BioSante (NASDAQ: BPAX): LibiGel Provides Big Upside Potential

image-4By Mike Havrilla

BioSante Pharmaceuticals, Inc. (NASDAQ: BPAX) is a specialty pharmaceutical company focused on developing products for female sexual health, menopause, contraception, and male testosterone deficiency (hypogonadism). The Company’s wholly-owned lead product is LibiGel (transdermal testosterone gel), which is in Phase 3 clinical development by BioSante under dual Special Protocol Assessments (SPAs) for the treatment of female sexual dysfunction (FSD).

On 9/22/09, BioSante and Cell Genesys (NASDAQ: CEGE) announced that they have determined the final exchange ratio will be 0.1828 in connection with the previously announced merger between the companies. If the merger is completed, CEGE shareholders will receive 0.1828 of a share of BPAX common stock for each share of CEGE common stock they hold immediately prior to the effective time of the merger. Each company is scheduled to hold a special meeting of stockholders on 9/30/09 at which time shareholders will be asked to approve the merger, and both companies expect to close the proposed merger promptly after such stockholder approvals have been obtained.

Three key points behind the bullish case for BioSante include:

1.) LibiGel is the only product in active clinical development in the U.S. for the treatment of FSD (specifically HSDD) in menopausal women for which there is no FDA-approved pharmaceutical product today, despite a multitude of

choices for men that include well-known products such as Viagra, Levitra and Cialis.

2.) Upon closing the CEGE merger at the end of September, BioSante will have sufficient cash on hand to make its way through a NDA filing (expected during 1H11) for LibiGel while retaining full ownership of the product. In addition,

BioSante expects a priority (six-month) review for LibiGel since there is no FDA-approved treatment for FSD / HSDD – resulting in a possible FDA approval and market launch in 2H11.

3.) With a share price that is currently hovering around the $2 level, BioSante is valued at a fraction of the conservative market opportunities in the U.S. market alone for LibiGel. With approximately 60 million fully diluted shares upon closing the CEGE merger, BioSante would be valued at a market cap of $120 compared to estimated peak sales for LibiGel of $600 million (the mid-point of Company guidance and 5X the current market cap) in the U.S. market alone.

It has been determined that CEGE’s net cash is $23.8 million and since this amount exceeded the applicable net cash target amount of $22.1 million by $1.7 million, the exchange ratio was adjusted upwards from the previous 0.1615 of a share of BPAX common stock. If the merger is completed, BioSante will issue an aggregate of approximately 20.2 million shares of BPAX common stock to holders of CEGE common stock and current BPAX shareholders will own approximately 62% of the combined company.

The following is a summary of key financial metrics reflecting the combination of BPAX / CEGE: (1) 53.2 million shares of common stock outstanding; (2) 5.7 million warrants outstanding (at an exercise price range of $2-8); (3) 2.9 million options outstanding (with an average exercise price of $2.90); (4) 61.8 million fully diluted shares of common stock; and (5) approximately $35 million in cash post-merger closing (which also reflects $12 million raised in mid-August) versus a cash burn rate of about $1.2 million per month.

In mid-April, BioSante announced the U.S. marketing launch of Elestrin (estradiol gel) by Azur Pharma, which is the Company’s licensee in the domestic market. Azur licensed the rights to Elestrin from BioSante in December 2008, and the product was approved by the FDA in December 2006 with patent protection through June 2022. BioSante is entitled to receive Elestrin milestone payments of up to an aggregate of $144.5 million if certain sales-based milestones are achieved and Azur has agreed to pay to the Company royalties on sales of Elestrin ranging from 10–20% based on annual sales.

Elestrin is absorbed through the skin after topical application on the upper arm, and delivers estradiol to the bloodstream evenly over time in a non-irritating, painless manner. Elestrin is administered using a metered dose applicator that delivers 12.5 micrograms of estradiol, a dose that is 67% lower than the lowest dose transdermal estradiol patch that is FDA approved for the treatment of hot flashes in the US. The lowest dose of Elestrin studied produces very low estradiol blood levels and exhibits a safety profile similar to that observed in the placebo group.

The total, single-entity US estrogen therapy market is estimated at about $1.4 billion in annual sales, of which the transdermal segment, mostly patches, is about $260 million. The low-dose efficacy of Elestrin is important because of consensus medical guidelines which recommend that women use the lowest effective dose of estradiol for the shortest period of time. In late June, BioSante announced that an Elestrin New Drug Application (NDA) was submitted in Israel by its licensee in that country, PharmaSwiss SA. PharmaSwiss is responsible for regulatory and marketing activities in Israel, and pproval in Israel is anticipated to occur in about one year.

In mid-August, BioSante announced positive safety data in its ongoing LibiGel Phase 3 clinical development program, reporting that with over 1,250 women enrolled and almost 825 women-years of exposure in its LibiGel Phase 3 program, there have been no deaths and only five cardiovascular events. This analysis of blinded data indicates a very low cardiovascular event rate has occurred thus far and the studies will continue as planned.

