Biodel Trades Down Close To Net Asset Value (BIOD)

If you just read headlines on Biodel Inc. (Nasdaq: BIOD) this morning, you would have thought the news coming out of the company was either good or just neutral.  Today was the exact opposite, and was an example of how dangerous it can be in merely glancing over data in biotech and emerging drug companies.  Biodel’s pivotal Phase III trials for VIAject met the primary endpoint of non-inferiority and results which demonstrated statistically significant reductions in hypoglycemic events and weight gain in Type 1 and 2 diabetes patients.  But there are problems with the data which were confusing.

For instance, the Type 2diabetes patients showed a 0.7 pound weight gain over 26 weeks and Type1 patients lost 0.7 pounds over that period.  There were also test results seen in India that did not coincide withresults in the US and Germany, which had to be excluded from the study.In both of the clinical trials, swelling, itching and redness werereported in less than 5% of patients receiving VIAject or RHI. VIAjectwas associated with injection site pain, the prevalence of whichdecreased with time. A combined total of 24 VIAject patients droppedout of the two clinical trials due to injection site pain.

The company said it was pleased with the decreases seen in hypoglycemicevents and over those receiving insulin alone.  Wall Street was aspleased as a someone sitting on broken glass.

We gave an alert at Volume Spike early on this one.  The stock closed closed downabout 66% today at $5.75 and we saw exponential volume growth withalmost 7 million shares trading hands today.  The prior 52-week tradingrange was $9.60 to $25.69.  At one point shares were down as low as $4.34.

With a $134 million market cap after today’s implosion, the stocktrades at about 1.3 times its last stated net tangible assets as ofJune 30.  Some biotechs implode to the point that they actuallytrade under their cash values because Wall Street discounts the nexttwo to three quarters of anticipated cash burn on top of the new legalexpenses.  If that happens here, shares of Biodel still have some extrabeatings coming.

Jon C. Ogg
September 8, 2008