GILD Gilead Sciences Inc

European biotechnology company Actelion Ltd. (ALIOF) recently acquired exclusive commercialization rights to Auxilium Pharmaceuticals, Inc.’s (AUXL) Xiaflex for the treatment of Dupuytren’s contracture and Peyronie’s disease in Canada, Australia, Brazil and Mexico.

Xiaflex is approved in the US and European Union and is under review in Canada for the treatrment of Dupuytren’s contracture. A decision in Canada is expected in the second half of 2012. In Brazil, Australia and Mexico, Actelion will file regulatory applications over the next 12 months. For Peyronie’s disease, a phase III trial is ongoing, top-line data fom which are expected in the second quarter of 2012. Auxilium will be responsible for the development of Xiaflex for Peyronie’s disease worldwide except in Actelion’s territories, where Actelion will bear clinical development costs, if any.

Auxilium will get an upfront payment of $10 million from Actelion. In addition, Auxilium will also be entitled to potential regulatory ($16 million) and sales based ($42.5 million) milestone payments.

Dupuytren’s contracture is a fixed flexion contracture of the hand where the fingers bend towards the palm and cannot be fully straightened. Peyronie's Disease is a connective tissues disorder which involves the growth of fibrous plaques in the soft tissue of the penis.

The addition of Xiaflex will boost Actelion’s already strong pipeline. The company’s most important pipeline candidate is Macitentan, a follow-on compound to its drug Tracleer which is marketed for the treatment of pulmonary arterial hypertension (PAH). Macitentan is currently in a phase III PAH trial (SERAPHIN; n>700).  Actelion is expected to present data from the study in the second half of this year. We believe that the SERAPHIN results will be the most important near-term catalyst for Actelion as it is designed to help replace Tracleer which is currently facing intense competition from Gilead’s (GILD) Letairis and is due to face generic competition in 2015-2017.

Our Take

Actelion’s shares carry a Zacks #5 Rank (short-term ‘Strong Sell’ rating). We like the company’s strong pipeline with abundant pipeline catalysts coming up in 2012. However, the poor fourth quarter and 2011 results justify the short-term bearish outlook on the company.

 
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