786881_1 

UNITED STATES DISTRICT COURT 

NORTHERN DISTRICT OF ILLINOIS 

EASTERN DIVISION 

In re BIOSANTE PHARMACEUTICALS, 

INC. DERIVATIVE LITIGATION 

This Document Relates To: 

ALL ACTIONS. 

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Case No. 1:12-cv-03480 

Judge Joan B. Gottschall 

VERIFIED CONSOLIDATED SHAREHOLDER DERIVATIVE COMPLAINT 

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NATURE AND SUMMARY OF THE ACTION 

1. This is a shareholder derivative action brought by plaintiffs on behalf of Nominal 

Party BioSante Pharmaceuticals, Inc. (“BioSante” or the “Company”) against certain of its officers 

and directors. Defendants are Louis W. Sullivan, Steven M. Simes, Fred Holubow, Ross J. 

Mangano, Edward C. Rosenow III, Stephen A. Sherwin and John T. Potts, Jr. 

2. Between at least February 8, 2010 and December 15, 2011, defendants breached their 

fiduciary duty of loyalty by making or causing to be made false and misleading statements about the 

commercial viability, efficacy, and market potential for LibiGel®, an experimental drug designed to 

improve the sex drive of women suffering from a type of female sexual dysfunction referred to as 

Hypoactive Sexual Desire Disorder (“HSDD”). 

3. More specifically, defendants caused BioSante to misrepresent LibiGel’s 

effectiveness over placebo, and provided supposedly reliable “data” concerning LibiGel’s 

“statistically significant” effect on increasing the “number of satisfying sexual events” for women 

suffering from HSDD. These purportedly positive clinical trials furthered defendants’ claims that 

LibiGel was “the most clinically advanced pharmaceutical product in the U.S.” for the treatment of 

HSDD. Defendants further misled BioSante shareholders by falsely describing the market potential 

for LibiGel as comparable to the male market for erectile dysfunction drugs, comparing LibiGel to 

such blockbuster drugs as Viagra, Levitra, and Cialis and suggesting that LibiGel could tap into a $2 

billion market. In fact, however, LibiGel’s actual performance and efficacy fell far short of 

defendants’ misrepresentations. 

4. Defendants’ statements regarding LibiGel failed to disclose the risks related to the 

probable chance that the very parameters by which HSDD is defined would significantly limit 

LibiGel’s market potential were it approved by the Food and Drug Administration (“FDA”). 

Specifically, the Fourth Edition of the Diagnostic Statistical Manual of Mental Disorders (“DSMCase: 1:12-cv-03480 Document #: 29 Filed: 11/20/12 Page 2 of 42 PageID #:75
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IV”), published in 1994 by the American Psychiatric Association (“APA”), describes HSDD and 

defines its symptoms. However, in May 2013, the APA will publish the Fifth Edition of the 

Diagnostic Statistical Manual of Mental Disorders (“DSM-5”) which will no longer include HSDD 

as a recognized individual disorder. Under the final draft of the DSM-5 that was closed for public 

comment on June 15, 2012, HSDD is being eliminated and its symptoms categorized as part of a 

more restrictive category of Female Sexual Dysfunction (“FSD”) called Female Sexual 

Interest/Arousal Disorder (“SIAD”). 

5. The significant risk that the elimination of HSDD as a defined disorder would occur 

was known to defendants well before the 2012 final draft of DSM-5, but was not publicly disclosed. 

The proposed removal of HSDD as a disorder is a critical, material fact that defendants failed to 

address during the Phase III LibiGel efficacy trials. The APA published a draft of its proposed 

revisions, including the subsuming of HSDD into SIAD, as early as February 10, 2010. Thus, if the 

new definition of HSDD was accepted, it could severely limit the market for LibiGel. 

6. In addition to making overly optimistic statements about the likelihood of LibiGel 

being approved in light of the substantial risk that it was being created to treat a disorder that would 

no longer be recognized in the DSM, defendants failed to fully reveal the substantial difficulty in 

conducting efficacy trials in light of the well documented perceived effectiveness of drugs directed 

at increasing female sexual desire. This medical phenomenon, known as the “Placebo Effect,” is 

commonly defined as the beneficial effect in a patient following a particular treatment that arises 

from the patient’s expectations concerning the treatment rather than from the treatment itself. 

Defendants never disclosed to shareholders the likelihood that the placebo/control patients of the two

Phase III efficacy trials, who were treated with an inactive simulation of LibiGel, would also report 

significant perceived improvement in their HSDD condition. BioSante’s structure of the Phase III 

LibiGel efficacy trials, which recorded data utilizing a daily diary, significantly compounded the 

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potential Placebo Effect by forcing participants to ruminate on a daily, rather than weekly or longer,

basis regarding their satisfying sexual events and/or desires which, in turn, resulted in skewed or 

biased data. Indeed, defendant Simes admitted as much when he explained LibiGel’s Phase III 

failure, in part, by stating that “even those in the placebo group were thinking more and more about 

their sexual drive, and therefore their sexual activity and desire increased even without increased 

level of testosterone.” 

7. In fact, according to a study published by Andrea Bradford and Cindy M. Meston in 

2009 entitled “Placebo Response in the Treatment of Women’s Sexual Dysfunctions: A Review and 

Commentary” (the “Bradford & Meston Study”), most potential pharmacological treatments for 

female sexual dysfunctions have failed to meaningfully outperform placebo, partly because women 

who enroll in HSDD trials already want to improve their sex lives and take an active role in seeking 

help. Expectancies for enhanced sexual desire could, in turn, increase a woman’s perception of 

having desire. 

8. Indeed, BioSante was not the first company to attempt to create the so-called “female 

Viagra.” In fact, Boehringer Ingelheim disclosed in 2010 that it was giving up on its efforts to 

develop such a drug, Flibanserin, in light of the substantial issues raised by the FDA concerning the 

safety and efficacy of Flibanserin. Biosante discounted these events and reassured investors that the

FDA Advisory Committee’s judgment on Flibanserin was “not relevant to the potential for FDA 

approval of LibiGel for the treatment of HSDD” with defendant Simes adding that “LibiGel is 

positioned to be the first product approved for the treatment of HSDD.” 

9. Defendants repeatedly issued materially false and misleading statements and omitted 

critical facts regarding the commercial viability, market potential, and most importantly, likely 

effectiveness of their purported blockbuster drug, LibiGel, in treating HSDD. Defendants’ overly 

optimistic statements concerning LibiGel’s likely approval failed to adequately disclose and/or 

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address the potential for a significant Placebo Effect and the foreseeable removal of HSDD as an 

identifiable disorder. 

10. As a result, on December 14, 2011, BioSante shareholders were stunned when 

defendants disclosed that LibiGel failed to yield positive results in large-scale efficacy tests. 

According to clinical trial results, women treated with LibiGel did not experience a statistically 

significant increase in either total satisfying encounters or sexual desire. In fact, in the double-blind 

placebo-controlled Phase III trial, LibiGel did not perform significantly better than the placebo. 

11. On this news, the trading price of BioSante’s stock collapsed from $2.12 to $0.48 per 

share, or over 77%, and wiped out over $36 million in shareholder equity. As a result of defendants’ 

unlawful scheme, the Company has been named as a defendant in a costly and expensive-to-defend 

class action lawsuit for violations of the federal securities laws. Additionally, the Company’s 

goodwill, reputation and standing in the community have been severely, if not irreparably, injured. 

Nevertheless, the BioSante Board has not taken action against defendants to recover damages for the 

injuries caused by their fiduciary breaches. By this action, plaintiffs therefore seek legal redress on 

behalf of BioSante. 

JURISDICTION AND VENUE 

12. This Court has jurisdiction under 28 U.S.C. §1332 because there is complete diversity 

between all plaintiffs and defendants, the amount in controversy exceeds $75,000 exclusive of 

interest and costs, and this is not a collusive action designed to confer jurisdiction on a court of the 

United States that it would not otherwise have. 

13. This Court has jurisdiction over each defendant because each defendant is either a 

corporation that is headquartered in and conducts business in this District, or is an individual who 

has sufficient minimum contacts with Illinois so as to render the exercise of jurisdiction by this 

Court permissible under traditional notions of fair play and substantial justice. 

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14. Venue is proper in this Court under 28 U.S.C. §1391 because BioSante maintains its 

principal place of business in this District, one or more of the defendants either resides in or 

maintains executive offices in this District, a substantial portion of the transactions and wrongs 

complained of herein, including the defendants’ primary participation in the wrongful acts detailed 

herein and aiding and abetting in violation of fiduciary duties owed to BioSante, occurred in this 

District, and defendants have received substantial compensation in this District by doing business 

here and engaging in numerous activities that had an effect in this District. 

PARTIES 

15. Plaintiff Jerome W. Weinstein is and has been a shareholder of BioSante since May 

23, 2011. Plaintiff Weinstein is a citizen of the state of Maryland. 

16. Plaintiff Carlo Oliva is and has been a shareholder of BioSante since July 11, 2011. 

Plaintiff Oliva is a citizen of the state of New Jersey. 

17. Nominal Party BioSante is a Delaware corporation with its principal executive offices 

located at 111 Barclay Boulevard, Lincolnshire, Illinois. BioSante is a specialty pharmaceutical 

company focused on developing products for female sexual health and oncology. BioSante is a 

citizen of the states of Delaware and Illinois. 

