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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934

Filed by the Registrant ý
Filed by a Party other than the Registrant o

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o   Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
o   Definitive Proxy Statement
o   Definitive Additional Materials
o   Soliciting Material Pursuant to §240.14a-12

BIOSANTE PHARMACEUTICALS, INC.
(Name of Registrant as Specified In Its Charter)

 
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
         
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Preliminary Proxy

LOGO


NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 21, 2002

TO THE STOCKHOLDERS OF BIOSANTE PHARMACEUTICALS, INC.:

        The Annual Meeting of Stockholders of BioSante Pharmaceuticals, Inc., a Delaware corporation, will be held on Tuesday, May 21, 2002, at 10:00 a.m., local time, at the American Airlines Admirals Club, Terminal 3, O'Hare International Airport, Chicago, Illinois, for the following purposes:

        Only stockholders of record at the close of business on April 19, 2002 will be entitled to notice of, and to vote at, the meeting and any adjournments thereof. It is important that your shares be represented and voted at the meeting. Please mark, sign, date and mail the enclosed proxy card in the postage-paid envelope provided.

April    , 2002
Lincolnshire, Illinois

Important: The prompt return of your proxy card will save the company the expense of further requests for proxies to ensure a quorum at the meeting. A self-addressed envelope is enclosed for your convenience. No postage is required if mailed within the United States or from Canada.



TABLE OF CONTENTS

 
   Page
INFORMATION CONCERNING THE ANNUAL MEETING   1
 
Date, Time, Place and Purposes
 
1
  Stockholders Entitled to Vote   1
  Proxies   1
  Revocation of Proxies   2
  Householding of Annual Meeting Materials   2
  Quorum Requirement   2
  Vote Required   2
  Proxy Solicitation Costs   3

SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
 
4

ELECTION OF DIRECTORS (Proposal 1)
 
6
 
Number of Directors
 
6
  Nominees for Director   6
  Vote Required   6
  Board Recommendation   6
  Information About Nominees   7
  Other Information About Nominees   7
  Information About the Board of Directors and its Committees   9
  Director Compensation   9
  Audit and Finance Committee Report   9

EXECUTIVE COMPENSATION AND OTHER BENEFITS
 
11
 
Summary of Cash and Other Compensation
 
11
  Option Grants in Last Fiscal Year   12
  Aggregated Option Exercises In Last Fiscal Year and Fiscal Year-End Option Values   13
  Employment and Separation Agreements   13
  Change in Control Arrangements   14

RELATED PARTY RELATIONSHIPS AND TRANSACTIONS
 
15
 
Director Relationships
 
15
  April 2001 Private Placement   15
  Other Agreements with Affiliates   15

PROPOSAL TO AMEND OUR AMENDED AND RESTATED 1998 STOCK OPTION PLAN TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK RESERVED FOR ISSUANCE (Proposal 2)
 
16
 
Proposed Amendment
 
16
  Purpose of the Amendment   16
  Summary of the Amended and Restated 1998 Stock Option Plan   16
  Federal Income Tax Consequences   19
  Options Under the Option Plan   20
  Securities Authorized for Issuance Under Equity Compensation Plans   21
  Vote Required   21
  Board Recommendation   21

PROPOSAL TO EFFECT A REVERSE STOCK SPLIT OF OUR COMMON STOCK AND OUR CLASS C SPECIAL STOCK (Proposal 3)
 
22
 
Proposed Reverse Stock Split
 
22
  Purpose of the Reverse Stock Split   23
  Effects of the Reverse Stock Split on BioSante's Stockholders   25
  Determination of Purchase Price   27
  Hypothetical Scenarios Illustrating the Effects of the Reverse Stock Split on BioSante's Stockholders   28
  Effects of the Reverse Stock Split on BioSante   29
  Effectiveness of the Reverse Stock Split   33
  Stock Certificates   34
  Material U.S. Federal Income Tax Consequences   34
  Appraisal Rights   36
  Recommendation of the Board of Directors   37

RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS (Proposal 4)
 
38
 
Appointment of Auditors
 
38
  Principal Accounting Fees   38
  Financial Information Systems Design and Implementation Fees   38
  All Other Fees   38
  Vote Required   38
  Board Recommendation   38

OTHER MATTERS
 
39
 
Section 16(a) Beneficial Ownership Reporting Compliance
 
39
  Stockholder Proposals For 2003 Annual Meeting   39
  Other Business   39
  Copies of 2001 Annual Report   39

LOGO

111 Barclay Boulevard
Lincolnshire, Illinois 60069

PROXY STATEMENT FOR
ANNUAL MEETING OF STOCKHOLDERS
May 21, 2002


INFORMATION CONCERNING THE ANNUAL MEETING

Date, Time, Place and Purposes

        The meeting will be held on Tuesday, May 21, 2002, at 10:00 a.m., local time, at the American Airlines Admirals Club, Terminal 3, O'Hare International Airport, Chicago, Illinois, for the purposes set forth in the Notice of Meeting.

Stockholders Entitled to Vote

        Stockholders of record at the close of business on April 19, 2002 will be entitled to vote at the meeting. As of that date, there were 63,218,798 shares of our common stock and 4,666,024 shares of our class C special stock outstanding. Each share of our common stock and class C special stock is entitled to one vote on each matter to be voted on at the Annual Meeting. Stockholders are not entitled to cumulate voting rights.

Proxies

        This proxy statement is being mailed to our stockholders beginning on or about April    , 2002 in connection with the solicitation of proxies by the Board of Directors for use at the Annual Meeting of Stockholders.

        Your vote is important. A proxy card is enclosed for your use. You are solicited on behalf of the Board of Directors, to mark, sign, date and return the proxy card in the accompanying envelope. No postage is required if mailed within the United States or from Canada.

        Proxies will be voted as specified by you. Signed proxies that lack any specification will be voted in favor of all of the proposals set forth in the Notice of Meeting and in favor of the election of all of the nominees for director listed in this proxy statement.

        The Board of Directors recommends that you vote FOR the approval of all of the proposals set forth in the Notice of Meeting and FOR all of the nominees for director listed in this proxy statement.

Revocation of Proxies

        Any stockholder giving a proxy may revoke it at any time prior to its use at the Annual Meeting by:

Householding of Annual Meeting Materials

        Some banks, brokers and other nominee record holders may be participating in the practice of "householding" proxy statements and annual reports. This means that only one copy of BioSante's Proxy Statement or Annual Report to Stockholders may have been sent to multiple stockholders in each household. BioSante will promptly deliver a separate copy of either document to any stockholder upon written or oral request to BioSante's Investor Relations Department, BioSante Pharmaceuticals, Inc., 111 Barclay Boulevard, Suite 280, Lincolnshire, Illinois 60069, telephone: (847) 478-0500. Any stockholder who wants to receive separate copies of BioSante's Proxy Statement or Annual Report to Stockholders in the future, or any stockholder who is receiving multiple copies and would like to receive only one copy per household, should contact the stockholder's bank, broker, or other nominee record holder, or the stockholder may contact BioSante at the above address and phone number.

Quorum Requirement

        The presence at the Annual Meeting, in person or by proxy, of the holders of a majority of the outstanding shares of our common stock (31,609,400 shares) and a majority of the outstanding shares of our class C special stock (2,333,013 shares) as of the record date will constitute a quorum for the transaction of business at the Annual Meeting. In general, shares of our common stock and shares of our class C special stock represented by a properly signed and returned proxy card will be counted as shares present and entitled to vote at the Annual Meeting for purposes of determining a quorum, without regard to whether the card reflects abstentions (or is left blank) or reflects a "broker non-vote" on a matter. A "broker non-vote" is a card returned by a broker on behalf of its beneficial owner customer that is not voted on a particular matter because voting instructions have not been received by the broker from the customer, and the broker has no discretionary authority to vote on behalf of such customer on such matter.

Vote Required

        Assuming a quorum is represented at the Annual Meeting, either in person or by proxy, (1) the election of the eight nominees for director requires the affirmative vote of a plurality of the shares of common stock and class C special stock, present in person or by proxy and entitled to vote, voting together as a single class, (2) the approval of the reverse stock split proposal described in this proxy statement requires the affirmative vote of the holders of a majority of the outstanding shares of our common stock and a majority of the outstanding shares of our class C special stock as of the record date, voting as separate classes and (3) the approval of each of the other proposals described in this proxy statement, requires the affirmative vote of the holders of a majority of the shares of common stock and class C special stock, present in person or by proxy and entitled to vote, voting together as a single class. Shares represented by a proxy card including any broker non-votes on a matter will be treated as shares not entitled to vote on that matter, and thus will not be counted in determining whether that matter has been approved. A "broker non-vote" is a card returned by a broker on behalf of its beneficial owner customer that is not voted on a particular matter because voting instructions have not been received, and the broker has no discretionary authority to vote. Shares represented by a proxy card voted as abstaining on any of the proposals will be treated as shares present and entitled to vote that were not cast in favor of a particular matter, and thus will be counted as votes against that matter.

        Signed proxies that lack any specification will be voted in favor of all of the proposals set forth in the Notice of Meeting and in favor of the election of all of the eight nominees for directors listed in this proxy statement.

Proxy Solicitation Costs

        The cost of soliciting proxies, including the preparation, assembly and mailing of proxies and soliciting material, as well as the cost of forwarding this material to the beneficial owners of our capital stock will be borne by us. Our directors, officers and regular employees may, without compensation other than their regular compensation, solicit proxies by telephone, facsimile, telegraph or personal conversation. We may reimburse brokerage firms and others for expenses in forwarding proxy materials to the beneficial owners of our capital stock.


SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS
AND MANAGEMENT

        The following table sets forth information known to us with respect to the beneficial ownership of each class of our capital stock as of April 1, 2002 for (1) each person known by us to beneficially own more than 5% of any class of our voting securities, (2) each of the executive officers named in the Summary Compensation Table on page 11 under the heading "Executive Compensation and Other Benefits," (3) each of our directors and (4) all of our executive officers and directors as a group.

        Except as otherwise indicated, we believe that each of the beneficial owners of our capital stock listed below, based on information provided by these owners, has sole investment and voting power with respect to its shares, subject to community property laws where applicable. Shares not outstanding but deemed beneficially owned by virtue of the right of a person or member of a group to acquire them within 60 days are treated as outstanding only when determining the amount and percent owned by such person or group.

 
   Common Stock
   Class C Special Stock
   Common Stock
and Common
Stock
Equivalents
   Percent of
Total
Voting
Power (1)
  
Name
  
  Number
   Percent
   Number
   Percent
  
Stephen M. Simes(2)   3,945,630 (3) 5.9 % —   —   3,945,630   5.5 %
Louis W. Sullivan, M.D.(2).   150,000 (4) *   1,000,000   21.4 % 1,150,000   1.7 %
Edward C. Rosenow III, M.D.(2)   175,000 (5) *   —   —   175,000   *  
Victor Morgenstern(2)   5,125,000 (6) 7.9 % —   —   5,125,000   7.4 %
Fred Holubow(2)   662,500 (7) 1.0 % —   —   662,500   1.0 %
Ross Mangano(2)   15,055,000 (8) 22.1 % —   —   15,055,000   20.7 %
Angela Ho(2)   750,000 (9) 1.2 % 1,000,000   21.4 % 1,750,000   2.6 %
Peter Kjaer(2)   100,000 (10) *   —   —   100,000   *  
Avi Ben-Abraham, M.D.   10,479,800 (11) 16.6 % —   —   10,479,800   15.4 %
Phillip B. Donenberg(2)   998,665 (12) 1.6 % —   —   998,665   1.5 %
Leah M. Lehman, Ph.D.(2)   749,000 (13) 1.2 % —   —   749,000   1.1 %
Steven J. Bell, Ph.D.(2)   282,292 (14) *   —   —   282,292   *  
JO & Co.   11,550,000 (15) 17.2 % —   —   11,550,000   16.1 %
Hans Michael Jebsen   4,250,000 (16) 6.6 % 1,000,000   21.4 % 5,250,000   7.6 %
King Cho Fung   3,700,000 (17) 5.8 % 625,000   13.4 % 4,325,000   6.3 %
Marcus Jebsen   1,750,000 (18) 2.8 % 500,000   10.7 % 2,250,000   3.3 %
All executive officers and directors as a group(12 persons)   38,472,887 (19) 50.9 % 2,000,000   42.9 % 40,472,887   50.5 %
*
less than 1%.

(1)
In calculating the percent of total voting power, the voting power of shares of our common stock and shares of our class C special stock is combined.

