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Biodel Inc. (NASDAQ:BIOD)

Analyst/Investor Research and Development Meeting Conference Call

October 11, 2012, 08:30 am ET

Executives

Seth Lewis - BIOD-G

Errol De Souza - President & CEO

Lutz Heinemann - Founder, former CEO & Scientific Advisor Profil Institute for Metabolic Research

Donna Rice - President, Big Picture Health & former President of the Diabetes Health & Wellness Institute

Gerard Michel - CFO & VP, Corporate Development

Steven Russell - Investigator, Massachusetts General Hospital Diabetes Research Center, Boston

Ed Damiano - Associate Professor, Biomedical Engineering, Boston University

Analysts

Seth Lewis

Good morning everybody. I’ll speak regardless, in the interest of time I just want to get everything started. I want to thank you all for joining us this morning. My name is Seth Lewis; I am with the Drug Group in the Boston Office and I wanted to welcome you to the Biodel R&D Day. We have a great panel, a great group discussion today and some really interesting stuff to show you, so I hope you enjoy it.

And to get things started, I just want to introduce Errol De Souza, Biodel’s President and CEO. So Errol, please join us.

Errol De Souza

Good morning everyone. Thanks Seth. Let me just take a few moments first to welcome you, seeing so many familiar faces out there. So I am glad you could make it today. We’ve got a great panel today. We had a preview of sort of the presentations last night and I can tell you, went a lot in the field of diabetes. So let me start off very quickly with some introductions and then we’ll get going with the panel.

First to my left is Professor Lutz Heinemann. For those of you who know sort of the premier site that does Phase I, Phase II studies in terms of diabetes Profil, both in Neuss, Germany and now in San Diego where Lutz was the founder and pretty much any diabetes product that you can think about I think goes through Profil in terms of its initial studies. And Lutz will give us a feel for the state of the ultra-rapid-acting insulins and in terms of the competition and why do we even need an ultra-rapid.

Next I would like to introduce to Lutz’s left, Donna Rice. Donna is the recent past President of the Diabetes Health & Wellness Institute, an affiliate Baylor Health Care Systems in Dallas and she is currently President of the Big Picture Health. And Donna will give us a real insight in terms of sort of from patient’s perspective in terms of what it means to live not only with diabetes, but hypoglycemia and that will sort of bridge into our glucagon program which we’ll talk about it late today.

Wrapping up our program today, the Boston boys; we’ve got Dr. Steven Russell from MGH and Ed Damiano from Boston University and they are going to tag team and that will be a treat for us, I think in terms of taking us through bridging both the insulin side and the glucagons side and it’s applications for the artificial pancreas.

Before I get started, I would just want to introduce some of the folks from our Board and internal management team. We have got Barry Ginsberg here from our Board and where are you Ira; Ira Lieberman from our Board of Directors.

From the internal management, we have Gerard Michel who will be a speaker; Gerard you guys know him well, very familiar to most of you our CFO and also Head of Corporate Development. Sitting in the back, we have got Paul Bavier, our General Counsel, and in the front is the man who has made this all happen Erik Steiner, who is one of the founders and Head of Operations.

In addition, we have Dr. Roderike Pohl, who is one of the founders and VP of Discovery and Bob Hauser who is our Head of Manufacturing. Alan Krasner, our Chief Medical Officer who was scheduled to be on the program today sends his apologies; unfortunately there was a medical emergency that there was situation where he had to cancel out at the last minute. So Alan sends his apologies and I will fill in for Alan; can’t do the same job as Alan, but I’ll do my best in terms of moving forward.

So with those introductions let me get started and Paul is in the back and reminding me that I have to read all the forward-looking statements, which will take us through the rest of the morning. But anyway, they are on our website and all the disclaimers are out there.

I have taken you through the introductions, what I would like to do is to remind you that today’s presentation is being webcast. We also have books there for you with all the slides. But a little explanation, the book was printed yesterday. We had a brainstorming session last night, so the presentations will cutback a little bit, so you have probably more in your books than we will go through today. So you know it may be a little bit difficult to follow, but we thought it’s better for you to get more information.

The agenda today, I’ll provide a quick introduction. Lutz will take you through the limitations of current meal-time insulins and what the future holds. I’ll fill in for Alan and tell you what we are doing in the area of ultra-rapid-acting-insulins. Donna will come and then we’re going to shift a little bit to the glucagon side of the equation, talk about the hypoglycemia, the ultimate insulin dose limiter and the use of glucagon in practice.

Then Gerard and I will tag team in terms of Gerard taking you through some details in terms of the glucagon market and I’ll talk about sort of the R&D side in terms of glucagon and then we’ll finish up with Steven and Ed in terms of the bionic pancreas. And we’ll open it up for Q&A after each presentation as long we keep on time, we will allow one or two questions, otherwise we’ll hold them to the end in terms of finishing up.

Okay. So let me start off with just setting the background in terms of Biodel. Biodel focuses on diabetes and into the two areas you’re going to hear about today, both in insulin and in glucagon. We come up with our products usually based on a platform technology in developing formulations which pharmacokinetics and stability of known FDA products. So in other words, the risk in terms of the unknown of the active ingredient is taken out. We deal with insulin or with glucagon.

The other part of the process which is different I think at Biodel relative to some of the other companies been associated with, we effectively use this 505(b)2 regulatory process which is a very different development cycle. As an example, we'll talk about glucagon that’s going to go sort of from beginning to NDA filing and you are talking about a couple of years that’s a very rapid cycle and even the ultra rapid acting insulin has a cycle of about four years or five years.

The markets, I think will speak for themselves in terms of the multi-billion dollar markets. The pipeline which most of you in the audience are quite familiar with, our recombinant human insulin based ultra rapid acting prandial insulin, just moves into phase II study and the top line data will be in 3Q ‘13.

For the analog base, ultra rapid acting prandial insulin, well the study has started, today we're going to announce the study has started and we're on track to report the top line data early in 2013.

We talked about the liquid stabilized glucagon formulation. We were targeting the NDA in 2014. We won't really talk about the research programs that are on our plate but I am going to introduce one new one to you in terms of a concentrated form of an ultra-rapid-acting-insulin.

Just from a resources standpoint, we closed the books at the end of June with about $44 million in cash and that time we had just completed and over subscribed pipe financing for about $18.5 million that’s about 18.1 million shares outstanding and we have about 40 employees just straight north of here in Danbury, Connecticut.

This slide is sort of diabetes 101 but its also meant to put in perspective sort of where the competition is and where we hope to grow the market. So if you’re facing life as a Type 1 diabetic obviously you are lacking insulin but you still have the task of maintaining glucose in the normal range.

So the first form of insulin therapy that you would go through is basal insulin, Lantus marketed by Sanofi-Aventis a product I know well I used to be head of researcher at (inaudible) when Lantus was developed. Lantus probably has the bulk of the market its in fact now the best selling product in diabetes, it’s over $5 billion.

Revenue from Novo Nordisk has a very small share of the market but as you know (inaudible) is going to give Lantus some good competition. That takes care of the sort of the low basal levels of insulin that are required throughout the day but then at meantime when you have got spikes of glucose increases you need to take care of that. And then you’ve got prandial insulin which stores spikes and you can see those shown over here.

And two best selling prandial insulins currently in the market are Humalog from Eli Lilly and NovoLog from Novo Nordisk. Apidra which is sold by Sanofi-Aventis has a very small share relatively small share of that market. So that puts in perspective sort of the insulin part of the picture and let me talk about the ultra rapid acting and Lutz will give you an overview. This is the segments that we really hope to grow because of the unmet medical needs that Lutz will talk about.

And then you have got the other side of the equation in terms of glucagon. Glucagon is just the opposite of insulin and that blood sugar and currently glucagon there is only one set of products in the market for glucagon and that's a rescue indication in terms of severe hypoglycemia, that's going to be an area that we really hope to grow the market, you will see where the unmet medical need is, but that's only the tip of the iceberg in terms of glucagon because as Ed and Steve will tell you this is an area that we truly think can be grown as a franchise in terms of multiple other indications related to glucagon.

And when we talk about the bionic pancreas my four man’s analogy is we are trying to maintain glucose levels or you could think if it as driving upon trying to maintain the speed, try doing that with only an accelerator or only a break essentially that's what we have. I think and with glucagon we would have both an accelerator and the break to maintain the speed extremely well.

So that's the overall picture that will summarize sort of the areas where we hope to make differences in terms of going to market. So in those areas, we have multiple programs at Biodel, if you look at the markets here in terms of basal, prandial and glucagon, you can see the growth as forecast over the next decade in all of those areas and in particular you can see glucagon has a very small share of the market, Gerard will take you through that, that we hope to grow and the color coating is related to the Biodel programs that are here and again we are going to focus first on the ultra rapid acting prandial insulin and then come back and talk about the glucagon with medical needs and then the Biodel programs here today.

So with that I am going to stop, keep us on time and turn it over to professor Lutz Heinemann who will take us through the limitations of current meal-time insulins and what the future holds.

Lutz Heinemann

Good morning everybody. I assume my old (inaudible) good German [beer] for his nice advertisement block for profit. So if you have some more question come along I am happy to answer them. With that, I would like to proceed now with my presentation here and probably I should acknowledge my conflict of interest and in other words I have long standing interest it was Biodel and corporate [throughput] a number of years, there are these number of people in the room and I am somewhat proud of that I am able to make this statement.

Errol already introduced you a little bit in the physiology of insulin, and here you have some key numbers that I believe are somewhat interesting to see. So if you are eating nothing for 24 hours you still have need of approximately 24 units of insulin over full day and if you then decide okay sometimes it is nice to have some food, so you have a chance of estimating how many insulin you need to cover your [primary] insulin requirements.

The physiology of insulin secretion is a complex one and I will not go into detail however, we should keep in mind that we and you will see over and over again in my presentation but if you see in the periphery is only that what has (inaudible) the liver and we should therefore be careful that we not try to mimic the hexamer insulin level that we're measuring in the periphery. In other words, these spikes and this is a complex pattern that we’ve seen with insulin secretion over the day, which was measured in a periphery is too low in comparison to that, once it better sets in the (inaudible) and secreted towards the liver.

So having this secretion pattern here in mind, it was clearly the idea of the modern diabetes therapy, monitoring daily injections to mimic this pattern by applying for the rapid-acting-insulin and to apply also basal insulin here and it's a summation of the metabolic effect of the rapid-acting and the basal insulin, which would then have here the plasma insulin profile more or less mimic.

Is it important to have this rapid upstroke here in insulin level that we’ve seen here? This figure should highlight a little bit. If you measure insulin level frequently, in healthy subject might that be obese or lean, you can see this half here first, insulin secretion very rapidly, and so trigger if you see something to immediate cephalic response, there is a rapid increase here in circulating insulin level, followed by a slower increase and decline, depending a bit on the body weight.

If you look at patients with Type II diabetes, this initial response here is missing. Has this any impact on first hypoglycemic; it was an interesting experiment performed showing here the increase in blood glucose levels overtime after meal; if you measure blood glucose increases here in patients with Type II diabetes, there is no initial increase in insulinemia. We have higher excursion here after the meal. However, if you are infused intravenously insulin, the first 30 minutes you can see a drastically lower postprandial glycemic excursion; in other words the first insulin pulse there has an impact.

There are numerous factors and I’ll not go here through all the details here that are listed here that have an impact on postprandial glycemic excursions. The reason for showing this little list here is that you must be aware of it when it comes to good clinical experimental studies, meal related studies that we want to perform in order to evaluate the benefit of for example an ultra-fast-insulin. If you don’t take all these factors into account especially the pre-prandial glycemic insulinemia had to be more or less identical on the different study base. In other words, you must take care of the standardization otherwise you have no meaningful results. And to be honest, if you check many of the publications that are around, from my point of view in many of these studies not much or not enough attention was paid to this requirement.

So what is this? This is an old story that I would like to show you, it’s so called pizza, coke and tiramisu study and it was clearly an idea of my former boss Michael Berger. When we had a visitor from Eli Lilly showing us the first data from insulin lispro; this was something very novel at this point in time. We said, come on, let’s test it with something extreme, something all good diabetologists tells their patient not to eat; in other words, a pizza, a regular coke and a tiramisu. So this is what the diabetologists would tell you; this is forbidden for patients.

However, I asked all to a subject who participated in this study, all of them are Type I patients and asked them to never eat a pizza and never have a coke and said really, we have it quite often, what we never have is regular coke, they prefer the diet coke and then the test was the benefit of subcutaneous insulin lispro is and as you can see here the postprandial glycemic excursion was quite lower in comparison to injection of the same dose of regular insulin, at the same point in time. And let me again mention, I believe that a sufficient duration of an identical pre-prandial glycemia and insulinemia is important in order to be able to see the benefit of a given development.

I mentioned here that the injection of insulin was given at same point in time, again if you read the instructions for use of insulin formulation of prandial insulin carefully, the use will recommend that you have an injection to meet interval; in other words you should inject regular insulin 30 minutes prior to the meal. We simply asked a number of patients what we do in reality and most of them never use such an interval.

Again, you have to imagine this is something the diabetologists tell you, but if you sit in a restaurant, say I don’t have a choice, I have 30 minutes, I better inject now and then I take, not 30 minutes but 60 minutes then you will have no dinner but you would end up in the ICU because you’ll have a pre-prandial hypoglycemic event. So this is one of the reasons why patients don't like to have such an injection meal interval.

I have made some nice statements about rapid-acting-insulins and most of you are quite familiar with insulin a piece of our glulisine insulin. However, we have recent data on infusion of insulin showing that the timing of insulin related boluses are probably even resist rapid-acting-insulin-analogs are not optimum. In this study here from Denver from Peter Chase, published two years ago in diabetes technology in (inaudible) he tried to evaluate what is the best timing. He studied 23 subjects with Type I diabetes and started the bolus 20 minutes prior to the meal immediately before the meal and 20 minutes after the meal. You might say hmm, why shall I start after the meal, if you have kids you would be very much interested in having this option, because you never know how much you are capable to eat, so if you cannot first see how many carbohydrates to eat and then apply the insulin this will be of real help for you.

I will not go into study details, but I would like to sure here again the increases in glycemia if you apply the bolus 20 minutes prior to the start of the meal you can see that the increase here is much lower in comparison to the situation raised start the bolus immediately when you start eating or if you inject it cost friendly 20 minutes later. So to have an injection meal is of benefit, but as I tried to indicate the patient don’t like it.

