Shakeup at Generex, CEO Out, Partnership In? Print E-mail
By Vinny Cassano   
Monday, 04 October 2010 00:00

The foundations at Generex Biotechnology Corporation (NASDAQ:GNBT) shook in Worcester last week when it was announced that co-founder and long time President and CEO Anna Gluskin was removed from her positions and replaced by Mr. Mark Fletcher, Generex's Executive Vice-President and General Counsel since 2003.   Mr. Fletcher's appointment was on an interim basis. 

 In another move, John P. Barratt, previously serving as an independant director, was asked to serve as Chairman of the Board. 

Ms. Gluskin will continue to serve as Director of the company.

The little guys are never going to know what went on behind closed doors in Worcester to lead to the removal of Anna Gluskin as CEO, but there will be a whole lot of speculating taking place.  Some speculation has it that Anna was forced out for being a roadblock to potential big-pharma partnerships, while others speculate that Ms. Gluskin was solely looking to boost her personal share of the company by pushing through the reverse split that never seemed to muster enough votes to be exercised.

Let's highlight some important quotes from the press release:

Mr. Barratt said, after recognizing Anna's past achievements, "The Board has concluded, however, that Generex has reached a stage in its maturation where new senior management leadership is now needed for the company to capitalize more effectively on the opportunities that we believe are available to the company. We believe that a tighter focus on the company's core business is needed and we have determined that this can only be achieved under a new President and CEO,"

My take:  It should be assumed that by "core business" Mr. Barrat means Oral-lyn and its delivery system, since the cancer and flu vaccine pipelines are being developed by a subsidiary.  If that is actually the case, then I think that Mr. Barrat - and the rest of the Board for that matter - believe that partnerships and/or licensing deals are available - and available right now - for Oral-lyn and any associated products that may utlitze the buccal drug delivery system through the inner lining of the cheek.   

Anna Gluskin may have been perceived as a threat to allowing any potential deals to materialize, whether it was because she wanted Generex to enjoy 100% of all potential Oral-lyn sales and refused to deal or whether it was because she was intent on allowing an R/S to go through.  Regardless of her reasoning, it also looks like it became painfully obvious that the share price was not going to reach the one dollar mark in quick time with Gluskin on watch. 

The R/S was tried and failed, and then the PR barrage also failed; that meant it was time for a change in management, in my opinion, because it looks obvious that the rest of the Board has a plan that Anna just didn't want to put into motion.

Also, what do we make of  "it maturation"?  What has Generex matured into that Mr. Barratt knows and we don't?  Curious.

"I will work with the Board to develop and execute growth strategies that focus on our strengths. I intend to maintain the many important partnerships that we have forged internationally with respect to the development and commercialization of our drug delivery systems and technologies," Mr. Fletcher said.

My Take:  Mr. Fletcher thinks that there are partners out there, and he thinks he's going to get a deal done.  I believe that "our strengths" are Oral-lyn and the drug delivery system.
Whatever the reasons behind the Gluskin ouster, Generex is still proving to be a company that never allows for a dull moment.
There is another side to the speculation, other than what I've already mentioned.  This could be another posturing by the company to buy more time from the Nasdaq while they try and get the stock price to a buck.  Since the PR barrage didn't do it, and since it doesn't look like the split is going to occur, this may be a last ditch effort to show the Nasdaq that the Board is doing something in order to return to compliance. 
While possible, I don't believe that the tone of this email supports this scenario.  I think the tone said, "It's time for a change - let's get a deal done."
Another possibility is that the Phase III results are still straddling the line between success and failure and the Board wants to sign a big partner now - before results are released - just in case they end up needing addtional financing to conduct an additional trial or gather more data.  Anna may not have felt a need to sign a 'crutch' right now for the 'just in case' scenario, but the Board might feel it necessary to stave off a complete collapse if this trial doesn't turn out quite as planned.

As I said, speculation will be rampant, and these are only a few theories - we won't know the truth until it appears on the news wires.
Which theory is VFC buying into?  It may not have been a hostile coup, after all, Anna is still the Director, but I think she was forced out and given the option to remain on in some capacity.  I think that the Board saw her as a detriment to progress, acted on it, and are now prepared to move Generex into the next phase of development.
We've seen Generex announce a couple of big partners over the last month, so let's see if we get the one that matters most - the Oral-lyn partner.
Never a dull moment around here, that's for sure.

Disclosure:  Long GNBT.
Vinny also authors the popular stock investing blog VFC's Stock House.

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