Executives
Paul Bavier - Corporate Secretary and General Counsel
Errol De Souza - President and CEO
Gerard Michel - CFO
Alan Krasner - CMO
Analysts
Jason Butler - JMP Securities
Matt Kaplan - Ladenburg Thalmann
Richard Reznick - William Blair
Biodel Inc. (BIOD) F3Q 2013 Earnings Call August 12, 2013 5:00 PM ET
Operator
Ladies and gentlemen, thank you for standing-by. Welcome to Biodel’s Third Quarter Fiscal Year 2013 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After opening remarks, we will open up the call for your questions. Instructions for queuing up will be provided at that time. I would also like to remind you that this call is being recorded for replay.
I would now turn the conference call over to Paul Bavier, Biodel’s Corporate Secretary and General Counsel.
Paul Bavier
Thank you. Good afternoon and welcome to our third quarter fiscal year 2013 conference call. On the call, we will be making forward-looking statements covered under the Private Securities Litigation Reform Act of 1995. These statements may involve risks and uncertainties that are described more fully in our filings with the SEC, which are also available on our website.
Forward-looking statements represent our views only as of today, and should not be relied upon as representing our views as of any subsequent date. While we may elect to update forward-looking statements at some point in the future, we disclaim any obligation to do so even if our estimates change.
Joining us on today’s call are Dr. Errol De Souza, Biodel’s President and Chief Executive Officer; Gerard Michel, our Chief Financial Officer and Vice President of Corporate Development; and Dr. Alan Krasner, our Chief Medical Officer. After their prepared remarks, we will open the call to your questions.
Now, I’ll turn the call over to Errol.
Errol De Souza
Thank you, Paul. Good afternoon, everyone. We are pleased to report on another quarter of continued advancing across the breadth of our portfolio of pipeline candidates. During today’s call, we’ll provide updates on one; our Phase II clinical trial of ultra-rapid-acting recombinant human insulin, our RHI-based candidate, BIOD-123; two, our ultra-rapid-acting insulin analog-based formulations; three, our lead concentrated ultra-rapid-acting insulin formulation, BIOD-531; and four, our glucagon program. In addition, we’ll provide details on our recent financing and finish up with the third quarter financial results.
Let me begin with an update on the BIOD-123 Phase II clinical trial. As you may recall, this trial was a randomized, open-label, parallel group study conducted at 33 investigative centers in the U.S. 132 subjects with Type 1 diabetes were randomized to receive either BIOD-123 or Humalog to use as a mealtime insulin and both arms of the study used insulin glargine, sold as Lantus, as the basal insulin.
Subjects were treated for 18 weeks to evaluate HbA1c control as the primary endpoint and secondary endpoints include postprandial glucose excursions, glycemic variability, hypoglycemic event rates and weight changes.
On July 11th we were pleased to report that the treatment segment of the study that concluded with all scheduled follow-up visits having been completed. We look forward to reporting top line data later in this calendar quarter.
Let me now turn to our analog-based ultra-rapid-acting insulin program, which offers opportunities independent of the RHI-based program. We recently presented a clinical trial results for the insulin lispro-based formulations, BIOD-238 and BIOD-250 at a late breaking session of the 73rd Scientific Sessions of the American Diabetes Association in June. Our presentation which is also available on our website detailed the results from a Phase I clinical trial designed to evaluate the pharmacokinetic and injection site toleration profiles of BIOD-238 and BIOD-250 relative to the rapid-acting insulin analog, sold as Humalog. Results from this trial were especially encouraging.
BIOD -238 and BIOD-250, like BIOD-123, demonstrated a significantly more rapid rate of absorption when compared to Humalog. Furthermore BIOD-250, like BIOD-123 also compared favorably to Humalog with regards to injection site tolerability. On the other hand BIOD-238 and BIOD-250, in contrast to 123, had a significantly faster decline from peak concentration compared to Humalog. These differences were all highly statistically significant.
The analog based candidates have a different pharmacokinetic profile versus BIOD-123 and may exhibit clinical characteristics in different settings. Therefore both programs are in development and may eventually be positioned in different market segments. For example the analog based formulation's distinct pharmacokinetic profiles maybe particularly suited for up use.
