|The Buzz Behind Generex|
|By Vinny Cassano|
|Wednesday, 24 March 2010 03:00|
The latest buzz surrounding Generex Biotechnologies (NasdaqCM: GNBT) was created by TheStreet.com- who's blogger Adam Feuerstein, posted a negative piece on Generex and the company's Phase III oral insulin product, Oral-Lyn. According to the website, the company is a scam and the product doesn't work.In response, Generex issued a press release on Tuesday demanding a retraction and an apology from the investment webloid, arguing that the bulk of Feuerstein's main points regarding Oral-Lyn were not only false, but misleading.
My first thoughts after learning that Feuerstein went negative on GNBT were actually thoughts of indifference, since I certainly don't value his opinion or information enough to consider it worthwhile DD. A growing number of investors are starting to lean that way as well, judging purely by message board chatter.
My interest was peaked enough to read his post, however, (I usually don't click on his articles) simply because I considered it out of the norm that he would write about a stock that hasn't had a recent major run-up.
For the most part, when a stock in the biotech sector enjoys a major spike, it's pretty much a given that it will retrace. It's on those spikes that Feuerstein seems to like going negative on a company because it's pretty easy to guess that the stock will drop again anyway. Many suspect he has the help from Cramer's cronies, but that's neither here nor there without proof.
This time it was only after Mannkind received the bad news about their own insulin inhaler that Feuerstein spoke. Could that be just a coincidence since the MNKD drop created such a stir? It's becoming harder and harder to believe that a guy who not have an ulterior motive every time he publishes a negative post.
That said, a couple of notes did stand out to me.
In his article, Feuerstein refers to David Kliff from the Diabetic Investor newsletter:
David Kliff, a diabetic himself who runs the well-respected Diabetic Investor newsletter, has followed Generex for years and is more succinct in his appraisal. "Generex is full of crap -- always."
However, in those "years" during which Kliff has followed Generex (according to Feuerstein) Kliff also had this to say that indicates the word "always" is a subjective term in this case:
David Kliff, editor of Diabetic Investor, thinks that Generex Biotech (nasdaq: GNBT - news - people ) is a big bargain at about $2 a share. Kliff says the company has "the best technology for alternative delivery of insulin," which is by mouth.
I'm all for someone changing their mind, but there's always that 'stink factor' when something or someone is associated to Feuerstein.
I also liked his comment that "Common sense should tell you that an insulin spray like Oral-Lyn is more fiction than science."
I'm not here to say that Oral-Lyn works or doesn't work - we'll know soon enough, but it's a scary assumption (or an easy cop-out) to claim that medicine cannot advance because the 'common sense' of a Street.com blogger doesn't think it can.
Every single day scientists and doctors are bringing new technology and medicine to the field, most of which would test anyone's faith in common sense - that's why some of the greatest developments were discovered by accident.
Additionally, Feuerstein writes that if Oral-Lyn worked as advertised, then Generex would surely have been bought out by now. That's another fine assumption, but that's all it is - an assumption.
Let's make on thing clear - Feuerstein makes his living on assumptions. His assumptions are that everything in the biotech world is doomed to failure.
It's my opinion, however, (to quote an old-school Segal flick) that "assumption is the mother of all screw ups."
I'll let the story play out, and I'll take input from various sources, but don't count TheStreet.com among them.
There's pleny of good medicine and treatments coming out of the biotech world, but it's easier to attract clicks and attention by going negative and just "assuming" that the sector is one doomed to failure. That's what Feuerstein does, and it's just become an accepted fact for those investing in the biotech world.
Investors shouldn't get angry at the guy - everyone's gotta make a living. If he bashes a stock that you've done your DD on and are confident in, then take advantage of any dip in price that he creates and add more shares.
All just my opinion, each investor should do his or her own DD, invest accordingly and come to their own conclusions.
Disclosure: Long GNBT
Vinny also authors the popular investing website VFC's Stock House.