BioSante Pharmaceuticals ( BPA) is wounded, maybe seriously.

The Thursday night rejection of Procter & Gamble's ( PG) female testosterone sex-drive patch Intrinsa by a Food and Drug Administration advisory panel will almost certainly delay efforts by BioSante to develop its own product, a testosterone gel called LibiGel.

BioSante shares, trading in the green all day Thursday, plunged at the closing bell as the Intrinsa panel's vote was taken. The stock closed the day down 90 cents, or 10%, to $7.50, then fell another $3.15, or 42%, to $4.35 in the after-hours session. Needless to say, this selloff is not what BioSante bulls (and I include myself in that category) were hoping for.

The FDA panel dinged Intrinsa over a lack of long-term safety data. Sharing concerns expressed by the FDA on Wednesday, the panel members were concerned that long-term use of testosterone by post-menopausal women already taking estrogen hormone therapy would raise their risk of heart attacks and cancer. A proposal by Proctor & Gamble to collect additional post-approval safety data from women using Intrinsa was dismissed by the panel as inadequate.

Although the FDA has yet to issue an approval decision on Intrinsa, the agency will likely follow the panel's recommendation and ask Proctor & Gamble to collect additional safety studies before approval. But how much safety data need to be collected, and from how many patients? Will ongoing Intrinsa studies be sufficient, or will the company be forced to start new studies?

The answers to these questions are unclear, which has both good and bad implications for BioSante. The company was expected to begin a phase III study of LibiGel in the first quarter 2005. There will be a delay but BioSante CEO Stephen Simes, reached last night while he was boarding a plane leaving the Intrinsa panel meeting, is hopeful that it won't last too long.

"The FDA clearly wants to see more safety data, but the good news for us is that we are still designing our phase III trials, so we can include the recommendations of the Intrinsa panel into our protocol," says Simes. He adds that any delay in the start of the LibiGel phase III studies will be measured in months, not years.

Could this be wishful thinking? Certainly. One of the panel members reviewing Intrinsa's safety, Dr. Steven Nissen, a cardiologist at Cleveland Clinic, suggested that adequate safety data would only come after studying Intrinsa's use in thousands of women, maybe tens of thousands of women. These are hugely expensive and time-consuming studies typically required for drugs like cholesterol-lowering statins.

The FDA has been stung by sharp criticism that it is too lax on drug safety, especially following Merck's ( MRK) withdrawal of Vioxx from the market. So, it's not out of the realm of possibility to see the agency take a hard line with Proctor & Gamble about Intrinsa safety data.

Bottom line: Until Proctor & Gamble meets with the FDA to hammer out the exact safety requirements for Intrinsa, BioSante's plans for LibiGel will also be on hold. And even if BioSante manages to get its phase III studies started relatively soon, the added burden of collecting more safety data could stretch out completion of the trials for many more months, if not years.

Simes says he's hopeful that BioSante will be able to piggyback on any safety data collected by Proctor & Gamble -- and make BioSante's task less onerous -- because testosterone, whether it enters the bloodstream via a patch (with Intrinsa) or through a gel application (with LibiGel), will have the same effect on a woman's body.

To date, BioSante has been determined to develop LibiGel on its own, in order to maximize the potential for the product to its shareholders. But Thursday's setback could force the company to raise more money to pay for larger, lengthier studies, or partner LibiGel with a larger company at less ideal terms.

It needs to be noted that BioSante is not a one-trick pony. The company does have other hormone therapy products in development, including an estrogen gel for women. Bio-E-Gel is wrapping up a pivotal phase III study and should be filed with the FDA in the middle of 2005. Unlike LibiGel, Bio-E-Gel shouldn't run into unexpected regulatory delays because similar products are already on the market.

Please note that due to factors including low market capitalization and/or insufficient public float, we consider BioSante Pharmaceuticals to be a small-cap stock. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.
Adam Feuerstein writes regularly for RealMoney.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to adam.feuerstein@thestreet.com.

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