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Overview: Generex Biotechnology (GNBT) is a pharmaceutical company based out of Toronto, Canada. This biotech upstart is in the process of creating a glucose spray/inhaler for those with diabetes. Presently, people with diabetes have to inject themselves with insulin daily in order to keep their body functioning properly. They are currently in the process of beginning Phase III trials for the FDA. Their product has already been approved for use in Ecuador. According to Generex, they can potentially use the inhalation delivery method to disburse monoclonal antibodies, human growth hormone, fertility hormone, estrogen, heparin, and a number of vaccines. The company has decided that it would be more cost effective if they focused on the insulin product until they develop a steady and reliable revenue stream.

Review:

The Good: This company has a very novel idea that could potentially change the lives of people with diabetes. Currently, diabetics have to inject themselves with insulin to keep their bodies healthy. Injecting oneself with needles on a daily basis would not be a very enjoyable experience. With the creation of this product a diabetic can get their daily dose of insulin by using a delivery method similar to what people with asthma use. The delivery method that is used is called Rapid Mist. With the Rapid Mist system, the patient sprays the formulation into their mouths. “Absorption of the pharmaceutical agent occurs in the buccal cavity, principally through the inner cheek walls.” The flagship product for the Rapid Mist delivery system is Generex Oral-lyn. According to the company, “Generex Oral-lyn™ is a liquid formulation of regular human insulin that is delivered to the buccal mucosa by way of the RapidMist™ device,where absorption is limited to the mouth with no entry into the lungs. The rich vascularity of the buccal mucosa allows for much faster absorption of insulin and a shorter total duration of activity which makes Generex Oral-lyn™ an ideal prandial insulin as it can be conveniently administered immediately prior to meals with little prospect of hypoglycemia.”

Generex believes that the injection method is not highly accepted by a large amount of patients. Because of this, they feel that patients may not be as likely to comply with the prescribed treatment plan. This could lead to more medical complications and increase costs over the long run as well. The elderly may also have problems injecting themselves properly as they age. Having an inhaler devise like Rapid Mist would likely eliminate many of the above mentioned problems.

Another plus for Generex is that there is unfortunately no cure for diabetes. People with diabetes will remain dependent on insulin products for their entire lives. If Generex can bring this product to market they will have customers for life. If their condition is not treated with daily insulin, “diabetes can lead to blindness, nerve disease, amputations, heart disease and stroke.”

According to the World Health Organization, there are over 180 million people with diabetes world wide. There are approximately 18 million people with diabetes in North America. This gives any company dealing with diabetes medicine a very large and permanent subscriber base.

Institutional investment is currently at 2%. An increase in institutional investment could cause dramatic increases in the company’s stock price. Also, because this figure is so low, and institutional sell off would not likely affect the stock price by much. As of 11/26/2007, Ghi, Inc was the largest institutional investor, holding 1.91 million shares of the company.

The Bad: The company is still a ways away from being able to market this product in the United States. They are just entering the Phase III trials that are vital to the future of this company. If they cannot make it through these trials, then the company will most likely cease to exist. If they can manage to make it through the Phase III trials though, one could profit handsomely.

Generex is burning money like it grows on trees. According to their 2007 annual report, they spent $11.983 million on Research and Development and an additional $12.317 million on General and Administrative expenses. Combine this with $.182 million in revenues and you have an operating loss of $24.994 million. Since 11/2/1995 when the company began operations, they have a total operating loss of $162.466 million.

The company has financed almost all of their operations through the sale of stock. At their current cash burn rates, they will continue to have to issue more and more shares to keep themselves afloat. The issuance of more shares will dilute the share value. At the current stock price of $1.31 per share, the company will have to issue 5,553,073 additional shares to satisfy their current liabilities.

The largest negative facing this company is that they may not be approved by the FDA. If this happens the company will be worthless to investors.

Opinion: I think that Generex is a very speculative company that has a great product. If approved it could change the lives of millions of people around the world. Bringing a pharmaceutical product to market is a very costly venture, and it could be a long time before Generex Biotechnology sees a profit. I see a lot of potential in this company and if they make the right moves they can become very profitable.