(2)
Address: 111 Barclay Boulevard, Suite 280, Lincolnshire, Illinois 60069.

(3)
Mr. Simes' beneficial ownership includes 3,094,271 shares of common stock issuable upon exercise of stock options and 187,500 shares of common stock issuable upon exercise of warrants.

(4)
Dr. Sullivan's beneficial ownership includes 150,000 shares of common stock issuable upon exercise of a stock option.

(5)
Dr. Rosenow's beneficial ownership includes 175,000 shares of common stock issuable upon exercise of stock options.

(6)
Mr. Morgenstern's beneficial ownership includes: (1) 100,000 shares of common stock issuable upon exercise of a stock option, (2) 950,000 shares of common stock issuable upon exercise of warrants, (3) 325,000 shares of common stock issuable upon exercise of warrants and 800,000
(7)
Mr. Holubow's beneficial ownership includes 187,500 shares of common stock issuable upon exercise of warrants and 100,000 shares of common stock issuable upon exercise of a stock option.

(8)
Mr. Mangano's beneficial ownership includes: (1) 100,000 shares of common stock issuable upon exercise of a stock option, (2) 3,750,000 shares of common stock issuable upon exercise of a warrant and 7,800,000 shares of common stock held by JO & Co., of which Mr. Mangano is President, and (3) an aggregate of 2,250,001 shares of common stock and an aggregate of 1,124,999 shares of common stock issuable upon exercise of warrants held in various accounts, of which Mr. Mangano is an advisor and/or a trustee. Mr. Mangano has sole dispositive power over these shares. See note (13) below.

(9)
Ms. Ho's beneficial ownership includes 150,000 shares of common stock issuable upon exercise of stock options.

(10)
Mr. Kjaer's beneficial ownership includes 100,000 shares of common stock issuable upon exercise of a stock option.

(11)
Dr. Ben-Abraham's beneficial ownership includes 50,000 shares of common stock issuable upon exercise of a stock option.

(12)
Mr. Donenberg's beneficial ownership includes 933,698 shares of common stock issuable upon exercise of stock options and 6,250 shares of common stock issuable upon exercise of a warrant.

(13)
Dr. Lehman's beneficial ownership includes 186,500 shares of common stock issuable upon exercise of a stock option and 187,500 shares of common stock issuable upon exercise of a warrant.

(14)
Dr. Bell's beneficial ownership includes 266,667 shares of common stock issuable upon exercise of stock options and 1,875 shares of common stock issuable upon exercise of a warrant.

(15)
Includes 3,750,000 shares of common stock issuable upon exercise of a warrant. Ross Mangano, a director of BioSante, has sole voting power over these shares. See note (8) above. The address for JO & Co. is 112 West Jefferson Boulevard, Suite 613, South Bend, Indiana 46634.

(16)
Mr. Jebsen's beneficial ownership includes 750,000 shares of common stock issuable upon exercise of a warrant. Mr. Jebsen's address is c/o Jebsen & Co. Ltd., 28/F Caroline Center, 28 Yun Ping Road, Causeway Bay, Hong Kong.

(17)
Mr. Fung's beneficial ownership includes 750,000 shares of common stock issuable upon exercise of a warrant. Mr. Fung's address is c/o SP 2, 15/F, 46 Lyndhurst Terrace, Central Hong Kong.

(18)
Mr. Jebsen's beneficial ownership includes 250,000 shares of common stock issuable upon exercise of a warrant. Mr. Jebsen's address is c/o Jebsen & Co. Ltd., 28/F Caroline Center, 28 Yun Ping Road, Causeway Bay, Hong Kong.

(19)
The amount beneficially owned by all current directors and executive officers as a group includes 6,926,762 shares issuable upon exercise of warrants and stock options held by these individuals and 5,549,999 shares issuable upon exercise of warrants held by entities affiliated with these individuals. See notes (6), (8) and (15) above.

ELECTION OF DIRECTORS

(Proposal 1)

Number of Directors

        Our bylaws provide that the Board of Directors will consist of at least one member, or such other number as may be determined by the Board of Directors or stockholders at an annual or special meeting. The number of directors is currently set at eight.

Nominees for Director

        The Board of Directors has nominated the following individuals to serve as our directors until the next annual meeting of our stockholders or until their successors are elected and qualified. All of the nominees named below are current members of the Board of Directors.

        Avi Ben-Abraham, M.D., one of our current directors, has chosen not to stand for re-election at the Annual Meeting in view of his other responsibilities and obligations. The Board of Directors thanks Dr. Ben-Abraham for his service to BioSante.

        Proxies can only be voted for the number of persons named as nominees in this proxy statement, which is eight.

Vote Required

        Assuming a quorum is represented at the Annual Meeting, either in person or by proxy, the election of a nominee for director requires the affirmative vote of a plurality of the shares of common stock and class C special stock represented in person or by proxy at the Annual Meeting, voting together as a single class.

Board Recommendation

        The Board of Directors recommends a vote FOR the election of all of the nominees named above.

        If prior to the Annual Meeting, the Board of Directors should learn that any nominee will be unable to serve for any reason, the proxies that otherwise would have been voted for this nominee will be voted for a substitute nominee as selected by the Board of Directors. Alternatively, the proxies, at the Board's discretion, may be voted for that fewer number of nominees as results from the inability of any nominee to serve. The Board of Directors has no reason to believe that any of the nominees will be unable to serve.


Information About Nominees

        The following table sets forth the name, age and principal occupation of each nominee for director, as of April 1, 2002, as well as how long each nominee has served as a director of BioSante.

Name of Nominee
   Age
   Principal Occupation
   Director
Since
Louis W. Sullivan, M.D.(1)(2)(3)   68   President of the Morehouse School of Medicine and Chairman of the Board of Directors of BioSante   1996
Stephen M. Simes   50   Vice Chairman, President and Chief Executive Officer of BioSante   1998
Victor Morgenstern(2)   59   Chairman of the Board of Trustees of The Oakmark Funds and Managing Director of Resolute Partners L.P.   1999
Fred Holubow(3)   63   Vice President of Pegasus Associates   1999
Ross Mangano(1)   56   President of Oliver Estate, Inc.   1999
Edward C. Rosenow III, M.D.(3)   67   Master Fellow of the American College of Physicians and the American College of Chest Physicians   1997
Angela Ho(2)   49   Vice Chairman and Chief Managing Officer of Jet-Asia Ltd.   1998
Peter Kjaer(1)   41   President and Chief Executive Officer of Jet-Asia Ltd.   1999
(1)
Member of the Audit and Finance Committee

(2)
Member of the Compensation Committee

(3)
Member of the Scientific Review Committee

Other Information About Nominees

        The Honorable Louis W. Sullivan, M.D. has been our Chairman of the Board of Directors since March 1998 and has been a director of our company since its formation. Dr. Sullivan served as Secretary of Health and Human Services in the cabinet of President George Bush from 1989 to 1993. Since retiring from the Bush Administration, Dr. Sullivan has been President of the Morehouse School of Medicine in Atlanta, Georgia. He had previously served as President and Dean of the School from 1981 to 1985 and as President from 1985 to 1989. Since 1993, Dr. Sullivan has served and continues to serve on the Boards of several large U.S. corporations, including 3M Corp., Bristol-Myers Squibb Company, Cigna Corporation, Georgia Pacific Corp. and Household International Inc.

        Stephen M. Simes has served as our Vice-Chairman, President and a director of our company since January 1998 and Chief Executive Officer since March 1998. From October 1994 to January 1997, Mr. Simes was President, Chief Executive Officer and a Director of Unimed Pharmaceuticals, Inc., a company with a product focus on infectious diseases, AIDS, endocrinology and oncology. From 1989 to 1993, Mr. Simes was Chairman, President and Chief Executive Officer of Gynex Pharmaceuticals, Inc., a company which concentrated on the AIDS, endocrinology, urology and growth disorders markets. In 1993, Gynex was acquired by Bio-Technology General Corp., and from 1993 to 1994, Mr. Simes served as Senior Vice President and Director of Bio-Technology General Corp. Mr. Simes' career in the pharmaceutical industry started in 1974 with G.D. Searle & Co.

        Victor Morgenstern was elected a director of our company in July 1999. Mr. Morgenstern has more than 32 years of investment experience and is the Chairman of the Board of Trustees of The Oakmark Funds, an open-end registered investment company and serves as managing director of Resolute Partners L.P. He is a trustee of the Illinois Institute of Technology.

        Fred Holubow was elected a director of our company in July 1999. Mr. Holubow has been a Vice President of Pegasus Associates since he founded Pegasus in 1982. Pegasus Associates is currently an operating division of William Harris Investors, a registered investment advisory firm. He specializes in


analyzing and investing in pharmaceutical and biotechnology companies. Mr. Holubow has served on the Boards for Bio-Technology General Corp., Gynex Pharmaceuticals, Inc., ThermoRetec Corporation and Unimed Pharmaceuticals, Inc.

        Ross Mangano was elected a director of our company in July 1999. Mr. Mangano has been the President and a director of Oliver Estate, Inc., a management company specializing in investments in public and private companies since 1971. He is the Chairman of Cerprobe Corporation, and serves as a director for Blue Chip Casino, Inc., Orchard Software Corporation, and U.S. RealTel Inc.

        Edward C. Rosenow, III, M.D.has been a director of our company since November 1997. Dr. Rosenow was the Arthur M. and Gladys D. Gray Professor of Medicine at the Mayo Clinic from 1988 until his recent retirement. Beginning with his residency in 1960, Dr. Rosenow has worked at the Mayo Clinic in many professional capacities including as a Consultant in Internal Medicine (Thoracic Diseases) from 1966 to 1996, an Assistant Professor, Associate Professor and Professor of Medicine at the Mayo Clinic Medical School, President of the Mayo Clinic Staff in 1986, and Chair of the Division of Pulmonary and Critical Care Medicine from 1987 to 1994. Dr. Rosenow has also served as a consultant to NASA, space station FREEDOM at the Johnson Space Center in Houston, Texas from 1989 to 1990 and as the President of the American College of Chest Physicians from 1989 to 1990. He is a Master Fellow of the American College of Physicians as well as Master Fellow of the American College of Chest Physicians. In 1998, he received the Mayo Distinguished Alumnus Award.

        Angela Ho has been a director of our company since June 1998. Ms. Ho was elected to our Board of Directors as a representative of certain major investors in Hong Kong. Ms. Ho has been the Vice Chairman and Chief Managing Officer of Jet-Asia Ltd., a Hong Kong-based aircraft and management company, since April 1996. From June 1996 to June 1998, Ms. Ho was the President of Ho Galleries Ltd., a New York art gallery. She specializes in investments in small and microcap companies.

        Peter Kjaer has been a director of our company since July 1999. Mr. Kjaer has been President and Chief Executive Officer of Jet-Asia Ltd., a Hong Kong-based aircraft and management company, since April 1996 and a representative of certain major investors in Hong Kong. From April 1989 to July 1996, Mr. Kjaer was the General Manager and a director of the Gallery of Contemporary Living Ltd., a Hong Kong-based art gallery.

Information About the Board of Directors and its Committees

        The Board of Directors met four times during fiscal 2001. All of the directors attended 75% or more of the meetings of the Board of Directors and all such committees on which they served during fiscal 2001, except that Dr. Ben-Abraham, a director in 2001 to date, attended 50% of the meetings of the Board of Directors.

        The Board of Directors has an Audit and Finance Committee, Compensation Committee and Scientific Review Committee.

        Audit and Finance Committee.    The Audit and Finance Committee provides assistance to the Board of Directors in satisfying its fiduciary responsibilities relating to our accounting, auditing, operating and reporting practices, and reviews our annual financial statements, the selection and work of our independent auditors and the adequacy of internal controls for compliance with corporate policies and directives. The Audit and Finance Committee consisted of Mr. Kjaer, Dr. Sullivan and Mr. Mangano. The Audit and Finance Committee met once during fiscal 2001.

        Compensation Committee.    The Compensation Committee:

        The Compensation Committee consisted of Dr. Sullivan, Mr. Morgenstern and Ms. Ho. The Compensation Committee met twice during fiscal 2001.

        Scientific Review Committee.    The Scientific Review Committee assists in evaluating potential new licenses or new products. The Scientific Review Committee consisted of Dr. Sullivan, Mr. Holubow and Dr. Rosenow. The Scientific Review Committee did not meet during fiscal 2001 but as part of our Board was presented with and evaluated in-licenses and scientific progress.

