424B5
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PROSPECTUS
SUPPLEMENT
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Filed
pursuant to Rule 424(b)(5)
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(To
Prospectus dated January 12, 2007)
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Registration
No. 333-139637
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17,200,000
Shares of Common Stock
Warrants
for the purchase of up to 8,600,000 Shares of Common Stock
Placement
Agent Warrants for the Purchase of up to 1,290,000 Shares of Common
Stock
GENEREX
BIOTECHNOLOGY CORPORATION
Pursuant
to this prospectus supplement and the accompanying prospectus, we are offering
up to 17,200,000 shares of our common stock (“Shares”) and warrants to purchase
up to 8,600,000 shares of our common stock (“Warrants”) (and the shares of
common stock issuable from time to time upon exercise of the Warrants) to
investors (collectively, the “Securities”). The Warrants have an initial
exercise price of $0.76 per share are exercisable for a period of five years
commencing 183 days after their issue date. The securities offered
hereby initially will be issued as units, with each unit comprising one common
share and a Warrant to purchase one-half of one share of our common stock,
but will not trade as units. The units will be sold
at a negotiated price of $0.6389 per share. As compensation for its
services in connection with this offering we will be issuing the placement agent
a warrant to purchase up to 1,290,000 shares of our common stock at a price of
$0.76 per share (“Placement Agent Warrant”). In addition to the Shares, the
Warrants, and the Placement Agent Warrant, we are also registering the shares of
common stock underlying the Warrants, and the Placement Agent
Warrant.
Neither
the Warrants nor the Placement Agent Warrant will be listed on any national
securities exchange. Our common stock is quoted on the NASDAQ Capital
Market under the symbol “GNBT.” On June 12, 2009, the last reported sale price
of our common stock on the NASDAQ Capital Market was $0.76 per
share. As of June 12, 2009, the number of outstanding voting and
non-voting common shares held by non-affiliates was 178,492,689. The
aggregate market value of our outstanding voting and non-voting common equity
computed by reference using the last reported sale of such common equity held by
non-affiliates, as of June 12, 2009, was $135,654,444. The aggregate
market value of all securities offered pursuant to General Instruction I.B.6. of
Form S-3 during the prior 12 calendar month period that ends on, and
includes, the date of this prospectus is $15,989,080 consisting of 32,351,515
Shares.
Investing
in our securities involves a high degree of risk. Before buying any securities,
you should read the discussion of material risks of investing in our common
stock under the heading “Risk factors” of this prospectus
supplement.
Neither
the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or passed upon the adequacy or
accuracy of this prospectus supplement or the accompanying prospectus. Any
representation to the contrary is a criminal offense.
We have
retained Midtown Partners & Co., LLC to act as our placement agent in
connection with this offering. We have agreed to pay the placement agent the
cash fees set forth in the table below (subject to certain exceptions), which
assumes that we sell all of the Shares we are offering. Additionally, we have
agreed to issue the placement agent a Placement Agent Warrant equal to 5% of the
Shares sold and the shares of common stock issuable upon exercise of the
Warrants sold (subject to certain exceptions). The terms of the
Placement Agent Warrant are described under the section of this prospectus
supplement entitled “Description of Securities.” We have also agreed
to reimburse the placement agents for certain of its expenses as described under
“Plan of Distribution” in this prospectus supplement. The placement agent is not
required to arrange for the sale of any specific number of Securities or dollar
amount but will use best efforts to arrange for the sale of all of the
Securities. The placement agent is also the holder of a warrant
issued prior to the date hereof as compensation for advisory services rendered
to us and unrelated to this offering pursuant to which the placement agent may
acquire up to 450,000 shares of our common stock at $0.33 per share (the
“Midtown Warrant”). Neither the Midtown Warrant nor the shares of our
common stock issuable thereunder are offered hereunder.
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Maximum
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Offering
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Per share
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Amount
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Offering price
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$
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0.6389
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$
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10,989,080
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Placement agent fees (maximum)
(1)
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$
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$
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439,563
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Proceeds,
before expenses, to us (maximum) (2)
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$
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$
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10,549,517
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(1) The
placement agent fees shown are the maximum cash fees payable by the Company to
the placement agent (not including expense reimbursement). We have
agreed to pay the placement agent a placement agent cash fee equal to: (i) 2.0%
of the gross proceeds of this offering (which will not include any monies
received by us in respect of the exercise of the Warrants) other than proceeds
received from certain specified prospective investors and other than proceeds
received from the former holders of the Company’s 8% senior secured convertible
promissory notes issued on March 31, 2008 (in respect of which no compensation
will be due and payable other than expense reimbursement); and (ii) 4.0% of the
gross proceeds of this offering from those certain specified investors (which
will not include any monies received by us in respect of the exercise of the
Warrants).
(2) The
proceeds shown exclude proceeds that we may receive upon exercise of the
Warrants or the Placement Agent Warrant or the Midtown Warrant.
We
estimate the total expenses of this offering, excluding the placement agent
fees, will be approximately $100,000. Because there is no minimum offering
amount required as a condition to closing in this offering, the actual offering
amount, the placement agent fees and proceeds to us, if any, in this offering
may be substantially less than the maximum offering amounts set forth
above.
The date
of this prospectus supplement is June 15, 2009.
This
prospectus supplement is not complete without, and may not be utilized except in
connection with, the accompanying prospectus dated January 12, 2007 and any
amendments to such prospectus. This prospectus supplement provides supplemental
information regarding us and updates certain information contained in the
accompanying prospectus and describes the specific terms of this offering. The
accompanying prospectus gives more general information, some of which may not
apply to this offering. We incorporate important information into this
prospectus supplement and the accompanying prospectus by
reference.
TABLE
OF CONTENTS
Prospectus
supplement
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Page
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About
This Prospectus
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S-1
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Note
Regarding Forward-Looking Statements
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S-1
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Summary
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S-4
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About Generex
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S-4
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The
Offering
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S-7
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Risk
Factors
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S-7
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Use
of Proceeds
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S-14
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Determination
of Offering Price
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S-15
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Dilution
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S-15
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Description
of Securities
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S-15
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Plan
of Distribution
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S-16
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Incorporation
of Certain Documents by Reference
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S-18
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Page
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About
this Prospectus
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1
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Forward-Looking
Statements
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1
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About
Generex
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2
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Risk
Factors
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3
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Use
of Proceeds
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3
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Plan
of Distribution
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3
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Description
of Common Stock
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4
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Description
of Preferred Stock
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5
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Description
of Warrants
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6
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Where
You Can Find More Information
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6
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Incorporation
of Certain Documents by Reference
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7
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Legal
Matters
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7
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Experts
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7
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We are
offering to sell, and seeking offers to buy, shares of our common stock and
warrants only in jurisdictions where offers and sales are permitted. The
distribution of this prospectus supplement and the offering of the common stock
and warrants in certain jurisdictions may be restricted by law. Persons outside
the United States who come into possession of this prospectus supplement must
inform themselves about, and observe any restrictions relating to, the offering
of the common stock and warrants and the distribution of this prospectus
supplement outside the United States. This prospectus supplement does not
constitute, and may not be used in connection with, an offer to sell, or a
solicitation of an offer to buy, any securities offered by this prospectus
supplement by any person in any jurisdiction in which it is unlawful for such
person to make such an offer or solicitation.
ABOUT
THIS PROSPECTUS
This
document is in two parts. The first part is this prospectus supplement, which
describes the terms of this offering and also adds to and updates information
contained in the accompanying prospectus and the documents incorporated by
reference into the accompanying prospectus. The second part is the accompanying
prospectus, which gives more general information about the shares of our common
stock and other securities we may offer from time to time under our shelf
registration statement, some of which may not apply to the securities offered by
this prospectus supplement. To the extent there is a conflict between the
information contained in this prospectus supplement, on the one hand, and the
information contained in the accompanying prospectus or any document
incorporated by reference therein, on the other hand, the information in this
prospectus supplement shall control.
We
further note that the representations, warranties and covenants made by us in
any agreement that is filed as an exhibit to any document that is incorporated
by reference in the accompanying base prospectus were made solely for the
benefit of the parties to such agreement, including, in some cases, for the
purpose of allocating risk among the parties to such agreements, and should not
be deemed to be a representation, warranty or covenant to you. Moreover, such
representations, warranties or covenants were accurate only as of the date when
made. Accordingly, such representations, warranties and covenants should not be
relied on as accurately representing the current state of our
affairs.
You
should rely only on the information contained or incorporated by reference in
this prospectus supplement and contained or incorporated by reference in the
accompanying prospectus. We have not authorized anyone, including the placement
agent, and the placement agent has not authorized anyone, to provide you with
different information. We are offering to sell, and seeking offers to buy, our
securities only in jurisdictions where offers and sales are permitted. The
information contained or incorporated by reference in this prospectus supplement
and contained, or incorporated by reference in the accompanying prospectus is
accurate only as of the respective dates thereof, regardless of the time of
delivery of this prospectus supplement and the accompanying prospectus, or of
any sale of our securities offered hereby. It is important for you to read and
consider all information contained in this prospectus supplement and the
accompanying prospectus, including the documents incorporated by reference
herein and therein, in making your investment decision. You should also read and
consider the information in the documents we have referred you to in
“Incorporation of Certain Information by Reference” in this prospectus
supplement and “Where You Can Find More Information” in the accompanying
prospectus.
Unless
otherwise indicated, “Generex” the “Company,” “we,” “us,” “our” and similar
terms refer to Generex Biotechnology Corporation.
This
offering of common stock is being made under a registration statement on Form
S-3, as amended by Pre-Effective Amendment No. 1 thereto (Registration File no.
333-139637) that we filed with the Securities and Exchange Commission as part of
a “shelf” registration process, as supplemented by the filing of the Prospectus
Supplement on Form 424(b)5, filed on May 15, 2009. Under the shelf registration
process, we may offer to sell shares of our common stock, $0.001 par value,
shares of our preferred stock, $0.001 par value, warrants to purchase shares of
our common stock and/or preferred stock, and/or units consisting of two or more
of any such securities from time to time in one or more offerings up to a total
dollar amount of $150,000,000.
We are
not making any representation to you regarding the legality of an investment in
the common stock and warrants by you under applicable law. You should consult
with your own legal advisors as to the legal, tax, business, financial and
related aspect of a purchase of the common stock and
warrants.
NOTE
REGARDING FORWARD-LOOKING STATEMENTS
Certain
matters in prospectus supplement constitute “forward-looking statements” within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. All statements,
other than statements of historical facts, included in this prospectus
supplement that address activities, events or developments that we expect or
anticipate will or may occur in the future, including such matters as our
projections, future capital expenditures, business strategy, competitive
strengths, goals, expansion, market and industry developments and the growth of
our businesses and operations, are forward-looking statements. These statements
can be identified by introductory words such as "expects," “anticipates,”
"plans," “seeks,” "intends," "believes," "will," "estimates," “budgets,”
"projects" “likely may result,” “may be,” “may continue,” or words of similar
meaning, and by the fact that they do not relate strictly to historical or
current facts.
Our
forward-looking statements address, among other things:
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our expectations concerning
product candidates for our
technologies;
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our expectations concerning
existing or potential development and license agreements for third-party
collaborations and joint
ventures;
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our expectations of when
different phases of clinical activity may commence and
conclude;
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our expectations of when
regulatory submissions may be filed or when regulatory approvals may be
received; and
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our expectations of when
commercial sales of our products may commence and when actual revenue from
the product sales may be
received.
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Any or
all of our forward-looking statements may turn out to be incorrect. They may be
affected by inaccurate assumptions that we may make or by known or unknown risks
and uncertainties. Actual outcomes and results may differ materially from what
is expressed or implied in our forward-looking statements. Among the factors
that could affect future results are:
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the inherent uncertainties of
product development based on our new and as yet not fully proven
technologies;
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the risks and uncertainties
regarding the actual effect on humans of seemingly safe and efficacious
formulations and treatments when tested
clinically;
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the inherent uncertainties
associated with clinical trials of product
candidates;
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the inherent uncertainties
associated with the process of obtaining regulatory approval to market
product candidates;
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the
inherent uncertainties associated with commercialization of products that
have received regulatory approval;
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our
to sell our products successfully if a market
develops;
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our
ability to attract and retain qualified personnel to implement our growth
strategies;
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our
ability to develop sales, marketing and distribution
capabilities;
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our
ability to obtain reimbursement from third party payer for the products
that we sell; and
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our
ability to obtain the necessary financing to fund our short-term and
long-term operating and capital
expenditures.
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Additional
factors that could affect future results are set forth below in this prospectus
supplement under the caption Risk Factors. We caution
investors that the forward-looking statements contained in this prospectus
supplement must be interpreted and understood in light of conditions and
circumstances that exist as of the date of this prospectus
supplement. We expressly disclaim any obligation or undertaking to
update or revise forward-looking statements made in this prospectus supplement
to reflect any changes in management's expectations resulting from future events
or changes in the conditions or circumstances upon which such expectations are
based.
Each
forward-looking statement should be read in context with, and in understanding
of, the various other disclosures concerning our company and our business made
elsewhere in this prospectus as well as our public filings with the SEC. You
should not place undue reliance on any forward-looking statement as a prediction
of actual results or developments. We are not obligated to update or revise any
forward-looking statements contained in this prospectus supplement or
any other filing to reflect new events or circumstances unless and to the extent
required by applicable law.
SUMMARY
This
summary highlights selected information appearing elsewhere or incorporated by
reference in this prospectus supplement and accompanying prospectus and may not
contain all of the information that is important to you. This prospectus
supplement and the accompanying prospectus include or incorporate by reference
information about the shares we are offering as well as information regarding
our business and detailed financial data. You should read this prospectus
supplement and the accompanying prospectus in their entirety, including the
information incorporated by reference.
ABOUT
GENEREX
Overview
We are
engaged primarily in the research, development and commercialization of drug
delivery systems and technologies. Our primary focus at the present time is our
proprietary technology for the administration of formulations of large molecule
drugs to the oral (buccal) cavity using a hand-held aerosol applicator. Through
our wholly-owned subsidiary, Antigen, we have expanded our focus to include
immunomedicines incorporating proprietary vaccine formulations.
We
believe that our buccal delivery technology is a platform technology that has
application to many large molecule drugs and provides a convenient,
non-invasive, accurate and cost-effective way to administer such drugs. We have
identified several large molecule drugs as possible candidates for development,
including estrogen, heparin, monoclonal antibodies, human growth hormone and
fertility hormone, but to date have focused our development efforts primarily on
one pharmaceutical product, Generex Oral-lyn™, an insulin formulation
administered as a fine spray into the oral cavity using our proprietary
hand-held aerosol spray applicator known as RapidMist™.
