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What: Shares of Auxilium Pharmaceuticals (NASDAQ: AUXL) were getting dumped by investors today, falling as much as 10% after missing estimates in its third-quarter earnings report.

So what: The maker of drugs such as Testim reported an EPS loss of $0.21 for the quarter, on revenues of $71 million. Analysts had expected a $0.04 loss and sales at $79 million. Growth from its XIAFLEX drug was strong, however, at 29%, and the company amended an agreement with Pfizer (NYSE:PFE) so that it could independently sell XIAFLEX in Europe. As a result, the company will recognize $94 million in deferred revenue in the fourth quarter, and management revised its guidance for the quarter to include $85 million to $90 million in net income for the quarter.

Now what: Auxilium has been racking up losses for the past few quarters, and investors seemed unimpressed with the Pfizer deal. The drugmaker also submitted an application to the FDA seeking the use of XIAFLEX as a biologic therapy for Peyronie's disease, and management reasserted its belief that 2012 will be the company's first profitable year. Given deferred revenue and growth channels Auxilium expects, the market's reaction seems overblown. Auxilium's fourth-quarter results should tell a clearer story about where this company is headed.

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