Biodel F3Q15 – Submission for GEM glucagon delayed at least nine months to early 2017; Phase 2b study of BIOD-531 temporarily on hold – August 19, 2015

Biodel provided its F3Q15 update last week in a call led by CEO Dr. Errol de Souza. The majority of the call was focused on the company’s Glucagon Emergency Management (GEM) auto-reconstitution rescue device and lead insulin candidate BIOD-531 (U400 ultra-rapid-acting human insulin), both of which have experienced unexpected delays. There were no updates on the progress of Biodel’s stable liquid glucagon program during the call, but we later learned that the company hopes to select a single lead formulation for advancement in 3Q15-4Q15. The remainder of Biodel’s portfolio, including BIOD-123 (U100 ultra-rapid-acting human insulin) has been de-prioritized over the past year as the company has focused its resources on its most promising late-stage candidates. Below we include our top five highlights from the call, followed by a pipeline summary, an overview of the glucagon competitive landscape, and Q&A.

1. Submission of the GEM device, previously expected in mid-2016, has been pushed back by at least nine months due to delayed timing for the manufacturing of registration lots and ongoing contract discussions with partner Unilife.

2. On a more positive note, Biodel recently completed a successful end-of-phase 2 meeting with the FDA that provided clarity on the requirements for an NDA submission of the GEM product.

3. The phase 2b study of BIOD-531 initiated in May is temporarily on hold due to an FDA request for additional data on Biodel’s novel U400 syringe – we’re excited to see this.

4. Management highlighted pump users and patients with type 2 diabetes on basal-bolus therapy as two key additional target populations for BIOD-531.

5. Biodel had cash and cash equivalents of $44.4 million as of June 30, 2015, down from $49.8 million at the end of 1Q15 and up from $24.5 million at the end of 2Q14. 

Top Five Highlights

1. Submission of Biodel’s Glucagon Emergency Management (GEM) auto-reconstitution rescue device, previously expected in mid-2016, has been delayed by at least nine months. The adjustment is primarily due to manufacturing delays: Biodel originally expected to receive the registration batches required for pivotal studies from partners Unilife and Emergent toward the end of 2015 but now does not anticipate receiving them until at least 3Q16. Adding another layer of uncertainty, Biodel is in ongoing discussions with Unilife related to contract requirements, and management stated that the company cannot provide a definite revised timeline until those outstanding issues are resolved. This news prompted significant frustration during Q&A, with one analyst bluntly asking “why does this not reflect management incompetence or management weakness?” It is disappointing to see complexity generated by lack of effective ongoing communication between parties and we hope that all outstanding issues can be resolved quickly though we certainly understand it isn’t easy. This delay will likely make it even more challenging for Biodel to compete against other novel glucagons (i.e. candidates from Locemia and Xeris), which will likely arrive first and may have an edge in terms of user-friendliness. That said, the potential market for novel glucagon is huge, and we have been impressed by Biodel’s proactive communication with the FDA and incorporation of pharmacoeconomic analysis into its plans for the GEM device. 

• The main cause of the delay appears to be poor coordination and communication between Biodel, Unilife, and Emergent. As a reminder, while Biodel is primarily responsible for the clinical development and regulatory submission of the GEM product, Unilife is responsible for the device itself and for coordinating activities with Emergent, which completes the final filling of the devices. Based on commentary from Biodel management during Q&A, Emergent can only complete that process during two biannual shutdown periods. Biodel had assumed that the final filling of the registration batches needed for pivotal studies would take place during one such shutdown period toward the end of 2015 but very recently learned that the process would be delayed until the next period in mid-2016. It is not clear whether the contract disputes between Biodel and Unilife stemmed from this situation or involve unrelated issues. We imagine that these disputes could potentially hamper Biodel’s search for a future partner for the GEM device, though management has stressed in the past that the company is fully prepared to commercialize the product on its own if need be.

