UPDATE: Morgan Stanley Downgrades Auxilium Pharmaceuticals to Underweight, Reiterates $15 PT as Growth May Not Match High Valuation

In a report published Thursday, Morgan Stanley analyst David Friedman downgraded the rating on Auxilium Pharmaceuticals AUXL from Equal-Weight to Underweight, but reiterated the $15.00 price target. In the report, Morgan Stanley noted, “We are DG AUXL to UW from EW as we do not believe the stock price reflects the shallower sales growth that we see as likely. Consensus revenue (per Thomson) is ~$860 by 2018, with a trend towards ~$1+bn by 2019. Using our DCF framework with consensus revenue/OpEx trends generates a valuation at the current stock price. Our $15 PT reflects lower revenue, OpEx, and EPS. While some on the Street attribute strategic value to AUXL, we see the likely slower future growth, currently rich valuation, high leverage ($13/sh debt), and key risks to T drugs and Stendra as precluding this activity. We believe as growth lags consensus, the stock will need to reflect a more commensurate valuation.” Auxilium Pharmaceuticals closed on Wednesday at $31.93.