Director Compensation

        We do not pay fees to our directors. We do, however, periodically compensate our directors through the granting of stock options. On January 1, 2001, we granted options to purchase 25,000 shares of common stock to each of our non-employee directors. These options have an exercise price of $0.67 per share, fully vest on January 1, 2002 and expire 10 years from the date of grant. All directors are reimbursed for travel expenses for attending meetings of the Board of Directors and any Board committees.

Audit and Finance Committee Report

        Notwithstanding anything to the contrary set forth in any of BioSante's previous or future filings under the Securities Act or the Exchange Act that might incorporate this proxy statement or future filings with the SEC, in whole or in part, the following report will not be deemed to be incorporated by reference into any such filing.

Membership of the Audit and Finance Committee

        The Audit and Finance Committee consists of Mr. Kjaer, Dr. Sullivan and Mr. Mangano, each of whom is a member of our Board of Directors and qualifies as "independent" as defined under the National Association of Securities Dealers' listing standards. The Audit and Finance Committee operates under a written charter adopted by the Board of Directors.

Review of BioSante's Audited Financial Statements for the Fiscal Year Ended December 31, 2001

        The Audit and Finance Committee has reviewed and discussed BioSante's audited financial statements for the fiscal year ended December 31, 2001 with BioSante's management. The Audit and Finance Committee has discussed with Deloitte & Touche L.L.P., BioSante's independent public accountants, the matters required to be discussed by Statement on Auditing Standards No. 61 (Communication with Audit Committees). The Audit and Finance Committee has also received the written disclosures and the letter from Deloitte & Touche L.L.P. required by Independence Standards Board Standard No. 1 (Independence Discussion with Audit Committees) and the Audit and Finance Committee has discussed the independence of Deloitte & Touche L.L.P. with them.

        Based on the Audit and Finance Committee's review and discussions noted above, the Audit and Finance Committee recommended to our Board of Directors that BioSante's audited financial statements be included in our Annual Report on Form 10-KSB for the fiscal year ended December 31, 2001 for filing with the SEC.


EXECUTIVE COMPENSATION AND OTHER BENEFITS

Summary of Cash and Other Compensation

        The following table provides summary information concerning cash and non-cash compensation paid to or earned by our Chief Executive Officer and our executive officers, who received or earned cash and non-cash salary and bonus of more than $100,000, for the fiscal year ended December 31, 2001.

Summary Compensation Table

 
   Annual Compensation
   Long-Term
Compensation
    
  
Name and Principal Position
   Year
   Salary ($)
   Bonus ($)
   Securities
Underlying
Options (#)
   All Other
Compensation ($)
  
Stephen M. Simes
 Vice Chairman, President and Chief Executive Officer		   2001
2000
1999		   $

 291,500
275,000
248,917		   $

 131,175
150,000
125,000
(1)
(2)		 714,063
0
1,856,250		   $

 18,388
29,317
22,965		 (3)
(3)
(3)

Phillip B. Donenberg
 Chief Financial Officer, Treasurer and Secretary
 
2001
2000
1999
 
 
150,000
127,000
110,000
 
 
45,000
42,000
33,000

(4)
(5)
215,469
0
521,875
 
 
13,592
13,286
13,001
(6)
(6)
(6)

Leah M. Lehman, Ph.D.
 Vice President, Clinical Development
 
2001
2000
1999
 
 
180,000
—
—
 
 
54,000
—
—
 
500,000
—
—
 
 
12,450
—
—
(7)

Steven J. Bell, Ph.D.
 Vice President, Research and Pre-Clinical Development
 
2001
2000
1999
 
 
102,000
91,521
85,313
 
 
30,000
26,000
10,000

(8)
50,000
0
125,000
 
 
11,250
11,250
6,500
(9)
(9)
(9)

John E. Lee (10)
 Former Vice President, Commercial Development
 
2001
2000
1999
 
 
146,407
70,833
 
 
—
—
—
 
—
500,000
—
 
 
9,338
81,470
—
(11)
(11)
(1)
Represents a cash bonus of $75,000 and a stock bonus of 125,000 shares of common stock valued at $75,000.

(2)
Represents a cash bonus of $75,000 and a stock bonus of 163,859 shares of common stock valued at $50,000.

(3)
Represents an auto allowance ($12,000 in 2001, $12,000 in 2000 and $12,000 in 1999), a 401(k) matching contribution ($5,250 in 2001, $5,250 in 2000 and $5,000 in 1999) and insurance premiums and taxes associated with the premiums ($1,138 in 2001, $12,067 in 2000 and $5,965 in 1999).

(4)
Represents a cash bonus of $30,000 and a stock bonus of 20,000 shares of common stock valued at $12,000.

(5)
Represents a cash bonus of $25,000 and a stock bonus of 26,217 shares of common stock valued at $8,000.

(6)
Represents an auto allowance ($7,200 in 2001, $7,200 in 2000 and $7,200 in 1999), a 401(k) matching contribution ($5,250 in 2001, $5,250 in 2000 and $5,000 in 1999) and insurance premiums paid and taxes associated with the premiums ($1,142 in 2001, $836 in 2000 and $801 in 1999).

(7)
Represents an auto allowance of $7,200 and a 401(k) matching contribution of $5,250.

(8)
Represents a cash bonus of $20,000 and a stock bonus of 10,000 shares of common stock valued at $6,000.
(9)
Represents an auto allowance ($6,000 in 2001, $6,000 in 2000 and $1,500 in 1999) and a 401(k) matching contribution ($5,250 in 2001, $5,250 in 2000 and $5,000 in 1999).

(10)
Mr. Lee was Vice President, Commercial Development from August 2000 to September 2001. Mr. Lee resigned as Vice President, Commercial Development on September 28, 2001.

(11)
Represents an auto allowance ($5,400 in 2001 and $3,000 in 2000), a 401(k) matching contribution ($3,938 in 2001 and $2,188 in 2000) and relocation expenses and associated taxes of $76,282 in 2000.

Option Grants in Last Fiscal Year

        The following tables summarize option grants and exercises during the fiscal year ended December 31, 2001 to or by each of the executive officers named in the Summary Compensation Table on page 11 and the potential realizable value of the options held by these persons at December 31, 2001.

 
   Individual Grants (1)
Name
   Number of
Securities
Underlying
Options
Granted (#)
   Percent of
Total Options
Granted to
Employees in
Fiscal Year
   Exercise
Price
Per Share
   Expiration
Date
Stephen M. Simes   714,063 (2) 41.00 % $ 0.40   4/5/11
Phillip B. Donenberg   215,469 (2) 12.37 % $ 0.40   4/5/11
Leah M. Lehman, Ph.D.   500,000 (3) 28.71 % $ 0.67   12/31/10
Steven J. Bell, Ph.D.   50,000 (4) 2.87 % $ 0.67   12/31/10
John E. Lee   —   —     —   —
(1)
All of the options granted to the individuals in this table were granted under our Amended and Restated 1998 Stock Option Plan.

(2)
This option vests in equal quarterly installments over three years so long as the executive officer remains employed by us at that date. To the extent not already exercisable, this option becomes immediately exercisable in full upon certain changes in control of our company and remains exercisable for the remainder of its term.

(3)
This option vests: (i) with respect to 74,600 shares on 6/30/2001 and 12/31/2001; (ii) 37,300 shares on 3/31/2002, 6/30/2002, 9/30/2002, 12/31/2002, 3/31/2003, 6/30/2003, 9/30/2003 and 12/31/2003; and (iii) 52,400 shares on 1/1/2004. To the extent not already exercisable, this option becomes immediately exercisable in full upon certain changes in control of our company and remains exercisable for the remainder of its term.

(4)
This option vests in equal annual installments over three years so long as the executive officer remains employed by us at that date. To the extend not already exercisable, this option becomes immediately exercisable in full upon certain changes in control of our company and remains exercisable for the remainder of its term.

Aggregated Option Exercises In Last Fiscal Year and Fiscal Year-End Option Values

        The following table summarizes the number and value of options held by each of the executive officers named in the Summary Compensation Table on page 11 at December 31, 2001. None of these executive officers exercised any stock options during 2001.

 
   Number of Securities
Underlying Unexercised
Options at December 31, 2001
   Value of Unexercised
In-the-Money Options
at December 31, 2001 (1)
Name
  Exercisable
   Unexercisable
   Exercisable
   Unexercisable
Stephen M. Simes   2,877,256   693,057   $ 2,049,490   $ 328,536
Phillip B. Donenberg   873,379   203,965   $ 604,070   $ 95,934
Leah M. Lehman, Ph.D   149,200   350,800   $ 26,856   $ 63,144
Steven J. Bell, Ph.D.   250,000   50,000   $ 140,625   $ 9,000
John E. Lee   275,000   225,000   $ —   $ —
(1)
Value based on the difference between the fair market value of one share of our common stock at December 31, 2001 ($0.85), and the exercise price of the options ranging from $0.23 to $0.91 per share. Options are in-the-money if the market price of the shares exceeds the option exercise price.

Employment and Separation Agreements

Simes Employment Agreement

        In January 1998, we entered into a letter agreement with Stephen M. Simes pursuant to which Mr. Simes serves as our Vice Chairman, President and Chief Executive Officer. The term of this agreement continues until December 31, 2003, after which time the term will be automatically extended for three additional years unless on or before October 1 immediately preceding the extension, either party gives written notice to the other of the termination of the agreement.

        Mr. Simes is entitled to receive an annual performance bonus of up to 50% of his then base salary if certain performance criteria are met. If Mr. Simes is terminated without cause or upon a change in control or if he terminates his employment for good reason, all of his options will become immediately exercisable and will remain exercisable for a period of one year (for the remainder of their term in the event of a change in control), and he will be entitled to a minimum severance payment of 12 months base salary. Mr. Simes is also subject to assignment of inventions, confidentiality and non-competition provisions.

Donenberg Employment Agreement

        In June 1998, we entered into a letter agreement with Phillip B. Donenberg pursuant to which Mr. Donenberg serves as our Chief Financial Officer. The term of this agreement continues until either party gives 30 days written notice to the other of the termination of the agreement.

        Mr. Donenberg is entitled to receive an annual performance bonus of up to 30% of his then base salary if certain performance criteria are met. If Mr. Donenberg is terminated without cause or upon a change in control or if he terminates his employment for good reason, all of his options will become immediately exercisable and will remain exercisable for a period of one year (for the remainder of their term in the event of a change in control), and he will be entitled to a minimum severance payment of 12 months base salary. Mr. Donenberg is also subject to assignment of inventions, confidentiality and non-competition provisions.

Employment Agreements with Other Executive Officers

        We have entered into employment agreements with each of our other executive officers, Leah M. Lehman, Ph.D. and Steven J. Bell, Ph.D. These agreements provide for a fixed salary which may be


adjusted from time to time by the Chief Executive Officer and the Compensation Committee of the Board. In addition, BioSante may pay Dr. Lehman and Dr. Bell an annual performance bonus of up to a maximum of 30% of their then base salary. The term of each of these employment agreements is for one year and will renew automatically every year unless either party gives the other party written notice of termination at least 30 days prior to the end of the then term of the agreement. If the executive officer's employment is terminated as a result of death or disability, by BioSante without cause or by the executive officer for good reason, the officer will be entitled to a severance payment in an amount equal to his or her base salary for the shorter of (1) 12 months or (2) the date upon which the officer obtains full-time employment or a consulting position with another company. In addition, the executive officer will receive health and dental benefits from BioSante during any severance period. Dr. Lehman and Dr. Bell are also subject to assignment of inventions, confidentiality and non-competition provisions.

Separation Agreement and Mutual Release

        On February 1, 2002, we entered into a separation and mutual release agreement with John E. Lee in connection with Mr. Lee's resignation as Vice President, Commercial Development and an employee of BioSante effective September 28, 2001. In connection with the separation and mutual release agreement, Mr. Lee received a severance payment of $184,166.66 on October 7, 2001 and will receive a monthly payment of $12,000 for eight months, commencing February 1, 2002 in consideration of providing marketing liaison services to BioSante during this time.

Change in Control Arrangements

        Under our Amended and Restated 1998 Stock Option Plan, options granted under that plan will become fully exercisable following certain changes in control of our company, such as:


RELATED PARTY RELATIONSHIPS AND TRANSACTIONS

Director Relationships

        Messrs. Morgenstern, Holubow and Mangano were elected to our Board of Directors in July 1999 as representatives of the lead investors in our May 1999 private placement. Neither Mr. Morgenstern, Mr. Holubow nor Mr. Mangano has entered into any voting agreements with the lead investors nor does Mr. Morgenstern, Mr. Holubow or Mr. Mangano otherwise have any control over the voting of shares held by the lead investors.

