Biodel Inc. F3Q09 (Qtr End 06/30/09) Earnings Call Transcript

Aug. 7.09 | About: Biodel Inc. (BIOD)

Biodel Inc. (NASDAQ:BIOD)

F3Q09 (Qtr End 06/30/09) Earnings Call

August 7, 2009 9:00 am ET

Executives

Paul Bavier - Corporate Secretary and General Counsel

Sol Steiner - Chairman and CEO

Gerard Michel - CFO, VP Corporate Development

Alan Krasner - CMO

Analysts

Corey Davis - Natixis

Matthew Kaplan - Ladenburg

Pamela Bassett - Cantor Fitzgerald

Liana Moussatos - Wedbush

John Newman - Oppenheimer

Cory Kasimov - JPMorgan

Operator

Welcome to Biodel’s third quarter 2009 Earnings Call. At this time all participants are in a listen-only mode. Later we will open the call for your questions and instructions for queuing up will be provided at that time. Also today's call is being recorded. I would now like to turn the call over to Paul Bavier, Corporate Secretary and General Counsel. Please go ahead.

Paul Bavier

Good afternoon and welcome to our third quarter 2009 conference call. Before we start, let me remind you that we will be making forward-looking statements covered under the Private Securities Litigation Reform Act of 1995, and that all of our projections and forward-looking statements represent our judgment as of today. These statements may involve risks and uncertainties that are described more fully in our filings with the SEC, which are also available on our website.

In addition, any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our estimates change; and therefore you should not rely on these forward-looking statements as representing our views as of any date subsequent to today.

Joining us on today’s call are Dr. Sol Steiner, Biodel’s Chairman and Chief Executive Officer; and Gerard Michel, our Chief Financial Officer and Vice President of Corporate Development. Also with us is Dr. Alan Krasner, our Chief Medical Officer. After their prepared remarks, we will open the call to your questions.

Now, I’ll turn the call over to Sol.

Sol Steiner

Thanks, Paul. Since our last conference call, we made good progress preparing our new drug applications, VIAject, which we plan to submit to the FDA by the end of 2009. Our team is not only completing the 100s of documents needed for the NDA, but also performing additional studies to further differentiate therapeutic potentials of VIAject from currently marketed rapid acting prandial insulins. We plan to include much of this new information in the NDA package, which is why we expect to submit the NDA toward the end of the calendar year.

For example, based on the data from our bridging trial, we believe that our proposed commercial formulation of VIAject has a very low incidence of injection site discomfort, comparable to common therapies and we are conducting a study to demonstrate this definitively for purposes of appropriate labeling upon approval. In addition, we are conducting a pilot study in Type 1 diabetic patients. We utilize insulin pumps. This pilot study is a precursor to a larger pump trial, which will compare VIAject to a marketed rapid acting insulin analog.

By utilizing continuous glucose monitoring, we hope to replicate in actual clinical use that VIAject reduces glycemic variability and enables patients to maintain their blood sugar in the normal range, a greater percentage of time than currently available rapid acting insulin analogs. There is an increasing awareness among physicians that reduction of glycemic variability is associated with less oxidative stress and a more favorable cardio vascular risk profile.

On this note, turning to recent scientific presentations, in June we presented new information on VIAject's mechanism of action and the effects on microvascular function at the American Diabetes Association meeting in New Orleans. Dr. Roderike Pohl, Biodel's Vice President of Research described results of in vitro studies to explain VIAject's mechanism of absorption and rapid onset of action. These studies showed that upon dilution with extracellular fluid, VIAject has a smaller mean particle size compared to rapid acting insulin analogs and much smaller compared to regular human insulin.

In a separate poster, in separate poster's actually Dr. Andreas Pfuetzner and Dr. Thomas Forst from the Institute for Clinical Research and Development in Mainz, Germany presented data that demonstrates VIAject produces less oxidative stress and endothelial dysfunction following a meal in patients with Type 2 diabetes.

VIAject was not only found to be the most effective of the three insulins in reducing postprandial oxidative stress and improving microvascular blood flow and function, it also produced a profile of responses more typical of healthy individuals. Both the presentations are available on our website.

Also at the ADA conference, the newsletter Closer Look reported on a survey of a 102 healthcare professionals conducted by Close Concerns, a healthcare information firm specializing in the business of diabetes. This survey showed increasing recognition of glycemic variability as an important and A1c-independent risk factor for diabetes complications.

