma wounds (abrasions, lacerations, second-degree burns and skin tears) and draining
wounds, enabling Olaregen to market Excellagen in multiple vertical markets. Since acquisition, Excellagen® became commercially
viable.
The
ongoing COVID-19 pandemic has impacted the United States economy in a profoundly negative manner. Hospital elective surgeries,
surgical centers and other direct-patient-facing businesses have been especially hard hit. Throughout the U.S., most states and
municipalities, VAs have at various points throughout the pandemic issued “shut down” orders to non-urgent care in-order
to mitigate the spread of the virus.
Do
to the current restrictions at the VA only essential personnel have been allowed access therefore restricting our representatives
from access. As you know we received our BPA contract with the VA in March of 2020 at the height of the pandemic. We have remained
in open and regular communication with the VA and our VA partner AvMedical in regard to keeping Excellagen on top of mind in preparation
for the re-opening of access in the near future.
We
have also kept in regular contact with our outsourced sales representatives and continue to cultivate relationships that we believe
will lead to sales once the VA system opens the outpatient wound care clinics for regular business. This continues to lead to
some minor sales in certain VA’s in Connecticut and Texas.
We
have taken advantage of the lockout at the VA to focus time on the private sector and have been in negotiations to bring Excellagen
on formulary for a large hospital network in Florida.
We
are also about to obtain a new order for Excellagen in a NYC Hospital who recently cleared us through the Value Analysis Committee.
In
addition, Mount Sinai Hospital is in the process of completing their quality study of 10 patients using Excellagen
in post OR debridement cases, preliminary results have been “extremely positive”.
We
continue to work towards the FDA approval in Malaysia with our partner NexGen Medical . They will be our sales channel
partner and they expect an approval in Malaysia sometime in the next 6 months. We have been involved with training their sales
leadership team on the benefits and uniqueness of Excellagen. They are excited and motivated to launch Excellagen in their market.
Olaregen
is working closely with Joe Moscato and his team to develop an agreement with China. We (Olaregen) licensor is providing an exclusive
sublicense to Licensee to make, use and sell products utilizing a proprietary Excellagen and related technologies for the treatment
of 17 types of wounds including non-healing wounds. This agreement will be with BEIJING YOUFENG BIOLOGICAL TECHNOLOGY COMPANY,
LTD .
We
have done our best to keep relationships strong with our manufacturing partners with the expectation that we will be able to manufacturer
new product sometime in the summer once pandemic begins to subside. We are confident our plans will lead to post pandemic success.
The
Wound Care Market
The
total global wound care industry is expected to reach $22.01 billion by 2022, according to Markets and Markets; the bioactive
wound care market (i.e. skin substitute) is valued at $7.8 billion; there are 6.5 million patients in the U.S. with chronic wounds
(NIH estimate) in the U.S.
Olaregen
Highlights:
|
•
|
Received FDA 510(k)
clearance on October 3, 2013, for 17 indications
|
|
•
|
Obtained intellectual
properties and global rights of Excellagen® except China, Russia and CIS
|
|
•
|
Received patent on
October 10, 2017
|
|
•
|
Has a unique Healthcare
Common Procedure Coding System (HCPCS) Code - Q4149
|
|
•
|
Clinical data show
significant tissue growth and positive wound closure (PDGF)
|
|
•
|
Ease of use –
No grafting
|
|
•
|
Low cost provider
with high profit margins;
|
|
•
|
Low execution risk
(seasoned management team with product launch experience)
|
|
•
|
No development risk
(over $20 million invested and completed)
|
|
•
|
No regulatory risk
(FDA cleared)
|
Excellagen
is an advanced, wound care management platform:
|
•
|
Formulated fibrillar
Type I bovine collagen (2.6%)
|
|
•
|
High molecular weight
|
|
•
|
Viscosity optimized
for dripless wound coverage
|
|
•
|
Flowable with no staples
or sutures required
|
|
•
|
Pre-filled, ready
to use syringes
|
|
•
|
One syringe covers
up to 5.0 cm2 wound
|
|
•
|
Refrigerated storage
only with no thawing or mixing
|
|
•
|
Treatment at only
one-week intervals
|
|
•
|
Activates human platelets
|
|
•
|
Triggers the release
of Platelet-Derived Growth Factor (PDGF)
|
|
•
|
Accelerates granulation
tissue growth in “non-healing wounds”
|
Additionally, Excellagen can
serve as an Enabling Delivery Platform for pluripotent stem cells, antimicrobial agents, small molecule drugs, DNA-Based Biologics,
conditioned cell media and peptides. Olaregen's initial focus will be in advanced wound care including diabetic foot ulcers (DFU),
venous leg ulcers and pressure ulcers. Future products focusing on innovative therapies in bone and joint regeneration comprise
the current pipeline.