We are currently developing both lispro and aspart based formulations with a focus on improving the overall stability profile of these analog based ultra-rapid-acting formulations. As you may recall lispro is the active pharmaceutical ingredient for API and Humalog and aspart is the API in Novalog. We are in discussions with a number of manufacturers to source commercial supplies of both lispro and aspart.
Once an API supply is secured we would expect additional formulation work to take place over a period of about six months. As we advance this promising program, we continue to remain engaged in discussions with major players in the insulin space.
Let me now turn to our concentrated insulin program. The use of concentrated insulin to treat type 2 diabetes patients with severe insulin resistance continues to increase at a greater rate than the overall market and currently represents approximately $300 million in annual revenues. Insulin resistant patients often require more than 200 units of insulin daily and are not well served by the standard insulin concentrations of 100 units per milliliter or U-100 formulations.
Currently, Eli Lilly’s Humulin-R U-500 is the only concentrated insulin product available to these patients. Because the Humulin-R U-500 duration of action is long enough to provide basal coverage Humulin-R U-500 concentrated insulin is often administrated by patients twice a day. However, it’s onset of action is delayed relative to equivalent doses of U-100 rapid acting insulin analog and it is not well suited to provide optimal mealtime insulin coverage.
During our last earnings call we announced the selection of BOID-531 as our lead concentrated insulin candidate. BIOD-531 is a concentrated u400 formulation of RHI, disodium EDTA, citrate and magnesium sulfate.
At the American Diabetes Association's 73rd scientific sessions in June we presented pharmacokinetic and pharmacodynamic profiles of BIOD-531 in the diabetic swine model. This presentation, which is also available on our website shows that BIOD-531 has a more rapid onset of action relative to Humulin-R U-500 and similar to or superior to that a standard U-100 Humalog.
BIOD-531 also demonstrated a comparable duration of action, relative to Humulin-R U-500 which indicates that like Humulin-R U-500, BIOD-531 could progress basal insulin needs as well. The BIOD-531 pharmacokinetic and pharmacodynamic profiles suggest that it could compete with insulin pre-mixes and provide superior mealtime coverage.
Premixes provide basal and prandial bolus therapy with fewer injections per day. Currently Eli Lilly and Novo Nordisk market presentations of human insulin or rapid-acting insulin analogs such as Novolog or Humalog, premixed with intermediate acting basal neutral Protamine insulins in a variety of ratios such as 70:30, 75:25, and 50:50.
In the U.S. the analog based premixes alone sell approximately $1.5 billion annually. While the premixes offer prandial and basal coverage with one injection, the prandial component is suboptimal. BIOD-531's ultra-rapid acting onset and basal duration profile, coupled with its high concentration could offer a truly novel therapeutic that provides basal coverage and improved prandial coverage to patients who are insulin resistant or use premixed insulins.
We are eager to continue the rapid advancement of this program. An engineering batch for BIOD-531 has been manufactured and clinical supplies schedule for manufacturing this quarter. An amendment to the investigation of new drug application has been submitted to the FDA.
Phase 1 clinical study initiation is anticipated next quarter. The trial will be a randomized blinded four way crossover phase 1 clinical trial, in which the pharmacokinetic, pharmacodynamic and injection site toleration profiles of BIOD-531 will be defined and compared to Humulin-R U-500 and to Humalog prandial-basal premixed insulin.
In this study, all volunteers will receive single injections of each insulin on separate days in a randomized treatment sequence. The identity of each study drug will be blinded at the time of injection. After each test injection, volunteers will undergo euglycemic class studies.
On two of the test days, BIOD-531 and Humulin-R U-500 will be administrated at doses of one unit per kilogram which is in the range used by the patients with type 2 diabetes and severe insulin resistance.
On the other two days of the full period study, BIOD-531 and Humalog 75/25 premixed insulin will be administrated at a dose of 0.5 units per kilogram. This dose reflects that which might be used by patients with moderate degrees of insulin resistant and (Audio Gap) who use the premixes. We anticipate top line data in the first calendar quarter of 2014.