I like the fact that Generex is seeking approval in companies outside of the United States as well. Having a product for sale in Ecuador shows that their product has been accepted and leads me to believe that their product can be accepted elsewhere as well. Even if they don’t get approved in the United States they could still have potential access to over 90% of the world’s diabetics. One drawback of this is that people in other countries may not have the funds to purchase Generex’s product.

Rating:

Market Sector: The Biotechnology sector is generally very speculative and volatile. This stock is not exception. This company has little revenue to speak of, so literally all price movements are a reflection of current speculation on the viability of this company. There are many Biotech companies out there, and it is possible that one invents a product superior to what Generex is attempting to produce.

Potential: Generex has an awesome potential. If they can get their product to the market I would imagine that many diabetics would want to switch to it to avoid having to inject themselves. There is really an unlimited potential for this company. At $1.31 it is priced very low which would allow an investor to make significant returns quite easily.

Risk: This is a very risky company and the price definitely reflects that. If you believe in the product that Generex Biotechnology (GNBT) is selling, now would be the time to get in on the stock before a press release pushes the price higher. Alternatively, there is a high potential that the Phase III trials could fail and the product will never reach the market. If you have a little extra cash sitting around, this company could make for an entertaining speculation.

Conclusion: 2.5 Generex Biotechnology (GNBT) is a very promising company with a unique product. I can’t quite rate them a hold (3) because they have been experiencing a steady decline for the past month and a half. On 12/14/2007 the stock closed at $1.90. It has dropped over 31% since. It could have a ways to go until it hits a bottom. I would keep my eye on this stock over the next year or so. If things go right for Generex it could see a nice price appreciation.

Note: As of 1/28/2008 I do not have any sort of financial investment in this company. For a current look at the stocks and options I own, .

Stock Recommendations, Stocks diabetes, generex, oral-lyn, Stock Recommendations

Overview: Under Armour (UA) began as a one man operation in 1996 by a former University of Maryland football player. The company specializes in high performance sportswear. They use synthetic materials to create tight fitting athletic clothing that company has designed to “wick perspiration away from the skin, help regulate body temperature, enhance comfort and mobility and improve performance regardless of weather condition.” Initially the company started out making mens shirts, but has since expanded to shorts, cleats, and womens clothing. As of 2006, Under Armour has placed their product in over 12,000 different retail outlets.

Review:

The Good: Since the company’s inception in 1996, they have continued to grow at a very steady pace. Net revenues have climbed from $49.55 million in 2002 to $430.689 million in 2006. The company is also trying to capitalize off this growth and expand into the Japanese and European markets. Under Armour has also increased their women’s apparel business by 60%. Another significant venture is that they have created a line of cleats. Their primary cleat business is for football, but they have also created cleats for baseball and softball.

Under Armour has tried to make their product more visible by sponsoring different teams. Currently they are the official outfitter of the University of Maryland, University of South Carolina, and Texas Tech football programs. They are also the official outfitter of the entire Auburn University athletic program. To top this off, they are also in the midst of a 6 year deal with the NFL to be their official footwear supplier.

According to financial statements, Under Armour’s operations seem to be getting a bit more efficient. In 2004, costs of goods sold accounted for 53.5% of net revenues. In 2006, this figure had dropped to 49.9%, making them 6.7% more efficient than before. It can also be seen throughout their financial statements that they have increased numbers across the board. Not bad considering the fierce competition of the retail world.

The Bad: Looking at the numeric financials alone, it would appear that Under Armour has very limited downside. One thing that concerns me is their $81.031 million in inventories. This figure represents 18.8% of their revenue for 2006. For comparison, Nike’s inventories in 2006 accounted for 13.9% of their revenue. These figures could explain that Under Armour has yet to be able to accurately forecast the demand for their products, causing them to overproduce and be stuck with leftover inventories.

Another possible negative is the fact that the average age of their executive officers is 40.9 years old as of the 2006 financial statement. The oldest member of this group (48) is the Vice President of Human Resources. This throws up some red flags because of the lack of experience that these major decision makers have. On the other hand, having a younger executive core in a retail company could help it be more progressive and attentive to a younger audience.