In addition, over 90% of the respondents believe there is a need for insulins that work faster than current rapid acting analogs, an advantage that we have repeatedly demonstrated. The respondents were also asked to comment on the likelihood that they would prescribe specific new products upon approval.

While the authors stress that their survey may not be a representative sample, we are nonetheless pleased that over 80% of the respondents said they plan to try VIAject if it is approved. We believe this is because of the general belief that our faster meal-time insulin could lead to better glycemic control and outcome. We find these observations to be quite encouraging.

That concludes my prepared remarks. Now I’ll have Gerard review our third quarter financial results before we open the call for your questions.

Gerard Michel

Thank you, Sol. For the quarter ended June 30, 2009, Biodel reported a net loss of $11.1 million, or $0.47 per share, compared to a loss of $10.1 million, or $0.43 per share a year ago.

R&D expenses during the quarter rose to $8 million versus $6.9 million a year ago, primarily due to costs related to the purchase of recombinant human insulin for preparation as commercial supply inventory. These costs were offset by a decline in clinical and manufacturing expenses, since we completed our two Phase 3 studies last year.

General and administrative expenses decreased during the quarter to $2.7 million, compared to $4.2 million in fiscal year 2008, primarily due to reductions in personnel related costs. Our end of quarter cash and securities balance was $64.6 million, and we have approximately 23.8 million shares outstanding.

That concludes our prepared remarks. Now we would like the operator to open the call to your questions.

Question-and-Answer Session

Operator

(Operator Instructions). We’ll take our first question from Corey Davis with Natixis.

Corey Davis - Natixis

Sol, it’s unclear to me from the two studies that you mentioned specifically, the bridging study in the Type 1 pilot, it sounds like those are going to be part of the NDA, but could you just maybe go through any other studies that you either have started or plan to start that will and will not be part of the NDA, just so we know exactly what's going to contribute to it?

Sol Steiner

I believe we mentioned one study that is in the process of starting. It’s a study to look at compare the injection site reaction, on injection of VIAject in our final formulation, to rapid-acting analog. That study will either be in the NDA or it will be submitted shortly thereafter, there is a period of 120 day safety follow-up period, where you can submit this.

We’ve already discussed that with the FDA. So, it will be in the NDA or it will be submitted shortly after we submit our NDA and the goal of that study is to show that the patients don’t have any more injection site discomfort with VIAject may do with Humalog.

Corey Davis - Natixis

Your bridging study is completed, correct?

Sol Steiner

That’s correct. We looked at that and we saw that, and that’s very encouraging. That we said, look we really wanted nail to stand definitively by doing a study that measures injection site discomfort, that’s its primary outcome measure. That’s what you are looking at and it carefully crafted to be sensitive to these things.

Corey Davis - Natixis

This new study you are talking about, will compare directly to Humalog?

Sol Steiner

That is correct.

Corey Davis - Natixis

Okay. Any other big studies that you've got?

Sol Steiner

Well, as I mentioned we are doing a pilot pump study. The pilot pump studies in Type 1 patients and we will probably use continuous glucose monitoring, not probably using continuous glucose monitoring and the goal there is to look at glycemic variability.

We believe that VIAject has a major advantage for use in pumps and the reason for that is because the time from administering to seeing a response is much shorter and the other end is equally important if not more important, the time from shutting off the pump to stopping the action of insulin is also much shorter, because the rate-limiting step on elimination is absorption. So, because it will absorb more rapidly it is eliminated more rapidly.

Now, imagine driving a car and because that's what you do it like, that's the analogy when you are using a pump. You have an accelerator pedal and that accelerator pedal is, you can let leave, you can put in more insulin or you can take your foot off the pedal and stop putting in insulin, okay? With CGM, with continuous glucose monitoring you're no longer wearing a blindfold.

So you can see where you are going, that's a big advantage, but you don't have a break. So, what matters is how to keep from running into the car in front of you is how, when to take your foot off the gas, how fast is the motor going to slow down, how fast that the car going to slow down. Well, it slows down faster with VIAject.

I hope this analogy was more elucidating than confusing, but that's basically the concept. So, we think we have a big advantage there with respect to pump use, and we want to be able to demonstrate that in a well controlled study.

Corey Davis - Natixis

Gerry, maybe just couple of comments on your cash balance and any changes in how far do you think this $65 million, I believe this can take you?

Gerard Michel

Corey, I think we’re going to stick to our earlier guidance and say, at a minimum, to the end of fiscal year 2010.

Corey Davis - Natixis

That’s all I had. Thanks.

Operator

Next we’ll turn to Matt Kaplan with Ladenburg.