18. Defendant Louis W. Sullivan (“Sullivan”) has been Chairman of the Board of 

BioSante since 1998. He also serves on the Audit and Finance, Compensation and Nominating 

Committees of the BioSante Board. From 2010 to 2011 Sullivan received at least $219,000 in fees 

and other compensation from BioSante. Sullivan is a citizen of the state of Georgia. 

19. Defendant Stephen M. Simes (“Simes”) has been Vice Chairman of the Board, Chief 

Executive Officer (“CEO”) and President of BioSante since 1998. From 2010 to 2011 Simes 

received at least $1,988,181 in fees and other compensation from BioSante. Simes is a citizen of the 

state of Illinois. 

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20. Defendant Fred Holubow (“Holubow”) has been a director of BioSante since 1999. 

He also serves on the Audit and Finance and Nominating Committees of the BioSante Board. From 

2010 to 2011 Holubow received at least $156,000 in fees and other compensation from BioSante. 

Holubow is a citizen of the state of Illinois. 

21. Defendant Ross J. Mangano (“Mangano”) has been a director of BioSante since 1999. 

He also serves on the Audit and Finance, Compensation and Nominating Committees of the 

BioSante Board. From 2010 to 2011 Mangano received at least $145,000 in fees and other 

compensation from BioSante. Mangano is a citizen of the state of Illinois. 

22. Defendant Edward C. Rosenow, III (“Rosenow”) has been a director of BioSante 

since 1997. He also serves on the Compensation Committee of the BioSante Board. From 2010 to 

2011 Rosenow received at least $139,000 in fees and other compensation from BioSante. Rosenow 

is a citizen of the state of Minnesota. 

23. Defendant Stephen A. Sherwin (“Sherwin”) has been a director of BioSante since 

2009. He also serves on the Nominating and Compensation Committees of the BioSante Board. 

From 2010 to 2011 Sherwin received at least $73,000 in fees and other compensation from BioSante. 

Sherwin is a citizen of the state of California. 

24. Defendant John T. Potts, Jr. (“Potts”) has been a director of BioSante since 2009. 

From 2010 to 2011 Potts received at least $163,000 in fees and other compensation from BioSante. 

Potts is a citizen of the state of Massachusetts. 

THE FIDUCIARY DUTIES OF BIOSANTE’S 

DIRECTORS AND OFFICERS 

25. As its directors and officers, defendants owed BioSante fiduciary duties of loyalty and 

good faith. Defendants were required to use their utmost ability to control and manage BioSante in a 

fair, just, honest, and equitable manner for the benefit of the Company. Defendants were also 

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required to act in furtherance of the best interests of BioSante so as to benefit all shareholders 

equally, not in furtherance of their personal interest or benefit. 

26. Each defendant owed to BioSante the duty to exercise good faith and diligence in the 

administration of the affairs of the Company and in the use and preservation of its property and 

assets. In addition, as BioSante’s corporate fiduciaries, defendants had a duty to speak the complete, 

full and unvarnished truth when they undertook to say anything about BioSante and/or its business. 

27. Defendants, because of their positions of control and authority as directors and/or 

officers of BioSante, were able to and did, directly and/or indirectly, exercise control over the 

wrongful acts detailed herein. Because of their executive positions and/or access to BioSante’s 

internal information, defendants knew or should have known that BioSante’s LibiGel was not 

performing nearly as well as they caused BioSante to publicly state and failed to fully disclose the 

substantial risk that the FDA would not approve LibiGel both because of the increased risk of a 

Placebo Effect and their inability to control for it in testing and because of the likelihood that 

HSDD’s removal from the DSM could significantly limit the market for LibiGel, even if it was 

effective (which it was not). Defendants similarly knew or should have known that by making such 

false statements and omitting adverse material non-public information, they were not only breaching 

their fiduciary duty of loyalty owed to BioSante, but also exposing the Company to damage and 

injury arising from misleading BioSante shareholders. Accordingly, defendants are not immune 

from liability and may not be indemnified by the Company for their disloyal acts. 

28. Each of the defendants directly participated in the management of the Company 

and/or was involved in drafting, producing, reviewing, and/or disseminating the false and misleading 

statements alleged herein, and/or was aware that these statements were being issued regarding the 

Company’s financial condition, business and operations, and approved or ratified these statements. 

Defendants were provided with copies of BioSante’s shareholder reports, press releases, earnings 

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announcements and similar false statements referenced herein before or immediately after their 

issuance, and had the ability and opportunity to prevent their issuance or to cause them to be 

corrected. 

29. At all relevant times, defendants were the agents of each of the other defendants and 

were at all times acting within the course and scope of such agency. 

CONSPIRACY, AIDING AND ABETTING, 

AND CONCERTED ACTION 

30. During all times relevant hereto, defendants individually and collectively initiated a 

course of conduct that was designed to mislead shareholders into believing that BioSante was 

promoting a new and successful product. In furtherance of this plan, conspiracy, and course of 

conduct, defendants collectively and individually took the actions set forth herein. 

31. In committing the wrongful acts alleged herein, defendants have pursued, or joined in 

the pursuit of, a common course of conduct, and have acted in concert with and conspired with one 

another in furtherance of their wrongdoing. 

32. The purpose and effect of defendants’ conspiracy, common enterprise, and/or 

common course of conduct was, among other things, to: (a) disguise defendants’ violations of law, 

including breaches of fiduciary duty and unjust enrichment; and (b) disguise and misrepresent the 

Company’s future business prospects. 

33. Defendants accomplished their conspiracy, common enterprise, and/or common 

course of conduct by causing the Company to make false and misleading statements about the 

Company’s financial condition and business prospects, including regarding the commercial viability, 

efficacy, and market potential for LibiGel, in BioSante’s shareholder reports and public filings. 

Because the actions described herein occurred under the authority of the Board, each of the 

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defendants was a direct, necessary, and substantial participant in the conspiracy, common enterprise, 

and/or common course of conduct complained of herein. 

34. Each of the defendants aided and abetted and rendered substantial assistance in the 

wrongs complained of herein. In taking such actions to substantially assist the commissions of the 

wrongdoing complained of herein, each defendant acted with knowledge of the primary wrongdoing, 

substantially assisted the accomplishment of that wrongdoing, and was aware of his overall 

contribution to and furtherance of the wrongdoing. 

SUBSTANTIVE ALLEGATIONS 

35. BioSante is a specialty pharmaceutical company focused on developing products for 

female sexual health and oncology. Over the past decade, BioSante has been in the process of 

developing LibiGel, a drug designed to improve the sex drive of women suffering from female 

sexual dysfunction, specifically HSDD. LibiGel is a gel formulation of testosterone designed to be 

quickly absorbed through the skin after application on the upper arm, delivering testosterone to the 

bloodstream evenly over time and in a non-invasive manner. LibiGel is BioSante’s flagship product 

under development. 

36. Given the success of drugs such as Viagra, Levitra, and Cialis, the industry had been 

in search of a “female Viagra” that could similarly prove to be a blockbuster drug to treat FSD. 

Approximately 43% of women ages 18-59 reportedly experience some form of sexual dysfunction, 

and HSDD is believed to be the most common form of female sexual dysfunction. As a result, FDA 

approval of LibiGel for the treatment of HSDD would have been an important breakthrough for the 

Company. Since at least February 2010, BioSante had two Phase III clinical trials in progress 

covered by a Special Protocol Assessment (“SPA”) with the FDA to demonstrate the safety and 

efficacy of LibiGel in the treatment of HSDD. 

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37. Starting in early 2010, defendants began a concerted effort to publicly promote their 

development of LibiGel and its likely approval by the FDA and to conceal the truth regarding the 

substantial risks that LibiGel would not be approved and that the capital raised to conduct the 

expensive testing would be wasted and lost by investors. In furtherance of this effort, defendants 

caused the Company to issue various press releases hyping LibiGel’s development and prospects. 

Each of the statements defendants caused to be issued explained in various ways that they believed 

LibiGel would be the first and only treatment for FSD and that they were seeing significant increases 

in the number of satisfying sexual events in their clinical trials. Each of defendant’s statements and 

press releases failed to mention, however, that clinical trials of drugs designed to treat FSD are 

commonly hobbled by the “Placebo Effect” whereby the treatments do not have a statistically 

meaningful improvement over placebos. Moreover, defendants never explained that the probable 

removal of HSDD as a recognized disorder would severely impact the market potential for LibiGel. 

38. For example, on February 8, 2010, defendants caused BioSante to issue a press 

release stating that defendant Simes was interviewed for “Med Tech Sentinel” and featured on its 

website. During the interview, defendant Simes stated in part: 

• LibiGel would be the only drug to treat female sexual dysfunction and the drug was 

in the last stages of Phase III testing. 

• 2009 was transformational for BioSante as it would permit it to complete testing. 

• The Company was well-financed. 

• The Company would be able to complete enrollment in testing. 

39. On February 22, 2010, defendants caused BioSante to issue a press release 

announcing positive safety data for LibiGel in its Phase III clinical development program. In 

addition, the press release reported extremely positive Phase II efficacy results, which failed to 

disclose the substantial risk that such results were skewed by the Placebo Effect and the inherent 

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flaws of the Phase II testing. The press release, approved by defendants on or about February 22, 

2010, stated in part: 

BioSante Pharmaceuticals, Inc. (NASDAQ: BPAX), today announced additional 

positive safety data in its ongoing LibiGel Phase III clinical development program. 