There is another study here from my colleague from Amsterdam having a similar study design. In here they start the infusion 30 minutes prior to the meals there is a rectangle you see it and 15 minutes and if you can see, it was 15 minutes. So cross (inaudible) were lower in comparison if you started directly with meals when you have this increase here in glycemia. Why is this 30 minutes prior to meals start has no benefit is not clear to me and nor is it to the author as indicated in their publication, they have no clue why this happened.

So ladies and gentlemen, I hope that I was able to convince you a little bit why I believe we have a need for ultra fast insulins or UVs as I call them to have a short-term for it. The currently available and quite often used rapid acting insulin analog are slower than the physiological insulin profile that we are used to.

The peak time to peak here with rapid acting insulin analog is in the range of one hour and physiologically but with rapid acting insulin analog is up to two hours. So if you have a UV here as a rapid onset of action, we're able to reduce the post prandial hypoglycemia and this would also allow to have a safe administration of insulin at the start of the meal and if you have then an additional also able to reduce the tail of insulin action, we then would also reduce the risk for late postprandial glycemic events that otherwise with regular insulins were not necessarily showing up two or three or four hours after the meals requiring a snick.

So what options do we have to develop ultra fast acting insulin and if you have a look on this table, and again I will not go into detail I just want to highlight a number of factors known to influence insulin absorption and insulin action. There are factors like temperature or volume and so on that you can modify in order to alter the insulin properties.

Saying this, then we have a list here of possibilities that are currently and the list is not exhaustive started to evaluating to develop you ultra fast insulin for example [mechanical] so called mechanical attempt that allow and increase in blood flow by heating up to the skin and I will show you some data in a minute.

We can have intradermal insulin application; you can inhale insulin having a different route of insulin application. I would show you no data about (inaudible). And I would also show you no data about sprinkler needle insulin injectors and so on, there are number of different developments.

However, I will show you briefly some data about attempts to have developments that allow the insulin molecules to stay as (inaudible) insulin formulations and not self aggregate to (inaudible) and what we’re going to have and this is also an interesting development from (inaudible) here; if you had excipients that ease the diffusion of insulin molecules in the subcutaneous tissue. The other development also they are developing new or novel rapid acting insulin analogs I will show you no data about this and also not about another route of insulin administration here the (inaudible) known application.

If you are interested in more details let me have another advertisement block here for the journal of diabetes science and technology. And earlier this year we had a symposium about ultra fast insulins and a colleague or friend of mine from Santiago and myself has written a little bit review about the development of ultra fast insulins and then you have a number, a series of six edition and articles two from Biodel about ultra fast insulin.

Before going into details, now let me introduce you briefly into the art of glucose [glimpse]. In other words what we are doing here, is we prevent the decline in blood glucose that normally would show up, if we inject insulin subcutaneous by varying the infusion rates of glucose in a manner that blood glucose is kept more or less constant.

And this glucose infusion here overtime then we reflect the time action profile of the insulin applied. And let me also introduce you briefly here to some pharmacodynamic summary measures that you will see over and over again, what you can evaluate from this time action profile is the area under the curve, but you can also clearly evaluate the maximum metabolic effect and the time required until this shows up and we can also evaluate what are the different A1cs here for certain time period.

Let me start with insulin, a company from Israel, they have a device or two different device actually one for subcutaneous infusion and one for injection under development which apply local heat to the sight of insulin application and if they are doing it what you can see is that risk application of heat the insulin absorbs and this is a some core kenotic data here insulin levels above the time here on the (inaudible) access.

You can see more rapid acting absorption of insulin in comparison to situation with (inaudible). This clearly transfers and in glucose claim studies and this is typical profile of glucose infusion rates over time showing pharmacodynamic properties and you can see there is pharmacokinetic data transfer into pharmacokinetics into pharmacodynamic data and also when you perform meal related studies you can see that there is a benefit in terms of blood glucose changes in other words there is a more rapid increase in insulin anemia and post prandial glycemic excursion.

Let me continue now with Becton Dickinson and Barry Ginsberg one of the constant years of insulin research, he is one of the fathers of this development. Showing you some figures here off the micro needles used to apply the insulin into the dermal in comparison to a standard needle and these are helpful you can see it just to have an idea of the size of the needle. This is the study that we have performed in the glucose claim study into the application of insulin in the large points in this case is a measure of this specific essay into different depths here in the skin.

And this figure here just shows you the time action profile of subcutaneously applied (inaudible) this is the pharmacodynamic that we are looking at and then we have different results here with different depth of the intradermal application and if you can see the difference I am not very pronounced.

Again, these data we have studied in a meal related study and here you can see that the more rapid onset of all absorption and all onset of action reduces the post prandial glycemic excursions. Biodel clearly however will continue showing you a little bit more of a detail here, why the excipients added EDTA and citric acid resulted in a decrease here of the cells association of the monomers towards hexamers. Again, this is a study that we have performed together with Biodel a couple of years back.

Here you can see again this time action profile of subcutaneously applied lispro and the blue line here of subcutaneously injected regular human insulin in comparison to three different doses here. It was called VIAject at this point in time and you can see a nice dose response curve here vis-à-vis three different doses of this monomeric insulin. A more recent publication in GDST to figure showing you the onsite of action, first one on a 20 minute, you can see the total time action profile of two different Biodel formulations in comparison to lispro and as you can see here, the onsite of action was more rapid to Biodel formation in comparison to lispro.

Again, data here from a meal related study we see one Biodel formulation having the lowest increase in postprandial glycemic excursions in comparison to lispro and clearly much higher in comparison to regular human insulin.

Halozyme; here we have an interesting differently different approach. An enzyme is injected into the subcutaneous tissue and normally we have Hyaluronan there very often in the subcutaneous tissue, with a considerable turnover here of grams per day, but if you inject then Hyaluronidase into the subcutaneous tissue, this Hyaluronan is then broken up which allows then molecules to more easily disperse into the subcutaneous tissue like insulin and have a more rapid absorption.

As you can see here, this is pharmacokinetic; you can see that absorption of the analog insulin analog together this is enzyme; it’s clearly inducing a more rapid insulin absorption in comparison to the application of the insulin alone and Halozyme has performed a number of studies in the last year.

Shown here you only new related studies; the increase in glycemia being higher in patients with Type I diabetes with lispro or in Type II diabetes with lispro in comparison to situation when you also apply the enzymes and the postprandial glycemic excursions are considerably lower. And the same holds to over the day in other words in recently performed Phase II trials if you apply the enzyme together with rapid-acting-insulin analog in a blood glucose portfolio over day, the excursions are lower.

Here we have an interesting different way of presenting the data looking at the postprandial glycemic excursions as a different use over day and with percentage reduction here in the excursion. As you can see here with lispro alone the numbers are clearly higher than with the analog combined with the enzyme.

So last but not least, and the title of my talk should give you some outlook into the future. Let me introduce you very briefly to two ideas to look at what really happened in the subcutaneous tissue. And from my point of view, it’s fascinating to see that something which millions of patients day-by-day, we have to noted very much in depth understanding over what really happens there and this young collogue here from Roche diagnostics interestingly from Switzerland, has develop a technique and which he inject a infused colored liquid into dead skin, whereas if (inaudible) from animal and/or human and then he cuts the skin into thin slices, take a computer evaluate then the form of the insulin depot and what is puzzling and interesting for me to see is that the depot that different injections in the subcutaneous tissue at the end forms another a bore like thing or something regular but very irregular.

You might say okay, this is depending on the technology used and so on probably, however let me show you some other data here that will be published in diabetes care very recently from our collogues from Graz, Austria, in which in one situation apply 18 units and this is more regular shape curve, it was done with a micro CT technology also not in living tissue, or if you apply nine times two units and as you can see also here, you don't have the regular forms, but clearly this nine times two units you have a much more rapid absorption insulin then this one time 18 units.

So ladies and gentlemen, let me finish here this my conclusion. I hope that I was able to convince you that we have a need for an improvement in prandial insulin formulation. I am pretty sure that this will transfer into clinically meaningful improvements in postprandial glycemic excursion and we have a number of different options; I have not shown you all that are in the development to my understanding and as a last careful statement there is no product in the market yet. Thank you very much for your attention.

Seth Lewis

Any questions for (inaudible) movement in the Biodel story?

Question-and-Answer Session

Unidentified Analyst

(Question Inaudible)

Lutz Heinemann

It’s a typical question of clinician to the non-clinician there. And if you look at the epidemiological data, cardiovascular risk factors and so on and so on, you clearly know that this is the benefit if you lower postprandial glycemic excursion, because these data studies have shown that if you do so, the risk for cardiovascular events especially in patients with Type II diabetes is lower. But if you are referring a bit more to the (inaudible) data from Montpellier in France, he has clearly shown that relatively impact of the postprandial glycemic excursion too was the HbA1c values differ a little bit in this level of metabolic controls that you have.

In other words if you have a very bad metabolic control high HbA1c values the postprandial glycemic excursions are not so high relevance that you have when you have better metabolic control. And in one of slides, I showed you that the pre-prandial glycemia has some high importance for the postprandial glycemic excursions. In other words, if you have pre-prandial glycemia of 100 milligram produce liter you might have an increase to 160 milligram produce liter max in postprandial phase where else when you have a pre-prandial glycemia of 200, you will not exceed 220 or something. So the prandial glycemia occurs in half (inaudible) for the treatment of patients with diabetes but it clearly depends on the overall metabolic quality. In other words, if you put basal insulin emia it's not well adjusted, you are in trouble.

Errol De Souza

Okay, we will come back to additional questions of the full panel. Let me keep us moving and what I would like to do is fill in for Alan today and just take you through the work that Biodel has done and I will give you just a very quick historical perspective in terms of how do we get here and then take you through more importantly where we are moving to.

So I am just briefing with the same slide that Lutz showed you but just to make a couple of different points. Linjeta is the prototype insulin that has had extensive data generated and in close to a 1,000 patients and I am going to review that for you and the basic premise that Biodel uses in terms of developing rapidly acting insulin as Lutz mentioned is to take the insulin Hexamer which is held together by zinc and utilize EDTA to chelate zinc, break it up but that’s only part of the solution. Then you need citric acid to match the surface charges to prevent reaggregation.

Now this is a little different from the approaches that were utilized to develop the rapid acting. This is Humalog, Lispro, and what you can see is the mode of action there is through genetic mutation of taking this Hexamer and turning it in to a [luso-Hexamer].

You may say citric acid and EDTA that’s seems like pretty simple but the proprietary physician is very strong and this just summarizes the patents issued and the exploration dates we are talking 2025, 2026.

This is a little bit sort of the history that looks talked about when you talked about Biodel. The initial formulation that went in it was VIAject or Linjeta which was a two-part. And then more recent studies were done with Linjeta itself which was 100 IU neutral-pH and this is the formulation that we’re moving forward with.

What I’m going to do fairly rapidly in the next few slides is take you through sort of the prototype Linjeta formulation and show you what we can expect in terms of very large scale studies not only in terms of pharmacokinetics or pharmacodynamics, but potential outcome measures in terms of regulating post postprandial control such as what happens to weight, what happens to hypoglycemic events etcetera.

So let’s first just review sort of the pluses and minuses of Linjeta. It is clearly significantly faster than Lispro which is Humalog here; you can see Linjeta has much faster onset of action relative to Linjeta. But one of the major issues that we identified in terms of Linjeta was related to an injection side tolerability issue that most of you I think in this room are familiar with. And if you measure it using a visual analog scale with zero there is no pain and 100 millimeters is severe pain you see a score of about 17 which is still mild pain. But the issue is other insulin such as Humalog has a score of about five.

Okay so you’ve got a big counter detailing issue that you have to worry about. And so the decision was made that we really have to get around this injections type tolerability issue. But let’s review what this benefit in pharmacokinetics does from the standpoint of outcomes.

So I am going to take you through a variety of measures, glycemic variability, glucose controlled hypoglycemia in a whole series of slides and we are going to go through these very rapidly. Lutz showed you just a different version of this slide, we are very good postprandial glucose control, the flattest line related to Humalog relative to RHI.

This blank area is the ideal range of where you want to be. So we do very good in terms of glycemic variability by having a faster more ultra rapid acting insulin. We also have benefits in terms of reductions in days of stressed markers, below this line is good above the line is that and you can see Linjeta shows benefits related to both Humalog and Humulin. Okay.

Let's talk about long-term glucose control and these are data from two pivotal studies with about 400 and somewhat patients in each study Type-1 and Type-2. Again, we won't go through the issues but we clearly have good glucose control but the bottom line was that we missed the regulatory endpoint in terms of non-inferiority and that's why the complete was once came in 2010, but you have got very good glucose control but we narrowly missed it in Type-1 and Type-2 was a little bit better.

Let's take a look at hypoglycemia, if you regulate postprandial glucose with the fatter curve you will see less hypoglycemia and the answer from the trails that we did appears to be yes, less severe hypoglycemia in Type-1 patients and less miles of 100 hypoglycemia and Donna will take you through all of the definitions of hypoglycemia in her presentation but clearly benefits of hypoglycemia and finally when we show you the benefits on weight you can see in Type-1 patients we saw essentially weight neutrality which is pretty remarkable in this particular study and in Type-2 patients you saw less weight gain.

So one of the questions that you asked what could be the potential benefits of regulating better in a better manner postprandial glucose? You should have better outcomes in terms of weight hypoglycemia many other things and obviously reduce hopefully long-term many of the risk factors associated with diabetes. So this shows you set of a summary of multiple trials and the data that I showed you, much better in terms of decay issues in terms of tolerability and the benefits are shown here on the right. As you know, we have identified sort of the issues related to the injections side tolerability because the former EDTA that we injected was disodium EDTA which in addition to chelating ultra zinc also chelates endogenous calcium and calcium is critical in terms of (inaudible).

So patients are experiencing a tingling like sensation. Why do I say that? With certainty because we took in calcium EDTA formulations, got rid of the pain but we compromised the PK profile. So we had to come up with a whole different strategy which we did earlier this year and credit goes to Dr. Ginsberg who is sitting here and in one of our board meetings he said why don’t we keep the PK profile the same, let’s not mess around with Linjeta but let’s add something that addresses the pain and that was the idea for magnesium sulphate.

Okay, magnesium sulphate something as simple as magnesium sulphate has been used in other settings to reduce pain. So there came the idea for Biodel 123 and I am going to show you data here. But let me remind you again of our historical data. So here is Humalog and the broken line here is Linjeta. Clearly faster, you can see here in the blow up. Biodel 123, think of it as Linjeta with magnesium sulphate. You can see the lines effectively overlap which is exactly what we wanted to see. You know, you don’t want to alter the PK profile as we did with calcium EDTA formulations.

