Jefferies Raises Price Target on Auxilium Pharmaceuticals (AUXL), Partnership With Asahi Kasei Pharma To Release Xiaflex in Japan

Jefferies is reiterating its Buy rating on shares of Auxilium Pharmaceuticals (NASDAQ: AUXL) following the company's announcement that it will partner with Asahi Kasei Pharma to develop and commercialize Xiaflex in Japan. The firm expects that Xiaflex will experience steady sales growth in 2011, but will see it accelerating rapidly in 2012. As a result, it is raising its price target on shares of AUXL to $39 from $36.

The partnership entitles that Asahi Kasei Pharma, AUXL will receive $15 million upfront, $247 million in potential milestone payments, and undisclosed tiered double-digit royalties based on Xiaflex sales in Japan, and will supply Xiaflex product to Asahi Kasei at an undisclosed cost.

The firm reports that, "We assume royalties paid at an aggregate 20% rate off Xiaflex peak sales in Japan of $174m in 2016 in the DC indication alone, based on initial pricing parity with the US with future discounting, and slightly increased R&D estimates in 2012 and 2013. This has the net effect of increasing our 2016 EPS from $4.99 to $5.37. Separately, we assume Xiaflex market exclusivity in Europe will extend to 2021."

For more ratings news on Auxilium Pharmaceuticals click here and for the rating history of Auxilium Pharmaceuticals click here.

Shares of Auxilium Pharmaceuticals closed at $22.01 yesterday.

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