* * * 

The DMC, which for the second time, reviewed the LibiGel safety data on an 

unblinded basis, confirms what we have learned from the blinded data, that LibiGel 

does not pose a safety risk to the women in the study, said Stephen M. Simes, 

BioSante’s president and CEO. A DMC can recommend continuing, changing or 

stopping a study and their main responsibility is to ensure that subjects recruited to 

the study are not exposed to unnecessary safety risks. Therefore, the DMC’s 

recommendation to continue the LibiGel safety study unchanged is the best possible 

outcome of the DMC’s second unblinded review of all adverse events. This is very 

good news for BioSante and for women since LibiGel remains the lead 

pharmaceutical product in the U.S. in active development for the treatment of 

hypoactive sexual desire disorder (HSDD) in surgically menopausal women. We 

continue to believe that LibiGel can be the first product approved by the FDA for 

this common and unmet medical need, also referred to as female sexual 

dysfunction (FSD). 

* * * 

In addition to the Phase III Cardiovascular and Breast Cancer Safety Study, 

BioSante is conducting two LibiGel Phase III efficacy trials. The Phase III efficacy 

trials of LibiGel in the treatment of FSD are double-blind, placebo-controlled trials 

that will enroll up to approximately 500 surgically menopausal women each for a 

six-month clinical trial. The efficacy trials are being conducted under an FDA 

approved SPA (special protocol assessment agreement). 

As previously announced by BioSante, treatment with LibiGel in a Phase II 

clinical trial significantly increased satisfying sexual events in surgically 

menopausal women suffering from FSD. The Phase II trial results showed 

LibiGel significantly increased the number of satisfying sexual events by 238 

percent versus baseline (p<0.0001); this increase also was significant versus 

placebo (p<0.05). In this study, the effective dose of LibiGel produced testosterone 

blood levels within the normal range for pre-menopausal women and had a safety 

profile similar to that observed in the placebo group. In addition, no serious adverse 

events and no discontinuations due to adverse events occurred in any subject 

receiving LibiGel. The Phase II clinical trial was a double-blind, placebocontrolled trial, conducted in the United States, in surgically menopausal women 

distressed by their low sexual desire and activity. 

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40. On March 30, 2010, defendants caused BioSante to file its Form 10-K with the SEC 

announcing the requirements remaining for submission and approval of LibiGel by the FDA. While 

continuing to tout LibiGel’s status as the “lead” product with potential to be the “first” approved by

the FDA, defendants continued to omit the truth regarding the substantial risks that LibiGel would 

not be approved both because of the Placebo Effect and because HSDD was likely to be eliminated 

from the DSM. The Form 10-K stated in part: 

We believe LibiGel remains the lead pharmaceutical product in the U.S. in 

active development for the treatment of hypoactive sexual desire disorder (HSDD) 

in menopausal women, and that it has the potential to be the first product approved 

by the FDA for this common and unmet medical need. We believe based on 

agreements with the FDA, including an SPA, that two Phase III safety and efficacy 

trials and one year of LibiGel exposure in a Phase III cardiovascular and breast 

cancer safety study with a four-year follow-up post- NDA filing and potentially postFDA approval are the essential requirements for submission and, if successful, 

approval by the FDA of a new drug application (NDA) for LibiGel for the treatment 

of FSD, specifically, HSDD in menopausal women. 

41. During the course of defendants’ ongoing promotion of LibiGel, one of BioSante’s 

competitors revealed that its drug had failed to overcome the Placebo Effect. On June 16, 2010, the 

FDA announced that “Flibanserin,” another drug for the treatment of female sexual disorders that 

was under development by a competing company, had been found ineffective as a treatment for 

HSDD; its effects were not significantly different from placebo in clinical trials. The FDA Advisory 

Committee reviewing Flibanserin therefore recommended against any further development, testing, 

or work on the drug. 

42. Despite the failure of Flibanserin, defendants continued to issue false and misleading 

statements that failed to explain or even discuss the fact that the Placebo Effect had derailed most 

previous attempts to develop drugs to treat female sexual dysfunctions and would be a significant 

hurdle for LibiGel. 

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43. On June 21, 2010, defendants caused BioSante to issue a press release entitled 

“BioSante Pharmaceuticals Says FDA Advisory Committee Recommendation Against Flibanserin 

Has No Impact on LibiGel®.” The release, approved by defendants on or about June 16, 2010, 

stated: 

“There are important scientific differences between the way LibiGel and 

Flibanserin work on the body, and differences in their clinical development 

programs,” stated BioSante President and CEO Stephen M. Simes. “The LibiGel 

safety and efficacy trials are being conducted under an SPA (Special Protocol 

Assessment) agreement with FDA, a level of agreement that the Flibanserin program 

did not have. BioSante also is conducting a large safety study comparing LibiGel to 

placebo to show cardiovascular and breast-cancer safety. We are pleased also by 

comments made by the Advisory Committee stressing the need for a product to treat 

this unmet medical need. Given the recommendation of the Advisory Committee,

we believe that LibiGel is positioned to be the first product approved for the 

treatment of HSDD.” 

“The Advisory Committee’s judgment on flibanserin has no impact on the 

clinical development program of LibiGel and is not relevant to the potential for FDA 

approval of LibiGel for the treatment of HSDD in menopausal women,” said Michael 

C. Snabes, MD, PhD, BioSante’s vice president of clinical development. 

44. Defendants continued, over time, to cause the Company to issue statements that failed 

to address the Placebo Effect that so prominently derailed previous attempts to develop drugs to treat

FSD. 

45. On July 13, 2010, defendants caused BioSante to issue a press release entitled 

“BioSante Pharmaceuticals Announces Initiation of LibiGel® Study to Evaluate its Effect on 

Cognitive Function in Women,” stating in part: 

“If this study demonstrates that testosterone improves cognitive performance, 

learning and memory, in healthy older women with normal cognition for their age, as 

compared to placebo, testosterone may be a potential strategy for the prevention of 

cognitive decline,” said Dr. [Susan] Davis [Professor of Women’s Health, Monash 

University Women’s Health Program in Australia]. 

“It is exciting that a new clinical trial has been initiated to evaluate whether 

testosterone improves memory and learning,” said Dr. Michael C. Snabes, 

BioSante’s vice president of clinical development. “Positive results from this new 

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study could provide scientific evidence for an additional advantage of testosterone 

for menopausal women.” 

46. On October 18, 2010, defendants caused BioSante to issue a press release entitled 

“BioSante Pharmaceuticals Reaches Key LibiGel® Safety Study Enrollment Target.” The release, 

approved by defendants on or about October 18, 2010, stated: 

“This milestone gives BioSante our first opportunity potentially to declare 

completion of enrollment in the safety study,” stated Michael Snabes, M.D., Ph.D., 

BioSante’s senior vice president of medical affairs. “We have had an extremely low 

number of cardiovascular and breast cancer events to date, as well as three previous 

favorable DMC recommendations. We expect the study to demonstrate the safety of 

LibiGel in the treated population, regardless of whether the DMC stops enrollment at 

2,500 women or we need to continue enrollment.” 

47. Defendants continued to tout the results of safety tests on LibiGel and their purported 

belief that it will “be the first product approved by the FDA,” all the while failing to disclose the 

substantial risk that LibiGel would not be approved, not due to safety issues, but because it is not 

more effective than placebo and because HSDD was likely to be eliminated from the DSM. For 

example, on October 26, 2010, defendants caused BioSante to issue a press release entitled 

“BioSante Pharmaceuticals Reports Positive LibiGel® Data Monitoring Committee 

Recommendation – No safety issues observed, study to continue as per protocol without 

modifications.” The release, approved by defendants on or about October 26, 2010, stated: 

“We are very pleased that the DMC recommended that the study should 

continue without modification. This means that there are no general or specific 

safety issues based on their unblinded review of adverse events. The low number of 

CV events to date is consistent with the safety of testosterone in women,”. . . . “Once 

the DMC determines that there are enough subjects enrolled for statistical 

significance, enrollment of new subjects into the study will be complete. The current 

LibiGel safety study protocol allows for up to 4,000 women to be enrolled.” 

* * * 

“With this most recent favorable DMC recommendation, we continue to 

believe that LibiGel will be the first product approved by the FDA to treat HSDD in 

menopausal women, also referred to as FSD,” said Stephen M. Simes, BioSante’s 

president & CEO. 

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48. On November 12, 2010, defendants caused BioSante to file its Form 10-Q with the 

SEC. This SEC Form 10-Q, approved by defendants on or about November 12, 2010, stated: 

We believe LibiGel remains the lead pharmaceutical product in the U.S. in 

active development for the treatment of hypoactive sexual desire disorder (HSDD) 

in menopausal women, and that it has the potential to be the first product approved 

by the FDA for this common and unmet medical need, for which presently there is 

no FDA approved pharmaceutical product. We believe based on agreements with 

the FDA, including an SPA, that two Phase III safety and efficacy trials and one year 

of LibiGel exposure in a Phase III cardiovascular and breast cancer safety study with 

a four-year follow-up post-NDA filing and potentially post-FDA approval and 

product launch, are the essential requirements for submission and, if successful, 

approval by the FDA of a new drug application (NDA) for LibiGel for the treatment 

of FSD, specifically HSDD in menopausal women. 