Now the real critical thing is what happens to the pain and that’s shown on the slide here. Again, you can see on a visual analog scale Linjeta shows you, it gives you a score of about 17 relative to Humalog, 123 is comparable to Humalog, not only on a vast scale, but we’ve asked a variety of question, if you look at relative severity to score, three patients say, it's equal to my normal injection and for Humalog it's 2.92, which is essentially a normal injection; 123 is 2.91 and you can look at the severity.

So 123 met the criteria and it is currently in Phase II trials. One of the things we’ve done since we first announced the Phase II trial, we have expanded the trial; we have doubled the size of the trial. So we can clearly not only look at the primary endpoints which would be HbA1c. The trial will be 18 weeks of duration, six weeks of active titration followed by 12 weeks of stable dozing, which is what you require for red cell turnover in terms of HbA1c measurements.

It's just two arms, 123 versus Humalog, the basal insulin is Lantus, but this trial that Alan designed really takes care of many of the secondary measures we want to look at in terms of postprandial glucose as Alan says, we’re measuring it pretty much every way you could measure it and we can come back in the discussion and get looks and comments and then have a discussion we’re using continuous glucose monitoring similar to what Halozyme used is relative traditional measures. We’re also looking at standard hyperglycemic event rate; way changes similar to what we looked at in the pivotal studies. Well the trial started and topline data is 3Q’13.

The proprietary technology that we have has utility beyond recombinant human insulin, and in fact we could take the rapid-acting analogs, Humalog shown here in orange, Novolog or Apidra, apply the same excipients as we did in Linjeta and turn it from rapid to ultra-rapid, so you can see that here.

Well, that’s good news; the limitation is these are still patented. Okay , so how do we get going in terms of working in this area about one of the big three and unfortunately we haven’t disclosed it, but we’ll soon enough as agreed to work with us in terms of providing us with materials in terms of moving forward with some clinical trials.

And the ones we’re looking at is 238 and 250; well 238 both of them have sort of similar excipients to Linjeta; 238 has lower EDTA concentrations, 250 is slightly higher but for good measure in 250 we’ve thrown in magnesium sulphate in there. So that gives you just a little bit of a sense relative to the analog. So this trial, Phase I trial which is our standard crossover design trial looking at PK as well as injections site tolerability is underway and we are on track for reporting the data in early 2013. So we just announced that trial is underway and the recruitment is very good.

I want to finish up with just a couple of slides and something that you haven't seen before, you know because we talk about some of the main programs at Biodel, but today is R&D day; its less about milestones but telling you, what else is going on. There is an area that I think the needs are really growing tremendously and that's the need for concentrated ultra rapid acting insulin. So what’s the rational for this? You got a growing Type 2 diabetes patients that are severely insulin resistant and obese, you know some of these patients require more than 200 units of insulin daily, remember what Lutz have showed you.

So you are talking about enormous amounts and the vials are only 100 ius per mil, so they are going to multiple vials here versus normal patients is vials are less for a while. Forget about multiple injections pain everything that’s associated with it, but there is only one product in the U.S. market and even Lilly will admit, it’s a suboptimal products and that's Humulin U-500 that's 500 units per mil, but just to give you a perspective for this market, it almost doubled between 2008 and 2010. We don't have sort of the recent figures, but it’s slow and it’s not approved for pumps. So clearly there is an unmet medical need. This is an area that we just got an SPR grant; Rode, Bob and the team are working feverishly on this. I just want to show you a snippet of data that is at least pretty exciting from our standpoint.

So what we are looking at now is data in diabetic’s line, okay; PK on the top in terms of insulin concentrations and glucose concentrations on the bottom. So take a look in blue, this is the Lilly U-500; take a look at Biodel, we have a U-400 which we call Biodel U30; look at this rapid acting profile here in terms of the first peak; you have actually got a mixture of a prandial basal in these kinds of formulation, but clearly we have got this rapid acting peak here.

And then if you look at glucose concentrations, you give them to Lilly formulation and it comes down, but it takes a couple of hours before they come down in terms of the prandial while if you use 530, boom, you see the glucose coming down which is really a consequence of that first peak in terms of ultra rapid. We are pretty excited by this and we are continuing to move forward on this so this the first line preview of a program you will start seeing a little bit more on.

So to summarize, built on Lutz’s look at this presentation, Biodel was the first to come up with the concept. I think Lutz you will agree with that in terms of the ultra rapid acting insulin, but as you can see the competition does not stay still, there is lots of competition which in many ways I think validates the need for an ultra rapid. We had a little bit of side step with our first formulation in the complete response, but we are back on track and we look forward to presenting additional data for you in terms of moving forward.

So let me stop, Erik how are we doing on time? Do we have time for questions? Okay. I will just stop if any of you have questions to either Lutz and I are happy to address them, because we are going shift gears and move to the glucagon part of the program. Any questions?

Question-and-Answer Session

Unidentified Analyst

One question that I get often as things move forward (inaudible), what do you think Phase 3 (inaudible) what do you think the FDA and other regulators want (inaudible)?

Errol De Souza

Let me give you sort of the regulatory answer and I am giving it to you from, with a perspective of having had a meeting with the FDA after our complete response in terms of what we need to do to move forward. The regulatory endpoint is quite simple; non-inferiority to Humalog that’s out there. Everything else for the most part is a commercial, endpoint in terms of obviously safety and I don’t want to minimize any of that but it's really the non-inferiority, which is the major, outcome measure that the FDA is going to called out to the fire. Now for us, as you’ve seen from the design of Phase 2 trial, we're going well beyond that, that's our ticket to entry but not necessarily the ticket to the multi-billion dollar product, there you want to show improvements in terms of post prandial glucose. Any one of them, potential improvements in terms of weight hypoglycemia, any one of them I think will be significantly different. So from a regulatory standpoint, that’s a feedback that we got from the FDA.

Unidentified Analyst

Can you talk about the pallets (inaudible) and I’m thinking about at a comparison for your pallet more than previous Linjeta trials real question here is, is there any potential (inaudible) in the single Phase 3 trials that you witness as a pivotal or more than the single trials?

Errol De Souza

Jason you’ve asked a bunch of questions there. So I’ll be quick to keep us back on time here. So let’s talk about the historical Linjeta trials they were about 400 and some odd patients in each. Okay. And for the sake of this family or audience let’s take out the India data where we had some issues which gives us a sense of what’s the power. That would bring it down to about 300 patients. And with those we would meet the non-inferiority margin which is 0.4. Okay. The current trial within the extended form is moving in the direction of 0.4 in that range of what we’re looking for the trial that was half that size would be a difference of more like about one. Okay. So that talks about the primary measures.

Now the difficulty with the second re-measure is there’s no historic data to be able to power so the Phase 2 trial is in fact designed to give us the estimates that we would need to power up for any one of these new measures in terms of moving forward. So you may say originally we said 70 patients and then we increased it to 130 which is essentially doubling it. One of the reasons was frankly we looked at the Halozyme data which utilizes continuous glucose monitoring and they happen to do 120 patients.

So we really felt from an investor standpoint and from your standpoint we’ve got to do a trial that’s comparable to what they did. But there aren’t a lot of historical data. If you look at the Linjeta database we had statistically significant differences. But there is criticism there in terms of influent dosing that we won’t go through but the bottom line is the 120 should give us I think a good indicator what to expect in the Phase 3 and the size of the Phase 3 that we would require.

Okay, I got to keep this moving, I am going now shift gears and we are going to turn it over, its going to be glucagon program but first we need to set sort of the basis that why do we need glucagon from both the patients standpoint and from a physicians or practitioners standpoint.

So Donna let me ask you to come up and educate us on hypoglycemia.

Donna Rice

Thank you. Good morning. I am really honored here to really represent the clinical practitioners especially develop education when we talk about diabetes and hypoglycemia because we really know that in order for someone to successfully live with diabetes and manage it, education is really a critical link.

I titled the presentation the most feared complication of diabetes management. And I did that on purpose because as a diabetes educator and working in clinical practice for me it is one of the most fear things and working with individuals and really on today aggressively trying to manage them the fear of hypoglycemia from a provider perspective is really out there and one of the big limiting factors for aggressively managing diabetes.

So if you look at diabetes we know we have an epidemic of type 2 of diabetes in our country and its escalating and it’s just an incredible proportions and really when you think in terms of that especially because lot of the new diagnosis is around type 2 because that's the majority of individuals with diabetes.

The complication rate most of the diagnosis will have complications and the complication of hypoglycemia is real under type 2 population especially those treated with insulin. So hypoglycemia is a burden, it’s not only a burden on the individual from a positive life perspective but all time the patient and to the healthcare system from a financial perspective but I will find the patient and the health care system from a financial perspective and if we look at hypoglycemia especially in the elderly we know that in patient hypoglycemia can lead to longer hospitalizations and greater a risk of that during and after the hospitalization and for each day with hypoglycemia the length of stay increases by 2.5 days and we know that they are significant in the current health care environment today and a study in the UK in 2007 and 2008 we know that there are more than 10,000 cases of hypoglycemia that constant hospital admissions which equated to 50,000 bed days and 69% of those episodes were in the population of over 60.

So the class of hypoglycemia per episode is anywhere from 1,087 from one study for mean cost of nearly $5,000 and then in a more recent data suggested that the cost of severe hypoglycemia in Europe and in three European countries ranged in Type-2 range anywhere from $774 to a $1,003.

When we look at hypoglycemia values, I mean this go back for a second, in hypoglycemia we really begin to see our mental changes around when the blood sugar is dropped around 60 to 65 really they become much more impaired when it drops below 40 and less in time we know that mentally the neurons are essentially become electrically silent so it’s almost like what you can call coma.

So the definition of hypoglycemia in patients with diabetes is really to find that it is an abnormally low plasma concentration less than 70 and at present diabetes guidelines because of the difference that happens at 65 and then actually even lower than that. So this is a plasma glucose concentration of less than 70 with or without symptoms that really can expose the individuals to harm.

So if you look at signs and symptoms and when we talk about severe hypoglycemia and we talk about the cost of diabetes, it's usually related to the severe hypoglycemic event that requires assistance from another individual or hospitalization; but the mild and the moderate hypoglycemia often times it's not documented. We don’t know how many times it's really happening and there is a cost to the individual both in maybe mid stage, at work productivity and also on financial cost. But some of the symptoms around mild hypoglycemia and I am sure all of us in this room have had an episode of hypoglycemia, whether we have diabetes or not, where you feel little bit shaky, your heart rate is beating, you may feel kind of anxious and then as it gets more and more severe, you really feel you know, you can develop a headache and then can get really shaky and sloppy and then more severe diabetes, you can actually pass out and become very confused and unconscious.

So looking at the path of physiology with hypoglycemia, one of the wonderful things about our body is we have great compensatory mechanisms that really help us in times when our blood sugar drops. So we have the brain that needs sugar, remember the brain is the organ that can really less or have blood glucose and the body can respond to low blood sugar in different ways and one is glycogenolysis where the body breaks down glucagon stores, at times of an emergency and also the liver can also produce glucose from other sources to really help elevate the blood sugar. So we have a lot of comprehensive type mechanism for often times in diabetes it's really not enough and we need to have other things.

So what's the magnitude of the problem? Well, we know in Type 1 diabetes, 2% to 4% of death with Type I patients are attributed to hypoglycemia and as an educator in practice, if you lose a patient with hypoglycemia, you become more and more astute to hypoglycemia and your education and your research and trying to really get people to process their blood sugars and their patents it becomes even more and more important for you. You have an average of two symptomatic; they have an average of two symptomatic hypos per week. And then average of one severe hyperglycemia event per year.

With the Type II diabetes the overall is less frequent than Type I however we know that diabetes is a progressive disease and the Type II population they actually develop the frequency equal to Type I just because as the disease progresses the management of Type II diabetes is much more aggressive and lot of them are in front.

So what class of hyperglycemia? We know certainly that is medication access or in terms of them for in therapy. Also ill-timed or in correct insulin administration and that is why if you look at the laundry list here of different things that could create hyperglycemia you could see the critical link and the role education plays in individual with diabetes trying to manage that. Certainly, the lack of management of meal timing; you know that meal timing is really, really important and even looking at inpatient, hospitalized patients with diabetes, the time insulin is administered and the time they could progress it’s traces often they are delaying you would see quiet a state of hyperglycemia in inpatient.

Also the missed meals appeared to fasting increased physical activity and also other non-diabetes specifics like alcohol consumption and that’s a huge fill in when your child goes off to college and you know what happens on college campuses and with pure pressure and things like that and develop alcohol place and their education piece that needs to happen with that; other metabolic diseases such as renal failure and also other severe illnesses and certainly certain medications can really potentate hypoglycemic events.

So severe hyperglycemia is really an event requiring the assistance of another person to actively administer carbohydrate, glucagon or other resuscitative actions and that is really (inaudible) severe and really at times that it happens you might not able to get glucose levels but when you give sugar that they recover that it’s related to low blood sugars.

So looking at severe hypoglycemia and balancing the risk of complications and there is an educator on practice and a clinician its really difficult I think to really kind of unbalance the risk of control versus hypoglycemia and this is the study that came from the [DCGT] which was a landmark study, that relieved the active rate of complications and the progression of complications with lowering A1c and we know that good control and lower A1c really equates to delay in the progression of complications or preventing complications. But like I said its very, very tight balanced and as A1c can lower the risk of hypoglycemia becomes even greater and that's one is certainly the limiting factor in practice with aggressively managing diabetes.

So why is hypoglycemia so feared by the patients? Well, we know if any of you had a low blood sugar reaction we know that it’s a very, very tough, it’s a horrible feeling; you don't want it to happen again, its scary, it can be very, very embarrassing. Often times it leads people for isolation, the often times people won’t do things in groups because they are afraid that they can get a low blood sugar reaction.

Certainly leads the anxiety and decreased quality of life and its recognized as a medical emergency and certainly it would require immediate action and treatment and it can resolve from this work and certainly on this school and mostly because it can certainly be fatal.

So the healthcare provider is certainly feared because irreversible complications and that and I don't know one provider healthcare that ones to have that all comes to the patient, so this is always looming on the four signs when we are trying to manage people. And may easily resolve in to medical emergencies and there is hesitation to really aggressively manage the disease and also management and educationists time intensive and as an educator I can tell you we have the opportunity and it’s a great opportunity because we get to build the relationship with that person and we get to work with them so that they could really process diabetes and make diabetes fit into their lives and really live successfully. But then it takes time and it’s difficult; it’s like I already take credit to like learning your iPhone or your BlackBerry we need tutorials and we go on to Google and we look at the stop so it is the same thing with diabetes they need someone there to really help them and guide them to their process.

