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 nine-month period ended
April 30, 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 nine months ended April 30, 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 April 30, 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:
29
• 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.
30
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 nine months ended April 30, 2021, an additional
$819,525 was paid for a total of $1,987,790 against the note. Regentys is
developing a non-surgical treatment for inflammatory bowel diseases such as
ulcerative colitis and Crohn's disease.
31
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 nine months ended April 30, 2021, an additional $134,090 was paid for
a total of $1,992,117 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 April 30, 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 April 30,
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.
32
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 pay 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.
As of April 30, 2021, Generex, has received approximately $4,500,000, net of
taxes, from the COVID Agreement in cash to pursue the commercialization of the
Vaccine.
33
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 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.
34
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.
35
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.
36
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).
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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
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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-?) 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 April 30, 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
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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 April 30, 2021, NGIO had 750,000,000 authorized shares of common stock.
On February 2, 2021, NGIO issued 100,000 shares of the Company's Series A Super
Voting Preferred Stock (the "Super Voting Preferred Stock") to Generex in
exchange for 300,000,000 shares of the Company's common stock, which were
immediately cancelled upon such exchange. As of April 30, 2021, NGIO had
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.
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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%.
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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.
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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 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.
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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) to the physicians. NuGenHealth, as the enabler of these reimbursements,
are paid for our platform of services by the physician practice, including the
software, training, technical support and the provision to the patients of
Bluetooth devices to monitor their health. Similar agreements for RPM have
subsequently been signed on May 6, 2021 and May 10, 2021 for Florida Health Care
Associates, of Boynton Beach, Fl, and Westside Medical and Cardiology, of
Westlake, Ohio. Numerous other clinics in other states are in discussion phase
to sign up as well. The company has received its first funds to begin operations
and plans its first kick off during the Month of May 2021 in the three signed
clinics
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 middleman. 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 post covid and
funding we are 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, RPM, and
DMEIQ programs.
DME-IQ
NDS is planning, upon funding and the lifting of Covid pandemic restrictions 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.
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
44
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. As of today, VA's are beginning to re-open with full
access and have started elective surgeries once again.
We had previously launched Excellagen and in December of 2019 had ramped it up
to over $500,000 in sales that month. Unfortunately, the Covid Pandemic hit and
stopped our sales in its track as elective surgeries and new sales calls were
shut down completely to the focused Sales Channel. We had signed an Agreement
with AvMedical which has a national contract with the VA. This created more
opportunity within the entire VA system. Excellagen is looked at as a best in
class wound healing product. The FDA has authorized its use in 17 different
indications, and we had already completed our tests within the VA and gained
acceptance. Now, some of the major metropolitan VA centers are still closed to
us, but many have reopened. We received an exclusive investment into the restart
of revenues activities this week. The use of funds will be used to:
• Convert our existing bulk inventory of Excellagen Wound Conforming Gel Matrix
into final fill finish and will be shipping product to AvMedical from our
partners in England, BSM. We have enough existing bulk inventory to create
approximately 25,000 syringes with 70% converted into our .08 cc syringes and
30% into our 3.0 cc syringes for larger wounds. This process is expected to
take 60-90 days to have inventory in place to sale. We believe these runs will
support our sales forecast up to approximately $30 million.
• We believe our forecast for this slimmed down focus on just VA will yield, at
the end of month 12, an annualized run rate of approximately $10,000,000 while
achieving a positive EBITDA in Month 6 of this rollout and an EBITDA projected
north of 70%. Years 2 and 3 is forecasted to have $39 million and $92 million
of revenue, respectfully, with EBITDA forecasted at $32 million and $65
million, respectfully.
• Begin our sales initiative with outsourced VA specialized sales groups.
• We will also need to create more bulk inventory as the current inventory runs
out. With timelines of 90-120 days to create the bulk and 60 days for each fill
finish run. We have to balance our inventory to sales to ensure we have shelf
life on the product. Once fill finished, Excellagen has a two-year shelf life.
• Once we get a foothold in the VA System which is now open for business, we will
immediately start with Managed Care and Insurance Systems. This is an important
point because insurance companies spend a lot of money on wound care, hard to
close wounds, and surgery where our 17 FDA cleared uses allow us to sell our
product. If a large insurer pays out a billion dollars, approximately $3
million is for suturing with our competitors' products at $1,200 per patient.
Now we can save them this cost because our best-in-class product is non
sutured. We believe insurers will be jump at the chance to save this money and
achieve a less costly procedure with better outcomes. This is an advantage as
we pursue this market.