2. On a more positive note, Biodel recently completed a successful end-of-phase 2 meeting with the FDA that provided clarity on the requirements for an NDA submission of the GEM device. Management stated that the FDA confirmed the company’s proposed design for its summative human factors study of the device and encouraged the inclusion of adolescents in the study population. The FDA also largely confirmed the design of Biodel’s planned pivotal clinical trial for the glucagon formulation (BIOD-961); it reaffirmed the need to demonstrate pharmacokinetic (PK) and pharmacodynamic (PD) bioequivalence vs. a marketed comparator and requested that the final commercial device be used in the study. Biodel also received confirmation that its plans to satisfy other requirements (e.g., toxicology, device verification, analytical stability) should pass FDA muster and be sufficient for a 505(b)(2) filing. Management characterized the meeting as productive and mostly in line with previous expectations and reiterated the guidance for an approximately six-month period between the receipt of the registration lots and NDA submission.

• As a reminder, Biodel released positive results from initial PK/PD and human factors studies for the GEM product earlier this year. Results from the phase 1 proof of concept trial (n=15) of BIOD-961 demonstrated a comparable PK/PD profile to Lilly’s and Novo Nordisk’s marketed glucagon formulations. Biodel plans to select a single comparator for the pivotal trial; a final decision has not been made, but management indicated that Lilly's glucagon is most likely. The company has suggested repeatedly in the past that the demonstration of PK bioequivalence with a marketed product should give BIOD-961 a significant edge over other novel glucagon formulations, but we assume there are likely other paths to approval based on other companies’ experiences. Results from the initial human factors study (n=24) of the GEM device demonstrated significantly greater usability compared to both marketed glucagon kits, with comparable success rates among trained and untrained participants.

3. The phase 2b study of BIOD-531 (U400 ultra-rapid-acting human insulin) is temporarily on hold due to an FDA request for additional data on Biodel’s novel U400 syringe. As a reminder, the open-label trial, initiated in May, is investigating BIOD-531 vs. Lilly’s Humalog Mix 75/25 in 130 patients with type 2 diabetes and moderate insulin resistance (daily insulin requirements of 40-200 units). During this call, management explained that Biodel has created a novel syringe for BIOD-531 that displays the correct dose and units for U400 insulin, with the goal of avoiding the dose conversions that have created challenges for Lilly’s Humulin R U500. While management stressed that Biodel conducted dose accuracy tests for the device prior to initiating the phase 2b study, the FDA issued a partial clinical hold shortly after enrollment began and requested additional data on the device’s dose and dose increment accuracy. This should ideally be a relatively short delay, as Biodel has completed the required testing and plans to submit data to the FDA within the next few weeks, after which the FDA has 30 days to review it. In the meantime, the seven patients already randomized to BIOD-531 will be treated with Humalog Mix 75/25 until the study resumes. Primary completion was originally expected in June 2016, and Biodel declined to provide a specific revised timeline prior to receiving feedback from the FDA. While this appears to be a manageable hurdle, we are again frustrated from a patient perspective for delays to emerge that could have been avoided with more effective communication between the parties (that said, again, it’s difficult to understand this complexity from the outside).. 

• Phase 2a data on BIOD-531 will be presented at EASD in September. This data is from a trial in severely insulin-resistant patients that demonstrated superior control vs. Humalog Mix 75/25 and comparable control vs. Humulin R U500 over a 24-hour period. In terms of postprandial control, pre-meal BIOD-531 was superior to both comparators given pre-meal, and post-meal BIOD-531 was equivalent to both comparators given pre-meal. Another phase 2a trial in moderately insulin-resistant patients showed superior postprandial glycemic control and higher time in range with pre-meal or post-meal BIOD-531 vs. both Humalog Mix 75/25 and Humulin R U500 given pre-meal. The potential for post-meal dosing could be one of the product’s strongest selling points, as it aligns with how many patients actually dose their prandial insulin.

