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Expert Financial Analysis and Reporting

An Analysis of 4Q, 2010 and A Look Forward (BDSI, $3.41)

BioDelivery Sciences is making steady progress in advancing its pipeline and also has set the stage for a pickup in Onsolis sales. It is rare that such a small market capitalization company combines both a currently marketed product with a promising pipeline. I am interested in the stock, but am not yet prepared to go to a buy.


The market capitalization of BDSI is about $95 million, which seems attractive in relation to the potential for sales of the already marketed Onsolis and a pipeline that could lead to the approval of three new products: BEMA buprenorphine in 2012, BEMA buprenorphine/naloxone in 2013 and BEMA granisetron in 2013. I think that the catalysts for the stock this year will be the announcement of phase III results and a partnering agreement for BEMA buprenorphine. The phase III results are expected in 3Q, 2011 and I expect they will be successful. This could be followed or possibly preceded by a partnering deal.


I would consider buying a small position in the stock at current levels, but not a full position. Biotechnology investors are showing profound risk aversion and I have seen in the case of companies like Avanir (AVNR), Cadence (CADX) Dendreon (DNDN) and Savient (SVNT) that the stocks actually trade poorly or down after approvals of their lead products. This investor risk aversion is in part based on the slow biotechnology product sales trajectories usually experienced after launch; I attribute this to the difficult and time consuming reimbursement process. Investors seem to be demanding not only a de-risking of the approval process but also a demonstrated sales trajectory before they step. If this hold true for BDSI, it might mean that the stock will not really start to reflect the pipeline potential until some time in 2012 or 2013, hence my tepid reaction.


For those who are not familiar with BDSI or who need an update, I would refer you to an overview piece that I wrote on February 24, 2011 called BioDelivery Sciences: An Emerging Interesting Drug Delivery Company.


Summary of Potential Milestones for 2011 and 2012



  1. FDA approval of retail REMS by the end of 2Q, 2011,
  2. Leveling of the REMS playing field in the US by 3Q, 2011,
  3. Launch in Canada in 2Q, 2011. This will occur without a REMS.
  4. Launches in the European Union beginning in 3Q, 2011. These launches will also occur without a REMS.


BEMA buprenorphine for chronic pain

  1. Phase 3 data in 3Q, 2011,
  2. A partnership no later than year-end 2011.
  3. NDA filing in late 2011 or 2012 and approval in 2012


BEMA buprenorphine/ naloxone for opioid dependence

  1. Pivotal bioequivalency data by year-end
  2. Possibility of a partnership in 2011. The timing will largely be driven by the discussions around BEMA buprenorphine.
  3. NDA filing in mid-2012 and possible approval in 2013


BEMA granisetron

  1. NDA filing in 2012 and possible approval in 2013.



BDSI held a conference call on March 11th to update investors on four issues:

(A) A $15 million financing priced on March 10th,

(B) The status of its pipeline with an emphasis on BEMA buprenorphine for chronic pain and BEMA buprenorphine/naloxone, a combination product a for opioid dependence,

(C) Ongoing partnering discussions regarding BEMA buprenorphine, and

(D) Update on Onsolis concerning the REMS review by FDA which will level the playing ground with competitive transdermal fentanyl products as well as other issues.


The Financing

The financing was done to strengthen the balance sheet. This gives BDSI a stronger position at the negotiating table in partnering discussions involving BEMA buprenorphine. Management did not want to get into a position in which the passage of time possibly due to partner delaying tactics might lead to deterioration of the balance sheet and negatively influence the economic terms of a potential deal. Management said that the catalyst for the financing was an approach by a significant investment fund that wanted to take a position in the stock. This also met a secondary goal of expanding institutional ownership.


Cash at December 31, 2010 was $18 million and the addition of the $15 million brought pro forma year end 2010 cash to $33 million. At the anticipated burn rate, this is enough to take the company into the first half of 2012. In addition, there is the potential in that time frame for a $5 million milestone payment from Meda for the first country approval and launch in the European Union. Most importantly, the company anticipates a partnership deal for BEMA buprenorphine by year end 2011 that will bring in at least $30 million.


The Pipeline

The two most important products in the pipeline are based on buprenorphine. A main appeal of this opioid narcotic is that it is a schedule III opioid that has less abuse potential than schedule II opioids, which have a high potential for abuse. Schedule II drugs include cocaine, opium, morphine, fentanyl, oxycodone, methylphenidate, methadone, hydromorphone, and tapentadol. They may be prescribed only with strict record keeping and storage procedures. Buprenorphine has a lesser propensity for abuse and to cause addiction because it causes less euphoria. It is a meaningful and safer option for doctors before they turn to Class II opioids. The pivotal phase III trial of BEMA buprenorphine is now two-thirds enrolled and BDSI remains on target for having results in July or August.


