There is no doubt the U.S. and world’s Insulin market and the way Diabetes is treated could soon see some of the most major changes the industry has seen in decades. In those lines I have been researching the companies with innovative Diabetes drugs ready to hit the market soon. Here, I come across a company who is innovating the management of diabetes through insulin much better than Mannkind's (NASDAQ:MNKD) Afrezza. Surprisingly this insulin innovation is not from the big players in this business ( Novo Nordisk (NYSE:NVO) , Eli Lilly (NYSE:LLY) , Sanofi Aventis (NYSE:SNY), but from a startup company based in Connecticut called Biodel, Inc ( NASDAQ:BIOD ). This innovation does directly address a much needed problem in the effective use of insulin by diabetics. Using their proprietary delivery technology platform, Biodel is seeking FDA approval for a rapid acting injectable insulin called VIAject. In my (and Biodel's) opinion, VIAject will solve the deficiencies in existing insulin therapeutic approaches while not introducing potential new deficiencies like Mannkind's (NASDAQ:MNKD) Afrezza does.
Existing fast acting insulin products are designed to deliver the appropriate glucose control at mealtime. However, the absorption of existing fast-acting insulin injectables is still too slow to mimic the natural initial insulin spike -a problem Afrezza was designed to address. Like Afrezza, VIAject delivers insulin in a manner which more closely resembles the way a normal body uses insulin to function, diminishing hyperglycemia and hypoglycemia swings that the currently marketed insulins cause.
Fast acting insulins are modified to remain as monomers, to prevent the formation of six-molecule aggregates (hexamers). VIAject, like Afrezza and other fast acting insulins, act quickly because of their monomeric form. However, unlike the other injectable fast acting insulins, VIAject has not been genetically modified to remain as monomers. Like Afrezza, VIAject's design causes rapid dissolution of the hexameric form of insulin to the monomeric form when it is administered. Like Afrezza, this allows more rapid delivery of insulin into the blood to produce its desired biological effects.
According to data provided by Biodel at the 2010 JP Morgan Health Conference:
the competing rapid-acting insulins, Novolog from Novo Nordisk (NVO) , Aprida from Sanofi Aventis and Humalog from Eli Lilly (LLY) , have relatively similar pharmacokinetic profiles, with maximal absorbtion of insulin being reached 45-60 minutes after injection. In contrast, VIAject reaches maximal absorption in 15 minutes; quite similar to Afrezza's 12-14 minute maximal absorbtion profile. VIAject is as long lasting as Afrezza and the injectable competitors.
NDA Submission:
On December 30, 2009, Biodel submitted a New Drug Application (NDA) for FDA approval to market VIAject for meal-time use by people with Type 1 or Type 2 diabetes (to be used in a manner similar to Mannkind's ( NASDAQ:MNKD ) Afrezza). This NDA was based upon results of two pivotal 6-month Phase 3 clinical trials comparing VIAject to Humalog in patients with Type 1 and Type 2 diabetes, as well as interim results from the long-term, 18-month safety extension trials for patients who completed the pivotal Phase 3 clinical trials. In these trials, similar to Afrezza, Viaject demonstrated not only equivalent long term glucose control (hA1c levels), but also improved secondary measures of glucose control such as faster reductions in blood-glucose activity, reduced risks of hyperglycemia and hypoglycemia, and less weight gain than patients who received the competing fast acting insulin.
Although Afrezza's proponents are touting the secondary benefits in short term glucose and less hypoglycemia events, as discussed in my previous article, More Research into Mannkind's Afrezza, these differences are not significant enough to mitigate the potential labeling and use risks of Afrezza. In contrast, VIAject does not carry any pulmonary risks, labeling risks, or marketing risks as it is administered by injection like the current fast acting insulins. Given the similarity in pharmacokinetic profile between Afrezza and VIAject, it is not surprising that VIAject touts identical benefits to Afrezza, as this is the key component that determines how VIAject improves glucose control.
A perhaps yet unrecognized safety benefit of VIAject, as this study shows,
is that VIAject requires one third to one half the dose of insulin required compared to fast acting injectable (3-6U VIAject vs 12U injectable) and one fifth the dose of Afrezza (3-6U VIAject vs 15-30U Afrezza). Thus, beyond equivalency to Afrezza, VIAject offers potential safety and use benefits over Afrezza.In contrast to analysts and investors having controversial opinions about the likelihood of Afrezza's approval, VIAject is expected by analysts to be approved without significant delay. Unlike Afrezza, VIAject is comprised of commercially available recombinant human insulin and a proprietary formulation of ingredients, all of which are Generally Regarded As Safe (GRAS) by the FDA. Since VIAject is simply a modified form of recombinant human insulin, Biodel submitted its new drug application for VIAject under section 505(b)(2), which governs the review of an NDA for a modified form of a previously approved product. This allowed Biodel to submit an NDA based on published literature or on the FDA's finding of safety and efficacy of one or more previously approved drugs. This route typically allows approval of a drug based on fewer clinical or nonclinical studies than would be required under a full NDA. Hence, its likely to encounter less scrutiny than Afrezza, which is filed as a new drug under 505(b)(1).
