Outperform -Price 29.51 on Sept. 8
by Wedbush/PacGrow Life Sciences

Using a 30% annual discount from net peak annual sales of Testim [for treating low testosterone] and net peak Xiaflex [for softening scar tissue] sales, and a seven-to-10 times multiple, we derive a fair value estimate for AUXL of 44, which includes cash per share of $1.91. We do not include value from Xiaflex in the Peyronie's disease indication, as no proof-of-concept data has been established. We estimate there remains significant potential upside to our fair-value estimate. Market cap: $1.2 billion.

growth

COUNTING THE POTENTIAL for both Testim and Xiaflex, Lee and PAI partner Joon Yun see Auxilium shares reaching 100 over three years, up from about 37 recently. So far this year, the shares are up about 21%. Auxilium, founded in 1999, has yet to turn a profit. It lost more than $40 million in each of the past two years. But that could soon change. Lee values the Testim business at $1 billion. That assumes the business is worth about five times its expected sales three years from now -- a conservative valuation for a biotech concern. The Xiaflex business, he suggests, is worth about $3 billion. He figures the business can capture 20% of patients with the hand disorder by 2011, winning $300 million in sales. To that sum he applies a multiple of 10, which is not unusual for super-high-growth biotech businesses.

biotech spec that makes Xiaflex, in pahse 3 trials for Dupuytren's contractures, Peyronie's disease and frozen shoulder.

biotech spec that makes Xiaflex, in pahse 3 trials for Dupuytren's contractures, Peyronie's disease and frozen shoulder.

11.6

Auxilium Pharma (AUXL) was downgraded to Neutral, Merrill Lynch said. Valuation call, as the stock is already pricing in 100% clinical success for Xiaflex.

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12.2 17.38%