To date,
we have received regulatory approval in Ecuador, India, Lebanon and Algeria for
the commercial marketing and sale of Generex Oral-lyn™. In March 2008, we
initiated Phase III clinical trials for this product in the U.S. with the first
patient screening for such trials at a clinical study site in Texas. The patient
screening at other participating clinical sites in the U.S. and Canada is
ongoing. Currently over 347 patients have been enrolled in 74 clinical sites
around the world, including sites in the United States, Canada, Bulgaria,
Poland, Romania, Russia and Ukraine.
We
received a Special Access Program (SAP) authorization from Health Canada for a
patient-specific, physician-supervised treatment of Type-1 diabetes with Generex
Oral-lyn™ in April 2008. SAP provides access to non-marketed drugs for
practitioners treating patients with serious or life-threatening conditions when
conventional therapies have failed, are not available or unsuitable. We received
a similar authorization from health authorities in Netherlands in September
2008. We will continue to expand our SAP participation in additional countries
around the world.
In
November 2008 we, together with our marketing partner Shreya Life Sciences Pvt.
Ltd. officially launched Generex Oral-lyn™ in India under marketing name of Oral
Recosulin. Each package of Oral Recosulin contains two canisters of
our product along with one actuator. Product was available for sale
since January 2009, and an estimated 50 dialectologists are currently
prescribing Oral Recosulin in India.
In
November 2008, we submitted our product dossier to the Ministry of Health in
Damascus, Syria through Generex MENA, our branch office in Dubai. The
dossier includes Generex Oral-lyn™. We also submitted a file to
register our proprietary over-the-counter products, including Glucose
RapidSpray™, 7-Day Diet Aid Spray™ (marketed as Crave-Nx™ in the United States
and Canada) and BaBOOM!™ Energy Spray. The Syrian Ministry of Health
will review the dossier and inform us of any additional requests for information
that it may have. There have been no immediate queries, and we anticipate
registration before the end of calendar year 2009. It is estimated that among
Syria's population of 20 million, between 3 million and 3.5 million people have
diabetes.
In
December 2008, we submitted Generex Oral-lyn™ dossier to the Ministry of Health
in Iraq (North) through Generex MENA, our branch office in Dubai and expect to
receive an approval to market the product in spring of 2009.
In
December 2008 we, together with our marketing partner Benta SA., received an
approval to market Generex Oral-lyn™ in Lebanon. Benta is currently
working on reimbursement policy for Generex Oral-lyn™. The official
product launch in Lebanon took place in May 2009.
In May
2009, the Algerian health authorities granted us permission to import and sell
Generex Oral-lyn™ for the treatment of diabetes in Algeria. We expect commercial
launch of the product by the end of calendar year 2009. Through the
efforts of our business development team, in association with the Generex MENA,
we have entered into a marketing sub-distribution relationship with Algerian
company Continental Pharm Laboratoire.
Using our
buccal delivery technology, we also have launched a line of over-the-counter
glucose and energy sprays , including Glucose RapidSpray™, GlucoBreak™ ,
Crave-NX 7-day Diet Aid Spray, and BaBOOM!™ Energy Spray. We believe these
products will complement Generex Oral-lyn™ and may provide us with an additional
revenue stream prior to the commercialization of Generex Oral-lyn™ in other
major jurisdictions.
In
October 2008, we announced the enrollment of subjects in our bioequivalence
clinical trial of MetControl™, our proprietary Metformin medicinal chewing gum
product. The protocol for the study is an open-label, two-treatment,
two-period, randomized, crossover study comparing MetControl™ and immediate
release Metformin™ tablets in healthy volunteers. The study results, that we
received and analyzed in December 2008, will allow us to proceed with additional
research and development initiatives and consider regulatory agency registration
applications.
Our
subsidiary, Antigen Express, concentrates on developing proprietary vaccine
formulations that work by stimulating the immune system to either attack
offending agents (i.e., cancer cells, bacteria, and viruses) or to stop
attacking benign elements (i.e., self proteins and allergens). Our
immunomedicine products are based on two platform technologies and are in the
early stages of development. We continue clinical development of Antigen’s
synthetic peptide vaccines designed to stimulate a potent and specific immune
response against tumors expressing the HER-2/neu oncogene for patients with
HER-2/neu positive breast cancer in a Phase II clinical trial and patients with
prostate cancer and against avian influenza in two Phase I trials. Development
efforts also are underway for seasonal influenza virus, H5N1, HIV, HPV,
melanoma, ovarian cancer, allergy and Type I diabetes mellitus. We have
established collaborations with clinical investigators at academic centers to
advance these technologies.
We face
competition from other providers of alternate forms of insulin. Some of our most
significant competitors, Pfizer, Eli Lilly, and Novo Nordisk, have announced
that they will discontinue development and/or sale of their inhalable forms of
insulin. Generex Oral-lyn™ is not an inhaled insulin; rather, it is a buccally
absorbed formulation with no residual pulmonary deposition. We believe that our
buccal delivery technology offers several advantages over inhaled insulin,
including the avoidance of pulmonary inhalation, which requires frequent
physician monitoring, ease of use and portability.
We are a
development stage company. From inception through the end of the year ended July
31, 2008, we have received only limited revenues from operations. In the fiscal
year ended July 31, 2008, we received approximately $128,039 in revenues from
sales of Glucose RapidSpray™. In the fiscal quarter ended April 30,
2009, we received approximately $45,251 in revenues from sales of Glucose
RapidSpray™. These numbers do not reflect deferred sales to the
customers during the respective period with the right of return.
We
operate in only one segment: the research, development and commercialization of
drug delivery systems and technologies for metabolic and immunological
diseases.
We were
incorporated in the State of Delaware in 1997. Our principal executive offices
are located at 33 Harbour Square, Suite 202, Toronto, Canada, and our telephone
number at that address is (416) 364-2551. We maintain an Internet website at
www.generex.com. We make available free of charge on or through our
website our filings with the SEC.
Our
Business Strategy
Our goal
is to develop and commercialize our buccal delivery technology to administer
large molecule drugs, including insulin, and proprietary vaccine formulations
based upon two Antigen platform technologies to provide innovative
biopharmaceutical products that offer the potential for superior efficacy and
safety over existing products. To achieve these goals, the key elements of our
strategy include:
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Conducting and completing Phase
III clinical trials of Generex Oral-lyn™ in the United States and Canada,
Europe and certain countries in Eastern Europe including Russia, Ukraine,
Bulgaria and Romania;
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Commercializing Generex Oral-lyn™
in Ecuador, India, Lebanon and Algeria, the countries where we have
obtained regulatory approval for its commercial marketing and sale, by
undertaking additional commercial manufacturing runs of Generex Oral-lyn™
at PharmaBrand, S.A.’s facilities in Quito, Ecuador and expanding such
production facilities to meet the anticipated demand for the product in
India, Lebanon, Algeria and other jurisdictions where governmental
approvals are pending and pursuing post-approval clinical studies and
marketing efforts in India, Lebanon and
Algeria.
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Establishing strategic
relationships worldwide for product development and distribution and
working with our multinational licensed distributors in the Middle East
and throughout Eastern Europe, Africa and Asia to obtain regulatory
approval for the registration, importation, marketing, distribution and
sale of Generex Oral-lyn™ in those
countries.
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Conducting and completing Phase
II clinical trials of Antigen’s synthetic peptide vaccines designed to
stimulate a potent and specific immune response against tumors expressing
the HER-2/neu oncogene for patients with HER-2/neu positive breast cancer,
a Phase I prostate cancer trial and a Phase I trial in patients with
breast or ovarian cancer;
and
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Conducting and completing a Phase
I clinical trial of Antigen’s synthetic peptide vaccines against avian
influenza.
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Our
Corporate Information
We were
incorporated in Delaware in 1997. Our principal executive offices are
located at 33 Harbour Square, Suite 202, Toronto, Canada M5J2G2 and our
telephone number is (416) 364-2551. Our website is located at
www.generex.com.
We
have not incorporated by reference into this prospectus supplement or the
accompanying prospectus the information in, or that can be accessed through, our
website, and you should not consider it to be part of this prospectus supplement
or the accompanying prospectus.
THE
OFFERING
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Common stock we are offering
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17,200,000
shares
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Common stock to be outstanding after this offering(1)
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206,375,778
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Warrants offered by us
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Warrants
to purchase up to 8,600,000 shares of our common stock. Each Warrant has
an exercise price of $0.76 per share, and is exercisable for a period of 5
years commencing 183 days after its issue date. This prospectus
supplement also relates to the offering of the shares of common stock
issuable upon exercise of the Warrants.
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Placement Agent Warrant
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A
warrant to purchase up to 1,290,000 shares of our common stock will be
issued to the placement agent as compensation for its services in
connection with this offering. The Placement Agent Warrant has an exercise
price of $0.76 per share, and is exercisable for a period of 5 years
commencing 183 days after its issue date. This prospectus
supplement also relates to the offering of the shares of common stock
issuable upon exercise of the Placement Agent Warrant.(2)
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Use of proceeds
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Repayment
of debt and/or general corporate purposes.
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NASDAQ CAPITAL MARKET Symbol
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GNBT
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(1)
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The number of shares of common
stock shown above to be outstanding after this offering is based on the
189,175,778 shares outstanding as of June 12, 2009 and assumes the sale of
all Shares.
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(2)
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The
placement agent is also the holder of a warrant issued prior to the date
hereof as compensation for advisory services rendered to us and unrelated
to this offering pursuant to which the placement agent may acquire up to
450,000 shares of our common stock at $0.33 per share. Neither
that warrant nor the shares of common stock issuable thereunder are
offered hereunder.
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RISK
FACTORS
Investing
in our common stock involves a high degree of risk. In addition to the risks
related to our business set forth in this prospectus supplement, the
accompanying prospectus and the other information included and incorporated by
reference in this prospectus supplement and accompanying prospectus, you should
carefully consider the risks described below before purchasing our common
stock. Additional risks, uncertainties and other factors not
presently known to us or that we currently deem immaterial may also impair our
business operations.
Any
of the risks, uncertainties and other factors could have a materially adverse
effect on our business, financial condition or results of operations and could
cause the trading price of our common stock to decline
substantially.
Risks Related to Our
Financial Condition
We
have a history of losses and will incur additional losses.
We are a
development stage company with a limited history of operations, and do not
expect sufficient revenues to support our operation in the immediately
foreseeable future. In the nine months ended April 30, 2009, we received modest
revenues from sales of Glucose RapidSpray™ . We did not recognize any revenue
from the sale of our oral insulin product in Ecuador or India in fiscal
2008. We do not expect to receive any revenues in Ecuador until we
enter into a definitive manufacturing and distribution agreement with our
business partner there. While we have entered into a licensing and distribution
agreement with a leading Indian-based pharmaceutical company and insulin
distributor, we do not anticipate significant revenue from the initial
commercial launch of Generex Oral-lyn™ in India this fiscal year. We also have
entered in subdistribution agreements in Lebanon and Algeria but do not expect
any signification revenue from the launch of the product in those countries in
calendar year 2009.
To date,
we have not been profitable and our accumulated net loss available to
shareholders was $283,591,400 at April 30, 2009. Our losses have resulted
principally from costs incurred in research and development, including clinical
trials, and from general and administrative costs associated with our
operations. While we seek to attain profitability, we cannot be sure that we
will ever achieve product and other revenue sufficient for us to attain this
objective.
With the
exception of Generex Oral-lyn™ which is currently available for sale in Ecuador
and has been approved for sale in India, Lebanon and Algeria and our
over-the-counter glucose and energy spray products, Glucose RapidSpray™,
BaBOOM!™ Energy Spray and GlucoBreak™, our product candidates are in research or
early stages of pre-clinical and clinical development. We will need to conduct
substantial additional research, development and clinical trials. We will also
need to receive necessary regulatory clearances both in the United States and
foreign countries and obtain meaningful patent protection for and establish
freedom to commercialize each of our product candidates. We must also complete
further clinical trials and seek regulatory approvals for Generex Oral-lyn™ in
countries outside of Ecuador, India, Lebanon and Algeria. We cannot be sure that
we will obtain required regulatory approvals, or successfully research, develop,
commercialize, manufacture and market any other product candidates. We expect
that these activities, together with future general and administrative
activities, will result in significant expenses for the foreseeable
future.
We
will need additional capital.
To
progress in product development or marketing, we will need additional capital
which may not be available to us. This may delay our progress in product
development or market.
We will
require funds in excess of our existing cash resources:
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to
proceed with the development of our buccal insulin
product;
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to
finance the research and development of new products based on our buccal
delivery and immunomedicine technologies, including clinical testing
relating to new products;
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to
finance the research and development activities of our subsidiary Antigen
with respect to other potential
technologies;
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to
commercially launch and market developed
products;
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to
develop or acquire other technologies or other lines of
business;
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to
establish and expand our manufacturing
capabilities;
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to
finance general and administrative activities that are not related to
specific products under development;
and
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to
otherwise carry on business.
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In the
past, we have funded most of our development and other costs through equity
financing. We anticipate that our existing capital resources will enable us to
maintain currently planned operations through the next twelve months. However,
this expectation is based on our current operating plan, which could change as a
result of many factors, including a further decline in the price of our stock,
and we may need additional funding sooner than anticipated. Because
our operating and capital resources are insufficient to meet future
requirements, we will have to raise additional funds in the near future to
continue the development and commercialization of our products. Unforeseen
problems, including materially negative developments in our clinical trials or
in general economic conditions, could interfere with our ability to raise
additional equity capital or materially adversely affect the terms upon which
such funding is available.
It is
possible that we will be unable to obtain additional funding as and when we need
it. If we were unable to obtain additional funding as and when needed, we could
be forced to delay the progress of certain development efforts. Such a scenario
poses risks. For example, our ability to bring a product to market and obtain
revenues could be delayed, our competitors could develop products ahead of us,
and/or we could be forced to relinquish rights to technologies, products or
potential products.
Our
research and development and marketing efforts may be highly dependent on
corporate collaborators and other third parties who may not devote sufficient
time, resources and attention to our programs, which may limit our efforts to
successfully develop and market potential products.
Because
we have limited resources, we have sought to enter into collaboration agreements
with other pharmaceutical companies that will assist us in developing, testing,
obtaining governmental approval for and commercializing products using our
buccal delivery and immunomedicine technologies. Any collaborator with whom we
may enter into such collaboration agreements may not support fully our research
and commercial interests since our program may compete for time, attention and
resources with such collaborator's internal programs. Therefore, these
collaborators may not commit sufficient resources to our program to move it
forward effectively, or that the program will advance as rapidly as it might if
we had retained complete control of all research, development, regulatory and
commercialization decisions.
Risks Related to Our
Technologies
With
the exception of Generex Oral-lyn™, Glucose RapidSpray™, BaBOOM! ™ Energy Spray
and GlucoBreak™, our technologies and products are at an early stage of
development and we cannot expect significant revenues in respect thereof in the
foreseeable future.
