Biosante Pharmaceuticals (BPAX) announced after the market closed today that its lead product in development, Libigel, often incorrectly called Viagra for women, had failed based on an initial analysis of data from two pivotal phase 3 efficacy trials. Well, actually, Libigel was remarkably effective on its own, but the problem was that in the double-blind, placebo-controlled trial, it did not fare significantly better than the placebo, or in other words, you would have done almost as well with the placebo as with Libigel. We believe that this may have to do with female sexual dysfunction (FSD), and specifically hypoactive sexual desire disorder (HSDD) in post-menopausal women that Libigel was targeting for treatment, being the result of a complex interplay of physical and psychological disorders, arguably with a strong psychological component. In contrast, its male counterpart, erectile dysfunction (NYSE:ED), is mostly a physiological condition that can be treated with chemicals that allow blood to rush to the penis to maintain an erection.
The race to develop a cure for FSD, an attractive multi-billion dollar market with no currently FDA-approved treatment, has been a graveyard for many drug manufacturers. It is well-known that Pfizer Inc. (NYSE:PFE), after the success of Viagra, tested the pill in women, and then abandoned the effort in 2004 due to lack of efficacy. Also, Procter & Gamble (NYSE:PG) abandoned its plans to develop a testosterone patch that same year due to safety issues, but which was later approved and marketed in Europe as Intrinsa, and also Boehringer Ingelheim was forced to abandon its efforts after a negative FDA Advisory Committee vote in June of last year. BPAX management has, perhaps predictably, asserted that they would continue to analyze the data fully and determine plans for next steps in the Libigel development pan. However, absent a miracle, Libigel at this time, with efficacy and potentially even safety issues related to cardiovascular and increased cancer risks, seems destined for the dust-heap.
The negative outcome is a big surprise as there was consensus emerging that the drug by some estimates had a 70%-80% probability of approval, and most of the negatives were thought to be safety-related and that efficacy would be almost a foregone conclusion. In fact, of the eight analysts who covered the stock, five rated it a strong buy and three a buy; no holds, no underperforms and no sells. And the median price target was $5.88, with a high target of $8. The company was all geared for a release of their safety study in 2012, following by NDA submission in Q4 of next year, and approval sometime in 2013, with maybe a sweet partnership deal in the 25%-30% royalty range by then. However, all of that is now off the table, and the real question isn’t what happens with Libigel the drug, but that what happens with BPAX the company.
In the after-hours, the stock had already dropped almost 80% to between 40c and 50c, after a crippling 16% loss by the end of the trading day on Wednesday. BPAX already has $73 million in cash and investments, less $21 million in short- and long-term debt, which gives it a cash value in the range of 50c. However, it is burning cash at the rate of $4 million per month or 10-12c per quarter, which gives it just enough cash say until the end of next year. Furthermore, the company still has a viable product portfolio absent Libigel, including its marketed Elestrin treatment for menopausal hot flashes; Bio-T-Gel, a testosterone gel for male hypogonadism that has a PDUFA date of February 14th next year; a phase 2 trial underway of Pill Plus, an oral contraceptive; and cancer vaccines in multiple phase 2 trials. Furthermore, the stock was trading in the $1.40 to $1.70 range prior to the surge in prices over excitement based on a potential approval for Libigel followed by a marketing partnership or a take-out at a premium, and prior to the 15%-20% dilution with the public offering in July. Assuming that back when the stock traded in the $1.50 range, maybe less than a 10%-15% chance of approval was already factored in, which went up to the 70%-80% range recently when the stock surged in the $3-$4 range, we arrive at a bottom price target in the 75c range for the stock.
Also, Antares Pharma Inc. (AIS), BPAX’s partner in the development of Libigel and with commercial rights for the drug in Europe, should also move strongly to the downside tomorrow on this negative news from BPAX. Its shares already started dropping 8% on Wednesday, and were trading down as much as 30% at the lows in after-hours trading.
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