Pfizer, which had the right to negotiate marketing other Xiaflex indications in the European Union, will return the rights to the Dupuytren's contracture treatment by April 24, 2013.

Auxilium, which is also testing Xiaflex to treat penile curvature, will record $94 million in deferred revenue. The drugmaker said it now expects between $153 million and $163 million in Xiaflex sales for 2012.

The company earlier expected Xiaflex sales of between $65 million and $77 million for the year. Sales of Xiaflex, called Xiapex in Europe, accounted for 22 percent of the company's total sales in its third quarter.

Auxilium, which filed a marketing application with U.S. health regulators to sell Xiaflex to treat penile curvature on Wednesday, said it still expects 2012 to be its first profitable year.

(Reporting by Vidya P L Nathan; Editing by Joyjeet Das)

• A Permanent Economic Emergency