Is This Biotech's Shortened Study Good Enough for Approval?

BioSante Pharmaceuticals (Nasdaq: BPAX  ) is stopping its long-term safety trial for its female sexual dysfunction, LibiGel, because the biotech thinks it has enough safety data to gain approval -- and for "other considerations."

My guess is those "other considerations" have a lot to do with the amount of cash in BioSante's bank account. The biotech had $42.4 million in the bank at the end of the second quarter and raised $3.3 million more in a secondary offering last month. It spent $7.1 million in the second quarter, giving it a runway of about six quarters if it doesn't change its burn rate.

But it will. Despite being unable to demonstrate in two phase 3 trials that LibiGel is able to increase women's sexual appetite, BioSante plans to press on with two new phase 3 trials. Those aren't going to be cheap. The company burned through about $14 million in the second quarter of last year when it had trials up and running.

BioSante has one approved drug, Bio-T-Gel, to treat men with low testosterone. BioSante licensed the drug to Teva Pharmaceuticals (NYSE: TEVA  ) , which hasn't launched it yet -- perhaps because a patent-infringement lawsuit with Abbott Labs (NYSE: ABT  ) is stopping the launch; settlement terms weren't disclosed. Whenever Bio-T-Gel does launch, it will run into competition from Abbott's testosterone replacement, as well as Auxilium Pharmaceuticals' (Nasdaq: AUXL  ) Testim, and Endo Pharmaceuticals' (Nasdaq: ENDP  ) Fortesta. I wouldn't count on royalties from Bio-T-Gel offsetting much of the cost of the LibiGel trials.

The original plan was for LibiGel to pass those phase 3 trials, and then the company could do the primary safety analysis around this time and submit the drug to the FDA for marketing approval in the fourth quarter.

But the safety trial was scheduled to continue until 2016. The average exposure of over two years was designed to be enough to convince the FDA to approve LibiGel, but presumably the FDA wants more data to ensure there aren't any longer-term problems with breast cancer or cardiovascular issues.

If LibiGel is able to pass its new phase 3 trials -- the company hopes reducing the placebo effect will help show a difference -- will the company have to run another large safety study to get longer-term data? And if it does, will the FDA be OK with it starting concurrently with the launch of LibiGel? The old plan gave the data a two-year head start on the general population of paid customers using the drug.

BioSante seems to be taking a let's-worry-about-that-later approach, which under the financial circumstances, isn't all that unreasonable. Investors should be careful though; most biotechs that enter survival mode end up sinking.

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Fool contributor Brian Orelli holds no position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Abbott Laboratories. The Motley Fool has a disclosure policy.
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