Biodel (BIOD) announced this morning that it had received a complete response letter (CRL) for its Linjeta rapid-acting insulin product.
The FDA is asking for two additional clinical trials – one for Type 1 and one for Type 2 diabetes – to establish safety and efficacy. The FDA has also asked for stability data.
Any time the FDA asks for additional clinical trials its almost certainly disastrous for the company’s share price. Biodel is currently down over 50% in premarket trading on the news.
I will be listening to the conference call at 8:15. Expect updates at that time.
Conference call update:
The CRL is looks rough. Here are the main points:
Disregarding the India data was post-hoc and therefore not appropriate
This was one of the biggest questions heading into the PDUFA data. I personally learned a lot about how the FDA addresses post-hoc data – it’s unacceptable. Keep that in mind when another company suggests arguments, no matter how reasonable, for disregarding certain data. There was also an additional mention of a post-hoc data analysis being inappropriate but to be honest I didn’t catch if that was referring to the India data or another data analyses.
While completer data was fine, intent-to-treat (ITT) population did not show non-inferiority to regular human insulin
Again, in a statistical sense, the Biodel interpretation was wrong. The problem that I see here is that Biodel had rough tolerability – I believe this was related to injection site pain – which caused a number of patients to drop out of trials. In an ITT analysis, all those drop outs count for the overall statistical conclusions. It might not seem ‘right’ in all cases that the drop-outs’ HbA1C numbers affect your statistical conclusions but it has to be that way for a number of other reasons.
Additional phase III trials are required in both type 1 and 2 diabetic patients
The company must address the India data and non-inferiority in ITT population issues with new phase III trials. We don’t know exactly what that will entail until the company meets with the FDA to discuss trial design. I believe we’re looking at something similar in nature to the original phase III trials which were stated to cost $15-$17 million.
The good news here is that Biodel has already addressed tolerability in newer formulations and I don’t believe this should be an issue in the new phase III trials. I don’t see a large question mark, in my mind, as to whether the trials will turn out favorable this time around. The biggest question is what the company will have to do to finance the requisite trials.
Stability and manufacturing data must be addressed
Biodel must submit new stability data in regards to its new formulation. Originally, six month stability data was required by the FDA. I expect this to stay the same and stability, therefore, will not be the rate limiting step in resubmission. Biodel previously had issues with its Hyaluron supplier, which surfaced again in the CRL, but this, too, should not be rate-limiting.
The company has cash for approximately one year of operations
In my own estimation, it would appear the company CANNOT finance the requests of the CRL on its own. The company had an end-of-quarter cash position of $23.9 million along with $8.6 million that was raised through a secondary offering. The company says it has about one year of cash compared to its projected burn rate. The company needs a partnership as soon as possible to help defray the costs of running the additional trials. Due to the precarious position the company is in, I don’t think the terms of that partnership are going to be that friendly.
Summary
The CRL is rough. Additional clinical trials are requested and the company will probably not have the cash to fund the trials in their entirety. However, there does not appear to be a high probability that the company will miss its endpoints the second time around. Therefore, its not so much a question of ‘if’ Linjeta receives approval, but rather ‘when’ and ‘at what cost’.
In addition, the data must always be taken with respect to the company’s market value. With a market cap now likely to be around $40 million, a tremendous amount of downside is priced in. I don’t plan on going near this stock in the near future – due primarily to its high uncertainty – but I imagine some will make the argument that the company is undervalued even when factoring in its hardships.
It’s a tough call and I hope we get some certainty over the following weeks and months.