        Ms. Ho and Mr. Kjaer were elected to our Board of Directors as representatives of several investors located in Hong Kong. Neither Ms. Ho nor Mr. Kjaer has entered into any voting agreements with these Hong Kong investors nor does Ms. Ho or Mr. Kjaer otherwise have any control over the voting of shares held by these investors.

April 2001 Private Placement

        In connection with our April 2001 private placement, we sold an aggregate of 9,250,000 shares of our common stock and warrants to purchase an aggregate of 4,625,000 shares of our common stock for $0.40 per unit, each unit consisting of one share of common stock and a warrant to purchase 0.50 shares of our common stock, for an aggregate purchase price of $3,700,000, to accredited investors, including certain existing stockholders, directors and officers. Stephen M. Simes purchased 125,000 shares of common stock and a warrant to purchase 62,500 shares of common stock, Phillip B. Donenberg purchased 12,500 shares of common stock and a warrant to purchase 6,250 shares of common stock, Leah M. Lehman, Ph.D. purchased 375,000 shares of common stock and a warrant to purchase 187,500 shares of common stock, Steven J. Bell, Ph.D. purchase 3,750 shares of common stock and a warrant to purchase 1,875 shares of common stock, Victor Morgenstern, including an affiliated Trust and his wife, purchased an aggregate of 750,000 shares of common stock and warrants to purchase an aggregate of 375,000 shares of common stock and Fred Holubow purchased 125,000 shares of common stock and a warrant to purchase 62,500 shares of common stock. Ross Mangano, as advisor and trustee, has sole dispositive power over 2,250,001 shares of common stock and warrants to purchase an aggregate of 1,124,999 shares purchased in the April 2001 private placement.

Other Agreements with Affiliates

        In January 2001, we entered into a consulting agreement with Scientific Research Development Corporation, a company owned and operated by Ronald B. McCright, the husband of Leah M. Lehman, Ph.D., an executive officer of BioSante. Under the agreement, Scientific Research Development Corporation provides us with database and statistical programming, database management, medical writing and project management services. In consideration for such services, we paid Scientific Research Development Corporation an aggregate of approximately $60,000 during the fiscal year ended December 31, 2001. This agreement expires on December 31, 2002.

        In July 2001, Avi Ben-Abraham, M.D., a director of BioSante, and BioSante entered into a settlement agreement with a stockholder of BioSante in connection with certain claims and disputes among the stockholder, Dr. Ben-Abraham and BioSante arising out of actions of Dr. Ben-Abraham during 1996. In exchange for a release of all claims, suits, damages and judgments among the stockholder, BioSante and Dr. Ben-Abraham, Dr. Ben-Abraham transferred 500,000 shares of his BioSante common stock to the stockholder.

PROPOSAL TO AMEND OUR AMENDED AND RESTATED 1998 STOCK OPTION PLAN TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK RESERVED FOR ISSUANCE

(Proposal 2)

Proposed Amendment

        On December 8, 1998, the Board of Directors adopted our Amended and Restated 1998 Stock Option Plan, and on July 13, 1999 our stockholders approved the option plan. This option plan provides for the grant to employees, officers, directors, consultants and independent contractors of our company of options to purchase shares of common stock that qualify as "incentive stock options" within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, as well as non-statutory options that do not qualify as incentive stock options. This plan is administered by the Compensation Committee of the Board of Directors, which determines the persons who are to receive options, as well as the type, terms and number of shares subject to each option.

        On January 14, 2002, the Board of Directors amended the option plan, subject to stockholder approval, to increase the number of shares of common stock reserved for issuance under the option plan by 1,500,000 shares, from 8,500,000 shares to 10,000,000 shares. You are being asked to approve this amendment at the Annual Meeting.

Purpose of the Amendment

        Providing stock option grants under our option plan is an important element in our overall success. In general, the Board of Directors believes that equity-based incentives align the interests of our management and employees with those of our stockholders. In addition, providing stock option grants under the option plan is an important strategy for attracting and retaining the type of high-quality executives, employees and advisors the Board of Directors believes is necessary for the achievement of our goals.

        Given the intense competition for such personnel, the Board of Directors believes that its ability to offer competitive compensation packages, including those with equity-based incentive components, such as stock options, is particularly important in attracting and retaining qualified candidates.

Summary of the Amended and Restated 1998 Stock Option Plan

        A general description of the material terms of our option plan, as proposed to be amended, is set forth below. Unless otherwise indicated, the following summary of the material provisions of the plan assumes the approval of the proposed amendment increasing the number of shares of common stock reserved for issuance. This summary is qualified in its entirety by reference to the actual text of the option plan, a copy of which you may obtain from us at the address set forth at the beginning of this proxy statement.

        Purpose of the Plan.    The option plan's purpose is to advance our interests and the interests of our stockholders by enabling us to attract and retain talented persons by providing an incentive to these individuals through equity participation in BioSante and also rewarding individuals who contribute to the achievement of our economic objectives.

        Eligible Participants.    All employees of BioSante and any non-employee directors, consultants and independent contractors of BioSante who, in the judgment of the Compensation Committee, have contributed, are contributing or are expected to contribute to the achievement of our economic objectives are eligible to participate in the option plan. On April 1, 2002, approximately 19 individuals were eligible to receive options under the option plan.

        Participants may be granted one or more options. The options will always be subject to whatever terms and conditions the Compensation Committee determines, provided such terms and conditions are


consistent with the option plan. All options are deemed granted as of the date specified in the Compensation Committee's resolution, which will be the date of the participant's option agreement.

        Administration.    The Compensation Committee of the Board of Directors administers the option plan. The Compensation Committee has the authority to determine all terms and conditions of options as long as they are consistent with the terms of the option plan. The Compensation Committee also has the authority to amend or modify the terms of any outstanding options in any manner. Any amendment or modification, however, must be permitted by the option plan and may not adversely affect any participant's rights without his or her consent. Each determination, interpretation or other action of the Compensation Committee will be conclusive and binding for all purposes on all persons.

        Stock Subject to the Option Plan.    The amendment to the option plan proposed would increase the number of shares of common stock specifically reserved for issuance under the option plan from 8,500,000 to 10,000,000 shares.

        As of April 1, 2002, no shares of common stock had been issued upon the exercise of options granted under the option plan, and options to purchase 7,762,657 shares of common stock were outstanding. Accordingly, 737,343 shares remained available for future grant under the option plan as of that date. Assuming approval of an increase of 1,500,000 shares to the option plan, 2,237,347 shares would be available for future grants.

        The following points describe how our Compensation Committee determines the number of shares of common stock available for issuance under our option plan at any point in time.

        In the event of any reorganization, merger, recapitalization, stock dividend, stock split or similar change in our corporate structure or our shares, appropriate adjustments will be made to the number and kind of shares reserved under the plan and under outstanding options and to the exercise price of outstanding options.

        Options.    An option provides the optionee with the opportunity to purchase a specified number of shares of common stock at a predetermined price for a specific period of time. Incentive options must be granted with an exercise price equal to at least the fair market value of the common stock on the date of grant. Non-qualified options must be granted with an exercise price equal to at least 85% of the fair market value of the common stock on the date of grant. For purposes of the plan, the fair market value of the common stock is the closing price as reported by the Over-the-Counter Bulletin Board. On April 1, 2002, the closing sale price of a share of our common stock on the OTC Bulletin Board was $0.51.

        Options will become exercisable at such times and in such installments as may be determined by the Compensation Committee, provided that options may not be exercisable after 10 years from their date of grant.

        The exercise price of options must be paid in cash, except that the Compensation Committee may allow payment to be made (in whole or in part) by tender of a "broker exercise notice" (pursuant to which the broker or dealer is instructed to sell enough shares or loan the optionee enough money to pay the exercise price and to remit such sums to us), a promissory note, a transfer of shares of common stock (either previously owned by the participant or previously acquired upon a partial stock option exercise) and owned for over six months, or by a combination of such methods. The aggregate fair market value of shares of common stock with respect to which incentive stock options may become


exercisable for the first time by a participant in any calendar year may not exceed $100,000. Any incentive options in excess of this amount will be treated as non-statutory options.

        Effect of Change in Control.    We refer you to "Executive Compensation and Other Benefits—Change in Control Arrangements" for discussion regarding the effects of a "change in control" on options granted under the option plan.

        Effect of Termination of Employment on Service.    If a participant's employment or other service with BioSante terminates by reason of death or disability, all outstanding options will remain exercisable to the extent then exercisable for a period of six months after termination, but in no event after their original expiration date. If a participant's employment or other service with BioSante is terminated by reason of retirement, all outstanding options will remain exercisable to the extent then exercisable for a period of three months after termination, but in no event after their original expiration date.

        If a participant's employment or other service with us is terminated for any other reason, other than for cause, all outstanding options will remain exercisable to the extent then exercisable for a period of three months after termination.

        If a participant's employment or other service with us is terminated for cause, all outstanding options will immediately terminate without notice.

        The Board of Directors may, in our discretion, modify these post-termination provisions, provided that no option may remain exercisable beyond its expiration date.

        Amendment of Option Plan.    The Board of Directors may suspend or terminate the option plan or any portion thereof at any time, and may amend the option plan from time to time to conform the plan to any change in applicable laws or regulations or in any other respect the Board of Directors may deem to be in the best interests of BioSante.

        The Board of Directors may not, however, make an amendment to the option plan without stockholder approval if stockholder approval is required under Rule 16b-3 under the Securities Exchange Act of 1934, as amended, Section 422 of the Internal Revenue Code or the rules of any exchange, Nasdaq or similar regulatory body, if applicable at that time to BioSante. Furthermore, the Board of Directors cannot make any modification to the option plan that would adversely affect outstanding options without the consent of the affected participants.

        Termination.    The option plan will terminate at midnight on December 8, 2008, unless terminated earlier by the Board of Directors. No options may be granted after such termination. Options outstanding upon termination of the option plan may continue to be exercised according to their terms.

Federal Income Tax Consequences

        The following description of federal income tax consequences is based on current statutes, regulations and interpretations. The description does not include foreign, state or local income tax consequences. In addition, the description is not intended to address specific tax consequences applicable to directors, executive officers or greater than 10% stockholders of BioSante or to any individual participant who receives an option under the option plan.

        Incentive Stock Options.    There will not be any federal income tax consequences to either the participant or BioSante as a result of the grant to an employee of an incentive stock option under the option plan. The exercise by a participant of an incentive stock option also will not result in any federal income tax consequences to BioSante or the participant, except that:

        Special rules will apply if previously acquired shares of common stock are permitted to be tendered in payment of an option exercise price.

        When a participant disposes of shares acquired upon exercise of an incentive stock option, the federal income tax consequences will depend upon how long the participant held those shares. If the participant does not dispose of the shares within two years after the incentive stock option was granted, nor within one year after the participant exercised the incentive stock option, then the participant will recognize a long-term capital gain or loss. The amount of the long-term capital gain or loss will be equal to the difference between:

        We are not entitled to any compensation expense deduction under these circumstances.

        If the participant does not satisfy both of the above holding period requirements, then the participant will be required to report as ordinary income, in the year the participant disposes of the shares, the amount by which the lesser of the fair market value of the shares at the time of exercise of the incentive stock option, or the amount realized on the disposition of the shares exceeds the option price for the shares.

        We will be entitled to a compensation expense deduction in an amount equal to the ordinary income includable in the taxable income of the participant. This compensation income may be subject to withholding. The remainder of the gain recognized on the disposition, if any, or any loss recognized on the disposition, will be treated as long-term or short-term capital gain or loss, depending on the holding period.

        Non-Statutory Stock Options.    Neither the participant nor BioSante incurs any federal income tax consequences as a result of the grant of a non-statutory stock option. Upon exercise of a non-statutory stock option, a participant will recognize ordinary income, subject to withholding, on the date of exercise in an amount equal to the difference between:

        The participant may be subject to an additional excise tax if any amounts are treated as excess parachute payments (see explanation below). Special rules will apply if previously acquired shares of common stock are permitted to be tendered in payment of an option exercise price.

        At the time of a subsequent sale or disposition of any shares of common stock obtained upon exercise of a non-statutory stock option, any gain or loss will be treated as long-term or short-term capital gain or loss, depending on the holding period from the date of exercise.

        In general, we will be entitled to a compensation expense deduction in connection with the exercise of a non-statutory stock option for any amounts includable in the taxable income of the participant as ordinary income, provided we comply with any applicable withholding requirements.