The description given is our restart of just the VA. Once we achieve our
milestones and secure funding, we will consider more aggressive plans:
• The VA has over 160 centers, and over 1,000 outpatient centers. We will move
more aggressively as it makes sense so as not get ahead of our cash flow and
controls.
• Managed Care is next up, and we are already engaged in discussion with a few as
a test. This market is considered low hanging fruit given we believe we can
save over $1,000 per procedure by converting from current practices to
Excellagen.
• Our Physician Network and entities are considered a third leg of sales with
Medicare reimbursement test underway by our Sales leaders
• We announced recently that Olaregen signed its first Asian Distribution
Agreement with NexGen Medical for exclusive distribution rights in Malaysia.
This starts out slow, but they have paid their own way for their equivalent FDA
approval and believe they will have such approval at the end of May. We see
this as a foot hold into the Asian market and NexGen has created their own Fill
finish capabilities and stand to open up Malaysia while we retain the license
for the product. This partnership could expand as we move forward.
• We have also obtained a new order for Excellagen in a NYC Hospital that
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".
In conclusion, we are excited for this restart amidst the negative impact of the
pandemic and will provide further updates as necessary.
45
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. Olaregen is providing an exclusive sublicense to the
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.
46
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.
47
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.
48
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.
49
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 $1,296,854 in the
aggregate. During the three and nine months ended April 30, 2021, the Company
has incurred $149,895 and $1,265,835 of expenses, respectively, leaving a
balance of $1,020,225 accrued under this agreement.
During the nine months ended April 30, 2021 and 2020, expensed $0 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
Current Estimated
Company Milestone Milestone Estimated
(Subsidiary) R&D Project Target Start Dates Milestone Costs
Phase II
NGIO AE37 Cancer Vaccine Clinical Trial January 2022 $ 1,800,000
Development of September
NGIO COVID-19 Vaccine Human Trials 2021 1,700,000
First In-Human
Clinical Trial
Regentys ECM in Australia December 2022 2,000,000
FDA 510K
NGDx Express I & II Approval $ 750,000The following is a summary of our research and development costs for the nine
months ending April 30, 2021 and 2020:
Nine Months Ending April 30,
R&D Project 2021 2020
AE37 Cancer Vaccine $ 118,496 $ 255,265
COVID-19 Vaccine 3,305,144 17,150
ECM 293,551 676,464
Express I & II 213,980 298,761
Excellagen* - 15,760
Excellasome®** - 7,200
$ 3,931,142 $ 1,270,600 *Product in active commercialization
**No longer an active research and development project
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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.
Results of Operations
Three months ended April 30, 2021 compared to three months ended April 30, 2020
During the three months ended April 30, 2021 and 2020, net revenues were $20,695
and $498,676, respectively. The decrease resulted primarily because there was no
revenue generated by Pantheon in the three months ended April 30, 2021 while it
generated $497,386 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 April 30, 2021 and 2020
were $1,202,835 and $332,029, respectively. The increase of $870,806 is
primarily from the clinical costs related to NGIO's COVID vaccine for which
minimal expenses were incurred during the same period in the prior fiscal year.
General and administrative expenses in the three months ended April 30, 2021 and
2020 were $5,115,320 and $3,624,709, respectively. The increase of $1,490,611 is
primarily due to increase in commissions paid, partially offset by reduction of
operations from Veneto, MediSource and Pantheon, interest due to settle with
AEXG and loss on impairment related to inventory and accounts receivable held by
MediSource and Pantheon.
Interest expense in the three months ended April 30, 2021 and 2020 was $978,524
and $1,506,103, respectively. The decrease is primarily due to the decrease in
amortization of debt discount of approximately $600,000 from the previous year's
fiscal quarter, partially offset default interest and increase of interest on
notes payable.
51
The change in fair value of derivative liabilities for the three months ended
April 30, 2021 and 2020 was a gain of $15,388,602 and a loss of $466,217,
respectively. The $15,854,819 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 April 30, 2021, which resulted in a gain of
approximately $14,564,363. The significant change in fair value is primarily
driven by the stock price decreased by about 40% during the quarter from $0.43
per share on January 29, 2021 to $0.26 per share on April 30, 2021.
As a result of a Settlement Agreement with Alpha on March 25, 2021 (Note 2), the
Company recorded a gain on the settlement of accrued interest in the amount of
$370,553 for the accrued interest previously recorded that was not required to
be paid under the Settlement.