4. Management highlighted patients with type 2 diabetes on basal-bolus therapy and pump users as two key additional target populations for BIOD-531. Biodel has taken an increasingly broad view of the target population for the product, announcing plans in F4Q14 for an additional phase 3 trial in type 1 diabetes and emphasizing the potential market within type 2 diabetes beyond patients with severe insulin resistance. In this call, management highlighted the potential of BIOD-531 to simplify complex basal-bolus regimens for patients with type 2 diabetes and provide “equivalent glycemic control at lower cost and greater patient satisfaction.” To that end, Biodel plans to conduct additional phase 2a studies of the product vs. standard basal-bolus therapy, though no specific timeline was provided (the company hopes to announce final designs and precise timelines in its next earnings call). Management also confirmed that a plan to develop BIOD-531 for use in pumps is still in the works, reiterating that the product appears to behave more like a rapid-acting insulin in that context based on preclinical data. We look forward to seeing these projects progress, though we assume that getting the ongoing phase 2b study back on track is the company’s immediate priority. Biodel has indicated in the past that it would likely seek a partner for its broader commercialization efforts for BIOD-531, and we assume the focus of an initial launch would still be on the highly insulin resistant patients who stand to derive the most benefit from the product.

5. Biodel had cash and cash equivalents of $44.4 million as of June 30, 2015, down from $49.8 million at the end of 1Q15 but up from $24.5 million at the end of 2Q14. This cash burn of $5.4 million is roughly comparable to that seen in recent quarters. As of last quarter, Biodel estimated that its resources would be sufficient to fund operations through 1Q17, which at the time included an expected NDA submission for the GEM program. The company benefitted greatly from a public offering earlier this year that generated ~$32.1 million in net proceeds. Prior to that, management estimated that Biodel’s resources would last only through 3Q15. The improved cash position gives us substantially greater confidence in the company’s prospects, and we imagine that potential partners will take a similar view.

Pipeline Summary – Insulin

Pipeline Summary – Glucagon

Glucagon Competitive Landscape Overview

Questions and Answers

Q: On the GEM program, it seems like the manufacturing has always been the rate-limiting step to filing the NDA and that continues today. Can you give us more of a sense of what the issue is with respect to completing manufacturing of the registration batches? Does it have anything to do with the API or is it just the device at this point?

A: There are a number of components that go into the timelines for the manufacture of the devices and ultimately the trials and submission of the NDA. At a high level, you can see this in our other disclosures and in our contract. Biodel is responsible for the formulation and development, for working with Unilife to establish the device design requirements, and for the clinical studies and the submission of the NDA. Unilife is responsible for the device, and during the development phase they are the manager of the activities with Emergent, and Emergent is the fill and finisher. All that has to come together in the right way to make sure that everything stays on track, which is complicated.

If it were just the issues about bringing all of that together, I think we could still give you timelines that we were confident in, even if we didn’t like the timelines or appreciate the delay. However, there is another element of it, which is that we are in discussions with our device collaborator on contract requirements. It’s premature to comment on the details of those, but we feel that the resolution of those discussions may have an important impact on our timelines overall. So at this point, we aren’t able to discuss the timelines in detail. We’re working as diligently as we can to bring those discussions to resolution and come back with a meaningful report. There are no issues with the API manufacturer. That is all on track and the formulation development is continuing.

Q: So it sounds like the discussion hinges on you being responsible for the device design requirements and then Unilife implementing those requirements?

A: Yes. I really can’t give more details on that. We are in a position where some of these discussions are sensitive and ongoing and fluid. We’re focusing on bringing those to conclusion so we can provide a more substantive update.

Q: It sounds like you’ve got good clarity in terms of what needs to be done for the summative human factor study and the pivotal bioequivalence PK/PD study. Do those studies hinge on manufacturing of the GEM device as well?

A: Yes, that is the gating item for us to be able to conduct the summative human factor study, the pivotal clinical trial, and the stability studies. The registration lots need to be delivered in order to conduct these studies. As we’ve previously communicated, we expected to have those registration lots toward the end of this year, and that’s where the delay has occurred in terms of moving forward. At the end-of-phase 2 meeting with the FDA, we got total clarity on exactly what we need to do and we are ready to go if and when we can get the registration lots to implement the Biodel portion of the plan for the NDA filing.

Q: On BIOD-531, can you give us more detail on when you think you can reopen enrollment in the study?

A: I can’t say with certainty because we need to submit our response to the FDA based on the additional laboratory studies we conducted on these syringes and we will do that very shortly. The FDA has about a 30-day timeline to review the response. As long as they agree, I would hope it’s only a short pause that we’re experiencing here, but I can’t say for certain until we have FDA buy-in to our proposal on the data we are submitting soon.

