Wider-than-Expected Loss at Auxilium - Analyst Blog

Auxilium Pharmaceuticals, Inc. AUXL reported first quarter 2014 loss (including stock-based compensation expense) of 47 cents per share, much wider than the Zacks Consensus Estimate of a loss of 14 cents per share. The company had reported a loss of 12 cents per share in the year-ago quarter.

First quarter revenues increased 34% year over year to $88.5 million. Revenues were boosted by the inclusion of Actient and newly launched Stendra revenues. Label expansion of Xiaflex also contributed to the increase. However, revenues fell short of the Zacks Consensus Estimate of $99 million.

Quarter in Detail

Testim posted sales of $11.8 million in the first quarter of 2014, down 74% year over year. Testim revenues in the U.S. declined 76% to $10.9 million. Sales were negatively impacted by slowing growth of the testosterone replacement therapy TRT market. Auxilium Pharma stated that the slowdown in the TRT market could be due to safety concerns raised by the U.S. Food and Drug Administration (FDA). Sales were affected by higher-than-expected destocking of Testim.

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 $11.6 million (including product shipment to wholesalers). In its first quarter conference call, the company said that the product has been received well and already enjoys 6% of the new PDE5 prescription market.

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 pick up share. We note that the company in-licensed Stendra from VIVUS Inc. VVUS.

Xiaflex's U.S. revenues grew 38% to $16.6 million. Strong initial launch momentum has been observed for Xiaflex for the PD indication.  

While Testopel generated revenues of $32 million, Edex revenues were $5.5 million with 52% market share. Both these products were gained from the Actient acquisition.

Research and development expenses (including stock-based compensation expense) for the reported quarter declined 7.6% to $11.0 million benefiting from lower spending on Xiaflex. Selling, general and administrative expenses (including stock-based compensation expense) shot up 74.0% to $77.1 million mainly due to the Actient acquisition as well as higher marketing and advertising spend related to the launch of Stendra and Xiaflex for the PD indication.

2014 Guidance

Last week, Auxilium announced a guidance cut in anticipation of weak Testim revenues. The company cut its revenue guidance by $70 million to $380−$420 million. The Zacks Consensus Estimate of $447 million is above the slashed 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, downward pressure on TRT gel scripts 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.

The company now expects to report break-even results or a loss of up to $15 million this year instead of reporting a net income of $45 million to $50 million projected earlier.

Our Take

Auxilium Pharma's first quarter results missed both revenues and earnings estimates primarily driven by lower-than-expected Testim revenues. The company's guidance cut prior to the earnings release was also disappointing. It had then led to a steep decline in the share price.

The company is now banking heavily on the successful commercialization of Xiaflex and Stendra.

Auxilium Pharma currently carries a Zacks Rank #5 (Strong Sell). Some better-ranked biopharma stocks worth considering include Alexion Pharmaceuticals, Inc. ALXN and Enanta Pharmaceuticals, Inc. ENTA. Both carry a Zacks Rank #1 (Strong Buy).