Education support may not be easily or readily available and there might be physicians in practice that aren’t really connected to education centers or they might not know who their educator is or where the temptations and may not have the knowledge or the time to really sit down with some one to teach them. It’s difficult to maintain management with skewed A1c and one of the things that really I think needs to be brought out is the value of monitoring of glucose and today there is a lot of controversy around Type II but we know that in order to really successfully manage diabetes they have to be really be able to see it and know it in process and they have to look at the root problem.

So if they have frequent low blood sugar reaction and then high skews at A1c; because A1c is really an average and so that really when you trend to manage somebody really could become a problem. So individuals really need to know when their blood sugars are low and when they need to process that and figure out why it was low; what were they doing; what was the timing of their meals, their activity and other medications that they were taking, so that they can prevent future hypoglycemic events from happening. Also there is an increased legal risk for practitioners and really a risk for the young and elderly.

So now it’s adhered by the family members and if you work with children with diabetes and work with their parents, it’s certainly a challenge for them, but the fear of a fatal or loosing a loved one. The fear of needles and injections; you may have a needle phobia or you don’t want even give yourself an injection and then to give your child an injection is whole another psychological process that you have to work people through.

Fear of injecting or hurting a loved one and also the family’s burden of educating support people. I was recently working with young mother with a child with diabetes and she said if I had to teach one more person about glucagon and sometimes I forgot that I teach this school person and then when the children go to middle school and they have multiple teachers and multiple things, it really becomes complicated and also difficult and babysitters and also well remedies be available in crucial situations, most people keep it in the refrigerator but what if somebody was rearranging the refrigerator and put the glucagon in the bottom drawer of the refrigerator and at times of emergency and stress, it's really hard to think and you tend to panic.

So a lot of these needs to be so much support and so much education and really reaching people so that they could really live successfully. So we look at the treatment of mild and moderate hypoglycemia and we called rule of 16 and really if the blood sugar is below 70, you treat with 15 grams of carbohydrate and there could be three glucose tablets or four depending upon the brand, a tube of glucose or else juice or coke and we teach people to wait 15 minutes and then to recap if it's below 70 to repeat the dosage and it's really important that we teach them the rule of 15 because what happens with hypoglycemia is when you feel very bad and you panic, you tend to drink more and then your blood sugar rebounds high. And that’s why I think really important that you have such doses and I think this could be really advantage when we talk about the new role of glucagon in the future.

Looking at the treatment of severe hypoglycemia, we know that glucagon is given by injection and it could be either into muscular, subcutaneous or IV and the dosage is usually around milligram for adults and half a milligram for children, just 20 kilograms or less and it's by prescription and as you think as an educator, when we get to intervene, often times we are the ones who are really instrumental in giving those glucagon script because often times and as a busy office visit and a 10 minute office visit often times those scripts aren’t written its just mainly because of think of it as the time and I always say that educators is really that extended role of the physician and we are really there to support them. And to really continue to education and making so that their patient has all the tools and the necessary things that they need to really be successful.

It really has to be administrated by someone else and they need of course like I said a lot of education and support in anytime of low blood sugar it’s a stressful situation not only for that person who has diabetes but also for their loved ones or the caregivers.

And really today the current kids are not ideal. It’s a multi-step process and the stability of the mixture, its really short-term and just like the evolution of blood glucose meters, we made them more simple and we kept simplifying them because of the more steps to the process the chance for error and it’s the same thing when we talk about glucagon administration.

So this piece I am not going to through each one but if you can just kind of look at the slides, you will see that this is from the package (inaudible) and glucagon and there aren’t many steps to administering glucagon. So if you just look at it and sometimes I don’t know about you but if you try to set up a VCR or DVD and you look at the instruction sheet, its always instructions, sometimes its easier for someone to just kind of walk you through it and talk about it versus reading every single step because it is more complicated.

So if you look at this and I am just kind of go through the slides, just quite a bit of stop to the administration of glucagon and certainly at the end of the administration you don’t certainly call 911 as soon as your child is awake and able to awake, you want to certainly turn him on the sides so that they don’t vomit and they are awaken to make sure that they are eating the kind of next scheduled meal with some carbohydrate and proteins.

So there is a process PCR and it is a bit I think scary for new people or new parents or individuals with diabetes or [curricular]. So looking at glucagon just summary, it’s really a must have for individuals on insulin or oral agents, its five prescription only. So our efforts need to focus on advancing the knowledge about hypoglycemia treatments to all providers. Diabetes educators are critical in establishing awareness and training around glucagon injection.

And people with diabetes must be taught about the importance of having glucagon on hands at all time. And hypoglycemia education must include glucagon awareness and if you look at what’s out there and currently out there even with glucose tablets extreme choose or five gelatins or whatever, the tablets (inaudible) is moderate and if you look at glucagon a lot of the information around with education materials really don't address glucagon the way that they should be.

And we should look at on creative marketing efforts with insulin orals and glucagon within upon maybe packaging them together or creating the awareness at the point of sales or areas around kind of marketing. Looking at the world of education we know that the best thing for hypoglycemia certainly is prevention, it’s a preferable treatment.

But education and support are really critical in reversing hypoglycemia and hypoglycemia unawareness, patient empowerment, patients have to be accountable for their care and I think we are really building in on certain things around empowerments and really making people accountable, behavior modifications, sometimes they are all consist of habits and its hard sometimes to change habits if you skip meals or around administration or physical activity.

So it’s really breaking habits and really working with people based up at a time and really looking at different things that you can do to change behavior to make their diabetes management much more successful.

Also frequent testing either through a self management of blood glucose or continuous glucose testing but it is really important that people are aware of those patterns and they know their blood sugar and I always tell everybody once you know your blood sugar like the thumb of your hand may be you skip testing at a time but until they build that knowledge around the facts of their meal and their blood sugar and the effects of the physical activity in the blood sugar testing is really a patient tool and people need to use that to really be successful.

Individualized glycemic control and that everybody’s control needs to be as tightly controlled, we need to look at the elderly and we need to look at children and really basic control is a little bit differently. Our flexible insulin regiments and also ongoing assessment, education and evaluation.

So in summary, hypoglycemia is the most feared complication of diabetes, left untreated it can be fatal. It affects quality of life and can lead to social isolation. The cost of diabetes and cost of hypoglycemia are burden to both the patient and the healthcare system and education is critical and treatment options need to be user friendly and cost effective and glucagon saves lives and its required medication for the treatment of severe low blood sugar reactions.

This is a little video that we are going to show and it just shows the demonstration of glucagon.

[Commercial Video]

So you can see why it is a little bit complicated and if you are in a stressful or nervous situation or your loved one was unconscious, those stops would be a bit cumbersome and it would be really, really difficult. So I just would like to say thank you and open it up for questions.

Question-and-Answer Session

Seth Lewis

Any questions for Donna?

Unidentified Analyst

(Question Inaudible)

Donna Rice

Hyperglycemic events you see all the time and often times we don’t see them because they happen at home or they happen at school and they go to the emergency department. But if you look at the amounts of hyperglycemia in the emergency department is staggering. And now there is a lot of exercising to really curtail and to really do education and really prevent some of those unnecessary (inaudible) because hyperglycemia is a reality in the emergency department today.

Unidentified Analyst

(Question Inaudible)

Donna Rice

I don’t know, do you know that?

Unidentified Company Representative

Okay. I will say it’s used a lot less frequently that it probably should be because of the complexity involved. Family members may not understand how to do it are worried about doing it in a stressful situation, they maybe more comfortable calling 911. So that the multi step process any ideas stabbing needling into somebody else when they are unconscious or perhaps having a seizure is a little bit overwhelming to non-medical personnel.

Unidentified Company Representative

And one of the comments I’ll make is that you usually don’t have that with you, so most people have their glucagon at home in refrigerator and shelf somewhere and much of the time they are not there; some people put in their cost and people put an extra kit in the office, but most people leave home without their glucagon and so if you are out off about your hyperglycemia anywhere you’re not going to be….

Unidentified Company Representative

Although we were at ADA two years ago and we heard this beeping noise. We looked around, that sounds a lot like a navigator, as far as it continues glucose monitors and we are going to lower, we are coming from and then all of a sudden there was this the stir and somebody was unconscious from hypoglycemic episode in the hall and then their navigator beeping hypoglycemia alarm and one of the bystanders actually had a good thing and revived her and it took only a couple of minutes. She woke up, that before the EMS got there, EMS ran there, and then she refused to go with them, she is like now I am fine. I have my glucagon and I am good to go. But you know that would have been a very different story, if there hadn’t been the glucagon available and so they would have to put an IV and at that point, they probably would have insisted that she go with them to the emergency room.

Unidentified Company Representative

That was also the American Diabetes Association National Meeting with the room full of endocrinologists and a bunch of other people with Type I; do not often in that situation.

Errol De Souza

Okay. Let’s keep moving, we are going tag team again, I am going to fill in for Alan here. But Gerard is going to give you a pretty good sense of the market because he has gone through a market analysis that we have done internally and then I’ll come back and tell you where we’re at from a Biodel standpoint. Gerard?

Gerard Michel

Yes, what I want to do is go to the current commercial opportunity and the expansion opportunities and just a little bit about where a lot of this data came from. Typical IMS audit I am sure you are all familiar with and we’ve had a number of focus groups with patients, diabetes educators, endocrinologist and payers on this topic. And we have also purchased longitudinal data and we followed about 5,000 patients over a period of four years where we could look at when they got a down script, whether or not they were on oral meds which one of that they were Type II, whether or not the previous year they were on insulins which told us whether or not they were new or not new to insulins whether they were out, they were whether or not they were on intensive insulin therapy or just basal; we could find out their ages, what type of insurance they had etcetera. So it is obviously blinded and I am not going to give you names and like that names, but IMS has a deal with payers, they blind that data, you could purchase them and follow a cohort of patients so we are able to get a really grainy view of what the business currently is and where the expansion opportunities are.

So quickly right now glucagon is used in two macro segments of the market. The first is diagnostics; this is a segment we are not going to talk about very much. The overall market it is a $185 million, the diagnostic is about $65 million. It’s diagnostic in some surgical procedures for GI procedures, so glucagon in addition to converting glycogen into glucose from the liver that also requires the guts, so it stops mortality for a short period of time and therefore GI docs like a lot because they can do their work without worrying about the peristalsis etcetera. That market for our interviews is very little in terms of unmet needs. It’ really no big deals in terms of reconstituting a vial in a GI suite and going forward, so the market we are focused on is a $125 million market for emergency.

Now glucagon is essentially you should think of it as a fire extinguisher. It’s something you probably never going to use, but you want to have it on hand. Now more than 50% of homes have fires extinguishers; the risk of that and the fire is far lower for your average home than it is in terms of a severe hypoglycemic event if you are Type I or an at risk Type II diabetic. Now my numbers there are 25 deaths per million patients which I pulled off of a website somewhere and this tells you why you should believe everything you read. I was just doing some back of the envelope math and what Donna said of 2% to 4% death in Type I.

If you back that out, it comes to something about two orders of magnitude or larger than that, which I think is probably more accurate and part of the deal here is it depends whether or not when they get to hospital where they know it’s hypoglycemia or whether you calculated somewhere else but my suspicion is more in the thousands or tens of thousands per million patient years.

It's a much larger, Europe, much larger risk for severe hypoglycemic event if you are type 1 or adverse type 2 diabetic, than you are in terms of having a fire in your house, you have most people have fire extinguishers. Very few diabetics actually carry this or have these kits at home. And the reason for that is these kids are not really like fire extinguishers. They’re more like (inaudible). They’re very, very cumbersome to use. You need to bring someone in to have them trained. So imagine you are going to (inaudible) to your co-workers and say hey, I want to leave one of these kids here. Come with me in three days between 12 and 1 and you need to get trained on how to use it. The same adults don’t want to do that with their spouses or with their boyfriends or girlfriends or roommates. So what happens is people don’t get trained. They don’t get the kit and most diabetes educators say we're not going to give you this kit unless you bring in the third-party to learn how to use it because it is that cumbersome and often when people have it, they say I can’t handle this. I am just going to dial 911. It's just too cumbersome to use.

Now if you want to look about where are the emergency kits currently sold? The portion where I think the most growth opportunity is the retail. Okay, the kits that are going directly into the patients hands that are filled at pharmacy or either mail order or from CVS or (inaudible). Currently that market is about $55 million. It's growing in the low teens every year. The other segment of the market is institution. It's about 50 million. That breaks down into long-term care facilities and we believe emergencies. So we see a fair amount of uptake in hospitals for the kits but we interview the hospitals, they only use the vials there’s no reason for them to have the kits.

We talk to some ambulances are very small percentage of ambulances do carry this kit. The reason why they don’t all carry it is because only if you are the highest level of training as a paramedic or you’re allowed to use the kit. You’re not allowed to use drugs that require reconstitution an interesting analogy is the EpiPen, any EMTS is allowed to use EpiPen. So we’re able to introduce the product that did not require reconstitution you probably get a fair amount of usage and get some growth here.

In terms of long-term care, if you have patients who are insulin dependant in rest homes and generally they have for the interviews generally they have a glucagon kit on hand, evidently glucose control for diabetics and long-term is horrendous and severe hyperglycemic event is not uncommon at all. And so it’s probably most commonly used place where they use glucagon I suspect based on the interviews this is very difficult to confirm obviously with data.

Now, what is the current penetration by segment of market? If you are new Type 1 about 50% of the patients again using longitudinal data after they get influents for the first time, get a glucagon kit when we interview the nurse educators and the docs they all universally say everyone gets it. The truth is probably somewhere between I suspect two-thirds or so get it. And about 50% of them end up filling the script. Where you have get penetration is where you have concerned parents.

Here they are with the kids and they go to the doc’s office they get trained, they don’t want their kid to obviously have a severe hyperglycemic event without this protection. So this is where you see the greatest penetration.

However, once people become adults they are complacent, they don’t bother having the kid around anymore. So you see less than 10% penetration in this segment. This is where we see most of the potential growth opportunity. And again the reason why you have this low penetration. We believe is because you have to bring someone else with you to the doctor. How many if you want to bring someone along with you to the physician’s office they haven't trained them or something, most people don't want to bother doing that.

Patients who are new to prevalence 1 who are type 2 have about 10% penetrations. And patients who are type 2 who are been uninfluenced for quite a while have well under 5% penetration. Now this makes a lot of sense on the phase of it and that conventional wisdom is the type 2 patients have a much lower overall risk of severe hypoglycemia.

A lot of them still have cell function and have (inaudible) function. However, if you look at the data and there is a study published in Czech Republic and a study published in the UK recently what you find out is the number of patients who call or have ambulances called for them for severe hypoglycemic event is about the same for type 2 as type 1, and the reason is that the longer you have type 2 the more like to type 1 you are. So if you look at various risk factors you can identify which patients were most at risk, and you can take this huge pool of type 2 patients and draw circle around a sub segment of them and identify who is at risk.