We have
no products approved for commercial sale at the present time with the exception
of Generex Oral-lyn™ in Ecuador, India, Lebanon and Algeria and our glucose
sprays which are available over-the-counter in retail outlets in the United
States and Canada. To be profitable, we must not only successfully research,
develop and obtain regulatory approval for our products under development, but
also manufacture, introduce, market and distribute them once development is
completed. We have yet to manufacture, market and distribute these products on a
large-scale commercial basis, and we expect to receive only modest revenues from
product sales in fiscal year 2009. We may not be successful in one or more of
these stages of the development or commercialization of our products, and/or any
of the products we develop may not be commercially viable. Until we can
establish that they are commercially viable products, we will not receive
significant revenues from ongoing operations.
Until
we receive regulatory approval to sell our pharmaceutical products in additional
countries, our ability to generate revenues from operations may be limited and
those revenues may be insufficient to sustain operations. Many factors impact
our ability to obtain approvals for commercially viable products.
Our only
pharmaceutical product that has been approved for commercial sale by drug
regulatory authorities is our oral insulin spray formulation, and that approval
was obtained in Ecuador, India, Lebanon and Algeria. We have begun the
regulatory approval process for our oral insulin, buccal morphine and fentanyl
products in other countries, and we have initiated late stage clinical trials of
Generex Oral-lyn™ at some of our clinical trial sites in North America according
to the Phase III clinical plan.
Our
immunomedicine products are in the pre-clinical stage of development, with the
exception of a Phase II trial in human patients with stage II HER-2/neu positive
breast cancer (U.S.), a Phase I trial in human patients with prostate cancer
(Athens, Greece), a Phase I trial in human patients with breast or ovarian
cancer (U.S.) and a Phase I trial in human volunteers of a peptide vaccine for
use against the H5N1 avian influenza virus (Beirut, Lebanon).
Pre-clinical
and clinical trials of our products, and the manufacturing and marketing of our
technologies, are subject to extensive, costly and rigorous regulation by
governmental authorities in the United States, Canada and other countries. The
process of obtaining required regulatory approvals from the FDA and other
regulatory authorities often takes many years, is expensive and can vary
significantly based on the type, complexity and novelty of the product
candidates. For these reasons, it is possible we will not receive regulatory
approval for any prescription pharmaceutical product candidate in any countries
other than Ecuador and India.
In
addition, we cannot be sure when or if we will be permitted by regulatory
agencies to undertake additional clinical trials or to commence any particular
phase of clinical trials. Because of this, statements in this prospectus
supplement regarding the expected timing of clinical trials cannot be regarded
as actual predictions of when we will obtain regulatory approval for any "phase"
of clinical trials.
Delays in
obtaining United States or other foreign approvals for our pharmaceutical
products could result in substantial additional costs to us, and, therefore,
could adversely affect our ability to compete with other companies. If
regulatory approval is ultimately granted in any countries other than Ecuador,
India, Lebanon and Algeria, the approval may place limitations on the intended
use of the product we wish to commercialize, and may restrict the way in which
we are permitted to market the product.
Due
to legal and factual uncertainties regarding the scope and protection afforded
by patents and other proprietary rights, we may not have meaningful protection
from competition.
Our
long-term success will substantially depend upon our ability to protect our
proprietary technologies from infringement, misappropriation, discovery and
duplication and avoid infringing the proprietary rights of others. Our patent
rights, and the patent rights of biotechnology and pharmaceutical companies in
general, are highly uncertain and include complex legal and factual issues.
Because of this, our pending patent applications may not be granted. These
uncertainties also mean that any patents that we own or will obtain in the
future could be subject to challenge, and even if not challenged, may not
provide us with meaningful protection from competition. Due to our financial
uncertainties, we may not possess the financial resources necessary to enforce
our patents. Patents already issued to us or our pending applications may become
subject to dispute, and any dispute could be resolved against us.
Because a
substantial number of patents have been issued in the field of alternative drug
delivery and because patent positions can be highly uncertain and frequently
involve complex legal and factual questions, the breadth of claims obtained in
any application or the enforceability of our patents cannot be predicted.
Consequently, we do not know whether any of our pending or future patent
applications will result in the issuance of patents or, to the extent patents
have been issued or will be issued, whether these patents will be subject to
further proceedings limiting their scope, will provide significant proprietary
protection or competitive advantage, or will be circumvented or
invalidated.
Also
because of these legal and factual uncertainties, and because pending patent
applications are held in secrecy for varying periods in the United States and
other countries, even after reasonable investigation we may not know with
certainty whether any products that we (or a licensee) may develop will infringe
upon any patent or other intellectual property right of a third party. For
example, we are aware of certain patents owned by third parties that such
parties could attempt to use in the future in efforts to affect our freedom to
practice some of the patents that we own or have applied for. Based upon the
science and scope of these third-party patents, we believe that the patents that
we own or have applied for do not infringe any such third-party patents;
however, we cannot know for certain whether we could successfully defend our
position, if challenged. We may incur substantial costs if we are required to
defend our intellectual property in patent suits brought by third parties. These
legal actions could seek damages and seek to enjoin testing, manufacturing and
marketing of the accused product or process. In addition to potential liability
for significant damages, we could be required to obtain a license to continue to
manufacture or market the accused product or process.
Risks Related to Marketing
of Our Potential Products
We
may not become, or stay, profitable even if our pharmaceutical products are
approved for sale.
Even if
we obtain regulatory approval to market our oral insulin product outside of
Ecuador, India, Lebanon and Algeria or to market any other prescription
pharmaceutical product candidate, many factors may prevent the product from ever
being sold in commercial quantities. Some of these factors are beyond our
control, such as:
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acceptance of the formulation or
treatment by health care professionals and diabetic
patients;
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the availability, effectiveness
and relative cost of alternative diabetes or immunomedicine treatments
that may be developed by competitors;
and
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the availability of third-party
(i.e., insurer and governmental agency)
reimbursements.
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We will
not receive significant revenues from Generex Oral-lyn™ or any of our other
pharmaceuticals products that may receive regulatory approval until we can
successfully manufacture, market and distribute them in the relevant
markets.
Similarly,
the successful commercialization of our over-the-counter glucose spray products
may be hindered by manufacturing, marketing and distribution
limitations.
We have
to depend upon others for marketing and distribution of our products, and we may
be forced to enter into contracts limiting the benefits we may receive and the
control we have over our products. We intend to rely on collaborative
arrangements with one or more other companies that possess strong marketing and
distribution resources to perform these functions for us. We may not be able to
enter into beneficial contracts, and we may be forced to enter into contracts
for the marketing and distribution of our products that substantially limit the
potential benefits to us from commercializing these products. In addition, we
will not have the same control over marketing and distribution that we would
have if we conducted these functions ourselves.
We
may not be able to compete with treatments now being marketed and developed, or
which may be developed and marketed in the future by other
companies.
Our
products will compete with existing and new therapies and treatments. We are
aware of a number of companies currently seeking to develop alternative means of
delivering insulin, as well as new drugs intended to replace insulin therapy at
least in part. We are also aware of a number of companies currently seeking to
develop alternative means of enhancing and suppressing peptides. In the longer
term, we also face competition from companies that seek to develop cures for
diabetes and other malignant, infectious, autoimmune and allergic diseases
through techniques for correcting the genetic deficiencies that underlie such
diseases.
Numerous
pharmaceutical, biotechnology and drug delivery companies, hospitals, research
organizations, individual scientists and nonprofit organizations are engaged in
the development of alternatives to our technologies. Some of these companies
have greater research and development capabilities, experience, manufacturing,
marketing, financial and managerial resources than we do. Collaborations or
mergers between large pharmaceutical or biotechnology companies with competing
drug delivery technologies could enhance our competitors’ financial, marketing
and other resources. Developments by other drug delivery companies could make
our products or technologies uncompetitive or obsolete. Accordingly, our
competitors may succeed in developing competing technologies, obtaining FDA
approval for products or gaining market acceptance more rapidly than we
can.
Some of
our most significant competitors, Pfizer, Eli Lilly, and Novo Nordisk, announced
that they will discontinue development and/or sale of their inhalable forms of
insulin. Unlike inhaled insulin formulations, Generex Oral-lyn™ is a buccally
absorbed formulation with no residual pulmonary deposition. We believe that our
buccal delivery technology offers several advantages over inhaled insulin,
including the avoidance of pulmonary inhalation, which requires frequent
physician monitoring, ease of use and portability.
If
government programs and insurance companies do not agree to pay for or reimburse
patients for our pharmaceutical products, our success will be
impacted.
Sales of
our oral insulin formulation in Ecuador and India and our other potential
pharmaceutical products in other markets will depend in part on the availability
of reimbursement by third-party payers such as government health administration
authorities, private health insurers and other organizations. Third-party payers
often challenge the price and cost-effectiveness of medical products and
services. Governmental approval of health care products does not guarantee that
these third-party payers will pay for the products. Even if third-party payers
do accept our product, the amounts they pay may not be adequate to enable us to
realize a profit. Legislation and regulations affecting the pricing of
pharmaceuticals may change before our products are approved for marketing and
any such changes could further limit reimbursement.
Risks Related to Potential
Liabilities
We
face significant product liability risks, which may have a negative effect on
our financial condition.
The
administration of drugs or treatments to humans, whether in clinical trials or
commercially, can result in product liability claims whether or not the drugs or
treatments are actually at fault for causing an injury. Furthermore, our
pharmaceutical products may cause, or may appear to have caused, serious adverse
side effects (including death) or potentially dangerous drug interactions that
we may not learn about or understand fully until the drug or treatment has been
administered to patients for some time. Product liability claims can be
expensive to defend and may result in large judgments or settlements against us,
which could have a severe negative effect on our financial condition. We
maintain product liability insurance in amounts we believe to be commercially
reasonable for our current level of activity and exposure, but claims could
exceed our coverage limits. Furthermore, due to factors in the insurance market
generally and our own experience, we may not always be able to purchase
sufficient insurance at an affordable price. Even if a product liability claim
is not successful, the adverse publicity and time and expense of defending such
a claim may interfere with our business.
Risks Related to the Market
for Our Common Stock
Our
common stock could be delisted from The NASDAQ Capital Market.
On July
23, 2008, we received notice from The NASDAQ Stock Market that we were not
compliance with Marketplace Rule 4310(c)(4) (now known as Listing Rule
5550(a)(2)), which requires us to have a minimum bid price per share of at least
$1.00 for thirty (30) consecutive business days. In accordance with
this Rule, we had 180 calendar days, or until January 20, 2009, subject to
extension, to regain compliance with this Rule.
On
October 16, 2008, NASDAQ temporarily suspended enforcement of the minimum bid
price requirement until January 19, 2009. On December 16, 2008,
NASDAQ extended the temporary suspension of enforcement until April 20, 2009,
and, on March 9, 2009, NASDAQ further extended the temporary suspension until
July 20, 2009. With the extended suspension, we now have until
October 26, 2009 to comply with the minimum bid price
requirement. Therefore, if, at anytime prior to October 26, 2009, the
bid price of our common stock closes at $1.00 per share or more for a minimum
period of ten (10) consecutive business days, we will regain compliance with the
Rule.
In the
event that we cannot demonstrate compliance with the minimum bid price
requirement by the specified deadline and are not eligible for an additional
compliance period, the staff will notify us that our stock would be delisted, at
which time we can appeal the staff’s determination to a Listing Qualifications
Panel. Pending the decision of the Listing Qualification Panel, our common stock
will continue to trade on the NASDAQ Capital Market. If we are not successful in
such an appeal, our stock would likely trade on NASDAQ’s over-the-counter
bulletin board, assuming we meet the requisite criteria.
If
we fail to maintain compliance with applicable NASDAQ Rules and our stock is
delisted from the NASDAQ Capital Market, it may become subject to Penny Stock
Regulations and there will be less interest for our stock in the market. This
may result in lower prices for our stock and make it more difficult for us to
obtain financing.
If our
stock is not listed on NASDAQ and fails to maintain a price of $5.00 or more per
share, our stock would become subject to the Securities and Exchange
Commission's "Penny Stock" rules. These rules require a broker to deliver, prior
to any transaction involving a Penny Stock, a disclosure schedule explaining the
Penny Stock Market and its risks. Additionally, broker/dealers who recommend
Penny Stocks to persons other than established customers and accredited
investors must make a special written suitability determination and receive the
purchaser's written agreement to a transaction prior to the sale. In the event
our stock becomes subject to these rules, it will become more difficult for
broker/dealers to sell our common stock. Therefore, it may be more difficult for
us to obtain financing.
The
price of our common stock may be volatile.
There may
be wide fluctuations in the price of our common stock. These fluctuations may be
caused by several factors including:
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announcements of research
activities and technology innovations or new products by us or our
competitors;
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changes in market valuation of
companies in our industry
generally;
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variations in operating
results;
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changes in governmental
regulations;
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developments in patent and other
proprietary rights;
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public concern as to the safety
of drugs or treatments developed by us or
others;
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results of clinical trials of our
products or our competitors' products;
and
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regulatory action or inaction on
our products or our competitors'
products.
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From time
to time, we may hire companies to assist us in pursuing investor relations
strategies to generate increased volumes of investment in our common stock. Such
activities may result, among other things, in causing the price of our common
stock to increase on a short-term basis.
Furthermore,
the stock market generally and the market for stocks of companies with lower
market capitalizations and small biopharmaceutical companies, like us, have from
time to time experienced, and likely will again experience significant price and
volume fluctuations that are unrelated to the operating performance of a
particular company. During the third calendar quarter of 2008 and
continuing to date, we, like many other publicly traded companies, have
experienced a sharp decline in the price of our stock attributable to concerns
about the current global recession. The widespread decline in stock
prices led The NASDAQ Stock Market to further extend its temporary suspension of
enforcement of the minimum bid price requirement until July 20,
2009.
Provisions
of our Restated Certificate of Incorporation could delay or prevent the
acquisition or sale of our business.
Our
Restated Certificate of Incorporation permits our Board of Directors to
designate new series of preferred stock and issue those shares without any vote
or action by our stockholders. Such newly authorized and issued shares of
preferred stock could contain terms that grant special voting rights to the
holders of such shares that make it more difficult to obtain stockholder
approval for an acquisition of our business or increase the cost of any such
acquisition.
This
offering will dilute current stockholders and could prevent the acquisition or
sale of our business.
