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This Weeks Stock Pick

7-27-2010 STW Recommendation BDSI - Buy

BioDelivery Sciences International Inc. (BDSI) is an emerging biotech company with a bright future. They have a unique drug delivery technology (BEMA) that received FDA approval last year in their breakthrough cancer pain product ONSOLIS which they have begun marketing in the US and are expanding into international markets with recent announcements of distribution in South Korea and approval in Canada.

BDSI is using this same technology with other drugs in various stages of testing. Because the technology delivers the drugs to most patients more effectively than existing methods and the drugs they are testing have been previously approved by the FDA using other delivery methods they may submit for approval without the usual amount and length of testing. In addition BDSI has an anti-fungal in early trials that appears to be safe and effective and the company sees a possibility of expanding this program to treat other conditions as they are now doing with BEMA. We anticipate a steady stream of approvals for BDSI products over the next few years plus expect several new formulations to begin testing soon using their proven technology. 

The company has managed to make it to market without the great dilution that often takes place with emerging biotechnology - pharmaceutical companies and their financial outlook is stable after some corporate moves earlier this year. They are attracting some institutional attention and have had a great increase in insider buying the past few months. The stock is still thinly followed and volume has remained lower than expected but as the story of this company and technology gets out and volume increases so will the share price. 

The share price dropped from highs above $8 after gaining FDA approval last year into the $4 range during the first quarter of 2010 and now are back to pre approval levels in the mid to $2.20 to $2.40 range. The recent decline came after disappointing first quarter financials were announced. We believe the stock is undervalued because investors are impatient and did not account for the fact that the roll out, marketing and physician acceptance of any new drug takes time. We are forecasting slightly improved  results for the second quarter and project increased sales for the balance of 2010 as distribution partnerships and US adoption increases. We also anticipate news regarding the other drugs in the pipeline and new additions to the pipeline in the near future which should further increase share price.  

Based on the Technical analysis below , our expectations of increased sales and profits in the second half of 2010 and our belief that the BDSI technologies will translate to more approvals in the future we are setting a short term price target of $4. We project that over the next couple of years this undervalued stock will reach the $15 - $20 range based on an analysis anticipated sales pending FDA approvals and industry standard profit margins.  

STW is now recommending BDSI as a BUY


BDSI Pipeline and FDA Approved Drug Overview Product Pipeline

 

Details taken from BDSI prospectus 04-20-2010

           We are a specialty pharmaceutical company that is utilizing licensed and owned proprietary drug delivery technologies to develop and commercialize, either on our own or in partnerships with third parties, significant new formulations of proven therapeutics. Utilizing our drug delivery technologies, we have developed and are continuing to develop pharmaceutical products aimed principally in the areas of pain management and oncology supportive care.

Our patented drug delivery technologies include:

The BEMA ® technology , a small, erodible polymer film for application to the buccal mucosa (the lining inside the cheek); and

The Bioral ® cochleate drug delivery technology , designed for the potential oral delivery of a broad base of products otherwise administered intravenously.

 

 Our first FDA approved product, ONSOLIS ® , as well as our pipeline of developmental stage products, predominately utilize our BEMA ® technology. Our current development strategy focuses primarily on our ability to utilize the U.S. Food and Drug Administration’s 505(b)(2) approval process to obtain more timely and efficient approval of new formulations of previously approved, active therapeutics incorporated into our drug delivery technologies. Because the 505(b)(2) approval process is designed to address new formulations of previously approved drugs, we believe it has the potential to be more cost efficient and expeditious, and have less regulatory approval risk, than other approval methods of the U.S. Food and Drug Administration, which we refer to herein as the FDA.

Our Products and Product Candidates

Our FDA approved product and principal product candidates include the following:
 

Formulated Products

ONSOLIS ®

Approved by the FDA in July 2009 and commercially launched in October 2009, ONSOLIS ® (fentanyl buccal soluble film) is an approved treatment for the management of “breakthrough” pain (pain that “breaks through” the effects of other medications being used to control persistent pain) in patients with cancer, eighteen years of age and older, who are already receiving, and who are tolerant to, opioid therapy for their underlying persistent cancer pain. ONSOLIS ® is a formulation of the narcotic fentanyl delivered through our BEMA ® technology.