Q: When the FDA put the temporary hold based on the device, did they ask you for specific data before you could reopen that study with the syringe you’re using?

A: They cited specific concerns, and it all has to do with the dose accuracy of these U400 syringes. There is no U400 syringe approved in the market. Although we generated data that showed the syringes were accurate with respect to ISO standards, they came back with these requests, which go well beyond ISO standards to look at the dose accuracy of these graduations and the accuracy of the minimal dose increments. Basically it just means testing a lot more dose graduations for volumetric accuracy than we had before, and I suspect we’ll be able to reassure them that these syringes meet all standards.

Q: With the GEM device, I understand that you have discussions ongoing and at the minimum we are dealing with a nine-month delay. Am I correct in stating that or can you envision a solution by which this would be a less than nine-month delay?

A: We do not have a plan to minimize the delay beyond that nine-month period. That could change, but we’re not holding that out right now as a big possibility. What we’re focusing on is bringing discussions on contract requirements to a conclusion so we can come back to you with real timelines. It’s safer to think about it as nine to 12 months as opposed to fantasizing about less than nine months.

Q: How long will the stability testing take once you have the material?

A: The stability testing is as per the previous plan because we were expecting to receive the registration lots from our device manufacturer toward the end of this year. That would’ve led to the pivotal clinical trial, stability studies, and all of that. And then about six months later, we would have been ready to file the NDA and then we would’ve supplemented the NDA with additional stability studies. That plan is intact. None of that’s changed. The gating item is receiving those registration lots, which are not solely in Biodel’s control.

Q: This syringe has been used in previous clinical trials and apparently you already screened seven patients in this study. What precipitated this request from the FDA? Was there an observation in the field or did it just come out of the blue?

A: This syringe was developed specifically for use in this clinical trial. It hasn’t been used before. The syringe it’s based on is an approved standard U100 insulin syringe, which basically was reprinted and recalibrated with units that are appropriate for U400 insulin. The FDA is concerned about the risk of dose errors associated with any concentrated insulin. This is based on their experience with Humulin R U500. U500 currently is marketed only in vials and there’s no special pen or syringe available for U500. So what happens in clinical practice is patients are taught to convert their doses into readings that are appropriate for a U100 insulin syringe or a tuberculin syringe.

As you can imagine, teaching patients to do this and depending on them doing this day in and day out is a complex process and prone to error. It is our understanding that multiple adverse events have occurred in clinical practice related to the use of U500. Hence the regulatory concern pertaining to concentrated insulins in general. We developed this U400 syringe in advance of this phase 2b study. We thought it would be appropriate for use in this study and actually address the FDA’s concerns proactively by giving patients a syringe where they can actually read the dose in units right off the syringe. I continue to believe that will help reduce the risk of these kinds of dose errors the FDA is concerned about. But because the printing and calibrations on this syringe have not been used in practice before, they requested more extensive testing than we were aware of based on ISO standards. We have just completed this testing and we will be submitting it very shortly.

Q: How do you define shortly? Is it days, weeks, a few months?

A: I would say a matter of a week or two before we submit, and the FDA then has to review that.

Q: I am a little confused about the GEM delay and why this was not anticipated. How do you wake up sometime in the last few weeks and someone has a conversation with Unilife, which should have been ongoing, and realizes that they are 12 months behind schedule or not on schedule at all? Why does this not reflect management incompetence or management weakness? Why was this not in your control? Why wasn’t somebody on top of this?

A: There is an element we’ve talked about before which results in fillings of several months very quickly once you cross the threshold that relates to that coordination of all the activities I was referring to. In particular, there are timelines that need to be coordinated with the fill finisher in order to be able to do immediate fills during twice a year shutdown periods. We were operating under the assumption until very recently that we would be receiving the devices’ fill finish following the biannual shutdown for the fill finisher taking place toward the end of this year. We no longer expect that the devices are going to be going through that media fill process toward the end of this year as we previously anticipated. The only next time that could come about is at the next biannual shutdown period, which is in the middle of 2016. So it does result in some wide swings that are uncontrollable once a certain threshold is met.

--by Emily Regier and Kelly Close