Monday, November 1, 2010

Biodel - Unsurprising Bad News

Given how finicky the FDA has become, it cannot really be said to be a surprise that the agency bounced Biodel's (Nasdaq: BIOD) application for approval of Linjeta in Type 1 and Type 2 diabetes.

What has to pour some salt in the wound, though, is that the two trials were both laid low by events largely out of the company's control. Heat damaged blood samples from India in a Type 1 study and unexpected drop-out rates reduced the statistical power of the Type 2 study to below the point of non-inferiority. Although both drugs held up fine on post-hoc studies, that did not cut it with the FDA.

So, what now?

The FDA is demanding new Phase 3 studies for both indications, and I would estimate that is a $160M bill for a company with less than $25 million in cash. Theoretically, maybe the company could raise enough for one trial with a share offering, but that would be horribly dilutive right now. There's also a reasonable chance that the company could find a partner (Linjeta *works*!), but the terms would not be even slightly favorable to the company. In fact, I imagine the conversation would go something like, "there is the barrel ... assume the position". Making matters worse, it is not practical for the company to partner just the Type 1 (or Type 2) indication - once one version gets approval, there will be rampant off-label usage and no really accurate way to track it.

I hope the company can figure something out. My hunch is that they will partner (or sell the company) and investors will get a partial recovery on their investment, but nothing like what they could or should have expected a couple of years ago.

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