The Key to Unlocking BioSante's Value

BioSante Pharma (BPA) is a biopharmaceutical company that licenses and develops hormone therapy products to treat men and women. Hormone therapy gel products include Elestrin™, LibiGel®, Bio-E/P-Gel, LibiGel®-E/T, Bio-T-Gel and Triple Hormone Contraceptive (such as The Pill-Plus). The Company's hormone therapy products are gel formulations of testosterone, estradiol, and combinations of estrogens, progestogens and androgens. Symptoms addressed by hormone therapies include menopausal symptoms in women, including hot flashes, vaginal atrophy, decreased sexual desire, sexual activity and impotence, lack of sex drive and muscle weakness in men. The primary goal of hormone therapy is to safely and effectively relieve these symptoms with minimal side effects. The Company is also engaged in the development of its calcium phosphate nanotechnology (CaP), primarily for vaccine adjuvants or immune system boosters and drug delivery systems. CaP products in development are BioVant, BioOral, BioAir and BioCap. The Company submitted a New Drug Application [NDA] for Elestrin™, in February 2006, and received approval in December 2006.

In November 2006, the company entered into an exclusive sublicense agreement with Bradley Pharma for the marketing of Elestrin™ in the United States. Upon execution of the agreement, BioSante received an upfront payment of $3.5 million. In addition, in March 2007, Bradley paid the company $7 million which was triggered by FDA approval of Elestrin™ in the U.S. and has agreed to pay an additional $3.5 million which is due on the one-year anniversary of such approval during 4Q07. BioSante is required to pay Antares 25% of these payments as a result of its license agreement with Antares. Bradley also has agreed to pay additional sales-based milestone payments of up to $40 million in the event certain sales-based milestones are achieved, plus royalties on the sales of Elestrin™.

The company has also entered into several other licensing agreements covering its hormone therapy products, including an agreement with Netherlands-based Pantarhei BioSciences covering the US rights to the estrogen & progestogen combination product, a development and license agreement with TEVA Pharma pursuant to which TEVA USA has agreed to develop the company's Bio-T-Gel androgen product for the US market and an agreement with Paladin Labs covering Canadian rights to certain of its hormone therapy products. The financial terms of these agreements generally include an upfront license fee, milestone payments, and royalty payments to BioSante if a product incorporating the licensed technology gets approved and subsequently marketed.

LibiGel® is clearly the key to BioSante's future and the associated shareholder return as I estimate a 2011 sales potential of $800 million, which yields a $328 million present value or roughly $12 per share. A buyout or lucrative partnership is likely within the next 12 to 18 months as the value of LibiGel® becomes apparent to larger pharmaceutical companies. Elestrin™ and the remainder of the Company's pipeline targets niche markets, and these products are licensed out to mitigate the cash burn for advancing LibiGel® through clinical trials, which have recently been clarified by the FDA with regard to the requirements necessary to obtain the first US approval for a low-dose testosterone product aimed at treating female sexual dysfunction. In addition to two Phase 3 efficacy trials of about 500 women each for six months in duration (one of which has already been initiated), BioSante will conduct a single Phase 3 cardiovascular safety study. The safety study will be a randomized, double-blind, placebo-controlled, multi-center, cardiovascular events driven study of between 2,400 and 3,100 women exposed to LibiGel or placebo for 12 months, at which time a NDA can be filed for review by the FDA. After NDA submission and potential approval, BioSante will continue to follow the women enrolled in the study for an additional four years, and the company plans to begin the safety trial by late 2007 or early 2008. The safety study is estimated to cost $20 million, in addition to the two efficacy trials at $10 million each for a total development cost for LibiGel of about $40 million. However, I believe that the blockbuster sales potential for LibiGel to become the "Viagra for Women" will result in the company entering a lucrative partnership or simply being acquired before LibiGel ever comes to the market.

Disclosure: none