49. The goodwill garnered by defendants’ false and misleading statements allowed 

defendants to raise additional capital from the markets through several efforts to induce investors to

purchase BioSante stock in new securities sales. For example, on December 27, 2010, BioSante 

announced that it had received commitments from several institutional investors to purchase $18 

million of securities in a registered direct offering. In a press release about the offering, defendants 

caused BioSante to falsely state: 

“We are pleased to have a commitment from these new and existing 

institutional investors,” said Stephen M. Simes, BioSante’s president and chief 

executive officer. “This additional funding from these high quality biotechnology 

institutional investors provides us with a strong cash position as we close out the 

year, ensuring our ongoing focus on our LibiGel® Phase III clinical study program. 

Our objective is to submit a new drug application (NDA) to the U.S. Food and Drug 

Administration (FDA) by the end of 2011. LibiGel remains the lead 

pharmaceutical product in the U.S. in active development for the treatment of 

hypoactive sexual desire disorder (HSDD) in menopausal women, andwe continue 

to believe that LibiGel has the potential to be the first product approved by the 

FDA for this common and unmet medical need.” 

50. On this positive news, BioSante’s share price increased over 26% to close at $2.00 

per share on December 27, 2010. 

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51. On December 31, 2010, BioSante completed another offering for 10.6 million shares 

of the Company’s common stock and warrants to purchase 5.3 million additional shares. This 

offering resulted in $16.9 million in net proceeds for the Company. 

52. On January 10, 2011, defendants caused the Company to issue a press release entitled 

“BioSante Pharmaceuticals Confirms Female Sexual Dysfunction as an Unmet Medical Need,” 

which discussed the characteristics of HSDD without adequately disclosing the scientific 

controversy surrounding the definition of the condition, which could, and ultimately did, impact 

LibiGel’s Phase III efficacy trials. The press release stated, in part: 

LINCOLNSHIRE, Illinois (January 10, 2011) – BioSante Pharmaceuticals, 

Inc. (NASDAQ: BPAX), a pharmaceutical company developing products for the 

treatment of female sexual health, today announced results of a survey of over 100 

Obstetrician/Gynecologists and Primary Care Physicians regarding the need for an 

FDA-approved drug to treat a form of Female Sexual Dysfunction (FSD) known as 

Hypoactive Sexual Desire Disorder (HSDD). The multiple surveys, conducted 

independently for BioSante by Campbell Alliance Group, Inc., revealed sexual 

dysfunction to be one of the most common complaints received in these doctors’ 

offices. The physicians described themselves as dissatisfied with the current lack of 

therapeutic options for HSDD, a loss of libido or sexual desire. 

Stephen M. Simes, president and CEO of BioSante, said, “The need for an 

FDA-approved treatment to cope with this condition is accepted by an astonishing 

over 90 percent of the doctors surveyed by Campbell. It has been more than a 

decade since the FDA approved Viagra for the treatment of male sexual 

dysfunction; it is time to provide women and their healthcare providers with a safe 

and effective option.” 

BioSante is developing LibiGel®, a testosterone gel, for treatment of HSDD 

in menopausal women. LibiGel is currently in three Phase III clinical studies to 

prove its safety and efficacy. 

53. On March 4, 2011, defendants caused BioSante to issue a press release announcing 

another registered direct offering and reiterating and repeating the expectation to be the first 

company to have a drug approved by the FDA to treat HSDD. The release, approved by defendants 

on or about March 4, 2011, stated: 

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“We are pleased to have this commitment from these new and existing 

institutional investors,” said Stephen M. Simes, BioSante’s president and chief 

executive officer. “This additional funding provides us with added financial power 

to continue to fund our ongoing LibiGel® Phase III clinical study program. We 

recently announced completion of enrollment in the first of the two LibiGel Phase III 

efficacy trials and expect to announce completion of enrollment in the second in the 

near future. LibiGel remains the lead pharmaceutical product in the U.S. in active 

development for the treatment of hypoactive sexual desire disorder (HSDD) in 

menopausal women, and we continue to believe that LibiGel has the potential to be 

the first product approved by the FDA for this common and unmet medical need.” 

54. On March 9, 2011, BioSante announced the completion of yet another direct offering 

of 12.2 million shares of the Company’s common stock and warrants to purchase 4.0 million 

additional shares. This offering resulted in $23.8 million in net proceeds for the Company. 

55. On March 16, 2011, defendants caused BioSante to issue a press release, this one 

announcing its financial results for 2010 and reporting on the Company’s clinical development. The 

release, approved by defendants on or about March 16, 2011, stated: 

“We are very pleased with our progress over the last year as well as our current cash 

balance,” said Stephen M. Simes, BioSante’s president and CEO. “Through careful 

cash management and our financing strategy, we believe we now have removed any 

near-term financial risk from BioSante, and our current cash balance is sufficient to 

finance our operations and LibiGel clinical development well into 2012, without 

need for additional funds.” 

* * * 

LibiGel® Clinical Highlights 

The increased LibiGel clinical development expenses during 2010 was the 

result of steady progress in BioSante’s LibiGel Phase III clinical program. 

LibiGel is in development for the treatment of female sexual dysfunction (FSD), 

specifically, hypoactive sexual desire disorder (HSDD) in menopausal women, for 

which there is no FDA-approved product. In February 2011, the company 

announced completion of enrollment in the first of two LibiGel Phase III efficacy 

trials, and expects enrollment in the second efficacy trial to be completed in the near 

future. BioSante continues to expect data from the two efficacy trials in Fall 2011. 

56. On March 30, 2011, defendants caused BioSante to issue a press release entitled 

“BioSante Pharmaceuticals Completes Enrollment in Both Pivotal LibiGel® Phase III Efficacy 

Trials.” This release stated in part: 

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BioSante Pharmaceuticals, Inc. (NASDAQ: BPAX) today announced that enrollment 

of subjects in the second of two pivotal Phase III LibiGel (testosterone gel) safety 

and efficacy trials has been completed. Enrollment in the first LibiGel efficacy trial 

was completed in February. The efficacy trials are being conducted under an FDAapproved special protocol assessment (SPA) agreement. LibiGel is in development 

for the treatment of female sexual dysfunction (FSD), specifically, hypoactive sexual 

desire disorder (HSDD) in menopausal women, for which there is no FDA-approved 

product. 

“This is an important achievement for BioSante and a key step toward 

completing the LibiGel Phase III clinical development program” . . . . “There are 

more than 1,000 subjects in the efficacy trials and we anticipate announcing top-line 

efficacy data this fall.” 

57. On April 15, 2011, defendant Simes presented at the Future Leaders in the Biotech 

Industry Conference, during which he leveraged the purportedly successful Phase II data into further 

optimism for LibiGel’s Phase III success, stating, in relevant part: 

If you look at our Phase II data, a similar dose by the way. We delivered 300 

micrograms a day, which is exactly the dose shown in the past to be effective. Now 

in ten published Phase III studies we showed a remarkable 238% increase in the 

number of satisfying sexual events, which was statistically significant significantly 

better than placebo. We hope to repeat these data in our Phase III studies. Now 

we’ve powered the studies to show a difference of one from placebo, one sexual 

event from placebo, even though in this study we showed a difference of over three 

satisfying sexual events over placebo. 

Another way to look at the data, and how much we further see this, and you 

can see in the first month, and this is four week increments is how these are 

measured, and it’s the last four weeks of the study compared to the base line four 

weeks, number of the events compared to number of events. At baseline our women 

had about 2.5 satisfying sexual events. And of course I am compelled to say, don’t 

ask me what a 0.5 sexual event is. However in the first month over four weeks of 

therapy there was an increase of 100% in the member of satisfying sexual events 

overly out of this 238% increase over the course of the three months study. 

58. During the same conference on April 15, 2011, defendant Simes discussed the FDA’s 

guidance on development of drugs for FSD since 2000, while failing to disclose the significant 

alterations taking place to the HSDD definition in the scientific and academic community, stating, in 

part: 

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Sexual events are defined as intercourse, masturbation or oral sex, giving or 

receiving. And the satisfying is the yes or a no answer, that is will the women find 

this experience to be satisfying. There are no questions of the partner. These are 

measured in a daily diary, a validated daily diary according to the FDA’s published 

guidance on validation of those instruments, patient reported outcome instruments. 

The secondary end point is a decrease in the stress associated with low sexual 

desire. Let me comment, because there is some question about this often. And that 

is the FDA first issued its guidance on development of drugs for female sexual 

dysfunction in 2000. And the requirements for a product from a efficacy point of 

view have not change since 2000, that is the two primary end points have always 

been an increase in desire and sexual activity and are secondary endpoint of the 

decrease in distress. 