Excellagen®
History
Olaregen
Therapeutix Inc. acquired the intellectual properties and global rights of Excellagen® except in China, Russia and CIS, from
Taxus Cardium, Inc. (OTC: CRXM), and its wholly owned subsidiaries Activation Therapeutics, Inc. and Gene Biotherapeutics, Inc.
On
August 2018, Olaregen acquired the IP for a total consideration is $4,200,000 and is broken down as follows: 1) $650,000 upfront
payment, 2) $200,000 sales credit for collagen solution, and 3) $3,350,000 payable at 10% of net sales, which is defined as total
sales less allowances, including hub fees, sales concessions, co-promote fees, cost of goods sold and other charges.
Regentys
Corporation
Our
majority-owned subsidiary, Regentys Corporation (formerly Asana Medical, Inc.) is a regenerative medicine company developing a
tissue engineered therapy for the treatment of Ulcerative Colitis (“UC”).
Overview
In
January 2019, we acquired a majority interest in Regentys Corporation, a Florida corporation, a development-stage regenerative
medicine company. Since its formation in May 2013 as Asana Medical Inc., Regentys has been developing a first-in-class tissue
engineered therapies for the treatment of UC and other inflammatory bowel diseases.
Ulcerative
Colitis
According
to an article that was published in The Lancet on December 23, 2018 named worldwide incidence and prevalence of inflammatory
bowel disease in the 21st century: a systematic review of population-based studies. (2018 Dec 23;390(10114):2769-2778),
Ulcerative Colitis affects an estimated 3.2 million patients in Europe, the United States and Japan. It is a chronic, inflammatory
disease that causes sores or ulcers in the lining of the large intestine (the colon). Immunological in nature, UC is thought to
be facilitated by a variety of hereditary, genetic and environmental factors and it is increasingly being diagnosed in more urbanized
areas. Symptoms, including urgency, bleeding, and diarrhea, that substantially affect quality of life.
Regentys™
Extracellular Matrix Hydrogel (“ECMH”)
Regentys’
initial product, ECMH™ Rectal Solution, is a first-in-class, non-pharmacologic, non-surgical treatment option for millions
of patients suffering from mild to moderate ulcerative colitis. Its product candidate is a powder that is reconstituted
with saline and delivered as a liquid via enema. As ECMH reaches body temperature, it gels and coats the mucosal lining of the
GI tract.
The
core technology is derived from ECM, a safe and effective FDA-approved base now extensively used for surgical applications
and wound treatment. ECMH acts as a bio-scaffold, separating the damaged tissue from waste flow, covering ulcerations to limit
the inflammatory response, and facilitating a healing environment using endogenous (the body’s own) stem cells.
Pre-Clinical
Results
Published
pre-clinical results in the Journal of Crohn’s and Colitis highlight the promise of Regentys technology.
Animal data show the ECMH therapy can both alleviate clinical symptoms and facilitate healing in UC patients. Previous pre-clinical
ECM animal data for approved products has been shown to have a high correlation with human data.
Competition
Currently
four biologics are FDA-approved, including top-selling antibody medicines Humira® (adalimumab), Simponi® (golimumab),
Remicade® (infliximab) and Entyvio® (vedolizumab), all of which act to suppress the pro-inflammatory protein, TNF-a (Tumor
Necrosis Factor Alpha), a leading cause of the proliferation of ulcerative colis and other forms of IDB. However, even with these
options, more than half of all UC patients do not achieve long- term remission. Moreover, 20-30% of non-responsive patients will
undergo colon removal surgery in an attempt to remediate the disease.
Regentys
Advantages
We
expect our product to offer a true alternative to patients non-responsive to first line therapies such as 5-ASA. Unresponsive
patients will then need to choose among therapies that alter the body’s immune system or pose long term health risks or
perhaps both. Regentys’ technology is expected to enable targeted tissue healing but pose none of the health risks of more
expensive market-leading biologics that generally suppress the immune system. We expect to provide our therapy at a cost less
than other therapies.
