Why Auxilium Pharmaceuticals Shares Popped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Auxilium Pharmaceuticals (Nasdaq: AUXL  ) rose as much as 12% today after it noted that Xiaflex, its treatment for Dupuytren's contracture (which causes curvature of the fingers due to tendon thickening and shortening), also proved effective in reducing curvature of the penis.

So what: Auxilium's press release noted that the drug was being tested as a treatment for Peyronie's disease in which scar tissue can harden and curve the penis. Thus far, Xiaflex demonstrated positive results with minimal side effects in stage 2 clinical trials. Auxilium states that Xiaflex would be the first biological treatment for Peyronie's disease if approved, and would help treat the 65,000 to 120,000 men diagnosed annually.

Now what: Xiaflex accounted for roughly 20% of Auxilium's sales last year, so any additional revenue streams could be the bump it needs to turn the corner to profitability. The silver lining of rare diseases is they rarely have many, if any, competitors. However, most biotechs will need more than just a handful of drugs to turn profitable due to the small number of patients their drugs will treat. At this point in time, I'd wait on the sidelines until Auxilium can demonstrate it can turn and maintain a profit.

Craving more input? Start by adding Auxilium Pharmaceuticals to your free and personalized watchlist so you can keep up on the latest news with the company.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

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  • Report this Comment On June 04, 2012, at 1:58 PM, MrSinnister wrote:

    Why not do an in-depth research report on both why Discovery Labs isn't moving and why now is the perfect time to both invest in Biotechs and DSCO? They have been major M&A targets the past Spring, and I don't see that stopping in the near future.

    Received FDA approval for 1 of its drugs, SURFAXIN, and its nebulizer Affectair on March 5th of this year. PPS Spiked at 5.39 until a week later, a secondary offering of 16 million shares @2.80 was submitted, killing the momentum from the FDA approval and leaving it in the doldrums where it sits today, lagging behind companies with only ONE drug and deeply in the red like Seattle Genetics SGEN, currently trading at over 19. DSCO is slated to have it's distribution pipeline for its infant RDS (Respiratory Distress Syndrome) drug out by the end of the year, with EU approval next year. Trading at currently 2.52, this stock could be the steal of the year, and can actually beat Bank of America (before the crises) as comeback stock or Stock of the Year. The volume is currently dismal as longs have rooted into their positions and currently not selling. Check it out and do your own due diligence.

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