        Excise Tax on Parachute Payments.    The Internal Revenue Code also imposes a 20% excise tax on the recipient of "excess parachute payments," as defined in the Internal Revenue Code and denies tax deductibility to us on excess parachute payments. Generally, parachute payments are payments in the nature of compensation to employees of a company who are officers, stockholders or highly compensated individuals, which payments are contingent upon a change in ownership or effective control of the company, or in the ownership of a substantial portion of the assets of the company. For example, acceleration of the exercisability of options or the vesting of restricted stock awards upon a change in control of BioSante may constitute parachute payments, and in certain cases, "excess parachute payments."


        Section 162(m).    Under Section 162(m) of the Internal Revenue Code, the deductibility of certain compensation paid to the chief executive officer and each of the four other most highly compensated executives of a publicly held corporation is limited to $1,000,000. Compensation for this purpose generally includes any items of compensation expense described above in connection with incentive awards under the option plan. However, certain types of compensation are excepted from this limit, including compensation that qualifies as "performance-based compensation." Under Section 162(m), any compensation expense resulting from the exercise of options under the option plan with exercise prices equal to (or greater than) the fair market value of the common stock on the date of grant should qualify as "performance-based compensation" excepted from the limit of Section 162(m). However, compensation expense in connection with any other incentive awards under the option plan will be subject to this limit.

Options Under the Option Plan

        The table below summarizes outstanding options under our option plan as of April 1, 2002 held by the persons or groups listed below. The options granted in fiscal year 2001 to the Named Executive Officers are also disclosed in the Summary of Compensation Table on page 11 and the option grants in Last Fiscal Year on page 12. Options granted in the future under the plan are within the discretion of the Compensation Committee and therefore cannot be ascertained at this time.

New Plan Benefits
Amended and Restated 1998 Stock Option Plan

Name and Position
   Number
of Shares
Underlying
Options
Stephen M. Simes   3,570,313
Phillip B. Donenberg   1,077,344
Leah M. Lehman, Ph.D.   900,000
Steven J. Bell, Ph.D.   500,000
   
Executive Group   6,047,657
Non-Executive Director Group   925,000
Non-Executive Employee Group   790,000
   
  Total   7,762,657

Securities Authorized for Issuance Under Equity Compensation Plans

        The following table summarizes securities authorized for issuance under our equity compensation plans.

Plan Category
   (a)
Number of Securities to
be Issued Upon Exercise
of Outstanding Options,
Warrants and Rights
   (b)
Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights
   (c)
Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation Plans
(excluding securities
reflected in column (a))
Equity compensation plans approved by security holders   7,762,657   $ 0.39   737,343
Equity compensation plans not approved by security holders   N/A     N/A   N/A
   
 
 
  Total   7,762,657   $ 0.39   737,343

        Our only equity compensation plan is the BioSante Pharmaceuticals, Inc. Amended and Restated 1998 Stock Plan, which has been approved by BioSante's stockholders. We do not have any other equity compensation plans.


Vote Required

        The affirmative vote of the holders of a majority of the shares of our common stock and class C special stock, present in person or by proxy on this matter at the Annual Meeting, voting together as a single class, is necessary for approval of the amendment to our option plan to increase the number of shares of common stock reserved for issuance by 1,500,000 shares, from 8,500,000 shares to 10,000,000 shares.

Board Recommendation

        The Board of Directors recommends that you vote FOR approval of the amendment to our option plan to increase the number of shares of common stock reserved for issuance by 1,500,000, from 8,500,000 shares to 10,000,000 shares.


PROPOSAL TO EFFECT A REVERSE STOCK SPLIT OF
OUR COMMON STOCK AND OUR CLASS C SPECIAL STOCK

(Proposal 3)

Proposed Reverse Stock Split

        On April 16, 2002, BioSante's Board of Directors adopted a resolution approving and recommending to our stockholders for their approval a proposal to amend Article IV of our Amended and Restated Certificate of Incorporation to authorize a reverse split of the issued and outstanding shares of our common stock and our class C special stock, at a ratio, to be established by the Board of Directors in its sole discretion, not to exceed one-for-ten. The form of the proposed Certificate of Amendment is attached to this proxy statement as Exhibit A. The amendment would effect the reverse stock split by reducing the number of issued and outstanding shares of our common stock and our class C special stock by the ratio to be determined by the Board of Directors. Although the amendment would reduce proportionately the number of authorized shares of our class C special stock, it would not change the number of authorized shares of our common stock or change the par value of our common stock or our class C special stock.

        To avoid the existence of fractional shares, any fractional share created as a result of the reverse stock split will be purchased, or cashed-out, by BioSante. Therefore, any stockholder who holds fewer than the number of shares equal to the number used in the split ratio (i.e., ten shares, if the split ratio is one-for-ten) will have his or her shares converted into less than one share in the reverse stock split and will receive a cash payment from BioSante equal to the fair value of the fractional share. We refer to such a stockholder in this proxy statement as a "cashed-out stockholder." Any stockholder who is not a cashed-out stockholder but holds a number of shares not evenly divisible by the number used in the split ratio will also receive a cash payment from BioSante equal to the fair value of the fractional share created. We refer to such a stockholder in this proxy statement as a "partially cashed-out stockholder." Any cash payment paid by BioSante in the reverse stock split will be based on the closing sale price of our common stock on the Over-the-Counter Bulletin Board, or OTC Bulletin Board, on the effective date of the reverse stock split.

        Approval of the proposed amendment to our Amended and Restated Certificate of Incorporation to effect the reverse stock split requires the affirmative vote of the holders of a majority of the outstanding shares of our common stock and a majority of the outstanding shares of our class C special stock as of the record date, voting as separate classes. By voting to approve the proposed amendment, our stockholders will be authorizing the Board of Directors, without further stockholder approval, to determine the ratio of the reverse stock split so long as the ratio does not exceed one-for-ten. In connection with any determination to effect a reverse stock split, the Board of Directors will select the reverse stock split ratio that it believes will result in the greatest marketability of our common stock based on prevailing market conditions and the highest likelihood of obtaining a stock exchange listing for our common stock. No further action on the part of our stockholders will be required for the Board to select the reverse stock split ratio or to either effect or abandon the reverse stock split. If no reverse stock split is effected by the first anniversary of the Annual Meeting approving the reverse stock split, the Board of Directors' authority to effect the reverse stock split will terminate. In addition, by voting to approve the proposed amendment, our stockholders will be authorizing our officers to make immaterial changes to the proposed amendment as our officers executing the amendment may deem appropriate.

Purpose of the Reverse Stock Split

        There are several reasons why the Board of Directors recommends that our stockholders approve the reverse stock split, including the following:


Improve Marketability and Liquidity of Our Common Stock

        We believe that a higher price per share of our common stock could improve the marketability and liquidity of our common stock and that the listing of our common stock on a stock exchange will increase liquidity of our common stock and may potentially minimize the spread between the "bid" and "asked" prices of our common stock quoted by market makers. We believe that the current per share price level of our common stock has reduced the effective marketability of our common stock because of the reluctance of many leading brokerage firms to recommend low-priced stock to their clients. Some investors view low-priced stock as speculative and unattractive. In addition, a variety of brokerage house policies and practices tend to discourage individual brokers within those firms from dealing in low-priced stock. Such policies and practices pertain to the payment of brokers' commissions and to the time-consuming procedures that function to make the handling of low-priced stocks unattractive to brokers from an economic standpoint.

        The federal "penny stock" rules also adversely affect the marketability of low-priced stocks, including our common stock. Federal regulations under the Securities Exchange Act of 1934, as amended, regulate the trading of so-called "penny stocks," which are generally defined as any security not listed on a national securities exchange or Nasdaq, priced at less than $5.00 per share and offered by an issuer with limited net tangible assets and revenues. Since our common stock currently trades on the OTC Bulletin Board at less than $5.00 per share, our common stock is a "penny stock" and may not be traded unless a disclosure schedule explaining the penny stock market and the risks associated therewith is delivered to a potential purchaser prior to any trade.

        Because brokerage commissions on low-priced stock generally represent a higher percentage of the stock price than commissions on higher-priced stocks, the current per share price of our common stock results in individual stockholders paying transaction costs (commission, markups or markdowns) that represent a higher percentage of their total share value than would be the case if the per share price of our common stock was substantially higher. This factor may also limit the willingness of institutions to purchase our common stock at its current market price.

        Although any increase in the market price of our common stock resulting from the reverse stock split may be proportionately less than the decrease in the number of shares outstanding, the proposed reverse stock split could result in a market price that would be high enough for the shares of our common stock to overcome the reluctance, policies and practices of brokerage firms and investors referred to above, to avoid "penny stock" regulation and to diminish the adverse impact of correspondingly higher trading commissions for the shares. No assurance can be provided, however, that our common stock will trade at a higher price or that we will be successful in improving the marketability and liquidity of our common stock after the reverse stock split.

Increase Market Price of Our Common Stock and Consequently the Likelihood of Obtaining a Stock Exchange Listing for Our Common Stock

        The proposal to approve the reverse stock split is intended to assist us in listing our common stock on a stock exchange. This may be achieved by combining the outstanding shares of our common stock so that the outstanding shares of our common stock after giving effect to the reverse stock split trade at a higher price per share than the outstanding shares of our common stock before giving effect to the reverse stock split. BioSante's Board of Directors believes that listing our common stock on a stock exchange is in the best interests of BioSante and our stockholders. We believe that a stock exchange listing of our common stock may enhance our access to capital and increase our flexibility in


responding to anticipated capital requirements. We believe that current and prospective investors will view an investment in BioSante more favorably if shares of our common stock are listed on a stock exchange; and therefore, we believe that we will be able to attract more individual and institutional investors who otherwise would not buy any of our shares. No assurance can be provided, however, that our common stock will trade at a higher price or that we will be successful in meeting all the requirements in order to list our common stock on a stock exchange after the reverse stock split.

Eliminate Administrative Burden Associated with Our Smallest Stockholders

        As of April 1, 2002, approximately 909 record holders of our common stock, or approximately 56% of the total number of record holders of our common stock, owned fewer than ten shares. In addition, these stockholders owned in the aggregate 4,216 shares of our common stock, representing less than 0.007% of our total shares of common stock outstanding. Based on the closing sale price of a share of our common stock on the OTC Bulletin Board on April 1, 2002 of approximately $0.51, ownership of ten shares of our common stock would have a market value of approximately $5.10.

        Accordingly, our cost of maintaining many small accounts is disproportionately high when compared with the total number of shares involved. The following table shows the number of record holders of our common stock holding fewer than ten, nine, eight, seven, six, five, four, three or two shares, and the number of outstanding shares of common stock held by these record holders:

Reverse Stock Split Ratio
   Number of Record Holders
   Number of Outstanding
Shares of Common Stock
Held by Such Record Holders
Fewer than ten shares   909   4,216
Fewer than nine shares   835   3,550
Fewer than eight shares   835   3,550
Fewer than seven shares   822   3,459
Fewer than six shares   477   1,389
Fewer than five shares   466   1,334
Fewer than four shares   398   1,062
Fewer than three shares   74   90
Fewer than two shares   58   58

        In view of the disproportionate cost to us of maintaining small stockholder accounts, we believe that it would be beneficial to the company and our stockholders as a whole to eliminate the administrative burden and cost associated with our smallest stockholders.

Provide Cost Effective Method for Our Smallest Stockholders to Dispose of Their Shares

        The reverse stock split will also enable the cashed-out stockholders to dispose of their investment at market value and, in effect, avoid brokerage fees on the transaction. Stockholders owning a small number of our shares would, if they chose to sell their shares otherwise, likely incur brokerage fees disproportionately high relative to the market value of their shares. In some cases, these stockholders might encounter difficulty in finding a broker willing to handle such small transactions.

No Assurance that Anticipated Effects of the Reverse Stock Split Will Occur

        For all the above reasons, the Board of Directors believes that the reverse stock split is advisable and in the best interests of BioSante and our stockholders. There can be no assurance, however, that the reverse stock split would have the desired consequences. Specifically, there can be no assurance that the foregoing effects would occur following the reverse stock split, that our common stock would be accepted for listing on a stock exchange, that the market price of our common stock immediately after implementation of the proposed reverse stock split would be maintained for any period of time, or that, assuming the maximum ratio of a one-for-ten stock split, such market price would approximate ten times the market price before the proposed reverse stock split.


Effects of the Reverse Stock Split on BioSante's Stockholders

        The reverse stock split will affect stockholders holding fewer than the number of shares equal to the number used in the split ratio (e.g., ten shares, if the split ratio is one-for-ten) differently than stockholders holding a number of shares equal to or exceeding the number used in the split ratio.

