Xiaflex Approval Still Likely in 2009

On March 2, 2009, Auxilium Pharmaceuticals (AUXL - Analyst Report) submitted a biologic license application (BLA) to the U.S. FDA for Xiaflex seeking approval for the treatment of Dupuytren’s contracture.

The BLA filing represents a major milestone for the company and, if approved, would put the company squarely on the path to sustained profitability.

On June 18, 2009, the U.S. FDA noted that its Division of Anesthesia, Analgesia and Rheumatology Products (DAARP) will hold an Arthritis Advisory Committee to discuss the pending application on September 16, 2009.

Although this meeting has been scheduled for a month after the PDUFA action date of August 28, 2009, we are pleased to hear that hand and/or other orthopedic surgeons (potential users of the product) will be on the panel. We think that approval is likely after the panel meeting, probably in October or November 2009.

The next potential update is FDA inspection of the manufacturing facility, likely to take place at some point over the summer. Management has hired a handful of regional medical liaisons (RMLs) to begin engaging thought leaders in the Dupuytren’s Contracture market.

Sales representatives have also been identified and management plans to hire 75 to 100 post-approval. Once approved, Auxilium should be in position to launch Xiaflex in roughly 60 days.

In early June 2008, Auxilium released positive results from two phase III trials, CORD-I and CORD-II. In the larger CORD-I trial, 64% of the patients in the trial achieved the primary endpoint, a reduction in angle of the primary joint contracture to less than or equal to 5 degrees of normal after 30 days vs. only 7% for the placebo.

The data was instrumental in helping Auxilium gain an outstanding commercialization partner in Pfizer (PFE - Analyst Report) for the development and commercialization of Xiaflex in 46 European and Eurasian countries. This deal has not only brought a significant upfront payment along with backend royalties, it will also help fund the U.S. launch.

Management is now looking for partners in other non-European and non-North American countries for Xiaflex – with the positive CORD data now in hand and the Pfizer deal in place, talks should greatly heat up.

We think the fundamentals are looking strong at Auxilium.  We are continuing to review the CORD-I data, but at this point we are feeling confident about approval in August 2009. We would be buyers of the stock below $24. Our price target is $30 per share.

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