Albireo Pharma, Inc.
Q2 2013 Earnings Call Transcript

Published: 8 May 2013

[Operator:]

Ladies and gentlemen, thank you for standing by. Welcome to Biodel’s Second 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 will now turn the conference call over to Paul Bavier, Biodel’s Corporate Secretary and General Counsel.

[Paul Bavier:]

Thank you. Good morning and welcome to our second 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.

[Dr. Errol De Souza:]

Thank you, Paul. Good morning, everyone. We are pleased to report on another quarter of steady progress advancing our portfolio of pipeline candidates with a particular focus on our three pronged ultra-rapid-acting insulin program. This morning we will provide you updates on our Phase II clinical trial of the ultra-rapid-acting recombinant human insulin, our RHI based candidate, BIOD-123; our ultra-rapid-acting insulin analog-based formulations, our concentrated ultra-rapid-acting insulin formulations, and our glucagon program. Let me begin with an update on the BIOD-123 Phase II clinical trial. To review briefly, the Phase II trial is a randomized, open-label, parallel group study being conducted at approximately 30 investigative centers in the US. Subjects with Type 1 diabetes are randomized to receive either BIOD-123 or Humalog to use as a mealtime insulin. Both arms of the study use insulin glargine, sold as Lantus, as the basal insulin. The 18-week treatment of approximately 130 subjects will evaluate HbA1c control as the primary end point and secondary end points include postprandial glucose excursions, glycemic variability, hypoglycemic event rates and weight changes. I’m pleased to report that enrolment is fully complete, and more than half of the subjects have finished the study. We remain on track to report top line data in the third calendar quarter of 2013. Once we have had the opportunity to analyze the data from this trial, we will work closely with regulators and potential partners to design pivotal trials with both regulatory and commercial end points. Let me turn briefly to our analog-based ultra-rapid-acting insulin program. During our last earnings call in February, we described positive top line results from a Phase I clinical trial designed to evaluate the pharmacokinetic or PK 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 particularly encouraging since BIOD-250 achieved all established primary and secondary study objectives. BIOD-250 demonstrated a significantly more rapid rate of absorption than Humalog. Patients treated with BIOD-250 absorbed approximately twice as much insulin in the first 30 minutes following injection than patients treated with Humalog. Furthermore, BIOD-250’s decline from peak concentration as indicated by time to half-maximal concentration after the peak was significantly shorter compared to Humalog. These differences were all highly statistically significant. BIOD-250 also compared favorably to Humalog with regard to local injection site tolerability, which was measured with a 100 millimeter visual analog or VAS as well as patient questionnaires. BIOD-250’s mean VAS score of 2.7 millimeters was numerically lower than Humalog’s mean VAS score of 8.2 millimeters, although the difference was not statistically significant. BIOD-250 met our target profile by demonstrating a rapid on, rapid off PK profile and injection site tolerability comparable to Humalog. Our next step is to modify the formulation to achieve commercial stability. We also continue to explore opportunities that could leverage our preclinical findings that suggest our proprietary excipient formulations can also enhance the pharmacokinetic profiles of other insulin analogs Apidra and Novolog. The analog insulins represent the largest and most lucrative portion of the prandial insulin markets. Given the size of this market and the excitement expressed in response to BIOD-250 Phase I clinical data, we are in discussion with the major players in the insulin space. The progress of our RHI and analog-based ultra-rapid-acting prandial insulin programs clearly demonstrate our success in enhancing absorption rates and achieving ultra-rapid acting PK profiles without adversely impacting injection site tolerability, which we are now leveraging in the third prong of our ultra-rapid-acting insulin program to develop improved formulations of concentrated insulin. In the past quarter, our concentrated insulin program has progressed rapidly and is getting ready for development studies. We have improved on our formulations and expanded our understanding of the potential patient populations in markets that we may be able to serve. During our last call we described a prototype concentrated formulation of RHI, disodium EDTA and citrate under evaluation as an alternative to Humulin-R U-500, currently used in the treatment of severely insulin resistant type 2 diabetes patients, who require greater than 200 units of insulin daily. An unmet medical need exists for this subset of diabetes patients for whom no rapid-acting, or ultra-rapid-acting concentrated insulins exist. Currently, Eli Lilly’s Humulin-R U-500 is the only concentrated insulin product in the US market. Because its 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 has a delayed onset of action relative to standard concentrated rapid-acting insulin analog formulations, and is thus not well suited to provide optimal mealtime insulin coverage. A second segment of the market of a concentrated insulin formulation with an enhanced profile may address is that of insulin premixes. Premixes provide basal and bolus therapy with fewer injections per day. Currently Eli Lilly and Novo Nordisk market presentations of human insulin or rapid-acting analog insulins such as Novolog or Humalog, premixed with intermediate acting basal neutral Protamine insulins in a variety of ratios such as 70

