We recently reiterated a 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 third quarter loss of 8 cents per share, well below the year-ago loss of 27 cents and the Zacks Consensus Estimate of a loss of 21 cents. Higher revenues boosted performance. Revenues, which increased 24.4% to $66.7 million, were marginally above the Zacks Consensus Estimate. For full details of our earnings coverage, click here.
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 Testim has been performing well, 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 Pharma relies heavily on Xiaflex. However, Xiaflex’ performance continues to lag expectations.
While the implementation of the permanent CPT code, effective January 2012, should help smoothen the reimbursement process, we do not expect the implementation of the code to lead to a major improvement in sales. In fact, the Zacks Consensus Loss Estimate for 2012 has gone up as several analysts following the stock have reduced their sales expectations for Xiaflex.
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.
With Auxilium Pharma working on driving sales of the product, we expect investor focus to remain on the successful commercialization of Xiaflex/Xiapex, and label expansion of the product for additional indications.
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