Sale of
the shares of common stock, warrants to purchase shares of common stock and the
placement agent warrant will dilute current stockholders. We are issuing up to
17,200,000 shares of our common stock and warrants to purchase up to 8,600,000
shares of our common stock to investors, plus the placement agent warrant to
purchase up to 1,290,000 shares of our common stock, which, in the aggregate,
represent approximately 14.32% of the shares of our common stock immediately
prior to the sale of such securities.. Additionally, approximately
46,515,115 shares of common stock are issuable upon the exercise of the warrants
that we issued or re-priced in connection with the private placement that we
entered into on March 31, 2008 (without regard to additional shares
which may become issuable due to anti-dilution adjustments), which represents
approximately 24.59% of the shares of common stock outstanding immediately prior
to the transaction. Assuming that the holders of the warrants issued
or re-priced in connection with the March 31, 2008 transaction and the holders
of the warrants issued in connection with this transaction exercise all of the
warrants into shares of common stock, the number of shares of issued and
outstanding common stock will increase significantly, and current stockholders
will own a smaller percentage of the outstanding common stock of the company.
The issuance of shares of common stock pursuant to the warrants sold in this and
prior equity financings will also have a dilutive effect on earnings per share
and may adversely affect the market price of the common stock.
In
addition, the issuance of the shares of common stock to the investors in this
investment and the issuance of shares of common stock upon exercise of the
warrants sold in this offering and sold or re-priced in our March 31, 2008
private placement could have an anti-takeover effect because such issuance will
make it more difficult for, or discourage an attempt by, a party to obtain
control of the Company by tender offer or other means. The issuance of common
stock upon the exercise of the warrants will increase the number of shares
entitled to vote, increase the number of votes required to approve a change of
control of the Company, and dilute the interest of a party attempting to obtain
control of the Company.
If we
raise funds through one or more additional equity financings in the future, it
will have a further dilutive effect on existing holders of our shares by
reducing their percentage ownership. The shares may be sold at a time when the
market price is low because we need the funds. This will dilute existing holders
more than if our stock price was higher. In addition, equity financings normally
involve shares sold at a discount to the current market price.
USE
OF PROCEEDS
We
estimate that the net proceeds from the sale of the 17,200,000 Shares and the
Warrants will be approximately $10,549,517, assuming that we sell the maximum
number of Shares and Warrants we are offering pursuant to this prospectus
supplement. Because of the difference between the minimum offering amount
required as a condition to the closing of this offering, and the maximum amount
of the offering, it is difficult to estimate the actual number of Shares sold
and net proceeds to us and may be substantially less than the amount set forth
above.
We intend
to use the net proceeds from this offering for repayment of debt and/or general
corporate purposes, including to continue the clinical trials of, and
commercialization of, our oral insulin formulation, in the research and
development of other products, and for general and administrative
expenses.
Until we
use the net proceeds of this offering for the above purposes, we intend to
invest the funds in short-term, investment grade, interest-bearing securities.
We cannot predict whether the proceeds invested will yield a favorable return.
We have not yet determined the amount or timing of the expenditures for the
categories listed above, and these expenditures may vary significantly depending
on a variety of factors. As a result, we will retain broad discretion over the
use of the net proceeds from this offering.
DETERMINATION
OF OFFERING PRICE
We
established the price following negotiations with prospective investors and with
reference to the prevailing market price of our common stock, recent trends in
such price, daily average trading volume of our common stock, our current stage
of development, future capital needs and other factors.
DIVIDEND
POLICY
We have
not paid dividends on our common stock in the past and have no present intention
of paying dividends in the foreseeable future.
DILUTION
If you
invest in our common stock, you will experience dilution to the extent of the
difference between the price per share you pay in this offering and the net book
value per share of our common stock immediately after this
offering.
Our net
book value as of April 30, 2009 was approximately $2,265,222, or $0.01 per share
of common stock. Net book value per share is equal to our total
assets minus total liabilities, all divided by the number of shares of common
stock outstanding as of June 12, 2009. Assuming we sell 17,200,000
shares of common stock, the maximum number of shares we are offering pursuant to
this prospectus supplement, at an offering price of $0.6389 per share, and after
deducting our estimated offering expenses payable by us, our as adjusted net
book value would have been approximately $12,814,739, or approximately $0.06 per
share of common stock, as of June 12, 2009. This represents an
immediate increase in net book value of approximately $0.05 per share to
existing stockholders and an immediate dilution of approximately $0.58 per share
to new investors. The following table illustrates this calculation on a per
share basis:
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Offering
price for one share of common stock
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$
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0.6389
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Book
value per share as of April 30,2009
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$
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0.01
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Increase
per share attributable to the offering
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$
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0.05
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Adjusted
net book value per share after this offering
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$
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0.06
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Dilution
per share to new investors
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0.58
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Because
there is no minimum offering amount required as a condition to the closing of
this offering, the dilution per share to new investors may be more than that
indicated above in the event that the actual number of Shares sold, if any, is
less than the maximum number of Shares we are offering.
The above
illustration of dilution per share to investors participating in this offering
assumes no exercise of outstanding options or warrants to purchase our common
stock. The exercise of outstanding options and warrants having an exercise price
less than the offering price will increase dilution to new
investors.
DESCRIPTION
OF SECURITIES
In this
offering, we are offering a maximum of 17,200,000 units, consisting of
17,200,000 shares of common stock and warrants to purchase up to 8,600,000
shares of common stock. Each unit consists of one share of common stock and
warrants to purchase one-half of one share of common stock at an exercise price
of $0.76 per share. We are also issuing a warrant to purchase up to 1,290,000
shares of common stock as compensation to the placement agent for its services
in connection with this offering. Prior to the date hereof, we issued
to the placement agent a warrant to purchase up to 450,000 shares of common
stock as compensation to the placement agent for advisory services provided to
us unrelated to this offering. This prospectus supplement also relates to the
offering of shares of our common stock upon the exercise, if any, of the
warrants issued in this offering.
Common
Stock
The
material terms and provisions of our common stock are described under the
caption “Description of Our Capital Stock” starting on page 8 of the
accompanying prospectus.
Warrants
The
material terms and provisions of the Warrants being offered pursuant to this
prospectus supplement and the accompanying prospectus are summarized below. This
summary is subject to, and qualified in its entirety by, the form of Warrant,
which will be provided to the investors in this offering and will be filed as an
exhibit to a Current Report on Form 8-K.
The
Warrants will provide for an exercise price of $0.76 per share and will be
exercisable at the option of the holder for a period of five years commencing
183 days after the issue date of the Warrants. The exercise price of the
warrants will be subject to adjustment in the case of stock splits, stock
dividends, combinations of shares and similar recapitalization
transactions. The holder will not have the right to exercise any
portion of the Warrant if the holder, together with its affiliates, would,
subject to limited exceptions, beneficially own in excess of 4.99% of the number
of shares of our common stock outstanding immediately after the exercise. The
holder may elect to change this beneficial ownership limitation from 4.99% to
9.99% of the number of shares of our common stock outstanding immediately after
the exercise upon 61 days’ prior written notice to us.
The
Warrant holders must surrender payment in cash of the exercise price of the
shares being acquired upon exercise of the Warrants. If,
however, we are unable to offer and sell the shares underlying these Warrants
pursuant to this prospectus supplement due to the ineffectiveness of the
registration statement of which this prospectus supplement is a part, then the
Warrants may be exercised on a “net” or “cashless” basis.
Placement
Agent Warrant
The
material terms and provisions of the Placement Agent Warrant being offered
pursuant to this prospectus supplement and the accompanying prospectus are
summarized below. This summary is subject to, and qualified in its entirety by,
the form of Placement Agent Warrant, which will be provided to the investors in
this offering and will be filed as an exhibit to a Current Report on Form
8-K.
The
Placement Agent Warrant will provide for an exercise price of $0.76 per share
and will be exercisable at the option of the holder for a period of five years
commencing 183 days after the issue date of the Placement Agent
Warrant.
The
exercise price of the Placement Agent Warrant will be subject to adjustment in
the case of stock splits, stock dividends, combinations of shares and similar
recapitalization transactions. The holder will not have the right to
exercise any portion of the warrant if the holder, together with its affiliates,
would, subject to limited exceptions, beneficially own in excess of 4.99% of the
number of shares of our common stock outstanding immediately after the exercise.
The holder may elect to change this beneficial ownership limitation from 4.99%
to 9.99% of the number of shares of our common stock outstanding immediately
after the exercise upon 61 days’ prior written notice to us.
The
holder must surrender payment in cash of the exercise price of the shares being
acquired upon exercise of the Placement Agent Warrant. The
Placement Agent Warrant may be exercised on a “net” or “cashless”
basis.
The
Placement Agent Warrant shall not be sold, transferred, assigned, pledged, or
hypothecated, or be the subject of any hedging, short sale, derivative, put, or
call transaction that would result in the effective economic disposition of the
securities by any person for a period of 180 days immediately following the date
of effectiveness or commencement of sales of the public offering, except as
provided by FINRA Rules.
PLAN
OF DISTRIBUTION
Pursuant
to a letter agreement between us and Midtown Partners & Co., LLC (“Midtown”)
we have engaged Midtown as our placement agent in connection with this offering.
The placement agent is not purchasing or selling any of the Securities we are
offering, and they are not required to arrange the purchase or sale of any
specific number of Securities or dollar amount, but they have agreed to use best
efforts to arrange for the sale of the Securities.
The terms
of any such offering will be subject to market conditions and private
negotiations between us and prospective purchasers, including investors
holding pre-existing participation rights. The placement agency agreement
does not give rise to any commitment by the placement agent to purchase any of
our Securities, and the placement agent will have no authority to bind us by
virtue of the placement agency agreement. Further, the placement agent does not
guarantee that it will be able to raise new capital in any prospective
offering.
We will
enter into securities purchase agreements directly with the purchasers in
connection with this offering, and we will only sell to purchasers who have
entered into securities purchase agreements.
We will
deliver the Securities being issued to the purchasers upon receipt of purchaser
funds for the purchase of the Shares offered pursuant to this prospectus
supplement. We expect to deliver the Securities being offered pursuant to this
prospectus supplement on June 15, 2009.
We have
agreed to pay Midtown a placement agent fee equal to: (i) a cash fee equal to
2.0% of the gross proceeds of this offering (which will not include any monies
received by us in respect of the exercise of the Warrants) other than proceeds
received from certain specified prospective investors and other than proceeds
received from the former holders of the Company’s 8% senior secured convertible
promissory notes issued on March 31, 2008 (in respect of which no compensation
will be due and payable other than expense reimbursement); (ii) a cash fee equal
to 4.0% of the gross proceeds of this offering from those certain specified
investors (which will not include any monies received by us in respect of the
exercise of the Warrants); and (ii) a Placement Agent Warrant equal
to 5.0% of the number of Shares sold in this offering (other than Shares sold to
the former holders of the Company’s 8% senior secured convertible promissory
notes issued on March 31, 2008) plus the number of shares of common stock
issuable upon exercise of the Warrants sold in this offering (other than
Warrants sold to the former holders of the Company’s 8% senior secured
convertible promissory notes issued on March 31, 2008). The Placement
Agent Warrant has an exercise price equal to $0.76, will be exercisable at the
option of the holder for a period of five years commencing 183 days after the
issue date of the Placement Agent Warrant, and will otherwise comply with the
rules of the Financial Industry Regulatory Authority, or FINRA.
In
compliance with the guidelines of FINRA, the maximum consideration or discount
to be received by the placement agent or any other FINRA member may not exceed
8% of the gross proceeds to us in this offering or any other offering in the
United States.
The placement agency
agreement with Midtown will be included as an exhibit to a Current Report on
Form 8-K that we will file with the SEC and that will be incorporated by
reference into the registration statement.
We may
also reimburse the placement agent for certain fees and legal expenses
reasonably incurred in connection with this offering. The estimated offering
expenses payable by us, in addition to the placement agent fees, are
approximately $100,000, which includes legal, accounting and printing costs and
various other fees associated with registering and listing the common stock.
After deducting certain fees due to the placement agent and our estimated
offering expenses, we expect the net proceeds from this offering to be
approximately $10,549,517.
LEGAL
MATTERS
The
validity of the securities being offered hereby will be passed on by Sichenzia
Ross Friedman Ference LLP, 61 Broadway, 32nd Floor, New York, NY 10006. Members
of the firm own additional shares (less than one percent in total) that they
purchased from time to time for cash, either from us or in the public
market.
EXPERTS
The
audited financial statements for the fiscal year ended July 31, 2008 and
management’s assessment of the effectiveness of internal control over financial
reporting (which is included in Management’s Report on Internal Control over
Financial Reporting) incorporated in this prospectus supplement, the
accompanying prospectus and elsewhere in the registration statement by reference
to the Annual Report on Form 10-K for the year ended July 31, 2008 have been so
incorporated in reliance on the report of MSCM LLP, an independent registered
public accounting firm (successor to Danziger Hochman Partners, LLP), given on
the authority of said firm as experts in auditing and accounting. The audited
financial statements for the fiscal years ended July 31, 2007 and 2006
incorporated in this prospectus supplement, the accompanying prospectus and
elsewhere in the registration statement by reference to the Annual Report on
Form 10-K for the year ended July 31, 2008 have been so incorporated in reliance
on the report of Danziger Hochman Partners, LLP, an independent registered
public accounting firm, given on the authority of said firm as experts in
auditing and accounting.
WHERE
YOU CAN FIND ADDITIONAL INFORMATION
We have
filed a registration statement on Form S-3 and an amendment thereto with the
SEC. This prospectus supplement and accompanying prospectus, which are a part of
the registration statement, do not contain all of the information contained in
the registration statement. Because some information is omitted, you should
refer to the registration statement, as amended, and its exhibits for additional
information. For example, the descriptions in this prospectus supplement and
accompanying prospectus regarding the contents of any of our contracts,
agreements or other documents, are not necessarily complete and you should refer
to the exhibits attached to the registration statement or incorporated by
reference for copies of the actual contract, agreement or other document. You
may obtain a copy of the registration statement from the SEC at the address
listed below or from the SEC’s web site.
We are
subject to the information and periodic reporting requirements of the Exchange
Act, and in accordance therewith file periodic reports, current reports, proxy
statements and other information with the SEC. Such periodic reports, current
reports, proxy statements, other information and a copy of the registration
statement on Form S-3 may be inspected by anyone without charge and copies of
these materials may be obtained upon the payment of the fees prescribed by the
SEC, at the Public Reference Room maintained by the SEC at 100 F Street, N.E.,
Washington, D.C. 20549. The public may obtain information on the operation of
the Public Reference Room by calling the SEC at 1-800-SEC-0330. The registration
statement on Form S-3 and the periodic reports, current reports, proxy
statements and other information filed by us are also available through the
Internet web site maintained by the SEC at the following address:
http://www.sec.gov.
INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE
The SEC
allows us to “incorporate by reference” into this prospectus supplement the
information we have filed with the SEC. The information we incorporate by
reference into this prospectus supplement is an important part of this
prospectus supplement. Any statement in a document we incorporate by reference
into this prospectus supplement or the accompanying prospectus will be
considered to be modified or superseded to the extent a statement contained in
this prospectus supplement or any other subsequently filed document that is
incorporated by reference into this prospectus supplement modifies or supersedes
that statement. The modified or superseded statement will not be considered to
be a part of this prospectus supplement or accompanying prospectus, as
applicable, except as modified or superseded.
