We recently reiterated our Neutral recommendation on specialty biopharmaceutical company Auxilium Pharmaceuticals, Inc. (AUXL). Auxilium Pharma is engaged in the development and marketing of products that focus on urology and sexual health. Auxilium Pharma has two US Food and Drug Administration (FDA) approved products in its portfolio – Testim and Xiaflex (EU trade name: Xiapex).
The company recently reported a fourth quarter loss of 34 cents per share, wider than the year-ago loss of 25 cents. Despite posting higher revenues, fourth quarter loss increased due to higher operating expenses. Revenues increased 28.7% to $61.8 million, beating the Zacks Consensus Estimate of $56 million. Full year loss came in at $1.08 per share, below the year-ago loss of $1.22. Full year revenues increased 28.9% to $211.4 million, beating the Zacks Consensus Estimate of $206 million.
Testim prescriptions continue to grow mainly due to Testim’s favorable clinical profile, physician and patient acceptance of the product, and aggressive promotion of the product by the company’s specialized sales force. Although we believe Testim could achieve a 25% share of the market, tough competition and the potential for a generic alternative beyond 2011 could limit the ultimate potential of the drug.
Given the eventual slowdown in Testim, the future of Auxilium relies heavily on Xiaflex. In this regard, we were pleased to see the company receive approval for Xiaflex for Dupuytren’s contracture (DC). While the initial ramp of Xiaflex was slower than expected, performance should improve with the implementation of the J-code. The implementation of the CPT code, potentially in 2012, should boost sales further. Xiaflex, which posted sales of $18.4 million in 2010, is expected to post $55 – $67 million in revenues in 2011.
In addition to the DC indication, Xiaflex is being studied for additional indications like Peyronie’s disease (PD) and adhesive capsulitis (frozen shoulder syndrome). Xiaflex is currently in phase III studies for the Peyronie’s indication with top-line results expected in the first half of 2012.
Meanwhile, we view Auxilium Pharma’s agreement with Pfizer (PFE) for the development and commercialization of Xiaflex in 46 European and Eurasian countries as a major positive for the stock. We believe Pfizer is an excellent ex-US partner for Auxilium Pharma.
Going forward, we expect investor focus to remain on the successful commercialization of Xiaflex/Xiapex.
AUXILIUM PHARMA (AUXL): Free Stock Analysis Report
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