Auxilium Posts Wider-than-Expected Loss, Outlook Maintained - Analyst Blog

The share price of Auxilium Pharmaceuticals, Inc . ( AUXL ) fell 9.6% after the company announced its second-quarter results on Aug 7. However, share prices have recovered approximately 3.1% thereafter.

Auxilium Pharma reported second quarter 2014 loss (including stock-based compensation expense) of 54 cents per share, much wider than the Zacks Consensus Estimate of a loss of 45 cents per share. The company had reported earnings of 14 cents per share in the year-ago quarter.

Auxilium Pharmaceuticals, Inc - Earnings Surprise | FindTheBest

Second quarter revenues decreased 17.4% year over year to $83.0 million. Revenues were impacted by a decrease in Testim and Testopel revenues. However, the quarter saw an increase in Xiaflex and Stendra revenues. Revenues, however, fell short of the Zacks Consensus Estimate of $91 million.

Quarter in Detail

Testim posted sales of $26.1 million in the second quarter of 2014, down 52% year over year. Testim revenues in the U.S. declined 77.6% to $11.9 million. Sales were negatively impacted by slowing growth of the testosterone replacement therapy (TRT) market.

The company launched Stendra for erectile dysfunction and Xiaflex for Peyronie's disease (PD) earlier this year. Auxilium Pharma recorded Stendra U.S. net revenues of $6.1 million (including product shipment to wholesalers).

We note that Auxilium Pharma is looking to expand Stendra's label to include the 15-minute onset of action claim. The FDA is expected to render a final decision on Sep 20, 2014. The product's fast onset of action and a favorable side effect profile could help Stendra pickup share. We note that the company in-licensed Stendra from VIVUS Inc. ( VVUS ).

Xiaflex's U.S. revenues grew 75.3% to $26.3 million. A strong initial launch momentum has been observed for Xiaflex for the PD indication.

While Testopel generated revenues of $4.2 million, Edex revenues were $7.5 million with 52% market share. Both products were gained from the Actient acquisition.

Research and development expenses (including stock-based compensation expense) for the reported quarter declined 16.9% to $11.3 million benefiting from lower spending on Xiaflex. Selling, general and administrative expenses (including stock-based compensation expense) declined 7.6% to $69.2 million.

2014 Guidance

The company reiterated its revenue guidance of $380−$420 million. The Zacks Consensus Estimate of $410 million falls within the guidance range.

In 2014, the company expects Testim revenues to be less than $85 million due to a shrinking TRT gel market, lower Testim market share, and downward pressure on TRT gel scripts due to concerns regarding safety, inventory destocking and higher rebates.

On a year-to-date basis, the company saw a decline of 19% in the TRT gel market. The company expects to report break-even results or a loss of up to $15 million this year.

Our Take

Auxilium Pharma currently carries a Zacks Rank #4 (Sell). Auxilium Pharma's second quarter results missed both revenues and earnings estimates primarily due to lower Testim revenues.

Auxilium Pharma is now treating Testim as a mature product and hence the company is banking heavily on the successful commercialization of Xiaflex and Stendra.

Meanwhile, in a bid to diversify its portfolio (ophthalmology and the orphan drug space) and save taxes, Auxilium Pharma entered into a definitive agreement to merge with Canadian entity QLT ( QLTI ) in an all stock deal in Jun 2014. The merger is expected to close in the fourth quarter of 2014.

Allergan ( AGN ) is a better-ranked stock in the healthcare sector with a Zacks Rank #1 (Strong Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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