My IRA Holdings, Part One: BIOD

My IRA currently has three stock positions: BIOD, AVNR, and IPHAF. The rest of the account is cash, tho I'm looking to add 1-2 new positions once market direction becomes clear. This post will focus on Biodel, which I'm holding in anticipation of the October decision date by the FDA to approve their drug Viaject.

BIOD

Biodel is a biopharmaceutical company focused on the development of diabetes specific drugs. Biodel is developing novel forms of insulin and other peptide hormones for use in treating diabetes and its complications, including hyperglycemia, hypoglycemia, cardiovascular complications and weight control. They have five chemical compounds in their current pipeline. Biodel has just under 24 million O/S shares, and with such a low float can motor quickly up or down on news.

Insider selling has been heavy and frequent the last year, with a single purchase this May at 5.59. In March of this year, the founder stepped down as chairman and CEO to act as Chief Scientific Officer, and they named a heavy hitter, former Glaxo CEO Dr. Charles Sanders, as chairman of the board, with Dr. Errol De Souza acting as CEO.

Biodel submitted a New Drug Application (NDA) for their most advanced chemical compound, Viaject, a rapid acting injectable insulin for meal time use by Type 1 or Type 2 diabetics, to the FDA on December 30th, 2009, causing the stock to motor above $5 in PM trading. Existing injectable insulin formulations from Novo Nordisk, Sanofi Aventis and Eli Lilly, allow for maximal absorbtion of insulin within an hour after injection. VIAject reaches maximal absorption in 15 minutes.

The Viaject NDA included data from two Phase 3 clinical trials comparing VIAject to Ely lilly's injectable insulin Humalog in patients with Type 1 and Type 2 diabetes. It also inlcuded from the long-term, 18-month safety extension trials for patients who completed the Phase 3 clinical trials.

From the PR for the December 30th Viaject PR:
"VIAject® is Biodel’s proprietary formulation of recombinant human insulin that is designed to be absorbed into the blood faster than currently marketed rapid-acting insulin analogs. It is Biodel’s most advanced product candidate and has been tested in more than 884 patients who participated in Phase 1, 2 and 3 clinical trials of the drug in the United States, Germany and India. Biodel is seeking approval to market VIAject® in the United States as a 100 IU/cc, pH7 (neutral) injectable liquid, in 10 ml vials and 3 ml pen cartridges. The NDA includes results from pharmacokinetic, pharmacodynamic and standardized meal studies, two pivotal 6-month Phase 3 clinical trials of VIAject® 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. The data from these studies consistently document the safety and efficacy of VIAject®."

Biodel shares fell off a cliff in Fall, 2008 after two issues arose as a result of the Phase 3 trials:
1. Phase 3 clinical trial results from India were reported as markedly different from the German and American trial sites:
"A statistically significant (p<0.01) interaction associated with data from India was observed and efficacy results from India are, therefore, not comparable to the results from the United States and Germany. Due to this interaction, the efficacy data from India are not included in the preliminary analyses. These data are not comparable to the rest of the data for several reasons including: (a) markedly increased HbA1c levels both prior to and after study drug initiation, (b) medically improbable doubling of intra-subject variability in HbA1c results both prior to and after study drug initiation and (c) markedly reduced reporting of any hypoglycemic events. These data anomalies were observed in both the VIAject(TM) and RHI treatment groups and are under investigation. Biodel believes including the data from India is not valid for determining non-inferiority." Two possible causes for the discrepancy may have been heterogeneity of data from patients in India for the Type I diabetes study, and also that trial blood samples in India may have been exposed to prolonged periods of extreme heat.

2. The second issue was pain at the injection site for patients receiving Viaject. 24 patients actually dropped from the study as a reuslt of the pain. At the time, Biodel commented that "Injection site pain may be related to the four-times greater volume of VIAject used to achieve an equivalent dose of RHI (Humulin)," noted the company in the release. The concentration of VIAject in the trials was 25 IU/ml, while the concentration of Humulin was 100 IU/ml. Since then, Biodel has developed a liquid 100 IU/ml formulation of VIAject that may reduce the incidence of injection-site pain because it would lower the injection volumes.

Second Quarter 2010 Financial Results:
* Biodel reported a net loss for the quarter ended March 31, 2010 of $10.4 million, or $0.44 per share, compared to a net loss of $11.6 million, or $0.49 per share, for the second quarter of fiscal year 2009.
* Research and development expenses were $7.0 million for the three months ended March 31, 2010, compared to $8.4 million for the same period in the prior year. The decrease in research and development expenses was primarily attributed to reductions in clinical expenses as patients completed the Phase 3 extension trials for VIAject® in February 2010 and reduced manufacturing expenses due to purchasing of a reduced quantity of recombinant human insulin.
* General and administrative expenses totaled $3.4 million for the three months ended March 31, 2010, compared to $3.4 million for the same period in the prior year. General and administrative expenses for the quarter ended March 31, 2010 included one-time professional fee expenses associated with the appointment of our new chief executive officer, implementation of our 2010 stock incentive plan and employment agreements. The expenses for the quarter ended March 31, 2009 included a non-recurring (or one-time) severance charge for our former general counsel.
* Expenses for the quarter ended March 31, 2009 and 2010 include $1.4 million and $1.3 million, respectively, in stock-based compensation expense related to options granted to employees and non-employees.
* Biodel did not recognize any revenue during the quarter ended March 31, 2009 or 2010.
* At March 31, 2010, Biodel had cash and cash equivalents of $32.7 million and 23.9 million shares outstanding.

Summary:
This allows the millions of diabetics to have a faster, more effective mechanism of insulin that retains the safety features of current injectable insulins. I think the pain at injection site has been addressed with a 100 ml formulation, but it's possible the FDA will ask for more data around this, or because of the Indian data issue. If they don't, I think BIOD becomes an attractive buyout candidate for one of the big bios already selling insulin.

I have traded this a couple of times, and have owned shares in my IRA since 4.16. If the current market shakeout today causes a dip back into the low 4s or high 3s, I'll be doubling my position. I'll be out before the approval date, and in the event of a Complete Response Letter (CRL) will add it back to my watch list for another eventual buy back.