Now let met turn to our glucagon program focused on developing a rescue presentation for diabetes patients experiencing severe hypoglycemia of very low concentrations of blood glucose. At the JMP Healthcare conference on July 9th, we presented new pharmacokinetic and pharmacodynamic data in dogs and accelerated stability data demonstrating that our glucagon formulation has commercially viable profiles comparable to Eli Lilly or Novo Nordisk's marketed glucagon.
As we have discussed in the past, the current products in the market are difficult to use and this is the daily limited uptake. The introduction of an intuitive easy to use device should both convert and extend the existing market.
On June 6th, we were pleased to announce a 15 year supply agreement with Unilife Corporation for exclusive worldwide rights to a proprietary auto reconstitution technology from their easy mix platform of dual chamber devices for use with glucagon as a rescue treatment for severe hypoglycemia.
The device has been highly customized for a convenient portability and for ease of use to enable rapid treatment during emergency situations with little to no training. The device automatically reconstitutes lyophilized glucagon and features automatic retraction of the needle upon full dose delivery, virtually eliminating dosing errors and the risk of needle stick injuries.
This device agreement with Unilife, combined with a previously signed long term commercial supply agreement for glucagon positions us to select a final formulation and employing a contract manufacturing partner during the quarter. We expect to submit an investigation in new drug application to the FDA during the next 12 months and initiate a pivotal clinical study during the second half of 2014.
This development schedule should put us in track to submit a new drug application to the FDA under the 505(b)(2) regulatory pathway in 2015. In parallel, we also continue to work on developing liquid glucagon formulations that could expand the market by addressing other applications such as development of the artificial pancreas.
Lastly, I would like to turn to our recent financing. As we announced in June 19th, we successfully completed a public offering, which generated approximately $19.3 million in net proceeds including proceeds from the exercise of the over-allotment (inaudible) option.
We are gratified that the over-subscribed financing with supported by high quality institutional investors including both the existing and new shareholders. We are also pleased that by Biodel was added to the Russell Microcap Index thereby further extending our visibility to a broad range of institutional investors and increasing liquidity.
As we enter the last quarter of our fiscal year with a strengthened balance sheet, re-examining strategies as part of our usual and customary annual budgeting process that will enable us to capitalize on opportunities in the execution of our full stale of development while maintain a focus on the prudent utilization of resources.
We currently forecast that our cash position will fund us at least through the second calendar quarter of 2015. Once our annual budgeting process is behind us, we look forward to revisiting this projection and providing additional updates regarding the entirety of the portfolio.
In conclusion, we have had another very productive quarter during which we advanced multiple programs. I am gratified by our success in building a company with a broad portfolio of novel therapeutics to treat diabetes, each serving a distinct unmet need.
That concludes my introductory remarks. Now, I will turn the call over to Gerard for a review of our third quarter 2013 financial results.
Gerard Michel
Thank you, Errol. Biodel reported a net loss for the three months ended June 30, 2013 of $9.6million or $0.66 per share of common stock, compared to a net loss of $6.1 million of $0.52 per share of common stock for the same period in the prior year.
Research and development expenses were $3.6 million for the three months ended June 30, 2013 compared to $3 million for the same period in the prior year. The increase in research and development expenses was primarily attributable to expenses associated with our Phase II clinical trial of BIOD-123.
General and administrative expenses were $1.7 million for the three months ended June 30, 2013 compared to $1.8 million for the same period in the prior year. Expenses for the three months ended June 30, 2013 included $4.4 million due to adjustments to fair value of common stock warrant liability compared to $1.4 million for the same period in the prior year. Expenses for the three months ended June 30, 2013 and 2012 included cost of $300,000 each and stock based compensation expense related to options and restricted stock units granted to employees and our non-employee directors.
Biodel did not recognize any revenue during the three months ended June 30, 2013 or 2012. At June 2013, Biodel had cash and cash equivalents of $42.4 million and 18.9 million shares of common stock outstanding and approximately an additional 3.9 million shares of common stock issuable upon conversion of outstanding preferred shares.
That concludes our prepared remarks. Now, we’d like the operator to open the call to your questions.
Question-and-Answer Session
Operator
(Operator Instructions) So we will take our first question from Jason Butler from JMP Securities. Jason, please go ahead.