[Gerard Michel:]

Thank you, Errol. Biodel reported a net loss for the three months ended March 31, 2013 of $5.2 million or $0.37 per share of common stock, compared to a net loss of $4.3 million or $0.45 per share of common stock for the same period in the prior year. Research and development expenses were $3 million for the three months ended March 31, 2013, compared to $2.6 million for the same period in the prior year. The increase in research and development expenses was primarily attributable to expenses associated with our ongoing Phase II clinical trial of BIOD-123. General and administrative expenses were $2.1 million for the three months ended March 31, 2013, compared to $1.8 million for the same period in the prior year. Expenses for the three months ended March 31, 2013 and 2012, included costs of $400,000 and $300,000 respectively, in stock-based compensation expense related to options and RSUs granted to employees and our non-employee directors. Biodel did not recognize any revenue during the three months ended March 31, 2013 or 2012. As of March 31, 2013, Biodel had cash and cash equivalents of $28 million. We had 14.2 million shares of common stock outstanding, and an additional 4.1 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.

[Operator:]

Thank you. (Operator instructions) Our first question comes from Liana Moussatos of Wedbush Securities. Please go ahead.

[Liana Moussatos:]

Thank you. I have a couple of questions. Can you give additional detail about the characteristics and number of patients for the concentrated insulin program, you mentioned that the patients require greater than 200 units per day. Can you give a little bit more color on the patients and the numbers of patients?

[Dr. Errol De Souza:]

Good morning Liana. I assume you want more color on the market opportunity related to the concentrated insulin.

[Liana Moussatos:]

Yes.

[Dr. Errol De Souza:]

Yes. Let me turn it over to Gerard, maybe you can take Liana through the market for the concentrated insulin.

[Gerard Michel:]

Sure Liana. So the concentrated insulin right now is obviously used for insulin resistant patients. The market right now for IMS in the US is somewhere between 100 and 200 million. We have some anecdotal evidence that it is quite a bit larger than that. IMS is not always terribly accurate. The market is growing significantly due to the increase in insulin resistance and we also expect some significant growth in this area as more and more pump companies, especially patch pumps move towards concentrated insulin formulations to handle type 2 patients.

[Dr. Errol De Souza:]

Can you talk about the premix market?

[Gerard Michel:]

The premix market as well that market is about $2 billion in the US and Europe. If we talk about specifically the analog premix, which is more the premium priced premix – I’m sorry that is the one in which we would compete. Those patients are primarily type 2 patients. They are usually patients for whom the hassle of a basal bolus regime positioned to size either for reasons of technical competency or some other reason, it doesn’t make sense to put them on what probably is standard of care, best standard of care, and instead they go with the premix. What you see with that is probably not an ideal rapid onset or duration. However, for the simplicity docs like to use it. There was a kind of a thought that the premix would slowly fade into the background when basal bolus started being used. But what has happened is that market has stubbornly continued to exist. We don’t see it going away. And the 2 billion probably represents close to probably a quarter to a third of the total analog basal bolus prandial type market.

[Dr. Errol De Souza:]

Just to summarize Liana, we look at the concentrated insulin as getting into a $1 billion plus market, a growing concentrated insulin market for insulin resistant patients plus the premix market. And the utility of the concentrated insulin would really be sorted out in the Phase I study, where we will go head to head against both Lilly U-500R, Humulin, as well as Humalog premixes, and that will give us really a good direction in terms of a follow-up. I mean we’re very excited about this formulation.

[Liana Moussatos:]

About what percent of type 2 diabetics are insulin resistant to the point that they would need a concentrated insulin?

[Dr. Errol De Souza:]

Alan, can you?

[Dr. Alan S. Krasner:]

Liana, I don’t know if there is good data on that. But it is a relatively small fraction of all type 2 patients out there for in terms of patients who have severe insulin resistance is defined by requiring more than 200 units a day. I just want to clarify that premixed group of patients is a completely separate group. The premix group are patients who do not have severe insulin resistance. They are more garden-variety type 2 primarily, who take generous, but more reasonable doses of insulin per day. So what they are looking for are minimizing the number of injections per day, some patients just cannot deal with or comply with intensive basal bolus regimens, so they usually take this premix twice a day. These are not patients with severe insulin resistance.

[Dr. Errol De Souza:]

And the bulk of these patients Alan would be type 2 diabetes.

[Dr. Alan S. Krasner:]

That is right by far.

[Dr. Errol De Souza:]

And just one last – Lilly actually published data were they said the market doubled between 2008 and 2010 for the concentrated insulin, and it is continuing to grow with an increasing segment of type 2s, who also are not just insulin resistant, but also obese.

