Selling Libido in a Gel Tube

12/20/2010 11:10 am EST


Michael Murphy

Former Editor, New World Investor

Antares Pharma’s testosterone gel aims to improve women’s love life and should pass muster with the FDA, writes Michael Murphy of New World Investor.

Antares Pharma (AMEX: AIS) licensed their transdermal gel for female hypoactive sexual desire disorder (HSDD) to BioSante Pharmaceuticals (Nasdaq: BPAX), which is conducting a Phase III study. LibiGel is testosterone, and Procter & Gamble (NYSE: PG) showed that testosterone therapy can produce positive results in HSDD. But P&G stopped development of their testosterone patch, Pfizer (NYSE: PFE) has never been able to move Viagra into the female population,and a Food and Drug Administration advisory panel recently rejected Boehringer Ingelheim’s flibanserin, forcing the company to also give up.

The object is desire.

So why do I think BioSante can get approval for LibiGel?

Mainly, because it is the right, simple approach. HSDD is the most commonly reported female sexual complaint, and is characterized by a decrease in sexual desire that causes marked personal distress and/or personal difficulties. According to prevalence studies about one in ten women reported low sexual desire with associated distress, which may be HSDD. The neurobiological pathway of female sexual desire involves interactions among multiple neurotransmitters, sex hormones, and various psychosocial factors. Sexual desire is modulated in distinct brain areas by a balance between inhibitory and excitatory neurotransmitters, with serotonin acting as an inhibitor and dopamine and norepinephrine acting as stimulators of sexual desire. Testosterone seems to raise dopamine and norepinephrine levels.

More Than a Gimmick
One of BioSante’s main problems in getting approval is opposition from people who still believe HSDD is nothing more than a marketing gimmick masquerading as a disease, even though HSDD has been recognized as a distinct sexual function disorder for more than 30 years. But the FDA knows that testosterone is being used today off-label for HSDD, and this gives the agency a chance to get control of it. Antares’ gel-delivery mechanism is more attractive than taking generic testosterone, and the cost of the drug is not likely to be so high that insurance carriers balk.

It will take a lot of money to market LibiGel, but BioSante intends to partner the drug or sell the whole company to a larger organization able to do that. Some royalties will still flow to Antares, no matter what the marketing plan turns out to be. AIS remains a top buy on both a value and timely basis up to $2. [Shares closed at $1.65 Friday, up 13% on the day—Editor.]

Zalicus Has Cash, Connections
Another small biotech attractively priced below $2 is Zalicus (Nasdaq: ZLCS). The company has 27 products in 22 indications, and partnership or R&D agreements with Covidien (NYSE: COV), Sanofi Aventis (NYSE: SNY), Amgen (Nasdaq: AMGN), Novartis (NYSE: NVS), Clinical Data (Nasdaq: CLDA), the U.S. Army Medical Research Institute for Infectious Diseases, the National Institute of Allergy and Infectious Diseases and others. Painkiller Exalgo is on the market already, with a projected royalty stream worth more than the $112.2 million market cap of the whole company. And they have $46.7 million in cash and no debt.

ZLCS remains a top buy on a value basis under $2 for my $7 target in 2011. [Shares closed at $1.43 Friday, up 8% on the day. For more on Zalicus, see this blog post—Editor.]

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