The Company is targeting its submission to the FDA of a NDA during 1H11 and LibiGel remains the only pharmaceutical product in the U.S. in active development for the treatment of hypoactive sexual desire disorder (HSDD) in menopausal women. The Phase 3 Cardiovascular and Breast Cancer Safety Study is a randomized, double-blind, placebo-controlled, multi-center, cardiovascular events and breast cancer study that will enroll between 2,400-3,100 women, exposed to LibiGel or placebo for 12 months.

After NDA submission and potential approval of LibiGel, BioSante will continue to follow the women enrolled in the study for an additional four years. In addition to the Phase 3 safety study, the Company is conducting two Phase 3 efficacy trials with about 500 surgically menopausal women each for a six-month clinical trial under an FDA approved SPA (special protocol assessment). Antares (AMEX: AIS) has a mid-single digit royalty percentage and milestone sharing rights in the U.S. and exclusive marketing rights in Europe and elsewhere since LibiGel is based on the Company’s Advanced Transdermal Delivery (ATD) gel technology.

Limited competition in the U.S. market for the treatment of HSDD with only two other products in development, including Luramist by Vivus (NASDAQ: VVUS) and Flibanserin by Boehringer-Ingelheim (with both of these differentiated from LibiGel because they are being evaluated in premenopausal women rather than menopausal women as BPAX is focused on with its three ongoing Phase 3 studies). 

In 2015, BioSante has modeled for U.S. peak sales of LibiGel for surgically menopausal women of $700 million (without competition) and approximately $500 million (with competition) with an estimated initial cost of therapy at $4 per day that increase to $4.50 per day at the time of peak sales. BioSante’s model includes an estimated eight-month duration of therapy for LibiGel with most likely competition arising from P&G’s Intrinsa or Vivus, but the Company notes that neither of these companies appear to be actively progressing in clinical development for HSDD product candidates.

In addition, BioSante notes a much larger market opportunity that exceeds $2 billion for FSD. A study published in the Journal of the American Medical Association demonstrated that 43% of American women (about 40 million) are estimated to experience some degree of impaired sexual function, with the majority of women reporting FSD being postmenopausal, through either the natural aging process or surgical means (hysterectomy). In 2007, an estimated 2 million testosterone prescriptions were dispensed off-label to women for FSD, which represents a $700 million market at a cost of $120 per month.

LibiGel has patent protection through mid-2022 with a proposed indication for the treatment of FSD, which is characterized by a lack of sexual desire, arousal or pleasure. LibiGel is poised to become the first approved prescription therapy for FSD that will target menopausal women. According to Procter & Gamble (NYSE: PG) market estimates, about 20–25% of the 25 million surgically menopausal women in the US are “distressed by a lack of sexual desire,” with another 10% of the 30 million naturally post-menopausal women also experiencing this distress – equating to a potential market opportunity of about 8 million women who could be classified as experiencing FSD.

Expected milestones for BioSante outlined at the Rodman Healthcare conference presentation two weeks ago (in addition to closing the CEGE merger by the end of September) include: (1) three ongoing Phase 3 studies of LibiGel with expected NDA filing 1H11 / market launch 4Q11; (2) Report additional Phase 2 study results for oral use of The Pill Plus (birth control with androgen) during 2H09; (3) Teva Pharma (NASDAQ: TEVA) is expected to submit for FDA approval of Bio-T-Gel (testosterone gel for male hypogonadism) by year-end; (4) Calcium phosphate technology platform (CaP) goals include initiating a human clinical trial before year-end for CAP Look as a facial line / wrinkle filler for a cosmetic medicine application + H1N1 vaccine adjuvant (BioVant) development in 2009 / 2010 in addition to drug deliver applications (e.g. BioAir and BioOral).

In addition, I had the opportunity to conduct a phone interview on 9/26/09 with BioSante’s President / CEO, Stephen Simes, who stated that the next update for the Phase 3 safety study of LibiGel is expected before the end of October – at which time the Safety Study External Executive Committee will have its first un-blinded look at the data and issue a safety update on the trial. While the data will remain blinded to the Company, Mr. Simes believes that by around mid-2010 partnership talks for LibiGel should begin to gain momentum ahead of final safety data and the anticipated NDA filing in 1H11.

Mr Simes also noted that the financial risk factor for BioSante will be eliminated with the expected closing by 30-September of the CEGE merger, and the clinical risk factor for LibiGel is mitigated because testosterone is a well known entity that has been used for many years. However, as agreed upon with the FDA, the safety study is designed to clearly demonstrate that testosterone can be used in women safely for FSD / HSDD – since there is little debate over the effectiveness of the hormone for this indication and it is already widely used on an off-label, non FDA-approved basis. 

Disclosure: No positions.

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