Market
In
2023, when we expect to receive approval, the projected drug costs for UC alone are expected to exceed $7.5B globally according
to a 2017 report by Allied Market Research; including other inflammatory bowel disease indications, the global market is expected
to be double the UC market. Based upon the nature of IBD, and the characteristics of Regentys’ technology, management believes
variations of Regentys’ core technology will also be effective in treating IBD diseases such as Crohn’s, rectal mucositis,
proctitis and anal fissures.
Intellectual
Property
Regentys
in-licensed patents and co-developed its technology platform with the University of Pittsburgh. It now holds patent rights in
US and foreign jurisdictions, and has other global filings pending; as well, it has patent applications pending for similar indications
predicated on its existing technology in other major global markets.
Regulatory
Path
The FDA has
affirmed our approach to file a 510(k) de novo application on its ECM hydrogel. We have developed a protocol and
engaged a clinical research organization to manage the conduct of our first-in-human (FIH) clinical trials.
Delays
caused by COVID-19 in 2020 impacted our expected funding, delayed the performance of activities by our university and corporate
partners and complicated our patient recruitment plans. With funding, and a prompt resumption of development activities, our FIH
trials may commence in the fourth quarter of fiscal year 2021. Any delays caused by mitigating factors beyond 90 days will likely
shift our FIH timetable backward.
Our
primary focus is to acquire sufficient data for FDA market approval in the US. Our initial plan includes a 20 person FIH pilot
trial in Australia to allow for cost and time savings and additional 50 person pivotal trial to be held in the US, Israel, Canada
and/or Europe.
Business
Development
Regentys
regularly undertakes discussions to try and add technology and products to its pipeline and to explore strategic opportunities
in its global business development efforts. More specifically, the company has undertaken informal discussions regarding
the possibility of a sublicensing arrangements in foreign jurisdictions. No firm agreements have been reached and there is no
assurance any of these discussions will result in binding agreements.
Should
management determine to commercialize its technology in a foreign jurisdiction, the elements of any sublicensing agreement would
likely track the provisions included in the core Regentys-University of Pittsburgh exclusive licensing arrangement including an
upfront payment, milestone payments, royalties on product sales, non-royalty payments, and some provision for regulatory costs
and expenses. Regentys may act to amend its exclusive license agreement to maximize its business options with any changes
contingent upon assent by its university partner.
In
the event Regentys would undertake an arrangement to license its technology in a foreign jurisdiction, management expects the
timing and location of its first-in-human trials to change. The company has executed consulting agreements that enable flexibility
in the choice of venue for such trials.
Product
Development
Since
2013, we have maintained a research and development agreement with the University of Pittsburgh supplemented with personnel from
the affiliated McGowan Institute of Regenerative Medicine. In February 2018, Regentys entered into a development agreement with
(and has received a co-investment by) Cook Biotech, Inc., a global leader in ECM manufacturing technology (CookBio). Product batches
now on hand are expected to be sufficient for additional development and testing. A larger clinical batch with finalized specifications
will be generated in the coming months for use in clinical trials. There are alternate providers of development services who can
assist with product development activities. Notwithstanding these options, management believes that because of the nature of ongoing
development activities, and the reliance upon certain bench and manufacturing processes and ECM product expertise and technology,
any interruption in the development relationship with CookBio would subject the Company to substantial expenditures of time and
cost to duplicate the product.
Manufacturing
Regentys
has an exclusive manufacturing agreement with CookBio for the production of biomaterial and use of its proprietary technology
conditioned upon the completion of final product development work. Management has negotiated an agreement with a third-party manufacturer
for product components and kitting. We believe that there are alternate sources of these manufacturing and supply services. However,
because of the nature of regulation in the medical device industry, and the reliance upon the collection, reporting and management
of medical device manufacturing data, a change of manufacturer would substantially impact the time and cost required for clinical
product production and regulatory compliance.
Financing
In
January 2019, Regentys was acquired by Generex for an aggregate purchase price of $15,000,000, with $400,000 paid in upfront cash
up-front and a promissory note of $14,600,000. Installments payable under the note were tied to specific business development
objectives and dates. As October 3, 2019, an additional $850,000 was paid for a total of $1,250,000 against the note. Regentys
entered into an accommodation agreement dated March 14, 2019 with Generex to provide longer time to pay. On November 25, 2019,
the payment due date for the first three installments was extended to December 30, 2019 and extended on January 10, 2020 further
to January 31, 2020. A Fourth Payment of $5,000,000 was due on or about February 1, 2020 and the final payment of $1,150,000 payable
on or about February 1, 2021 (both of which have not been paid).