Matthew Kaplan - Ladenburg

A couple of questions; are you going to be presenting any data at the upcoming diabetes conferences, EASD, or other conferences? Then I guess kind of a related question is, could some of the data that you are collecting from these studies you've started or plan to start be presented later this year and as well at these conferences?

Then, I guess kind of interrelated, what do you see as the rate-limiting step for the NDA right now filing?

Sol Steiner

Right, let’s take them one at a time. We do not intend to present anything at EASD, which is coming up in late September in Vienna, although we will be present. One of our colleagues, an investigator, who is using VIAject will be presenting at Diabetes Technology, and then maybe other presenters at Diabetes Technology about VIAject, specifically about pump use. So that data might be in the -- you might see that this year.

Matthew Kaplan - Ladenburg

Is that in October or December?

Sol Steiner

That’s in November I believe. It’s in early November. That I think would be about what we -- that’s what we have planned for the present time, and if we make any future plans we’ll let you know, but that’s where we are at this point in time. What was your next question?

Matthew Kaplan - Ladenburg

So, if you look at the studies that you plan to incorporate with the NDA submission process, what's the rate-limiting step right now for the NDA submission.

Sol Steiner

When you say rate-limiting step?

Matthew Kaplan - Ladenburg

Is there a data collection that you have to complete right now that you want to incorporate?

Sol Steiner

The primary rate-limiting step is real-time stability data because as we mentioned, we are looking at our formulation of VIAject. Our final formulation of VIAject, which is a 100 IU per ml liquid. You need real-time stability data and there is a minimal of that that you need in your presentation.

So, that’s to get enough of that in that pushes it out towards November and in the sense that’s a rate-limiting step. Then the other rate-limiting step is that you want to make sure that you do everything right that you have a very clean database that you have, that all your papers, that all your files are in a appropriate order and that its submitted appropriately. The tolerability of an injection site response data will either be in the NDA, as I said it will be submitted very shortly thereafter.

Matthew Kaplan - Ladenburg

That’s on critical path so to speak.

Sol Steiner

No, it’s a not a critical path. It's not required and we have permission to put it in the 120-day safety update without restarting the clock.

Matthew Kaplan - Ladenburg

Then just one final question, in terms of beyond the study that you detailed, are there any other studies that you have planned to differentiate the product in the commercial setting that you are starting right now or have plans to start in the future?

Sol Steiner

The pilot pump, as we said is going to go on to a large pump study. That study will be conducted, while the larger pump study, while VIAject is being reviewed for approval. That study is fairly large study and it again it primarily focuses on euglycemia.

It will probably look at other measures, other biochemical measures of blood glucose control. We've already done study or Dr. Forst has done a study in Type 2 patients, a meal study looking at oxidative stress and there maybe some enlargement of that, but those are the kinds of things that we're planning at this point in time.

Operator

Now we'll move to Pamela Bassett with Cantor Fitzgerald.

Pamela Bassett - Cantor Fitzgerald

Actually you’ve been answered, which [have been risk]. How are partnership discussions in the line?

Sol Steiner

Well, partnership discussions are ongoing. We have been ongoing to some extent. We don't like to comment on them. We make predictions. So, I can say that we are pleased talking to many potential corporate partners.

Pamela Bassett - Cantor Fitzgerald

Will you remind us, what the plan is for manufacturing and the current status?

Sol Steiner

Well, currently as you know we don't make the insulin. We buy that and we are stockpiling it and then the formulation still unfinished, is done with outside contractors. That is we don't, while it’s our people, who go and supervise it. Actually they’re not done at a facility owned by Biodel.

They are done at large, at contract manufacturing. We have two currently that we’re using, and it’s always good to have more than one, and they’re doing a very nice job and we’ve made material, more than required material for filing our NDA, and we will be making additional material in preparation for launch.

Operator

We’ll take our next question from Liana Moussatos with Wedbush.

Liana Moussatos - Wedbush

Thank you. When do you think that you will have enough regular human insulin stockpiled for commercial launch?

Gerard Michel

Hi. We probably have enough now to probably cover the first year of launch. We’re trying to push back the purchases, and we’ve worked with our supplier in [Oregon] who’s been excellent in terms of the flexibility to minimize our contractual obligations, but we are in good shape in terms of, right now we probably have lot of year's worth of stock, maybe a little bit less than that, but by the time we reach our PDUFA date, we should probably have two to three years worth of supply in inventory, which is a bit more than we’d actually like to buy, but again, we initially wrote the contract with an earlier launch date in mind.

