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Auxilium Pharmaceuticals (AUXL - OUTPERFORM): CORD I Data Published in the New England Journal of Medicine (NEJM); No Surprises; Await Safety Data Presentation at ASSH on September 4th

Price: $29.34 (close 9/2/09) Price Target: $44

• The Phase III Xiaflex data from the CORD I study was published today in the New England Journal of Medicine. Although top-line data from the study was released previously, the publication stratified the data on a joint by joint basis and by severity of the diseased joints.

• The reduction in the angle of contracture in both metacarpophalangeal (MP) and proximal interphalangeal (PIP) joints were clinically meaningful. All twenty-six secondary endpoints were successfully met in comparison to placebo (p less than or equal to 0.002).

• Importantly, no deaths, clinically meaningful hypersensitivity events, nerve injuries, arterial injuries or significant changes in flexion or grip strength were observed.

• Auxilium will present 12-month safety data for Xiaflex in 100 patients at the American Society for Surgery of the Hand conference (September 3-5, San Francisco). We do not anticipate negative safety data as management confirmed, on the Q2 earnings conference call, the lack of new cases of tendon ruptures and any cases of hypersensitivity reactions. We believe presentation of positive data is already priced into the stock and do not anticipate significant price appreciation as a result of this event. We expect the full Phase III Xiaflex dataset to be published in the briefing documents, approximately two days ahead of the Sept. 16th FDA Advisory Committee panel meeting.

• We are maintaining our OUTPERFORM rating and $44 fair value estimate based on a sum-of-the-parts valuation analysis. Using a 30% annual discount from net peak annual sales of Testim and net peak Xiaflex sales and a 7-10x 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.