Yesterday Proctor & Gamble's (NYSE:PG) Intrinsa went in front of the FDA's Advisory Committee for Reproductive Health Drugs. Intrinsa is a testosterone patch in development for the treatment of female sexual dysfunction, which is a condition characterized by a lack of sexual arousal, desire, and pleasure.

P&G was filing for approval to market Intrinsa to women who are surgically menopausal as a result of having their ovaries removed -- women who would be taking estrogen therapy at the same time as they would be using the Intrinsa patch. The Advisory Committee did not recommend Intrinsa for approval because of concerns over potential long-term safety risks.

Specifically the FDA committee had concerns about chronic usage of testosterone along with estrogen. The primary source of the committee's concern is the Women's Health Initiative (WHI), which reported in 2002 that women taking estrogen had an increased risk of stroke. The WHI also found that women taking estrogen plus progestin had an increased risk of breast cancer. In light of this WHI data, the Advisory Committee said Intrinsa warrants further study because of the potential for increased health risks due to long-term use of estrogen in combination with testosterone.

It is clear that the FDA is taking a very cautious stance here. That's an understandable position given all the heat the agency has taken since Merck (NYSE:MRK) withdrew Vioxx. It is very important to note that the committee is not concerned about actual problems, but the potential for increased risk of heart attacks and cancer due to the long-term use of Intrinsa with estrogen. That's a big difference.

To determine whether this potential danger is an actual problem, the FDA could call for a long-term, prospective, controlled study. This type of study would require a large number of participants, and it would take years to complete. At this time, the FDA has not stated what studies need to be done.

What Intrinsa's setback does is erode P&G's sizable lead-time over competitors BioSante (NASDAQ:BPA), Cellegy (NASDAQ:CLGY), and Vivus (NASDAQ:VVUS). The impact on these much smaller companies is not yet clear. Will they, too, need to run very large and lengthy phase 3 trials, or will they be able to point to P&G's long-term safety data? That is a question that remains to be answered.

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Fool contributor Charly Travers is the biotech analyst for Motley Fool Rule Breakers . He does not own shares of any company mentioned in this article.