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Auxilium Pharmaceuticals, Inc. Announces Offering Of Convertible Senior Notes Due 2018

Auxilium intends to use the net proceeds from the Offering to pay the cost of the note hedge transactions described below (after such cost is partially offset by the proceeds from the sale of warrants, as described below) and for general corporate purposes, which may include the acquisition (including by merger, purchase, license or otherwise) of businesses, products, product rights or technologies.

In connection with the Offering, Auxilium expects to enter into note hedge transactions with one or more of the underwriters of the Convertible Notes or their respective affiliates (the "hedge counterparties"). The note hedge transactions are expected generally to reduce the potential dilution to Auxilium's common stock and/or offset potential cash payments in excess of the principal amount upon any conversion of Convertible Notes in the event that the market value per share of Auxilium's common stock, as measured under the terms of the note hedge transactions, is greater than the strike price of the note hedge transactions (which is expected to correspond to the initial conversion price of the Convertible Notes and be subject to certain adjustments substantially similar to those contained in the Convertible Notes). In addition, in order to partially offset the cost of the note hedge transactions, Auxilium expects to issue warrants to the hedge counterparties at a higher strike price. The warrants would separately have a dilutive effect to the extent that the market value per share of Auxilium's common stock exceeds the applicable strike price of the warrants. If the underwriters exercise their option to purchase additional Convertible Notes, Auxilium may enter into additional note hedge and warrant transactions.

Auxilium has been advised that, in connection with the note hedge and warrant transactions, the hedge counterparties or their affiliates expect to enter into various derivative transactions with respect to Auxilium's common stock concurrently with, or shortly after, the pricing of the Convertible Notes and may, from time to time following the pricing of the Convertible Notes, enter into or unwind various derivatives and/or purchase or sell Auxilium's common stock or other securities of Auxilium in secondary market transactions (and are likely to do so during any observation period relating to a conversion of Convertible Notes). These activities could increase (or reduce the size of any decrease in) the price of Auxilium's common stock concurrently with or following the pricing of the Convertible Notes, and could also cause or avoid an increase or a decrease in the price of Auxilium's common stock following the pricing of the Convertible Notes and prior to the maturity date.

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