This year biotech investors will once again be presented with a myriad of options for success and failure. More so than with any other sector, the biotech sector will dole out stocks with huge gains as well as devastating losses. Although there are safer bets to be had within the sector, there are no safe bets. Promising phase I data can often give way to horrific phase II data in terms of efficacy and/or safety. Phenomenal phase III data can lead to rejected NDA's and CRL's. There are no givens and no secret formulas to success, only luck and arming oneself with the best weapon available in the form of research and due diligence. There are two biotechs with transdermal and other drugs in their pipelines that are possible candidates for biotech investors with fairly safe futures ahead and are listed as good starting points due to their current share price. Their investment potential is not because of their potential for success, but it is rather because their possible failure and or marketability has already been priced in while taking into consideration their remaining pipelines.
Apricus Biosciences (NASDAQ:APRI) had a phenomenal 2011 in obtaining OTC FDA clearances for its NexACT topical drug delivery system. These gave apparent legitimacy to the transdermal system with three clearances for over-the-counter drugs including the anti-fungal drug Tolnaftate-D (tolnaftate), an anti-itch drug Hydrocortisone-D (hydrocortisone) and the anti-itch drug Diphenhydramine-D (diphenhydramine hydrochloride and zinc acetate). With multiple patent allowances worldwide for the NexACT system, the company is securing its pipeline and gaining a stronghold in the multi-billion dollar topical drug market and will likely see licensing agreements for their proprietary system with pharmaceuticals as the system is proven and gains more legitimacy.
The novel NexACT delivery system and its three FDA clearances will no doubt begin generating revenue for them and will be a good foundation to build their financial future. However, Apricus also obtained Canadian approval for its Vitaros drug for erectile dysfunction (ED) in November 2010. With ED drugs netting nearly $2 billion in the U.S. and $4.9 billion globally in 2010, the potential here is remarkable. Despite the aforementioned successes, the market capitalization for the company is still only $107 million as of market close on January 26th. With such potential in their pipeline, a desperate financial move by the company in 2009 negated much future for what potentially could have been a huge source of revenue via Vitaros. In 2009, Apricus sold its U.S. marketing rights for Vitaros to Warner Chilcott (NASDAQ:WCRX) for $2.5 million with an additional $2.5 million milestone payment due upon FDA approval. Although the capital from the transaction was a nice shot in the arm for the company's financials, it eliminated the single largest market for the drug leaving the remaining $2.9 billion market scattered throughout the remainder of the world with competition and regulatory approval in each country to contend with.
The company's future, however, should be worth more than their current $107 market cap indicates. Apricus has recently completed a phase III trial on Femprox for the treatment of Female Sexual Arousal Disorder. Data from the trial indicated the drug produced an arousal rate in women of roughly 44% stronger than in women who received a placebo. As with Vitaros, the company is focusing on Canadian approval for the drug first. Approval there or elsewhere along with the beginnings of the regulatory process for the U.S. will be huge catalysts for the company as there is currently no approved drug for the condition. Additional value added to the company includes a January 9th announcement that the company has struck a deal with Abbott Laboratories, Inc. (NYSE:ABT) to market Vitaros in Canada. The deal will be worth up to $16 million for Apricus over the life of the deal including upfront and sales milestone payments and tiered royalties based on the products sales. An additional announcement on January 10th gave further indications that the company's bottom line and future is getting more solidified via an agreement with Elis Pharmaceuticals to market Mycova in the Middle East and Gulf. Mycova will be marketed to treat onychomycosis (persistent nail fungus), and the company will receive up to $2.1 million in milestone payments in addition to royalties from the product's sales. Although not with blockbuster-potential drugs, the company is proving over time the validity and marketability of its NexAct drug delivery system. More deals are likely coming with a continuous improvement in the company's financials and reputation. Investors and Big Pharma will likely show increasing interest in the company as it grows its pipeline, NexAct licenses and financials.
