SITUATION OF THE MONTH
By Lawrence C. Oakley
October 2001

Conservative Speculator October 2001

GeneLink BioSciences, Inc. (Excerpted from www.wallstreetcorner.com Oct-2001)

• World's first family centered DNA bank & hereditary genetic information service
• Made a breakthrough in genetic profiling
• Has a collaborative agreement with a unit of Arch Chemicals (NYSE/ARJ)
• Developing anti-aging products with Arch related to skin care
• Revenues from such new products expected in the early part of 2002
• The market for its products is huge
• Its revenue will come from license fees
• Overhead minuscule compared to potential revenues
• The stock is undervalued in my opinion
• Leaving R&D -- entering commercialization phase 

Key Facts

Business: Genetic Profiling Technology 
Listed: OTC:BB 
Symbol: GNLK 
Price (9/28/2001 Close): 0.30 
Dow (9/28/2001 Close): 8847.56 
NASDAQ (9/28/2001 Close): 1498.80 
S&P 500 (9/28/2001 Close): 1040.94 
52 Week Range: 0.165 - 0.510 
Shares Out (@ 6/30/2001): 14,815,692 
Approximate Float: 3 million shares 
Market Cap at 9/28/2001: $4.44 million 

Background

GeneLink BioSciences, Inc. was organized in PA to offer to the public the safe collection & preservation of a family's DNA material for later use by the family to determine genetic linkage. GNLK was founded in response to the information being generated in the field of human molecular genetics. Management believed that future generations could benefit from the DNA store of knowledge. For this reason, management created a DNA banking service that stores DNA before & after an individual dies. 

This genetic history can help families determine if they are at risk for certain inherited diseases. Humans have over 100,000 genes, & there are more than 4,500 diseases that are genetically based. 

This DNA can be used to establish whether or not the disease or disorder that caused death was genetic in origin. Scientists are discovering an increasing number of connections between genes & specific diseases. DNA, the hereditary material of life, is contained in all of the genes that make up who we are. If one of these genes is defective, it can cause disease. DNA banking shifts the emphasis from diagnosis & treatment, to prediction & prevention. 

Because of the success of the Human Genome Project, genetics will increasingly affect all aspects of our lives. Inherited diseases will be identified, & with reference DNA from an afflicted family member, location of the genes that cause the inherited disease will help a family physician predict, & possibly prevent, the occurrence in future generations. Also, while some genetic tests are available today, many more will be available in the future, & with more accuracy. GeneLink's DNA Banking system is set up to assist in future genetic testing. 

GNLK's Initial Product

GNLK developed a DNA Collection Kit' for the collection of DNA specimens of its clients. No licensing or training is necessary for the collection by the client of his or her DNA specimen. The collection process, which uses six swabs, is self-administered & takes less than five minutes to complete. The client forwards the swabs to the University of North Texas Health Science Center at Fort Worth (UNTHSC) & completes & forwards a data form to GNLK. Specimens can be collected during an individual's lifetime or up to 36 to 40 hours after death. UNTHSC will store the DNA specimens for up to 75 years. Upon the client's request, & upon the payment of a modest retrieval fee, the stored DNA specimen can be retrieved & sent to a laboratory for testing. More than one test can be made on the same DNA specimen. 

GNLK developed three proprietary genetic indicator tests (GeneLink's Genesis I Program(TM)) & has filed three patent applications: (1) Assessment of Oxidative Stress (OS) -- Genes that can contribute to disease & aging; (2) Assessment of Oxidative Stress (OS) Genes to be used to genetically predict an individual's risk for skin aging; & (3) A SNPs based method to detect susceptibility to obesity. 

Specifically, these genetics based tests are designed to measure single-nucleotide polymorphisms, or SNP's, which are small variations in DNA. GNLK's patented DNA Collection Kit(R) will be used for the program, which can assist nutritional companies & medical, health & anti-aging practitioners to offer a "more targeted" & improved approach to wellness/nutritional therapies. 

The Patent

On 9/25/2000, GNLK announced it has been granted U.S. Patent No. 6,291,171. The Patent addresses GeneLink's DNA Collection KitR for identifying & storing an individual's DNA. 

GeneLink is continuing an aggressive course of patent protection for its Identification Kits in both the national & international venues. 

Products & Business

The GeneLink DNA Collection KitR now offers the public a safe, easy, non-invasive method of collecting one's DNA & storing it confidentially at the Company's DNA Bank located in Fort Worth at the University of North Texas' 105 year-old Health Science Center. The GeneLink system provides a simple, secure, & cost-effective way to preserve an individual's or family's genetic history. GeneLink, a bioscience company, is also an emerging leader in genetic technologies. 

