Auxilium second quarter net loss decreases to $5.1 million

Aug 1 2011

Auxilium Pharmaceuticals, Inc. (NASDAQ: AUXL), a specialty biopharmaceutical company, today announced financial results and operational highlights for the quarter ended June 30, 2011. For the second quarter of 2011, Auxilium reported net revenues of $65.9 million compared to net revenues of $50.5 million in the second quarter of 2010.  The net loss for the second quarter of 2011 was $(5.1) million, or $(0.11) per share, compared to a net loss of $(13.5) million, or $(0.28) per share, reported for the second quarter of 2010.

"We believe that the progress we made in the second quarter of 2011 will drive long term shareholder value.  XIAFLEX® showed double-digit sequential growth over the first quarter of 2011 and we remain encouraged by the success stories on XIAFLEX use, reflecting a steady shift in the treatment paradigm," said Armando Anido, Chief Executive Officer and President of Auxilium.  "Testim® continued to perform well, despite several new competitors entering the market, with prescriptions posting growth over the second quarter of 2010 and over the first quarter 2011."  

Second Quarter and Recent Operational Highlights:

XIAFLEX:

• Worldwide net revenues for XIAFLEX were $15.4 million for the second quarter 2011, versus $3.1 million in the second quarter of 2010.
• Net revenues of XIAFLEX in the U.S. were $9.9 million in the second quarter 2011, versus $2.0 million in the second quarter of 2010.  
• The Company expects the active dosing phase for the double-blind placebo-controlled phase III program of XIAFLEX for the treatment of Peyronie's disease to be completed by the end of August.  Top-line data is expected in the second quarter of 2012.
• On June 30, the Company announced a three year nominal recurrence rate of 34.8% for joints previously treated successfully with XIAFLEX from the CORDLESS extension study in Dupuytren's contracture patients.   Additionally, 93% of joints that were successfully treated with XIAFLEX did not receive any medical or surgical intervention through three years of follow-up.
• In the second quarter, the Company received $33.6 million in regulatory milestone payments from its EU partner, Pfizer Inc. (Pfizer), representing $37.5 million for the first sale of XIAPEX® for the treatment of Dupuytren's contracture in the United Kingdom (the "UK") and Germany, offset by $3.9 million in costs incurred by Pfizer for the development of XIAPEX which by contract could be deducted from such first sale milestones.  XIAPEX is now available for sale in Austria, Denmark, Finland, Germany, Norway, Sweden, and the UK, and was recently approved in Switzerland.  Auxilium is eligible to receive up to $22.5 million in additional regulatory milestone payments for this indication, which will be paid in $7.5 million increments, following Pfizer's first sale of XIAPEX in each of the remaining major markets of the EU.  

Testim:

• Worldwide revenues for Testim were $50.5 million, up 7% over the second quarter of 2010, with $49.7 million of these revenues earned in the U.S.
• According to IMS Health, Inc., a pharmaceutical market research firm ("IMS"), over 174,200 total prescriptions for Testim were dispensed in the second quarter of 2011, a growth of 3% over the second quarter of 2010 and 1% growth over the first quarter of 2011.
• Total prescriptions within the gel segment of the testosterone replacement therapy market in the U.S. increased 12% versus the second quarter of 2010, according to IMS.
• Due to new market entrants, Testim ended the month of June with a 20% share of total prescriptions for testosterone gels in the U.S., compared to 22% at the end of June 2010, according to IMS.  

Updated Guidance:

• The Company is decreasing full year 2011 guidance for XIAFLEX U.S. revenues from the previously stated guidance of a range of $50 to $60 million to a range of $45 to $50 million.
• The decrease in XIAFLEX U.S. revenues guidance changes full year 2011 net loss guidance from the previously stated guidance of a range of $(31) to $(41) million to a range of $(40) to $(45) million for the year.

Second quarter 2011 Revenue Details

Auxilium reported the following unaudited net revenues (all amounts in millions of dollars):

Ex-U.S. & contract revenues represent the ongoing amortization of deferred up-front and milestone payment amounts, cumulative catch-up adjustments for milestone payments received during the period, in the case of Testim, sales of products to our partner and, in the case of XIAFLEX, royalties received on product sales by our licensees. For 2011, XIAFLEX revenue recognition methodology records sales of XIAFLEX when units are sold to its distributors.  XIAFLEX 2010 revenue recognition methodology recorded sales of XIAFLEX when units are sold from its distributors to physician offices.

Second Quarter 2011 Financial Details

The net loss for the second quarter of 2011 was $(5.1) million, or $(0.11) per share, compared to a net loss of $(13.5) million, or $(0.28) per share, reported for the second quarter of 2010.  Net loss for the second quarter of 2011 includes total stock-based compensation expense of $4.0 million, compared to $4.6 million for the second quarter of 2010.

Gross margin on net revenues was 78.2% for the quarter ended June 30, 2011 compared to 77.1% for the comparable period in 2010.  Gross margin reflects the costs of products sold, royalty obligations due to the Company's licensors, and the amortization of the deferred costs associated with the Pfizer contract.  The increase in the gross margin rate is due to the contribution of high margin XIAFLEX contract revenues and product sales, and year-over-year price increases of Testim in the U.S., partially offset by increased managed care rebates.

Investments in research and development for the quarter ended June 30, 2011 were $13.3 million, compared to $11.1 million for the comparable period in 2010.  The increase results principally from the activities related to the phase III XIAFLEX clinical trials for Peyronie's disease offset by a slightly smaller investment in the development of a larger scale XIAFLEX production process.

Selling, general and administrative costs for the quarter ended June 30, 2011 were $43.4 million, compared to $41.2 million in the comparable 2010 period.  The increase was primarily due to promotional and training activity in support of the launch of XIAFLEX for Dupuytren's in the U.S. offset by lower administrative costs and stock based compensation costs.

As of June 30, 2011, Auxilium had $151.8 million in cash, cash equivalents and short-term investments, compared to $130.9 million at March 31, 2011.