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Overview: American Medical Alert Corp. (AMAC) was formed in 1981. They provide healthcare communication and monitoring services. The company’s main market is naturally the healthcare community. Up until 2000 AMAC’s business relied mainly on the sale of emergency monitoring devices. Since 2000 they have expanded their company to provide complementary call centers and monitoring services for their customers. People with medical issues enjoy the peace of mind of knowing that if they run into trouble they will have a friendly and knowledgeable representative to talk to with just the push of a button. As of the end of Fiscal Year 2006, the company has built or acquired 9 call centers around the country. These call centers are located to serve the Southern New England, Mid-Atlantic and Midwestern states. Currently the call centers and the personal emergency response systems made up the majority of the income fore AMAC.

The company has recognized a new emerging technology that they are highly invested in. This new technology is called telehealth. Essentially, telehealth is a remote monitoring system that patients can use to help doctors diagnose their illnesses without having to physically visit the doctor. According to American Medical Alert Corp’s website, “This vital information is automatically transmitted via standard telephone line to a secure, Internet-based, HIPAA-compliant software platform, the AMAC iCare Desktop™. Authorized healthcare professionals can access, view and interpret patient results and take proactive measures to promote early intervention and positive reinforcement.” The company believes that the aging baby boomer demographic will be more open to accessing healthcare services from home. The company estimates that chronic diseases will affect over 5.6 million Americans over the age of 65.

Beyond the emergency monitoring systems and the call centers, the company also has a product that will remind its users to take their medications. This can be especially useful for those patients with Alzheimer’s disease. According to the company, “10% of all admissions to hospital and 23% of all admissions to nursing homes can be traced to medication mismanagement.”

Review:

The Good: This is a Medical Alert company that has been around since 1981, so they are not some new and unreliable company that was recently created to cash in on the aging baby boomer population. This company has an established and trusting client base, with a positive reputation around the healthcare community.

The products and services that they offer rely on older people who are generally more prone to accidents. Playing into AMAC’s favor is the fact that they baby boomer population is reaching the age where it will be important for them to have the products and services that AMAC offers. An additional plus is that life expectancy in the United States continues to increase. This means that they will be able to provide their products to each individual customer longer on average than they did ten years ago. This should help to increase customer retention. If a customer is happy with the products and services that American Medical Alert Corp. offers, the only reason they will cancel is if they die. For the fiscal year 2006, 96% of the company’s revenues were generated through monthly recurring revenues (subscriptions). Obviously a longer life span is something viewed in a very positive light by AMAC.

As of February 2007, the company entered into an agreement with Wallgreens to be the provider of emergency response systems (EMR) for the store. These EMRs would be produced by AMAC, but branded under the Walgreens name. This would allow for the company to get more product sales under a more well known and nationally recognized name.

The subscription portion of their business, which provides 96% of the company’s revenues has been becoming more efficient over the years. Their gross margin in this segment has increased from 49% in 2004 to 52.5% in 2006. This number is especially impressive due to the fact that they have been opening new call centers over the past few years. It would seem as though the costs to train all the new employees would bring down this figure. It seems as though AMAC has become experts in opening new call centers.

The Bad: The company has been experiencing many technical difficulties with its’ telehealth products like the Health Buddy and the PERS Buddy. Although the company has been taking steps to fix these issues, this could deter some users from renewing their subscriptions, as well as create negative word of mouth advertising about the company.

The company generates 13% of total revenues through the government’s Medicaid programs. If eligibility and reimbursement restrictions were to change, it could adversely affect AMAC’s overall revenue. It is possible that changes in the Medicaid program could be advantageous to the company as well.

If you are hoping to obtain dividends from this stock, they do not plan on paying out dividends at any point in the near future. Depending on your outlook for this stock, this could be seen as positive since they will be reinvesting their profits into the expansion of the company.

The company’s revenues are heavily leveraged with their subscription services. 96% of the company’s revenues come from this portion of their business. If a few healthcare providers decide to switch away from them this could negatively impact all facets of the company’s operations.

As of September 2007, AMAC had $588,361 in inventories, but had only sold $339,778 in product. It seems like AMAC is producing far too much inventory. It doesn’t make sense to hold more in inventories than you can sell in three quarters. Changes in technology could make this inventory instantly obsolete. These inventories would be pretty much worthless to AMAC.

Opinion: American Medical Alert Corp. has a fairly solid business model. They are in the business of making sure the elderly can maintain the independent lifestyle that they are used to, while having the safeguard of having someone in the medical field be only the push of a button away. Although this is nice business model it is not unique only to them. There are many other companies out there that provide the same services. Judging by the consistent increase in revenues by the company, they have managed to stand apart from the competition. With the aging population, they should have customers for life once they decide to join their service.

I would like to see the company create more revenues from places other than just their subscription service. Their partnership with Walgreens should help to grow their subscriber base. It should also increase their product revenues as well. Having their product backed by a national brand like Walgreens should add some credibility to the company and should make it accessible to more people.

Rating:

Market Sector: Once again, with the increase in age of the baby boomers, the company should be able to take advantage of a long term subscriber base. This market will be growing, and naturally we should expect to see a lot of new entrants into this market hoping to make and easy buck off this emerging market.

Potential: AMAC has a decent amount of potential. For them to truly expand, they need to expand their operations across the country. Rather than pay out dividends, it seems like the company has been investing their profits back into themselves by buying up additional call centers to better help their growing subscriber base. Since AMAC has teamed up with Wallgreens, now would be a good time to begin to expand nationwide now that the product has become available to more and more people.

Risk: AMAC actually has a decent amount of risk associated with it. They have invested a lot of money into the call centers, but ever changing technology could have an negative impact on the call center environment. A large amount of the debt on the company’s financials is related to the expenditures on additional call centers. If call center technology becomes obsolete, AMAC could be paying off defunct call center related debts for quite some time.

Conclusion: 3. The company has consistently improved revenues quarter after quarter. If it can correctly position itself over the next 5-10 years for the retirement of the baby boomers, they should be able to easily cash in on the situation. I don’t see the stock making a large price jump any time in the near future, but rather see it steadily increasing over the coming years. I see this stock as more of a buy and hold for the long term. This stock should be a steady performer over the coming years and a nice addition to a portfolio.

Note: As of 2/4/2008 I do not have any financial investment in this company. For a current listing of the stocks and options that I own, click here.

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, .

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.