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AUXL Files Patent Infringement Suit

Zacks Equity Research

Auxilium Pharmaceuticals, Inc. (AUXL) recently announced the initiation of a patent infringement lawsuit against Upsher-Smith Laboratories, Inc. which is looking to launch its generic version of Testim, 1% testosterone gel. Upsher-Smith has challenged ten patents that are listed in the Orange Book and which are slated to expire between Apr 21, 2023 and Jan 18, 2025.

The filing of the patent infringement lawsuit within 45 days from the date of receipt of notice from Upsher-Smith is in line with our expectations. This will ensure that the FDA cannot grant final approval to Upsher-Smith’s generic for up to 30 months (Jun 24, 2015) or the court’s decision, whichever is earlier.

We note that Auxilium Pharma is already facing a patent challenge for Testim. In Apr 2012, Actavis, Inc. (ACT) had challenged Testim’s patents. Auxilium Pharma has filed a patent infringement lawsuit against Actavis.

Testim, the lead product at Auxilium Pharma is approved for the treatment of hypogonadism or low testosterone level. Testim sales came in at $55.4 million in the third quarter of 2012, accounting for 78% of the company’s revenues. The entry of a generic version would be a major blow for the company.

Auxilium Pharma is currently working on boosting Testim sales. The company has a co-promotion agreement with GlaxoSmithKline (GSK) for Testim. With urology being a key focus area at Glaxo, Testim sales should benefit from the additional promotional effort. Moreover, it has been seen that testosterone replacement therapies (TRTs) are sensitive to promotional efforts. Glaxo’s sales force started promoting Testim from Jul 2012.

Auxilium Pharma currently carries a Zacks #3 Rank (Hold). Currently, Salix Pharmaceuticals (SLXP), which carries a Zacks Rank #1 (Strong Buy), looks more attractive.

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