[Dr. Alan S. Krasner:]

I’m just going to chime in, and we know we have talked internally about this. It is easy to get confused. What we found in the swine studies with this concentrated formulation was a surprising profile that looked as good or quite frankly better than the current mixes out there. Concentrated insulin right now people are insulin resistant they suffer through the fact that they get no rapid action at all when they take their insulin. It is like they have gone back 30 years in terms of the standard of care. So we were saying, hey, maybe we can give them something better. When we saw – but then we also noticed you know, this speed of onset is excellent. It has detail which in this case is a good thing, lot of detail, and you realize it looked probably better than the current mixes out there. So it can address two very different populations. The fact that it is concentrated might be a marginal benefit to some of the current premix patients. But in reality it would be transparent to them in that we would market this in a pen that is automatically compensated for the fact that it is concentrated. So it would be an attribute that might be beneficial to some of them. But in reality what we’re doing is offering these premix patients a product that we believe in the clinic, and hope will show a better onset of action and (inaudible) so they can use this two or three times a day instead of the four times a day that you have to use for MDI basal bolus therapy.

[Liana Moussatos:]

Okay, and then for the analog program what is the timing for Phase II and what is your commercialization plan, do you owe any royalties?

[Dr. Errol De Souza:]

On the analog, you mean the Biodel 238, 250 series?

[Liana Moussatos:]

Yes.

[Dr. Errol De Souza:]

Yes, I mean, there – we are moving down in two fronts. One is internal efforts to make the formulation from APIs that is lispro, the 238 and 250 as we disclosed previously were made from commercial Humalog and that enabled us to do our studies rapidly. So that is ongoing and we continue – I can tell you we are also applying the same technologies to Novolog and Apidra. Those studies are progressing internally. And as I mentioned in the call Liana, in parallel we are having discussions with all the major players who are very interested in the analog-based ultra-rapid insulins to extend their portfolios. The competition is not standing behind. Novo Nordisk as you know have announced their aspart-based what they call ultra-fast that is moving into the clinic later this year. And they are going from Phase I studies to Phase III studies. So they are skipping Phase II study. So the other players are looking very aggressively at our formulations also.

[Liana Moussatos:]

Okay, and then when will you start the Phase I for the concentrated insulin?

[Dr. Errol De Souza:]

You know, we will announce that very shortly. I just don’t want to put out the dates there because we are finalizing the dates for manufacturing, and we are finalizing – Alan is just nailing down the date for the Phase I study. And as soon as we have that – we’re not talking about months, we’re talking about weeks. We will put out the specific dates, but you can expect based on this call that it will be in the short term.

[Liana Moussatos:]

Thank you very much.

[Dr. Errol De Souza:]

Thank you, Liana.

[Operator:]

Our next question comes from Jason Butler of JMP Securities. Please go ahead.

[Jason Butler:]

Hi, thanks for taking the questions. Could you just – you mentioned that you needed to do more stability work on 250, can you give us any more color on that. And also talk about what stability data you have for BIOD-123?

[Dr. Errol De Souza:]

Yes, the stability data that we have for BIOD-123, now real time stability is just over a year based on the manufactured lots that we have had. Now multiple manufactured lots of BIOD-123, and it is tracking very close to what our Linjeta formulations tracked, which would be about 18 month stability at 5C, which is for us, the commercial viability. And then sort of the usual 28 days room temperature. We haven’t done a lot of work at 37C, because our favorite pump formulations would actually be the analog-based formulations. But our prediction is that it would be good at 37. So that is the story on Linjeta. When we are talking about the formulations related to Humalog, the 250 formulation, what we have is just using Humalog itself which is an optimal way to make it. We have got reasonable stability at 5C, not as good as Humalog. I mean, and we have got reasonable stability at 25C. The reason we are putting a lot of effort in terms of further stabilizing it is to get better stability at 37C, which is for pump use. And a profile of 250 which is the rapid on, rapid off profile is really ideal for pump use. And that is why we and I can tell you the partners that we are having discussions with really feel it is warranted to put some additional time. And in parallel as I mentioned, you know, there are some very active discussions going on with regard to interest on these analog-based formulations.

[Jason Butler:]

Okay. I think you may have just answered this question as well, but you mentioned Novolog’s ultra fast now moving straight into Phase III , is where the chance that you move one of your analog-based formulations straight from Phase I to Phase III, and would the BIOD-123 Phase III program potentially also involve an analogue based formulation in the same trials.

[Dr. Errol De Souza:]

You are raising a lot of interesting points Jason. We certainly would consider in this particular case moving from a Phase I to a Phase III, especially given that Alan has gone through a dress rehearsal of going through it as we speak in terms of the Phase II clinical trial. The reason we thought of investments for the Biodel 123 program, a Phase II program was prudent was for a variety of reasons including really getting a good handle on post-prandial glucose control using continuous glucose monitoring et cetera, and as Alan puts it doing a dress rehearsal in terms of moving forward. With that under our belt we don’t really see that the trial design would be that different. In fact if you look at even the Novo trials that are out there in terms of – on clinicaltrials.gov that they are proposing. You know, they are standard garden variety with – we probably would use Lantus and Levemir in there. But now that is certainly a consideration, and depending on the timing and then these are the ongoing discussions with potential partners. You can progress this fairly rapidly to be in the running and really not too far behind Novo on these formulations.