Stockholders Holding Fewer than the Number of Shares Equal to the Number Used in the Split Ratio

        If the reverse stock split is approved by our stockholders and completed and you are a "cashed-out stockholder", that is, a stockholder holding fewer than the number of shares equal to the number used in the split ratio (e.g., ten shares, if the split ratio is one-for-ten) immediately prior to the reverse stock split:

        If you are a "cashed-out stockholder" with a stock certificate representing your cashed-out shares:

        If you want to continue to hold BioSante common stock after the reverse stock split, you may do so by taking either of the following actions far enough in advance so that it is complete by the effective date of the reverse stock split:

Stockholders Holding a Number of Shares Equal to At Least the Number Used in the Split Ratio

        If the reverse stock split is approved by our stockholders and completed and you hold a number of shares equal to at least the number used in the split ratio, we will convert your shares into a lesser number of shares equal to the number of shares you hold immediately prior to the reverse stock split, multiplied by a fraction equal to one divided by the number used in the reverse split ratio. For example, if the reverse split ratio is one-for-ten, the result of the reverse stock split will be for every ten shares you hold prior to the reverse stock split, you will hold one share after the reverse stock split.

        Instead of receiving any fractional share of BioSante common stock or class C special stock, as the case may be, existing after the reverse stock split, you will receive cash equal to the purchase price of your affected shares. See the section entitled "Determination of Purchase Price" below for an explanation of how we will determine this price. You will not receive any interest in cash payments owed to you as a result of any fractional shares created in the reverse stock split.

        Following the reverse stock split, existing stock certificates cannot be used for either transfers or deliveries of our common stock or our class C special stock. You will receive a transmittal letter from us as soon as practicable after the effective date, which will contain instructions on how to surrender your old certificates to our transfer agent, Computershare Trust Company of Canada, and receive new certificates. You will not receive your new certificates until you surrender your outstanding certificates to our transfer agent, together with a completed and executed transmittal letter.

        If approved and implemented, the reverse stock split would result in some stockholders owning "odd-lots" of less than 100 shares of our common stock. Odd-lot shares may be more difficult to sell and brokerage commissions and other costs of transactions in odd-lots are generally somewhat higher than the costs of transactions in "round-lots" of even multiples of 100 shares. The Board of Directors believes, however, that these risks are outweighed by the benefits of the reverse stock split discussed above under the heading "Purpose of the Reverse Stock Split."

Determination of Purchase Price

        We will value each outstanding share of our common stock held at the close of business on the effective date of the reverse stock split at the closing sale price of a share of our common stock on the OTC Bulletin Board on the effective date, without interest. We will refer to this per-share price as the "common stock purchase price."

        We will value each outstanding share of our class C special stock held at the close of business on the effective date at the common stock purchase price minus $0.25. We will refer to this per-share price as the "class C special stock purchase price."

        Each cashed-out stockholder will receive cash in the amount of the common stock purchase price or class C special stock purchase price, as the case may be, multiplied by the number of shares of our common stock or our class C special stock, as the case may be, held immediately prior to the reverse stock split. Each partially cashed-out stockholder will receive cash in the amount of the common stock purchase price or class C special stock purchase price, as the case may be, multiplied by the fractional share created as a result of the reverse stock split. All amounts payable to these stockholders will be subject to applicable federal income tax and state abandoned property laws. No brokerage commissions or service charges will be payable by these stockholders in connection with the reverse stock split. Moreover, we will pay no interest on cash sums due any stockholder pursuant to the reverse stock split.


Hypothetical Scenarios Illustrating the Effects of the Reverse Stock Split on BioSante's Stockholders

        The following table summarizes the effects of the reverse stock split on hypothetical BioSante stockholders, assuming a reverse stock split of one-for-ten.

Hypothetical Scenario
   Result
Andy is a stockholder who holds five shares of BioSante common stock on the effective date of the reverse stock split. At that time, assume the common stock purchase price of one share of BioSante common stock is $0.50 (see "Determination of Purchase Price" above).   Instead of receiving a fractional share (0.5 of a share) of BioSante common stock after the reverse stock split, Andy's five shares will be converted into the right to receive cash. Assuming the common stock purchase price is $0.50 per share, Andy will receive $2.50 ($0.50 times five shares).

 
 
Note: If Andy wants to continue his investment in BioSante, he can buy at least five more shares of BioSante common stock and hold it in his record account. Andy would have to act far enough in advance of the effective date so that the purchase is complete by the close of business on that date.

Mary has two record accounts. On the effective date of the reverse stock split, she holds five shares of BioSante common stock in one account and five shares of BioSante common stock in the other. All of her shares are registered in her name only.
 
Mary will receive cash payments equal to the common stock purchase price of her shares of BioSante common stock in each record account instead of receiving fractional shares. Assuming the common stock purchase price is $0.50 per share, Mary would receive two checks totaling $5.00 (five times $0.50 = $2.50, multiplied by two).

 
 
Note: If Mary wants to continue her investment in BioSante, she can consolidate/transfer her two record accounts prior to the effective date of the reverse stock split. In that case, her holdings will not be cashed out in connection with the reverse stock split because she will hold at least ten shares in one record account. She would have to act far enough in advance of the effective date of the reverse stock split so that the consolidation is complete by the close of business on such date.

Oliver holds 100 shares of BioSante common stock in his record account as of the effective date.
 
After the reverse stock split, Oliver will hold 10 shares of BioSante common stock.

Effects of the Reverse Stock Split on BioSante

        The reverse stock split, if approved by our stockholders and completed, will result in a number of effects on BioSante, including the following:

Number of Holders of BioSante Common Stock

        Following the reverse stock split, the number of holders of BioSante common stock would be reduced. The amount of the reduction would depend upon the split ratio used. Based on our best estimates, if the reverse stock split had taken place on April 1, 2002, the number of registered holders of our common stock would have been reduced depending upon the split ratio used as shown in the table below:

Reverse Stock Split Ratio
   Number of Registered Holders of
Common Stock After the Reverse
Stock Split
No reverse stock split   1,622
Reverse stock split of one-for-two   1,564
Reverse stock split of one-for-three   1,548
Reverse stock split of one-for-four   1,224
Reverse stock split of one-for-five   1,156
Reverse stock split of one-for-six   1,145
Reverse stock split of one-for-seven   800
Reverse stock split of one-for-eight   787
Reverse stock split of one-for-nine   787
Reverse stock split of one-for-ten   713

        Since all of the holders of our class C special stock hold more than ten shares, the number of holders of our class C special stock would not be reduced as a result of the reverse stock split.

Number of Issued and Outstanding Shares of Common Stock and Class C Special Stock

        As of April 1, 2002, there were 63,218,798 shares of our common stock issued and outstanding and 4,666,024 shares of our class C special stock issued and outstanding. As a result of the reverse stock split, the number of shares of our common stock and our class C special stock issued and outstanding would be reduced depending upon the split ratio used. Based on our best estimates, if the reverse stock split had taken place on April 1, 2002, the number of issued and outstanding shares of our common


stock and class C special stock would be reduced depending upon the split ratio used as shown in the table below:

Reverse Stock Split Ratio
   Number of Outstanding
Shares of Common Stock
After the Reverse Stock Split
   Number of Outstanding
Shares of Class C
Special Stock After the
Reverse Stock Split
No reverse stock split   63,218,798   4,666,024
Reverse stock split of one-for-two   31,609,370   2,333,012
Reverse stock split of one-for-three   21,072,903   1,555,341
Reverse stock split of one-for-four   15,804,434   1,166,506
Reverse stock split of one-for-five   12,643,493   933,204
Reverse stock split of one-for-six   10,536,235   777,670
Reverse stock split of one-for-seven   9,030,763   666,574
Reverse stock split of one-for-eight   7,901,906   583,253
Reverse stock split of one-for-nine   7,023,916   518,447
Reverse stock split of one-for-ten   6,321,458   466,602

        As a consequence, the aggregate par value of our common stock and our class C special stock would also be reduced. Stockholders' equity will be reduced by the amount of cash paid out to fractional stockholders who own less than ten shares. All of our share and per share information would be retroactively adjusted following the effective date to reflect the reverse stock split for all periods presented in future filings.

Amount of Cash to Be Paid By BioSante in Cashing Out Fractional Shares

        The total cash to be paid by BioSante in cashing out fractional shares created in the reverse stock split is unknown. If the reverse stock split had been completed on April 1, 2002, when the closing sale price of our common stock on the OTC Bulletin Board was $0.51, then the cash payments that would have been issued to cashed-out and partially cashed-out stockholders instead of fractional shares would have been equal to $0.51 multiplied by the number of pre-split shares purchased by BioSante. The actual amount will depend on the number of cashed-out and partially cash-out stockholders in the reverse stock split on the effective date of the reverse stock split, which will vary from the number estimated based on the April 1, 2002 date and the closing sale price of our common stock on the OTC Bulletin Board on the effective date of the reverse stock split.

Options, Benefit Plans, Warrants and Other Securities

        If the reverse stock split is implemented, outstanding and unexercised options, warrants, and other securities convertible into, or exercisable or exchangeable for, shares of our common stock would be automatically converted into an economically equivalent option, warrant or other security to purchase shares of our common stock by decreasing the number of shares underlying the option, warrant, or other security and increasing the exercise price appropriately. For example, if the reverse stock split was one-for-ten, an option, warrant or other security to purchase 160 shares of our common stock at an exercise price of $1.00 per share would become an option, warrant, or other security to purchase 16 shares of our common stock at an exercise price of $10.00 per share. In addition, the number of shares of our common stock that remain available for issuance under our benefit plans would be reduced accordingly. We do not have any outstanding options, warrants, and other securities convertible into, or exercisable or exchangeable for, shares of our class C special stock. As a result of the reverse stock split, the conversion price of our class C special stock into our common stock will increase to $2.50, assuming the split ratio is one-for-ten.

Rights and Preferences of Shares of BioSante Stock

        With the exception of the number of shares issued and outstanding and the conversion price of our class C special stock as described above, the rights and preferences of outstanding shares of our


common stock and our class C special stock prior and subsequent to the reverse stock split would remain the same. Holders of our common stock and our class C special stock would continue to have no preemptive rights. Following the reverse stock split, each full share of our common stock and our class C special stock resulting from the reverse stock split would entitle the holder thereof to one vote per share and would otherwise be identical to the shares of our common stock and class C special stock outstanding immediately prior to the reverse stock split.

Increase Likelihood that BioSante Common Stock Will Obtain Listing on a Stock Exchange

        As discussed above under the heading "Purpose of the Reverse Stock Split," one of the reasons for effecting the reverse stock split is to assist us in obtaining a listing for our common stock on a stock exchange. This may be achieved by combining the outstanding shares of our common stock so that the outstanding shares of our common stock after giving effect to the reverse stock split trade at a higher price per share than the outstanding shares of our common stock before giving effect to the reverse stock split. One of the requirements to list our common stock on the American Stock Exchange is that our common stock must have a minimum bid price of at least $3.00 per share. One of the requirements to include our common stock on the Nasdaq SmallCap Market is that our common stock must have a minimum bid price of at least $4.00. No assurance can be provided, however, that our common stock will trade at a higher price or that we will be successful in meeting all the requirements in order to list our common stock on a stock exchange after the reverse stock split.

Registration of BioSante Common Stock under the Securities Exchange Act of 1934

        Our common stock is currently registered under Section 12(g) of the Securities Exchange Act of 1934, as amended. The reverse stock split would not affect the registration of our common stock under the Exchange Act.