We have granted commercialization and distribution rights for ONSOLIS ® on a worldwide basis (except in South Korea and Taiwan) to Meda AB (which we refer to herein as Meda), a leading international specialty pharmaceutical company based in Sweden with its U.S. headquarters in Somerset New Jersey. We receive a double digit royalty on the net sales of ONSOLIS ® and also have the potential to receive milestone payments based on achieving certain predetermined sales targets. We estimate that ONSOLIS ® has the potential to reach $200 million in annual peak sales.

In addition, we believe that ONSOLIS ® may also have the potential for a broader indication that would allow for the treatment of chronic pain outside of breakthrough cancer pain. If approved by the FDA, this would extend the commercial opportunity for ONSOLIS ® , and we will continue to evaluate this opportunity together with Meda.

BEMA ® Buprenorphine (low dose for pain)

This product candidate utilizes the BEMA ® technology to deliver the opioid analgesic buprenorphine for the treatment of moderate to severe pain conditions. A low dose formulation of BEMA ® Buprenorphine was evaluated in a single dose, Phase 1 study that began in late November 2008. In March 2009, we announced favorable preliminary results from this Phase 1 study and our intention to commence a Phase 2 efficacy study in June 2009. In December 2009, we announced that the primary efficacy endpoint was achieved in this Phase 2 clinical study. We believe that this endpoint, called SPID 8 (summary of the pain intensity difference over 8 hours), is a good indicator of a product candidate’s effectiveness in treating chronic pain.

We believe that buprenorphine is an attractive option for development given that it has demonstrated efficacy in the treatment of pain and is a Schedule III opioid, meaning there is a lower potential for abuse and addiction compared to Schedule II drugs such as morphine and oxycodone. We estimate that BEMA ® Buprenorphine (low dose) has the potential to exceed $500 million in annual peak sales.

BEMA ® Buprenorphine (high dose for opioid dependence)

We are also investigating a higher dose formulation of BEMA ® Buprenorphine. Because of its lower propensity for abuse and addiction, BEMA ® Buprenorphine (high dose) may also serve as a treatment for opioid dependence by preventing an opioid addicted patients’ withdrawal symptoms while at the same time maintaining pain control. Currently in the U.S. there are two buprenorphine products approved for this indication, and we believe BEMA ® Buprenorphine (high dose) has the potential to offer advantages over these products. We estimate that BEMA ® Buprenorphine for the treatment of opioid dependence has the potential to achieve between $200 to $300 million in annual peak sales.

Buprenorphine as early as the end of 2010 or in 2011.

BEMA ® Granisetron

This product candidate utilizes the BEMA ® technology to deliver granisetron , an FDA approved antiemetic to prevent the nausea and vomiting often observed following chemotherapy. This product candidate is presently in initial formulation development and we intend to move BEMA ® Granisetron into clinical trials in 2010. We believe that BEMA ® Granisetron would have the potential for better tolerance than oral formulations in the presence of nausea and vomiting as well as potential for better and more consistent absorption in the presence of nausea and vomiting.

BEMA ® “Triptan”

This product candidate utilizes the BEMA ® technology to deliver a “triptan”, which refers to a class of compounds that FDA has approved for the treatment of migraine headaches. This product candidate is intended to move into formulation development in the second half of 2010. We believe that BEMA ® “Triptan” has the potential for both earlier plasma concentrations and migraine response as well as the potential for better response in presence of nausea and vomiting based on more consistent absorption from the BEMA ® technology compared to currently available oral formulations.

Bioral ® Products

Bioral ® Amphotericin B

Our lead Bioral ® formulation is an encochleated version of Amphotericin B, a treatment for fungal infections. If this product gains regulatory approval it could become the first “oral” amphotericin product available in the world to treat systemic fungal infections. A single dose Phase I study has been performed with Bioral ® Amphotericin B. We reported preliminary results in February 2009 where we indicated that plasma concentrations of Amphotericin B were detected in the sample of patients tested suggesting oral absorption from the Bioral ® delivery system. On October 6, 2009, we announced our receipt of a $1.3 million grant from the Walter Reed Army Institute of Research to support the clinical study of Bioral ® Amphotericin B product candidate in the treatment of Cutaneous Leishmaniasis, a skin infection typically found in third world countries.