59. On May 31, 2011, defendants caused BioSante to issue a press release strongly 

suggestive of the conclusion that LibiGel would soon be the first product approved by the FDA for 

the treatment of HSDD. The release, approved by defendants on or about May 31, 2011, stated: 

“LibiGel remains the only product in the world in Phase III clinical 

development for the treatment of HSDD,” said Stephen M. Simes, BioSante’s 

president & CEO. “The ability to stop enrollment as per the sample size analysis that 

indicates a 90 percent predictive probability of success is very encouraging for the 

outcome of our LibiGel Phase III clinical development program. With this most 

recent development, we continue to believe that LibiGel will be the first product 

approved by the FDA to treat HSDD, also referred to as FSD, in menopausal 

women.” 

60. On August 5, 2011, defendants caused BioSante to file its Form 10-Q with the SEC, 

which misrepresented, among other things, that “LibiGel remains the most clinically advanced 

pharmaceutical product in the U.S.” 

61. On October 4, 2011, defendants caused BioSante to issue a press release entitled 

“BioSante Pharmaceuticals Completes Both Pivotal LibiGel® Efficacy Trials,” which stated, in 

relevant part: 

LINCOLNSHIRE, Illinois (October 4, 2011) – BioSante Pharmaceuticals, 

Inc. (NASDAQ: BPAX) today announced completion of its two pivotal LibiGel 

(testosterone gel) efficacy trials, required for the company’s anticipated LibiGel new 

drug application (NDA). The final visit of the last subject enrolled in the second of 

the two pivotal LibiGel Phase III efficacy trials occurred at the end of September. 

LibiGel is in development for the treatment of female sexual dysfunction (FSD), 

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specifically, hypoactive sexual desire disorder (HSDD) in menopausal women, for 

which there is no FDA-approved product. 

Data are being collected from the 141 investigative sites in the U.S. and 

Canada that participated in the two trials, and BioSante expects to announce top-line 

LibiGel efficacy results during this quarter. Both efficacy trials were conducted 

according to an FDA-agreed special protocol assessment (SPA). The third and last 

pivotal study for the LibiGel clinical development program is the ongoing LibiGel 

Phase III cardiovascular and breast cancer safety study, which has completed 

enrollment of 3,656 subjects. The primary analysis of safety data is targeted for third 

quarter of 2012. The LibiGel NDA submission will include data from the two 

efficacy trials as well as the safety study and is targeted for the fourth quarter of 

2012. 

“We are delighted to have completed both LibiGel Phase III efficacy trials. 

We appreciate the diligence of the investigative sites and their care of the subjects in 

the trials, and we also thank the participating subjects,” noted Joanne Zborowski, 

BioSante’s vice president of clinical development. “There were over 1,100 subjects 

enrolled in the two efficacy trials, and we look forward to analyzing the data and 

announcing the results later this year.” 

62. On October 21, 2011, defendant Simes presented at the BioCentury Publications Inc. 

NewsMakers in the Biotech Industry Conference, during which he discussed the critical separation 

LibiGel achieved in comparison to placebo during the Phase II trial, without adequately disclosing 

LibiGel’s realistic and foreseeable failure to meaningfully outperform placebo during Phase III 

efficacy trials, stating, in relevant part: 

These are the results of our Phase II trial and that was a three-month trial. So 

remember, Phase III is six months. We know from the literature including Procter & 

Gamble’s publications on Intrinsa that maximum effect is reached in months four and 

five and then the effect tends to level off. It does not fall as long as the woman 

continues to take testosterone therapy. 

But at baseline in the four weeks at baseline the women in this study had 2.5 

satisfying sexual events and you can see an increase of 2.6 satisfying sexual events in 

the first four weeks. So a 100% increase in the number of events, all the way out to a 

238% increase over the course of three months. 

What’s most critical here is the difference from placebo, a difference of 3.4 

satisfying sexual events more in the LibiGel group than in the placebo group. Not 

only was this statistically significant, but we believe highly clinically meaningful, 

which is a very important consideration in these studies. 

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63. On October 25, 2011, Simes once again discussed Phase II LibiGel data without 

adequately disclosing the likelihood of a significant Placebo Effect which could, and ultimately did, 

lead to LibiGel’s failure to meaningfully outperform placebo in the treatment of women’s sexual 

dysfunctions. Simes stated in part: 

The SPA defines and has agreement on the clinical trial design, the clinical 

end-points, sample sized planned conduct and statistical analysis. So, we feel as well 

as you can have an agreement, and in this case a written agreement with the FDA 

that the trials are designed to bring in the data that the FDA will require for an 

approval we feel very comfortable. 

These are the result of our Phase II study. The Green line you see there is the 

placebo effect. And as you can imagine in these studies there is a placebo effect, but 

slightly there is an hot flash studies or even depression or pain studies. 

But, your hope is that the placebo will [plateau], because if it kept getting 

better of course there is no reason for therapy, in fact it did. But you can see in the 

LibiGel group, the number of satisfying sexual events increased by about a 100% in 

the first four weeks. Remember at baseline they had 2.5 satisfying sexual events in 

the baseline four weeks. 

64. On November 9, 2011, defendants caused BioSante to file its Form 10-Q with the 

SEC further publicizing the development of its breakthrough new drug for the treatment of HSDD. 

The Form 10-Q stated in part: 

We believe LibiGel remains the most clinically advanced pharmaceutical 

product in the U.S. in active development for the treatment of hypoactive sexual 

desire disorder in menopausal women, and that it has the potential to be the first 

product approved by the FDA for this common and unmet medical need. We believe 

based on discussions with the FDA, including an SPA relating to the design of our 

two LibiGel Phase III safety and efficacy trials, that these trials and our Phase III 

cardiovascular and breast cancer safety study are the essential requirements for 

submission and, if successful, approval by the FDA of an NDA for LibiGel for the 

treatment of FSD, specifically HSDD in menopausal women. 

A. Defendants Knew About but Failed to Disclose Issues Related to the Definition 

of HSDD 

65. During the course of their ongoing promotion of LibiGel, defendants never disclosed, 

let alone discussed, the looming changes to HSDD as a defined and treatable disorder. According to 

the DSM-IV, the primary indicator of HSDD is defined as follows: 

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A. Persistently or recurrently deficient (or absent) sexual fantasies and desire 

for sexual activity. The judgment of deficiency or absence is made by the 

clinician, taking into account factors that affect sexual functioning, such as 

age and the context of the person’s life. 

B. The disturbance causes marked distress or interpersonal difficulty. 

C. The sexual dysfunction is not better accounted for by another Axis I disorder 

(except another Sexual Dysfunction) and is not due exclusively to the direct 

physiological effects of a substance (e.g., a drug of abuse, a medication) or a 

general medical condition. 

66. HSDD is primarily characterized by Criterion A, the deficiency or total lack of sexual 

fantasies and desire. Since 1999, before BioSante began developing LibiGel, the APA has been 

researching revisions for the DSM-5. The work groups tasked with researching these revisions 

periodically published draft DSM-5 diagnostic criteria for public comment, the first of which was 

available on February 10, 2010. The final commenting period on the draft DSM-5 closed on June 

15, 2012. 

67. When the first draft of the DSM-5 was published for public comment on February 10, 

2010, it became clear that these revisions included substantial changes to the definitions of various 

sexual dysfunctions – and HSDD was, in fact, to be removed as a singular disorder and integrated

with an arousal disorder to form a more restrictive category of FSD called SIAD. 

68. As recently as April 30, 2012, SIAD was defined in the draft DSM-5 as a lack of 

sexual interest/arousal for a six-month duration as manifested by at least three of the following 

indicators: 

1) absent/reduced interest in sexual activity; 

2) absent/reduced sexual/erotic thoughts and fantasies; 

3) no initiation of sexual activity and not receptive to partner’s attempts to 

initiate; 

4) absent/reduced sexual excitement/pleasure during sexual activation on at 

least 75% of occasions of sexual activity; 

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5) Desire not triggered by sexual/erotic stimulus; and/or 

6) Absent/reduced genital or nongenital physical changes during sexual activity 

on at least 75% of occasions of sexual activity which causes distress and is 

not due to a physiological substance or general medical condition. 

69. The new SIAD category is much more restrictive, which significantly changes the 

number and demographic of women who actually could be diagnosed with one of these desire or 

arousal disorders. The APA explicitly chose to make this category more restrictive and 

acknowledged that HSDD/FSAD may be over-diagnosed: “[t]he current standard for diagnosing a 

sexual dysfunction often results in inflated estimates of the proportion of women meeting criteria for

a sexual dysfunction.”1 This change affects both market share for LibiGel and the population of 

patients enrolled in the clinical trials. With fewer women who could potentially be diagnosed with 

a desire disorder, defendants’ $2-billion-market estimate was vastly overstated. And with the 

creation of five other symptomatic criteria, it is likely that BioSante’s trial patient population did not 

accurately reflect the proper demographic of women with SIAD. 

70. Moreover, one of the APA’s reasons for removing the word “Hypoactive” from the 

proper name of the disorder is related explicitly to the fact that “[s]ome interpret the ‘hypo’ in HSDD 

to infer a biological deficiency of testosterone.”2 The APA’s suggestion that HSDD (or SIAD) is 

not caused by a testosterone deficiency completely undermines BioSante’s entire LibiGel premise, 

and at the very least confirms the uncertainty surrounding testosterone’s ability to treat symptoms 

even loosely associated with HSDD. While there remains no definitive proof on testosterone’s 

efficacy, this statement by the APA certainly raises more questions than assurances regarding 

 

1

 American Psychiatric Association, DSM-5 Development, Proposed Revisions, N 04 Female Sexual 

Interests/Arousal Disorder, http://www.dsm5.org/Lists/ProposedRevision/DispForm.aspx?ID=432 (last 

visited November 19, 2012). 

