Biodel: Upside from Potential Linjeta Approval

| About: Albireo Pharma, (ALBO)

I wanted to weigh in on the Biodel (BIOD) PDUFA for their rapid-acting insulin formulation, Linjeta. Many investigations have taken place here, here, and here (and my first article offered a play that has returned over 50% since July here), but I thought it would be worthwhile to provide a summary of what’s at stake.

Linjeta, to provide a little background, is a new formulation of rapid-acting prandial (meal-time) insulin. It is basically regular insulin that has been treated with EDTA to break the hexameric insulin into three dimers. The remaining dimers are treated with citric acid in order to break the dimers into monomers. What results is an insulin that goes to work faster (it doesn’t have to break down in the body from hexamer to monomer) and is supposed to more closely mimic the body’s natural insulin response.

With that, let’s address the more salient points pertaining to Linjeta’s potential FDA approval on October 30.

Linjeta passes primary and secondary endpoints in phase III trials…

Due to the fact that Linjeta is classified as a new formulation of an existing therapy, namely human insulin, Linjeta’s phase III trials were designed to prove non-inferiority to the traditional therapy. This allows Biodel to pursue a 505(b)(2) approval path which saves the company time and money over traditional 505(b)(1) approvals. The primary endpoint for the phase III trial was non-inferiority in HbA1c, or glycated hemoglobin, reduction compared to Humulin (normal human insulin). HbA1c is formed through a non-enzymatic reaction between hemoglobin and glucose and is therefore used as an indicator for blood glucose concentration over time. Secondary endpoints were designed to compare Linjeta to Humulin on weight change and rate of serious hypoglycemia events. The trials were carried out in type 1 diabetes patients and type 2 dibetes patients in separate trials in three locations; the U.S., Germany, and India.

In the U.S. and Germany treatment arms primary endpoints were met for statistically significant non-inferiority in reduction of mean HbA1c levels for type 1 diabetes. In addition, Linjeta demonstrated a statistically significant, albeit very small, reduction in total body weight, compared to an average gain of 1.5kg in the Humulin treatment arm. There was also a reduction in severe hypoglycemia events by 49% over Humulin, but this was not statistically significant (p = 0.1324).

In the type 2 trial arms, Linjeta met the non-inferiority guidelines across all countries for reduction in mean HbA1C levels. The was a weight gain in both Linjeta and Humulin treatment arms but weight loss was less in the Linjeta treatment and was statistically significant (mean 0.46kg gain in Linjeta, 1.35kg gain for Humulin, p < 0.02). There was also a statistically significant reduction in mild to moderate hypoglycemia events with Linjeta over Humulin. The median subject event rate in Linjeta was 0.33 versus 0.66 with Humulin (p = 0.018).

…but not when the India data is included for Type 1

When the India data is included in the type 1 trials, unfortunately, the data misses the cutoff for non-inferiority versus Humulin in mean HbA1C reduction. Management at Biodel has offered a few explanations including mishandling of the blood samples used in the analysis and a poorly controlled patient population in terms of starting HbA1C concentration.

As a chemist, I completely buy the assertion that mishandling – namely keeping samples at ambient temperature – would lead to an increase of HbA1C levels. As I mentioned earlier, glycation of hemoglobin is non-enzymatic and will occur to some degree whenever glucose and hemoglobin are in solution together. This reaction, along with most organic reactions, is likely to be highly temperature dependant. We use a ‘rule of thumb’ in the lab: with every increase of ten degrees Celsius, the reaction rate increases by two to three times. While this isn’t always the case, the reaction pathway I envision to which the HbA1c forms is not at all unusual, and should follow the typical kinetic profile. If the blood were supposed to be kept at 0° C and were instead kept at 30° C, you could see how the HbA1C reaction could have been sped up considerably (as much as 27 times faster!), leading to the formation of higher amounts of HbA1C.

I don’t buy, however, the explanation that the data is anomalous because of the poorly managed patient population. At the JMP Securities Healthcare Focus conference, the CEO of Biodel stated that the Indian population had HbA1C levels in the “in the nines” whereas the other patient populations were “in the sevens”. He was referring to the percent hemoglobin glycation. What worried me here is that if this were the case, Biodel is basically suggesting that Linjeta may be inferior (or not non-inferior, rather) in patients with less well controlled blood glucose. First, I don’t believe that makes sense, given Linjeta’s similarity to regular insulin. More importantly, however, it gives the FDA an easy way of asking for more trials based on unproven non-inferiority in certain (namely high baseline HbA1C) patient populations. In my opinion, Biodel should stick to the heat exposure explanation and not suggest other explanations that call efficacy into doubt.

Regardless of Biodel's explanations, the market has taken the data very hard as shares collapsed after information on the India data was released - going from $18 to $2 in two months. The previous high does show just how much upside may be inherent in this stock, should the FDA decide to overlook the anomalous data. With prices currently at $5.30, it's not unreasonable to expect an up to triple your initial investment if the FDA rules in Biodel's favor. Add in the potential for Biodel to quickly partner following approval and the upside potential adds up quick.


I do believe Linjeta is a highly effective treatment for diabetes; both type 1 and type 2. It has been shown to go to work faster and to control blood glucose levels better than both Humulin and Humalog. I believe it will be found non-inferior in all patient populations versus Humulin with respect to mean HbA1c levels eventually. Unfortunately, the botched Indian data provides some uncertainty in a program that should have been a sure thing. Ultimately, the FDA will have to decide if the uncertainty is to be resolved before Linjeta goes on the market or after.

Due to the non-inferiority in mean HbA1c reduction in most patient populations (and superiority in terms of weight gain and hypoglycemic events), I believe the FDA will lean towards approval. I see no reason 1) why Linjeta should be delayed for the type 2 patient populations where everything was fine and 2) why Linjeta should be sent back for more trials in type 1 diabetes where the outcome is virtually assured ahead of time (assuming the samples are kept cold this time around). While uncertainty about the India data makes holding through the PDUFA a scary proposition, due to the tremendous upside inherent in approval at the end of October a long position through this event may prove highly profitable.

Disclosure: Long Biodel