Other Potential Bioral ® Candidates.

We also believe our Bioral ® technology has the potential to be applied to other types of pharmaceutical actives and also to other therapeutics such as small interfering RNA, or siRNA, and although we have not dedicated material corporate resources to these opportunities in recent years, we may seek to out-license these opportunities.

FDA Approval of ONSOLIS ®

On July 16, 2009, we announced FDA approval of ONSOLIS ® . ONSOLIS ® will be marketed in Europe under the name BREAKYL TM if regulatory approvals are obtained. The FDA approval of ONSOLIS ® , together with our satisfactory preparation of launch supplies of ONSOLIS ® , triggered the payment by Meda to us of approval milestones aggregating $26.8 million and the termination of a security interest in the ONSOLIS ® product and related assets which was held by CDC IV, LLC, or CDC, pursuant to a funding arrangement that we previously entered into with CDC in connection with the development of ONSOLIS ® . Additionally, the FDA approval triggered a requirement by us to pay an approval milestone of $2.0 million to QLT USA Inc., from which we purchased the BEMA ® delivery technology, which payment was made in August 2009.

 

ONSOLIS ® Commercial Partner

We have granted commercialization and distribution rights for ONSOLIS ® on a worldwide basis (except in South Korea and Taiwan) to Meda, a leading international specialty pharmaceutical company based in Sweden. Meda’s U.S. division, located in Somerset, New Jersey, is a specialty pharmaceutical company that develops, markets, and sells branded prescription therapeutics. Although Meda was founded in 2001, it draws upon a long history, entering the U.S. market in 2007 through the acquisition of Medpointe Pharmaceuticals (previously known as Carter-Wallace, Inc.). Meda has an experienced, well trained and highly regarded sales force of over 400 representatives with a focus in specialty therapeutic areas including pain and central nervous system conditions. Meda has established a track record of commercializing products with their top two products, Astelin ® and the more recently launched Soma ® 250 mg. They have proven their ability to launch products and sustain growth in highly competitive pharmaceutical markets, as demonstrated by Astelin ® , which has out-performed competitors in the anti-histamine, nasal steroid and rhinitis markets with regard to total prescription growth. We expect Meda to also effectively compete in the transmucosal opioid market. Meda has secured access to additional markets through acquisition of European businesses from Valeant, and a joint venture with Valeant covering Australia, Mexico and Canada.

Corporate Information

We are a Delaware corporation.

801 Corporate Center Drive, suite 210

Raleigh, North Carolina, 27607

telephone number (919) 582-9050.

www.bdsi.com


Company Overview

BioDelivery Sciences International, Inc. (BDSI) is a specialty pharmaceutical company utilizing licensed and owned drug delivery technologies to develop and commercialize, either on its own or in partnerships with third parties, new formulations of therapeutics. The drug delivery technologies include the BioErodible MucoAdhesive (BEMA) technology, a small, erodible polymer film for application to the buccal mucosa (the lining inside the cheek), and the Bioral cochleate drug delivery technology, designed for the oral delivery of a range of products otherwise administered intravenously. The Company's United States Food and Drug Administration (FDA) product, ONSOLIS (fentanyl buccal soluble film), as well as the developmental stage products, utilizes the BEMA technology. The Bioral formulation is an encochleated version of Amphotericin B, a treatment for fungal infections.  
 

BDSI Technical Analysis

 BioDelivery Sciences International Inc  BDSI: NASDAQ

 

Bollinger Bands
BDSI has been stable recently. This is evidenced by the width of its Bollinger Bands which are tighter than normal. The recent tightening indicates the stock may be ready to make a move in either direction. BDSI is trading within its Bollinger Bands. This is a normal condition and suggests that the stock is neither overbought nor oversold relative to the recent price action.

MACD
BDSI is currently indicating a weak bullish signal as the MACD is now trending above the signal line.

Stochastic Oscillator
Indicates a strong bullish signal as the %K has crossed above the %D and the oscillator recently moved above the critical value of 20 showing it is no longer oversold.

Directional Movement Index
The +DI line is currently crossed with the -DI line. This signals that the recent bearishness shown by the Directional Movement Index is ending and is a positive indicator.

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