Auxilium Pharmaceuticals, Inc. (AUXL) and FCB I LLC recently filed a patent infringement lawsuit against Watson Pharmaceuticals (WPI) and its subsidiary, Watson Laboratories, Inc. which is looking to launch a generic version of Auxilium Pharma’s 1% testosterone gel, Testim.
Testim is the lead product at Auxilium Pharma. Testim sales came in at $207.9 million in 2011, accounting for 78.6% of the company’s revenues. Testim’s prescription share of the gel market was 20% in December 2011. However, the product faces stiff competition from Abbott Labs’ (ABT) AndroGel. Testim is facing additional competition in the form of Endo Pharmaceutical’s (ENDP) Fortesta and Eli Lilly’s (LLY) Axiron.
The testosterone gel market will become even more competitive from 2015 when generic versions of AndroGel are scheduled to enter the market. The availability of a cheaper generic testosterone gel product could impact Testim’s market share as well as its formulary status.
Our Take
The filing of the patent infringement lawsuit within 45 days from the date of receipt of notice from Watson is in line with our expectations. This will ensure that the FDA cannot grant final approval to Watson’s generic for up to 30 months or the court’s decision, whichever is earlier.
We note that Auxilium Pharma is leaving no stone unturned to drive Testim sales. The company recently signed a co-promotion agreement with GlaxoSmithKline (GSK) for Testim in the U.S. Following the announcement of the Glaxo co-promotion agreement, Auxilium Pharma increased its revenue guidance based on higher Testim revenues and trimmed its net loss guidance.
We currently have a Neutral recommendation on Auxilium Pharma, which carries a Zacks #3 Rank (short-term ‘Hold’ rating).
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