[Jason Butler:]

Okay, great. Thanks a lot for taking the questions.

[Dr. Errol De Souza:]

Thank you, Jason.

[Operator:]

(Operator instructions) Our next question comes from Richard Reznick of William Blair. Please go ahead.

[Richard Reznick:]

Hi, guys, this is Rich Reznick for John Sonnier.

[Dr. Errol De Souza:]

Hi Rich.

[Richard Reznick:]

For BIOD-531, it looks like you guys are going to be targeting focused markets, especially if it is severe insulin resistant market? So is it a program you consider developing on your own, or do you consider it more a part of the suite of insulin products that you are developing that you would consider offering in partnership discussions?

[Dr. Errol De Souza:]

You know, a great question, I can tell you there is already interest on the concentrated insulin. While we started off with a focused market, which is probably a few hundred million dollars, the data that we started getting, head-to-head data with the premix really make it an opportunity I think to capture more of a multibillion-dollar market. You know, if you think about when we look at the front-end it truly is an ultra-rapid-acting, it is not just a rapid acting, it is ultra-rapid-acting. It has got the same onset as BIOD-123 as an example, or a 238 or 250. But coming back to your question would we consider developing it ourselves, we certainly could. And the way to go would be to get it on the market for the smaller population. We are also being very aggressive in developing it for the pump, which is an unmet medical need. You might have read the press release from Insulet. There was lot of write up, Insulet is developing the OmniPod. They just announced it this week for Lilly’s U-500. So that gives you a sense of utility in pumps, which is going to go into this market quite a bit more. We are doing now studies in pumps and those would be like follow-on trials. So, a quick answer is yes, we would consider developing it on our own, but I can tell you that there is a lots of interest also from companies that are in this area.

[Richard Reznick:]

Great. Thanks for taking this question.

[Dr. Errol De Souza:]

Thank you.

[Operator:]

Our next question comes from Marc Stutman of Trimark. Please go ahead.

[Marc Stutman:]

Hi, I just wonder – I have one follow-up question on the commercial stability. On 250, is the commercial stability work actually completed or is that something we should expect let us say some time next quarter?

[Dr. Errol De Souza:]

The work on the commercial, let us call it commercial stability, is ongoing and the reason for that Marc is for us to be able to say anything about commercial stability we have got to make the formulation from the stock with active ingredient, which is lispro. Now lispro is still patented in this country. So we have sourced lispro both from the major players here, as well as other sources. So that is being part of the slowing down in terms of working on it. And that is really one of the issues that I think we’re past in terms of sourcing the API. Now you have got to do the work, and whenever it comes to stability work you can rely to a certain extent on accelerated stability. But you also need a few months of real-time stability in terms of making projections.

[Marc Stutman:]

Okay. Is this in any way holding up, you know, discussions with potential partners?

[Dr. Errol De Souza:]

Not at all.

[Marc Stutman:]

Okay. And then the final question is on Humulin on the 500, what is the approximate annual cost for a user?

[Dr. Errol De Souza:]

You know, I – do you know Alan?

[Dr. Alan S. Krasner:]

It is pretty expensive. I believe it is about 4 times the cost of a standard insulin vial at the retail level for the patient.

[Marc Stutman:]

Four times, okay.

[Dr. Alan S. Krasner:]

Something in that range.

[Dr. Errol De Souza:]

Premium priced. When Lilly talked about the doubling of the market between ’08 and ’10 (inaudible) isn’t here, that wasn’t the doubling of just the use. It was an increase in use coupled with premium pricing. I mean they have increased this in shots of 20%. So this is a premium priced product.

[Marc Stutman:]

So, are you saying let us say $8000 to $10,000 per person. Is that approximate?

[Dr. Errol De Souza:]

You know I’m not certain. But I do know it is in the 2 to 4 fold range in terms of per patient per vial cost. Now the vials for U-500 have higher volumes as well. But they use a lot more. So in other words – I bet you are in the right ballpark for the annual cost. But I would have to check that.

[Marc Stutman:]

All right. Thanks.

[Operator:]

That concludes the Q&A portion of the call and I will turn the call back to Dr. De Souza.

[Dr. Errol De Souza:]

Great. Thanks so much for calling in early this morning, and have a great day.

[Operator:]

Ladies and gentlemen, this does conclude today’s conference. You may all disconnect and have a wonderful day.