We
incorporate by reference into this prospectus supplement the information
contained in the documents listed below, which is considered to be a part of
this prospectus supplement:
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Our Annual Report on Form 10-K
filed with the Commission on October 10, 2008 , for the year ended July
31, 2008;
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Amendment No. 1 to our Annual
Report, for the year ended July 31, 2008, on Form 10-K/A filed with the
Commission on November 26,
2008;
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Our Quarterly Report on Form 10-Q
for the quarter ended October 31, 2008, filed with the Commission on
December 9, 2009;
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Our Quarterly Report on Form 10-Q
for the quarter ended January 31, 2009 filed with the Commission on March
11, 2009;
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Our
Quarterly Report on Form 10-Q for the quarter ended April 30, 2009 filed
with the Commission on June 9,
2009;
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Our Current Report on Form 8-K
filed with the Commission on August 1,
2008;
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Our
Current Report on Form 8-K filed with the Commission on August 25,
2008;
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Our
Current Report on Form 8-K filed with the Commission on September 10,
2008;
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Our
Current Report on Form 8-K/A filed with the Commission on September 19,
2008;
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Our
Current Report on Form 8-K filed with the Commission on September 25,
2008;
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Our Current Report on Form 8-K
filed with the Commission on December 23,
2008;
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Our Current Report on Form 8-K
filed with the Commission on February 17,
2009;
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Our
Current Report on Form 8-K filed with the Commission on March 2,
2009;
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Our Current Report on Form 8-K
filed with the Commission on March 20,
2009;
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Our Current Report on Form 8-K
filed with the Commission on March 27,
2009;
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Our
Current Report on Form 8-K filed with the Commission on April 6,
2009;
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Our
Current Report on Form 8-K filed with the Commission on May 18,
2009;
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The
description of our common stock contained in our Registration Statement on
Form S-3 (Registration No. 333-139637), as amended (the
"Registration Statement"), filed under the Securities Act of 1933, as
amended, with the Commission on January 12, 2007 and declared
effective February 23, 2007; and
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The
description of our common stock contained in the Prospectus Supplement on
Form 424(b)5, filed with the Commission on May 15,
2009.
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We also
incorporate by reference all documents filed pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this prospectus
supplement and prior to the termination of this offering; provided, however,
that we are not incorporating any information furnished under Item 2.02 or
Item 7.01 of any current report on Form 8-K we may subsequently
file.
Statements
made in this prospectus supplement or the accompanying prospectus or in any
document incorporated by reference in this prospectus supplement or the
accompanying prospectus as to the contents of any contract or other document
referred to herein or therein are not necessarily complete, and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the documents incorporated by reference, each such statement being
qualified in all material respects by such reference.
You may
request a copy of these documents (other than an exhibit to a filing unless that
exhibit is specifically incorporated by reference into that filing), which will
be provided to you at no cost, by writing or telephoning us using the following
contact information:
Generex
Biotechnology Corporation
Attention:
Mark Fletcher, Executive Vice-President & General Counsel
33
Harbour Square, Suite 202
Toronto,
Ontario
Canada
M5J 2G2
(416)
364-2551
PROSPECTUS
GENEREX
BIOTECHNOLOGY CORPORATION
$150,000,000
Common
Stock
Preferred
Stock
Warrants
Units
We may
offer and sell, from time to time, shares of our common stock, preferred stock,
warrants and/or units consisting of two or more of any such securities on terms
to be determined at the time of sale. The preferred stock may be convertible
into shares of our common stock and the warrants may be exercisable for shares
of our common stock or shares of our preferred stock. We may offer these
securities separately or together in one or more offerings with a maximum
aggregate offering price of $150,000,000.
Specific
terms of the securities being sold as well specific terms of these offerings
will be provided in supplements to this prospectus. You should read this
prospectus and any prospectus supplements, including any information
incorporated herein or therein, carefully before you invest.
The
securities being sold may be sold on a delayed basis or continuous basis
directly by us, through dealers, agents or underwriters designated from time to
time, or through any combination of these methods. If any dealers, agents or
underwriters are involved in the sale of the securities in respect of which this
prospectus is being delivered, we will disclose their names and the nature of
our arrangements with them in any prospectus supplement. The net proceeds we
expect to receive from any such sale will also be included in the applicable
prospectus supplement.
Our
common stock is listed on the NASDAQ Capital Market
under the symbol "GNBT." The last sale price of our common stock on January 9,
2007, as reported by NASDAQ, was $1.68 per share. None of the other securities
offered under this prospectus are publicly traded.
Investing in our common stock
involves risks. See “Risk Factors” beginning on page 2 to read about the factors you should
consider before investing.
This
prospectus may not be used to offer and sell securities unless accompanied by a
prospectus supplement for the securities being sold.
Neither
the Securities and Exchange Commission nor any state securities commission has
approved or disapproved these securities, or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal
offense.
The date
of this prospectus is January 12, 2007
TABLE
OF CONTENTS
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Page
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Summary
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1
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Our
Company
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1
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About
This Prospectus
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2
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Risk
Factors
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2
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Cautionary
Note Regarding Forward-Looking Statements
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9
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Use
of Proceeds
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9
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Description
of Our Capital Stock
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10
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Description
of Our Warrants
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15
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Description
of Our Units
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16
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Plan
of Distribution
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17
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Legal
Matters
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19
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Experts
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19
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Where
You Can Find More Information
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19
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Incorporation
of Certain Documents by Reference
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20
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SUMMARY
The
summary description of our business may not contain all information that may be
important to you. You should read this entire prospectus and any accompanying
prospectus supplement, including the information set forth “Risk Factors” and
our financial statements and related notes, included or incorporated by
reference in this prospectus or any prospectus supplement before making an
investment decision.
References
in this prospectus to “we,” “us,” “our,” “Generex” or the “company,” unless the
context requires otherwise, refer to Generex Biotechnology
Corporation.
Our
Company
Generex
Biotechnology Corporation is a Delaware corporation engaged in the research and
development of injection-free methods for delivery of large molecule drugs. We
are a development stage company.
To date,
we have focused our efforts and resources on a platform technology to orally
administer large molecule drugs by absorption through the walls of the mouth
cavity. The mouth cavity is also known as the "buccal" cavity. Large molecule
drugs include proteins, hormones, peptides and vaccines. Large molecule drugs,
such as synthetic insulin, are presently administered almost exclusively by
injection.
The
initial product that we have developed is an oral insulin formulation for use in
the treatment of diabetes. The formulation is sprayed into the mouth using our
RapidMist™ device, a small and lightweight aerosol applicator that administers a
metered dose for absorption. Absorption occurs through the mucous membranes in
the buccal cavity.
We have
also pursued the application of our technology for the buccal delivery of
pharmaceutical products in addition to insulin, such as the buccal delivery of
morphine, fentanyl citrate and low molecular weight heparin.
In August
2003, we acquired Antigen Express, Inc. Antigen is engaged in the
research and development of technologies for the treatment of malignant,
infectious, autoimmune and allergic diseases.
Our
organizational structure consists of Generex Biotechnology Corporation and five
wholly-owned subsidiaries: Generex Pharmaceuticals Inc., which is incorporated
in Ontario, Canada and which performs all of our Canadian operations; Generex
(Bermuda), Inc., which is incorporated in Bermuda and which currently does not
conduct any business activities; Antigen Express, Inc., which is incorporated in
Delaware and which we acquired in 2003; Generex Pharmaceuticals (USA) LLC, which
we organized in North Carolina in February 2006 and which has not yet commenced
any business operations; and Generex Marketing & Distribution Inc., which we
organized in Ontario, Canada in September 2006 and which has not yet commenced
any business operations.
Our
principal offices are located at 33 Harbour Square, Suite 202, Toronto, Ontario,
Canada M5J 2G2. Our telephone number is (416) 364-2551 and our Internet address
is www.generex.com.
Information contained in, or accessible through, our website does not constitute
a part of this prospectus.
About
This Prospectus
This
prospectus is part of a registration statement that we have filed with the
Securities and Exchange Commission, or SEC, using the “shelf” registration
process. By using a shelf registration statement, we may, from time to time,
issue and sell in one or more series or classes our common stock, preferred
stock and/or warrants in one or more offerings up to an aggregate maximum
offering price of $150,000,000 (or its equivalent in foreign or composite
currencies).
This
prospectus provides you with a general description of the securities we may
offer. Each time we offer securities, we will provide a prospectus supplement
that will contain specific information about the terms of that offering and the
terms of the securities being sold. We will file each prospectus supplement with
the SEC. The prospectus supplement may also add, update or change information
contained in this prospectus. You should read both this prospectus and any
prospectus supplement together with additional information described under the
heading “Where You Can Find More Information” below.
You
should rely only on the information contained or incorporated by reference in
this prospectus and in any prospectus supplement. We have not authorized anyone
to provide you with different information. We will not make an offer to sell
these securities in any jurisdiction where the offer or sale is not permitted.
The information contained in this prospectus and any prospectus supplement is
accurate only as of the date of this prospectus or such prospectus supplement,
and the information contained in any document incorporated herein or therein by
reference is accurate only as the date of such document incorporated by
reference, regardless of the time of delivery or any sale of our
securities.
RISK
FACTORS
An
investment in our stock is very speculative and involves a high degree of risk.
You should carefully consider the following important factors, as well as the
other information in this prospectus, any accompanying prospectus supplement and
the other reports that we have filed heretofore (and will file hereafter) with
the SEC, before purchasing our stock. The risks described below are not the only
ones we face. Additional risks not presently known to us or that we currently
believe are immaterial may also impair our business operations and financial
results. If any of the following risks actually occurs, our business, financial
condition or results of operations could be adversely affected. In such case,
the trading price of our common stock could decline and you could lose all or
part of your investment. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including the risks we face described below.
Risks
Related to Our Financial Condition
We
have a history of losses and will incur additional losses.
We are a
development stage company with a limited history of operations, and do not
expect sufficient revenues to support our operation in the immediately
foreseeable future. In the quarterly period ending October 31, 2006, we have
received nominal revenues from sales of our confectionary, Glucose RapidSpray™,
and we expect to receive some revenue from the sale of our oral insulin product
in Ecuador in the second quarter of fiscal 2007. To date, we have not been
profitable and our accumulated net loss available to common shareholders was
$192,153,357 at October 31, 2006. Our losses have resulted principally from
costs incurred in research and development, including clinical trials, and from
general and administrative costs associated with our operations. While we seek
to attain profitability, we cannot be sure that we will ever achieve product and
other revenue sufficient for us to attain this objective.
With the
exception of Generex Oral-lyn™ which is currently selling in Ecuador and Glucose
RapidSpray™ which we began selling in the United States in October 2006, our
product candidates are in research or early stages of pre-clinical and clinical
development. We will need to conduct substantial additional research,
development and clinical trials. We will also need to receive necessary
regulatory clearances both in the United States and foreign countries and obtain
meaningful patent protection for and establish freedom to commercialize each of
our product candidates. We cannot be sure that we will obtain required
regulatory approvals, or successfully research, develop, commercialize,
manufacture and market any other product candidates. We expect that these
activities, together with future general and administrative activities, will
result in significant expenses for the foreseeable future.
We
will need additional capital.
To
progress in product development or marketing, we will need additional capital
which may not be available to us. This may delay our progress in product
development or market.
We will
require funds in excess of our existing cash resources:
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to
proceed with the development of our buccal insulin
product;
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to finance the research and
development of new products based on our buccal delivery and
immunomedicine technologies, including clinical testing relating to new
products;
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to finance the research and
development activities of our subsidiary Antigen with respect to other
potential technologies;
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to commercially launch and market
developed products;
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to develop or acquire other
technologies or other lines of
business;
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to establish and expand our
manufacturing capabilities;
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to finance general and
administrative activities that are not related to specific products under
development; and
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to otherwise carry on
business.
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In the
past, we have funded most of our development and other costs through equity
financing. We anticipate that our existing capital resources will enable us to
maintain currently planned operations through the next 12 months. However, this
expectation is based on our current operating plan, which could change as a
result of many factors, and we may need additional funding sooner than
anticipated. Because our operating and capital resources are insufficient to
meet future requirements, we will have to raise additional funds in the near
future to continue the development and commercialization of our products.
Unforeseen problems, including materially negative developments in our clinical
trials or in general economic conditions, could interfere with our ability to
raise additional equity capital or materially adversely affect the terms upon
which such funding is available.
It is
possible that we will be unable to obtain additional funding as and when we need
it. If we were unable to obtain additional funding as and when needed, we could
be forced to delay the progress of certain development efforts. Such a scenario
poses risks. For example, our ability to bring a product to market and obtain
revenues could be delayed, our competitors could develop products ahead of us,
and/or we could be forced to relinquish rights to technologies, products or
potential products.
Any
new equity financing will dilute current stockholders.
If we
raise funds through equity financing to meet the needs discussed above, it will
have a dilutive effect on existing holders of our shares by reducing their
percentage ownership. The shares may be sold at a time when the market price is
low because we need the funds. This will dilute existing holders more than if
our stock price was higher. In addition, equity financings normally involve
shares sold at a discount to the current market price.
Our
research and development and marketing efforts may be highly dependent on
corporate collaborators and other third parties who may not devote sufficient
time, resources and attention to our programs, which may limit our efforts to
successfully develop and market potential products.
Because
we have limited resources, we have sought to enter into collaboration agreements
with other pharmaceutical companies that will assist us in developing, testing,
obtaining governmental approval for and commercializing products using our
buccal delivery and immunomedicine technologies. Any collaborator with whom we
may enter into such collaboration agreements may not support fully our research
and commercial interests since our program may compete for time, attention and
resources with such collaborator's internal programs. Therefore, these
collaborators may not commit sufficient resources to our program to move it
forward effectively, or that the program will advance as rapidly as it might if
we had retained complete control of all research, development, regulatory and
commercialization decisions.
Risks
Related to Our Technologies
With
the exception of Generex Oral-lyn™ and Glucose RapidSpray™, our technologies and
products are at an early stage of development and we cannot expect revenues in
respect thereof in the foreseeable future.
We have
no products approved for commercial sale at the present time with the exception
of Generex Oral-lyn™ and Glucose RapidSpray™. To be profitable, we must not only
successfully research, develop and obtain regulatory approval for our products
under development, but also manufacture, introduce, market and distribute them
once development is completed. We may not be successful in one or more of these
stages of the development or commercialization of our products, and/or any of
the products we develop may not be commercially viable.
Although
Generex Oral-lyn™, our proprietary oral insulin spray formulation, has been
approved for commercial marketing and sale in Ecuador, and Glucose RapidSpray™,
our confectionary product, will be available for purchase in the United States,
we have yet to manufacture, market and distribute these products on a
large-scale commercial basis. Until we can establish that they are commercially
viable products, we will not receive significant revenues from ongoing
operations.
