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Size Does Matter In The Market For Treating Sexual Dysfunction

|Includes: Palatin Technologies, Inc (PTN)

Biotech investors recall the story of a little company called ICOS. Before Eli Lilly acquired the technology to Cialis, investors faced an uphill battle against the already existing powerhouse brand of the competitor drug Viagra. Yet, men spoke with their feet as doctors and patients quickly rendered Viagra an inferior drug when compared to Cialis's ability to treat erectile dysfunction.

It seems that investors may have a second bite at the sexual dysfunction market. This time, however, the target market will not be men suffering from erectile dysfunction, but women suffering from female sexual dysfunction ("FSD") - a condition at least 43% of women in the United States suffer from (compared to erectile dysfunction, which affects just 26% of all men), which is characterized by a below average or below normal desire to engage in sexual activity.

Palatin Technologies, PTN, is scheduled to proceed with phase III trials of bremelanotide ("PT 141"), a drug that acts directly on the central nervous system's mechanism for sexual response and arousal. Unlike erectile dysfunction drugs that simply allow blood to flow to the genitals, PT 141 actually increases a patient's mental desire to engage in sexual activity, desire sex, become aroused, and enhance the patient's sexual response.

Given the biomechanics of how PT 141 affects a patient's sexual desire, the complete absense of any competition in the marketplace for similar medications treating the same condition in the same manner, and the sheer size of the market for PT 141, PTN may find itself becoming a more and more rational addition to the portfolio of many biotech investors and funds.

Yet, unlike the market for Cialis and other erectile dysfuntion medications, PT 141 faces somewhat different indirect sales challenges. First, although the market size for women suffering from FSD is nearly double that of men suffering from ED, sales of PT 141 may not necessarily be higher than sales of erectile dysfunction medications. This is because men who suffer from ED still have a normal and healthy desire to engage in sexual activity. Thus, men are motivated to actually go ahead and visit a doctor and take medication to treat the condition that is preventing them from having the sex they already want to have, but are simply unable to have. Women suffering from FSD, however, lack a normal and healthy desire to engage in sexual activity. Thus, women suffering from FSD lack the same motivation to visit a doctor or take medication to help treat FSD. As a result, PT 141 may encounter the same marketing challenges that transdermal testosterone gels like Axiron and AndroGel encounter with men suffering from low testosterone.

Secondly, something the FDA has already expressed concern about, is PT 141's potential to act as a legally dangerous date rape drug. In most states, a defendant is guilty of the crime of forcible rape if the defendant engages in (1) sexual intercourse, (2) without the victim's consent, (3) accomplished by either (i) force, (ii) threat of force, (iii) or when the victim is unconscious. The mens rea (criminal mental state) for forcible rape is intent to commit the crime.

Traditional date rape drugs either render the victim incapable of giving consent or unconscious. PT 141, however, does neither. Not only is a person under the influence of PT 141 conscious, but that person may very well be affirmatively, overtly, and expressly consenting to sexual activity. PTN has yet to offer any data clarifying at what point a person under the influence of PT 141 is, as a practical and medical matter, unable or incapable of truly exercising their sexual free will and giving their actual consent to engage in sexual activity. Until that data is more clear and conclusive, it remains unclear to what extent PT 141 actually vitiates a person's capacity to give consent to sexual activity. PT 141 potentially arms would-be rapists with the ability to engage in sexual activity that they would otherwise not have consent to engage in, but risk being criminally liable only for assault - not for forcible rape.

Additionally, PT 141 could give rise to more legally complicated third wheel scenarios. For example, a defendant can be guilty only for assault for merely intending to cause PT 141 to become present in the victim's system. Then, an unsuspecting third party interacts with the victim (now under the influence of PT 141) and engages in what he believes to be consentual sex. Although a rape has actually occurred, neither the defendant nor the unsuspecting third party ever had the necessary mens rea of intent to rape the victim. Thus, neither the defendant nor the unsuspecting third party can be found guilty for the crime of forcible rape.

Thus, despite strong phase II data, PTN's strongest sales challenges facing PT 141 come not from the quality of the drug itself, but from the difficulties of marketing PT 141 to its target market and the reasonable roadblocks the FDA and state governments will certainly put up in response to the drug's potential criminal use.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.