Auxilium Pharmaceuticals, Inc. (AUXL) recently received a major boost when the U.S. Food and Drug Administration (FDA) granted approval to Xiaflex for the treatment of adult Dupuytren’s contracture patients with a palpable cord. The approval comes several months after an FDA advisory panel voted unanimously in favor of approving the product. Shares were up 9.5% in after-market trading.
 
Dupuytren’s contracture is a condition that affects the connective tissue in the palm known as palmar fascia. The company estimates that approximately 240,000 Dupuytren’s candidates could exist in the U.S. and the EU. This represents significant commercial opportunity for Auxilium and the company could capture a significant share of the market as Xiaflex is the first and only FDA-approved non-surgical treatment for Dupuytren’s contracture.
 
The FDA is requiring the company to make Xiaflex available under a risk evaluation and mitigation strategy (REMS) program, which consists of a communication plan and a medication guide. While the REMS will provide information to healthcare providers on the proper use of Xiaflex, patients will be made aware of the serious risks associated with the use of the product.
 
Xiaflex’ approval is a major milestone for Auxilium. Testim, the company’s lead product, is likely to face slowing sales due to tough competition and the potential for a generic alternative beyond 2011. Given the eventual slowdown in Testim growth, Auxilium’s future relies heavily on the successful commercialization of Xiaflex.
 
Auxilium intends to start shipping Xiaflex in early March so that the product will be available from late March. Auxilium will sell and market the product in the US through a team of 100 people. As far as the European Union (EU) is concerned, Auxilium has a development, commercialization and supply agreement with Pfizer, Inc. (PFE) for Xiaflex for the treatment of Dupuytren’s and Peyronie’s in Europe and certain Eurasian countries. Xiaflex is currently being reviewed by the European regulatory authorities and EU approval should come later this year.
 
Xiaflex is also being studied for the treatment of Peyronie’s disease and frozen shoulder syndrome. According to the company, there are at least 450,000 potential patients annually in the U.S. and the EU for Dupuytren’s and Peyronie’s.
 
Approval for the Peyronie’s indication could help Xiaflex sales cross $1 billion. The company will be meeting with the FDA in the second quarter of 2010 to discuss the future development path for the Peyronie’s indication.
 
With Xiaflex gaining approval in the US, we believe Auxilium will intensify its search for partners for other non-European and non-North American territories. We currently have a Neutral recommendation on Auxilium.
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