Biodel To Capitalize On New Treatments In The $10B Diabetes Market
Scott Matusow | Jun 18, 2013 04:58AM ET
Glucose is one of the most important chemical structures because it is essential in providing the body with energy. It is integral in the chemical process called aerobic respiration, which generates a usable form of energy. Glycolysis is the beginning of this process, which oxidizes glucose to form CO2, H20, and adenosine triphosphate (ATP). ATP is a chemical structure that stores energy and transfers it throughout the body. When our bodies have trouble regulating the uptake of glucose into the blood stream, not enough energy is created and distributed to important organs, especially the brain. Since glucose is a necessary chemical in our bodies, problems with the uptake of this chemical can cause major issues.
Diabetes is a disease that causes the body to have problems regulating the uptake of glucose in the bloodstream. The uptake of glucose through the blood stream is controlled by a balance between glucose and a peptide hormone released by the pancreas called insulin. The amount of glucose in the blood stream is important because too much glucose can lead to hyperglycemia, but too little can lead to hypoglycemia. Hyperglycemia can lead to blindness, loss of kidney function, and nerve damage while hypoglycemia can result in dizziness, fainting, confusion, and increased heart rate. Since diabetes has become such a prevalent disease, several biotech companies have created therapies to help patients regulate insulin and glucose in the blood stream.
Biodel (BIOD) is one such biotech company that is developing specialized therapies for diabetes. Biodel's lead drug candidate BIOD-123 is a therapy for patients with Type 1 and Type 2 diabetes. Although still in clinical trials, BIOD-123 has the potential to be a better therapy than those currently on the market. The drug's faster onset of action and non-invasive routes of delivery improve the efficacy, safety, compliance, and convenience for the patients.
- Pipeline: BIOD-123
The goal of diabetic therapies is to help the body's cells uptake the glucose in the blood stream by providing insulin. There are two different types of diabetics that need a constant need for insulin -- type 1 and Type 2. In Type 1 diabetes, the body attacks the cells in the pancreas that produce insulin, which is usually caused by a genetic condition. In Type 2 diabetes insulin resistance occurs, causing the body to not produce enough or ignore available insulin. Although Type 2 diabetes has some genetic risk factors, it is predominately caused by lifestyle choices. In both cases, patients require a supplementation of insulin in order to regulate their blood glucose levels. Biodel's BIOD-123 is a proprietary form of injectable recombinant human insulin (RHI) that is injected to help regulate blood glucose level. It is designed to be an ultra-rapid acting formulation when compared to the current "fast acting" mealtime (prandial) insulin that already exists on the market.
Although still in early clinical trials, Biodel is taking the next step in insulin-based therapies by developing an ultra-rapid acting therapy. If eventually approved, the ultra-rapid acting insulin formulation would take a majority share of the diabetic market because it would be the superior option, as it addressing several of the market's unmet needs.
- Improvement over Current Therapies
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There are several advantages of the ultra-rapid acting insulin therapies that would represent a significant upgrade over current therapies. Current insulin "analogs" are synthetic lab-made recombinant forms of human insulin on the market and aren't perfect in performing their desired task. After eating a meal, the body naturally creates insulin within minutes to react to glucose entering the blood stream. This first-phase insulin spike is not easily mimicked by injected insulin, which takes about 120 to 180 minutes to reach peak levels in the blood stream. One of the significant milestones in diabetic treatments was the invention of the rapid-acting insulin analogs, which takes about 50 to 70 minutes to reach peak level, which is a significant improvement over injected insulin.
The major goal of companies who have brought insulin products to market is to mimic that exact function of real insulin release with as little time delay as possible. However, even the most advanced rapid-acting insulin analogs on the market today have a significant time delay Orbimed's 2,874,153 shares in Biodel, with 1,478,643 of those recently added. Orbimed is also known to have a very good record with investing in small cap biotechs.
Financial and Share Structure
Biodel burns roughly $5M a quarter, so the company has enough cash to get through the next year.
- Chart
The chart above looks very solid, with the uptrend resuming after being initially overbought as indicated by the MACD histogram (yellow indicator). I see a nice pattern of continuation with lower highs and higher lows. Because this is a low float stock, the price movement can be very sudden and drastic.
- Conclusion
With a current market cap of about $60M and products in development for the multi-billion-dollar diabetes market, Biodel is significantly under speculated. So far, it seems evident that the company has addressed the issues the FDA had with Linjecta and the company is ready to move forward with BIOD-123. With catalysts looming, speculation of partnerships, and a large market opportunity, it is my opinion that Biodel will see a significant run in the coming months.
My short-term target is $6.00. If positive data is announced, then I expect the stock to double from current levels to between $8 and $9.
Disclosure: I am long BIOD.
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