Increase of Shares of Common Stock Available for Future Issuance

        We are currently authorized to issue a maximum of 100,000,000 shares of common stock and 4,687,684 shares of class C special stock. As of April 1, 2002, there were 63,218,798 shares of our common stock issued and outstanding and 4,666,024 shares of our class C special stock issued and outstanding. We do not have any shares held in our treasury. As a result of the reverse stock split, there would be a reduction in the number of shares of our common stock and our class C special stock issued and outstanding. As part of the amendment to effect the reverse stock split, we will amend the number of shares of class C special stock we are authorized to issue to decrease it proportionately with the reverse stock split ratio. We will not, however, decrease the number of shares of common stock we will be authorized to issue. As a result, the reverse stock split would have the effect of increasing the number of authorized but unissued shares of our common stock. Based on our best estimates, if the reverse stock split had taken place on April 1, 2002, the number of issued and outstanding shares of our common stock would be reduced and the number of authorized but unissued shares of our common stock would be increased, depending upon the split ratio used, as shown in the table below:

Reverse Stock Split Ratio
   Number of Authorized But Unissued
Shares of Common Stock After the
Reverse Stock Split
No reverse stock split   36,781,202
Reverse stock split of one-for-two   68,390,630
Reverse stock split of one-for-three   78,927,097
Reverse stock split of one-for-four   84,195,566
Reverse stock split of one-for-five   87,356,507
Reverse stock split of one-for-six   89,463,765
Reverse stock split of one-for-seven   90,969,237
Reverse stock split of one-for-eight   92,098,094
Reverse stock split of one-for-nine   92,976,084
Reverse stock split of one-for-ten   93,678,542

        The Board of Directors considered reducing the number of shares of authorized common stock in connection with the reverse stock split but determined that the availability of additional shares may be beneficial to BioSante in the future. The availability of additional authorized but unissued shares will allow the Board of Directors to issue shares for corporate purposes, if appropriate opportunities should arise, without further action by our stockholders or the time delay involved in obtaining stockholder approval, except to the extent that approval is otherwise required by applicable law. These additional authorized shares could be used for any proper corporate purpose approved by the Board of Directors including, among others, future financing transactions.

Anti-Takeover Effect of Reverse Stock Split

        Because the reverse stock split would increase the number of shares of our common stock available for issuance, the reverse stock split could be construed as having an anti-takeover effect, since we could use the increased available shares to frustrate persons seeking to effect a takeover or otherwise gain control of BioSante. For example, we could use the additional authorized but unissued shares to resist or frustrate a third-party transaction providing an above-market premium that is favored by a majority of our stockholders.

        In addition to the increased number of shares of our common stock that would be available for issuance as a result of the reverse stock split, other provisions of our Amended and Restated Certificate of Incorporation and Bylaws could delay or prevent a merger, tender offer or proxy contest to take control of BioSante. Specifically, our Amended and Restated Certificate of Incorporation and Bylaws contain provisions which:

        Our Bylaws also require advance written notice to us of any stockholder-proposed business or of a stockholder's intention to make a nomination for director at an annual meeting of stockholders. Our Bylaws limit the business that may be conducted at any special meeting of stockholders to business brought by the Board of Directors. Specifically, our Bylaws provide that business may be brought before an annual meeting by a stockholder only if the stockholder provides written notice in proper form to our Secretary not less than 90 or more than 120 days prior to the first anniversary of the date that we first released or mailed our proxy statement to our stockholders in connection with the immediately preceding annual meeting of stockholders, unless the annual meeting is called for a date that is not within 30 days before or after the anniversary date of the immediately preceding annual meeting of stockholders. In that case, a stockholder's notice of proposed business must be provided no later than 10 days following the date notice of the annual meeting was mailed or the public announcement of the date was made, whichever is earlier.

Effectiveness of the Reverse Stock Split

        The reverse stock split, if approved by our stockholders, would become effective upon the later of (i) the filing with the Secretary of State of the State of Delaware of a Certificate of Amendment to our Amended and Restated Certificate of Incorporation in substantially the form of the amendment attached to this proxy statement as Exhibit A or (ii) such later date as provided in such Amendment. The timing of the filing of the Certificate of Amendment would be determined by BioSante's Board of Directors based upon its evaluation as to when this action would be most advantageous to BioSante and our stockholders, and the Board reserves the right to delay the amendment for up to 12 months following stockholder approval thereof. In addition, the Board reserves the right, notwithstanding stockholder approval and without further action by the stockholders, to elect not to proceed with the reverse stock split if, at any time prior to the effective time of the amendment, the Board of Directors, in its sole discretion, determines that a reverse stock split of our common stock and class C special stock is no longer advisable and in the best interests of BioSante and its stockholders.

Stock Certificates

        In connection with the reverse stock split, BioSante's common stock will be identified by a new CUSIP number, which will appear on all certificates representing shares of BioSante common stock issued after the effective date. After the effective date, each stock certificate representing shares of our common stock and our class C special stock would be deemed for all corporate purposes to evidence ownership of the reduced number of shares of common stock and class C special stock resulting from


the reverse stock split. As soon as practicable after the effective date of the reverse stock split, stockholders would be notified as to the effectiveness of the reverse stock split and instructed as to how and when to surrender their stock certificates. We intend to use Computershare Trust Company of Canada as our exchange agent in effecting the exchange of certificates following the effectiveness of the reverse stock split.

        As described above, all cashed-out and partially cashed-out stockholders in the reverse stock split with share certificates will receive a letter of transmittal after the reverse stock split is completed. These stockholders must complete and sign the letter of transmittal and return it with their stock certificate(s) to our transfer agent before they can receive cash payment for those shares and in the case of partially cashed-out stockholders, a new certificate.

        Please do not send to us your stock certificates now. You should send them to our exchange agent only after you receive a letter of transmittal from our exchange agent. If we decide to effect the reverse stock split, a letter of transmittal will be mailed to you soon after the reverse stock split becomes effective.

Material U.S. Federal Income Tax Consequences

        The following discussion summarizes the material United States federal income tax consequences of the reverse stock split to our stockholders. This discussion is based on the Internal Revenue Code of 1986, as amended, the applicable Treasury Regulations promulgated thereunder, judicial authority and current administrative rulings and practices in effect on the date of this proxy statement, all of which are subject to change. This summary does not discuss all aspects of federal income taxation which may be important to you in light of your individual circumstances. Many stockholders (such as financial institutions, insurance companies, broker-dealers, tax-exempt organizations, and foreign persons) may be subject to special tax rules. Other stockholders may also be subject to special tax rules, including but not limited to stockholders who received BioSante stock as compensation for services or pursuant to the exercise of an employee stock option, or stockholders who have held, or will hold, stock as part of a straddle, hedging, or conversion transaction for federal income tax purposes. In addition, this summary does not discuss any state, local, foreign, or other tax considerations. This summary assumes that you are a U.S. citizen and have held, and will hold, your shares as capital assets for investment purposes under the Internal Revenue Code of 1986, as amended. You should consult your tax advisor as to the particular federal, state, local, foreign, and other tax consequences of the reverse stock split, in light of your specific circumstances.

Federal Income Tax Consequences to BioSante

        We believe that the reverse stock split will be treated as a tax-free "recapitalization" for federal income tax purposes. This will result in no material federal income tax consequences to BioSante.

Federal Income Tax Consequences to Stockholders Who are Not Cashed Out by the Reverse Stock Split

        If you (1) continue to hold BioSante stock immediately after the reverse stock split, and (2) you receive no cash as a result of the reverse stock split, you will not recognize any gain or loss and you will have the same adjusted tax basis and holding period in your BioSante stock as you had in such stock immediately prior to the reverse stock split.

Federal Income Tax Consequences to Cashed-Out Stockholders Who Exchange All of Their BioSante Stock for Cash as a Result of the Reverse Stock Split

        If you receive cash as a result of the reverse stock split in exchange for all of your BioSante stock, your tax consequences will depend upon whether any person or entity related to you continues to hold BioSante stock immediately after the reverse stock split, as explained below. If you (1) receive cash in exchange for a fractional share as a result of the reverse stock split, (2) you do not continue to hold any BioSante stock immediately after the reverse stock split, and (3) you are not related to any person or entity which holds BioSante stock immediately after the reverse stock split, you will recognize capital


gain or loss as a result of the exchange of all of your BioSante stock for cash. The amount of capital gain or loss you recognize will equal the difference between the cash you receive for your cashed-out BioSante stock and your aggregate adjusted tax basis in BioSante stock.

        If you are related to a person or entity who continues to hold BioSante stock immediately after the reverse stock split, you will recognize gain in the same manner as set forth in the previous paragraph, provided that your receipt of cash either (1) is "not essentially equivalent to a dividend," or (2) is a "substantially disproportionate redemption of stock," as described below.

        Not Essentially Equivalent to a Dividend.    You will satisfy the "not essentially equivalent to a dividend" test if the reduction in your proportionate interest in BioSante resulting from the reverse stock split is considered a "meaningful reduction" given your particular facts and circumstances. The Internal Revenue Service has ruled that a small reduction by a minority stockholder whose relative stock interest is minimal and who exercises no control over the affairs of the corporation will meet this test.

        Substantially Disproportionate Redemption of Stock.    The receipt of cash in the reverse stock split will be a "substantially disproportionate redemption of stock" for you if the percentage of the outstanding shares of BioSante stock owned by you immediately after the reverse stock split is less than 80% of the percentage of shares of BioSante stock owned by you immediately before the reverse stock split.

        In applying these tests, you will be treated as owning shares actually or constructively owned by certain individuals and entities related to you. If you have completely terminated your interest in BioSante but you are not able to meet these tests due to attribution of ownership of BioSante stock from a member of your family, it may be possible to obtain a waiver of such family attribution by filing an election under the Internal Revenue Code of 1986, as amended and Treasury Regulations and thereby retain capital gain or loss treatment as described above.

        If the taxable amount is not treated as capital gain under any of the tests, it will be treated first as ordinary dividend income to the extent of your ratable share of BioSante's undistributed earnings and profits either for the current year or on a cumulative basis, then as a tax-free return of capital to the extent of your aggregate adjusted tax basis in your shares, and any remaining gain will be treated as capital gain. See "Maximum Tax Rates Applicable to Capital Gain" below.

Federal Income Tax Consequences to Stockholders Who Both Receive Cash and Continue to Hold BioSante Stock Immediately After the Reverse Stock Split

        If you both receive cash as a result of the reverse stock split and continue to hold BioSante stock immediately after the reverse stock split, you generally will recognize gain, but not loss, in an amount equal to the lesser of (1) the excess of the sum of aggregate fair market value of your shares of BioSante stock immediately after the reverse stock split plus the cash received over your adjusted tax basis in your shares of BioSante stock immediately prior to the reverse stock split, or (2) the amount of cash received in the reverse stock split. In determining whether you continue to hold stock immediately after the reverse stock split, you will be treated as owning shares actually or constructively owned by certain individuals and entities related to you. Your aggregate adjusted tax basis in your shares of BioSante stock held immediately after the reverse stock split will be equal to your aggregate adjusted tax basis in your shares of BioSante stock held immediately prior to the reverse stock split, increased by any gain recognized in the reverse stock split, and decreased by the amount of cash received in the reverse stock split.

        Any gain recognized in the reverse stock split will be treated, for federal income tax purposes, as capital gain, provided that your receipt of cash either (1) is "not essentially equivalent to a dividend" with respect to you, or (2) is a "substantially disproportionate redemption of stock" with respect to you, with each such test as described above under "Federal Income Tax Consequences to Cashed-Out Stockholders Who Exchange All of Their BioSante Stock for Cash as a Result of the Reverse Stock Split." In applying these tests, you may possibly take into account sales of shares of BioSante stock that


occur substantially contemporaneously with the reverse stock split. If your gain is not treated as capital gain under any of these tests, the gain will be treated as ordinary dividend income to you to the extent of your ratable share of BioSante's undistributed earnings and profits either for the current year or on a cumulative basis, then as a tax-free return of capital to the extent of your aggregate adjusted tax basis in your shares, and any remaining gain will be treated as capital gain.

Maximum Tax Rates Applicable to Capital Gain

        Net capital gain (i.e., generally, capital gain in excess of capital loss) recognized by an individual upon the sale of a capital asset that has been held for more than 12 months will generally be subject to tax at a rate not to exceed 20%. Capital gain recognized from the sale of a capital asset that has been held for 12 months or less will be subject to tax at ordinary income tax rates. In addition, capital gain recognized by a corporate taxpayer will be subject to tax at the ordinary income tax rates applicable to corporations. A net capital loss (i.e., generally, capital loss in excess of capital gain) of an individual may offset up to $3,000 of ordinary income, in any year, with any balance carried over indefinitely. As explained above, the amounts paid to you as a result of the reverse stock split may result in dividend income, capital gain income, capital loss or some combination thereof depending on your individual circumstances.

        You should consult your tax advisor as to the particular federal, state, local, foreign, and other tax consequences of the reverse stock split, in light of your specific circumstances.

Appraisal Rights

        No appraisal rights are available under the Delaware General Corporation Law or under our Amended and Restated Certificate of Incorporation or Bylaws to any stockholder who dissents from the proposal to approve the amendment to our Amended and Restated Certificate of Incorporation to effect the reverse stock split.

