Auxilium Pharmaceuticals, Inc.
) reported a loss of 21 cents per share in the third quarter of
2012, wider than the year-ago loss of 8 cents and the Zacks
Consensus Estimate of a loss of 6 cents. Lower-than-expected
revenues and higher costs led to the disappointing results.
Revenues, which increased 6.4% to $71.0 million, were well below
the Zacks Consensus Estimate of $80 million.
Quarter in Detail
Performance of lead product, Testim, was weak in the third
quarter with sales coming in at $55.4 million, up 3%. Testim
revenues in the US increased 3% to $54.6 million. Auxilium Pharma
attributed the weakness in Testim's performance to challenges in
the managed-care environment and operational disruption resulting
from the company's co-promotion agreement with
). Glaxo started co-promoting Testim in the US from July.
Testim is facing additional competition in the testosterone
replacement therapy (TRT) gel market. Auxilium Pharma noted that
prescription growth was below expectations. The TRT gel market is
growing at a slower rate and this will affect sales going
forward. Testim also lost some volume during the quarter due to
additional pressure from payers.
Meanwhile, Xiaflex sales grew 20% to $15.7 million, including
contract and ex- US revenues. US revenues increased 29% to $13.2
million. However, ex-US Xiaflex net revenues decreased 12% in the
third quarter of 2012 - the year ago period included cumulative
catch-up revenue adjustments totaling $1.0 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
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 is currently seeking US Food and Drug
Administration (FDA) approval for this indication.
Although Auxilium Pharma has sought priority review status, it
expects the FDA to grant standard review. This means a response
regarding approval should be out by September 2013. News as to
whether the FDA will grant priority review status should be out
by the end of January.
Meanwhile, Auxilium Pharma initiated a phase Ib study in Jan
2012 for the treatment of cellulite (edematous fibrosclerotic
panniculopathy) - top-line results are expected by year end.
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.
Research and development expenses for the reported quarter
declined 25.4% to $10.6 million due to lower spending on the
Peyronie's studies. Selling, general and administrative expenses
grew 27.7% to $55.3 million mainly due to higher spending and a
change in the timing of spend on Xiaflex and Testim.
Pfizer Agreement Terminated
Apart from announcing third quarter results, Auxilium Pharma
said that its collaboration agreement with
) for Xiapex in the EU and a few other European and Eurasian
countries will come to an end by April 24, 2013. As a result, the
company expects to recognize deferred revenues of $94 million in
the fourth quarter of 2012 and deferred costs of $9 million.
As of September 30, 2012, the company had $103.4 million of
deferred revenues on its balance sheet under the Pfizer agreement
and $9.3 million of deferred costs (payment to BioSpecifics
Technologies). While a major part of these amounts will be
recognized in the fourth quarter of 2012, the balance will be
recognized in the first half of 2013.
With the company now expecting to recognize deferred revenues
of $94 million under the Pfizer agreement in 2012, revenue
guidance has shot up to $388 - $408 million from $310 - $332
Although Xiaflex global sales guidance is now $153 - $163
million, significantly above the earlier guidance of $65 - $77
million, we note that the $94 million deferred revenue accounts
for the increase. In fact, the company has reduced its 2012
outlook for Xiaflex sales in the US to $52 - $60 million (old
guidance: $55 - $65 million). Testim sales guidance was cut by
$10 million to $235 - $245 million.
Auxilium Pharma also adjusted its operating expenses guidance.
The company narrowed its R&D guidance to $45 - $50 million
from $45 - $55 million. Meanwhile, SG&A guidance was cut by
$15 million to $185 - $195 million (old guidance: $200 - $210
Auxilium now expects 2012 net income of $85-$90 million
instead of $0-$5 million.
Auxilium Pharma's third quarter results were disappointing
considering the weak Testim sales. The shares were down on the
weak results and the termination of the Pfizer agreement.
Although the company expects Testim sales to improve, we expect
some weakness in the shares until Testim shows signs of
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