This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

BioSante: A Penny Stock Still Overvalued

Content on this page requires a newer version of Adobe Flash Player.



Get Adobe Flash player

LINCOLNSHIRE, Ill. (TheStreet) --Don't look any deeper than momentum-fueled day trading to explain the dramatic rise in BioSante Pharmaceuticals' (BPAX) stock price. Real numbers don't justify the company's valuation.

BioSante shares rose 27% to 96 cents Wednesday -- and were up as much as 62% intraday -- after U.S. regulators approved Bio-T-Gel, a testosterone replacement therapy for men who have low levels of natural testosterone.Teva (TEVA) is in charge of marketing Bio-T-Gel and will pay BioSante a small single-digit royalty (think 6%) on sales.

Bio-T-Gel's fundamental problem is that five existing testosterone gels already compete in a crowded U.S. market. None of these products are materially different from each other, so Bio-T-Gel faces serious challenges coming in as testosterone gel number six.

For that reason alone, BioSante is an expensive stock. Even trading for less than a buck per share, the company's market value of $106 million is too rich by at least a third, perhaps as much 50-60%.

Abbott (ABT) is the testosterone gel market leader. Worldwide sales of Androgel totaled $875 million in 2011, a company spokeswoman said, although she declined to break out U.S. sales.

That's a lot of testosterone gel, but once you get past Abbott's 74% U.S. market share, according to IMS Healthcare, the numbers drop off fast.

Auxillium Pharmaceuticals (AUXL) has reported $150 million in sales of Testim through the first nine months of the year, making it the second-largest testosterone replacement gel in the U.S. Testim sales in 2010 totaled $190 million -- it took eight years for the product to reach that level.

Behind Testim, none of the other testosterone gels sold in the U.S. -- from Watson Pharmaceuticals (WPI), Eli Lilly (LLY) and Endo Pharmaceuticals (ENDP), respectively -- cracks $100 million in sales, according to IMS Healthcare.

Remember, all these testosterone gels are basically the same, giving doctors and patients have very little reason or incentive to switch. Abbott's Androgel was the first gel approved in 2000 and it remains the market leader. Testim was the second gel approved and lags badly. The other gels are almost non-factors in the market.

Realistically, Bio-T-Gel doesn't stand a chance, but let's give Teva the benefit of the doubt and assume its marketing muscle and know-how actually makes a dent in the T-gel market. How generous should we be? Let's say Teva manages to pull in $100 million in Bio-T-Gel sales five or six years after launch.

That puts $6 million in BioSante's pocket -- not even enough to cover half a quarter's cash burn at the company's current rate of spending.

I generally counsel investors not to follow the advice of sell-side analysts because their forecasts are usually way too optimistic but let's make an exception for BioSante.

The Roth analyst forecasts $200 million in Bio-T-Gel sales by 2015 (I told you, these analysts can be crazy optimistic) but that only brings $11.6 million in royalty revenue to BioSante. Roth has the company losing $3.5 million in that year.

The Jefferies analyst is a bit more realistic, forecasting $6.8 million in Bio-T-Gel royalty revenue for BioSante in 2015. [That infers $113 million in actual Bio-T-Gel sales.] On that revenue, BioSante would lose $13.2 million in 2015, Jefferies says.

The Jefferies analyst also does a sum-of-the-parts valuation analysis on BioSante in which Bio-T-Gel is worth today just 59 cents per share. The entire company today is worth 70 cents per share.

In case you were wondering, Leerink Swann's current fair-value calculation on BioSante: 11 cents per share.

However you spin it, BioSante at 96 cents per share is grossly over-valued.

One last word: No mention of Libigel? And what about the cancer vaccine programs? Libigel is an expensive placebo. Two failed efficacy trials in female sexual dysfunction proved that fact beyond any argument. BioSante continues to run a Libigel safety study, but demonstrating that a placebo does no harm isn't exactly a value-creating feat of drug development. Libigel is a zero.

Likewise, BioSante's cancer vaccine programs are worthless. BioSante gained control of the cancer vaccines when it acquired the defunct Cell Genesys for its cash. Cell Genesys blew up because its cancer vaccines failed phase III studies. Another zero.

--Written by Adam Feuerstein in Boston.



>To contact the writer of this article, click here: Adam Feuerstein.

>To follow the writer on Twitter, go to http://twitter.com/adamfeuerstein.

>To submit a news tip, send an email to: tips@thestreet.com.

Follow TheStreet on Twitter and become a fan on Facebook.

Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,039.49 +60.36 0.36%
S&P 500 1,992.37 +5.86 0.30%
NASDAQ 4,532.1040 +5.6220 0.12%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs