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by Steven T. Gold
BioHealth Investor.com



Auxilium Pharmaceuticals (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 (BAC) 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 revenues, in 2006 revenues were 68.5 million, and those revenues are 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. Those revenues come 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-truck 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. They also have 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.


RELATED READING:
- Auxilium Completes Phase 3 Enrollment, Analyst Downgrades!

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Steven T. Gold, Esq., is a graduate of Yale University (B.A.) and the University of Florida (J.D., M.P.H.). Presently, Steve is working as an attorney while enrolled in a Master of Bioethics program at Penn. Steve is knowledgeable in the fields of public health, managed care, ethics and biotechnology. He is an avid and experienced investor who is presently starting a subscription newsletter and alert service along with his father Dr. Mark Gold, a world famous researcher and inventor in addiction medicine, which will be located at www.mentallystableinvesting.com. Steve will be a regular contributor to Biohealth Investor.
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