Over the past few quarters the economy has been in the dumps and this always tends to affect the retail sector. With many consumers saving now instead of spending, the retail sector has been taking a hit. Since 8/10/2007, we have seen the stock drop from $66.44/share to a current price of $34.94/share (1/23/2008). Depending on the state of the economy over the next few months, this stock could continue to drop, or it could start to rebound as it has started to over the past few days.

Another negative for the company is that Dick’s Sporting Goods and the Sports Authority account for 37% of their net revenues. If one or both of these stores were to drop their agreement to sell the Under Armour product, the company could see a large drop in revenues.

Finally, the synthetic materials used in the creation of the Under Armour products are fairly dependent on petroleum to be produced. If the cost of oil continues to rise, it would cost more to create the product. This in turn would either reduce the gross margin, or it would cause the company to increase their prices and possibly discourage customers.

Opinion: I think that Under Armour is a great company that is headed in the right direction. They are a small company and are subject to a lot of competition from companies like Nike, Adidas & Reebok. They have managed to create a niche product, although they do not have any exclusive rights to the creation of it. I think that Under Armour is headed in the right direction by selling cleats. I think if they are going to succeed in the European markets they will need to sell a Soccer cleat.

I also like the direction they are headed in with their sponsorship deals, especially those with college football. It will help give the company the exposure they need. I anticipate seeing the company inking more sponsorship deals with different colleges over the next few years.

If the company can continue to expand its’ womens and youth brand it should help out their bottom line if they market it properly. Women and youth tend to make the majority of household purchase decisions, so it is important that they attract this market.

I am also happy to see that the company has started to create more looser fitting clothing. Although the skin tight shirts that they sell look really good on someone with some muscle definition, the fact is that the majority of Americans are out of shape. By creating more looser fitting clothing, they can appeal to a wider audience.

Rating:

Market Sector: Because this is a retail company, how the retail sector performs will have a fairly strong correlation on the price movements of this stock. Since the retail sector has been a bit sluggish as of late, and since Under Armour does about 2/3 of its sales in the fall and winter months, I don’t anticipate seeing stellar numbers for this upcoming quarter. Over the past few days it seems as though this stock and the market in general have bottomed out and could be facing a rebound.

Potential: The potential of this company seems to be ever increasing. They have been increasing revenues and profits at a very fast pace over the past few years and does not show any signs of slowing down. I would expect to see profits and revenues increase by less than they typically do because of the way the economy has been lately. In the long term I see this company as having a great potential.

Risk: Even though this company is 12 years old, it is still a relatively young company and probably has a few bumps along the road to hit. I would not consider this to be an ultra-risky company to invest in. Over the long term it should be a safe bet. For short-term traders the volatility of this stock as of late would make it very risky in the short term.

Conclusion: 3.8 This stock has a very large upside to it. I can’t quite rate it a 4 because it is hard to say if the stock has truly hit its’ bottom. If I had some extra cash to invest, I would definitely take a hard look at investing in this company over the next 3-5 years.

Note: As of 1/23/2008 I do not have any sort of financial investment in this company. For a current look at the stocks and options I own, click here.

Stock Recommendations stock recommendation, under armour

From time to time I will write a review of a company and in the end conclude whether or not it is a buy, sell or hold opportunity. I hope to do these reviews increasingly more and more so that they will make up the bulk of this site. I intend to give a brief overview of what the company does, review some of their financials, predict how the stock will fare over the short and long term, and finally make a recommendation for the stock. I plan on using a 1-5 scale to rate these stocks.

1: Strong Sell. Sell your holdings in this stock, or better yet short it.

2: Sell. This stock isn’t yet a disaster, but the future is not looking bright for it.

3: Hold. It is hard to say which direction the company is headed in. Be careful and watch for sudden changes in the stock price.

4: Accumulate. The company seems to be headed up, but not at full steam. Buy on dips in the price.

5: Strong Buy. Buy this stock before it is too late!

I will also try to revisit companies and edit my ratings of them accordingly. You can find my reviews in the Stock Recommendations category.

Stock Recommendations Stock Recommendations