Auxilium Pharmaceuticals (AUXL)
From Cabot Wealth Advisory 7/2/12 Sign up for free Cabot Wealth Advisory e-newsletter
It's the same with stocks, of course. A certified blue chip stock, one with a long earnings history and an attractive product and a host of institutional sponsors will sell at a premium and will have a chart that shows slow, steady growth.
But if you're in the mood for fireworks in your portfolio, you have to look for companies with a mixed bag of qualities. In the case of Auxilium Pharmaceuticals (AUXL), you will be looking at a company that hasn't booked a profitable quarter in its entire life. And the stock's chart will look like a roman candle, with a whole lot of hissing punctuated by occasional moments of brilliance.
Auxilium has two FDA-approved products that have produced seven years of revenue growth; during that time, revenue increased from $8.8 million in 2003 to $264 million in 2011.
The first product, Testim, is a gel that replaces replaces testosterone for guys who aren't producing enough. There are about 13 million men out there with this condition, but there are lots more who just appreciate the muscle-building, fat-burning, sex-drive stimulating effects, which creates opportunities for off-label uses. The second product is Xiaflex, a drug that treats potentially crippling contractions of hand tendons.
So why has AUXL, which spent three years dropping from 42 in August 2008 to 14 in August 2011, been soaring like a skyrocket since June 4? This rally has kicked the stock from 19 when June began to 27 in recent trading.
The answer is that Xiaflex has had great results in late-stage clinical trials for treatment of another condition (Peyronie's Disease), and investors always like it when existing drugs find new uses. Without increasing costs, such a move can have a big impact on the bottom line. (I won't describe Peyronie's Disease here, but any men who want to do the research will quickly see why a treatment has high potential.)
Auxilium is, like fireworks, both high potential and high risk. Investors are buying AUXL now, but pharmaceutical companies can occasionally hit potholes when it looks like clear sailing.
|Auxilium Pharmaceuticals (AUXL)
40 Valley Stream Parkway
Malvern, Pennslyvania 19355
|Index Membership: N/A
Industry: Drug Related Products
Full Time Employees: 526