So to ask the same question of VIAject that I asked of Afrezza in my first article, Many Questions On Mannkind's Afrezza: Why bother? In the case of VIAject, the answer is simple: VIAject delivery is without question safe, more readily accepted by patients, and provides major improvements over currently marketed fast acting insulins, and equivalent efficacy in all aspects to Afrezza. VIAject's approval route is straight forward because its ingredients are GRAS and it is seeking the 505(b)(2) route- compared to the risker 505(b)(1) route of Afrezza. There will be no "black box" warnings or REMs strategy proposed for VIAject like there is likely to be for Afrezza. With Biodel, the risk is very low and the reward is very high.
Beyond the low risk, high reward offered to Biodel investors, BIOD is an incredible value right now. There is a back story to the VIAject clinical trials that has driven BIOD stock to the current extremely undervalued levels: Biodel went public 3 years ago and its shares traded at around $18. But in late 2008 the stock took a nose dive into a $4 range, when the company announced the preliminary efficacy results from its Phase III clinical trial of VIAject in India. The Indian trial results did not compare to the previously released trial results from patients in the United States and Germany. While non-inferiority of VIAject was achieved without the data from India, it was not achieved when the data from India was included. The analyses by independent clinical and regulatory experts at the FDA suggested there were specific factors that explain the results in India, specifically heat. Among the causes noted in the Pre-NDA briefing package, an identifiable subset of blood samples from patients in India were found to be compromised due to excessive heat exposure in transit to a central laboratory. These anomalous results from India killed the company’s stock price and it has never since recovered.
However, when the compromised samples are accounted for in the efficacy analysis, non-inferiority in both the Type 1 and Type 2 trials is achieved. Upon recommendation by FDA advisors, the company filed the NDA, accounting for the data from heat damaged samples. On March 1st 2010, Biodel announced that the FDA accepted for review the VIAject NDA. The FDA expects the Prescription Drug User Fee Act (PDUFA) action date for this NDA to be October 30, 2010. Now one can only believe that FDA’s nod in accepting the NDA for review as a big value driver (though yet to reflect in the share price), and a positive sign for the FDA's belief in the Phase III trail results showing non-inferiority (given the blood samples from patients in India were found to be compromised). Given the breadth of data with VIAject showing equivalancy (even accounting for the anomalous Indian data), its components being GRAS, and its 505(b)(2) route, I anticipate approval on the first try.
Current Financial Position and Rating:
Wedbush Securities has reiterated an OUTPERFORM rating on the stock and a fair value of $17. Wedbush also commented: “We believe a partnership announcement with $500 million in milestones and double-digit royalties could have a significant impact on BIOD valuation. With Biodel having what I believe is a differentiated mealtime insulin candidate potentially reaching peak sales over $900 million is trading at less than $100 million market capitalization”. VIAject is likely to capture a large market share because it offers distinct advantages over the other injectable insulins without any paradigm shift. I believe that this conservative sales estimate and market penetration is easily achievable even in the face of Afrezza approval given the potential problems with patient acceptance of Afrezza.
Given VIAject is equivalent in efficacy to Afrezza, without the marketing and regulatory risks, my bet is placed with Biodel. Investors have already given MNKD a market capitalization of nearly 1 billion dollars, banking on approval. Assuming FDA approval of VIAject, and successful commercialization, and the potential sales of over $900 million, that should put the market capitalization for Biodel at well above 3.5 Billion (given a fair value market capitalization of 4 to 5 times the annual revenues). This is a shocking 30 times larger than the current market capitalization of about $100M. Apart from Afrezza (if it can get through its numerous hurdles), there are no other potential novel drugs for diabetes ready for commercialization other than Biodel’s VIAject.
Apart from VIAject, Biodel also has a deep pipeline of innovative Diabetes drugs in various phases of development. Generex (NASDAQ:GNBT) investors should note that BIOD has a phase I trial investigating Oral Sublingual Insulin (VIAtab) using their delivery platform. They are also developing two adjustable basal insulin products, all to be developed through the 505(b)(2) route. Biodel is very well positioned financially with over $40M in Cash and cash equivalents, and no long term debt. With the current outstanding common shares of less than 24M (out of which 18M are held by insiders and institutions) the outstanding float is very very small. With close to 8% of the shares shorted, Traders should recognize that any small increase in the normally ultra-low volume could send shorts covering and the share price soaring. Significant price action on Biodel (NASDAQ:BIOD) may not wait close to the FDA date for VIAject. BIOD offers the opportunity for much larger returns on investment than MNKD.
Disclosure: Joseph Krueger has a long position in BIOD.
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