Jason Butler - JMP Securities
Hi guys. Thanks for taking the questions and congratulations on progress. I know we’re looking forward to the data coming soon. Maybe I could just ask a question on the concentrated insulin program. Could you talk a little bit about the hurdles that you’re looking at meeting or exceeding for advancing that program, or on the reversal would make you go back to the drawing board and look for another candidate?
Errol De Souza
Jason, thanks for the question, let me talk about the hurdles and then I’ll let Alan Krasner sort of elaborate on the design of the trial to be able to meet the end point. As we have presented data in diabetic swine, what we see with BIOD-531 is an ultra-rapid profile initially followed by a basal profile. Now, the ultra-rapid profile initially should provide for significantly better meal coverage and that’s evidenced by the data in diabetic swine where we see a return or normalization of glucose in the diabetic pigs much faster than you would see with either the U-500 Humulin-R U-500 formulation and is at least comparable maybe a little bit better than Humalog U-100.
So I think this formulation off of it is better prandial coverage with comparable basal coverage, and Alan maybe you can comment how the Phase I clinical trial is really designed to bring out both of these endpoints.
Alan Krasner
So in the clinical trial, we’ll be measuring both pharmacokinetics and pharmacodynamics. The PD is measured using the new glycemic clamp technique. Basically we want to be able to demonstrate in humans what they’ll describe has been shown so far in the pig model that is that the absorption of our formulations are measurably and significantly more rapid than that of either of the competitors that Errol mentioned either U-500 or Humalog premixed. And we’d like to also quantitate the duration of action of our end point versus the market competitors. We think the measures of the success would be more rapid absorption and similar duration of action to these competitors which have known basal activity and are used as basal infants as well.
Jason Butler - JMP Securities
Great, thanks. And then just one more question on concentration insulin program, can you talk about Cmax and what the concentration of insulin is at similar time points to what you’re seeing with the ultra-fast insulin line? I guess, what I’m thinking about here is in the premix setting given your fast strong set of action, are you getting to a high enough concentration that you’d be worried about hypoglycemia?
Errol De Souza
We have not seen that in the diabetic model. I mean, we get up much faster from the standpoint of time if you compare us out to the Cmax for example Humulin R U-500, it’s comparable in that. The mix is it’s difficult to compare the Cmax, Jason, to the mixes because they’re really different assays but if you look at the pharmacodynamic responses as surrogate, what we see is the normalization of the high glucose levels that I’ve seen in diabetic swine much faster versus what even the premixes they don’t come down very quickly, in fact they do it over a protracted period of time.
So if you compare us I’ll (inaudible) with Humulin R U-500 the Cmax is I think in a comparable range but it's difficult because of the different assays to compare head to head with the Humalog 75-25.
Operator
And we'll take our next question from Matt Kaplan from Ladenburg Thalmann. Please go ahead with your question.
Matt Kaplan - Ladenburg Thalmann
Going into I guess the near term data announcement for 123 Phase 2 program, could you just help us understand what we should be expecting and looking for in the Phase 2 data there?
Errol De Souza
This is really a data rich trial, because one of things that we have in this trial is not just sort of the standard measures in terms of HbA1c and the glycemic excursions with glucose measured by SMBG, but we have also used continuous glucose monitoring, so you can get a sense for the amount of data that we expect to analyze in this trial. So our primary end point is HbA1c non-inferiority and that for us I think is really a key in terms of showing non-inferiority with the Humalog, which is the comparator in this trial. And that's really what the trial is out for.
Now we're looking at a variety of secondary measures including the glycemic excursions, weight gains, hypoglycemic events. And we'll be looking at the data. But here what we're looking for is trends and based on the mechanism we would anticipate showing better postprandial coverage with our formulation relative to Humalog. And that could show up in many different ways, and we're going to be looking at different cuts of the data, time in the normal range, time below seven in the hypoglycemic range. That's going to be I think a good indicator for us in terms of showing benefits that patients might expect with our formulations.
And then there as sort of the standard kinds of measures that you may be looking at, that showed benefits in previous our (inaudible) trials, but those were done versus cumalin and there we saw improvements in terms of hypoglycemia, more mild to moderate and as well as weight changes. So that's sort of the gamut of secondary measures. But they were looking for more trends, the primary one is HbA1c. Alan anything to add?
