Biodel: Reemerging From Obscurity In 2013

| About: Albireo Pharma, (ALBO)

There are many reasons a small pharmaceutical company may remain under the radar despite significant upcoming catalysts. Often, the company may be one that has simply had no significant catalysts for quite some time, once interested investors may have removed it from their crowded watch lists, or frustrated investors may have forgotten it after an earlier failed trial, or previous management decisions may simply have simply made the investment quality of the company questionable. Following is an emerging small pharmaceutical company which may begin garnering investor interest in the days, weeks and months ahead. Once a favorite of mine, I believe it should be reconsidered despite earlier failures. Biodel (BIOD) had a huge investor following during 2008-2010 as the company was pursuing FDA approval of Linjeta™, a rapid-release insulin for diabetic patients. Despite an anticipated approval by investors (including myself) the company instead received rejection via a complete response letter (CRL) for the drug noting "comments related to clinical trials, statistical analysis and chemistry, manufacturing and controls." After a subsequent meeting with the FDA, Biodel decided to totally drop Linjeta™ and pursue other formulations at its disposal.

Upcoming Catalysts

After eliminating one of two new clinical candidates as a result of a phase 1 trial, Biodel initiated a phase 2 trial for BIOD-123, an ultra-rapid-acting formulation of recombinant human insulin ((RHI)), on September 13th of 2012 which should be a primary focus for investors moving forward. Currently-approved rapid-acting insulin analogs do not work quickly enough after meals with peak insulin levels typically occurring within 50 to 70 minutes following injection. This lag in blood insulin levels is too slow as blood glucose levels spike rapidly just minutes after meals. In late March, Biodel announced that it had completed enrollment in the 130-patient trial evaluating BIOD-123 versus Eli Lilly & Company's (LLY) Humalog® as a meal-time insulin for patients with type 1 diabetes. Both arms of the trial would receive Lantus®, as the basal insulin with HbA1c control as the primary endpoint, and secondary endpoints including postprandial glucose excursions, glycemic variability, hypoglycemic event rates and weight changes. HbA1c is a form of hemoglobin that is evaluated to help quantify the average plasma glucose concentration over prolonged periods of time. Its use is commonplace when evaluating new insulin products in clinicals, and is a means to track patients' current regimen for dosing changes and to track disease progression. Biodel noted in its enrollment completion PR that it is still on track for Q3 2013 topline data release, a significant event for the $40 million market capitalization company.

Unlike the Biodel of 2008-2010 with no real backup plan to its credit, the new Biodel is keeping contingency plans going with a more diversified pipeline to maximize the company's chance of near-term success. On January 24th, Biodel released phase 1 data for BIOD-238 and BIOD-250. Unlike BIOD-123, these candidates' excipients accelerate the absorption of an insulin analog without prolonging the decline from peak concentration. While recombinant human insulin-based formulation BIOD-123 has a more prolonged drop from peak insulin levels, insulin analogs BIOD-238 and BIOD-250 levels drop off much more rapidly from peak levels, a profile more desirable for some patients. With earlier candidate Linjeta™ having notable problems with injection site discomfort, Biodel has been more careful with that aspect of its newer formulations. With EDTA levels implicated in Linjeta™'s injection site discomfort, the new trials attempt to address this area by reducing disodium EDTA concentrations (BIOD-238) and having an addition of magnesium sulfate (BIOD-250), which was observed to improve tolerance in earlier trials. Both candidates exhibited superior performances relative to Humalog® with ultra rapid and absorption and rapid declines from peak concentration, desirable endpoints for this trial. However, only BIOD-250 demonstrated injection site toleration comparable to Humalog®. With no comments yet from the company on an upcoming phase 2 trial on BIOD-250, I consider such an announcement to be an imminent catalyst and one interested investors should be anticipating.

