Huge Potential But Tough Entry For Female Sexual Dysfunction Drugs

By Brian L. Wilson - Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...)

Female Sexual Dysfunction (FSD) is often overshadowed by the more prominent erectile dysfunction market. While companies like Pfizer (NYSE: PFE) recruit the likes of Bob Dole and other prominent celebrities to help push Viagra, the attention on FSD has been lacking to say the least. This obscures an analysis of a National Health and Social Life Survey performed six years before initial FDA approval of Viagra which estimated that 43% of women suffer from symptoms of FSD. This and other studies imply that there is indeed a vast and significant unmet need for FSD treatments that needs to be addressed to improve the wellbeing of millions of women. In addition to this, there is a huge and untapped therapeutic market that offers a multi-billion opportunity (mimicking the size and scope of the Viagra/Cialis market) for drug developers and their investors.

Currently there is a transdermal testosterone product for FSD available that was developed by Watson Pharmaceuticals along with partnerProcter & Gamble (NYSE: PG) which is sold in Europe, although the drug never made it to FDA approval and had its NDA withdrawn in 2004 due to concerns over its safety data. Another big attempt by the US market by Boehringer Ingelheim Pharmaceuticals with the drug that was commonly referred to as "Pink Viagra" fell flat on its face in 2010 after the company failed to convince the FDA of the utility of the product. In more recent history, we saw the failure of the testosterone gel known as "Libigel" hurt shares of BioSante Pharmaceuticals (NASDAQ: BPAX) at the end of 2011 after the placebo arm outperformed the Libigel arm in a phase III study.

Despite all of the trouble that companies have had in the past in their attempts at the US FSD market, the unmet need (and monetary potential) remains up for the taking. Investors who are familiar with the space are now looking at other FSD drug developers that have a shot at FDA approval.

One of the leading candidates in the space is Palatin (NYSE: PTN),which anticipates the start of a Phase III trial later this year. The Company is testing bremelanotide, a peptide melanocortin receptor agonist, in patients with FSD. Bremalanotide works via activation of melanocortin receptors in the central nervous system, and is intended for on-demand use approximately an hour prior to anticipated sexual activity. In the first quarter of 2013, Palatin released top-line data for their Phase IIb, at-home clinical trial in patients with female sexual dysfunction. The trial was a randomized, double-blinded study testing the safety and efficacy of bremalanotide in almost 400 patients with FSD. The patients were separated into one of four trial groups and received bremalanotide at 0.75 mg, 1.25 mg, 1.75 mg, or placebo. Patients self-administer via a single sub-cutaneous dose prior to an anticipated sexual encounter.

The trial hit on the primary and key secondary endpoints, a major success, demonstrating a good safety profile for bremalanotide and statistically significant increases in the number of Satisfying Sexual Events (SSE) versus placebo. The most common adverse reactions with incidence over 5% among bremalanotide users at any dose included nausea, flushing and headache. The FDA approved a Phase III trial design with bremalanotide, and the company could start the trial as early as Q4 2013.

Palatin is in good financial shape with $32.9 million in cash at the end 2012. With a cash burn rate of approximately $12 million per year, the company can readily fund its operations through FY2014, including the upcoming Phase III trial. With a market capitalization of about $24 million, shares of Palatin are actually trading below the value of cash on hand, so this may be a very attractive entry point for investors who want exposure to a potentially successful FSD drug development program.

Also promising for Palatin is the notion that there are no strong competitors in the FSD space. As mentioned earlier, BioSante Pharmaceuticals announced very poor results from two Phase III trials with their candidate LibiGel in 2011. These trials did not achieve statistical significance, forcing the company to temporarily step back from the program. While the company has not officially abandoned the Libigel program, it's difficult to see how they will overcome the problem of the extremely high placebo response.

Palatin's program is differentiated from BioSante's failed effort because bremalanotide uses a specific MOA directly affecting FSD, while BioSante is simply making another testosterone gel.

Apricus (NASDAQ: APRI) is the only company that is close to an approved treatment and has finished a Phase III study with its candidate Femprox (alprostadil and DDAIP HCl). The company is planning to submit an application for approval in Canada in the near future.

The Takeaway

Female Sexual Dysfunction is a huge unmet need in the United States, although the companies that have made attempts on this drug indication in the past have been unsuccessful. Currently, there are only a handful of companies with drug development plans that target this indication. Some are better than others. BioSante's Libigel, which is just another testosterone gel, doesn't look as likely to succeed while Palatin's melanocortin receptor agonist bremalanotide and also Apricus' topical prostaglandin agonist Femprox look more interesting.