Generex even raised money from investors on four different occasions following the Indian government's action against Oral-lyn. The prospectuses for those stock offerings are supposed to inform investors of all the risk and uncertainties involved in Generex's business, but none of them include mention that Oral-lyn's approval in India was revoked.

"If a company chooses to trumpet one set of facts, it's important to correct the record if those facts turn out not to be true or the facts change," said Megan Gates, a partner at the life sciences law firm Mintz Levin and a specialist in securities law.

Gates is not privy to the reasons why Generex chose not to update investors about the Oral-lyn situation in India, but "if I was their counsel, I'd have a hard time swallowing an argument that this wasn't material information," she said.

Generex's Oral-lyn is an insulin mist that patients spray into their mouths. The insulin is supposed to be absorbed buccally (through the lining of the mouth) and into the bloodstream, in contrast to standard injectable insulins like those made by Novo Nordisk ( NVO), Eli Lilly ( LLY) and Sanofi-Aventis ( SNY), among others. Drug regulators in the U.S. and Europe have not approved Oral-lyn for sale. Generex is one of a handful of companies, MannKind ( MNKD) most notable among them, which are trying to develop alternative insulin delivery technologies.

Trumpeting Oral-lyn's India potential

A Generex press release dated Nov. 1, 2007 announced Oral-lyn's approval in India after what the company described as a "long and intensive review of the Generex Oral-lyn dossier by the Drugs Controller General India office." The DCGI is the Indian equivalent of the U.S. Food and Drug Administration, in charge of approving new drugs for sale in that country.

"This approval in a market with one of the largest numbers of patients with diabetes comes after the Indian health regulatory agency conducted a rigorous review of clinical data demonstrating the safety and efficacy of Generex Oral-lyn," said Generex CEO Gluskin in the November 2007 press release.

Upon Oral-lyn's approval, Generex entered into a partnership with Shreya Life Sciences, an Indian-based drug company and distributor, to market and sell Oral-lyn in India. Generex said it would spend the rest of 2007 and much of 2008 preparing for Oral-lyn's commercial launch through Shreya Life.

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