CEO John R. DePhillipo says, "The potential uses for GeneLink's DNA Collection KitR are enormous. As the genomic revolution moves forward, individuals, families, & the traveling public, as well as medical, pharmaceutical, & genomic research organizations will continue to look to GeneLink as the name they can trust for safe, confidential collection, & handling of DNA." 

Adds DePhillipo about the 9/25/2001 patent announcement: "This patent coincides perfectly with our recently announced collaborative agreement with Arch Personal Care Products; GeneLink's DNA Collection KitR also forms the foundation of our proprietary system for utilizing `genetic profiling' as a basis to develop customize personal care products." 

On 9/19/2001, GeneLink & Arch Personal Care Products L.P. of South Plainfield, NJ, a unit of Arch Chemicals, Inc. (NYSE: ARJ) announced that they would collaborate to create an innovative category of products for the personal care cosmetics industry. The joint effort is focused on developing products with unique active ingredients that help alleviate specific oxidative stress deficiencies in the skin -B deficiencies that can be quickly determined by GeneLink's new single nucleotide polymorphism (SNPs based) genetic profiling methodologies. (Additional patents pending). 

My Personal Comments

I first covered GNLK in my Mid-Week Comment column at www.WallStreetCorner.com 6/21/2000. I've been following its progress since. My opinion then was that the appreciation potential of this special situation is nothing short of outstanding. I interviewed CEO John R. DePhillipo again 9/19/2001 -- I am now even more impressed with its potential. 

GNLK is positioned to become a leading provider of genetic profiling technologies. It developed a proprietary method for "genetic profiling" (patents pending) & will begin licensing this breakthrough technology to companies that market or manufacture products for the $100 billion plus nutraceutical, skin care, wellness, & weight-loss industries. 

GNLK's genetic profiling can give companies the unique ability to offer more personalized & more effective products -- specifically tailored to their customers' individual needs -B based on their genetics. The expected result should be both an increased customer base & improved customer retention for those companies. 

GeneLink currently offers four proprietary genetically based profiles related to oxidative stress. They are genetic profiling for: (1) Oxidative Stress (OS); (2) Oxidative Stress for Skin; (3) Oxidative Stress for Obesity Susceptibility; & (4) Oxidative Stress for Osteopenia Susceptibility (patents pending). 

Market Potential -- Genomics & "The Wellness Revolution"

Approximately one seventh of the U.S economy today, about $1.4 trillion, is devoted to the healthcare business. By the year 2010, that number is expected to explode to nearly $3 trillion. 

The following excerpt describes GNLK's technology & market potential. (From "The Next Trillion," by best-selling author/economist Paul Zane Pilzer, pgs. 29-30). One of the central themes is the "The Wellness Revolution" currently taking place in the U.S. & the part genetics will play. 

"Our demand for wellness based products & services is primarily driven by one function of the genetic code which causes aging -B from wrinkles that appear on our skin to the ultimate breakdown of our bodily organs. Over the long term, the understanding & eventual manipulation of this genetic code holds the greatest promise for the wellness industry.

"By examining a person's DNA, which can be taken from the mouth with just a small swab or scraping device, it is already possible to predict the probability that a person will develop certain diseases, & soon, based on the recently completed mapping of the human genome, it should be possible to predict every forthcoming disease or condition not caused by external (i.e. diet & exercise) factors.

"Scientists expect this type of genetic testing to become widespread by 2010. In just the next few years, by using this information to predict the probability to develop a certain condition, a wellness distributor could suggest a vitamin- or supplement-based therapy. 

"For example, a person with a genetic propensity to develop osteoporosis would be directed to take calcium supplements, or a person with a genetic propensity for developing prostrate problems would be an early candidate to take saw palmetto." 

Marketing Objectives

Over the next 24-36 months, GNLK's objective is to develop an installed base of up to 250,000 customers who are subscribing to a personalized monthly nutritional supplement, skin-care, weight-loss, or wellness program that was determined through the use of GNLK's proprietary genetic profiling. 

Marketing Strategy 

GNLK is currently negotiating marketing agreements with some of the world's largest distributors of nutritional, skin-care, personal care, wellness, & anti-aging products. Revenues from the genetic profiling systems & ongoing royalties from product sales are expected to begin in Q1 2002. 

The First Agreement

On 9/19/2001, GNLK & Arch Personal Care Products L.P. of South Plainfield, NJ, a unit of Arch Chemicals, Inc. (NYSE/ARJ) announced they entered into a collaborative agreement to create an innovative category of products for the personal care & cosmetics industry. 

The collaborative effort will focus on developing products with unique active ingredients that help alleviate specific oxidative stress deficiencies in the skin -- deficiencies that can be quickly determined by GNLK's new single nucleotide polymorphism (SNPs based) genetic profiling methodologies. 