As a result of the forgiveness of a PPP loan awarded to Regentys the Company the
$73,100 principal forgiven was recognized as Gain on Forgiveness of PPP loan on
the Statement of Operations.
We had net income for the three months ended April 30, 2021 of $8,485,334 and a
net loss of $5,760,817, during the same period in the prior fiscal year. The
increase in net income for the three months ended April 30, 2021 was caused by
the factors described above.
Nine months ended April 30, 2021 compared to Nine months ended April 30, 2020
During the nine months ended April 30, 2021 and 2020, net revenues were $109,130
and $2,077,764, respectively. The decrease resulted primarily because there was
no revenue generated by Pantheon in the nine months ended April 30, 2021 while
it generated $2,059,662 during the same period in the prior fiscal year.
Additionally, there was a decrease in revenues generated by Olaregen which was
impacted by COVID-19.
Research and development costs in the nine months ended April 30, 2021 and 2020
were $3,931,142 and $1,270,600, respectively. The increase of $2,660,542 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 nine months ended April 30, 2021 and
2020 were $25,036,787 and $13,058,813, respectively. The increase of $11,977,974
is primarily due to bonus compensation of $7,050,417 to be paid in approximately
$1 million in cash and $6 million in stock, $457,653 due to impairment of
inventory held by Medisource and Pantheon and $4,538,735 judgement from the AEXG
arbitration that was accrued during the nine months ended April 30, 2021.
Interest expense in the nine months ended April 30, 2021 and 2020 was $2,585,640
and $5,453,268, respectively. The decrease is primarily due to the decrease in
amortization of debt discount approximately $2,300,000 from the previous year's
fiscal quarter.
The change in fair value of derivative liabilities for the nine months ended
April 30, 2021 and 2020 was a gain of $4,151,388 and a loss of $4,112,208,
respectively. The $8,263,596 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 gain of
approximately $3,921,311, 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.
We had a net loss for the nine months ended April 30, 2021 and 2020 of
$26,910,363 and $22,353,394, respectively. The increase in net loss for the nine
months ended April 30, 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, $1,854,257
from the sale of common stock and $2,050,200 of net proceeds from notes payable
during the nine months ended April 30, 2021, the Company's cash position is not
sufficient for twelve months of operations from the filing of this report.
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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 nine months ended April 30, 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.
On March 9, 2021, the Company sold 500,000 shares of common stock to Oasis for
net proceeds of $144,224 which went directly towards repaying an outstanding
note with Oasis.
On March 30, 2021, the Company sold 300,000 shares of common stock to Oasis for
net proceeds of $74,120.
On April 12, 2021, the Company sold 300,000 shares of common stock to Oasis for
net proceeds of $68,324.
On April 23, 2021, the Company sold 300,000 shares of common stock to Oasis for
net proceeds of $71,084 which went directly towards repaying an outstanding note
with Oasis.
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Cash flows for the nine months ended April 30, 2021
For the nine months ended April 30, 2021, we used $1,739,029 in cash to fund our
operating activities. The use for operating activities included a net loss of
$26,910,363. Changes to working capital included an increase of $17,032,881
related to accounts payable and accrued expenses.
The use of cash was offset by non-cash expenses of $783,173 related to
depreciation and amortization, $2,160,788 related to stock compensation,
$975,835 of amortization of debt discount and an offset by a gain in fair value
of derivative liabilities of $4,151,388.
We had cash provided by financing activities in the nine months ended April 30,
2021 of $3,398,604, most of which was from net proceeds from private placement
(PIPE) of $1,850,000, net proceeds from sale of common stock of $1,854,257 and
net proceeds from notes payable of $2,050,200 partially offset by payments on
notes payable of $2,349,996.
Our net working capital deficiency on April 30, 2021 increased to $61 million
from $40.1 million on April 30, 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
yet made this payment.
• $6,000,000 on or before January 31, 2020. We have not yet 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
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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 April 30,
2021, the Company has paid $1,987,790.
• $2,000,000 to initiate patient recruitment activities on or before May 1,
2019. As of April 30, 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.
• $3,000,000 to initiate a first-in-human pilot study on or before December 30,
2019. As April 30, 2021, the company has not paid this amount.
• $5,000,000 to initiate a human pivotal study on or before February 1,
2020. As April 30, 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 April 30, 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 number 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.
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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.
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GENEREX BIOTECHNOLOGY CORPORATION 