Until
we receive regulatory approval to sell our products in additional countries, our
ability to generate revenues from operations may be limited and those revenues
may be insufficient to sustain operations. Many factors impact our ability to
obtain approvals for commercially viable products.
Only our
oral insulin product has been approved for commercial sale by drug regulatory
authorities, and that approval was obtained in Ecuador. We have begun the
regulatory approval process for our oral insulin, buccal morphine and fentanyl
products in other countries. Our immunomedicine products are in the pre-clinical
stage of development, with the exception of our Phase 1 trial in human patients
with stage II HER-2/neu positive breast cancer.
Pre-clinical
and clinical trials of our products, and the manufacturing and marketing of our
technologies, are subject to extensive, costly and rigorous regulation by
governmental authorities in the United States, Canada and other countries. The
process of obtaining required regulatory approvals from the FDA and other
regulatory authorities often takes many years, is expensive and can vary
significantly based on the type, complexity and novelty of the product
candidates. For these reasons, it is possible we will not receive regulatory
approval for any prescription pharmaceutical product candidate in any country
other than Ecuador.
In
addition, we cannot be sure when or if we will be permitted by regulatory
agencies to undertake additional clinical trials or to commence any particular
phase of clinical trials. Because of this, statements in this prospectus
regarding the expected timing of clinical trials cannot be regarded as actual
predictions of when we will obtain regulatory approval for any "phase" of
clinical trials.
Delays in
obtaining United States or other foreign approvals for our products could result
in substantial additional costs to us, and, therefore, could adversely affect
our ability to compete with other companies. If regulatory approval is
ultimately granted in any country other than Ecuador, the approval may place
limitations on the intended use of the product we wish to commercialize, and may
restrict the way in which we are permitted to market the product.
Due
to legal and factual uncertainties regarding the scope and protection afforded
by patents and other proprietary rights, we may not have meaningful protection
from competition.
Our
long-term success will substantially depend upon our ability to protect our
proprietary technologies from infringement, misappropriation, discovery and
duplication and avoid infringing the proprietary rights of others. Our patent
rights, and the patent rights of biotechnology and pharmaceutical companies in
general, are highly uncertain and include complex legal and factual issues.
Because of this, our pending patent applications may not be granted. These
uncertainties also mean that any patents that we own or will obtain in the
future could be subject to challenge, and even if not challenged, may not
provide us with meaningful protection from competition. Due to our financial
uncertainties, we may not possess the financial resources necessary to enforce
our patents. Patents already issued to us or our pending applications may become
subject to dispute, and any dispute could be resolved against us.
Because a
substantial number of patents have been issued in the field of alternative drug
delivery and because patent positions can be highly uncertain and frequently
involve complex legal and factual questions, the breadth of claims obtained in
any application or the enforceability of our patents cannot be predicted.
Consequently, we do not know whether any of our pending or future patent
applications will result in the issuance of patents or, to the extent patents
have been issued or will be issued, whether these patents will be subject to
further proceedings limiting their scope, will provide significant proprietary
protection or competitive advantage, or will be circumvented or
invalidated.
Also
because of these legal and factual uncertainties, and because pending patent
applications are held in secrecy for varying periods in the United States and
other countries, even after reasonable investigation we may not know with
certainty whether any products that we (or a licensee) may develop will infringe
upon any patent or other intellectual property right of a third party. For
example, we are aware of certain patents owned by third parties that such
parties could attempt to use in the future in efforts to affect our freedom to
practice some of the patents that we own or have applied for. Based upon the
science and scope of these third-party patents, we believe that the patents that
we own or have applied for do not infringe any such third-party patents;
however, we cannot know for certain whether we could successfully defend our
position, if challenged. We may incur substantial costs if we are required to
defend our intellectual property in patent suits brought by third parties. These
legal actions could seek damages and seek to enjoin testing, manufacturing and
marketing of the accused product or process. In addition to potential liability
for significant damages, we could be required to obtain a license to continue to
manufacture or market the accused product or process.
Risks
Related to Marketing of Our Potential Products
We
may not become, or stay, profitable even if our products are approved for
sale.
Even if
we obtain regulatory approval to market our oral insulin product or any other
prescription pharmaceutical product candidate in another country other than
Ecuador, many factors may prevent the product from ever being sold in commercial
quantities. Similarly, the successful commercialization of our confectionary may
be hindered. Some of these factors are beyond our control, such as:
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acceptance of the formulation or
treatment by health care professionals and diabetic
patients;
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the availability, effectiveness
and relative cost of alternative diabetes or immunomedicine treatments
that may be developed by competitors;
and
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the availability of third-party
(i.e., insurer and governmental agency)
reimbursements.
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We will
not receive significant revenues from Generex Oral-lyn™ in Ecuador or Glucose
RapidSpray™ in the United States or any of our other products that may receive
regulatory approval until we can successfully manufacture, market and distribute
them in the relevant market.
We will
have to depend upon others for marketing and distribution of our products, and
we may be forced to enter into contracts limiting the benefits we may receive
and the control we have over our products. We intend to rely on collaborative
arrangements with one or more other companies that possess strong marketing and
distribution resources to perform these functions for us. We may not be able to
enter into beneficial contracts, and we may be forced to enter into contracts
for the marketing and distribution of our products that substantially limit the
potential benefits to us from commercializing these products. In addition, we
will not have the same control over marketing and distribution that we would
have if we conducted these functions ourselves.
We
may not be able to compete with treatments now being marketed and developed, or
which may be developed and marketed in the future by other
companies.
Our
products will compete with existing and new therapies and treatments. We are
aware of a number of companies currently seeking to develop alternative means of
delivering insulin, as well as new drugs intended to replace insulin therapy at
least in part. We are also aware of a number of companies currently seeking to
develop alternative means of enhancing and suppressing peptides. In the longer
term, we also face competition from companies that seek to develop cures for
diabetes and other malignant, infectious, autoimmune and allergic diseases
through techniques for correcting the genetic deficiencies that underlie such
diseases.
Numerous
pharmaceutical, biotechnology and drug delivery companies, hospitals, research
organizations, individual scientists and nonprofit organizations are engaged in
the development of alternatives to our technologies. Some of these companies
have greater research and development capabilities, experience, manufacturing,
marketing, financial and managerial resources than we do. Accordingly, our
competitors may succeed in developing competing technologies, obtaining FDA
approval for products or gaining market acceptance more rapidly than we
can.
In
January, 2006, the FDA approved Pfizer, Inc.’s inhalable form of insulin, the
first non-injected insulin to be approved by the FDA. Pfizer’s product in
inhaled through the mouth and absorbed in the lungs. Initial supplies of this
product, which is marketed as Exubera®, became available in the U.S. in
September 2006. We understand that an expanded roll-out of Exubera® to
primary-care physicians in the U.S., which Pfizer previously targeted for
November 2006, will begin in January 2007. While we believe that absorption
though the buccal cavity offers several advantages over absorption through the
lungs, Pfizer’s early approval could allow it to capture a large portion of the
market.
If
government programs and insurance companies do not agree to pay for or reimburse
patients for our products, our success will be impacted.
Sales of
our oral insulin formulation in Ecuador and our potential products in other
markets depend in part on the availability of reimbursement by third-party
payers such as government health administration authorities, private health
insurers and other organizations. Third-party payers often challenge the price
and cost-effectiveness of medical products and services. Governmental approval
of health care products does not guarantee that these third-party payers will
pay for the products. Even if third-party payers do accept our product, the
amounts they pay may not be adequate to enable us to realize a profit.
Legislation and regulations affecting the pricing of pharmaceuticals may change
before our products are approved for marketing and any such changes could
further limit reimbursement.
Risks
Related to Potential Liabilities
We
face significant product liability risks, which may have a negative effect on
our financial condition.
The
administration of drugs or treatments to humans, whether in clinical trials or
commercially, can result in product liability claims whether or not the drugs or
treatments are actually at fault for causing an injury. Furthermore, our
products may cause, or may appear to have caused, serious adverse side effects
(including death) or potentially dangerous drug interactions that we may not
learn about or understand fully until the drug or treatment has been
administered to patients for some time. Product liability claims can be
expensive to defend and may result in large judgments or settlements against us,
which could have a severe negative effect on our financial condition. We
maintain product liability insurance in amounts we believe to be commercially
reasonable for our current level of activity and exposure, but claims could
exceed our coverage limits. Furthermore, due to factors in the insurance market
generally and our own experience, we may not always be able to purchase
sufficient insurance at an affordable price. Even if a product liability claim
is not successful, the adverse publicity and time and expense of defending such
a claim may interfere with our business.
Risks
Related to the Market for Our Common Stock
Our
common stock could be delisted from The NASDAQ Capital Market.
In the
past, we have failed to comply with certain of NASDAQ’s listing requirements. In
late 2004, we did not comply with NASDAQ Rule 4310(c)(2)(B) which requires us to
have a minimum of $2,500,000 in stockholders' equity or $35,000,000 market value
of listed securities or $500,000 of net income from continuing operations for
the most recently completed fiscal year or two of the three most recently
completed fiscal years. While we regained compliance with this standard, we are
still in the development stage. Consequently, there is no guarantee that we will
sustain compliance with this standard. In the event we cannot sustain
compliance, our shares of common stock may be delisted from the NASDAQ Capital
Market and begin trading on the over-the-counter bulletin board, assuming we
meet the requisite criteria.
In
addition, from October 2004 until October 2005, we failed to comply with NASDAQ
Rule 4310(c)(4) which requires us to have a minimum bid price per share of at
least $1.00. Although we regained compliance with the minimum bid price
requirement in November 2005, there is no guarantee that the bid price of our
common stock will remain at or above $1.00 per share. In the event that the
price of our common stock falls below $1.00 per share for thirty (30)
consecutive trading days, we would likely receive a notice from the NASDAQ Stock
Market LLC informing us of our noncompliance with NASDAQ Rule 4310(c)(4) and
giving us 180 calendar days, subject to extension, to regain compliance with the
rule. In the event that we could not demonstrate compliance with NASDAQ Rule
4310(c)(4) by the specified deadline and were not eligible for an additional
compliance period, the staff would notify us that our stock would be delisted,
at which time we could appeal the staff’s determination to a Listing
Qualifications Panel. Pending the decision of the Listing Qualification Panel,
our common stock would continue to trade on the NASDAQ Capital Market. If we
were not successful in such an appeal, our stock would likely trade on NASDAQ’s
over-the-counter bulletin board, assuming we meet the requisite
criteria.
If
we fail to maintain compliance with applicable NASDAQ Rules and our stock is
delisted from the NASDAQ Capital Market, it may become subject to Penny Stock
Regulations and there will be less interest for our stock in the market. This
may result in lower prices for our stock and make it more difficult for us to
obtain financing.
If our
stock is not listed on NASDAQ and fails to maintain a price of $5.00 or more per
share, our stock would become subject to the Securities and Exchange
Commission's "Penny Stock" rules. These rules require a broker to deliver, prior
to any transaction involving a Penny Stock, a disclosure schedule explaining the
Penny Stock Market and its risks. Additionally, broker/dealers who recommend
Penny Stocks to persons other than established customers and accredited
investors must make a special written suitability determination and receive the
purchaser's written agreement to a transaction prior to the sale. In the event
our stock becomes subject to these rules, it will become more difficult for
broker/dealers to sell our common stock. Therefore, it may be more difficult for
us to obtain financing.
The
price of our common stock may be volatile.
There may
be wide fluctuations in the price of our common stock. These fluctuations may be
caused by several factors including:
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announcements of research
activities and technology innovations or new products by us or our
competitors;
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changes in market valuation of
companies in our industry
generally;
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variations in operating
results;
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changes in governmental
regulations;
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developments in patent and other
proprietary rights;
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public concern as to the safety
of drugs or treatments developed by us or
others;
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results of clinical trials of our
products or our competitors' products;
and
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regulatory action or inaction on
our products or our competitors'
products.
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From time
to time, we may hire companies to assist us in pursuing investor relations
strategies to generate increased volumes of investment in our common stock. Such
activities may result, among other things, in causing the price of our common
stock to increase on a short-term basis.
Furthermore,
the stock market generally and the market for stocks of companies with lower
market capitalizations and small biopharmaceutical companies, like us, have from
time to time experienced, and likely will again experience significant price and
volume fluctuations that are unrelated to the operating performance of a
particular company.
Provisions
of our Restated Certificate of Incorporation could delay or prevent the
acquisition or sale of our business.
Our
Restated Certificate of Incorporation permits our Board of Directors to
designate new series of preferred stock and issue those shares without any vote
or action by our stockholders. Such newly authorized and issued shares of
preferred stock could contain terms that grant special voting rights to the
holders of such shares that make it more difficult to obtain stockholder
approval for an acquisition of our business or increase the cost of any such
acquisition.
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
We have
made statements in this prospectus that may be forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. These
statements can be identified by introductory words such as "expects," "plans,"
"intends," "believes," "will," "estimates," "forecasts," "projects" or words of
similar meaning, and by the fact that they do not relate strictly to historical
or current facts. Our forward-looking statements address, among other
things:
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Our expectations concerning
product candidates for our
technologies;
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Our expectations concerning
existing or potential development and license agreements for third-party
collaborations and joint
ventures;
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Our expectations of when
different phases of clinical activity may commence;
and
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Our expectations of when
regulatory submissions may be filed or when regulatory approvals may be
received.
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Any or
all of our forward-looking statements may turn out to be wrong. They may be
affected by inaccurate assumptions that we might make or by known or unknown
risks and uncertainties. Actual outcomes and results may differ materially from
what is expressed or implied in our forward-looking statements. Among the
factors that could affect future results are:
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The inherent uncertainties of
product development based on our new and as yet not fully proven
technologies;
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The risks and uncertainties
regarding the actual effect on humans of seemingly safe and efficacious
formulations and treatments when tested
clinically;
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The inherent uncertainties
associated with clinical trials of product
candidates;
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The inherent uncertainties
associated with the process of obtaining regulatory approval to market
product candidates; and
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The inherent uncertainties
associated with commercialization of products that have received
regulatory approval.
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Additional
factors that could affect future results are set forth above under the caption
“Risk Factors”. We caution investors that the forward-looking statements
contained in this prospectus must be interpreted and understood in light of
conditions and circumstances that exist as of the date of this prospectus. We
expressly disclaim any obligation or undertaking to update or revise
forward-looking statements made in this prospectus to reflect any changes in
management's expectations resulting from future events or changes in the
conditions or circumstances upon which such expectations are based. You are
advised, however, to consult any further disclosures we make on related subjects
in our 10-K, 10-Q and 8-K reports to the SEC.