While clinical success in BIOD-123 or BIOD-250 can certainly positively influence share price in the coming weeks, Biodel is still a few years from marketing either candidate for the huge targeted market diabetes pie. The first phase 3 trials for Linjeta™, ran simultaneously for Type 1 and Type 2 diabetes, evaluated patients for 6 months after enrollment. With a large targeted market group, the likely upcoming phase 3 trial will likely enroll fairly quickly with final data readout roughly 6 months after the last patients are enrolled. Linjeta™ phase 3 trials completed enrollment in January of 2008. The company announced preliminary results 8 months later, on September 8th, 2008 and then submitted a New Drug Application (NDA) a little over a year later, on December 30th, 2009 due to an 18-month safety extension trial for patients who had completed the pivotal phase 3 trials.

While I do not foresee an additional 18-month extension this time due to Linjeta™ safety data helping to secure the safety profile as it also used the same Biodel proprietary drug delivery technology, the possibility certainly exists for delays of some sort. To expedite the company's revenue generation in the interim, Biodel is scheduled to submit a new drug application (NDA) during Q1, 2014 for BIOD-Stable Glucagon, a temperature stable synthetic hormone therapy intended to prevent hypoglycemia (low blood sugar) in congenital hyperinsulinism (CHI) patients. Currently-used glucagon formulations are chemically and physically unstable in solution (dissolved) at high temperatures and are not practical in emergency situations due to the need to mix the more stable powders as needed. In the company's recent earnings conference call on February 12th, Biodel's CEO appeared to be more hesitant about an exact timeline for the NDA submission. He noted "Our minimum target product profile for this indication is a glucagon product in a user-friendly presentation with room temperature stability. Our formulation development work is ongoing and in parallel, we are addressing drug device combination compatibility issues and negotiating agreements with vendors. We will provide you with updates on our progress and projected development timelines in subsequent calls." Although the Q1 2014 goal may or may not be met, updates on this program are likely forthcoming.

BIOD-Stable received the FDA's Orphan Drug designation on December 6th, 2012 providing a short-term boost for the company's common shares. The FDA's Orphan Drug designation is intended to provide incentives for smaller market indications therapies including, but not limited to, a 7-year period of marketing exclusivity after regulatory approval for a therapy addressing a rare disease indication. During this Orphan market exclusivity period, the FDA will not approve an NDA or a generic drug application for the same product and for the same indication. Biodel already received the European Medicines Agency's (EMA) Orphan Drug status for BIOD-Stable Glucagon on January 17, 2012, and orphan designation by the European Commission (EC) on March 5, 2012. The marketing exclusivity is particularly significant in Europe as the designation there provides a 10-year product protection.


With lessons likely learned from Linjeta™'s failure, Biodel should be more stream-lined and focused in its clinicals for its current candidate(s). On February 12th, the company released its Q1, 2013 financials. As mentioned above, its two significant accomplishments noted were as follows:

Reported positive top line data from Phase 1 clinical trial of two Humalog®-based ultra-rapid-acting formulations, BIOD-238 and BIOD-250.

Phase 2 clinical trial of BIOD-123, an ultra-rapid-acting formulation of recombinant human insulin ((RHI)), enrolling according to schedule; top line data expected in the third calendar quarter of 2013.

Research and development expenses for the quarter ending December 31st, 2012 were $4.5 million dollars with an additional $1.4 million in general and administrative expenses, for a total cash burn in fiscal Q1 of $5.9 million. As of December 31st, Biodel had cash and equivalents of $34.3 million, enough to last almost 6 quarters at the current quarterly cash burn rate, which will likely accelerate once phase 3 trials begin enrollment. At Biodel's Q1 2013 conference call, the CEO noted that he anticipated the company's cash level to carry the company "at least until the second calendar quarter of 2014."

With a solid cash position, imminent catalysts including a likely phase 2 trial initiation of BIOD-250 for Type 1 diabetes and updates on the BIOD-stable Glucagon candidate upcoming as well as topline phase 2 data for BIOD-123 in June, I anticipate dramatically increased investor interest in the coming weeks ahead. As with any development-phase pharmaceutical, I advise much additional research before considering a position in this high-risk company. Entry and exit plans should be formulated before opening a position, with consideration of the overall markets also part of the investment decision.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in BIOD over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.