2

 Id.

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BioSante’s testosterone gel – a fact defendants failed to ever disclose when they promoted LibiGel 

and its development. 

71. Defendants were undoubtedly aware of the controversial nature of the HSDD 

condition within the medical community. For example, on May 17, 2010, BioSante presented at the 

Rodman & Renshaw Global Investment Conference, in which defendant Simes acknowledged the 

importance of getting an SPA, in light of the controversial nature of HSDD, stating, “[t]he SPA here, 

critical point is, since there is no product approved for this indication, we thought it was important 

to get the FDA on record as saying that in fact female sexual dysfunction is a diagnosable 

condition with measurable endpoints and that women deserve an option, a therapeutic option.” 

72. Similarly, during an October 21, 2011 presentation at the BioCentury Newsmakers In 

The Biotech Industry Conference, defendant Simes stated, in relevant part: 

The SPA, we applied for these SPAs early on because we felt that since 

there is no product approved for this indication we should get the FDA on record 

as acknowledging that in fact there is a condition here that with measurable 

endpoints – and women deserve an option. 

73. However, defendants never adequately discussed the proposed changes to the new 

DSM-5 when they publicly discussed LibiGel and its clinical trial performance or the substantial risk 

and decreased market potential for LibiGel if HSDD was excluded from the DSM. Moreover, these 

changes to the DSM were foreseeable. Most of the proposed DSM-5 revisions reflect theories that 

have been leading the discussion on female sexual dysfunctions for years and each of the changes 

were subject to public comment since at least February 2010. BioSante’s backwards approach to 

what they repeatedly call an important “unmet medical need” demonstrated that the Company was 

either recklessly out of touch with the issues surrounding female sexual dysfunction, or intentionally

ignored those issues in an attempt to rush LibiGel into the market before the DSM-5 was discussed 

outside of scientific circles. 

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B. Defendants Knew About but Failed to Disclose the High Possibility of a Placebo 

Effect 

74. According to the Bradford & Meston Study, most potential pharmacological 

treatments for FSD have “failed to meaningfully outperform placebo in the treatment of women’s 

sexual dysfunctions.”3

 Consequently, no pharmaceutical company has developed an FDA-approved 

drug for women’s sexual desire or arousal disorders. 

75. The Bradford & Meston Study evaluated the placebo group outcomes in sixteen 

women’s sexual dysfunction studies, seven of which compared the efficacy of placebo to that of 

testosterone in the form of a transdermal patch or topical cream. Six of the seven studies looked at 

patient populations consisting of post-menopausal women. Among those six studies, “ratings of 

sexual desire or sexual interest significantly increased from baseline levels among placebo 

recipients. . . . Reductions in personal distress among placebo groups were also evident in several 

studies.”4 Given the strong Placebo Effect in sexual desire dysfunction trials, the Bradford & 

Meston Study concluded: 

Although most clinical trial reports understandably focus on the effect of an active 

treatment over and above that of placebo, statistical significance alone is not a 

satisfactory criterion for evaluating the difference between placebo and active 

treatments. If effects were reported in more robust terms, such as the percentage of 

participants no longer meeting criteria for sexual dysfunction after treatment, then the 

relative effects of placebo and active treatments would have greater relevance to 

clinical practice.5

76. The high possibility of Placebo Effect in the HSDD trials is also a function of 

psychological factors. For example, women who enroll in HSDD trials already want to improve 

 

3

 Andrea Bradford & Cindy M. Meston, Placebo Response in the Treatment of Women’s Sexual

Dysfunctions: A Review and Commentary, 35 J. Sex & Marital Therapy 164, 165 (2009). 

4

Id. at 174. 

5

Id. at 177. 

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their sex lives and take an active role in seeking help. Moreover, expectancies for enhanced sexual 

desire could increase a woman’s perception of having desire. Participation in an HSDD trial 

compels a woman to regularly communicate and record her sexual experiences, keeping sexual 

activity at the forefront of her mind.6

77. Despite the significant risk of these confounding factors potentially leading to a 

higher Placebo Effect, defendants failed to cause BioSante to structure the LibiGel trials in a manner

that would minimize the Placebo Effect. Specifically, BioSante chose to record the primary 

endpoints of the studies with a daily diary, as opposed to a weekly diary. The contributing effects of 

a daily diary on the Placebo Effect in sexual dysfunction trials are well known. In fact, a 2005 

article authored by Stanley Althof, et al., entitled “Outcome Measurement in Female Sexual 

Dysfunction Clinical Trials: Review and Recommendations” concluded: 

[D]aily completion of a diary may create a skewing or biasing of the data. By 

completing a daily diary subjects are forced to reflect on their level of desire, arousal 

or satisfaction which may act as an intervention contributing, in part, to the high 

placebo response rates seen in FSD studies.7

78. On the same date BioSante released the top-line results from its two pivotal Phase III 

LibiGel efficacy trials, the Company held a conference call to discuss the results, in which defendant

Simes readily admitted that the Placebo Effect, caused in part by the daily-diary submission, 

contributed to the Phase III efficacy failure, stating: 

At this point, we can only speculate about the reasons for the placebo effect 

including the effect of the daily administration of the product, and the daily 

recording of the events by each subject as well as the monthly visits and various 

reminders that our investigators send out to their subjects. 

 

6

 Sheryl A. Kingsberg & Stanley E. Althof, Satisfying Sexual Events as Outcome Measures in Clinical 

Trial of Female Sexual Dysfunction, J. Sex. Med. 1, 5 (2011). 

7

 Stanley Althof, et al., Outcome Measurement in Female Sexual Dysfunction Clinical Trials: Review 

and Recommendations, 31 J. Sex & Marital Therapy 153, 161 (2005). 

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With all of these actions by and with the subjects participating in these trials, 

we believe that even those in the placebo group were thinking more and more 

about their sexual drive, and therefore their sexual activity and desire increased 

even without increased level of testosterone. 

* * * 

W[he]ther in fact and we are just asking the question, we don’t have an 

answer whether in fact, most of the efficacy or most of the benefit from that is the 

women’s own reaction to being treated as opposed to the testosterone because at 

least in our two trials, testosterone did not seem to be indicative of efficiency. 

* * * 

But unfortunately it is not LibiGel did not work, the problem is that both 

arms work equally well and it’s an interesting situation, however I am told by 

others that in other areas for example depression as many as 50% of depression trials 

fail because of placebo event and this is something that is a major issue for our 

industry so, truly there is no treatment arm because the women in our study were 

well taking care of in both arms and so there is truly no treatment arm and we have 

suffered the consequences of that. 

79. Similarly, during the June 6, 2012 Jefferies Global Healthcare Conference, defendant 

Simes stated the following: 

So these are the results of one of the two Phase III trials, but they are about 

the same. And what you can see is that LibiGel performed as predicted and as well 

as or even better than previous testosterone products have done in this population. 

And what we are looking at on this slide is an increase in the number of satisfying 

sexual events. This is one of the key primary endpoints. And you can see that from 

baseline, these women at baseline had about four satisfying sexual events in the 

baseline four-week period, and they increased by about between three and four 

satisfying sexual events at the end of the study. So the LibiGel performed very, very 

well. So we’ve increased these women by about 80% and the number of satisfying 

sexual events that they reported. Unfortunately, the placebo did as well. And so 

what we’ve been doing over these last several months is not only internally but 

consulting with experts about how we might mitigate the placebo response. 

To really put it in perspective, on this slide, you can see the two top lines or 

the two placebos in our two Phase III efficacy trials. And so the placebo did 

extraordinarily well. In fact, we created a therapeutic effect in these women. 

80. Thus, defendants were undoubtedly aware of, and/or recklessly disregarded, the 

potentially high Placebo Effect, given the nature of the HSDD condition and the structure of the 

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daily-diary submission during the clinical trials, and yet defendants never disclosed the full extent of 

risk of a high Placebo Effect to the investing public. 

81. In fact, BioSante restructured the Phase III clinical efficacy trials in 2012 in an 

attempt to reduce the Placebo Effect by shifting from a daily-diary entry to a weekly-diary entry. 

Defendant Simes acknowledged on June 11, 2012, the day the Company announced the intention to 

continue LibiGel clinical development, the serious impact daily versus weekly diary entry structure 

could have on the clinical trials, stating: 

We just plan on making changes so that the outcome will be different. Daily diary 

versus weekly diary is a critical factor. 

In fact surely after we published our data or announced our data in December 

of last year, a paper appeared by Sheryl Kingsberg, a lead clinician in this area who – 

and they – and she published a paper saying that her analysis of this indication daily 

d[ia]ries are just not as effective as weekly d[ia]ries. So, in addition to the body of 

data that exist in the published clinical trials, we have others and experts in this 

area that also agree that daily versus weekly is an issue. 

82. Ultimately, defendants not only failed to adequately warn investors of the risk of high 

placebo response, but they recklessly compounded the problem by overstating/overhyping the 

correlation between testosterone levels and desire.

