Auxilium Pharmaceuticals, Inc.
) swung to a profit in the second quarter of 2012 with earnings
coming in at 16 cents per share, well above the year-ago loss of 11
cents and the Zacks Consensus Estimate of a loss of 6 cents. This
was the first quarter in which Auxilium Pharma reported a profit.
Higher revenues and lower costs led to the improvement in results.
Revenues, which increased 18.7% to $78.2 million, were above the
Zacks Consensus Estimate of $74 million.
Quarter in Detail
During the reported quarter, total Testim sales increased 26% to
$63.8 million. Testim revenues in the US increased 26% to $62.5
Auxilium Pharma expects Testim revenues of $245 - $255 million
in 2012, up from $207.9 million in 2011. Testim, however, is facing
a patent challenge from Watson Laboratories, Inc.
Meanwhile, Xiaflex sales declined 6% to $14.4 million, including
contract and ex- US revenues. US revenues increased 21% to $11.9
million. However, ex-US Xiaflex net revenues decreased in the
second quarter of 2012 - the year ago period included cumulative
catch-up revenue adjustments totaling $3.8 million which did not
occur in the reported quarter.
Auxilium Pharma's partner,
) is planning to launch Xiaflex in Canada in the first half of
2013. Actelion also intends to seek approval for Xiaflex in Brazil,
Australia and Mexico over the next 15 months.
Auxilium Pharma is working on creating and increasing awareness
among physicians and patients about Xiaflex. The company continues
to present data on the clinical profile of Xiaflex. Besides this,
the company has launched a targeted national media and education
Auxilium Pharma is working on expanding Xiaflex' label. In June
2012, the company presented impressive top-line results from two
phase III studies conducted for the Peyronie's disease indication.
Auxilium Pharma intends to seek US Food and Drug Administration
(FDA) approval for this indication by year end.
Meanwhile, the company recently completed a 60-patient,
multi-cord study with Xiaflex in Dupuytren's contraction. Auxilium
Pharma intends to initiate a larger study in the third quarter
which, if successful, would allow the company to seek expansion of
the Dupuytren's label.
Auxilium Pharma initiated a phase Ib study in Jan 2012 for the
treatment of cellulite (edematous fibrosclerotic panniculopathy) -
top-line results are expected in late 2012. Xiaflex is currently in
a phase IIa study for the treatment of frozen shoulder syndrome
with top-line results expected in the first quarter of 2013.
BioSpecifics Technologies Corp. (
, Auxilium Pharma's licensor, has initiated a phase II study in
canine lipoma and a phase I study in human lipoma with results
expected in the first half of 2013.
Research and development expenses for the reported quarter
declined 23.3% to $10.2 million due to lower spending on the
Peyronie's studies. Selling, general and administrative expenses
declined 1.8% to $42.6 million mainly due to lower spending and a
change in the timing of spend on Xiaflex and Testim.
The company raised its 2012 revenue guidance by $17 million to
$310 - $332 million. While Xiaflex global sales guidance was cut by
$3 million to $65 - $77 million, Testim sales guidance was upped by
$20 million to $245 - $255 million. Testim sales should benefit
from the additional sales effort under Auxilium Pharma's agreement
). Glaxo's sales force started promoting Testim from mid-July
The reduction in Xiaflex' guidance reflects lower sales
expectation from ex-US markets. The company has cut its ex-US
Xiaflex sales guidance by $3 million to $10 - $12 million due to
reimbursement issues in some EU countries. US Xiaflex sales
guidance remains unchanged at $55 - $65 million.
Auxilium Pharma also adjusted its operating expenses guidance.
The company lowered its R&D guidance by $10 million to $45 -
$55 million mainly due to its decision to push back additional work
on a higher volume production capacity for Xiaflex that was
previously expected in the second half of 2012. Meanwhile, SG&A
guidance was increased by $10 million to $200 - $210 million to
reflect higher legal costs and revenue sharing payments to Glaxo.
Moreover, the company expects to recognize post-2015 tail payments
to Glaxo over the term of the active co-promotion period.
Auxilium now expects 2012 net income of $0-$5 million instead of
a loss of $5-$10 million.
Neutral on Auxilium Pharma
We currently have a Neutral recommendation on Auxilium Pharma,
which carries a Zacks #2 Rank (short-term 'Buy' rating). We expect
Testim to continue performing well especially with the additional
promotional effort from Glaxo. However, Xiaflex' performance
continues to lag expectations. With Auxilium Pharma working on
driving sales of the product, we expect investor focus to remain on
the successful commercialization of Xiaflex/Xiapex, and label
expansion of the product for additional indications.
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