Analyst Downgrades After Auxilium Completes Phase 3 Enrollment

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Here is a perfect example of how erratic and unconventional biotech investing can be.

Auxilium Pharmaceuticals (NASDAQ:AUXL) has had a very busy several days. Last week the company released its quarterly earnings, with a wider loss compared to 2005. Then, the company received the news that its stock will be listed on the Nasdaq Biotechnology Index on November 20th. That is good news.

Then on Monday Mark T. Taylor, a Roth Capital Partners analyst, downgraded the stock from "Hold" to "Sell". Almost all of his statements are positive. He cites that the company's low testosterone treatment, Testim, is capturing a larger market share. He likes the fact that the company is increasing its efforts in preparing its manufacturing capability for its candidate AA4500 for treating several conditions, including Duputryen's Contracture, Peyronie's Disease and Frozen Shoulder Syndrome.

Mr.Taylor even increased his sales estimates for the treatment of Duputryen's. Duputryen is a condition that affects the joints in the hand, making it difficult for the afflicted to straighten their fingers.

Yet, he rates the stock a "sell", but even more interesting, raises the price target from $13 to $14. His only negative remark, if such a remark can be viewed as negative, is the fact that shares of Auxilium are up more than 200% so far in 2006, and have more than doubled over the last 3 months. Is that a bad thing?

The company later that day announced that its phase III pivotal trial for the treatment of, you guessed it, Duputryen's, has enrolled the patients and is set to begin.

The stock dropped huge before noon as Mr.Taylor's downgrade made headlines, only to be followed by the Duputryen news and the stock regained some ground.

With a market cap of about $500 million, and a soaring share price, Auxilium stock will prove to be a highly erratic investment, complete with the usual high peeks and deep valleys.

AUXL 1-yr chart:

Auxilium chart