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DBL%20Hendrix%20small.png College chemistry, 1983

Derek Lowe The 2002 Model

Dbl%20new%20portrait%20B%26W.png After 10 years of blogging. . .

Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases. To contact Derek email him directly: derekb.lowe@gmail.com Twitter: Dereklowe

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April 7, 2010

Generex and Their Insulin Spray: Just Hype?

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Posted by Derek

I haven't written anything about Generex, a company developing an oral insulin spray for Type I diabetes, although they have come up in the comments here once or twice. I'm now regretting my lack of coverage, since if I'd said something uncomplimentary about them (an even bet), I might have had my chance to get sued by them as well. That's what's happening to Adam Feuerstein of TheStreet.com.

Feuerstein wrote two recent columns about the company. The first one was quite skeptical of the company's prospects, saying that he thought the company's Oral-lyn was "a total bust". Said Feuerstein:

"Common sense should tell you that an insulin spray like Oral-lyn is more fiction than science. If Oral-lyn was real, Big Pharma would have snatched up the technology a long time ago. Instead, Pfizer lost millions with an insulin bong, and Al Mann, billionaire healthcare entrepreneur and MannKind's founder, is spending hundreds of millions of dollars of his own money to build another inhalable insulin device. For that kind of money, Mann could have bought Generex several times over. He didn't."

There were also some unkind comments about the way the company touts its regulatory approvals in Ecuador, India, Lebanon and Algeria. (You'll notice that India is by far the most serious regulatory and financial market in that list - read on!) He also had things to say about the size of the company's potential market, given the effectiveness of insulin injections for Type I patients. But his second column (written in response to a flood of e-mail and a hostile legal letter from the company about the first one) was even more blunt:

"The more I dig into Generex Biotechnology(GNBT) and its insulin spray for diabetics, the more preposterous the story becomes. . .it becomes apparent almost immediately that the company is using science and the quest to develop an alternative insulin delivery method not to actually help diabetics but as a ruse to perpetuate a 15 year-long stock promotion scheme. In the process, investors are getting fleeced while Generex management earns millions of dollars in compensation."

Read the rest of his article to get the story on the clinical data, which include things like a ten-day trial in two dozen patients in Ecuador. Actually, that's the centerpiece of the clinical story, come to think of it. The company recently press-released "Successful Phase III Data", although they only had data on 60 patients out of the targeted 750. And so on. No, something seems odd about all this.

If you ask me, Feuerstein's likely in the right here. I, too, have trouble believing that an oral insulin spray can reliably treat the type I diabetes population, for whom careful insulin dosing is crucial. And I think that if there were a realistic chance of that happening, that the likes of Novo Nordisk and Eli Lilly would probably have at least looked into the possibility. And even if they'd missed out, if Generex were the company to discover a real opportunity here, I don't see how they wouldn't be able to raise more money (or do a co-development deal) with more convincing clinical data, if they had any. Why treat a handful of people in Ecuador and let your stock value sit at 60 cents a share, if you have the chance to raise the serious money needed to get a real diabetes therapy through some convincing Phase III trials instead? That's not how this business tends to work.

Generex, though, decided after the second Feuerstein column that they'd had enough, and has sued. For two hundred and fifty million dollars, yet. The company has some very vocal defenders, and I believe that they're completely sincere, but this lawsuit makes me think even less of Generex than I did after reading about their product. Why are they wasting time and money on this sort of thing? These kinds of lawsuits have virtually no chance of going anywhere - the only reason I can see for filing one (if indeed they have) is to get more publicity (and look noble and beleaguered).

The same day the lawsuit was announced, Feuerstein dropped another article into the mix, returning to that regulatory-approval-in-India issue. As it happens, the Indian government revoked the approval a year ago, only three months after the product was offered for sale. You can search (and Feuerstein does, gleefully) through all of Generex's press releases, conference call transcripts, and regulatory filings for any mention at all of this material event. There's nothing. Now, the original approval in India was covered extensively by the company, as you'd imagine, but the withdrawal seems to have passed in total silence - with even a denial last fall that there were any delays or problems in India at all. According to Feuerstein, Generex has completed several financing deals without apparently getting around to mentioning this little detail.