The risk factor is probably the biggest one is how long you have been on insulin therapy and how long since you have been diagnosed. The next is probably your age, are you on passable to mix and then actually the largest and most important one I take that back as a previous hypoglycemic event that's the best on indicator of being at risk.

Now if you can identify population those of you who have ever sold anything, you can market to them. You can sell and promote. So you can now paint a picture with the studies that are out there top of the docs and the nurse educators and say look for patients who meet this criteria, this is who you should be describing glucagon and that's a real easy way to grow our market once you can identify and paint a picture of the patient.

And we estimated somewhere between 500,000 to 750,000 patients who probably meet two or three of those risk factors. So that is a nice segment to go after. Now in terms of pricing what is this worth to the payers, there are awful lot of numbers up their that’s because there is an awful lot of incidents and cost numbers published at that are widely divergent. So what I have done is I have taken different rates ranging from 0.1 per year for the average patient to one per year by taking cost per incident ranging from about a grand which is low end of the main figure.

I have seen the 4,000 which is on the high end on then what I have done is I assume let’s say on an ex-factory price phase as we increase the cost of the product by $50. Right now, ex-factory rate is about 100 per patients and it is probably closer to $120 or $140 and then we say let’s say for everyone you prescribed it’s used 50% of the time when it’s called upon to be used. That doesn’t mean 50% are used but to assume when there is a hypo half the time they actually grab the kit that they have.

And down below you can see the net savings to the payer or expense for our RX written when you can see is only for the least, the most conservative rate of incidence and the most conservative cost is it actually cost the payer or anything. So in reality, you can probably raise the price 50% and soon like excellent pharmaco economic argument to the payers that they should be covered.

So now let’s look at potential sources of growth. So what we try to do is do in middle of the road we will help large of this market grow in three years, ignoring growth in overall patient numbers just in terms of primarily penetration and premium. So for long-term care we don’t see much growth opportunity primarily because we think they already have it on every floor available for our interviews.

For ambulances, for emergency responders, we think it should be used as commonly as an EpiPen. It will take a while to change practice to state by state effort. Now I assumed one per year if ambulances did start carrying it and then last night as we go into the slide, our panelists here told me I was crazy that it will be something like 10 per year if they were carrying it. So that might be a much larger number than I have there in terms of truly ambulances do have and I don’t know whether the average ambulances have one a week or three week but they have very frequent calls for severe hypoglycemia. So there probably is quite a bit more growth opportunity than I initially thought there based on what I learned last night.

In terms of Type 2 patients, I am assuming that 30% of new Type 2s and 30% of all high risk Type 2s get it in this forecast. So that gives you another about $50 million in terms of business. That could be quite a bit higher. I am being fairly conservative looking for three of those four risk factors when I try to identify the population. Type 1s, this is where I see most of the growth opportunity, given overall, there is about 10% penetration and we would like to try to get more in the fire extinguisher range. Make sure everyone has it and once you show payers that saves the money, they can get involved and try to push the usage of the product actually, because they would much rather pay for this than an ER visit.

And then lastly, we put a 20% premium here, another 50 that I show was in the prior slide. So overall, I think just by penetration in premium, not overall growth in patient background, you probably can grow this market to about $300 million in the U.S. These are all U.S. numbers.

So now what do we need to get this growth? So what I am showing now is the minimum you need to get for the long-term care institution. There are usher requirements that say that if a needle stick protection device is available the healthcare provider should use it. So if you introduce the products with needle stick protection they will immediately be market share shift. The reconstitution is important in this market obviously even though the healthcare professionals; for the ambulance segment its mandatory, you won’t get EpiPen like usage unless it doesn’t require a reconstitution. The minimum shelf life, again this is the minimum we’re looking at 18 months refrigerated, refrigeration is not a problem either an ambulance or the long-term care setting.

For Type 1 and Type 2 needle stick is per se is not as important, what’s really important is there is a low fear factor people see they can use it very easily. And they know reconstitution is the biggest there. And also be important not to have insulin and half long needle which is really what you see is roughly that size with the current glucagon kit. But what’s most important is you don’t want to have to drag somebody into be trained. Now a lot of nurse educators probably will say, I want you to have someone in to be trained. But in reality if you have simple enough you can turn the Type 1 patient or at risk Type 2 into a trainer; so you train the trainer. This is how you use it, use these prescriptions, take one to the office, show a few for a set of user, put it in the fridge, keep one in home, tell your family members how to use it, keep it in the fridge and then I think you’ll see a lot more uptick; again, if you don’t have to bring somebody in and put them through a training procedure.

So our entry product that we’re talking about now we’ll go into the technical details. It’s an auto injector with needle stick protection; we’ve shown an SHO shelf device with multiple excellent auto injectors on the market. We don’t need to go with the sports design. So we would just customize that with color etcetera, it doesn’t have to necessarily be the SHO; in terms we wanted to make sure once we pay, we’re going to put our product in that we think at a minimum it’s going to have 18 months refrigerate self life, we require very little training and again it will meet the usher requirements that we talked before we should leave the rapid share shift in the institutional segment.

Now there are some expansion opportunities for glucagon. These are not necessarily things we are driving after right now and some of them require a lot of thought in terms of development but they all are based on either healthcare professionals or patients saying we would like to have that. Now I have done this backward, upper left hand corner is harder in terms of regulatory risk going down lower it gets better, so we have that point at me last night, but some are confusing but I didn't change it.

So where we would like to go next this is something called what I am calling the acute mini dose prevention, severe hypoglycemia event prevention. So anyone who has had small kids knows that a couple times in a year they generally come down with the stomach bowel, it just happens with them and that’s no big deal unless your child is a Type 1 diabetic and you just give then prandial insulin dose then they either throw up the food they have just eaten or alternatively they just can’t eat at all.

So what you are doing now is you are on the way to meet ER to get an IV line for them. There are two studies that are published where they worked out algorithms where they based it on the child’s age and/or their weight, where they titrate the amount of glucagon given, so they are not giving them a sledgehammer blow. The amount of glucagon in the rest of the doses is huge, it will make you sick to your stomach and you will feel like you had the worst hangover that ever you had in your life and you don't need to give that amount.

In an emergency situation when someone is slipping into a coma it makes a lot of sense to pull out that sledgehammer. For a kid, who just had an insulin dose there is no reason to put them through that or you try the kid to an hospital and have an IV line put in. What will be better is to just figure out how much they need and titrate it and you’ve done that before, you told me you pulled up the manuscript from one of the papers and figured that as your child is non responsive and so it is done off label by some parents. Now you are probably not the average parent working on the artificial pancreas, but it is doable, so that’s one market we would like to go after and it’s acute and any acute indication is much easier to do than chronic as you all know.

The next one we will talk about is the one that’s a little controversial depending on who you talk to; who we talk to in Type I patients and some Type II, they say I would sometimes I know I have enough glycogen in the liver; I know I have eaten enough, I know I am slipping low whether it’s exercise or something else I really don’t want to take any more of these dextrose tabs. They would like to have an alternative delivery of glucagon, some way to raise up their glucose; use the glycogen storage in their liver to bring themselves back up; an alternative to taking incremental calories. This is required that alternative delivery I don’t think the one take another needle stick and probably we would take some significant development efforts in that, the FDA would want to be convinced that you are doing a good thing with this and not putting people at risk for let’s say hypoglycemia four hours later by depleting the glycogen storage. This is definitely something patients are interested in.

Now we’re going to talk quite a bit about the artificial pancreas; one way to go forward is just to go for the goal, go for the (inaudible), which I am hoping you guys are successful. Another way to do it is just to start out with a dual chamber pump and have glucagon in one reservoir and insulin in another and allow the patient to give themselves a correction dose of glucagon. So one of the pump companies out there, doesn’t mind me sharing that tandem is that market research has to what patients want to see in the second reservoir and by far and away it is glucagon. So one concept is to introduce the pump with few chambers; this would be a much easier regulatory. I think then going straight to close loop for both glucagon and insulin. After you have that, you can close the loop on the glucagon only which means that glucagon will be dosed automatically when you go low but don’t close the loop on the insulin because that’s the dangerous hormone that can drop you into a coma if the algorithm malfunctions or the sensor malfunctions.

So that will be the second step and then the third incremental step would be closing the loop. So that’s another pathway that we can consider working on. We would love to see it go right to the close loop artificial pancreas immediately but we're having conversations not a lot of work right now but conversations of pump companies about the open loop, the bio hormonal open loop. In other words, you dose both the insulin and the glucagon.

Now for this various new indications what we have to do. So for the pediatric equipment dosing, it would simply be a titrate-able pen, that’s very simple. It would be the same formulation in all likelihood as rescue. For the chronic mini dosing, we probably need to do either intranasal or some type of sublingual or buckle. Now that would require increase in the bio-availability of the polypeptide. The technology we license to protect to help with the stabilization of glucagon also opens up tight cell injections and you can get excellent bio-availability.

We have not tried that yet with glucagon but polypeptide it’s similar site so just (inaudible) have excellent bioavailability, something in the 70% range and that will be more than adequate to create an alternative dosing version of glucagon.

And then lastly for the pump, what we’re developing now, we are developing with pump in mind, so the formulation that we're putting together right now for rescue should be usable in a pump that’s the overall plan.

And with that, I will take any questions and/or hand it over to Errol.

Question-and-Answer Session

Unidentified Analyst

(Question Inaudible)

Gerard Michel

Yeah the question was can the emergency responders automatically put it in IV lining? Yes they can. But if you have a patient who is convulsing which is often part of what happens when they become severely hyperglycemic or patients that somewhat will be. It’s hard to put the line in it’s much faster to be given the dose of glucagon. What we envision is they would give an immediate dose of glucagon with an auto injector which takes seconds. And then move right to an IV line. So it wouldn’t take extra time maybe 30 seconds and then make a move to an IV line.

And the benefit of that is if the patient comes out of the comma, they’re probably not going to have to bring them into emergency room. They can leave in their home; have a candy bar whatever after that, they’re good to go. You put an IV line they go into the hospital. Sort of avoids the hospitalization.

Unidentified Company Representative

(Inaudible) IV access in the field and then the hospital we have other options we can go to central line which you can always get the feel occasionally it could be very challenging.

Errol De Souza

Let me just take you back on towards market analysis and tell you where we were at Biodel in terms of the formulation. But also let me take this opportunity to just sort of to bring you up to speed in terms of what’s responsible for glucagon breakdown. I mean for the most part we think of sort of breakdown in terms of chemical instability which is clearly one of the issues to deal with glucagon. But we also have physical stability to deal with glucagon.

And again I’m not going to go through the details but the physical stability. If you think the really glucagon is an example and just been is a neutral [PHE] if you could try this with a kit, it won't take long, you will see a gel forming, you get this five drills forming essentially which is responsible for the lack of stability. So you have got both chemical stability and physical stability to deal. With regard to the chemical stability, I mean these mechanisms have been worked out quite well in terms of both the dimidiation and leverage of key amino acids.

Now one of the mechanisms by which we are going to stabilize glucagon and again I am not going to go through the details of this slide, but think about keeping a liquid formulation in a stable environment and protecting it, well how can you do that, you can have my cells that formed which protect this in the liquid formulation and then when you inject it micelles breaks down and then you got the glucagon.

And that's effectively what the technologies that we are very utilizing and again we won't go through the details of it but its forming micelles and protecting the liquid formulation of glucagon. We have got two different formulations that we are working with and it really as a family of formulations because we see glucagon as rescue as being the initial entry point but extending in many different markets.

This 903 family which we probably have the most extensive information on, it’s a proprietary Biodel formulation we have got real time stability now two years refrigerated this is in projections, you will see lot of data in terms of a few weeks and we are projecting it out and we have also got pump compatibility because these are formulations that we like to work with and Steven and other folks in terms of developing other applications of glucagon.

In June, we announced the license from a company called Aegis and I will take you through a little more detail in terms of what that technology and that’s the 905-913 family and we say likely for 24 months obviously when you do licensing in June you are not going to have 24 months but I can tell you all the data that we have is tracking at least as good if not better than the 903 family which gives us a head-to-head comparison in terms of the directions we are moving forward.

So let me talk about the ProTek that’s the Aegis technology. It has a dual benefit of action in terms of what peptide proteins stabilization and again the details I shown here in terms of protecting from oxidative degradation which is part of the chemical degradation of glucagon reduced aggregation is now the physical degradation part of glucagon. But it also has another utility that Gerard alluded to in that it open type cell junctions.

And in fact this technology was first developed for other routes of delivery like intranasal formulation. We added a slide that we took out but if you look at even large proteins like EPO they shown intranasal delivery with that particular technology. With just from stability standpoint to give you a sense this is just something that Biodel proven and this is the same technology that (inaudible) has licensed to sterilize their antibodies and we have an exclusive per use in terms in of glucagon.

So let’s take a look at some data that we have at different temperatures that we need to go through. Again, here 903 family, 905, 913 family, two years here; here we’ve got about 11 months real time stability. If you look at room temperature, the 913 familiar is significantly better. Remember the hurdle and I will take you through here. You may say 81% it's broken down a lot. Actually, the threshold for breakdown is 65% here. So we're still above the threshold. And then if you look at 37C which is relevant to utility in the pump and in particular with agitation, you can see we're well beyond what you would require for a pump which would be you know, filled every three days. So you need six day stability and we're well beyond that.

I am going to take you through three slides that are going to show you sort of stability from accelerated stability at 37, down to refrigerated stability and all of them are going to have sort of the same family of formulations. This is the Lilly, this is the 903 family and this is the Aegis technology. You can see the real benefits of the Aegis technology when you get to accelerate the temperatures and 65% is really the chemical cut off for glucagon content. But when you look at potency as a cut off, it's actually 80% and while you may say, why is it different, 65% versus 80%, some of glucagon degradation products, actually biologically active and that’s why you have that difference.

So that’s 37, here is room temperature, Lilly, 903 and you can see the ProTek technology is tracking better and then the reason we end license it and finally refrigerated, you know, it's almost a flat line, where we’re out actually now to two years. So we're very confident that we can meet the profile that Gerard talked about in his market analysis in terms of moving forward. But I’ve got to say we’re also looking at room temperature formulations. We’re now quite there more to come in that particular area in terms of making sure that we can not only leverage the current market, but expand the market in terms of moving forward.

And finally from a stability standpoint; and this is talking about from compatibility Bob and his group had done extensive studies and these are very complicated studies because you’re not just looking at compatibility in the pump, you’re looking the reservoir in comparisons with what sort of controls which for us are sort of glass cartridges that we would utilize.