Operations
Currently,
Regentys employs four full-time contract employee and several part-time consultants. We supplement our business operations by
engaging external legal (intellectual property, corporate and health care), accounting and tax professionals. We also have contracted
with information services, regulatory and clinical trial companies who make available professionals to manage the information
services, regulatory, clinical, and compliance aspects of the business. Upon payment of the interim note, Regentys will formally
add two contract employees, additional administrative staff and a third-party provider to assist with employee payroll and benefits
as well as undertake clinical trial activities suing external support.
NuGenerex
Surgical Products
MediSource
Partners & Pantheon Medical – Foot & Ankle
Due
to various business complications including the termination of the Travis Brid consulting agreement and the ongoing COVID-19 pandemic,
the operations of MediSource Partners and Pantheon Foot & Ankle have been curtailed until further notice.
Accounting
for Research and Development Projects
Our
major research and development projects are NGIO’s peptide immunotherapeutic vaccines, including COVID-19 and breast cancer
vaccines.
On June
2, 2020, the Company entered into a Laboratory Services Agreement
and Statement of Work Agreement with Cellular Technology Limited (“CTL”). The Agreement calls
for CTL to provide certain laboratory testing and analysis. These services provided by CTL to Generex are part of
the development of a potential vaccine for COVID-19 based upon NGIO Ii-Key vaccine technology. NGIO is a majority owned subsidiary
of Generex. Generex/NGIO will own the intellectual property generated by CTL’s work. Additionally, several work orders have
been entered into related to this agreement.
Pursuant
to this agreement and subsequent work orders, Generex will pay to CTL a fee for work plan completion an amount not to exceed $1,194,442
in the aggregate. During the three and six months ended January 31, 2021, the Company has incurred $562,063 and $1,115,940 of
expenses, respectively, leaving a balance of $1,120,637 accrued under this agreement.
During
the six months ended January 31, 2021 and 2020, expensed $80,000 and $251,459, respectively, to NSABP for clinical trials for
additional research and development relating to NGIO’s peptide immune therapeutic vaccines and related technologies. One
NGIO vaccine is currently in Phase II clinical trials in the United States involving patients with HER-2/neu positive breast cancer,
and we have completed a Phase I clinical trial for an NGIO vaccine for H5N1 avian influenza which was conducted at the Lebanese-Canadian
Hospital in Beirut. NGIO’s prostate cancer vaccine based on AE37 has been tested in a completed (August 2009) Phase I clinical
trial in Greece.
Because
of various uncertainties, we cannot predict the timing of completion and commercialization of NGIO’s peptide immunotherapeutic
vaccines or related technologies. These uncertainties include the success of current studies net operating losses attributed to
NGDx, our ability to obtain the required financing and the time required to obtain regulatory approval even if our research and
development efforts are completed and successful, our ability to enter into collaborative marketing and distribution agreements
with third-parties, and the success of such marketing and distribution arrangements. For the same reasons, we cannot predict when
any products may begin to produce net cash inflows.
The
following table summarizes our research and development projects in development and the next milestone in its development
and estimated costs to achieve such milestone:
List
of Projects
Company
(Subsidiary)
|
|
R&D
Project
|
|
Current
Milestone Target
|
|
Estimated
Milestone Start Dates
|
|
Estimated
Milestone Costs
|
NGIO
|
|
AE37 Cancer
Vaccine
|
|
Phase
II Clinical Trial
|
|
March
2021
|
|
$
|
1,800,000
|
|
NGIO
|
|
COVID-19 Vaccine
|
|
Development of Human
Trials
|
|
Jan.