THE TRUTH IS REVEALED 

83. On December 14, 2011, defendants finally caused BioSante to reveal for the first time 

that LibiGel had failed to yield positive results in large-scale efficacy tests designed by the 

Company. According to the clinical trial results, women treated with LibiGel did not experience a 

statistically significant increase in either total satisfying sexual encounters or sexual desire, when

compared to the placebo. In fact, in the double-blind placebo-controlled trial, LibiGel did not fare 

significantly better than the placebo. More specifically, defendants stated: 

“We obviously are very disappointed by the Phase III LibiGel efficacy trial 

results. We have been committed to LibiGel for many years and we are committed 

to determining the future of LibiGel,” stated Stephen M. Simes, BioSante’s president 

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& CEO. “We will continue to analyze the efficacy trial data fully and determine 

plans for our next steps in the LibiGel development plan, and provide an update at a 

later time. While the LibiGel Phase III cardiovascular and breast cancer safety study 

currently continues as planned, we will be analyzing the best path forward for the 

study given the results reported today. I want to thank our entire BioSante clinical 

team and the clinical investigators for their tireless efforts in these trials, and I also 

want to thank the women enrolled in the BLOOM trials for their participation.” 

84. On this news, BioSante’s share price collapsed by $1.64 per share, or over 77%, 

instantly wiping out over $36 million in shareholder equity. Despite these tremendous losses to 

investors from the revelation that LibiGel did not work, defendants profited substantially during the 

relevant period through their salaries and other payments. 

DAMAGES TO BIOSANTE 

85. As a result of defendants’ false statements, BioSante has been severely injured and 

damaged. Millions of dollars in shareholders’ equity has been wiped out. The Company has also 

been named as a defendant in a complex and expensive-to-defend securities class action lawsuit. 

86. Moreover, these actions irreparably damaged BioSante’s corporate image and 

goodwill. The financial viability of the Company and the motives of management have been put in 

serious doubt. For at least the foreseeable future, BioSante will suffer from what is known as the 

“liar’s discount,” a term applied to the stock of companies who have been implicated in unlawful 

conduct and/or have misled their shareholders, such that BioSante’s ability to raise capital or debt on 

favorable terms in the future is now impaired, as has been shown by subsequent events. 

DEMAND FUTILITY ALLEGATIONS 

87. Plaintiffs incorporate ¶¶1-86. 

88. Plaintiffs did not make a pre-suit demand on the Board to pursue this action, because 

such a demand would have been a futile and wasteful act for the following reasons. 

89. First, the members of BioSante’s Board have demonstrated their unwillingness and/or 

inability to act in compliance with their fiduciary obligations, or to sue themselves or their fellow 

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directors and allies in the top ranks of the corporation for the violations of law complained of herein. 

The Board members have professional relationships with, are friends with, and have entangling 

financial alliances, interests and dependencies with the other defendants. Because of these 

relationships, the Board is unable to and will not vigorously prosecute any such action. 

90. Second, LibiGel was BioSante’s primary product and the Company’s continued 

ability to operate was dependent on LibiGel’s success. As BioSante directors and officers, 

defendants had access to all of the information, reports, and clinical data regarding LibiGel and its 

prospects. Thus, all information related to LibiGel’s clinical trials, including the design of the trials, 

FDA communications and approvals regarding the clinical trials, the performance of the trials, the 

substantial hurdles underlying the trial design and outcomes, LibiGel’s efficacy and its commercial 

viability, was material to each of the director defendants. Despite the material nature of LibiGel to

BioSante and each director, the director defendants repeatedly approved false and misleading 

statements regarding LibiGel’s performance in clinical trials and its prospects for success. 

Accordingly, none of the director defendants can exercise independent business judgment in 

deciding whether or not to bring and vigorously prosecute this action because they each face 

substantial likelihood of liability for breaching their fiduciary duty of loyalty and any demand upon 

them would be futile. 

91. Third, the BioSante Board participated in, approved and/or permitted the wrongs 

alleged herein to have occurred, participated in efforts to conceal or disguise those wrongs from 

BioSante’s shareholders, or recklessly and/or negligently disregarded the wrongs complained of 

herein, and are therefore not disinterested parties. As a result of their access to and review of 

internal corporate documents, conversations and contacts with other corporate officers, employees, 

and directors, and attendance at management and/or Board meetings, each of the defendants knew or 

recklessly disregarded the adverse non-public information regarding BioSante’s business and 

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financial condition, specifically that LibiGel failed to yield positive results compared to placebo and 

in efficacy tests and, therefore, was unlikely to receive FDA approval or have significant market 

potential. 

92. Fourth, pursuant to their specific duties as Board and Board Committee members, the 

members of the BioSante Board are charged with managing the Company and conducting its 

business affairs. Defendants breached the fiduciary duties of loyalty, candor and good faith owed to 

BioSante by making false and misleading statements about the Company’s financial condition and 

business prospects, including regarding the commercial viability, efficacy, and market potential for 

LibiGel, in BioSante’s shareholder reports and public filings. The BioSante Board cannot exercise 

independent objective judgment in deciding whether to bring this action or whether to vigorously 

prosecute this action, because each of its members participated in the wrongdoing or are 

interdependent with other defendants who did. 

93. Fifth, as members of the Audit and Finance Committee, defendants Sullivan, 

Holubow, and Mangano had particular fiduciary responsibilities over and above those conferred by 

their roles as directors of BioSante. Defendants Sullivan, Holubow, and Mangano specifically were 

responsible for: 

• Overseeing BioSante’s accounting and financial reporting processes, systems 

of internal control over financial reporting and disclosure controls and 

procedures on behalf of the Board and reporting the results or findings of its 

oversight activities to the Board. 

• Overseeing BioSante’s system to monitor and manage risk, and legal and 

ethical compliance programs, including the establishment and administration 

(including the grant of any waiver from) a written code of ethics applicable to 

each of BioSante’s principal executive officer, principal financial officer, 

principal accounting officer or controller, or persons performing similar 

functions. 

• Reviewing and discussing with management and the independent auditor, 

together and in separate sessions, the adequacy and effectiveness of 

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BioSante’s internal control over financial reporting, including the Company’s 

SEC filings. 

• Reviewing any disclosures made to the Committee by BioSante’s CEO and 

Chief Financial Officer during their certification process for the Form 10-K 

and Form 10-Q about any significant deficiencies and material weaknesses in 

the design or operation of BioSante’s internal control over financial reporting 

and any fraud involving management or other employees who have a 

significant role in BioSante’s internal control over financial reporting. 

• Discussing with management their review of the adequacy of BioSante’s 

disclosure controls and procedures, the effectiveness of such controls and 

procedures and any findings following such review. 

• Reviewing BioSante’s system to monitor, assess and manage risk and legal 

and ethical compliance program. 

• Reviewing and discussing with management and the independent auditor 

prior to the filing of BioSante’s Annual Report on Form 10-K, and 10-Q, 

BioSante’s annual and periodic financial statements and related footnotes and 

other financial information, including the information in the “Management’s 

Discussion and Analysis of Financial Condition and Results of Operations” 

section of such report. 

94. Defendant Sullivan, as Chairman of the Board and as a member of the Audit and 

Finance Committee, and defendants Holubow and Mangano, who also sat on the Audit and Financial 

Committee, were privy to material information not timely disclosed to the investing public and is 

therefore responsible directly and indirectly for the breaches of fiduciary duty as alleged herein. 

Defendants Sullivan, Holubow and Mangano are not capable of objectively considering a demand 

that BioSante initiate litigation that would result in their personal liability. Demand on Sullivan, 

Holubow and Mangano would be futile. 

95. Sixth, Simes, as Vice Chairman of the Board, CEO and President of BioSante, was 

both privy to the material adverse information withheld from shareholders and personally and 

directly responsible for disseminating and causing BioSante to disseminate misleading public 

announcements and to make misleading regulatory filings. Additionally, defendant Simes is 

employed full-time by the Company, and has received and continues to receive substantial monetary 

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compensation as a result of that employment. Defendant Simes will act to preserve his position of 

control and the prerequisites thereof, and is therefore incapable of exercising independent objective 

judgment in deciding whether to bring this action. For example, Simes received at least $1,988,181 

in fees and other compensation from BioSante. Defendant Simes is not capable of objectively 

considering a demand that BioSante initiate litigation that would result in his personal liability. A

demand that Simes initiate litigation that would have as its object finding him guilty of fiduciary 

breaches, and likely require clawback from his nearly $2 million in compensation, would be futile. 

96. Because of this, a demand made on a Board that includes Simes, Sullivan, Holubow, 

and Mangano as four of its seven members would therefore be a useless and futile act. 

97. Seventh, the acts complained of constitute violations of the fiduciary duty of loyalty, 

candor and good faith owed by BioSante directors and these acts are incapable of ratification. 

98. Eighth, the members of BioSante’s Board have benefitted, and will continue to 

benefit, from the wrongdoing herein alleged; have engaged in such conduct to preserve their 

positions of control and the prerequisites derived thereof; and are incapable of exercising 

independent objective judgment in deciding whether to bring this action. At least two of the Board 

members benefitted directly and immediately under the terms of the announced merger: they were 

rewarded with seats on the board of the merged company. 

