I have been watching BioSante Pharmaceuticals (Nasdaq:BPAX) for a long time and waiting for the best time to get in.

She stock got my attention when it was $2+, but I made up my mind to introduce it to my readers because of an affair related to another stock that has been on my watch list quote a bit longer.

So was it a really bad deal?

Let’s start with Cell Genesys first.

CEGE develops gene therapies for patients with cancer, its leading product is GVAX immunotherapy for prostate cancer which interested Japanese giant Takeda so much that it promised to pour $320 Million (50M down payment) into CEGE, but the trial failed eventually and had to look for a merger.

According to the Merger Agreement, CEGE shareholders will get 0.1615/per share of BPAX.

BPAX will own 60.4% of the new company, and CEGE shareholders get the rest.

Apparently, the market saw the terms and reacted immediately, but as we know, the market is also shortsighted. Looking at the deal a little deeper, I think this buyout could be a key development for BPAX’s future success and here's why:

1- CEGE will bring $20M to $25M cash to BPAX, it could be life-saving fund for the company whose current cash reserves only go as far as March of 2010.

2- The good relationship between CEGE and Takeda may open the door for BAPX to one of the most important markets in Asia—Japan.

3- If Biosante decides to continue development of CEGE’s immunotherapy for prostate cancer, it could enrich BPAX’s product pipelines and provide important technical support.

I like that BioSante is a specialty pharmaceutical company focused on developing products for female sexual health, menopause, contraception and male hypogonadism.

It has the potential to be a player in the flu pandemic space as it also has a novel vaccine adjuvant – BioVant™. The company has conducted pre-clinical studies with BioVant to demonstrate efficacy using various viruses and bacteria including anthrax, hepatitis B, herpes simplex virus type-2 (HSV-2) and flu (H1N1 Swine, H5N1 avian and seasonal). These were animal studies that demonstrated that their CaP system elicits positive immune response to vaccines using either DNA-based or recombinant antigen formulations. In addition, the same adjuvant technology is effective as a delivery vehicle for both injected and non-injected vaccines.

Product Pipeline

Elestrin™ for the treatment of moderate-to-severe hot flashes associated with menopause is at the marketing stage, BPAX has an agreement with Azur Pharma to sell Elestrin™ in the United States. Under the terms of the agreement, Azur paid BioSante US$3.3 million comprised of a product licensing fee and payment for the transfer of the trademark and inventories, amongst other items. In addition, Azur Pharma will pay BioSante royalties and contingent milestones with a maximum of $144.5 M based on future net sales of Elestrin.

Whats really intriguing is the stage 3 clinical trial of LibiGel®  which will finish final data collection in March 2010 as seen in the BioMedReports FDA calendar. A successful trial will be an important milestone in BPAX’S history

BPAX will release thier second quarter earnings report after the market close on 08/07/2009 and besides some updated news of clinical trial data, I am expecting that the company will provide a much clearer and satisfiable explanation for its buyout of Cell Genesys.

Given more time, I believe that BPAX may be able to find the type of success that the father of Viagra, Pfizer, has had with that drug.

My 3 month target price per share for BPAX is $3, and my one year target is $5, but in the service of full disclosure, I am not a licenced analyst.

Disclosure: Long BPAX

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