What do these formulations look like in animals? I am going to show you data both in diabetic swine as well as in normal dogs; I mean for us we don’t spend a lot of time with the rats. You’ll see a lot of data in rats that are really not indicative of the kind of bioavailability that you could project in terms of man. And given that we’re in the insulin business, we’ve got a cohort of diabetic swine. So why not just go to the best model that’s out there.

And this is more in the micro dosing paradigm that Ed and Steven will talk about; you can see comparable to the Lilly glucagon and this is the 903 family, this is a typo here. And now when we look at 913 ProTek family; I am actually showing you a variety of different formulations related to different forms of excipients, different amounts I should say of the excipients relative to the Lilly glucagon which is shown in green here.

Now this is at a clinical dose that would be relevant to the 1 milligram dose that's given in man and recently know its relevant we have the pharmacokinetic data of showing we achieved the same blood levels that's been shown in the Lilly paper in terms of the pharmacokinetics and you can see we see a very nice pharmacodynamic profile.

And the reason I am showing you the dogs is, when I come back to the regulatory requirement for the clinical development, its not in patients, but the regulators have given a feedback in the pivotal trial would be in normal human volunteers; that's why we’ve also done studies in normal dogs.

So let me finish up here just a couple of slides in terms with the regulatory and milestones as many of you know in meetings with you, we just announced this program this year and we are moving very fast, but we have been working on glucagon as you know for at least two years, I am showing you real time stability. So don't we have a coming out party this year?

It’s simple as last September we submitted to the FDA a request for a meeting. In terms of tell us the regulatory paths for approval. So they came back to us and said, we will talk about a meeting just send in your questions, which we did in the fourth quarter of last year. There is no 30 day call coming in here, they could take their sweet time which they did and in March they came back and gave us the guidance, that gave us the confidence level in terms of sort of designing a plan in terms of moving forward and the reason we wanted that comfort level is the last time a product was approved it was almost 12 years ago which was the novel Lilly glucagon product.

So what's the guidance that they gave us in the letter on March 6th and this by the way was a written guidance. In terms the feedback was assuming development, you know in adult the existing data would support pediatric, so we don’t have to do studies in children in terms of getting approval for use in children that dose obviously is a different dose.

They gave us you know the endpoint; they told us lots of detail on the toxicology and keep in mind, the questions that we asked here was not just what toxicology you require for the drug product, but also for our excipients that are being utilized the way you require different toxicology and part of the reason we did the license with Aegis is there is an extensive toxicology on the product in spite of that we will have to do more additional toxicology.

They gave us a lot of details on human factor study; so when you think about the development for the rescue indication the clinical development is sort of like the point of entry, but your commercial label is actually dependent on new human factor study and you know someone got carried away. We got three pages of actually exactly what we need in terms of the human factor studies.

So we felt very good about the interaction here, but that’s just the beginning in terms of the interactions; I mean obviously as we develop our studies we’ll have a needing after our proof of concept study and discuss all of that. We are not just going to sit here and say, okay, the next step is filed the NDA, we are going to have intermediate discussions and that’s what this slide is meant to be.

So the milestones we’ve talked about in ‘13 and ‘14 in terms of this indication and as I mentioned, the first formulation that these milestones are based on is refrigerated auto injector, but we also are looking at room temperature formulations.

So to summarize, I think for the glucagon approach and you are going to hear the next presentation, which is actually going to integrate the two parts of Biodel has been working on in insulin and glucagon but we look at the rescue medication for hypoglycemia as the low hanging fruit and get there as quickly as possible for you as an investment thesis but you got to know that same formulation is based on what Gerard has talked about can truly expand the market in terms of taking in and then I can tell you, through our estimates, conservative based on some of the discussions but when you are getting in to a new area, it's better to be conservative then just to throw out the projections out there.

So let me stop there and address any quick questions that you may have and [John]

Question-and-Answer Session

Unidentified Analyst

(Question Inaudible)

Errol De Souza

I wish Alan was here to answer that but John I don’t think so because that is actually not even a requirement for the pivotal study in terms of doing that and the proof of concept, the way Alan is thinking about it now is actually to give us a sense for the dose response relationship and that would be very difficult to do with an auto-injector because it’s essentially one dose or it would be half a meal. So we're planning to just use sort of the normal syringe to do the proof of concept.

Unidentified Analyst

(Question Inaudible)

Errol De Souza

We're trying to bridge the gap as quickly as possible that’s about as much as I can say. I’ve got my general counsel there in the back telling me we’re in the quite period here. But we’re here hopefully we convey to you today how we’re thinking about this market. I can talk to you the organization throughout and the team I think you met this market in a manner that I doubt that anyone else including the players that are marketing in now.

So we’re looking at two kinds of directions, room temperature clearly being one of them, portability is being another one also. Auto-injector is nice at the beginning but it would be even nicer to have something beyond and that’s not quite ready for prime time but we will come out with those announcements.

Unidentified Analyst

(Question Inaudible)

Gerard Michel

All right. Good question. The question was can we talk about the competition that’s out there. At one level when you look at the glucagon program it looks so simple and straight forward. And you think it is and they’ll analyze the competition. So there is lots of boys out there looking at sterilized glucagon utilizing a variety of formulations from non-acreage formulations, I mean Xeris, Latitude, Arecor I could just name but how those are relatively early stations in terms of formulation. And each one of them have their plusses and minuses in terms of moving forward.

Our goal is to move as quickly as possible to have the first entry point in there and extend it. But from your standpoint the competition is heating up I can tell you that in terms of moving forward and to wiping lots of attention to the competition?

Errol De Souza

Okay. Let me keep us on track. We are doing pretty today. And let me finish up with the last we have saved the best for last. We got a tag team approach with Ed and Steve and they are going to decide, how they are going to do it and we may even have some demonstrations for you in terms of the bionic pancreas.

So Ed and Steve thanks for coming.

Steven Russell

So while Ed is setting this up, I will give you little bit of background I am dental endocrinologist, at Mass General Hospital working primarily with diabetes and Ed is an engineer who was doing primarily applied mathematics and fluid dynamics problems and tell about 10 years ago when his son was diagnosed with type 1 diabetes and he shifted his focus to a point where now he is almost entirely working on bionic pancreas and not on fluid dynamics and applied mathematics anymore.

And we started working together about six years ago, he had done some studies with the graduate student in a (inaudible) model of type 1 diabetes and I saw (inaudible) at the joint from diabetes center and I was really excited by the approach he was taking at bio-hormonal bionic pancreas and proposed to them that we move to clinical studies. And so I am going to tell you little bit about what we have done so far and then Ed will show you the future of the bionic pancreas including the demonstration.

All right. So what we are trying to accomplish here is to in this physiologic way as possible to replace the functions that are missing in people with type 1 diabetes and the idea is to using current technology for continuous glucose monitoring, minimally invasive glucose monitoring linked to a computer algorithms that can control the dosing of insulin and micro dose glucagon. We can completely automate the control of blood glucose control replacing the endocrine functions of the pancreas and a lot has been said about glucagon already but the important thing to emphasize here is the type 1 diabetes is not just a disease of insulin deficiency although it is certainly that but in the absence of Permethrin effects on the alpha cells from beta cells which are lost in type 1 diabetes, you no longer have effective regulation of glucagon.

So glucagon normally is accretive in response to following blood glucose that no longer happens after the first couple of years of type 1 diabetes in fact there is some recent data that I just reviewed suggesting that it happens even earlier than we thought.

So that the primary count of regulatory response to hypoglycemia which is glucagon. There are others (inaudible) growth hormone but those are not nearly as effective nor nearly as quick and the primary response to hypoglycemia is glucagon and that is lost in type 1 diabetes, explaining why they are often more vulnerable to hypoglycemia than people with type 2 diabetes.

So the control strategy that Ed and his (inaudible) team developed, as I mentioned, uses a dual subcutaneous infusion of insulin and glucagon and I just want to emphasize one other element which is that the controlled algorithm takes into account the pharmacokinetics of insulin and so new dosing decisions by the algorithm are made with the knowledge of insulin that’s already been delivered and a model for it's transition from the subcutaneous space to the blood and this is actually the primary challenge in bionic pancreas, the relatively long delay between sensing of glucose signal and the effect of the control action that’s taken, the kind of algorithms that are used have their history in process control, industrial process control where the response to a change in the parameters that’s made by an automatic control system is very quick. When there is a long delay, this process gets much more complicated which is part of the reason that this technology has not been ready for prime time but the other reason is that the glucose sensing was not as developed as it is now.

So the first clinical feasibility trial that we did was done in the hospital setting at MGH and we published this study in 2010 in Science Translational Medicine. It was the first biohormonal bionic pancreas experiment. We used a laptop driven platform. We measured glucose from the venous blood rather than with continuous glucose monitoring in the study, controlled them out on a laptop and that shows the doses of insulin and glucagon that we administered subcutaneously though standard infusions steps.

And on the left here we have an example of one of these experiments, the experiments last for 24 hours in length. We get three high carbohydrate yields they are indicated by these little rectangles. This is the blood glucose measured every five minutes venous blood glucose. And you can see the green zone is 70 to 120 mgs/deciliter and the blue zone from a 120 to 180 mgs/deciliter. So combined these are the target zone for people with Type 1 diabetes or diabetes of any kind.

And you can see that after each meal there is a rise in blood glucose that occurs as the carbohydrates are absorbed into the blood and then this is the response of the algorithm. Blue stripes down represent doses of insulin given automatically by the controlled algorithm. And you can see that in response to this rise in blood glucose there’s a number of controlled doses given, the largest to these doses is about 1.75 units, a new decision was made every five minutes. So this is aggregation of multiple doses.

In response to that the blood glucose starts to come down from hypoglycemia. And you can see that if it continued this trajectory it would pass through the normal range and into the hypoglycemic range pretty quickly. But these red stripes represent doses of glucagon that were given automatically by the controlled algorithm. These are very small doses, the single large dose here represents 15 micrograms of glucagon or 1.5% of the currently FDA approved rescue doses of glucagons.

And you can see that there is abrupt change in the trajectory of this blood glucose factor. It slows, it falls substantially and then a few additional small doses of glucagon reverse this fall in blood glucose and then with a push and pull between a little bit more insulin, a little bit of glucagon, the blood glucose stabilize in the normal range and stays the over night. And the same pattern is repeated with the breakfast meals the next morning, and the lunch morning meal the next morning with dosing and insulin and then after a fall of blood glucose down to the normal range and the rest of that fall by micro dose glucagon.

And you can see down here this are the green is the predicted insulin based on the controlled algorithm dosing and its pharmacokinetic model and the blue is actual insulin levels. And then down here is levels of glucagon, the grey is the normal range of glucagon and the fast state. This was an experiment that worked precisely as we would expected it would work based on the PK studies and we are very happy with this, but not all our experiments were done that way, this was the worst experiment we had in that first group of experiments and you can see the situation is very, very different here.

Blood glucose goes up higher and stays up longer; much more insulin is delivered, eventually the blood glucose comes down, but when it comes down the blood passes through the normal range and into the hypoglycemic range despite very large amounts of glucagon relatively large being administered; whereas the total glucagon administered over 24 hours here was approximately 370 micrograms of glucagon or a third of a rescue does and this experiment the amount of glucagon was over 1 milligram so three times more over 24 hours, yet we didn't had hypoglycemia and we have to get carbohydrates showing by the little black rectangle to rescue this hypoglycemia.

And the reasons for this to not become apparent until we measure the insulin levels and compare them with the predicted insulin levels based on the pharmacokinetic model. You can see that in green here when the blood glucose has reached it’s peak and his first cluster of doses analogous to these doses were given here, blood glucose reached it’s peak but did not start to come down in fact it reached the higher peak and stabilize but the algorithm was predicting that the insulin levels had reached the peak and it was expecting a decline in blood glucose. When it didn’t occur further insulin dosing was given and in fact quite a bit more insulin dosing were given and eventually the blood glucose came down here and it responded with glucagon and we can show that in fact that glucagon had been absorbed we had relatively high levels of glucagon as compared to this other experiment but that wasn’t enough to prevent the fall and it became clear why when we measure the actual insulin levels.

You can see there is a tremendous delay between what was expected based on the model and when the insulin actually peaked and the insulin peaked just when the blood glucose was falling into the normal range and these micro doses of glucagon ordinary strain could not do anything against this huge tsunami of insulin. In fact when we estimated the [Tmax] of insulin in this individual and this is insulin lispro, a Humalog, Tmax was a 191 minutes, so it took over three hours for insulin lispro to peak in his blood compared to the roughly 30 to 90 minutes that we would have predicted based on the pathogens for lispro and in fact we had build an assumption into the control algorithm that lispro would peak in 33 minutes which was a little bit aggressive in retrospect, but that was within the range that had been proposed in the pathogens and it is what we saw in the PK.

And so what you see here is that when there is a very large disconnect between the expected behavior of insulin and the actual behavior of insulin, the controlled algorithm makes incorrect decisions and overdoses and backs insulin. So what do we decide to do about that? Well, we thought about customizing the controlled algorithm for pharmacokinetics of each individual. The problem was we brought these individuals back and we did pharmacokinetic experiments; we will give a single dose and looked at the speed of absorption and clearance and the problem is there was quite a bit of variability from subject to subject. We had in our original cohort of 11 people, we had anywhere from a Tmax of 56 minutes to a Tmax of 191 minutes.

And so there was a great deal of variability between subjects, but there was also we later determined a great deal of variability within subjects, different infusion set insertions within subjects. We noticed that if we divided the subjects in to those that had the need for carbohydrate interventions and those that hadn’t, it's very clearly tracked with their speed of insulin lispro absorption. So folks that didn’t require carb interventions, all had Tmaxes less than or equal to 70 minutes and those that required carbohydrate interventions all Tmaxes greater than or equal to 70 minutes.

So we thought that perhaps what we should do is instead just assume that everyone has flown from lispro absorption to avoid insulin stacking and hope that we would still get reasonable good control in these people who had fairly fast absorption, because the truth is we wouldn't be able to know in advance who is who.

So what we did is we made that change. We changed the Tmax setting in the control algorithm from 33 minutes to 65 minutes and then brought back all of the subjects with hypoglycemia and we found that that when we repeated those experiments, this is the same individual; we repeated the experiment in him with the same meals. Now the insulin absorption or insulin dosing is much more conservative. All these extra doses are given because the controlled algorithm is waiting to see what happens before dosing again and we got a good blood glucose control with no hypoglycemia requiring carbohydrate intervention and much more lower glucagon levels.

