Prospects Are Good, But Hurdles Remain for BioSante Pharmaceuticals

For some time now, people have been asking me why I have not written about a company called BioSante Pharmaceuticals Inc. (BPA), which, so they claim, is developing the ultimate solution for lack of libido in older women. The reason why I haven’t written about it until now is that it is not an Israeli company and has no connection to Israel (despite the investment by Teva Pharmaceutical Industries Ltd. (TEVA). I have, however, mentioned it in the past in the same manner as I mentioned many other non-Israeli companies which either soared or plummeted, following the success or failure to secure US Food and Drug Administration [FDA] approval for their products.

BioSante’s longtime president and CEO is Stephen M. Simes, an executive with a long and diverse career in biotechnology. Back in the 1970s, he served as a board member of General Biotechnology, which subsequently became Savient Pharmaceuticals Inc. (SVNTE). Like every other biotech stock, BioSante reaches for the sky every time hopes for it are rekindled anew, and then nosedives again every time it fails to live up to expectations. The last time it got everyone’s pulse racing was at the end of 2004, when the stock crossed $10. It has since plummeted 72% to its current price of $2.8.

Recently, there have been a number of very encouraging developments at BioSante. One of these was the FDA approval to market Bio-E-Gel, the company’s estradiol transdermal gel indicated for the treatment of moderate to severe hot flashes in menopausal women. Bio-E-Gel will be marketed under the name Elestrin. BioSante has given marketing rights for the product to Bradley Pharmaceuticals Inc. (BDY), which will begin marketing it this summer.

In addition, the company announced that it is proceeding to Phase III clinical trials of another drug, LibiGel, a transdermal bio-identical testosterone gel for the treatment of female sexual dysfunction. These two announcements sent the stock up 147% in one month from mid-November to mid-December. What’s interesting, and perhaps even surprising, is that the stock subsequently fell 20% again despite all the good news.

As I see it, the stock is now experiencing what I call “the gap between the reality on Main Street and the dreams on Wall Street.” This is a psychological chasm into which many dream stocks have fallen (does ImClone ring a bell?). Market manipulators exploit investors’ gullibility on the one hand and their greed on the other. Those driving BioSante upward convinced investors that the company’s solution would solve libido problems in older women, and the market for this would be worth $3 billion.

It takes time for investors to differentiate fantasy from facts. BioSante has made great progress, but it still faces significant obstacles on the road to its goal, such as alternative cash flow, final FDA approval and others. These obstacles are obfuscated by greed when dreams set in. There is nothing wrong with BioSante. Its current stock price shows just how far removed the dreams still are from reality.

BPA 1-year chart:

Published originally by Globes [online], Israel business news - www.globes.co.il
© Copyright of Globes Publisher Itonut (1983) Ltd. 2007. Republished on Seeking Alpha with full permission.