For the first time, simply by swabbing the inside of one's mouth & sending the collected sample to GNLK's laboratories, a person can have a skin or personal care formulation specifically designed to compensate for associated deficiencies. 

DePhillipo says: "We are privileged & excited to begin working with Arch Personal Care Products. Together we expect to advance the science of personal care & anticipate new products could be ready for worldwide distribution in the early part of 2002." 

"Arch is pleased to begin this collaborative development effort with GeneLink," stated Andy Banham, Arch's VP of personal care sales." 

Arch Personal Care Products, L.P., a business unit with Arch's Treatment Products business segment, sells a variety of unique products to businesses in the cosmetics & toiletries arena, an approximately $40 billion US retail market (5/14/2001 Chemical Market Reporter). 

Arch Chemicals, Inc. has sales of about $1 billion, & has manufacturing facilities in North America, South America, Europe, Asia, & Africa. 

Management

John R. DePhillipo is chairman, CEO, president, & founder. He was educated at Temple University in Business Administration, & was chairman & CEO of Applied Safety, Inc., which developed a retro-fit driver's side airbag for installation in new or used vehicles. 

Monte Taylor is GNLK's business development, focusing on rolling out GNLK's proprietary genetic profiling assessments to the direct selling, nutrition, & skin-care industries worldwide. For 20 years, he specialized in strategic marketing plans, business development, & marketing communications for several mid-size & Fortune 500 companies. He personally developed sales & distribution networks numbering in the tens of thousands, for direct selling companies. 

Ronald P. Robertson is director of GNLK's special markets. He was VP sales for the Loewen Group International, Inc. -- he was responsible for sales for 1,600 cemetery & funeral home locations. He assisted in growing Loewen's sales organizations from 485 to 4,300 salespeople in four years. He is focusing on rolling out GNLK's product to the cemetery & cremation markets. Robert P. Ricciardi, Ph.D. is treasurer & founder. He is a professor of microbiology at the University of Pennsylvania, where he is chairman of the Microbiology & Virology Program of the Molecular Biology Graduate Group. His Ph.D. is from the University of Illinois at Urbana in cellular biology. He was a postdoctoral fellow at Brandeis University & Harvard Medical School in the Department of Biological Chemistry, & was awarded fellowships by the American Cancer Society, National Institute of Health, & Charles A. King Trust. He developed one of the first techniques in molecular biology, which has been widely used both to map genes & determine the proteins they encode. While most of his research has centered on basic mechanisms of cancer, he developed, patented, & has a patent pending for recombinant delivery vectors for use as vaccines & for potential use in gene therapy. He served as a consultant to The National Institutes of Health, Smith Kline & Beecham's Department of Molecular Genetics, & Children's Hospital of Philadelphia's Department of Infectious Disease. He has authored 55 publications, was awarded a NATO Visiting Professorship at Ferrara Medical School, Italy, & has been an invitational speaker at various scientific meetings & a seminar guest speaker at the Mayo Clinic & Johns Hopkins University. 

Medical Advisory Board

Its members include Robert P. Ricciardi, Ph.D., a founder of GNLK, as well as: 

Jeffrey Kant, Ph.D., M.D. is director, Division of Molecular Diagnostics, University of Pittsburgh Medical Center. He is professor of Pathology & Human Genetics at the University of Pittsburgh. He was an expert consultant for the Hematopathology Section of the National Cancer Institute & an assistant professor of Pathology & Laboratory Medicine at the University of Pennsylvania. He has published extensively on the topics of DNA & genetics.

Henry T. Lynch, M.D. is professor & chairman, department of Preventive Medicine, Creighton University School of Medicine, the director of the Creighton Cancer Center, & a member of the editorial boards of the Journal of Tumor Marker Oncology, Anti-Cancer Research - International Journal of Cancer Research & Treatment, & American Journal of Medical Genetics. He is the recipient of the American Cancer Society 1997 Medal of Honor Clinical Research Award & the Association of Community Cancer Center's 1996 Outstanding Advancement in Clinical Research. 

James W. Simpkins, Ph.D. received his B.S, & M.S. degrees from the University of Toledo & in 1977 received a Ph.D. Degree in Physiology from Michigan State University. He joined the faculty at the University of Florida, College of Pharmacy in 1997 & rose through the ranks to the position of professor of Pharmacodynamics. He served as chairman of the department of Pharmacodynamics, chairman of the department of Pharmaceutics, associate dean for Research & Graduate Studies & director, Center for the Neurobiology of Aging at the University of Florida. In 1996, he was appointed as the Frank Duckworth Professor of Drug Discovery at the University of Florida. He has more than 230 peer reviewed publications, a dozen patents for his discoveries & has edited two texts on Alzheimer's disease therapy. He served as the director of the University of Florida Drug Discovery Group for Alzheimer's disease, which has sustained funding by the National Institute on Aging to support research in the pharmacotherapy for Alzheimer's disease. In 1999, he was appointed to the Medical & Scientific Advisory Council of the National Alzheimer's Association. In 7/2000, he became the Chair of the Department of Pharmacology & Neuroscience & director, Institute for Aging & Alzheimer's Disease Research at the University of North Texas Health Science at Fort Worth. 

