On a day when the Dow Jones Industrial Average (INDEX: ^DJI) dropped 131 points, hitting its lowest level in weeks, significantly larger moves happened in the health-care sector. BioSante Pharmaceuticals (Nasdaq: BPAX) fell 16% on eight times its normal trading volume.

But BioSante wasn't done plummeting yet. Shares have been eviscerated after hours, losing more than three-quarters of their value. Why?

Its lead sexual dysfunction drug LibiGel couldn't beat a placebo in phase 3 trials.

Unsurprisingly, Antares Pharma (AMEX: AIS), whose gel BioSante uses to deliver the drug, is down 25% after hours. BioSante had a pretty good run (especially for those investors that got out pre-announcement). Shares were up 43% over the last twelve months, and even more since the beginning of 2009. All the momentum appeared to be in BioSante's favor. There was talk of a sizable deal or even a takeover. Shares hit $4. Just last month the company revealed that LibiGel improved free testosterone levels in women post-menopause. But after tonight, all that is a distant memory.

Female sexual dysfunction is notoriously hard to treat. Heavy hitters Pfizer (NYSE: PFE) and Proctor & Gamble (NYSE: PG) both had to stop development of their respective drugs because of efficacy and safety concerns. In fact, even after receiving approval to continue the trial, fellow Fool Brian Orelli prophetically warned that "it's not a guarantee that the long-term study will end in BioSante's favor."

Unless management suffers from childlike optimism, I can't imagine them still seeking approval for LibiGel next year. Considering the efficacy data just got a cold shower, as well as a potentially increased likelihood for breast cancer among patients, the FDA getting isn't too excited over this drug.

What's next for BioSante? Well, the company still has Bio-T-Gel licensed to Teva (Nasdaq: TEVA) and a prostate cancer vaccine that it licensed out for exactly zero up-front dollars. Although there is hope it could succeed like Dendreon's (Nasdaq: DNDN) Provenge, there is still a long way to go. And time is a problem.

At the end of last quarter, BioSante had just under $70 million in cash and is burning through about $12 million a quarter. The new low share price will make equity raises like the one in late July even more difficult and painful.

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