Wagering may now commence as to whether either the lawsuit or the oral insulin spray are going anywhere. If the company really has failed to disclose a material event, though, they may be going somewhere themselves.

Comments (32) + TrackBacks (0) | Category: Business and Markets | Diabetes and Obesity | Press Coverage


COMMENTS

1. Virgil on April 7, 2010 8:14 AM writes...

Feuerstein is likely correct on this one, but on several other issues he's shown himself to be a bigot and a paid shill for the hedge funds...

1) Going to other blogs and publicly deriding their writers.
2) Passing on contents of private "press releases" and "analyst statements" which are not in the public domain, and often are derogatory to strong biopharma stocks (like DNDN).
3) Bashing bashing bashing stocks that actually have a lot of mileage, and quite frankly missing the boat on a number of very good plays.

He tries to paint himself as a kind of warrior/savior, fighting on behalf of beleaguered investors, but a lot of the time people can see right through his ruse. He works for one of the biggest crooks in the game (Jim Cramer), and often publishes crap. It's not exactly surprising that someone eventually decided to sue him.

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2. vanderschelden on April 7, 2010 8:24 AM writes...

Dear All,

I liked your article...And I also Like AF...Just for his FDA "Live" Follow...He learnt me a lot...
But I disagree with him about AGEN...CVM...and GNBT...
For AGEN and CVM...Copanies have to defend themselves...
For GNBT...My BIG QUESTION is Why One of the 3-4 AMGEN's Founder (Medical Advisor.." put his legs...In this Company...To play DOMINOS????
Wrong for his reputation...Wrong for him...Wrong for his Future...Or is he A JOKE???
This is my QUESTIONJ?

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3. anon the II on April 7, 2010 8:56 AM writes...

Can somebody do a translation on that "vanderschelden" post?

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4. Sili on April 7, 2010 8:58 AM writes...

This is not my area of expertise, but you make a good argument for why oral insulin is bunk.

The funny thing is that it reminds me of your coverage of Blacklight's free energy scam, to whom you extended the benefit of doubt.

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5. Vader on April 7, 2010 9:06 AM writes...

anon the II, word salad can be pretty hard to translate.

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6. sgcox on April 7, 2010 9:34 AM writes...

That company is truly useless and incompetent - everybody knows you should sue in London for libel !

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7. p on April 7, 2010 9:34 AM writes...

Careful dosing indeed. I've been taking shots/using a pump for 27 years and have never had a clue how anyone could deliver the small amounts necessary, when necessary, either orally, nasally or through a patch. I could envision any of these pathways being appropriate for a basal level, but they would be impossible to dose a bolus to combat a high or to cover a meal.

And, moreover, the pharma initiatives in these areas seems to derive from the idea that taking shots is the main hassle with Type I diabetes. A reliable and non-invasive method for measuring blood glucose levels would be far, far, far more beneficial and revolutionaray. Drugs to smooth and normalize digestion would be big (as symlin has proved to be).

I would gladly stick an insulin needle in my leg every half hour for the rest of my life if all the rest of it (BG, insulin/carb ratios, complications) could magically go away. In other words, I think even if this company can do everything it says it can, if they can't do it for almost free, I don't see a market.

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8. Hap on April 7, 2010 10:14 AM writes...

Maybe they're hoping the lawsuit will gum up the works for when the SEC comes knocking? Of course, if being a hit man for Gotti and killing seventeen (at least) people didn't disqualify a witness against Gotti, I don't see how having a libel suit would disqualify one as a witness if he has the information he says.

If I were Generex executives, I'd probably consider looking for good lawyers, and for accessories that go well with orange.

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9. bbooooooya on April 7, 2010 10:41 AM writes...