Liana Moussatos - Wedbush

Then you mentioned having stability data in November?

Gerard Michel

That stability data is in terms of our final presentation, so whether in a cartridge or a vial etcetera.

Sol Steiner

I think, just to elaborate a little bit on that, we have stability data, but in order to put it in an NDA… We’ve been studying this for a long time. In order to put it in an NDA, you have to make it on the GMP at a manufacturing site. The actual batches that you’re going to use, then you that upon stability and you have to make three of them and then it’s the last one that you made that is the rate-limiting step and that’s been on stability already. Then you get the data and then you have to analyze it and put it in the NDA. So we figure that that should be done by somewhere around November.

Liana Moussatos - Wedbush

Okay and going back to the pump study, the pilot pump study, are you going to include that in the NDA and submit it in the 120 days?

Sol Steiner

It depends whether it’s in the NDA or not. It is not a requirement and we are not planning and we don’t have to do it nor do we particularly need to do it. The pilot pump study is something, if its completed and the final report is written before we submit to the NDA then it will be in the NDA. However, there is no requirement for that and we're not planning to do that. So most likely the pilot pump study will be -- the actual data will be collective but the final report will not have been generated by the time we submit the NDA.

Liana Moussatos - Wedbush

Okay. Then finally are you planning to do any study with Pens?

Gerard Michel

This is Gerard, we are actively looking at a number of different pens. Pens fall into two categories, reusable and disposable, but its really important with the pens is, on the disposable side is, really just getting the stability data up and doing a user expectancy test and making sure that it passes various ISO requirements and the hard part with the disposable is using a manufacture to make it for you on a [negotiable] agreement.

Disposables are a bit different. You need to qualify your cartridge with their pens. You cannot do that with a number of different players or dedicate yourself to one, but in terms of actual clinical studies, in terms of trying [your] clinical advantages, there is no need to do large scale study, that don't give much commercial clinical benefit in that.

Operator

(Operator Instructions). We'll turn to John Newman with Oppenheimer

John Newman - Oppenheimer

Gerard, you had at one point discussed the possibility of including some sort of a pen formulation in the NDA filing. Just wanted to [say its] still high on the list and also Sol, in terms of the stability testing, are you conducting accelerated stability and what is the total length of time in terms of what you need for stability? Thanks.

Gerard Michel

In terms of pen, you're right. We had in the past there are a number of things we might like try to get into the NDA and that. One of the things that maybe there is the pen and you're right. It's one of those things that we might like to get with NDA or purposely being a little bit (Inaudible) the full signal something is that, we'd like to try and there is a chance, but we are not promising anything, but we are working hard on pens. We've recognized that disposable pens are critical for this market, we've know that for a while. We have done a lot of homework in that area, but we are not going to commit to that, until it's a done deal.

Sol Steiner

John in terms of stability, we've already completed accelerated stability studies. That's been done. We've actually completed, real-time stability in excess of what one would need to file. So, we know the answer and the answer is good, but when you file you have to make three registration batches and put all three of them up on stability and get real-time stability and it's the third batch that is the rate-limiting step. As I said, we should have sufficient data to file with by November. Is that clear or?

John Newman - Oppenheimer

Yes, I was just curious as to, in terms of the time period over, which you look at the real-time stability, what kind of a time period is that?

Sol Steiner

Well, your minimum time period for filing is six months then you do a real-time stability. Obviously, we’ve looked for longer than six months.

John Newman - Oppenheimer

Great.

Sol Steiner

We’ve done accelerated stability. So, we have a very good idea where we’re going to come out. We think we’re comfortable with where we are. We’re very comfortable.

Operator

Now we’ll move to Cory Kasimov with JPMorgan.

Cory Kasimov - JPMorgan

Just to be clear on a point and Sol, you kind of answered this I think already. I just want to be sure though. With regards to these additional studies that you’re running aside from the stability work you’re doing, the FDA did not request any of these such as the injection site reaction. You’re purely doing these for commercial purposes?

Sol Steiner

That is correct. They were not requested by the FDA. We’re doing this because we want to include it. We want to have it in the package, and we want to get it on the label, when we get approved that there’s no difference in injection site reaction between us and rapid-acting analog.

Cory Kasimov - JPMorgan

Okay, makes sense. Next, in NDA filings obviously pretty a very big task for a small company. Just curious, what kind of outside regulatory experts you’re consulting with help you out with this, if you are at all?

Sol Steiner

Alan, do you want to pick that up?