2021
|
|
|
1,700,000
|
|
Regentys
|
|
ECM
|
|
First
In-Human Clinical Trial in Australia
|
|
June
2021
|
|
|
2,000,000
|
|
NGDx
|
|
Express
I & II
|
|
FDA
510K Approval
|
|
|
|
|
|
|
The
following is a summary of our research and development costs for the six months ending January 31, 2021 and 2020:
|
|
Six
Months Ending January 31,
|
R&D
Project
|
|
2021
|
|
2020
|
AE37 Cancer Vaccine
|
|
$
|
305,267
|
|
|
$
|
142,200
|
|
COVID-19 Vaccine
|
|
|
2,053,830
|
|
|
|
—
|
|
ECM
|
|
|
244,113
|
|
|
|
566,190
|
|
Express I & II
|
|
|
125,097
|
|
|
|
207,221
|
|
Excellagen
|
|
|
—
|
|
|
|
15,760
|
|
Excellasome®**
|
|
|
—
|
|
|
|
7,200
|
|
|
|
$
|
2,728,307
|
|
|
$
|
938,571
|
|
*Product
in active commercialization
**No
longer an active research and development project
Critical
Accounting Policies
There
are no material changes from the critical accounting policies set forth in “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” of our Form 10-K for the year ended July 31, 2020 filed with the SEC on November
13, 2020, except as follows:
Derivative
warrant liability. FASB ASC 815, Derivatives and Hedging, requires all derivatives to be recorded on the condensed
interim consolidated balance sheet at fair value. As a result, certain derivative warrant liabilities are separately valued
and accounted for on our balance sheet, with any changes in fair value recorded in earnings. On our condensed interim consolidated
balance sheets as of January 31, 2021 and July 31, 2020, we used the binomial lattice model to estimate the fair value of these
warrants. Key assumptions of either a multinomial lattice model or a Monte Carlo model include the market price of our stock,
the exercise price of the warrants, applicable volatility rates, risk-free interest rates, expected dividends, contractual exercise
price reset events, and change in control timing estimate and the instrument’s remaining term. These assumptions require
significant management judgment. In addition, changes in any of these variables during a period can result in material changes
in the fair value (and resultant gains or losses) of this derivative instrument.
As
reported above, the Company has a sequencing policy regarding share settlement wherein instruments with the earliest issuance
date would be settled first. The sequencing policy also considers contingently issuable additional shares, such as those issuable
upon a stock split, to have an issuance date to coincide with the event giving rise to the additional shares.
On
January 24, 2019, the company entered into a note payable with an unrelated party at a percentage discount (variable) exercise
price which causes the number to be converted into a number of common shares that “approach infinity”, as the underlying
stock price could approach zero. Accordingly, all convertible instruments issued after January 24, 2019 are considered derivatives
according to the Company’s sequencing policy.
Results
of Operations
Three
months ended January 31, 2021 compared to three months ended January 31, 2020
During
the three months ended January 31, 2021 and 2020, net revenues were $0 and $857,427, respectively. The decrease resulted primarily
because there was no revenue generated by Pantheon in the three months ended January 31, 2021 while it generated $804,567 during
the same period in the prior fiscal year. Additionally, there was a decrease in revenues generated by Olaregen which has been
impacted by COVID-19.
Research
and development costs in the three months ended January 31, 2021 and 2020 were $1,558,299 and $599,837, respectively. The increase
of $958,462 is primarily from the clinical costs related to NGIO’s COVID vaccine for which no expenses were incurred during
the same period in the prior fiscal year.
General and administrative expenses in the
three months ended January 31, 2021 and 2020 were $6,913,295 and $4,647,065, respectively. The increase of $2,266,230 is primarily
due to the $3,748,177 judgement from AEXG arbitration partially offset by reduction in consulting fees incurred in the previous
fiscal period to Travis Bird of approximately $291,000 and other various consulting fees of approximately $323,000.
Interest
expense in the three months ended January 31, 2021 and 2020 was $587,489 and $1,431,052, respectively. The decrease is primarily
due to the decrease in amortization of debt discount of approximately $1,000,000 from the previous year’s fiscal quarter,
partially offset default interest and increase of interest on notes payable.
The
change in fair value of derivative liabilities for the three months ended January 2021 and 2020 was a loss of $15,257,066 and
$1,406,569, respectively. The $13,850,497 increase is primarily due to the change in fair value of the Series A, B, C and D Warrants
issued in connection with the PIPE during the three months ended January 31, 2021, which resulted in a loss of approximately $14,564,363,
compared to the $1,406,569 loss in the previous year’s fiscal quarter. The significant change in fair value is primarily
driven by the stock price which more than doubled during the quarter from $0.20 per share on November 2, 2020 to $0.43 per share
on January 29, 2021.
We
had a net loss for the three months ended January 31, 2021 and 2020 of $24,406,621 and $7,280,030, respectively. The increase
in net loss for the three months ended January 31, 2021 was caused by the factors described above.
Six
months ended January 31, 2021 compared to Six months ended January 31, 2020
During
the six months ended January 31, 2021 and 2020, net revenues decreased $1,490,653 to $88,435 from $1,579,088, respectively. The
decrease resulted primarily because there was no revenue generated by Pantheon in the six months ended January 31, 2021 while
it generated $1,253,763 during the same period in the prior fiscal year. Additionally, there was a decrease in revenues generated
by Olaregen which has been impacted by COVID-19.