AF is one of the few commentators on biotech stocks that actually tells the straight dope, and is a refreshing change from the typical BS provided by sell side analysts. He tends to get many comments from retail investors hoping to hit the lottery with a biotech penny stock, but (aside from a miscall on DNDN, no one is perfect) he's usually right: e.g. CTIC, HEB, AGEN, OCLS, NVLT, GNVC, MNKD, CVM.

The lawsuit by GNBT seems to me nothing more than a weak attempt to stop AF from writing further about the company. It is amazing how far biotech executives will go to protect their $250K+ salaries. Nice work if you can get it, though.

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10. The Judge on April 7, 2010 10:53 AM writes...

To Virgil:

All I seem to hear about AF is DNDN. Get over DNDN. The reality is that the vaccine doesn't do nearly as much as those promoting it suggest, and AF simply reports the facts. When he registers an opinion, he does a pretty good job of labeling it as such. His complaints about ITMN seem spot-on in retrospect, with the CEO at the time subsequently convicted. Generex, rightly or wrongly, misjudged when filing its suit, as it only increases AF's readership and reputation.

As for the charge against Jim Cramer, I note that he's been investigated by the SEC more times than Bernie M (the one who bilked everyone out of $50+ billion) and been cleared. He's restricted from trading any stocks other than TSCM, and thus far, he's not wearing any orange. Until he does, I suggest finding someone else to rant about.

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11. Keith on April 7, 2010 11:02 AM writes...

In respect of bboo....ya's comments on the GNBT lawsuit; surely you are aware that this kind of lawyerly intimidation is common, it's not restricted to biotech companies. So common in fact that it has it's own acronym, to wit: SLAP! (Strategic Litigation Against People.) It is commonly used to intimidate local politicians contemplating an ordinance that, just conceivably, might harm the bottom line, hence the executive bonuses, of some large wealthy corporation. Ah the joys of the world's most rapacious legal system.

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12. dNorrisM on April 7, 2010 12:00 PM writes...

I heard on the Radio that SLAPP was the runner-up in the catchy acronym contest. the winner was:

Frivolous
Action
Reform
Tort.

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13. David P on April 7, 2010 12:25 PM writes...

No doubt the US legal system is rapacious, though the U.K. libel laws make it worse.

The whole story above is quite reminiscent of the Singh v. British Chiropractic Association case in the UK in fact, except that one actually had judges and courts involved - and BCA very nearly won their case.

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14. rjs9787 on April 7, 2010 1:20 PM writes...

Hi Derek, I appreciate you mentioning my article from last week, http://seekingalpha.com/article/195914-sorting-out-the-street-s-misinformation-on-generex , but it does not appear you have grasped all of the information I was detailing. First, I don't agree that the REAL subject line should be to question Generex's buccal insulin spray, but rather the misinformative and inflammatory reporting surrounding their clinical effort. Let me explain and I will use your article as an example.

First, you state that you are "now regretting" your "lack of coverage" {of Generex}, since if you had said "something uncomplimentary about them (an even bet), I might have had my chance to get sued by them as well. That's what's happening to Adam Feuerstein of TheStreet.com." Derek, I believe that is untrue (and unfair), in the sense it requires a distorting of actual events. Feuerstein is not getting sued by Generex for saying uncomplimentary statements, but for what they allege are "numerous defamatory statements" and "that the articles put forward several ostensible statements of fact that are, in truth, misleading or outright misstatements made with malicious intent or with a reckless disregard for the truth". Whether a company can sue for libel or slander is out of my realm of understanding, but I agree with their characterization of his writings.

I first wrote about Feuerstein's reporting of Generex on March 21, see http://seekingalpha.com/instablog/112537-r-j-steffens/59667-in-support-of-generex-from-thestreet , and noted that: "A columnist offering a negative opinion on a company or stock can often result in a more well rounded perspective and be helpful. However, when the article presents a defamatory opinion based on untrue statements, the small retail shareholder holding shares can watch his investment deteriorate for potentially manipulative reasons." Both articles detail where I believed Feuerstein to misinform about Generex and Oral-lyn, and I am confident that any fact checker will determine that I am correct. Many of the examples actually highlight the low level of dd conducted by Feuerstein.

