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Sanofi and Lilly Likely Suitors for Biodel's New Diabetes Drug

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The biotech is unlikely to get approval for its fast-acting insulin on the first go-around, but prospects are good that it will be partnered with a Big Pharma.

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In about a month the FDA is expected to make a decision on Biodel's (BIOD) fast-acting injectable insulin Linjeta. You've probably never heard of this product despite it being so late in the development stage; that's because the company announced at the beginning of September that it was changing the brand name on its lead product from VIAject to Linjeta. VIAject may sound a bit more familiar.

While a name change may throw off some investors, it won't change the likely outcome of the FDA's decision come Linjeta's PDUFA date on Oct. 30. As the volatility in the stock has shown (it has dropped from around $14 per share to linger near $5 per share), not many investors believe that the product can make it past the FDA's scrutiny -- and they're probably right. But investors shouldn't write off Biodel just yet. While approval on Oct. 30 is not a foregone conclusion, the FDA is apt to set up a very clear regulatory path beyond that, potentially driving up the stock.

The biggest hindrance to the FDA's acceptance of the new drug application for Linjeta could be a small number of patients in a late-stage study from India. The number of patients in the study was reduced by one-third when Biodel had to exclude certain data after some of the samples were mishandled and damaged due to heat exposure. While the FDA typically allows exclusion of data for this reason, the small sample size could be a weak spot for the filing. The anomalous data makes it difficult to determine whether the drug met its primary endpoint in the studies of being non-inferior to Humulin, a leading insulin product made by Eli Lilly (LLY).

The company has prepared supplementary data to include in the New Drug Application for Linjeta, but analysts still wonder if it will be enough to satisfy the FDA. It's likely the agency will ask for further evidence to support the non-inferiority claims of the drug, pushing back approval.

Beyond that, safety issues may become a concern -- not because the drug isn't safe -- but because the company didn't really conduct any extensive safety trials. The filing submitted by Biodel allowed the company to skip over performing some of these tests based on findings for previously approved drugs -- in this case, insulin. Any concerns here will be buffered by communication between the company and the agency on how Linjeta differs from insulin.

Biodel has also had to overcome problems with patients experiencing pain at the injection site. The company was able to tinker with the amout of insulin released at once to make the injections less painful.

If Linjeta is approved it will be a huge boon to the company. The drug caters to both type-1 and type-2 diabetics. Diabetes is a disease that affects 285 million, or 7%, of the adult population in the world, according to the International Diabetes Federation. The disease commonly comes in two types -- type 1 is an autoimmune disease that cannot be prevented and typically begins early in life, whereas type 2 diabetes is a preventable condition that tends to affect older, overweight patients. It's a leading cause of blindness, amputation, kidney failure, and stroke. Linjeta is a fast-acting insulin that has proven to be more rapidly absorbed into the bloodstream than current standards of care.

A lot hinges on the success of this drug for Biodel. The company has said that it cannot afford to bring Linjeta to market by itself and will be looking for a partner from Big Pharma in the coming year. No such suitors have yet stepped forward, but Sanofi-Aventis (SNY) and Eli Lilly seem like the best fit.

Lilly's research chief Jan Lundberg told Dow Jones on Tuesday that the company is likely to ink deals for products that will generate revenues by 2014 (when Lilly hits its big patent cliff). Even if Linjeta is not approved in October, it would be on a path to be approved well before that time. It would also be a natural complement to Lilly's Humulin, as well as the rest of the Big Phrama's diabetes franchise.

Meanwhile, Sanofi senior medical director Riccardo Perfetti told Bloomberg last week that the company is hoping to expand its diabetes franchise as a way of competing with Danish rival Novo Nordisk (NVO). Perfetti said that the company may be interested in a successor to its long-acting insulin Lantus, as well as a fast-acting insulin (the category that Linjeta falls in).

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