Talk about getting excited. BioSante Pharmaceuticals (Nasdaq: BPAX) is up 38% this month without a single press release from the company. Bloomberg published an article in which CRO Stephen Simes says the company is looking for a partner or a buyer of the whole company, but that only seems to have been an aphrodisiac for a desire that was already there.

It appears investors are opening positions in BioSante in anticipation of the release of company data from two clinical trials for its female sexual-dysfunction treatment, LibiGel, by the end of the year.

There are two risks here. First the placebo effect comes into play in subjective readouts like the desire to have sex. Taking a drug, whether it contains active ingredients or not, could be enough to push women toward a higher libido, making it harder to prove that the drug works.

The second concern is safety. The FDA is likely to see a female sexual-dysfunction drug as a lifestyle drug. Unlike diabetes or high cholesterol, not treating the disease is not life-threatening -- even if the women's husbands would claim otherwise. Boehringer Ingelheim, Pfizer (NYSE: PFE), and Procter & Gamble (NYSE: PG) all stopped developing female sexual-dysfunction drugs because of safety issues.

LibiGel is in a long-term study checking for the risk of cardiovascular events and breast cancer. So far, the data-monitoring board has allowed the trial to continue, which should give investors a little confidence, but it's not a guarantee that the long-term study will end in BioSante's favor.

I could see Pfizer, Eli Lilly (NYSE: LLY), Bayer, or GlaxoSmithKline (NYSE: GSK) licensing LibiGel, since they all sell erectile-dysfunction drugs. But I have a hard time seeing them getting turned on to the drug until it proves itself in the clinic -- and maybe not until it gets past the FDA.

Even at this inflated level, there's still plenty of upside for BioSante if LibiGel is approved, but it also means there's further to fall.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.