Distribution Agreement

Exhibit 10.1

December 1, 2006

VIA FACSIMILE AND EXPRESS COURIER

Mr. Philip Blake

President

Bayer Inc.

77 Belfield Road

Toronto, ON M9W 1G6

CANADA

Dear Mr. Blake:

Reference is made to the Distribution Agreement between Bayer Inc. (“Bayer”) and Auxilium Pharmaceuticals, Inc. (“Auxilium”), entered into on December 29, 2003 (the “Agreement”). This letter agreement sets forth the terms and conditions upon which Bayer and Auxilium have mutually agreed to terminate the Agreement. All capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to them in the Agreement. The terms and conditions of the mutual termination are as follows:

1. Effective upon the close of business on December 4, 2006 (the “Termination Date”), the Agreement is terminated and Bayer shall cease all distribution activities related to the Product.

2. On or before December 22, 2006, at Bayer’s expense, Bayer shall return to Auxilium or destroy all Confidential Information in its possession or control, and deliver to Auxilium or destroy all Promotional Materials related to the Product in its possession related to the Product.

3. Except as to such rights, claims or obligations as may be created by this letter agreement, Bayer hereby releases and forever discharges Auxilium, any Affiliate, and its and their present and former shareholders, officers, directors, agents, employees, attorneys, successors, and assigns from any and all debts, liabilities, obligations, promises, covenants, contracts, endorsements, bonds, controversies, actions, causes of action, judgments, damages, expenses, claims and demands of any nature whatsoever, known or unknown, fixed or contingent, in law or in equity, which Bayer had, or now has, or hereafter can, shall or may have against Auxilium jointly, severally, or in the alternative, for, or by reason of, any matter or cause whatsoever arising from or related in any manner whatsoever to the Agreement. Bayer agrees that it will not assert any claim against any third party who might claim contribution or indemnity from Auxilium in respect of any of the matters released hereby.

Mr. Philip Blake

December 1, 2006

4. Except as to such rights, claims or obligations as may be created by this letter agreement, Auxilium hereby releases and forever discharges Bayer, any Affiliate, and its and their present and former shareholders, officers, directors, agents, employees, attorneys, successors, and assigns from any and all debts, liabilities, obligations, promises, covenants, contracts, endorsements, bonds, controversies, actions, causes of action, judgments, damages, expenses, claims and demands of any nature whatsoever, known or unknown, fixed or contingent, in law or in equity, which Auxilium had, or now has, or hereafter can, shall or may have against Bayer jointly, severally, or in the alternative, for, or by reason of, any matter or cause whatsoever arising from or related in any manner whatsoever to the Agreement. Auxilium agrees that it will not assert any claim against any third party who might claim contribution or indemnity from Bayer in respect of any of the matters released hereby.

5. The parties agree that this mutual termination of the Agreement may be announced by each party prior to 9:30 AM Eastern Time on the fourth business day after execution by Bayer of this letter agreement. Bayer and Auxilium agree to provide each other with a draft copy of al