Genesis Pharma Completes 40-to-1 Reverse Split
Genesis Pharmaceuticals Enterprises (GNPH.OB) has effected a 40-to-1 reverse stock split and changed its ticker symbol to GNPH from the previous symbol GTEC. As before, Genesis Pharma trades on the OTC Bulletin Board Exchange. After the reverse split, Genesis has 10.3 million shares outstanding.
Cao Wubo, Chairman and CEO of Genesis, said in a statement that the reverse split was part of a strategic initiative to move its listing to a “senior” stock exchange in the US.
Before the reverse split, Genesis closed Wednesday night at 24 cents per share. This implies a post-split price of $9.60. However, three hours after the market opened, Genesis had not yet traded. It is listed as being bid at $5.25 with an ask of $22.00, a divide of truly Grand Canyon proportions. At a theoretical value of $9.60 and 10.3 million shares outstanding, Genesis Pharma has a market capitalization of $99 million.
Genesis Pharma became a publicly traded company in October of 2007 through a reverse merger. Its operational company, Laiyang Jiangbo Pharmaceuticals Co., Ltd. of Shandong, merged into Genesis Technology Group. In its short history, the company has engaged in a considerable amount of financial engineering, including a $30 million three-year note offering, completed in June of this year. The notes carry a 6% coupon and are convertible into stock at 20 cents per share, an unusually steep 3% discount to the price at the time of the offering. The convertible shares will add 3.75 million shares onto the number of shares outstanding.
The terms of the offering were dilutive to existing shareholders and would usually suggest a marginal enterprise that is desperate for cash at any price. But Laiyang Jiangbo is a robust and profitable pharmaceutical company. In the first nine months of its fiscal year (ended March 30, 2008), the company produced net income of $12.9 million on revenues of $66.6 million.
Approximately 67% of its revenues come from western-style drugs while the remainder derives from traditional Chinese medicines. Its top four products in fiscal 2007 were Clarithromycin sustained-release tablets (antibiotic), Itopride Hydrochloride granules (a digestive aid), Ciprofloxacin Hydrochloride tablets (bacterial antibiotic), and Paracetamol tablets (analgesic for flu). Laiyang Jiangbo spent a fairly substantial $2.2 million in the first nine months of the year on R&D.
In November 2007, Laiyang Jiangbo used the majority of a $5 million private placement to buy the patent on a new cerebral vascular medicine, currently undergoing testing in China. The drug, Ligustrazine Ferulic Acid Acetate [LFAA], works to reduce blood clotting and prevent platelets from clumping together. LFAA is classified as Chinese Class 1 compound, which means that it has never been imported to China nor marketed elsewhere in the world. Assuming the drug is granted marketing approval by the SFDA, Genesis will put LFAA into trial production in 2008 and begin marketing the drug in 2009.
Disclosure: none.
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