BioSante Pharmaceuticals ( BPAX) CEO Stephen Simes was jubilant Tuesday after announcing that three years of hard work had finally paid off: The company now has a crystal-clear regulatory path for the company's experimental female sexual dysfunction drug.

A significant payoff for investors, however, is less certain.

During a conference call Tuesday, Simes announced that the small specialty pharmaceuticals firm and the Food and Drug Administration had come to terms on a Special Protocol Assessment that lays out the steps BioSante must follow to get the LibiGel drug approved.

The LibiGel program was critically injured back in 2004, and investors certainly thought the drug was all but dead, punting BioSante's stock to the remainders bin in the process.

On Tuesday, BioSante shot up 6.5% to $3.88 on news of the FDA agreement. That's still far below the $9 level where the stock traded in the fall of 2004, the last time LibiGel had any life. And rightly so -- there's a lot of work, and a good bit of risk, still residing in the BioSante story.

But Tuesday's good news was a start.

LibiGel is a testosterone gel specifically formulated for post-menopausal women with waning sex drives. The easy-to-use gel (it's quickly absorbed into the skin) boosts testosterone back to normal levels, and along with it, a woman's desire for sex.

LibiGel works in a completely different way than erectile dysfunction drugs, but that won't stop most folks from thinking about LibiGel as "female Viagra," so don't let it stop you either.

With the FDA regulatory agreement signed, BioSante is moving ahead on a series of phase III safety and efficacy studies, with initial results expected in the first half of 2009. If the data are positive, Simes says the company will file LibiGel with the FDA in early 2010.

Join me now in the Wayback Machine going back to December 2004: That's when an FDA advisory panel rejected a female testosterone sex-drive patch from Procter & Gamble ( PG). That, in turn, was right after Merck ( MRK) pulled the pain drug Vioxx from the market. A large study of post-menopausal women on estrogen therapy had also reported worrisome safety effects. The FDA, naturally, was freaking out over drug safety.

There wasn't any hard evidence to suggest that post-menopausal women taking P&G's testosterone patch, known as Intrinsa, were at any greater risk for heart attack, but that didn't stop the FDA and its advisory panel from rejecting the patch until the company could provide long-term safety data. To this day, P&G has yet to move Intrinsa forward in the U.S.

BioSante shares were spanked hard back then because of the Intrinsa rejection. The message out of the FDA was that the agency wasn't ready to approve a drug for female sexual dysfunction. That left BioSante and LibiGel in limbo. I spoke to Simes in December 2004 for a story in which he was hopeful that the delay would last "months, not years."

Clearly, that was wishful thinking. But now you understand why Simes was ecstatic on Tuesday. Three-plus years are a long time to wait for clarity from the FDA.

Do you buy BioSante now? I want to say yes, but my gut says no -- it's OK to watch and wait.

It's going to take a year or so for BioSante to enroll these LibiGel trials and more time after that for any data to be available, so the company essentially goes dark for awhile. In this market, "catalyst-light" drug and biotech companies aren't in very high demand by investors.

Don't be surprised to see BioSante raise some money, either. The company has about $30 million in the bank but needs about $50 million to go from here to an FDA filing, Simes told me in an interview a couple of weeks ago.

Simes will also be looking for a big drug company partner to market LibiGel. He'll need one with deep pockets, because this isn't a drug that's going to sell itself.

BioSante landing a whale of a marketing partner for some big upfront dollars is one of the better reasons to own the stock now, but again, my gut tells me that potential partners might just wait awhile before getting serious.

BioSante needs cash and a marketing partner, which doesn't necessarily give it the upper hand in negotiations. On the other side, LibiGel has the commercial potential to be as big or bigger than the erectile dysfunction drug franchise -- a $2 billion market.

There isn't a Big Pharma company out there who couldn't use that kind of revenue boosting its income statement.

Motley Fool's biotech maven Brian Lawler is a BioSante doubter, because he thinks LibiGel, if approved, won't be able to compete against low-priced testosterone generics. He doesn't say so specifically, but I'm assuming he's also skeptical about a partner coming on board for exactly the same reason.

I hadn't thought about this wrinkle, to be honest, and it might well be a big risk to the BioSante-LibiGel story. With no approved testosterone therapy today specifically for female sexual dysfunction, many women and their doctors do turn to male testosterone therapy, whether that be creams, gels or injections.

But none of these male testosterone products are formulated for women, and reimbursement is likely spotty at best. If LibiGel were to be approved and marketed correctly, I think it could be a successful, high-margin product.

It's taken three years to get to this point. It will take a few more to find out if LibiGel truly can be the female Viagra.
Adam Feuerstein writes regularly for In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.

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