So when you begin your article by saying that if you had previously made uncomplimentary statements about Generex you may also have your chance to be sued, I feel you are exhibiting the same type of rational that plagues journalists across every sector or industry. In my opinion, you propose a statement based on fiction, or a version of reality distorted by design or inattention to detail. Further comments follow the pattern, such as why "treat a handful of people in Ecuador and let your stock value sit at 60 cents a share, if you have the chance to raise the serious money needed to get a real diabetes therapy through some convincing Phase III trials instead?" Generex isn't treating a handful of patients in Ecuador, but hundreds of patients in a worldwide Phase 3 trial and is now treating additional patients through a Treatment IND that was approved by the US FDA. Generex is a small R and D firm, and has to raise capital as the trials progress, and with all of the activity for Oral-lyn and AE37, it is apparent that they are doing a good job.

There are other examples, as well as exhibiting a lack of knowledge on basic information. Lilly did look at buccal insulin, but was already heavily invested in inhalable insulin and held Generex down for a couple years from conducting any studies. You can go back to a 2008 article to catch up to speed- http://seekingalpha.com/article/71819-generex-biotechnology-oral-lyn-buccal-insulin-takes-center-stage .

In my opinion, after what we have witnessed in what I believe are sloppy and misinformative articles from TheStreet regarding Generex in the last few weeks, any analysis that starts a sentence with "According to Feuerstein" should be taken with a wink and a smile. We are all entitled to opinions, but we shouldn't be able to recreate reality in order to make faulty logic stand tall.

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15. biobug on April 7, 2010 1:41 PM writes...

I have met with GNBT several times to review their technology and data, while considering participating in their fund raising efforts. My impression was always that the company has a vague but decent concept, poorly documented formulation work, virtually no valid clinical work, and a lot of effort put into spin and press releases and fund raising. I always recommended strongly against getting involved with them, and extend that recommendation to other readers.

Mr Feuerstein has a strong reputation on the street of only publishing articles that support his friends / affiliates trading positions. While he has gotten a good scoop a time or two, and is usually in the realm of accurate, beware of any person who recommends stocks publicly. If they were actually so good at it, they would keep quiet and make money rather than publish. The only reason to speak is to try and shift public attention / opinion in order to make your trades more profitable.

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16. faster on April 7, 2010 4:04 PM writes...

derek, the street is working with criminals like jpmorgan, to bring down shares, with stupid and criminal comments like feuerstein, or with criminal naked short sales like jpm in the wamu case.
and you are an accomplice in a crime, and therefore also a criminal.
how much did you get paid, to bash the shares of companys like generex from the criminals?

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17. bbooooooya on April 7, 2010 4:11 PM writes...

"with stupid and criminal comments like feuerstein"

Funny, and the same tripe those who disagreed with AF on HEB, CVM, AGEN, OCLS, CTIC, and many other biotechs that are bordeline frauds. In the end it all plays out the same: the company ends up destroying tons of shareholder money, the executives keep getting paid, and the irrational pumpers keep blaming others (while being unable of pointing to any wrongdoing, aside from statements of fact and opinion).

Can you point to a specific "stupid and criminal comments like feuerstein"? I didn't think so. Your assertion that DL is a criminal is laughable.

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18. he's probably right but... on April 7, 2010 4:15 PM writes...

Adam may be right, but that doesn't mean what he said isn't libel. Saying the company is using science as a "ruse to perpetuate a 15 year-long stock promotion scheme" is libel because that is obviously not true. Generex is "the leader in drug delivery for metabolic diseases through the inner lining of the mouth" so Generex does have a case.

http://www.fiercebiotech.com/press-releases/generex-biotechnology-corporation-gnbt-launches-250-000-000-lawsuit-against-thestreet#ixzz0kS1yHRKk

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19. Vader on April 7, 2010 4:25 PM writes...