Research
and development costs in the six months ended January 31, 2021 and 2020 were $2,728,307 and $938,571, respectively. The increase
of $1,789,736 is primarily from the clinical costs related to NGIO’s COVID-19 vaccine for which no expenses were incurred
during the same period in the prior fiscal year.
General
and administrative expenses in the six months ended January 31, 2021 and 2020 were $19,921,467 and $9,434,104, respectively. The
increase of $10,487,363 is primarily due to bonus compensation of $7,050,417 to be paid in approximately $1 million in cash and
$6 million in stock and $3,748,177 judgement from the AEXG arbitration that was accrued.
Interest
expense in the six months ended January 31, 2021 and 2020 was $1,606,569 and $3,947,165, respectively. The decrease is primarily
due to the decrease in amortization of debt discount of $2,221,253 from the previous year’s fiscal quarter, partially offset
by approximately $255,080 of default interest.
The
change in fair value of derivative liabilities for the six months ended January 2021 and 2020 was a loss of $11,237,214 and $3,645,991,
respectively. The $7,591,223 increase is primarily due to the change in fair value of the Series A, B, C and D Warrants issued
in connection with the PIPE during the first quarter of fiscal year 2021, which resulted in a loss of approximately $10,643,052,
compared to the loss of approximately $3,033,000 in the previous year’s fiscal quarter which resulted from the change in
fair value of downside protection. The significant change in fair value of the PIPE warrants is primarily driven by the stock
price which more than doubled during the second quarter of fiscal year 2021 from $0.20 to $0.43 per share.
We
had a net loss for the six months ended January 31, 2021 and 2020 of $35,395,697 and $16,592,577, respectively. The increase in
net loss for the six months ended January 31, 2021 was caused by the factors described above.
Financial
Condition, Liquidity and Resources
Sources
of Liquidity
To
date we have financed our development stage activities primarily through private placements of our common stock, securities convertible
into our common stock, and investor loans. We will require additional funds to support our working capital requirements and any
development or other activities. NGDx will require additional funds to support its working capital requirements and any development
or other activities or will need to curtail its research and development and other planned activities or suspend operations. NGDx
will no longer be able to rely on its former primary owner for necessary financing. Going forward, NGDx will rely on Generex financing
activities to fund NGDx operations, development, and other activities.
While
we raised $1,850,000 of net proceeds from a private placement and $1,164,616 from the sale of common stock during the six months
ended January 31, 2021, the Company’s cash position is not sufficient for twelve months of operations from the filing of
this report.
Management
may seek to meet all or some of our operating cash flow requirements through financing activities, such as private placement of
our common stock, preferred stock offerings and offerings of debt and convertible debt instruments as well as through merger or
acquisition opportunities.
In
addition, management is actively pursuing financial and strategic alternatives, including strategic investments and divestitures,
industry collaboration activities, and potential strategic partners. Management has sold non-essential real estate assets which
are classified as Assets Held for Investment to augment the company’s cash position and reduce its long-term debt.
We
will continue to require substantial funds to continue research and development, including preclinical studies and clinical trials
of our product candidates, further clinical trials for Oral-lyn™ and to commence sales and marketing efforts if the FDA
or other regulatory approvals are obtained.
Financings
The
following is a summary of the financing activities that we have completed during the six months ended January 31, 2021.
Financing
– August 4, 2020
On
August 4, 2020, the Company and three institutional accredited investors (each a “Buyer” and, collectively, the “Buyers”)
entered into a securities purchase agreement (the “Securities Purchase Agreement”) pursuant to which the Company sold
and issued to the Buyers an aggregate of 5,102,040 shares (the “Common Shares”) of the Company’s common stock,
par value $0.001 per share (the “Common Stock”), at an aggregate price of $2,000,000 (the “Private Placement”).
Financing
– Oasis Capital, LLC (“Oasis”)
On
September 25, 2020, the Company sold 600,000 shares of common stock to Oasis for net proceeds of $95,083.
On
October 9, 2020, the Company sold 750,000 shares of common stock to Oasis for net proceeds of $131,204.
On
October 9, 2020, the Company sold 750,000 shares of common stock to Oasis for net proceeds of $130,424.
On
November 6, 2020, the Company sold 750,000 shares of common stock to Oasis for net proceeds of $123,524.
On
November 17, 2020, the Company sold 1,000,000 shares of common stock to Oasis for net proceeds of $183,416.