Recommendation of the Board of Directors

        The Board of Directors believes that it is advisable and in the best interests of BioSante and our stockholders to amend our Amended and Restated Certificate of Incorporation to effect a reverse stock split of the issued and outstanding shares of our common stock and our class C special stock at a ratio to be established by the Board of Directors in its sole discretion, which ratio will not exceed one-for-ten. The Board of Directors, therefore, recommends a vote FOR the proposal to amend our Amended and Restated Certificate of Incorporation to effect the reverse stock split. The Board of Directors reserves the right to abandon the proposed reverse stock split without further action by our stockholders at any time prior to the filing of the Certificate of Amendment with the Delaware Secretary of State, notwithstanding authorization of the proposed amendment by our stockholders.


RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS

(Proposal 4)

Appointment of Auditors

        The Board of Directors has appointed Deloitte & Touche L.L.P. as our independent auditors for the year ending December 31, 2002. Deloitte & Touche L.L.P. has acted as our independent auditors since January 1, 1999. Prior to that date, Deloitte & Touche, C.A. in Canada acted as our independent auditors since our inception in August 1996.

        Although it is not required to do so, the Board of Directors wishes to submit the selection of Deloitte & Touche L.L.P. to the stockholders for ratification. If you do not ratify the appointment of Deloitte & Touche L.L.P., another firm of independent auditors will be considered by the Board of Directors.

        Representatives of Deloitte & Touche L.L.P. will be present at the Annual Meeting via telephone, will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions.

Principal Accounting Fees

        Aggregate audit and quarterly review audit fees of $32,000 were billed to BioSante for the fiscal year ended December 31, 2001 by BioSante's principal accounting firm, Deloitte & Touche L.L.P., the member firms of Deloitte & Touche Tohmatsu, and their respective affiliates (collectively, Deloitte).

Financial Information Systems Design and Implementation Fees

        Deloitte did not render any services to us in 2001 with respect to financial information systems design and implementation.

All Other Fees

        Deloitte's fees for all other services rendered to us during 2001 were $15,850, all of which were audit-related fees. These other audit-related services consisted of review of registration statements and issuance of consents. The audit committee has considered whether the provision of these services is compatible with maintaining Deloitte's independence.

Vote Required

        The affirmative vote of the holders of a majority of the shares of our common stock and class C special stock, present in person or by proxy on this matter at the Annual Meeting, voting together as a single class, is necessary for the ratification of Deloitte & Touche L.L.P., as our independent auditors for the year ending December 31, 2002.

Board Recommendation

        The Board of Directors recommends a vote FOR ratification of the appointment of Deloitte & Touche L.L.P. as our independent auditors for the year ending December 31, 2002.



OTHER MATTERS

Section 16(a) Beneficial Ownership Reporting Compliance

        Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors and executive officers and all persons who beneficially own more than 10% of the outstanding shares of our common stock to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of our common stock. Executive officers, directors and greater than 10% beneficial owners are also required to furnish us with copies of all Section 16(a) forms they file.

        All Section 16 reports under the Securities Exchange Act of 1934, as amended, for our directors, executive officers and beneficial owners of greater than 10% of our common stock were filed on a timely basis during the fiscal year ended December 31, 2001.

Stockholder Proposals For 2003 Annual Meeting

        Stockholder proposals intended to be presented in the proxy materials relating to the next Annual Meeting of Stockholders must be received by us on or before January 10, 2003 and must satisfy the requirements of the proxy rules promulgated by the Securities and Exchange Commission.

        A stockholder who wishes to make a proposal at the next Annual Meeting without including the proposal in our proxy statement must notify us by March 27, 2003. If a stockholder fails to give notice by this date, then the persons named as proxies in the proxies solicited by us for the next Annual Meeting will have discretionary authority to vote on the proposal.

Other Business

        Our management does not intend to present other items of business and knows of no items of business that are likely to be brought before the Annual Meeting, except those described in this proxy statement. However, if any other matters should properly come before the Annual Meeting, the persons named in the enclosed proxy will have discretionary authority to vote such proxy in accordance with their best judgment on the matters.

Copies of 2001 Annual Report

        We have sent to each of our stockholders a copy of our Annual Report on Form 10-KSB (without exhibits) for the fiscal year ended December 31, 2001. We will furnish a copy of any exhibit to our Form 10-KSB upon receipt from any such person of a written request for such exhibits upon the payment of our reasonable expenses in furnishing the exhibits.

        This request should be sent to:

        Your vote is important. Whether or not you plan to attend the Annual Meeting, please vote your shares of common stock and class C special stock by marking, signing, dating and promptly returning the enclosed proxy card in the envelope provided. No postage is required for mailing in the United States or from Canada.

April    , 2002
Lincolnshire, Illinois

Exhibit A

CERTIFICATE OF AMENDMENT
OF THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF BIOSANTE PHARMACEUTICALS, INC.

        BioSante Pharmaceuticals, Inc., a corporation organized and existing under and by virtue of the laws of State of Delaware (the "Corporation"), pursuant to the provisions of the General Corporation Law of State of Delaware (the "DGCL"), DOES HEREBY CERTIFY that:

        FIRST: The Board of Directors of the Corporation, at a meeting held on April 16, 2002, duly adopted resolutions setting forth a proposed amendment of the Amended and Restated Certificate of Incorporation of the Corporation, declaring said amendment to be advisable and proposing that said amendment be submitted to the stockholders of the Corporation for their consideration and approval. The resolution setting forth the proposed amendment is as follows:

        SECOND: The stockholders of the Corporation duly approved and adopted such amendment in accordance with the provisions of Section 242 of the DGCL by a vote of the holders of a majority of the shares of outstanding Common Stock and the holders of a majority of the shares of outstanding Class C Special Stock of the Corporation entitled to vote thereon at the annual meeting of stockholders duly held on May 21, 2002, upon notice in accordance with Section 222 of the DGCL.

        IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be signed by Stephen M. Simes, its President and Chief Executive Officer, thereunto duly authorized, this       day of                  ,        .

    BIOSANTE PHARMACEUTICALS, INC.

 
 
By:
 
 
       
Stephen M. Simes
Vice Chairman, President and
Chief Executive Officer


BIOSANTE PHARMACEUTICALS, INC.
AMENDED AND RESTATED
1998 STOCK OPTION PLAN

(As amended through June 13, 2001)

        1.    Purpose of Plan.    

        The purpose of the BioSante Pharmaceuticals, Inc. 1998 Stock Option Plan (the "Plan") is to advance the interests of BioSante Pharmaceuticals, Inc. (the "Company") and its shareholders by enabling the Company and its Subsidiaries to attract and retain persons of ability to perform services for the Company and its Subsidiaries by providing an incentive to such individuals through equity participation in the Company and by rewarding such individuals who contribute to the achievement by the Company of its objectives, as the Board of Directors describes them.

        2.    Definitions.    

        The following terms will have the meanings set forth below, unless the context clearly otherwise requires:

        3.    Plan Administration.    

2

        4.    Shares Available for Issuance.    

3

        5.    Participation.    

        Participants in the Plan will be those Eligible Recipients who, in the judgment of the Committee, have contributed, are contributing or are expected to contribute to the achievement of objectives as determined by the Board of the Company or its Subsidiaries. Eligible Recipients may be granted from time to time one or more Options as may be determined by the Committee in its sole discretion. Options will be deemed to be granted as of the date specified in the grant resolution of the Committee, which date will be the date of any related agreement with the Participant.

        6.    Options.    

4

        7.    Effect of Termination of Employment or Other Service.    

5

        8.    Payment of Withholding Taxes.    

6

        9.    Change in Control.    

7

        10.    Rights of Eligible Recipients and Participants; Transferability.    

        11.    Securities Law and Other Restrictions.    

        Notwithstanding any other provision of the Plan or any agreements entered into pursuant to the Plan, the Company will not be required to issue any shares of Common Stock under this Plan, and a Participant may not sell, assign, transfer or otherwise dispose of shares of Common Stock issued

8


pursuant to Options granted under the Plan, unless (a) there is in effect with respect to such shares a registration statement under the Securities Act and any applicable state or foreign securities laws or an exemption from such registration under the Securities Act and applicable state or foreign securities laws, and (b) there has been obtained any other consent, approval or permit from any other regulatory body which the Committee, in its sole discretion, deems necessary or advisable. The Company may condition such issuance, sale or transfer upon the receipt of any representations or agreements from the parties involved, and the placement of any legends on certificates representing shares of Common Stock, as may be deemed necessary or advisable by the Company in order to comply with such securities law or other restrictions.

        12.    Plan Amendment, Modification and Termination.    

        The Board may suspend or terminate the Plan or any portion thereof at any time, and may amend the Plan from time to time in such respects as the Board may deem advisable in order that Options under the Plan will conform to any change in applicable laws or regulations or in any other respect the Board may deem to be in the best interests of the Company; provided, however, that no amendments to the Plan will be effective without approval of the shareholders of the Company if shareholder approval of the amendment is then required pursuant to Section 422 of the Code or the rules of any stock exchange or Nasdaq or similar regulatory body. No termination, suspension or amendment of the Plan may adversely affect any outstanding Option without the consent of the affected Participant; provided, however, that this sentence will not impair the right of the Committee to take whatever action it deems appropriate under Sections 3.2, 4.3 and 9 of the Plan.

        13.    Effective Date and Duration of the Plan.    

        The Plan is effective as of December 8, 1998, the date it was adopted by the Board. The Plan will terminate at midnight on December 8, 2008 and may be terminated prior to such time to by Board action, and no Option will be granted after such termination. Options outstanding upon termination of the Plan may continue to be exercised in accordance with their terms.

        14.    Miscellaneous.    

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LOGO


This Proxy is solicited by the Board of Directors

        The undersigned hereby appoints Stephen M. Simes and Phillip B. Donenberg and each of them, as proxies, each with full power of substitution, and hereby authorizes each of them to represent and to vote, as designated below, all the shares of capital stock of BioSante Pharmaceuticals, Inc. held of record by the undersigned on April 19, 2002, at the Annual Meeting of Stockholders to be held on May 21, 2002, or any adjournment thereof.

1.
ELECTION OF DIRECTORS
FOR

   WITHHOLD

   NOMINEE
         
/ /   / /   Louis W. Sullivan, M.D.
/ /   / /   Victor Morgenstern
/ /   / /   Ross Mangano
/ /   / /   Angela Ho
/ /   / /   Stephen M. Simes
/ /   / /   Fred Holubow
/ /   / /   Edward C. Rosenow III, M.D.
/ /   / /   Peter Kjaer
2.   VOTE FOR / / or AGAINST / / ABSTAIN / /
    AMENDMENT OF THE AMENDED AND RESTATED 1998 STOCK OPTION PLAN
Proposal to amend the Amended and Restated 1998 Stock Option Plan to increase the number of shares of common stock specifically reserved for issuance under the plan by 1,500,000 shares, from 8,500,000 shares to 10,000,000 shares.
3.   VOTE FOR / / or AGAINST / / ABSTAIN / /
AMENDMENT TO AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
Proposal to approve the amendment to BioSante's Amended and Restated Certificate of Incorporation to effect a reverse split of the outstanding shares of common stock and class C special stock at a ratio to be determined by BioSante but not to exceed one-for-ten, the amendment to be effected, if at all, by the filing, at the discretion of BioSante, of a certificate of amendment, with the Secretary of State of the State of Delaware, by the first anniversary of the annual meeting of the stockholders, approving the reverse stock split.
4.   VOTE FOR / / or AGAINST / / ABSTAIN / /
RATIFICATION OF AUDITORS
Proposal to ratify the appointment of Deloitte & Touche L.L.P. as independent auditors for the fiscal year ending December 31, 2002.
5.   In their discretion, the proxies are authorized to vote upon such other business, as may properly come before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ALL NOMINEES NAMED IN PROPOSAL 1 AND FOR PROPOSALS 2, 3 AND 4.
Please sign exactly as name appears below. When shares are held by joint tenants, both should sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in full corporate name by President or other authorized officer. If a partnership, please sign in partnership name by authorized person.

Dated: ___ , 2002

Signature ________

Signature if held jointly _______________________________

PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.


QuickLinks

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TABLE OF CONTENTS
INFORMATION CONCERNING THE ANNUAL MEETING
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
(Proposal 1)
EXECUTIVE COMPENSATION AND OTHER BENEFITS
RELATED PARTY RELATIONSHIPS AND TRANSACTIONS
(Proposal 2)
(Proposal 3)
(Proposal 4)
OTHER MATTERS
BIOSANTE PHARMACEUTICALS, INC. AMENDED AND RESTATED 1998 STOCK OPTION PLAN (As amended through June 13, 2001)
This Proxy is solicited by the Board of Directors