And we were able to prevent hypoglycemia in every subject using the simple global change to the parameters, but there was a cost to that. And that cost was that when we brought back people who didn’t have hypoglycemia the first time around, in the first round they had average blood glucose of 136 milligrams per deciliter and almost no time in the hypoglycemic range. When we used the slower assumption, meanwhile glucose went up to a 154 mgs/deciliter or a difference of 18 mgs/deciliter approximately 1.5 of percentage of A1c and the pharmacokinetics were the same on average in between these two different experiments.

So the point is overall that as long as we take into account the slower insulin absorption and make the algorithm more conservative we can get reasonable control and avoid hypoglycemia. But if we had faster insulin absorption, we could get much better glucose control in all of these individuals. And so we’ve been highly motivated to find insulins that have more rapid absorption.

I’ll just quickly mention that we’ve also now completed a second clinical trial at MGH of a new system which uses continuous glucose monitoring as the input to the system, so this is something that when miniaturized would be amendable to outpatient system. We also did longer experiments; 48 hours of close loop control with six carbohydrate rich yields and also included a period of structured exercise. And this is one of those experiments, fairly typical one where we’ll have 48 we get mean blood glucose of 154 mgs/deciliter. This period is a period of exercise.

And you can see that the pattern is the same we have insulin dosing after meals and then glucagon is given to arrest the fall and prevent hypoglycemia. The overall blood glucose control was excellent and average blood glucose across all experiments of 158 mgs/deciliter which would be an A1c of just over 7%. And less than 1% of the time in the hypoglycemic range. Overnight we had a 123 mgs/deciliter the average blood glucose and only 0.5% of time less than 70 mgs/deciliter and in fact this was represented by single blood glucose value of 66 mgs/deciliter overnight, so this is excellent blood glucose control.

But in addition to the prevention of hypoglycemia in that postprandial period, also I want to make the point that glucagon has a really critical role in response to another challenge that faced a close loop bionic pancreas and that is exercise. So and refueling factor because of this problem it will be impossible to have a truly closed loop automatic regulation of blood glucose control without a counter regulatory hormone like glucagon. And that is because if you imagine coming into about exercise with the blood glucose of around 100 mgs/deciliter and your blood glucose falls in response to exercise at a rate of 2 mgs/deciliter per minute which is about what the average we have seen although we have seen rates up to 7 mgs/deciliter per minute for short period. You will be hypoglycemic within 15 minutes.

What people do now is they try and arrest the delivery of insulin. Now people do that by setting a lower basal rate if they are controlling in an open loop and our competitors in the bionic pancreas space who are using insulin only will try and turn off the insulin when the blood glucose starts to fall but the problem is in 15 minutes that’s going to have absolutely no effect on the insulin and the insulin levels.

The only way to prevent this hypoglycemia is to have a counter regulatory either to take carbs or to have counter regulatory hormone like glucagon kick in. And this is what we saw in our trial with exercise. These are two different; we had a two day trial. This is the same period of time on both days. This is the day without exercise and this is in the late post prandial period at 4 O’clock in the afternoon. This is the period with exercise and I think you can see there is a dramatically different slope here.

The glucose clearance is increased by more than fourfold by moderate exercise just peddling on a exercise bike at a moderate pace and you can that if we hadn’t done something, this blood glucose would have punched through the normal range and then into the hypoglycemic range but this is the mean glucagon dosing in these two periods and you can see there is a spike in glucagon dosing and a spike in plasma glucagon levels here, and we are able to roughly arrest this fall and rebound the blood glucose have it stabilize in the normal range.

And this falling blood glucose is occurring with approximately the same insulin levels. So this is entirely due to exercise and this is something a bionic or artificial pancreas is using insulin alone would not be able to deal with. And in fact, we’ve talked to a number of investigators who told us that their insulin only systems are not able to deal with exercise in this way.

So I am going to turn it over to Ed now, who is going to tell you about our next phase studies using our truly mobile device. But I just want to point out that we think that this is coming close loop bionic pancreas is going to be the therapy for diabetes in five years or six years. And it’s going to completely turn upside down the kind of therapy we do for diabetes. And it’s going to take glucagon from a rescue indication to something that people put in a reservoir everyday just like they put in insulin. And so they’re going to be using glucagon in vastly larger quantities; in bionic pancreas that (inaudible) hormonal like this than they are in the current time, and so we think that this is really going to change the business of diabetes in a fundamental way.

Ed Damiano

Thanks Steven. So I want to just give you a sense of where we’re headed in the coming months with our system and how that has bearing on Biodel’s mission as well. So as Steven mentioned we think this is really going to get paradigm shift in the way we manage diabetes this bionic pancreas. And as we also mentioned we really do think that this is like a freight train it might be coming too slowly but its coming it’s an added ability and as a consequence that to we need to prepare build the technologies that are going to support it. And the first people to do that are going to be ones that benefit the most from it. And that in my mind translates into two things really three but one has been happening on its own in parallel with this process and that’s the improved accuracy the continuous glucose monitoring technologies that we’re seeing out there.

There was a technology that was very good and it was it is made available to the US market for a short time it was pulled, new technologies just really weren’t good enough by our estimates and our careful comparisons to these centers and head-to-head studies are to drive blood group systems but Dexcom just released its announcement today they have FDA approval they joined force and which we have also tested and that comes with does appear to have the accuracy metrics when we think we need to close the loop around that signal. So encouraged by that and that was always our biggest concern but our next two biggest concerns were fastest insulin’s and stable pump of glucagon and these are two things of Biodel has been working on.

I would prioritize from my own personal interest that glucagon over the fast insulin as Steven just showed with the off the shelf rapid act so called rapid acting insulins which aren’t so rapid in some of our subjects and I can achieve good glycemic control, average glucose levels that are within the 88 recommended target zone with essentially no hypoglycemia and the key thing is that the system we are talking about, it essentially eradicates hypoglycemia or nearly eradicates hypoglycemia all day long and all night long and the think about open loop controls taking more carbohydrates, using glucagon rescue kits required either somebody they are watching you all the time, no one is doing that night generally.

Or your ability to be alert to do these things and you want to prevent the complications are being compromised by hypoglycemia on one hand but you also want to have this thing available to you if you are not conscious at night which this system is doing. Now all our studies that Steven described are in a clinical research center set. So we have been testing this thing on the rig that looks like this, it’s a some like a (inaudible) device, it does work, it’s held together by bubble gum and string and so forth but it does get up through these two years of studies that we done. It’s a fully automated system but its time has come we need to really throw this thing of the 13 floor of research center and replace it with something around our subjects to get up about and that's what we have done. While the study was going on, this study actually will finish the end of next month, by November we will finally done with this system and we are going to be replacing it with a mobile platform.

So the key thing here was to get the technology to work together with great technologies across platforms and you have got a continuous glucose monitor made by Dexcom, you have got pumps made by Tandem Diabetes you got systems driving it made by Apple. So we need to figure to integrate all these things. So we rewrote the algorithm that was written in math lab and once on the laptop in C++ and built a custom app around that it runs on the phone and the nice thing was it that the new iPhones all have low energy Bluetooth and so to do the androids now.

So we can talk down to Bluetooth enabled insulin pumps and control automatically and wirelessly insulin and glucagon dosing from the phone so that low energy Bluetooth is really key because standard Bluetooth will just drain the battery too fast. So a lot of technologies that have to come together for us to be able to build this mobile platform but the time is really ready for it. We need to get our subjects out of the CRC. All the study Steven was showing you in a situation even though we introduce a little bit of exercise in the middle of the study in our current protocol, it is nothing like the kind of activity that people are going to have when people are going to have when they are walking around all day long.

And we need to extend these studies from one and two day studies in a clinical research center to five days and two weeks outside of the CRC in out patient study. In a setting that is comparable to it is close at approximation to their real life circumstances is possible. So we build this system and this is actually a real system right here and it runs on a standard unadulterated iPhone and this is not a jail broken phone. We got the off the shelf iPhone and we have to do these things because we have regulatory issues to be concerned with.

And you need to run these things such that the user can’t get at other stuff on the phone. Apple has helped us out with that by building this greatest operating system that allows us to block out, users trying to hit the home button and get into the operating system with this guided access modes. But basically we got an app that runs on the phone, on the front there is a little piece of electronics that you see here is an iPhone. On the back is the receiver unit for this Gen4 Dexcom system that I told you about. This is the one that was FDA approved literally this past week and we have a custom hardware interface that the folks at system put together for us with the help of sweet spot diabetes that basically streams data off this shelf G4 Dexcom receiver into the 30 pin on the phone and that’s all hiding out behind here.

The phone’s battery is intact as is the Dexcom battery. We added a third battery that’s rechargeable here. Everything gets recharge through a single USB port. Okay. So this is the device that is constantly receiving a glucose signal from a sensor transmitter into this receiver unit. Every five minutes, we're pulling data from the receiver into the phone. The app is running on the phone. Every five minutes, our algorithm which is running in that app is making a therapeutic decision to dose either insulin or glucagon and the blue stripes down we would like to grasp that you are seeing would be insulin doses like your basal insulin here and it's adjusting this glucose signal here and the red stripe upper would be glucagon dosing to rebound glucose when it's falling.

Now this is, I am running it in a simulation mode right now but I have on and that I am wearing the device myself. So this device is absolutely operational and here is the pump that we're using. Now I have this sophisticated carrying system, it's got three rubber bands. My dad looked at the pressure and he use lots of rubber bands. So I used that trick from his trade and tied these things together but we're going to come over algorithm solution for the trial which we hope to start in December. But basically, this is my dual chamber pumps. It’s too Bluetooth enabled, independent tandem pumps. The tandem pumps are also FDA approved this year, actually November of last year, but they hit the market in the U.S. in August, not with Bluetooth enabled technology, but they’ve done better.

And so we do have a dual-chamber pump it happens to be the smallest pump in the market. So that helps us out in terms of size; it’s a little bit of a brick. But the fact that matters we can fill one reservoir of insulin, one with glucagon; we’re using Lilly glucagon for our studies right now. So it’s not stable as you’ve guys have seen over the course of the past couple of hours. But we do have approval from the FDA to do these investigational studies by changing the glucagon reservoir out every 27 hours. So we’re not exposing ourselves to these unstable glucagon components.

So what we have to thought to do with that device, this is also an investigation device; this not the embodiment of the actual system we envision selling commercially. However, it’s the last investigation device that we hope to build. My goal is to use this technology to get us through the transitional studies. So we’ve done up till now what the FDA’s referred to feasibility studies. Shorter term studies one to two days in clinical research center with one on one nursing. Now we need to get people on their feet out of the CRC, out of the hospital walking around, less nursing, nursing on hand but not one on one nursing and we’re going to do this in several steps across three trials.

The first is I mentioned is going to be this big in health space, it’s going to be five days in duration and this study I hope to start in December. So we’ve been working on, Steven’s working on this; we’ve been working on the investigation device exemption application for this device which we hope to submit next week to the FDA. If we get that approved by mid November finish up to two days study that we just showed you by the end of November, and in December we can begin its five day study.

So subjects will have no set schedule of diet, basically be on vacation for five days on Beacon Hill in Boston. And they will sleep in a hotel near the hospital. There are free run at the Beacon Hill neighborhood we’ll give them stipend everyday to eat at restaurants. They can augment that if they want to eat some of the more fancy ones, there is a lot of nice places at Beacon Hill to eat. They can use the hospital facilities, so they can witness poor MGH in the center, so and we’ll also a nurse on hand for safety and here we will have one on one nursing for this five day study. But we’ll only have point of care blood glucose checks; we’ll only like eight blood sugars a day, at night we will put them on a continuous glucose monitoring, blood glucose monitoring device while they are sleeping.

So this is a step away from the level of intense oversight we had in the pervious studies and a lot more flexibility to have physical activity, a lot more physical activity. This will be a much better check of the system, but then the real reality check before we go something like a registration trial or pivotal study would be that the two studies that follow it.

The first that which we hope it happen in summer of 2013 and this is going to be a camp study and we’ve got what look likes good news from the NIH to fund this study and we also have buying from the Medical Board at camp Joslin and Clara Barton camps to do a study this summer and the following summer in children six to 20 years of age with Type I diabetes; they go to these camps every summer anyway, they need to take care their own blood sugars. We are going to put a cohort of those kids on bionic pancreas; half will be open loop, half will be close loop; it will be a two crossover studies design to randomize crossover study design. Those kids will do another weeks experiment where they switch over, they open the kids to close loop with vice versa.

So this is going to be a huge challenge; these kids are going to be really physically active and you run them around, they are going to be crazy and that's what you want, you want to be eating, you want to be running, you want to be physical and we are going to really get the challenge the system and this is why glucagon is going to shine and convince it. We get this kids running around like if a kid misses a school bus, chases after a school bus. This insulin with plasma is made quite good and so we did that, but like it happens, and these things come along and suddenly they create a bunch of glucose from the muscle and they have got too much basal insulin there; not that insulin control is anything wrong; it just simply can’t adjust to that; glucagon is kind of regular that we see team access in glucagon in order of about 23 minutes and that’s in human subjects.

So it’s very exciting; we don’t have worry about making glucagon analogues, reformulations will work and these kinds of ideas that Biodel put on the table and have a faster regulatory path all you need for glucagon, we don’t need these very complicated analogues. So this study we want to do in the summer of 2013; it will be our first study where we are going to have more than two people at a time in a close loop and we are going to six, eight to 10 kids all at once under close loop. And then we need to sort of perpetually these ideas in an adult study but adults are types that don’t go to summer camp every year.

So when I was speaking with my collaborators David Nathan had a great idea or the other initial concept was, well, we got a lot of people who work at MGH, how many of them are Type I, we know a lot of people at MGH with Type I, there are lots of employees in the progress system, it’s 60,000 I think in partners; MGH is a large subset of that. So there can be you know we can have 30, 40 people with Type I work at MGH alone, with Type I, probably a couple of hundred with Type I and can compare this study by the way to other hospitals, so we can very quickly get our numbers up in our so called transitional studies; these are both considered transitional studies by the FDA.

Here we’ve got people who are staff people at MGH, they might be administrative people, they might be staff, they might be clinical people, so it doesn’t mean that what you do at MGH, you are just an employee and you have that Type I, you may be qualified for this study. Again, it’s going to be crossover design; subjects will have two weeks of close loop control and then two weeks to open them. They will sleep at home, they are supposed to be camp where we have a little bit more oversight with the nurses on hand at the campus and sleeping at the camp, here we are going to actually let help go home and sleep overnight on the close loop system.

