Seeking Alpha
Biotech, healthcare, small-cap, special situations
Profile| Send Message|
( followers)  

Clinical interest in oral insulin, estimated to have market potential upwards of $10 billion, is escalating as more diabetics are diagnosed each year and patients' petulant demands for an alternative to needles and pens use up more of a doctor's limited practice time. Not just the domain of the smaller biotech, now larger pharmaceuticals are taking up the search. This puts front-runner Oramed Pharmaceuticals (NASDAQ:ORMP), furthest along in studies with its ORMD-0801 oral insulin for Type 1 and Type 2 diabetes, in the spotlight.

Last November, Bristol-Myers Squibb Company (NYSE:BMY) entered into an agreement with India's Biocon to aid in development and commercialization of Biocon's prandial oral insulin product should it pass Phase II. Biocon needs a pharmaceutical advocate after setbacks in early testing with its drug due to placebo effect. However, demonstration of efficacy is years away. Bristol-Myers would gain an innovative new product in a new field of medicine where competition is on the rise.

Novo Nordisk A/S (NYSE:NVO), a long-time devotee of oral insulin but widely unsuccessful so far, hangs on to its partnership with Ireland-based Merrion Pharmaceuticals and recently finished a single-dose Phase I trial of the jointly-developed insulin tablet NN1954 for Type 2 diabetes. A multiple dose Phase I will follow although the company cannot predict a timeline for Phase II but believes that final approval is a decade away.

Even Google Inc. (NASDAQ:GOOG) with its $341 billion market cap knows oral insulin is hot. In September, Google Ventures, the technology giant's alternative investment subsidiary, plowed more than $10 million in start-up Rani Therapeutics of San Jose, California, to further the development of its platform for oral delivery, including insulin. Studies are only at the preclinical stage, however, meaning testing in rodents.

Ahead of the crowd, Oramed has been enrolling patients in early-to-mid stage clinicals for ORMD-0801 since the summer. In July, the first patient had been placed in a Phase IIa for Type 2 diabetes to evaluate safety. Quickly following that, patient recruitment was begun for a Phase I, first-in-human trial using ORMD-0801 for Type 1.

Oramed is the only investigator into an insulin pill to attempt to control Type 1 diabetes, encouraged by a peer-reviewed study published in April showing ORMD-0801 stabilized glucose levels when given before eating. Type 1, the most dangerous of the disease, is often characterized by uncontrollable swings in blood sugar where even intensive insulin programs do not work. This study, although small in size, treated Type 1 diabetics for 10 days with ORMD-0801 taken three times per day before a meal in addition to their usual injected insulin regimen. The results showed good tolerance to the drug and significant average decreases in glucose, particularly during evening hours when hyperglycemia is more prevalent among Type 1s using injected insulin only. Future studies will examine different doses to shed light on the full value of ORMD-0801 in stabilizing blood glucose in this patient population.

For all of Novo Nordisk's historical desire for an oral insulin therapy, not to mention its hordes of scientists and 90 years of experience with the insulin molecule, success has been elusive. In 2008, the company stated that "the next generation of products will be oral insulin," and in 2009, it partnered with Merrion to develop the first generation insulin tablet, NN1952, that was discontinued two years later for reasons difficult to ascertain from the literature. Originally, NN1952 was designed to be tested in people with both Type 1 and Type 2 diabetes. As mentioned above, its current formulation of oral insulin is being given to Type 2s only.

All diabetics living long enough will eventually need insulin and Type 2s often delay using it, putting their health at greater risk. Oral insulin is clinically desirable because absorption through the difficult pathways of the digestive tract would go directly to the liver as opposed to making the rounds systemically where high amounts of insulin in circulation can increase risks to other organs as is so evident by the number of co-morbidities associated with diabetes. Patient compliance would be almost guaranteed. Thus, an insulin pill lends the opportunity to save billions in unnecessary medical costs.

Pharmaceutical partners are attracted to a winning technology, but there are some entrants in the race for a pioneering diabetes treatment that may not fare well. Mannkind Corp. (NASDAQ:MNKD) could have trouble attracting partnerships because of the taint still surrounding Pfizer Inc.'s (NYSE:PFE) catastrophe with its inhaled insulin product Exubera. Fans of Mannkind excitedly point to the eternally-resubmitted New Drug Application (NDA) last month for AFREZZA, its version of inhaled insulin that's becoming like a badly shopped-around financing deal. The company will clearly need a partner to market the product and memories run very short when it comes to large pharmaceutical companies committing money to a venture that badly burnt one of their brethren.

Most egregious of Mannkind's sins to investors was its recent third quarter conference call, a compilation of smoke and mirrors surrounding AFREZZA. There was discussion of market research directed to a "large sample" of endocrinologists and primary care physicians about the product with 86% saying they were "very likely" to use AFREZZA. From my own experience, any doctor focus group paid upwards of $400 for two hours of their time is bound to have a positive bent.

Next in line of absurdity was the statement that the NDA package sent to the FDA was 800,000 pages long. These are government workers, of which I once was one. If I were on a panel of advisors required to review a document that amounted to a reading of Tolstoy's War and Peace 555 times, I might miss a point or two and chances of approval could sink markedly. Lastly, Mannkind crowed about a "quality of life" survey taken among AFREZZA patients that reported, not surprisingly, a big improvement in their "self-reported health status" versus the control insulin group. Diabetic patients, like any with a chronic disease, are more than happy for the attention and opinions do not necessarily reflect value of the therapy. This is called the placebo effect and the same phenomenon that Biocon experienced that caused a restart of clinical trials.

Risks abound in any new diabetic therapy and oral insulin has specific potential pitfalls. A pill may not replace injections and may be used only in patients who still produce insulin, limiting clinical acceptance. However, it would still have clinical value in that diabetics could be encouraged into earlier treatment and reduce downstream complications like blindness, heart disease, neuropathy and kidney failure. Marketing to endocrinologists could be a monumental effort as many doctors remain conservative for fear of losing referrals and are reluctant to prescribe insulin to early diabetics who associate insulin with later-stage disease meant for sicker people. Oramed's small sample size of the pilot study for Type 1 makes it very hard to predict if results will translate to a larger group of patients.

If early studies prove true, Oramed may have a more viable compound than Novo Nordisk for Type 1s, making it an attractive take-over candidate. Oramed's Phase II for Type 2s, not a large trial, may mean that results will occur sooner than Novo Nordisk's single-dose Phase I for Type 2s. Novo Nordisk has publicly stated its intention to dedicate resources to the insulin pill. A brutally competitive diabetes market constantly seeking something new, plus, if history repeats itself, potentially unfavorable clinical results from its current Phase I makes Novo Nordisk likely to make a play for Oramed.

Source: Orameds's Success In Type 1 Diabetes Could Solve Novo Nordisk's Problems