99. Ninth, any suit by the directors of BioSante to remedy these wrongs would likely 

further expose defendants to liability under the federal securities laws, which could result in 

additional civil and/or criminal actions being filed against one or more of defendants. Thus, they are 

hopelessly conflicted in making any supposedly independent determination whether to sue 

themselves. 

100. Tenth, BioSante has been and continues to be exposed to significant losses due to the 

wrongdoing complained of herein, yet the BioSante Board has not filed any lawsuits against 

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defendants or others who were responsible for that wrongful conduct to attempt to recover for 

BioSante any part of the damages BioSante suffered and will suffer thereby. 

101. Eleventh, demand is excused because the conduct alleged herein, including the 

issuance of false and misleading statements to shareholders, was not the product of a valid exercise 

of business judgment. The conduct of the directors/defendants alleged herein, including the issuance 

of false and misleading statements to shareholders, was so egregious on its face that Board approval 

cannot meet the test of business judgment, and a substantial likelihood of director liability for breach 

of fiduciary duty therefore exists. 

102. Plaintiffs have not made any demand on shareholders of BioSante to institute this 

action since such demand would be a futile and useless act for the following reasons: 

(a) BioSante is a publicly traded company with approximately 109 million shares 

outstanding and many thousands of shareholders; 

(b) Making demand on such a number of shareholders would be impossible for 

plaintiffs who have no way of finding out the names, addresses or phone numbers of shareholders; 

and 

(c) Making demand on all shareholders would force plaintiffs to incur huge 

expenses, assuming all shareholders could be individually identified. 

COUNT I 

(Breach of Fiduciary Duty Against All Defendants) 

103. Plaintiffs incorporate ¶¶1-102. 

104. Defendants owe BioSante undivided fiduciary duties of loyalty, candor and good 

faith. 

105. Defendants have violated their fiduciary duties of loyalty, candor and good faith. 

More specifically, defendants, in breach of these fiduciary duties, made and/or participated in 

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making false statements and omitted to disclose adverse material non-public information regarding 

the Company’s financial condition and business prospects, specifically the commercial viability, 

efficacy, and market potential for LibiGel, the Company’s leading potential product, in BioSante’s 

public filings, shareholder reports and other public announcements. 

106. By reason of the foregoing acts, practices and course of conduct, defendants have 

failed to faithfully discharge their fiduciary duties owed to BioSante and its shareholders. 

107. As a proximate result of defendants’ misconduct, BioSante has been injured and is 

entitled to damages. 

COUNT II 

(Abuse of Control Against All Defendants) 

108. Plaintiffs incorporate ¶¶1-107. 

109. At all relevant times, defendants employed an unlawful scheme for the purpose of 

maintaining and entrenching themselves in their positions of control, power, prestige and profit at 

BioSante. As a part of this scheme, defendants made, caused to be made, and/or participated in the 

making of misrepresentations regarding BioSante’s financial condition and business prospects. 

110. Defendants’ conduct constituted an abuse of their ability to control and influence 

BioSante. 

111. As a proximate result of defendants’ misconduct, BioSante has been injured and is 

entitled to damages. 

COUNT III 

(Unjust Enrichment Against All Defendants) 

112. Plaintiffs incorporate ¶¶1-102. 

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113. As a result of the misconduct particularized herein, defendants have been unjustly 

enriched at the expense of BioSante, in the form of unjustified fees, salaries, stock awards and other

emoluments of office. 

114. All the payments and benefits provided to defendants were at the expense of 

BioSante. The Company received no benefit from these payments. 

115. As a proximate result of defendants’ misconduct, BioSante has been injured and is 

entitled to damages. 

PRAYER FOR RELIEF 

WHEREFORE, plaintiffs demand judgment as follows: 

A. Awarding money damages against all defendants, jointly and severally, for all losses 

and damages suffered as a result of the acts and transactions complained of herein, together with prejudgment interest, to ensure that defendants do not benefit thereby; 

B. Directing all defendants to account for all damages caused by them and all profits, 

special benefits and unjust enrichment they have obtained as a result of their unlawful conduct, 

including all fees, salaries, stock awards and other payments, and imposing a constructive trust 

thereon; 

C. Directing BioSante to take all necessary actions to reform and improve its corporate 

governance and internal control procedures to comply with applicable law, including, but not limited 

to, the federal securities laws and state corporation laws regarding fiduciary duties of loyalty, candor 

and good faith; 

D. Awarding punitive damages; 

E. Awarding costs and disbursements of this action, including reasonable attorneys’ fees 

and experts’ fees; and 

F. Granting such other and further relief as this Court may deem just and proper. 

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JURY DEMAND 

Plaintiffs demand a trial by jury. 

DATED: November 20, 2012 ROBBINS GELLER RUDMAN 

 & DOWD LLP 

BENNY C. GOODMAN III 

ERIK LUEDEKE 

s/ Benny C. Goodman III 

BENNY C. GOODMAN III 

655 West Broadway, Suite 1900 

San Diego, CA 92101 

Telephone: 619/231-1058 

619/231-7423 (fax) 

ROBBINS GELLER RUDMAN 

 & DOWD LLP 

JAMES E. BARZ (IL Bar# 6255605) 

200 South Wacker Drive, 31st Floor 

Chicago, IL 60606 

Telephone: 312/674-4674 

312/674-4676 (fax) 

Lead Counsel for Plaintiffs 

LAW OFFICES BERNARD M. 

 GROSS, P.C. 

DEBORAH R. GROSS 

Wanamaker Bldg., Suite 450 

100 Penn Square East 

Philadelphia, PA 19107 

Telephone: 215/561-3600 

215/561-3000 (fax) 

JOHNSON & WEAVER, LLP 

FRANK J. JOHNSON 

110 West “A” Street, Suite 750 

San Diego, CA 92101 

Telephone: 619/230-0063 

619/255-1856 (fax) 

Attorneys for Plaintiff 

Case: 1:12-cv-03480 Document #: 29 Filed: 11/20/12 Page 38 of 42 PageID #:111
VERIFICATION 

J, Jerome W. Weinstein, hereby verify that I arn familiar with the allegations in the Verified 

Consolidated Shareholder Derivative Complaint ("Complaint"), and that I have authorized the filing 

ofthe Complaint and that the foregoing is true and correct to the best of my knowledge, infom1ation 

and belief. 

Executed this _J1_ day of November, 2012. 

Case: 1:12-cv-03480 Document #: 29 Filed: 11/20/12 Page 39 of 42 PageID #:112
VERIFICATION 

I, Carlo Oliva, hereby verify that I am familiar with the allegations in the Verified 

Consolidated Shareholder Derivative Complaint ("Complaint"), and that I have authorized the filing 

of the Complaint and that the foregoing is true and correct to the best of my knowledge, information 

and belief 

Executed this _j_L_ day ofNovember, 2012. 

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786881_1 

CERTIFICATE OF SERVICE

I hereby certify that on November 20, 2012, I authorized the electronic filing of the foregoing 

with the Clerk of the Court using the CM/ECF system which will send notification of such filing to 

the e-mail addresses denoted on the attached Electronic Mail Notice List, and I hereby certify that I 

caused to be mailed the foregoing document or paper via the United States Postal Service to the nonCM/ECF participants indicated on the attached Manual Notice List. 

I certify under penalty of perjury under the laws of the United States of America that the 

foregoing is true and correct. Executed on November 20, 2012. 

s/ Benny C. Goodman III 

BENNY C. GOODMAN III 

ROBBINS GELLER RUDMAN 

 & DOWD LLP 

655 West Broadway, Suite 1900 

San Diego, CA 92101-3301 

Telephone: 619/231-1058 

619/231-7423 (fax) 

E-mail: bennyg@rgrdlaw.com

Case: 1:12-cv-03480 Document #: 29 Filed: 11/20/12 Page 41 of 42 PageID #:114
Mailing Information for a Case 1:12-cv-03480 

Electronic Mail Notice List 

The following are those who are currently on the list to receive e-mail notices for this case. 

 James E Barz 

jbarz@rgrdlaw.com,stremblay@rgrdlaw.com,e_file_sd@rgrdlaw.com 

 Ashley John Burden 

ashley.burden@dechert.com,nycmanagingclerks@dechert.com 

 Benny C. Goodman , III

bennyg@rgrdlaw.com,e_file_SD@rgrdlaw.com,ldeem@rgrdlaw.com 

 Deborah R. Gross 

debbie@bernardmgross.com 

 David H. Kistenbroker 

david.kistenbroker@dechert.com,nycmanagingclerks@dechert.com 

 Erik W. Luedeke 

eluedeke@rgrdlaw.com,ldeem@rgrdlaw.com 

 Carl E. Volz 

carl.volz@dechert.com,nycmanagingclerks@dechert.com,nicole.ladue@dechert.com 

Manual Notice List 

The following is the list of attorneys who are not on the list to receive e-mail notices for this case (who 

therefore require manual noticing). You may wish to use your mouse to select and copy this list into 

your word processing program in order to create notices or labels for these recipients. 

 (No manual recipients) 

CM/ECF LIVE, Ver 5.0.3 - U.S. District Court, Northern Illinois- Page 1 of 1

https://ecf.ilnd.uscourts.gov/cgi-bin/MailList.pl?725100145903666-L_1_0-1 11/20/2012

Case: 1:12-cv-03480 Document #: 29 Filed: 11/20/12 Page 42 of 42 PageID #:115