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Generex Biotech - can the stock add to recent gains?

Starting in November, Generex Biotechnology (GNBT) has been quite volatile. That's about the time the company announced that its Oral-Lyn product had been licensed for commercial use in India. In October, a similar license was obtained in South Africa. The company is in the process of securing approvals to market the product in various Middle Eastern countries, as well.

In mid-November, Wall Street Strategies, an independent stock market research company, published a report on the company. They pointed out that the India news was a distinct positive for GNBT and that the stock is a buy. In addition, their analyst provided a further opinion as follows: "Currently, Oral-lyn is in phase III testing in North America. We expect that approval would automatically make this a $5.00 stock, but once sales begin we think the stock could move even higher." This sounds good but investors should be aware that Generex has retained Wall Street Strategies to provide investor relation services.

Earlier in the year, the stock jumped on a number of news events. There were various patent awards and license agreements in the US and other countries such as Lebanon, Armenia, Georgia, etc. The company began testing of a cancer vaccine in China with early signs of success. Positive analysis from Rodman and Renshaw briefly gave the stock a big boost. GNBT also announced that the number of retail chains in Canada and the United States that are carrying its proprietary Glucose RapidSpray(tm) product has expanded.

Without fail, however, the stock always falls back after a big event. Now, we are approaching an earnings announcement. The stock had over a 7% gain today. What are investors expecting?

Based on the last four quarters, revenues have been minimal and operating earnings negative. Are we actually going to see Generex begin to reap the benefits of some of the recent patents and license agreements? Essentially, GNBT is still a development stage company. Even as Generex gets closer to delivering on the promise of its Oral-Lyn product, it is unlikely that actual profits will be forthcoming this quarter. Investors may need to be prepared to see the stock swoon yet again.

Disclosure: GNBT is in our model portfolio

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