USE
OF PROCEEDS
Except as
described in any prospectus supplement, we currently intend to use the net
proceeds from this offering for general corporate purposes, including to
continue the clinical trials of, and commercialization of, our oral insulin
formulation, in the research and development of other products, and for general
and administrative expenses. We may also issue the securities offered under this
prospectus in connection with product license and supply agreements, research
collaboration agreements and to our commercial vendors and suppliers in exchange
for products and services.
Each time
we issue securities, we will provide a prospectus supplement that will contain
information about how we intend to use the proceeds from each such
offering.
Until we
use the net proceeds of this offering for the above purposes, we intend to
invest the funds in short-term, investment grade, interest-bearing securities.
We cannot predict whether the proceeds invested will yield a favorable return.
We have not yet determined the amount or timing of the expenditures for the
categories listed above, and these expenditures may vary significantly depending
on a variety of factors. As a result, we will retain broad discretion over the
use of the net proceeds from this offering.
We cannot
guarantee that we will receive any proceeds in connection with any offering
hereunder because we may choose not to issue any of the securities covered by
this prospectus.
DESCRIPTION
OF OUR CAPITAL STOCK
Set forth
below is a summary of the material terms of our capital stock. This summary is
not complete. We encourage you to read our Restated Certificate of Incorporation
(the “Certificate of Incorporation”) and our By-Laws that we have previously
filed with the SEC. See “Where You Can Find More Information.”
General
Our
authorized capital stock consists of: (i) 500,000,000 shares of common stock,
par value $.001 per share, of which 108,157,688 shares were outstanding as of
January 9, 2007 (ii) 1,000,000 shares of undesignated preferred stock, par value
$.001 per share, and (iii) 1,000 shares of Special Voting Rights Preferred Stock
outstanding.
Common
Stock
Holders
of common stock are entitled to one vote for each share owned of record on all
matters on which shareholders may vote. Holders of common stock do not have
cumulative voting rights in the election of directors. Therefore, the holders of
more than 50% of the outstanding shares can elect the entire Board of Directors.
The holders of common stock are entitled, upon liquidation or dissolution of the
company, to receive pro rata all remaining assets available for distribution to
stockholders after payment to any preferred shareholders who may have
preferential rights. The common stock has no preemptive or other subscription
rights, and there are no conversion rights or redemption provisions. All
outstanding shares of common stock are validly issued, fully paid, and
nonassessable.
Special
Voting Rights Preferred Stock
We have
1,000 shares of Special Voting Rights Preferred Stock outstanding. Dr. Pankaj
Modi, our former director and Vice President, Research and Development, is the
owner of all of these shares. The Special Voting Rights Preferred Stock is not
convertible into shares of our common stock.
The
Special Voting Rights Preferred Stock has the following special voting
rights:
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The Special Voting Rights
Preferred Stock has the right to elect a majority of our Board of
Directors if a “Change of Control” (as specifically defined)
occurs;
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The Special Voting Rights
Preferred Stock has the right to approve any transaction that would result
in a Change of Control; and
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The Special Voting Rights
Preferred Stock has the right to vote whenever specifically required by
Delaware law.
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The
Special Voting Rights Preferred Stock is entitled to share in dividends paid on
the common stock.
We have
the right to redeem the Special Voting Rights Preferred Stock at any time for
$.10 per share. We expect that the Board of Directors will take action in due
course to redeem the Special Voting Rights Preferred Stock.
Undesignated
Preferred Stock
Our Board
of Directors has the authority to issue up to 1,000,000 shares of preferred
stock in one or more series and fix the number of shares constituting any such
series, the voting powers, designations, preferences and relative,
participating, optional or other special rights and qualifications, limitations
or restrictions thereof, including the dividend rights, dividend rate, terms of
redemption (including sinking fund provisions), redemption price or prices,
conversion rights and liquidation preferences of the shares constituting any
series, without any further vote or action by the stockholders. For example, the
Board of Directors is authorized to issue a series of preferred stock that would
have the right to vote, separately or with any other series of preferred stock,
on any proposed amendment to our Certificate of Incorporation or on any other
proposed corporate action, including business combinations and other
transactions.
The terms
of any particular series of preferred stock will be described in the prospectus
supplement relating to the offering of shares of that particular series of
preferred and may include, among other things:
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the title and stated
value;
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the number of shares
authorized;
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the liquidation preference per
share;
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the dividend rate, period and
payment date, and method of calculation (including whether cumulative or
non-cumulative);
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terms and amount of any sinking
fund;
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provisions for redemption or
repurchase, if applicable, and any restrictions on the ability of the
company to exercise such redemption and repurchase
rights;
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conversion rights and rates, if
applicable, including the conversion price and how and when it will be
calculated and adjusted;
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preemptive rights, if
any;
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restrictions on sale, transfer
and assignment, if any;
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the relative ranking and
preferences of the preferred stock;
and
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any other specific terms, rights
or limitations of, or restrictions on, such preferred
stock.
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Anti-Takeover
Provisions
We are
not aware of any pending takeover attempt or interest in making such an attempt.
Our Certificate of Incorporation and Bylaws contain certain provisions which may
be deemed to be "anti-takeover" in that they may deter, discourage or make more
difficult the assumption of control of Generex by another corporation or person
through a tender offer, merger, proxy contest or similar transaction or series
of transactions.
Special Voting Rights Preferred
Stock: As indicated above, our outstanding Special Voting Rights
Preferred Stock prevents a "Change of Control" of Generex without the consent of
the holders of those shares. At the present time, all of these shares are owned
by Dr. Modi, our former director and Vice President, Research and
Development.
Authorized but Unissued
Shares: The authorized but unissued shares of our common stock and
preferred stock are available for future issuance without stockholder approval,
subject to any limitations imposed by the NASDAQ Stock Market. The Board of
Directors may set the rights, preferences and terms of new preferred stock,
without shareholder approval. Shares of preferred stock could be issued quickly
without shareholder approval, with terms calculated to delay or prevent a change
in control of Generex. Our stockholders do not have preemptive rights with
respect to the purchase of these shares. Therefore, such issuance could result
in a dilution of voting rights and book value per share of the common stock. No
shares of preferred stock other than the Special Voting Rights Preferred Stock
are currently outstanding, and we have no present plan to issue any preferred
stock.
Advance Notice Requirements for
Stockholder Proposals and Director Nominations: Our Bylaws provide that a
stockholder seeking to bring business before an annual meeting of stockholders,
or to nominate candidates for election as directors, must provide timely notice
of such stockholder’s intention in writing. To be timely, a stockholder’s notice
must be received not less than 60 days nor more than 90 days prior to the
meeting at which such proposal or candidate is to be considered. However, if the
company does not give prior notice or make public disclosure of the date of the
meeting at least 70 days prior to the meeting date, notice by the stockholder is
considered timely if it is received no later than the close of business on the
10th day following the day on which such notice was mailed or public disclosure
was made. If a stockholder desires to have a proposal included in the company’s
proxy statement, notice of such proposal must be received not less than 120 days
prior to the first anniversary of the date of the company’s notice of the
previous year’s annual meeting. These advance notice provisions may preclude
stockholders from bringing matters before a meeting or from making nominations
for directors.
Special Meetings of
Stockholders: Our Bylaws provide that special meetings of stockholders
may be called only by the Board of Directors, the Chairman of the Board or the
President, and may be called by the Board upon the request of the holders of a
majority of the outstanding shares of stock of the company entitled to vote at
the meeting. Further, business transacted at any special meeting of stockholders
is limited to matters relating to the purpose or purposes stated in the notice
of meeting.
General Effect of Anti-Takeover
Provisions: The overall effect of these provisions may be to deter a
future tender offer or other takeover attempt that some stockholders might view
to be in their best interests at that time. In addition, these provisions may
have the effect of assisting our current management in retaining its position
and place it in a better position to resist changes which some stockholders may
want to make if dissatisfied with the conduct of our business.
Stockholder
Rights Plan
At our
annual meeting on May 30, 2006, our stockholders approved the adoption of a
stockholder rights plan that will allow our Board of Directors to declare a
dividend of one share purchase right for each outstanding share of our common
stock. Our Board of Directors has considered adoption of this plan but has not
yet approved its adoption. We expect that any stockholder rights plan adopted by
our Board will contain terms substantially as described below:
The terms
of the rights plan will provide for a dividend distribution of one preferred
share purchase right, which we refer to as a “Right,” for each outstanding share
of our common stock. The dividend will be payable on a date established by the
Board to the stockholders of record on that date. Each Right will entitle the
registered holder to purchase from Generex one one-hundredth of a share of
preferred stock (each a “Preferred Share” and, collectively, the “Preferred
Shares”) at a price of $.01 per one one-hundredth of a share of preferred stock,
subject to certain adjustments. Each Preferred Share will have designations and
powers, preferences and rights, and the qualifications, limitations and
restrictions which make its value approximately equal to the value of one share
of our common stock.
The
Rights will not be exercisable until the earlier to occur of:
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the date of a public announcement
that a person, entity or group of affiliated or associated persons have
acquired beneficial ownership of 20% or more of our outstanding shares of
common stock, which we refer to as an "Acquiring Person",
or
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(ii)
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10 business days (or such later
date as may be determined by action of the Board of Directors prior to
such time as any person or entity becomes an Acquiring Person) following
the commencement of, or announcement of an intention to commence, a tender
offer or exchange offer the consummation of which would result in any
person or entity becoming an Acquiring Person (the earlier of such dates
being called the "Distribution
Date").
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Until the
Distribution Date, the Rights will be transferable with and only with shares of
our common stock. The Rights will expire ten years after adoption of the
stockholders rights plan unless the Rights are earlier redeemed or exchanged by
Generex.
Preferred
Shares purchasable upon exercise of the Rights will not be redeemable. Each
Preferred Share will be entitled to a minimum preferential quarterly dividend
payment of $1.00 but will be entitled to an aggregate dividend of 100 times the
dividend declared per share of common stock. In the event of liquidation, the
holders of the Preferred Shares would be entitled to a minimum preferential
liquidation payment of $100 per share, but would be entitled to receive an
aggregate payment equal to 100 times the payment made per share of common stock.
Each Preferred Share will have 100 votes, voting together with the common stock.
Finally, in the event of any merger, consolidation or other transaction in which
shares of common stock are exchanged, each Preferred Share will be entitled to
receive 100 times the amount of consideration received per share of common
stock. These rights will be protected by customary anti-dilution provisions.
Because of the nature of the Preferred Shares' dividend and liquidation rights,
the value of one one-hundredth of a Preferred Share should approximate the value
of one share of common stock. The Preferred Shares would rank junior to any
other series of our preferred stock.
In the
event that any person or group of affiliated or associated persons becomes an
Acquiring Person, proper provision will be made so that each holder of a Right,
other than Rights beneficially owned by the Acquiring Person and its associates
and affiliates (which will thereafter be void), will for a 60-day period have
the right to receive upon exercise that number of shares of Preferred Stock
having a market value of two times the exercise price of the Right (or, if such
number of shares is not and cannot be authorized, Generex may issue Preferred
Shares, cash, debt, stock or a combination thereof in exchange for the Rights).
This right will terminate 60 days after the date on which the Rights become
nonredeemable (as described below), unless there is an injunction or similar
obstacle to exercise of the Rights, in which event this right will terminate 60
days after the date on which the Rights again become exercisable.
The
rights plan will contain certain exceptions to the characterization of a person
or group as an "Acquiring Person." That term shall not be deemed to
include:
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a subsidiary of
Generex,
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any employee benefit or
compensation plan of
Generex,
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any entity holding shares of
common stock for or pursuant to the terms of any such employee benefit or
compensation plan or
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any officer, director or current
5% holder as of the date the rights plan is
implemented.
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The right
plan may also except certain institutional shareholders from the definition of
“Acquiring Person.” In addition, except under limited circumstances, no person
or entity shall become an Acquiring Person as the result of the acquisition of
shares of common stock by Generex which, by reducing the number of shares
outstanding, increases the proportionate number of shares beneficially owned by
such person or entity to 20% or more of the shares of common stock then
outstanding.
The
stockholders rights plan may also contain what is commonly known as a
“flip-over” provision. In the event that Generex is acquired in a merger or
other business combination transaction or 50% or more of its consolidated assets
or earning power are sold to an Acquiring Person, its associates or affiliates
or certain other persons in which such persons have an interest, the plan will
require that proper provision be made so that each holder of a Right will
thereafter have the right to receive, upon the exercise thereof at the then
current exercise price of the Right, that number of shares of common stock of
the acquiring company which at the time of such transaction will have a market
value of two times the exercise price of the Right.
At any
time after an Acquiring Person becomes an Acquiring Person and prior to the
acquisition by such Acquiring Person of 50% or more of the outstanding shares of
Generex’s common stock, our Board of Directors may exchange the Rights (other
than Rights owned by such person or group which have become void), in whole or
in part, at an exchange ratio of one share of common stock, or one one-hundredth
of a Preferred Share, per Right (or, at our election, Generex may issue cash,
debt, stock or a combination thereof in exchange for the Rights), subject to
adjustment.
At any
time prior to the earliest of (i) the day of the first public announcement that
a person has become an Acquiring Person or (ii) the final expiration date of the
rights, our Board of Directors may redeem the Rights in whole, but not in part,
at a price of $.001 per Right. Following the expiration of the above periods,
the Rights become nonredeemable. Immediately upon any redemption of the Rights,
the right to exercise the Rights will terminate and the only right of the
holders of Rights will be to receive the redemption price.
The
Rights would have certain anti-takeover effects. The Rights would cause
substantial dilution to a person or group that attempts to acquire Generex on
terms not approved by our Board of Directors. The Rights should not interfere
with any merger or other business combination approved by our Board of Directors
since the Rights could be amended to permit such acquisition or redeemed by us
at $.001 per Right prior to the earliest of (i) the time that a person or group
has acquired beneficial ownership of 20% or more of our shares of common stock
or (ii) the final expiration date of the rights.
Dividend
Policy
Holders
of our common stock are entitled to receive such dividends as the Board of
Directors may from time to time declare. The Board may declare dividends only
when dividends are legally available. Under the Delaware General Corporation
Law, the Board may only declare dividends out of our capital surplus (generally
the amount of its paid-in capital above the par value of the outstanding stock)
or out of net profits for the fiscal year with respect to which the dividends
are paid. Holders of our Special Voting Rights Preferred Stock are entitled to
receive a dividend per share equal to the dividends paid on share of common
stock when and if such dividends are declared and paid. We have never paid any
dividends on our common stock and do not anticipate paying dividends in the
foreseeable future.
Transfer
Agent
StockTrans,
Inc., 44 West Lancaster Avenue, Ardmore, PA 19003, is the transfer agent and
registrar for our common stock.
Listing
Our
common stock is listed on the NASDAQ Capital Market under the symbol
"GNBT."