There has been a pre-IND meeting with the FDA on BEMA buprenorphine/naloxone. Clinical trials for this drug will follow a 505(b) (2) regulatory pathway which only requires demonstrating bioequivalency to a reference drug; no clinical efficacy and safety trial is required. The pivotal trial will be a bioequivalence study comparing the blood concentrations of the BEMA buprenorphine/naloxone formulation to Suboxone. Results are expected by the end of 2011 and an NDA could be filed in mid-2012. The company believes that BEMA buprenorphine/naloxone will provide a more efficient and more convenient means of delivering buprenorphine than the Suboxone/ Subutex regimen which had sales exceeding $1 billion in 2010. Management is projecting peak sales of BEMA buprenorphine/ naloxone of $300 million.


The company has also had a pre-IND meeting with the FDA on BEMA granisetron. The 505 (b) (2) route will also be followed with this product so there will not be any requirement for a clinical efficacy and safety study. It is the third product in their pipeline and it is anticipation that an NDA could be filed sometime in 2012.


Partnering Discussion around BEMA Buprenorphine

BDSI did not initiate serious partnering discussions until the middle of 2010. Management reports that a number of companies are currently engaged in due diligence. Some of these companies have expressed interest in partnering BEMA buprenorphine/naloxone as well. However, the two products do not necessarily have to be partnered with the same company. The primary goal is to get BEMA buprenorphine for chronic pain partnered.


BDSI is seeking a deal structure similar what was achieved with Meda for Onsolis. This included milestone payments, a 20% to 30% royalty and the right to co-promote in the US. BDSI received a $30 million upfront payment from Meda for Onsolis. Management thinks they can receive a better upfront milestone with BEMA buprenorphine.


Onsolis (BEMA fentanyl)

Onsolis had a tough year in 2010 due to the restrictiveness of its REMS as its older competitors have not yet put a REMS program in place. This unlevel playing field is about to change. In November of 2010, FDA provided to each manufacturer of fast-acting fentanyl products a template for a retail REMS covering their distribution in retail pharmacies. The current Onsolis REMS uses a more stringent ingle source pharmacy distribution that results in extra time relative to competitors in getting the product to the patient versus the patient picking it up at a local pharmacy after receiving a prescription from the doctor.


Last November, each company was given 120 days to submit their REMS based on the FDA supplied template. BDSI was able to quickly submit a provision in early December since much of the template was consistent with Onsolis’ already approved REMS other than the part calling for retail distribution. Competition has been able to delay their REMS program for some time but there is now an FDA-mandated timetable for completion. BDSI’s marketing partner. MEDA, anticipates approval sometime in 2Q, 2011. Now that FDA has completed the review of the REMS programs for all fast-acting Fentanyl products, Onsolis will compete on its own merits a level playing field by 3Q, 2011.


Onsolis received regulatory approvals in both Canada and the European Union in 2010. In Canada, it was the first transmucosal fentanyl product to be approved for the treatment of breakthrough cancer pain. BDSI anticipates launching in Canada in 2Q, 2011 and the EU in 3Q, 2011. Meda has filed a regulatory application seeking the approval for Onsolis in Australia, and other filings are planned. BDSI also completed commercial licensing agreements last year with Kunwha Pharmaceutical for South Korea and TTY Biopharm in Taiwan. BDSI continues to expand Onsolis throughout the world.


The expectation is to see an uptick in sales in the second half. Management believes that there will be a steady growth occurring with Onsolis thereafter. In addition when physicians no longer have the option of prescribing a competing product because it is less work, then another uptick is expected.


Butrans, a Buprenorphine Competitor from Purdue Pharma

Purdue Pharma recently launched Butrans, which is a seven day transdermal buprenorphine patch. It is just out of the gate and appears to be annualizing sales at about $25 million of sales. Management feels that the BEMA system has an advantage in terms of titrating to get to the optimum dose. Its marketing motto for BEMA buprenorphine will be "Start low, go slow," and will emphasize flexibility inherent from being able to titrate the dose. That said, it is not an either/ or situation for Butrans and BEMA buprenorphine. Both can do well, particularly if the market comes to the belief that buprenorphine has advantages over class II opioids.








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