So the timeline for this is what I think most exciting about this. The (inaudible) study I talked about is going to start up I am hoping in December and when we get that thing done by the fall of 2013, but we're going to stick in the middle there, these diabetes camp studies. So we're just going to, Steve and I our staff are going to just check out for eight weeks and in the summer we spend a whole time at this camp one week after the next watching the studies evolve. So this is going to be just massive effort to get all these experiments done in that first summer.

When the five day study ends, we can begin to start doing the hospital staff studies. So we're carrying to the hospital staff study at MGH and we're also talking with some collaborative at other institutions to parallel like this, so this is a timeline if you just look at this, we're looking at a period of not more than about 24 months to 30 months from now. So with this device, this device should get us, I am hoping, to a point where we can build the commercial product and that build will happen somewhere in here and sometime in 2015, we could be doing a pivotal study with the actual commercial product that we want to bring to the FDA with the PMA.

So that timeline fits well with me because 2015, if you do a pivotal study in the calendar year 2015, the FDA sits with the calendar year 2016. By 2017, my kids are senior in high school and so I am trying to fixed on before they go to the college. That’s been my goal for literally about 13 years, diabetes. So I think it's a realizable goal but in parallel with our device development, we have to see this glucagon coming to its own. In the timeline that you saw today, laid out, it happened in parallel with what we're doing.

We want to be substituting our Lily glucagon by this summer with the Biodel glucagon with a stable glucagon formulation, December 2013; we love to see that happen. I think that’s a realizable goal. We have a way of doing that in the next six months so we can actually see a replacement for the investigation study like this as soon as the summer of 2013. So we’d like to do that, that’s one of our goals. And then all the way through here is a regulatory path of stabilizing glucagon and getting that through with an R&D. And then we come out at the other hand we can meet, they have a product that really does address the needs of people Hypoglycemia and hyperglycemia. So that’s it for me. if you have any questions we’re happy to take.

Errol De Souza

The questions for Ed and Stevens and lets just open it up to the panel. And I’ll, hopefully you get a sense before we --- reflecting sort of how we’re working at by in terms of people (inaudible) with other things are going along in terms of the cutting edge research. So if you think internally in terms of what we’re doing to bring the products to markets that have been leveraging to (inaudible). So frankly for Stevens and Ed.

Question-and-Answer Session

Unidentified Analyst

Yeah in terms of stress involving that new formulation of glucagon and is the ultra fast insulin also vital for the new (inaudible) device?

Ed Damiano

Can you repeat the question because we’re doing a webcast. So the question is we seem to be stressing the importance of a stable comparable glucagon. But is ultra fast insulin also a priority for us. And I would say it absolutely is, we know for a fact that is insulin mechanics improves that is to say gets shorter we have less inter subject variability, less inter subject variability we get much tighter control. And we’ve actually conducted experiments in diabetic to take that hypothesis to extreme in parallel with this we’re developing that is mentioned in the presentation.

We’re developing a close loop system for regulating glucose in hospital setting in which you have IV access and there we don’t use glucose alone we use dextrose, there is no need to rely on glycogen stores. So we need administered through dextrose IV in regular insulin.

When you do that and you have direct answers to vascular space. We see glycemic control which is normalized. So with the CGM running the controller, we have normal glycemia and by that I mean you can see this little 50 kilogram pigs, 200 grams of carbohydrates and you will see excursion going from a 100 mix but that's lead up to 120 and then back down and you don't see hypoglycemia to dextrose is always there.

So that taking rapidly absorbing insulin to its ultimate streams instantaneous availability right. But anything in the middle is going to help us, anything ground we can get from we curvedly set with the analogs that are out there the Humalogs and Novologs and the Apidras.

As we move closer to that IV, that IV kind of rapid onset the better we will do, and I think it’s going to be dramatic and I think we are going to get more yardage in that first 30 minutes. So we go from a average team max which we are seeing in our subjects to be around 70 minutes down to 30 minutes I think you can get more from that and just about any other period in the timesaving spectrum.

So I think we really do want to see rapid insulins but we can get this thing out there and get really good glycemia with no hypoglycemia with the current insulins but it will only get better overtime as the absorption is improved.

Steven Russell

Two aspect so it when I explained to you a little bit about the principal of glucose (inaudible) I did not mention that you advise they are using for it and so called bios data (inaudible) from the 1970s however as we relied on the IV glucose measurement and IV insulin or glucose infusion and this device is a close loop system, it’s simply not traffic to one around of it but in principally it does it’s job one point. The other point is that cardiac as it (inaudible) IPA is running experiments with insulin application and then you have a more rapid insulin absorption and he was really enthusiastic about the improvement in these closed loop experiments that he has performed recently and we have not seen any data that far but I am pretty sure he represents ADA next year.

Unidentified Analyst

(Question Inaudible)

Steven Russell

We need a glucagon that is the question is what do we need to see for Biodel in terms of glucagon formulation and what we need to see is the formulation that has similar stability to current insulins for pump use. So we need to have approval for three days in a pump reservoir and we need to have similar pharmacokinetic behavior so we need to have no slowdown of glucagon absorption in the formulation and based on the data we have seen so far their formulations have comparable pharmacokinetics and certainly the stability profile they have already shown us would be more than adequate for a purposes.

Errol De Souza

Jason you have a follow up?

Unidentified Analyst

(Question Inaudible)

Ed Damiano

So the question is how many inputs are there to our algorithm and what will be customizing our algorithm to an individual? And the answer to the first is we have a single input and that is glucose, continuous glucose from our CGM, Continuous Glucose Monitoring Device. We do not have, as of yet, a way to, in real time measure insulin. When Steven showed you those plots of plasma insulin levels, he was superimposing what was a predicted instantaneous prediction of plasma insulin in real time during experiment by the algorithm. There Steven formed a mathematical model, pharmacokinetic model of insulin absorption. It is not taking real time measures plasma insulin. Currently we can’t do that. We can’t plasma insulin like we can measure glucose levels continuously.

So those measurements that he was showing you, the actual plasma insulin levels were actually taken from samples that we were drawn at the time the experiment was conducted and then offline, analyzed maxed and analyzed and then weeks later, we got those results and we could superimpose them on what the algorithm of what was happening.

So we can’t measure anything, but glucose right now. We don’t use any other inputs like level of physical activity. There are all kinds of things that people try to measure. They use the accelerometers, they try and see running around and being physically active. We think that the verdict is born out in glucose and we should rely solely on glucose. Almost every other metric I’ve ever thought, I’ve ever considered will invariably lead to some erroneous results and could cause dosing of insulin in an inappropriate way, but glucose doesn’t lies. As long as the CGM is accurate, glucose is the signal we follow.

In terms of individualizing it, we do not do that either; other than to say that we act what you are weighting and if we are willing to disclose that, we type your weight in to the device and you do wear the device and with that online. I have some slides that I didn’t show. They show you how our controlled algorithm can deal with very significant differences in insulin requirement from subject to subject, but most importantly an individual can experience profound changes and insulin sensitivity over the course of their day.

So not just to quote what’s it day over the course, weeks, months and years people go through puberty and they have, you can see that their insulin requirement is tripled relative to what adults require. And that can last for a period of a couple of years. You can have inter-current illness; where you suddenly become very insulin sensitive and you need much less insulin. The controller if you try to chew in a controller to personalize again to a subject that in my mind is an issue because it tells me the things need that; it needs that kind of assistance.

And it has to be much more robustly adapted because you’re not one person with you are a person with diabetes you are 10 people, because you are constantly changing; its changes in stress, changes in physical activity all these things change glucose clearance. And you are susceptible to the insulin, so we need to have this system adapt on multiple times and how it works. It’s not too intuitive to an individual.

As far as the pharmacokinetic parenthesis, we found what we think is a reasonable average value for that 65 minutes Tmax with lispro, that would tuned if Biodel produced one of their formulations which had a Tmax on average and the aggregate of 35 minutes or so; that’s what we would put in our output for that, but so we would tune it to the drug not to the individual.

Unidentified Analyst

(Question Inaudible)

Ed Damiano

Well so, what we really want is a dual chamber pump right. And it’s a bit of a chicken in the egg problem; (inaudible) who is going to build the dual chamber pump and look to something we put into the second chamber and who is going to build a drug that needs the chamber pump, right they don’t exist.

Well, I think the drug should come first, it’s a chicken in the egg problem but I am going to give the drug the upper hand on this one. As glucagon becomes available and stable formulations of glucagon first options become available there will be an unmet need to pump it and we will see all kinds of pump manufacturers come in creative ways of doing it. Patch pumps have the simple solutions, single PDM controls and up a single patch not right like now, right.

You can put to independent patch pumps or have a single PDA control and you got a dual chamber solution; it’s not elegant to rather have a single patch with two insertions, but it certainly could get to there initially. And similarly Tandem is a company that’s been extremely interest in working with us and arte highly motivated, but they have what I think is the best technology for tube pumps to make a dual chamber and that's part of the reason that called Tandem effectors, several reasons for the origin of that name comes from several sources, but one is because they have a great technology; it’s very small and the way they pump insulin is very different. They make this very funny shape reservoirs; they can make a second reservoir in this pump and increase it to mention by only about 30% or so. So you could still have a dual chamber Tandem pump which is previously smallest pump in the market. So they can produce one of these things and I think they motivated to do so, so we are talking to Tandem; talking to a lots of pump manufacturers.

Unidentified Analyst

(Question Inaudible)

Ed Damiano

One device and so our algorithm to be collocated with that dual chamber pump and the sensory receiver would also be collocated with the dual chamber pump and the algorithm, so then can put everything in a single bus and you could also while as we talk to a mobile device for display purposes. So you could watch your glucose on a much more slicker device that is what we build into these medical grade consumer electronic devices. Well that (inaudible) yet but we are getting there. It will be impressive.

Steven Russell

And I fully agree with your statements about insulin sensitivity or the change including insulin requirements. However, we have an idea a while ago because we have similar also experience like you that each subject each of us to my belief has an individual reaction to for example subcutaneous injection of (inaudible) in other words, each subject if you repeat the experiments you can see the similar photo time action profiles and we had a little joke at the university where we said okay this is that subject just seeing his time action profile and in other words what I am proposing a little bit if you would run one single glucose clamp then you might be able to see what is for this subject, his pharmacokinetic way of handling insulin that would allow you to individualize your algorithms to a certain extend not in the absolute level but in time wise you would get some critical information.

Ed Damiano

Yeah but this is I do have a comment about that. People with diabetes don’t live in the mean they are a million statistics and I just give you an example so you could find some kind of a mean representative distribution yourself.

Unidentified Analyst

You would have to repeat the experiments for each and every subject?

Ed Damiano

I understood I know what you are saying but you couldn’t repeat every single experiment for each subject. In other words, every single time you want some just the act of experience in mind about my own. Couple of years ago, I did the same thing with my kid every morning he had 8 ounces of that was his only breakfast that’s what he did, the school age kid and we did the same thing and we gave 0.8 units 15 minutes before that, he had routine every single morning for a year. It worked like a chant. His blood sugar would be normal going into that thing. It would go up to 120, going into the meal 120 and it will be back down. It was beautifully controlled like you no pancreatic function.

Except for one morning out of about 300 mornings. One morning I did that his blood sugar was normal, he could wear the navigator. I checked his blood sugar with a finger stick meter every morning to check if the navigator is doing. There was nothing different about this morning that could be seen right. What happens was he comes downstairs and he was feeling funny, he is not responding well and he is walking around but he is just being a bozo because his blood sugar is 20 and 15 minutes after that primary goal.

And the navigator was saying he was 100 because it was so fast that his blood glucose level hadn’t fall of yet and I said you are fine, it says right here. He was trying to check blood sugar, he couldn't do it. So I checked him and he said low on the meter, 20 is it low. Five, 10 minutes later, the navigator starts crashing and so I am trying to give him the drink orange juice which he won't do because he is swatting it, because he is not rational. He is severely hypoglycemic. So we gave him a tiny dose of glucagon. We gave him about 100, 200 micrograms of glucagon, rebounded perfectly with no nausea, he ate breakfast 15 minutes later and he missed the bus but he made it to school on time. So glucagon is great by the way if you can play it right but with the current state of the art but the point is that you are all the statistics and all it takes is one of those things.

Steven Russell

But this is exactly what I showed in the last slide. However, insulin deformers and we have a limited knowledge about it. I am highly interested in variability insulin of our absorption. Nevertheless under the relatively controlled conditions of the glucose clamp, I am pretty sure that you would get relevant information.

Ed Damiano

Maybe, but subcutaneous infusion is the challenge because the right thing may have happened is that channel was placed near (inaudible) agreed and you can’t control that. When you start these things day in and day out these things could happen that’s why we need glucagon in closed group right. He would have hypoglycemia because they are (inaudible) that it would have been there.

Errol De Souza

We can continue this discussion after you look into my couple of slides. And we’re going to invite you to launch. So let me try and keep us on time.

Let’s here we go. So let me wrap up. I hope we’ve communicated to you the clear cut unmet medical needs where we’re working. I want to just finish up with some of the accomplishments in each one of these areas, we’ve had a tough going in terms of coming back from complete response but we’re back on track. And the ultra rapid acting chart based we reformulated Linjeta, completed the Phase 1 study, the Phase 2 study has started. It’s an extended study. In addition, we showed you some new data in terms of our concentrated insulin that we’re very excited in terms of the ultra rapid concept.

And the milestones I’ve shown there on the right. If you look at the analog based formulations the trial was underway. First quarter, we’ll have the data on the trial. And we want to move forward. And then on the glucagon we’ve had a great discussion. I mean we really wanted to give you a sense of what we were doing in the short-term from a rescue taking you through the market. But this is an emerging field which is evidenced by I think the discussion in the last presentation in terms of the ultimate application, in terms of the artificial pancreas and our timelines we’re going to have stabilized glucagon formulation. Why are we doing those pump compatibility study so that we can work but Steven and Ed and the other folks in terms of furthering the field. We want our glucagon to be sort of a key glucagon for all of these applications.

These slides, these milestones are up there and they are in your books. So I am not going to spend a lot of time. And just to finish up, I think Biodel is an exciting opportunity. We are really focused on a multi-billion dollar glucagon and insulin diabetes market, our proprietary technology continues to produce products but we are very focused in delivering in terms of the key areas that we talked about today. And we will keep you informed in terms of the milestones.

With that I want to thank all of our speakers this morning. I want to thank all of you not only for showing up today but really for your continued support in terms of helping us transition from coming back from a complete response to what looks to be a great cheer for us. We need to execute over the next year, we need to let the data do the driving and we will keep engaged in terms of communicating to you in our next call in terms of where those milestones are.

So with that let me conclude, our lunch is out there. I invite you and the speakers to please join us for lunch and let's continue the debate and the interactions. Thanks again.

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