"I didn't think so. Your assertion that DL is a criminal is laughable."

And a good thing. If it wasn't so ludicrous, it would be an actionable libel.

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20. faster on April 7, 2010 4:28 PM writes...

stupid bloo,

my accusation, if wrong, is criminal. so let dl take actions against me, i would recomend the fbi.

in the meantime, i would like to know, how many sheres of gnbt feuerstein and the other gang at the street did buy on the cheap?
i remeber a disclaimer from starke in the wamu case, he owns equity, but weeks after he made his stupid, criminal bashing comments.

and you, stupid, before laughing, should read other souces, not only the street:
http://seekingalpha.com/instablog/112537-r-j-steffens/59667-in-support-of-generex-from-thestreet

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21. faster on April 7, 2010 4:36 PM writes...

and i would like to read an disclaimer from dl.
is he short on gnbt, or has he bought cheap shares in the last weeks?

every honest blogger at seeking alpha has this disclaimer, why he not?

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22. The Judge on April 7, 2010 5:38 PM writes...

faster

If you ever bothered looking at RealMoney, where AF posts, you'd see the company policy that no journalists (including JJC) can own any stocks other than TSCM. For commentators, the rule is disclosure, but for the journalists, it's an absolute. Now, lest you say that he's dirty and doesn't adhere to the policy, I note the SEC examines the securities transactions of all financial journalists--something much easier to do with the net and PCs than ever before. As I recall it, this was one of the reasons Herb Greenberg became a hedge fund manager. For all the heartache he had as a journalist, he felt it paid better as a manager.

Sounds to me like you've got some sour grapes. Maybe you were one of those big Dendreon fans?

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23. bbooooooya on April 7, 2010 7:27 PM writes...

'Saying the company is using science as a "ruse to perpetuate a 15 year-long stock promotion scheme" is libel because that is obviously not true."

Apparently you're not very familiar with how many small biotech companies operate....

'Generex is "the leader in drug delivery for metabolic diseases through the inner lining of the mouth" so Generex does have a case.'

Well, if it's in a press released by GNBT it has to be true! I've been telling people for years that I'm the best quarterback ever: oddly, I still haven't got the call to start for the Jets. I wonder if I can sue?

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24. Ed on April 8, 2010 1:55 AM writes...

Dear Judge #22,

Does this disclosure rule extend to AF's wife/partner? If not, it is a totally worthless and easily circumvented PR ruse designed to fool the gullible.

Mrs Feuerstein could easily establish a London based spread betting account (UK based financial oversight is virtually non-existent) which could be used to front-run her husbands "journalistic" pieces and make huge amounts of money, which would be entirely tax-free (in the UK, tax isn't paid on gambling winnings, which is what this form of financial speculation is categorised as).

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25. Ellen on April 8, 2010 5:33 AM writes...

I wish Al Mann would have spent his money on cure-focused research to cure diabetes instead of yet another worthless insulin delivery device. Though it's not bong shaped and Mannkind claims there has not been any sign of lung function deterioration I predict it will ultimately prove to yield the same dangers as Exubera. Further, we know with a great deal of certainty injected insulin does not harm the lungs. Injected insulin can be taken regardless of respiratory infection etc. Another waste of money. We need a CURE for diabetes, or true restoration of euglycemia, not another mode of insulin delivery

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26. J-bone on April 8, 2010 7:57 AM writes...

I've been telling people for years that I'm the best quarterback ever: oddly, I still haven't got the call to start for the Jets.

That's because they're not thinking clearly. They just released Thomas Jones after an outstanding season and picked up an aging LT, who rode the pine for most of the same season. You should give them a call again and let them know your credentials.

