Auxilium Pharmaceuticals, Inc.
) reported a loss of 12 cents per share in the first quarter of
2013, wider than the year-ago loss of 4 cents and the Zacks
Consensus Estimate of earnings of 7 cents per share. Lower
revenues led to the wider loss.
Revenues, which declined 10% to $66.2 million, were well below
the Zacks Consensus Estimate of $80 million. US sales of both
Testim and Xiaflex were weak in the reported quarter.
Quarter in Detail
Lead product Testim posted sales of $45.5 million in the first
quarter of 2013, down 23% year-over-year. Testim revenues in the
U.S. declined 22% to $45.3 million. Sales were negatively
impacted by slowing growth of the testosterone replacement
therapy (TRT) market, increased competition and managed care
challenges, and the impact of managed care on the company's net
realized selling price.
Auxilium Pharma said that the TRT market growth rate was much
slower than the company's expectations. Scrips increased just 11%
in the reported quarter compared to the 27% growth seen in the
fourth quarter of 2012. Testim's market share in the first
quarter of 2013 declined to 14.2% from 19% in the year-ago
Testim also faced some inventory de-stocking ($3 - $4 million)
in first-quarter 2013.
Meanwhile, Xiaflex US revenues declined 5% to $12 million. The
company took a price increase for Xiaflex in the US earlier this
year. With physicians in this market being sensitive to
reimbursement issues, the company expects pressure on volumes
until the average selling price is reset.
Auxilium Pharma is working on expanding Xiaflex' label. The
company is currently seeking FDA approval for Peyronie's disease
- a response should be out by Sep 6, 2013.
Research and development expenses for the reported quarter
declined 0.8% to $11.9 million due to lower spending on
activities related to the Xiaflex Peyronie's studies. Selling,
general and administrative expenses declined 5.5% to $44.3
million mainly due to lower spending on Xiaflex for the
In addition to announcing first-quarter 2013 results, Auxilium
Pharma announced that it has acquired private urology specialty
therapeutics company, Actient Holdings LLC. The acquisition terms
include an upfront cash payment of $585 million and contingent
consideration and warrants to purchase 1.25 million shares of
Auxilium Pharma's common stock at an exercise price of $17.80 per
share. Auxilium Pharma may also pay up to $50 million on the
achievement of future revenue targets.
With this acquisition, Auxilium Pharma will add urology
products like Testopel (testosterone replacement therapy), Edex
(non-oral drug for erectile dysfunction), Striant (a buccal
system for testosterone delivery) and Osbon ErecAid (a device for
aiding erectile dysfunction) to its portfolio. Additionally,
Actient has a non-promoted respiratory franchise consisting of
Theo-24and Semprex-D and three other products.
Actient's revenues in 2012 were about $125 million.
The deal is expected to generate cost synergies of about $20
million with the majority of these synergies expected in 2014.
The company also expects to achieve meaningful revenue synergies
from cross-selling opportunities. These synergies and increased
sales force leverage should lead to significant operating margin
expansion over time.
2013 Guidance Revised
Auxilium Pharma revised its guidance to reflect the impact of
the Actient acquisition as well as the performance of Testim and
The company expects revenues of $360 million to $415 million.
Both Testim and US Xiaflex sales guidance have been reduced
reflecting the disappointing first quarter performance. While
Testim sales are now expected in the range of $210 million to
$240 million (old guidance: $250-$265 million), US Xiaflex sales
are expected in the range of $55 million to $65 million (old
guidance: $65-$75 million).
The company continues to expect ex-US and deferred revenues
for Xiaflex of $10 million to $15 million. Meanwhile, Actient
products are expected to contribute $85 million - $95 million to
While Auxilium Pharma refrained from providing specific net
income guidance, it said that it expects the Actient acquisition
to be accretive to the previously announced net income guidance
of $18-$23 million. Auxilium Pharma expects a tax benefit of
about $60 million due to the acquisition.
Auxilium Pharma's first quarter results were disappointing
with both Testim and Xiaflex posting lower sales. Auxilium Pharma
cut its outlook for both Testim and US Xiaflex sales in 2013.
While the Actient deal should help strengthen the company's
urology franchise and reduce its dependence on Testim, we are
concerned about the lack of patent protection for some of the key
Auxilium Pharma currently carries a Zacks Rank #4 (Sell). The
shares were down about 12.7% following the release of
first-quarter 2013 results. Companies that currently look more
Catalyst Pharmaceuticals Partners Inc.
Onyx Pharmaceuticals, Inc.
). While UCB and Catalyst Pharma are Zacks Rank #1 (Strong Buy)
stocks, Onyx Pharma is a Zacks Rank #2 (Buy) stock.
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