Auxilium Pharmaceuticals: Not A One-Trick Pony

Auxilium Pharmaceuticals (NASDAQ:AUXL) is a 500m+ market cap name that seems destined to move higher. When doing research for myself last week I came across the name.

Bank of America Analyst Ho last Friday initiated coverage with a buy and a $22 target. The stock currently trades at the high end of its 52 week range around $15.5. However, the $22 target represents quite a nice profit from the current level so I decided to have a look.

AUXL has an injectable enzyme known as AA4500, which is designed to dissolve scar tissue and irregular connective tissue. If successful this therapy would be the first of its kind and could potentially lead to applications in other areas.
The late stage trial of AA4500 was suspended in December due to a manufacturing issue, but Ho called the trial “low risk.” The testing will not resume until the end of 2007. While the company has significant revenue (in 2006 revenue was 68.5 million, and that revenue is increasing at a rapid rate, 2007 revenue is expected at about 90 million), the company is still very much in the red and is expecting to lose about $40 million for the year, after losing about $46 million last year. That revenue comes almost exclusively from Testim, AUXL’s only approved product, which was approved by the FDA in 2002 to treat men with hypogonadism, or low testosterone.

The company has a developed pipeline all at various stages of the clinical trial process. While the scar tissue product shows a potential $800m dollar market and a huge upside for the company, this is not a one-trick pony. Besides AA4500, which is a collagenase enzyme for intralesional injection for the treatment of Dupuytren’s contracture, Peyronie’s disease, and Frozen Shoulder syndrome (Adhesive Capsulitis), AUXL has developed a new oral transmucosal drug-delivery system based on technology licensed from Formulation Technologies, Inc., also known as LAB International.

AUXL is currently developing three product candidates using this technology: a therapy to treat overactive bladder and two product candidates to treat pain. It also has rights to six additional pain products and products for hormone replacement and urologic disease using the transmucosal film delivery system. The overactive bladder drug candidate is in Phase I, while the others are in pre-clinical phases. Nevertheless, AUXL has a range of pre-clinical and clinical product candidates and when combined with a current revenue stream from Testim and the potential from AA4500, should be considered a bargain at the current approximate $500m market cap.

It seems like a big pharma partnership is on the horizon for this small PA-based biotech.

- Auxilium Completes Phase 3 Enrollment, Analyst Downgrades!

AUXL 1-yr chart:
auxl chart