biosante pharmaceuticals bpa
December 31, 2006 - 8:31pm EST by
2006 2007
Price: 2.77 EPS
Shares Out. (in M): 0 P/E
Market Cap (in $M): 64 P/FCF
Net Debt (in $M): 0 EBIT 0 0

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  • Pharmaceuticals
  • FDA approval


Biosante (nasdaq: bpa) is a emerging pharmaceutical company based in Lincolnshire, IL that is developing and working to commercialize a pipeline of hormone therapy products to treat both men and women. The company develops hormone replacement products to treat testosterone deficiency in men, estrogen deficiency in women, and female sexual dysfunction. In addition, Biosante is developing calcium phosphate nanoparticles (CAP) as a drug and vaccine delivery system and as an adjuvant to stimulate immune response to vaccines.

At current prices, we believe investors are receiving a free option on Biostante’s female "Viagra" drug with downside protection in the form of a strong drug pipeline that justifies the current market value of the company.

Biosante was originally posted by Issambres839 on 11/15/2004. We recommend reading that write-up as it provides an excellent history. At the time of Issambres839’s write-up, Procter & Gamble (P&G) had filed its new drug application (NDA) for Intrinsa, a testosterone patch designed to treat female sexual dysfunction (FSD), and was waiting for the FDA to review the application. Biosante had planned on riding P&G’s marketing push with the release of Libigel, Biosante’ testosterone gel designed to treat FSD. At the time, analysts had expected the FSD market in the US to be worth $1 billion to $2 billion and that Biosante could capture between 10-20% of this market.

In hindsight, P&G chose an inauspicious time to submit its NDA: Merck had just withdrawn Vioxx from the market and the FDA, under fire from various critics, chose to crack down on new drugs. P&G’s application was turned down on safety concerns. Biosante’s stock price decreased from $10.44 / share on 11/29/2004 to $4.84 / share on 12/03/2004, the day after the FDA’s decision on Intrinsa. Since then, Biosante’s stock has languished, reaching a low of $1.65 / share on 11/10/2006.

Since then, three major events have occurred that should begin to unlock value in Biosante:

  1. P&G has successfully obtained approval for Intrinsa in Europe.
  2. P&G received approval for Intrinsa in July 2006 in Europe. P&G will likely launch Intrinsa in 1h07 and this will be a major milestone for Biosante and validate testosterone as a treatment for FSD. It is unclear what P&G’s plans are with regard to the US market although Biosante is moving ahead in working to commercialize Libigel.



  3. Biosante has successfully received approval for Bio-E Gel from the FDA.
  4. On December 12, 2006, Biosante received approval for Bio-E gel. Bio-E gel is the first and only estrogen replacement therapy identified by the FDA as the lowest effective dose. This is a competitive advantage given the negative publicity that estrogen replacement therapies have received since the 2002 WHI study. This triggers a milestone payment from Bradley Pharmaceuticals for $7.9 million, net of fees to Antares. Biosante has stated that it can receive up to $40 million in regulatory and sales milestones as well as an undisclosed royalty rate for Bio-E gel from Bradley, net of fees paid to Antares.

  5. Biosante has begun its phase III trials of Libigel (it’s female "Viagra" drug) after revising its phase III protocols with the FDA.

On December 28, 2006, Biosante began the Phase III trials for Libigel. Biosante will complete two 6 month Phase III trials for Libigel. The second Phase III trial will begin in 1H07. The FDA requires 5 years of safety studies after the Phase III trials but Biosante can submit its NDA after the first year of safety studies. At the current time line, Biosante will begin its safety studies in 2007 and tie up the safety studies in 2008. Biosante plans to submit the NDA for Libigel in 2008 and launch to market in 2009. As P&G has not resubmitted its Phase III protocols to the FDA, Biosante may be the first company to introduce a FSD drug to the US market.

Biosante’s cash burn rate is currently $500,000 to $600,000 per month. Now that Biosante is beginning its Phase III trials for Libigel, the burn rate will increase to $1 million per month. Assuming no additional sales milestones or royalty payments from Bradley Pharmaceuticals, Biosante has enough cash to operate for two years. Biosante acknowledges that it will not have enough cash to bring Libigel to the market but wants to refrain from licensing Libigel until it is further along in its trials in order to maximize the payments that the company will receive.

Biosante has 23 million shares outstanding which at $2.77 / share yields a $63.6 million market cap. With no debt and $18.2 million in cash (BPA will receive $7.9 million from Bradley due to the Bio-E Gel NDA), Biosante is trading at less than the value of just its CAP technology, which we estimate to be worth at least $50 million. At this price, you can buy Biosante and get its Libigel drug to treat female sexual dysfunction for free.

While it is difficult to estimate a value for Libigel given the wide range of potential outcomes, P&G’s launch of Intrinsa in Europe in 1h07 will validate strong consumer interest in this product. And given that tests-to-date on Libigel have shown positive comparisons versus Intrinsa in terms of both efficacy and easy of use (i.e., it comes in a gel form), we believe Biosante will be well positioned

As Issambres839 noted, CEO Stephen Simes and CFO Phil Donenberg are first class managers. They previously worked together at Unimed Pharmaceuticals, Inc. and Gynex Pharmaceuticals, Inc., both of which were sold, generating healthy returns for investors. Management, together with the Board, currently owns close to 20% of the outstanding equity and remain focused on creating shareholder value.


P&G launching Intrinsa in Europe. Biosante finishing its Phase III protocols on Libigel in 2007. Bradley Pharmaceuticals launching Bio-E Gel, under the name Elestrin, in 1h07. Further development on the rest of the drug pipeline.
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