Auxilium Gets A Testoserone Boost - Barron's

Testim is a testosterone-based gel that can help men increase muscle, lose fat, even curb heart disease, diabetes and osteoporosis. Auxilium Pharmaceuticals’ (NASDAQ:AUXL) prescription drug already generates $120 million in revenues annually, and baby boomer customers could mean 20% growth potential annually.

But Barron’s says investors should really consider Auxilium’s Xiaflex, a late-stage testing drug that allows non-invasive treatment instead of difficult surgery for a hand condition. Over 270,000 Americans suffer from Dupuytren's contracture, which causes hands to contract into claw-like form. That’s a potential $1.2 billion market, and Europe is another potential $1B. Some analysts put the market at $3B, adding another $1B for Testim.

Auxilium’s problem is that it has lost more than $80 million since 2006. It needs a European partner to help distribute Xiaflex because it’s burning through its cash at a rate of $55M a year, with only $49M in cash on hand as of Q2. There are also questions about side-effects of testosterone treatment and some doctors even question treating “male menopause” at all. But Xiaflex promises other possible uses, like frozen shoulder syndrome or even cellulitis. Bullish analysts think the $37 stock could reach $100 by 2011.

 

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Xiaflex has been slow in getting to market, though it’s almost there, and revenues are still mainly from Testim. But Steven T. Gold says AUXL is not a one-trick pony anyway. Auxilium’s impressive pipeline includes a new oral transmucosal drug-delivery system, and the biotech is developing three other products for use of this technology—one for overactive bladders (in Phase I of testing) and two pain treatment products in pre-clinical trials. It also has rights to six additional pain products and products for hormone replacement and urologic disease using the same drug-delivery system. Gold says the relatively small cap pharmaceutical is a bargain and cites the possibility that a big pharma partnership is on the horizon as well.

CEO Armando Anido said on Auxilium’s Q1’08 conference call that there is great interest on behalf of European distributors for Testim. It looks like the cash questions that Barron’s raised may soon be moot.