BioSante (BPAX) is a biotech company focusing on drugs for sexual health as well as oncology. Data for two pivotal (suitable for regulatory approval) phase III trials for the company's highly touted LibiGel testosterone gel were released on December 14th. The trials, termed BLOOM-1 and BLOOM-2, analyzed LibiGel's effectiveness in hypoactive sexual desire disorder for postmenopausal women, an indication for which there is no FDA-approved product. Both trials failed to meet primary or secondary endpoints, and the market's response pummeled the stock sending it to a current range of about 0.65 with a market cap of about $71.5 million relative to just under $270 million before the failures were announced.
The company's future should hold multiple catalysts and a more solid foundation in this company than such a dramatic drop in the price per share may have necessitated. Biotech companies often have a limited pipeline and a failure of a late-stage drug is often devastating to the company's financials as the development costs of running additional trials or developing new products from onset are lengthy and expensive. BioSante, however, has a fairly deep pipeline with one drug approved (Elestrin in late 2006) and another facing a regulatory decision in the form of an FDA decision on February 14th, 2012. Their next catalyst is likely the Valentine's Day (who says the FDA doesn't have a sense of humor?) PDUFA date for Bio-T-Gel, a testosterone gel for male hypogonadism, a condition in which men don't produce enough testosterone and thereby suffer fatigue, decreased energy, reduced sexual desire and depressed mood. Initially developed by BioSante it has since been licensed to Teva Pharmaceutical Industries, Inc. Terms of the agreement state that BioSante will receive royalties upon approval and commercialization in addition to the $1.5 million upfront they have already received.
Additional value for the company comes in the form of BioSante's development and commercial rights to its pipeline of cancer fighting drugs through its Immunotherapy drugs. Cancer vaccines are rapidly becoming a force in the battle against the relentless disease in its many forms. The 2010 FDA approval of Dendreon's Provenge for prostate cancer gave legitimacy to the immunotherapy approach to fighting cancer in 2010 with BioSante now positioning itself with its own impressive immunotherapy pipeline. More information may be found on the company's website, but a brief summary of this pipeline shows positive results for three of their cancer vaccines in Chronic Myeloid Leukemia (CML), Acute Myeloid Leukemia (AML) and Pancreatic Cancers. Phase II results of BioSante's CML trial were positive with 7 of the 19 patients treated experiencing complete remission. Their phase II AML vaccine trial was also positive with relapse-free survival and overall survival rate improvement of approximately 30% compared with the non-BioSante-treated subjects. BioSante's phase II pancreatic cancer vaccine has also shown success with phase II results showing a 25% increase in median survival of resected patients and a 35% increase in one-year survival.
BioSante's late-stage failure with LibiGel will likely culminate with a lot of time and money lost. Their website indicates that the company still had about $55 million in cash as of December 31st, 2011, about $16.5 million less than its market cap. With the remainder of their pipeline looking strong with many possibilities of clinical successes and partnerships and the February 14th PDUFA approaching, BioSante should see increased interest in the short term and for the remainder of the year. This is the biotech arena and risks obviously exist that are common in the biotech sector. Additional due diligence is still recommended for any investor considering a position in BioSante. With its current market cap, BioSante may be an attractive investment for those deeming the risk reward ratio to be acceptable with failure possibly priced into the February 14th PDUFA. Remember, the LibiGel failures have little in common with the Bio-T-Gel efficacy other than the administration technology. Catalysts loom large for the company with a 10K and 10Q both being filed soon along with the PDUFA date and any clinical trial updates that could come at any time.
Deep research into Apricus and BioSante is essential before committing funds to any type of position. Investors should not only be asking, "Will Bio-T-Gel get approved?" or "Will Vitaros approval come from countries in addition to Canada?" They should also be asking, "What do the mid to long term successes and failures mean to the company with regard to the bottom line and investors' opinions?" "Will NexAct continue to prove itself?" "Will BioSante's transdermal system prove itself valid or a money pit?" "Will BioSante's immunotherapy approach to fighting cancer prove its safety and efficacy", and "Does today's market cap support the current levels of development for the drugs as they currently stand with varying degrees of successes and failures?" Lastly, the speculative question for any biotech with a promising product or pipeline "Do either of these companies represent a potential buyout by Big Pharma?" 2012 will likely answer many questions about both of these companies, and these answers will determine the shareholder value and the companies' futures.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.