Shares of Auxilium Pharmaceuticals Inc. jumped Thursday after the company said it could receive up to $485 million in payments, plus future royalties from Pfizer Inc. in a partnership over its developing drug Xiaflex.
The Malvern, Pa.-based company's stock gained $3.83, or 16.7 percent, to reach $26.72 in afternoon trading. Shares have traded between $15.44 and $42.75 over the last 52 weeks.
Xiaflex is being studied as a treatment for Dupuytren's contracture, a condition where a person's fingers bend toward the palm and can't fully be extended. The company plans on asking for Food and Drug Administration approval for that indication in early 2009. The drug is also being studied as a treatment for Peyronie's disease, a condition where fibrous plaques grow in the soft tissue of the penis. The condition affects between 1 percent and 4 percent of men.
Under the deal, Auxilium will receive $75 million upfront. In all of 2007, the company had revenue of about $95.7 million.
Meanwhile, the company is entitled to regulatory milestone payments up to $150 million and sales milestone payments up to $260 million. Auxilium will also receive tiered sales royalties.
Auxilium collaborates with Lynbrook, N.Y.-based BioSpecifics Technologies Corp. on the drug candidate. That company will receive just under $6.4 million of the $75 million upfront payment and 8.5 percent of the milestone payments.
New York-based Pfizer receives exclusive rights to sell the drug in the 27 member countries of the European Union and 19 additional nations. Pfizer expects to ask for European Union approval of Xiaflex for Dupuytren's contracture in 2010.
"Today, Pfizer and Auxilium have forged a compelling partnership and together we believe we have the opportunity to offer the first, effective non-surgical treatment for two diseases," Auxilium President and Chief Executive Armando Anido said in a statement. "With the strength of Pfizer's commercialization and development organization, this relationship greatly enhances our ability to effectively introduce this potentially groundbreaking technology for the treatment of Dupuytren's contracture and Peyronie's disease in Europe."
Leerink Swann & Co. Joseph Schwartz reaffirmed a "Outperform" rating and raised his price target to $35 from $30 on Auxilium, saying the deal increases confidence in Xiaflex.
"Pfizer's due diligence adds comfort, ahead of Auxilium's one-year safety update," he said, in a note to investors. "Pfizer's development, reimbursement and commercial capabilities should also maximize the Xiaflex opportunity in the European Union."
Cowen and Co. analyst Eric Schmidt also reaffirmed a "Outperform" rating.
"We continue to believe that Auxilium shares are positioned to outperform the market by 25 percent over the next 12 to 18 months as Xiaflex's development progresses and investors better appreciate its opportunity Dupuytren's and Peyronie's," he said in a note to investors.