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27. faster on April 8, 2010 8:42 AM writes...

to the judge:

this rule is enforced by the sec, isn`t it.
is this the same sec, who had never ever made a look at maddoff?
the same sec, who had never ever made a look at wamu?

and bo, even if it is from gnbt, it could be true. thats the difference to feuerstein, who is openly lying.

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28. rcyran on April 8, 2010 8:46 AM writes...

Two points-

First, there's practically zero chance Generex will win. To be convicted under US libel law, you need to KNOWINGLY publish something you know is a lie. Under this standard, AF has to know that Generex isn't actually a 15 year stock promotion scheme. That's a pretty high barrier. It's been my experience that it's a big red flag when companies sue journalists. If you are legit, who cares - if you are a real company, clinical results will prove it.

Second, many, but not all journalists aren't really motivated by money - they get off on exposing what they think are phonies and frauds.
(I have been a reporter for about 20 years, and I have turned down lots of higher paying jobs - money's just not as interesting as writing.)

Finally, contrary to what one poster says, the SEC does not routinely check over journos trade records (they barely check over anyone's records!).

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29. faster on April 8, 2010 8:58 AM writes...

@ the judge 2.

i do not even know, what or who is dendreon. and i own generex shares since yesterday. why?

1. if there is a distinct possibility, to develope a oral insulin solution, it would be a better world for many people. i have one in the family, i know it from daily expirience.

2. if in the next weeks or month there is a offer for a takeover of generex, a good lawyer would have a field day, to organize a class suit againt this company, the street and feuerstein. as you said, you can allways reconstruct securities transactions, lol.

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30. faster on April 8, 2010 11:13 AM writes...

@bboo:

now, stupid, whats up with this news:
"generex .... today announced that it has entered into a common stock purchase agreement with Seaside 88, LP, a private investment limited partnership. Seaside has committed to purchase up to 49,455,130 shares of Generex common stock. Seaside will purchase up to 2,000,000 shares every two weeks in up to 25 tranches (with up to 1,455,130 shares purchased in the final tranche)"

first, are this seaside llp all stupids, to invest in generex?
second, to push the price down from 0,66 to 0,44, with the help of some "journalists", is gaining them 10 million dollar.
and who cares? it`s only the current stockholders, who were defrauded, with the help of feuerstein and lowe.

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31. weirdo on April 9, 2010 12:06 PM writes...

faster,
If you really believe in the company's future, this is simply another buying opportunity for you, so why do you care what the stock price is today?

If you really believe the drug will work, the stock will be worth many-fold more in less than a year, so why do you care what the stock price is today?

If you REALLY believe the hype, you'll be rich pretty soon, so why do you care what the stock price is today?

If you REALLY REALLY believe, then AF and DL will be proven wrong by the facts, so why do you care what the stock price is today?

If, on the other hand, you're a day-trading Gordon Gecko wannabe with a 6th-grade education, it matters if it's up or down 2 cents, today.

Hmmm . . . .

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32. Hap on April 9, 2010 6:50 PM writes...

#14:

1) If Generex were claiming malicious stock manipulation, wouldn't the easiest route be to drop a dime to the SEC (and perhaps publicly reveal said call, as well, to prod them along)? That would simultaneously remove Feuerstein's credibility (if the claim were accurate) and subject him to significant penalties. Suing for libel without a clear and malicious lie is like saying "Well, we don't like what you're saying, but don't have enough evidence of dishonesty to pursue one of the many available criminal outlets, so we're hoping if we threaten you, you'll go away." It decreases Generex's credibility and enhances Feuerstein's, which would seem to be counterproductive (for Generex).

2) You don't seem to mention the core matter of Generex forgetting to inform its shareholders and other funders of its loss of sales approval in India. If they didn't inform people, whatever the reason, they're in trouble. If the reason for the revocation were innocent, why hide it (because doing so puts them at significant risk, and damages them more than the truth would)? If they had mentioned the revocation before, revealing that they had would again lower Feuerstein's credibility and raise Generex's. The silence on this doesn't help Generex's credibility and makes them look bad (to a much wider audience) than previously.

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