Auxilium Pharmaceuticals, Inc. (AUXL) reported a second quarter loss of 28 cents per share, 3 cents wider than the Zacks Consensus Estimate but lower than the year-ago loss of 32 cents. Net revenues increased 28.8% to $50.5 million in the second quarter, slightly above the Zacks Consensus Estimate of $50 million.
Quarter in Detail
During the reported quarter, Testim sales in the US grew 25.9% to $46.6 million, with prescriptions growing 11.8% from the year-ago period. According to IMS Health, Testim exited the month of Jun 2010 with a 22.1% share of the US testosterone gel market, up from the 21.9% share in the year-ago period. Worldwide Testim revenues were $47.4 million (up 23.8%) including product shipments outside the US. Auxilium expects Testim revenues in the range of $185 million to $195 million in 2010.
Net revenues for the reported quarter also included $2 million in Xiaflex sales in the US and $1.1 million related to the amortization of upfront payments related to the out-licensing of Xiaflex to Pfizer (PFE). Xiaflex received US Food and Drug Administration (FDA) approval for Dupuytren’s contracture in Feb 2010 and was launched in March. Xiaflex is currently under regulatory review in the EU.
Auxilium reported that about 1,747 physicians have received training on using Xiaflex. The company is working on gaining formulary coverage for the product. Auxilium estimates that about 91% of insured lives have formulary access to the product. Auxilium expects Xiaflex revenues in the range of $5.5 – $6.5 million in the third quarter, including the $1.1 million recognized by the company related to the amortization of upfront payments received from Pfizer.
Going forward, Auxilium is looking to move Xiaflex into phase III studies for Peyronie’s disease in the second half of 2010.
While research and development expenses for the reported quarter declined 19% to $11.1 million, selling, general and administrative expenses increased 40.1% to $41.2 million mainly due to increased investments associated with the US launch of Xiaflex. The company is working on creating and increasing awareness among physicians and patients about the product. For 2010, the company expects R&D expenses in the range of $50 – $60 million. SG&A spend is expected in the range of $160 – $170 million.
Our Take
We currently have a Zacks #4 Rank (Sell) on Auxilium. Although we expect Xiaflex sales to pick up, we believe initial ramp-up will be slow. Moreover, reimbursement concerns could limit uptake of the product.
Longer-term, we are Neutral on the stock. The company is working on gaining managed care coverage for Xiaflex. Once the company successfully settles reimbursement issues, increased formulary access should help drive Xiaflex sales. Xiaflex’s approval in the EU would also be a major boost for the stock.
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