On
January 12, 2021, the Company sold 1,000,000 shares of common stock to Oasis for net proceeds of $239,120.
On
January 20, 2021, the Company sold 750,000 shares of common stock to Oasis for net proceeds of $261,450.
On
January 29, 2021, the Company sold 750,000 shares of common stock to Oasis for net proceeds of $275,324.
On
February 24, 2021, the Company sold 750,000 shares of common stock to Oasis for net proceeds of $271,874.
On
March 4, 2021, the Company sold 750,000 shares of common stock to Oasis for net proceeds of $175,964 which went directly towards
repaying an outstanding note with Oasis.
Cash
flows for the Six months ended January 31, 2021
For the six months ended January 31, 2021,
we used $2,315,721 in cash to fund our operating activities. The use for operating activities included a net loss of $35,395,697,
offset primarily by change in fair value of derivative liabilities of $11,237,214 and contract liabilities of $3,000,000 and change
of $15,445,719 in accounts payable and accrued expenses.
The use of cash was offset by non-cash expenses
of $523,699 related to depreciation and amortization, $1,742,050 related to stock compensation, $340,226 of amortization of debt
discount and a $11,237,214 change in fair value of derivative liabilities.
We had cash provided by financing activities
in the six months ended January 31, 2021 of $2,896,301, most of which was from net proceeds from private placement (PIPE) of $1,850,000
and net proceeds from sale of common stock of $1,164,616 partially offset by payments on notes payable of $127,459.
Our net working capital deficiency on January
31, 2021 increased to $57.9 million from $40.1 million on July 31, 2020, which was attributed primarily to an increase in accounts
payable and accrued expenses.
Funding
Requirements and Commitments
In
addition to our commitments under the financings described above, we have the following obligations:
Olaregen
and Regentys Acquisitions
Olaregen
As
of January 7, 2019, the Company completed a definitive Stock Purchase Agreement and related documents relating to the Company’s
purchase of 3,282,632 newly issued shares of the Olaregen common stock representing 51% percent of the issued and outstanding
capital stock of Olaregen for an aggregate $12,000,000.
In
addition to $400,000 paid to Olaregen upon signing of the LOI, the purchase price for the Olaregen shares will consist of the
following cash payments:
•
|
|
$800,000
on or before January 15, 2019. The Company has paid this installment.
|
•
|
|
$800,000
on or before January 31, 2019. The Company has paid this installment.
|
•
|
|
$3,000,000
on or before February 28, 2019. The full balance of $3,000,000 is payable on or before
January 31, 2020 per extension in amended agreement.
|
•
|
|
$1,000,000
on or before May 31, 2019. As of September 14, 2020, the Company has not paid this installment
and the full balance of $1,000,000 was payable on or before January 31, 2020 per extension
in amended agreement. We have not made this payment.
|
•
|
|
$6,000,000
on or before January 31, 2020. We have not made this payment.
|
Generex
issued its promissory note in the amount of $11,600,000 (the “Note’) representing its obligation to pay the above
amounts. The Note is secured by a pledge of the Olaregen Shares pursuant to a Pledge and Security Agreement.
On
November 24, 2019, the Company and Olaregen amended the Stock Purchase Agreement and Promissory Note to extend the due date of
the remaining balance of the note on or before April 30, 2020. The extension of this due date has no impact on the existing schedule
of future payments or any additional terms within the Note.
Based
on the Note, in the event any incremental payment is not paid when due, Olaregen has the option to increase the per share purchase
price for all remaining purchased shares to $4.00 per share. Based on $1,400,000 of remitted payments and a Promissory Note balance
of $10,400,000 prior to the first extension agreement on March 14, 2019, Olaregen elected the option to proportionally increase
the per share purchase price to $4.00 for the remaining 2,899,658 of the total 3,282,632 shares to be acquired. This resulted
in an additional $998,633 which has been accrued
for
the Company to remit to Olaregen pursuant to the acquisition. On February 14, 2020, the Company acquired the remaining outstanding
shares of Olaregen in exchange for 4,250,000 shares of GNBT Stock and 1,065,000 shares of NGIO Stock and the penalty and outstanding
interest of approximately $1,900,000 was waived.
Regentys
On
January 7, 2019 the Company completed a definitive Stock Purchase Agreement and related documents relating to the Company’s
purchase of 12,048,161 newly issued shares of the Regentys common stock representing 51% percent of the issued and outstanding
capital stock of Regentys (“Regentys Shares”) for an aggregate of $15,000,000.