Financial Status (As of 6/30/2001)*

Current Assets: $58,691 
Total Assets: $109,875 
Current Liabilities: $162,154 
Long-Term Liabilities: $320,605 
Stockholders' Equity (Deficit): ($372,884) 
Accumulated Deficit: ($4,362,935) 

1. GNLK is just beginning to emerge from its R&D & startup phases, so revenues are not significant as yet. As the new technology is introduced & revenues become significant, I'll update you either here in CS, or in one of my other editorial venues. 

2. On 6/18/2001, GNLK commenced a private placement offering of up to 250,000 units at a price of $0.30 per unit under Rule 506 of Regulation D. Each unit consists of one share of common stock and a warrant to acquire one share of common stock at $0.50 per share. The proceeds are being used for working capital & to fund R&D relating to a new product line, & patent costs. 

Recommendation

I recommend GNLK for both midterm & long-term appreciation. I particularly like the application related to oxidative stress. GNLK's research demonstrates that individuals have distinctive profiles for Oxidative Stress (OS). The profile can measure their body's potential to efficiently control oxygen free-radical damage, eliminate hydrogen peroxide, protect & repair oxidized phospholipids, & destroy harmful environmental compounds. 

Profile results can then direct the person to antioxidant vitamin & nutrient combinations that are specifically formulated to help compensate for their predicted deficiencies. 

Everyone's ability to control oxidative stress is different. You probably have seen people who look to be 80 years old & you are surprised to find they are only 62. You probably have also seen people who look like they are 38 & you are surprised to find that they are 62. 

The ones whose bodies have not effectively controlled oxidative stress are those who look older than their chronological age. 

The ones whose bodies do a good job of controlling oxidative stress are those who look younger than their chronological age. 

I've been told that taking a large dosage of the nutrients & supplements that combat oxidative stress is dangerous -- taking the right amount that provides exactly what the body needs to function most efficiently is what is really needed. There appears to be only one way to accurately accomplish that -- have GNLK do a genetic profile using its proprietary computer analysis program, after inputting one's DNA data (collected using GNLK's DNA Collection KitR). 

The economic potential is really substantial. Regarding the aging process, what percentage of the people in the world would you guess might want to avail themselves of a vitamin regimen that was formulated to greatly slow (or in some cases possibly reverse for a time) the aging process so they would look & feel younger & more vibrant? 

If you guessed close to 100%, you had the same reaction to that question I got from each of the people I asked in the past several days of my latest investigation of GNLK. Can you see the potential? The best part of it is that the sales effort will be made by a large company, with an extremely small amount of effort required of GNLK. GeneLink can handle the work associated with very large revenues with as little as six employees. 

GNLK's association with Arch is similar, except that it is focused on skin care products instead of vitamins & supplements. In this regard, how many women would you guess might want the best possible formulation to maximize the youthful, healthy look of their facial skin? Again, probably close to 100% -- another rather awesome market. 

I see GNLK's association with Arch as the first of many. I suspect the next one will be with a large nutritional supplement corporation. I think the strategy is brilliant. GNLK can take advantage of the huge sales forces of large companies. GNLK will get a small portion of the selling price of the products sold as a result of its technology being used. The revenue potential to GNLK could be staggering. I suggest you seriously look into this one. It's greatly undervalued in my opinion. 

Contact

Call CEO John R. DePhillipo @ 609-823-6991, fax 609-823-6616, e-mail genelink@aol.com, or write P.O. Box 3212, Margate, NJ 08402. www.genelinkinc.com 

Disclaimer:The writer/publisher of the Oakley report-Larry Oakley, has received no remuneration of any kind from GeneLink BioSciences, Inc."

Forward Looking Information: The statements in this news release contain forward looking information within the meaning of the Private Securities Litigation Act of 1995. Such forward looking statements involve certain risks, assumptions and uncertainties, including the inability to generate and secure the necessary product sale, or the lack of acceptance of the company's products by its customers. In each case actual results may differ materially from such forward-looking statements. The company does not undertake to publicly update or revise its forward looking statements even if experience or future changes make it clear that any projected results (expressed or modified) will not be realized.

SOURCE: GeneLink BioSciences, Inc.