Auxilium Pharmaceuticals, Inc. (AUXL) announced certain restructuring steps following a comprehensive assessment of its product portfolio in a bid to lower operating costs and drive growth.
Auxilium Pharma plans to reduce its headcount by approximately 30%, majority of which will be effective immediately. Under the restructuring plan, Auxilium Pharma plans to consolidate its existing three sales forces into two, thereby strengthening the urology franchise along with commercializing Xiaflex for Peyronie’s disease (PD).
The company had launched Stendra for erectile dysfunction and Xiaflex for PD in Jan 2014.
This consolidation will also allow Auxilium Pharma to maintain the targeted commercial resources required for Xiaflex for the indication of Dupuytren's contracture along with develop Xiaflex for additional indications such as cellulite and frozen shoulder syndrome.
As a result, Auxilium Pharma expects to reduce operating expenses by more than $75 million and align its cost structure better with the existing product portfolio.
Auxilium Pharma anticipates a substantial portion of the restructuring plan to be completed by the end of 2014, with the full $75 million run-rate achieved by mid-2015.
Auxilium Pharma currently carries a Zacks Rank #4 (Sell). We note that Auxilium Pharma has faced significant challenges in 2014 due to a drastic decline in the testosterone replacement therapy market, forcing the company to restructure its operations.
We expect that this strategy will result in a leaner and efficient operational structure. Meanwhile, in a bid to diversify its portfolio (ophthalmology and the orphan drug space) and save taxes, Auxilium Pharma has also entered into a definitive agreement to merge with the Canadian entity, QLT (QLTI), in an all-stock deal in Jun 2014.
Some better-ranked stocks in the healthcare sector include Allergan (AGN) and Gilead Sciences (GILD). Both carry a Zacks Rank #1 (Strong Buy).
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