Alan Krasner

Well, we are working with a group of regulatory consultants, who are very experienced. I think we talked about this in previous calls, and they are helping guide the conclusions and messaging in our NDA.

Cory Kasimov - JPMorgan

Okay and then lastly, to go back to the partnership question for just a second here. I know there is only so much you can say right now but in terms of internal goals, is it realistic to assume that you can do this pre-approval or do you think that you are going to need the FDA to sign off on the NDA first to get the value that you would want from a partner in terms of, from a financial standpoint?

Gerard Michel

Cory, you are clearly articulating a critical trade-off in terms of the value we would get pre and post approval. Hypothetically if any of that deal was signed now, I would expect it to be more back-ended that if the deal was signed post approval. Whether or not that means there is no deal on the table or that we would expect prior approval, we just can't say.

Operator

Next is Corey Davis from Natixis.

Corey Davis - Natixis

Just one follow-up, earlier in the year you were -- I thought considering doing a formal non-inferiority study to Humalog for a big Phase 3 study, is this the first time that you are saying that you are not going to do that or did I completely miss this and you made that decision months ago?

Gerard Michel

Corey, I think what we said is we would like to is, we were considering doing a robust trial against an analog in parallel with the FDA review and there would be a non-inferiority and a likelihood endpoint. I mean, I will have to look to analysts as to what the absolute end point is, whether it is superiority or non-inferiority.

What we said during that time is the endpoint would likely be something about glycemic variability and we are conducting a pilot right now to better understand what the larger trial would look like.

So we are - the larger trial that we are prepping with pilot, as Sol spoke to, is precisely the trial that we talked about earlier in the year.

Corey Davis - Natixis

Okay. When would you envision that starting, because I thought at one point your goal would be to have that completed by the time the NDA came up for review, so that if the FDA wanted that, it would have been done buy then?

Gerard Michel

Yes. So what the question is, how long will it take and when can we start it?

Corey Davis - Natixis

I mean, in all likelihood, such a trial would be complete before the PDUFA date.

Gerard Michel

I doesn’t…

Corey Davis - Natixis

It doesn’t have to be?

Gerard Michel

It doesn’t have to be a six month trial, CGM or general much shorter, you are looking if glycemic variability will be a much shorter end-point then looking at HbA1c.

Sol Steiner

Even if you looked at HbA1c you really only need three months. You can see changes, large changes at HbA1c at six weeks. You run three months because in three months, all the red blood cells would have turned over and so that's the gold standard so to speak.

The reason why you run a six month trial that why we ran six month trials and why the FDA wanted us to run six month trials wasn't so much for HbA1c, but really to look at any possible allergic reactions because that's the time that you're most likely, if you're going to have -- if you don't have an allergic reaction by six months, it's unlikely you will be able to get one and that's why they wanted; it's for safety purposes more than anything else.

Operator

John Newman with Oppenheimer.

John Newman - Oppenheimer

Thanks for taking the follow-up, actually a follow-up to Corey's question. So, should we take your response as saying, there is a possibility that this trial will be done and conducted before the NDA is filed, or it’s something that you’re still in the planning stage?

Sol Steiner

No. I’m sorry, if I wasn’t clear. I don’t think there is any reasonable possibility. I would say there is no reasonable possibility that it will be completed before we file the NDA. What we said is that it’s likely that it will be completed, while it is to be completed by the PDUFA, but that’s here from ten months from when you file.

John Newman - Oppenheimer

Right, okay and one other quick question, I seem to remember as well originally, at least the language around the discussions for this type of trial seem to suggest it would be sort of the standard trial and maybe Type 1 patients simply by injecting the insulin?

It seem like now you’re focusing on the pump population, is that what we should expect in terms of a trial, comparing your products to the analogs going forward?

Sol Steiner

That’s how we’re thinking at this time, and that’s why we’re doing the pilot, to see if the data supports our beliefs, as to how it’s going to come out. The pilot will actually give us some data, so we will be able to look at it and say, what we right, but this is the right place for us to be focused, and if that is, well the pilot will turn into a larger study.

Operator

Now we’ll turn to Liana Moussatos with Wedbush.

Liana Moussatos - Wedbush

Question was just answered.

Operator

Thank you and with that we’ll conclude today’s question-and-answer session. Gentlemen, I’ll turn the conference back to you for any additional or closing remarks.

Sol Steiner

Well, thank you for joining us today, and for your continued interest in Biodel. We look forward to updating you on our progress later this year. Have a good day.

Operator

With that we will conclude today's conference. Thank you everyone for your participation.

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