Auxilium Pharma Cuts Guidance - Analyst Blog

Auxilium Pharmaceuticals, Inc. AUXL lowered its guidance for 2014. The company cuts its revenue guidance by $70 million to $380 million−$420 million. The Zacks Consensus Estimate of $483 million is significantly above the new guidance range. This revision is primarily driven by lower-than-expected Testim revenues.

Last year, Testim revenues were $211.2 million. However, in 2014, the company expects Testim revenues to be less than $85 million. In the first quarter of 2014, Testim revenues are expected in the range of $11 million − $13 million.

Auxilium Pharma said that Testim will be affected by several factors like a shrinking testosterone replacement therapy TRT gel market, lower Testim market share, downward pressure on TRT gel scrips due to concerns regarding safety, inventory destocking, and higher rebates.

The company expects prescription volume in the TRT gel market to go down by 25% in 2014 from the 2013 level.  

While the company still expects gross margin in the range of 79% − 80%, R&D spend is now expected in the range of $40 million – $45 million (down by $10 million from the previous guidance: $50 million – $55 million). SG&A expenditure, however, remains unchanged in the range of $255 million – $265 million.

Auxilium Pharma now expects to break-even or report a loss of up to $15 million this year instead of reporting net income of $45 million – $50 million.

Our Take

Auxilium Pharma's guidance cut is disappointing. We expect significant downward revisions in estimates given the company's new guidance range. Although Auxilium has been working on diversifying its revenue base, Testim still accounted for 52.7% of the company's revenues in 2013. We expect shares to be negatively impacted by the guidance cut.

Auxilium Pharma carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the health care sector include Enanta Pharmaceuticals, Inc. ENTA, WuXi PharmaTech (Cayman) Inc. WX and BioSpecifics Technologies Corp. BSTC. While Enanta Pharma and WuXi Pharma hold a Zacks Rank #1 (Strong Buy), BioSpecifics carry a Zacks Rank #2 (Buy).