In
addition to $400,000 paid to Regentys upon signing of the LOI, the purchase price for the Regentys shares consist of the following
cash payments, with the proceeds intended to be used for specific purposes, as noted:
•
|
|
$3,450,000
to initiate pre-clinical activities on or before January 15, 2018. The balance was payable on or before December 30, 2019,
but as of January 31, 2021, the Company has paid $1,887,790.
|
•
|
|
$2,000,000
to initiate patient recruitment activities on or before May 1, 2019. As of January 31, 2021, the Company has not yet paid
this installment and the full balance of $2,000,000 was payable on or before December 30, 2019 per extension in amended agreement. As
January 31, 2021, the company has not paid this amount.
|
•
|
|
$3,000,000
to initiate a first-in-human pilot study on or before December 30, 2019. As January 31, 2021, the company has not
paid this amount.
|
•
|
|
$5,000,000
to initiate a human pivotal study on or before February 1, 2020. As January 31, 2021, the company has not paid
this amount.
|
•
|
|
$1,150,000
to submit a 510(k) de novo submission to the FDA on or about February 1, 2021. As January 31, 2021, the company
has not paid this amount.
|
The
Company issued its promissory note in the amount of $14,600,000 (the “Note’) representing its obligation to pay the
above amounts. The Note is secured by a pledge of the Regentys pursuant to a Pledge and Security Agreement.
On
November 25, 2019, the Company and Regentys amended the Stock Purchase Agreement and Promissory Note to extend the due date of
the remaining balance of the note on or before December 30, 2019. The extension of this due date has no impact on the existing
schedule of future payments or any additional terms within the Note. Regentys has not filed any notice of default as of the date
of publication, and Generex continues to provide Regentys with business opportunities continuing the relationship.
If
we obtain necessary financing, we expect to expend resources towards additional acquisitions and regulatory approval and commercialization
of Generex Oral-lyn™ and further clinical development of our immunotherapeutic vaccines.
In
addition to our future funding requirements, commitments, and our ability to raise additional capital will depend on factors that
include:
•
|
|
the
timing and amount of expenses incurred to complete our clinical trials;
|
•
|
|
the
costs and timing of the regulatory process as we seek approval of our products in development;
|
•
|
|
the
advancement of our products in development;
|
•
|
|
our
ability to generate new relationships with industry partners throughout the world that
will provide us with regulatory assistance and long-term commercialization opportunities;
|
•
|
|
the
timing, receipt, and amount of sales, if any, from Generex Oral-lyn™ in India,
Lebanon, Algeria and Ecuador;
|
•
|
|
the
cost of manufacturing (paid to third parties) of our licensed products and the cost of
marketing and sales activities of those products;
|
•
|
|
the
costs of prosecuting, maintaining, and enforcing patent claims if any claims are made;
|
•
|
|
our
ability to maintain existing collaborative relationships and establish new relationships
as we advance our products in development;
|
•
|
|
our
ability to obtain the necessary financing to fund our operations and effect our strategic
development plan; and the receptivity of the financial market to biopharmaceutical companies.
|
•
|
|
our
ability to obtain the necessary financing to fund our operations and effect our strategic
development plan; and
|
•
|
|
the
receptivity of the financial market to biopharmaceutical companies.
|
Off-Balance
Sheet Arrangements
We
have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital
resources that is material to investors, and we do not have any non-consolidated special purpose entities.
Tabular
Disclosure of Contractual Obligations
Generex
is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required
under this item.
Recently
Issued Accounting Pronouncements
In
August 2020, the FASB issued ASU No. 2020-06 (“ASU 2020-06”) “Debt—Debt with Conversion and Other
Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting
for Convertible Instruments and Contracts in an Entity’s Own Equity.” ASU 2020-06 will simplify the accounting
for convertible instruments by reducing the number of accounting models for convertible debt instruments and convertible preferred
stock. Limiting the accounting models will result in fewer embedded conversion features being separately recognized from the host
contract as compared with current GAAP. Convertible instruments that continue to be subject to separation models are (1) those
with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a
derivative, and that do not qualify for a scope exception from derivative accounting and (2) convertible debt instruments issued
with substantial premiums for which the premiums are recorded as paid-in capital. ASU 2020-06 also amends the guidance for the
derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions.
ASU 2020-06 will be effective January 1, 2024, for the Company. Early adoption is permitted, but no earlier than January 1, 2021,
including interim periods within that year. The Company has not yet adopted this guidance and is determining the impact on its
financial statements.