Alan Krasner
We are looking at the secondary variables (inaudible) footprint glucose that Errol mentioned, in a variety of ways, CGM is one of four ways where we’re capturing postprandial glucemia in this trial. So there are literally hundreds of thousands of data points to analyze here and we'll be looking at all of them of course.
Matt Kaplan - Ladenburg Thalmann
Just another question on the glucagon program, thanks for the update there. In terms of figuring out the final formulation, where are you in terms of being able to do that right now?
Errol De Souza
Yes, we pretty much got final formulation selected that, the data that we have on our website that we presented in July shows you both accelerated stability, which tracks, it's at least as good as the Lilly formulation, in fact on a high molecular way our API was significantly lower than Lilly which was used as a comparative.
In addition what we have done is sort of tried to mimic the pivotal study that we would do on volunteers and dogs, and using a dose of glucagon that would be equivalent to what the human dose would be. And there as you can see from the data, the formulations that we've selected is looking equivalent to Lilly's formulation and both Lilly and our formulation are slightly better than Novo and that's a consistent response that we've seen. So we feel pretty good about the formulation that we have.
Now what we're going through in terms of the formulation is we'll obviously be working with the CMO in terms of the manufacturing process. But we have a pretty good idea of the components that are going to go into the products and what the final composition of the dose, the formulation itself.
Matt Kaplan - Ladenburg Thalmann
And what's your sense in terms of the pivotal study, what will that look like?
Errol De Souza
Alan why don't you describe the pivotal study?
Alan Krasner
This is an interesting product, because the pivotal study for this drug which we hope would be rarely used in clinic is a single bio-equivalent study, where we show bioequivalence between our formulation and an equal dose of marketed competitor like Lilly's glucagon. It's a fairly standard study design; there is a published study we're modeling after that Lilly used to establish bioequivalence for their recognizant glucagon back in the late 90s. So actually that is a pretty straight forward pivotal; study.
Matt Kaplan - Ladenburg Thalmann
And then would you also have to do a user usability type of study as well.
Unidentified Company Representative
Absolutely especially since our device, there would be a device to deliver the drug, there would be as you would expect, human factor study to be part of the NDA as well.
Operator
(Operator Instructions). Okay, we will move onto our next question coming from Richard Reznick from William Blair. Richard, please go ahead with your question.
Richard Reznick - William Blair
Hi guys, Richard Reznick for John Sonnier at William Blair. Quick question about the insulin programs in general, so you have a portfolio of compounds now, and even though there are differences between these compounds, do you think that positive results with BIOD-123 could de-risk the other program to some degree and also do you think that could potentially give you the opportunity to move from phase I to phase III with any of these programs in the future? Thanks.
Unidentified Company Representative
We feel very good about the portfolio of candidates that we have developed and to a great extent while they’re related in sort of having an ultra-rapid acting profile, each of them have unique profiles which make them all worthy of the development. As I tried to bring out in this call similarities and differences between our RHI based candidate 123 which we expect to announce topline data this quarter from the analog base formation, both faster on, they are both favorable on the injection sites tolerability, but Humalog based formations have a faster off.
This really makes it a fairly good type of formation, ideal I should say in a pump setting. Both of them could be used in an MDI setting, so we really see them as an independent and the analog base formulations moving forward irrespective of the outcome of 123. And so in a scenario in terms of positive data we would see both of them moving forward and the analog base formation we’re working very hard to stabilize them. And the concentrated insulin is really a unique formation, it’s very different.
In developing this concentrated insulin formation, we have got two pools an ultra-rapid pool which is great for the prandial in fact better than the competitors out there in a basal pool and that would be competing in a very different market then say 123 or the analog base formation, so we truly see a portfolio candidates independent of each other all worthy to move forward and then obviously we have got glucagon which is really a short term deliverable in terms of an NDA in 2015.
Operator
Well, I am showing that this concludes the Q&A portion of the call. I will now turn the call back Dr. De Souza. Dr. De Souza?
Errol De Souza
Great, thank you so much for joining us on today’s call and your question and have a great day.
Operator
Okay, ladies and gentlemen, this does conclude your conference. You may now disconnect and have a great day.
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