Generex agrees to acquire 51% equity interest in Hema Diagnostic Systems

Generex Biotechnology CorporationSep 30 2015

Generex seeks to augment the Antigen Express work In infectious diseases with the HDS detection technologies

Generex Biotechnology Corporation (www.generex.com) (OTCQB: GNBT) today announced that it has entered into a non-binding Letter of Intent (LOI) with Hema Diagnostic Systems, LLC (HDS) (www.rapid123.com), a Florida company that designs and manufactures proprietary infectious disease detection technologies.

The LOI contemplates that Generex will acquire a 51% equity interest in HDS in exchange for a purchase price of US$15,000,000 to be paid in accordance with an HDS business plan identifying a timeline, milestones, and a budget. Generex will also receive a royalty on gross sales of the product (capped at an aggregate of US$50,000,000).

HDS has designed, engineered, and manufactured a series of new and innovative rapid diagnostic tests for infectious diseases. The goal of HDS has always been to deliver high quality, reliable, and easy to use in vitro rapid diagnostic tests that address the global medical community's need for accurate, affordable, and reliable test results in. Currently, HDS provides a series of rapid tests for such infectious diseases as HIV, tuberculosis, and malaria. These diseases kill over six million people worldwide every year. To address this worldwide need, HDS offers unique proprietary and patented delivery systems that incorporate high quality test components specifically designed for the detection of a number of infectious diseases. All HDS rapid tests are manufactured under GMP conditions and in accordance with ISO13485 guidelines. Such adherence to regulatory obligations, combined with new and novel design approaches, helps to create a system of rapid diagnostic assays unlike that of any other company. The unique delivery system of HDS rapid tests incorporates the new and innovative RAPID 1-2-3® HEMA EXPRESS® housing. The RAPID 1-2-3® HEMA EXPRESS® system is an easier and safer means of blood testing in the field or in the lab and eliminates many of the problems associated with user error, resulting in more accurate and reliable test results.

As a direct result of HDS's experience in international markets, HDS rapid tests target those diseases that have long affected people around the world and which include hepatitis B, hepatitis C, malaria, HIV, tuberculosis, syphilis and dengue. New diagnostic tests currently being developed include chikungunya and Zika Virus, two new vector diseases that are quickly spreading around the world. Also under development is a new and unique anthrax test that will detect both the Protective Antigen and the Lethal Factor of anthrax in 15 minutes using only one drop of blood. Through its relationships in West Africa, HDS has undertaken the development of a new rapid whole blood Ebola test for in-field and clinical use. As Ebola is highly contagious, it is of utmost importance that blood products be maintained under the strictest control. Incorporating an Ebola test strip into the RAPID 1-2-3® HEMA EXPRESS® system provides a substantially higher degree of protection to all parties when testing a patient for the Ebola infection. Such a system restricts the free flow of the blood sample, directing it onto an absorbent pad and then directly into a sealed, transparent housing, virtually eliminating the need for transport of potentially infected blood from the in-field test site to the clinical lab.

In contemplation of the prospects for cooperation between Generex / Antigen Express and HDS, Mr. Lawrence Salvo, President & Chief Executive Officer of HDS, stated: "We believe that the HDS infectious disease detection technologies can form a synergistic adjunct to the Antigen Express proprietary infectious diseases vaccine platform technology, with prospects for efforts on the Ebola virus as well as avian and swine influenzas, where Antigen Express has already undertaken clinical work, creating new and expanded market opportunities for us both."

HDS's rapid HIV assays have been evaluated and approved by the Centers for Disease Control (CDC) and are included on the USAID Blanket Waiver List. This enables organizations around the globe to procure the tests with funds under the PEPFAR Program (The President's Emergency Program for AIDS Relief). HDS is also preparing for a new 4^th Generation HIV test for submission to the FDA. Additional HDS tests are being prepared for FDA, Global Fund, and World Health Organization (WHO) submission.

HDS is a supplier of product to The Global Fund (www.theglobalfund.org) and to The Partnership for Supply Chain Management (PFSCM) (www.pfscm.org) and seeks to assist governmental and non-governmental organizations in their fight against the three pandemics of HIV, Malaria, and m.Tuberculosis. Effective rapid diagnostic tests are one of the key tools for intervening in the spread of these three diseases around the world.

As m.Tuberculosis continues to expand worldwide, HDS is finalizing a new rapid TB assay incorporating the RAPID 1-2-3® HEMA EXPRESS® housing systems. The new mTB diagnostic tool is quite novel as it will not react to the Bacillus Calmette–Guerin (BCG) vaccine, and based upon test results will become a triage test confirming the presence of the active/infectious form of m.tuberculosis in a test subject. HDS, upon successful submission of data derived in a series of classified evaluations, will become the first accepted whole blood rapid test for the detection of m.TB in the active/infectious state.

The RAPID 1-2-3® HEMA EXPRESS® HIV 4^th Generation will be one of the first and newest rapid tests in the domestic and international market for the early detection of HIV in a recently infected patient. The HIV 4^th Generation will detect the presence of HIV in a patient weeks earlier than the current 3^rd Generation.

Mark Fletcher, Generex President & Chief Executive Officer, said, "We look forward to embarking on this exciting new endeavor, an opportunity to leverage the scientific work already undertaken by Antigen Express in vaccines for infectious diseases and to access the presence and experience of Hema Diagnostic Systems in the international marketplace."

The discussions between Generex and HDS are at an early stage, and the LOI does not assure that the arrangements contemplated thereby will be achieved. Valuation and other due diligence exercises must be completed. Even if Generex and HDS enter into formal arrangements, any benefit from those arrangements will depend upon the ability of HDS to execute its business plan to achieve successful commercialization and on the ability of Generex to raise the requisite funding for the acquisition of the equity.