DESCRIPTION OF OUR
WARRANTS
This
description summarizes only the terms of any warrants that we may offer under
this prospectus and related warrant agreements and is not complete. You should
refer to the warrant agreement, including the form of the warrant, relating to
the specific warrants being offered for complete terms, which will be described
and included in an accompanying prospectus supplement. Such warrant agreement,
together with the form of the warrant, will be filed with the SEC in connection
with the offering of the specific warrants.
We may
issue warrants for the purchase of common or preferred stock. Warrants may be
issued independently or together with common or preferred stock, and may be
attached to or separate from any offered securities.
We will
issue each series of warrants under a separate warrant agreement. We may enter
into the warrant agreement with a warrant agent and, if so, we will indicate the
name and address of the warrant agent in the applicable prospectus supplement
relating to the particular series of warrants.
The
particular terms of any issue of warrants will be described in the prospectus
supplement relating to the series. Those terms may include:
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The title of such
warrants;
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The aggregate number of such
warrants;
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The price or prices at which such
warrants will be issued;
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The currency or currencies
(including composite currencies) in which the price of such warrants may
be payable;
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the terms of the securities
issuable upon exercise of such warrants and the procedures and conditions
relating to the exercise of such
warrants;
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The price at which the securities
issuable upon exercise of such warrants may be
acquired;
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The dates on which the right to
exercise such warrants will commence and
expire;
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any provisions for adjustment of
the number or amount of securities receivable upon exercise of the
warrants or the exercise price of the
warrants;
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if applicable, the minimum or
maximum amount of such warrants that may be exercised at any one
time;
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if applicable, the designation
and terms of the securities with which such warrants are issued and the
number of such warrants issued with each such security or principal amount
of such security;
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if applicable, the date on and
after which such warrants and the related securities will be separately
transferable;
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if applicable, the redemption or
call provisions of such
warrants;
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information with respect to
book-entry procedures, if any;
and
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any other terms of such warrants,
including terms, procedures and limitations relating to the exchange or
exercise of such warrants.
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The
prospectus supplement relating to any warrants to purchase equity securities may
also include, if applicable, a discussion of certain U.S. federal income tax and
ERISA considerations.
Exercise of
Warrants
Each
warrant will entitle its holder to purchase the number of shares of common or
preferred stock at the exercise price set forth in, or calculable as set forth
in, the applicable prospectus supplement. Unless we otherwise specify in the
applicable prospectus supplement, holders of the warrants may exercise the
warrants at any time up to the expiration date set forth in the applicable
prospectus supplement. After the close of business on the expiration date,
unexercised warrants will become void. We will specify the place or places
where, and the manner in which, warrants may be exercised in the applicable
prospectus supplement. We will set forth on the reverse side of the applicable
certificate (or in the form of exercise notice attached to each warrant) and in
the applicable prospectus supplement the information that the holder of the
warrant will be required to deliver upon exercise.
Upon
receipt of payment and the warrant properly completed and duly executed, we
will, as soon as practicable, forward the purchased securities. If less than all
of the warrants represented by the warrant are exercised, a new warrant will be
issued for the remaining warrants.
Enforceability of Rights by Holders
of Warrants
Each
warrant agent will act solely as our agent under the applicable warrant
agreement and will not assume any obligation or relationship of agency or trust
with any holder of any warrant. A single bank or trust company may act as
warrant agent for more than one issue of warrants. A warrant agent will have no
duty or responsibility in case of any default by us under the applicable warrant
agreement or warrant, including any duty or responsibility to initiate any
proceedings at law or otherwise, or to make any demand upon us. Any holder of a
warrant may, without the consent of the related warrant agent or the holder of
any other warrant, enforce by appropriate legal action its right to exercise,
and receive the securities purchasable upon exercise of, such holder’s
warrants.
Prior to
the exercise of any warrants to purchase preferred stock or common stock,
holders of the warrants will not have any of the rights of holders of the
preferred stock or common stock purchasable upon exercise, including the right
to vote or to receive any payments of dividends.
DESCRIPTION
OF OUR UNITS
We may
issue units comprised of two or more of the other securities described in this
prospectus in any combination. Each unit will be issued so that the holder of
the unit is also the holder of each security included in the unit. Thus, the
holder of a unit will have the rights and obligations of a holder of each
included security. The units will be issued under units agreements, and we may
enter into such unit agreements with a bank or trust company, as unit agent, as
detailed in the prospectus supplement relating to units being
offered.
The
prospectus supplement will describe:
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the designation and terms of the
units and of the securities comprising the units, including whether and
under what circumstances the securities comprising the units may be held
or transferred separately;
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a description of the terms of any
unit agreement governing the
units;
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a description of the provisions
for the payment, settlement, transfer or exchange of the
units;
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a discussion of material U.S.
federal income tax considerations, if applicable;
and
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whether the units will be issued
in fully registered or global
form.
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The
descriptions of the units in this prospectus and in any prospectus supplement
are summaries of the material provisions of the applicable agreements. These
descriptions do not restate those agreements in their entirety and may not
contain all the information that you may find useful. We urge you to read the
applicable agreements because they, and not the summaries, define your rights as
holders of the units. For more information, please review the form of the
relevant agreements, which will be filed with the SEC promptly after the
offering of units and will be available as described under the heading “Where
You Can Find Additional Information”.
PLAN
OF DISTRIBUTION
We may
sell any of the securities being offered pursuant to this prospectus from time
to time in one or more of the following ways:
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directly
to purchasers;
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to
or through underwriters;
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through
dealers or agents;
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in
privately negotiated transactions;
or
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through
a combination of methods.
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We may
distribute the securities from time to time in one or more transactions at a
fixed price or prices, which may be changed, at market prices prevailing at the
time of sale, at prices related to the prevailing market prices or at negotiated
prices. We may also determine the price or other terms of the securities offered
under this prospectus by use of an electronic auction.
The
prospectus supplement with respect to the securities being offered will set
forth the terms of the offering, including:
· the
names of the underwriters, dealers or agents, if any,
· the
terms of the securities being offered, including the purchase price of the
securities and the net proceeds to us,
· any
underwriting discounts and other items constituting underwriters’
compensation,
· any
over-allotment options under which underwriters may purchase additional
securities from us, and
·
any discounts or concessions allowed or reallowed or paid to dealers and
any securities exchanges on which the securities may be listed.
Also, if
applicable, we will describe in the prospectus supplement how any auction will
determine the price or any other terms, how potential investors may participate
in the auction and the nature of the underwriters’ obligations with respect to
the auction.
We have
not entered into any agreements, understandings or arrangements with any
underwriters, broker-dealers or other parties regarding the sale of securities.
As of the date of this prospectus, there were no special selling arrangements
between any broker-dealer or other person and the company. No period of time has
been fixed within which the securities will be offered or sold.
If
required under applicable state securities laws, we will sell the securities
only through registered or licensed brokers or dealers. In addition, in some
states, we may not sell securities unless they have been registered or qualified
for sale in the applicable state or unless we have complied with an exemption
from any registration or qualification requirements.
If
underwriters are used in an offering, we will sign an underwriting agreement
with the underwriters and will specify the name of each underwriter and the
terms of the transaction (including any underwriting discounts and other terms
constituting compensation of the underwriters and any dealers) in a prospectus
supplement. If an underwriting syndicate is used, the managing
underwriter(s) will be specified on the cover of the prospectus supplement.
If underwriters are used in the sale, the offered securities will be acquired by
the underwriters for their own accounts and may be resold from time to time in
one or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of sale. Any public
offering price and any discounts or concessions allowed or reallowed or paid to
dealers may be changed from time to time. Unless otherwise set forth in the
prospectus supplement, the obligations of the underwriters to purchase the
offered securities will be subject to conditions precedent, and the underwriters
will be obligated to purchase all of the offered securities if any are
purchased.
If
dealers are used in an offering, we will sell the securities to the dealers as
principals. The dealers then may resell the securities to the public at varying
prices which they determine at the time of resale. The names of the dealers and
the terms of the transaction will be specified in a prospectus
supplement.
The
securities may be sold directly by us or through agents we designate. If agents
are used in an offering, the names of the agents and the terms of the agency
will be specified in a prospectus supplement. Unless otherwise indicated in a
prospectus supplement, the agents will act on a best-efforts basis for the
period of their appointment.
Dealers
and agents named in a prospectus supplement may be deemed to be underwriters
(within the meaning of the Securities Act of 1933, as amended, or the Securities
Act) of the securities described therein.
We may
sell securities directly to one or more purchasers, in which case underwriters
or agents would not be involved in the transaction. In addition, we may sell the
securities directly to institutional investors or others who may be deemed to be
underwriters within the meaning of the Securities Act with respect to any
resales thereof.
Further,
we may authorize agents, underwriters or dealers to solicit offers by certain
types of institutional investors to purchase securities from us at the public
offering price set forth in the prospectus supplement pursuant to delayed
delivery contracts providing for payment and delivery on a specified date in the
future. We will describe the conditions to these contracts and the commissions
we must pay for solicitation of these contracts in an applicable prospectus
supplement.
Underwriters,
dealers and agents may be entitled to indemnification by us against specific
civil liabilities, including liabilities under the Securities Act or to
contribution with respect to payments which the underwriters or agents may be
required to make in respect thereof, under underwriting or other agreements.
Certain underwriters, dealers or agents and their associates may engage in
transactions with, and perform services for us in the ordinary course of
business.
Any
underwriter may engage in over-allotment transactions, stabilizing transactions,
short-covering transactions and penalty bids in accordance with
Regulation M under the Exchange Act. Over-allotment involves sales in
excess of the offering size, which create a short position. Stabilizing
transactions permit bids to purchase the underlying security so long as the
stabilizing bids do not exceed a specified maximum. Short covering transactions
involve purchases of the securities in the open market after the distribution is
completed to cover short positions. Penalty bids permit the underwriters to
reclaim a selling concession from a dealer when the securities originally sold
by the dealer are purchased in a covering transaction to cover short positions.
Those activities may cause the price of the securities to be higher than it
would otherwise be. If commenced, the underwriters may discontinue any of the
activities at any time. We make no representation or prediction as to the
direction or magnitude of any effect that such transactions may have on the
price of the securities. For a description of these activities, see the
information under the heading “Underwriting” in the applicable prospectus
supplement.
Any
common stock sold pursuant to a prospectus supplement will be eligible for
listing and trading on the NASDAQ Capital Market, subject to official notice of
issuance. Any underwriters to whom securities are sold by us for public offering
and sale may make a market in the securities, but the underwriters will not be
obligated to do so and may discontinue any market making at any time without
notice.
LEGAL
MATTERS
The
validity of the issuance of the securities offered in this prospectus will be
passed upon for us by Eckert Seamans Cherin & Mellott, LLC, 1515 Market
Street, 9th Floor, Philadelphia, PA 19102. Certain members of the firm of Eckert
Seamans Cherin & Mellott hold options that are exercisable for 30,000 shares
at $7.56 per share. These options were granted under our 2000 Stock Option Plan.
Members of the firm also own additional shares (less than one percent in total)
that they purchased from time to time for cash, either from us or in the public
market.
Any
underwriters will also be advised about legal matters by their own counsel,
which will be named in the prospectus supplement.
EXPERTS
The
audited financial statements for the fiscal year ended July 31, 2006 and
management’s assessment of the effectiveness of internal control over financial
reporting (which is included in Management’s Report on Internal Control over
Financial Reporting) incorporated in this prospectus by reference to the Annual
Report on Form 10-K for the year ended July 31, 2006 have been so incorporated
in reliance on the report of Danziger & Hochman, Chartered Accountants, an
independent registered public accounting firm, given on the authority of said
firm as experts in auditing and accounting. The audited financial statements for
the fiscal years ended July 31, 2005 and 2004 incorporated in this prospectus by
reference to the Annual Report on Form 10-K for the year ended July 31, 2006
have been so incorporated in reliance on the report of BDO Dunwoody LLP, an
independent registered public accounting firm, given on the authority of said
firm as experts in auditing and accounting.
WHERE
YOU CAN FIND MORE INFORMATION
We file
reports, proxy statements and other documents with the SEC. You may read any
copy any document we file at the SEC’s Public Reference Room at 100 F Street,
N.E., Washington, D.C. 20549. You can obtain information on the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC
maintains an Internet site at www.sec.gov, from which you
can electronically access our SEC filings.
You
should rely only on the information contained or incorporated by reference in
this prospectus and in any accompanying prospectus supplement. We have not
authorized anyone to provide you with information different from that contained
in this prospectus. The securities offered under this prospectus are offered
only in jurisdictions where offers and sales are permitted. The information
contained in this prospectus is accurate only as of the date of this Prospectus,
regardless of the time of delivery of this Prospectus or any sale of the
securities.
This
prospectus constitutes a part of a Registration Statement we filed with the
Commission under the Securities Act. This prospectus does not contain all of the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission. For
further information with respect to the company and our securities, reference is
hereby made to the Registration Statement. The Registration Statement may be
inspected at the public reference facilities maintained by the Commission at the
addresses set forth in the preceding paragraph. Statements contained herein
concerning any document filed as an exhibit are not necessarily complete, and,
in each instance, reference is made to the copy of such document filed as an
exhibit to the Registration Statement. Each such statement is qualified in its
entirety by such reference.
INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE
The SEC
allows us to “incorporate by reference” the information contained in documents
that we file with them, which means that we can disclose important information
to you by referring you to those documents. The information incorporated by
reference is considered to be part of this prospectus and any prospectus
supplement. Information in this prospectus supersedes information incorporated
by reference that we filed with the SEC prior to the date of this prospectus,
while information that we file later with the SEC will automatically update and
supersede this information. The following documents have been filed by us with
the SEC and are incorporated herein by reference:
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Our
Annual Report on Form 10-K for the fiscal year ended July 31,
2006;
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Amendment No. 1 to our Annual
Report on Form 10-K for the fiscal year ended July 31,
2006;
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Our Quarterly Report on
Form 10-Q for the quarter ended October 31,
2006;
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Our Current Report on Form 8-K
filed on September 14, 2006;
and
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The description of our common
stock contained in our registration statement on Form 10 filed on December
14, 1998, as amended by a Form 10/A filed on February 24, 1999, and
including any amendment or report subsequently filed for the purpose of
update the description.
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All
documents subsequently filed by the Registrant pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), prior to the termination of the offering shall be deemed to be
incorporated by reference in this registration statement and to be a part hereof
from the date of filing of such documents; except as to any portion of any
future annual or quarterly report to stockholders or document that is not deemed
filed under such provisions. For the purposes of this prospectus, any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
prospectus.
You may
request a copy of these documents, which will be provided to you at no cost, by
writing or telephoning us using the following contact information:
Generex
Biotechnology Corporation
Attention:
Mark Fletcher
Executive
Vice President and General Counsel
33
Harbour Square, Suite 202
Toronto,
Ontario
Canada
M5J 2G2
(416)
364-2551