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A specialty pharmaceutical company, which focused on the development and commercialization of innovative treatments for endocrine disorders such as diabetes and osteoporosis.
This is my second underperform pitch on Biodel. For context I will cite previous pitches:From an outperform pitch: The company will certainly have to repeat their phase III trial if they want FDA approval for Viaject (for type I diabetes). If they attempt to file an NDA based on their flawed trial, clearly management is incompetent or corrupt and I'm losing my shirt on this bet. If they repeat the phase III trial the share price will likely eventually float upward again, although not to levels seen previously.From the exit: I'm not happy with the logic in the latest guidance. They plan to meet with the FDA in 1/09, and then they plan to do a new trial in type I diabetes, but they haven't decided yet if the NDA will be submitted with or without the new trial? Do they really think there's a chance in Hell the FDA will approve Viaject on screwed up data while the make-up trial is in progress? Either they are suicidal and they'll try that strategy, or they'll announce in 2/09 that the NDA is delayed. Either way they'll be going down then. If they continue to rise I'll likely red thumb in anticipation of that announcement.From an underperform pitch: Since that time the company has stated they plan to clarify their regulatory strategy by the end of Q1. Given that the share price has risen, I think they are in trouble either way. If they announce a delay in the NDA filing until after the repeat phase III trial in type I diabetes (i.e. Q2 2010) the share price should decline immediately. If they announce they will file the NDA in Q2 2009, the share price might bump up in the short term but should crash when they eventually get smacked down by the FDA. I'm predicting they take the first path, and suck up the short term hit for a better long term future.I terminated the most recent underperform after the share price sank back down, knowing the story wasn't done but without the confidence to drop a green thumb. Today the regulatory strategy became clear. Biodel submitted their Viaject NDA with PR language indicating they will attempt to convince the FDA that the India data was an aberration and should be disregarded. My assessment of the likelihood of that happening? Last time I visited Hell I didn't see many snowflakes. Biodel knows they're going to get a complete response letter, but for some reason they'd rather enjoy a higher share price in the short term and take another smackdown in 10 months or so. The short-term thinkers in the baby bio space bid the shares up substantially and fortunately I was on the ball and caught it near the top. Hopefully I can get in and out a couple more times on this volatile stub before the complete response letter at the beginning of 2010. NTMF, this is your notice. If you want to keep this score leadership, you'd better start rating this stock again. I'm coming up fast.
Biodel will range trade until the complete response letter, and I'll be back with a red thumb over 5.5 or possible even a green near the 100M threshold.
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