Auxilium Pharmaceuticals, Inc. (AUXL) and Pfizer Inc. (PFE) recently announced that the review process of their Marketing Authorization Application (MAA) for Xiaflex has commenced in the European Union. Pfizer was informed by the European Medicines Agency (EMEA) that the Xiaflex MAA has completed the validation phase successfully resulting in the commencement of the review process on Jan 21, 2010.

Auxilium is now eligible to receive a $15 million milestone payment from Pfizer based on the commencement of the review process. The development, commercialization and supply agreement with Pfizer for Xiaflex covers Europe and certain Eurasian countries.

Going forward, Auxilium can earn an additional $135 million in regulatory milestones and $260 million in sales milestones, along with a tiered double-digit royalty on sales at Pfizer.

Pfizer and Auxilium are currently seeking approval for the use of Xiaflex in the treatment of Dupuytren’s Contracture, a condition that affects the connective tissue in the palm known as palmar fascia. Auxilium estimates that approximately 240,000 Dupuytren’s candidates could exist in the U.S. and the EU. This represents significant commercial opportunity for Auxilium.

Xiaflex is also being studied for the treatment of Peyronie’s disease and frozen shoulder syndrome. According to Auxilium, there are at least 450,000 potential patients annually in the U.S. and the EU suffering from Dupuytren Contracture and Peyronie. Approval for both indications could help Xiaflex sales cross $1 billion.

Meanwhile, Auxilium is looking to conduct additional studies for the frozen shoulder syndrome indication. Frozen shoulder syndrome is a disorder of diminished shoulder motion and almost 3% of people, especially women, develop this problem over their lifetime.

Auxilium is currently awaiting a decision from the U.S. Food and Drug Administration (FDA) on Xiaflex, for the treatment of Dupuytren’s Contracture. In Sep 2009, Auxilium received a major boost in the form of a favorable recommendation from the FDA’s Arthritis Advisory Committee for Xiaflex for the treatment of Dupuytren’s Contracture.

The advisory panel’s unanimous recommendation (12-0) brings Xiaflex a step closer to receiving approval. Although the FDA is not required to follow the advice of the panel, it usually does so. A response from the agency should be out shortly. We have a Neutral rating on the stock

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