Auxilium reports net revenues of $66.7 million for third quarter 2011

Oct 31 2011

Auxilium Pharmaceuticals, Inc. (NASDAQ: AUXL), a specialty biopharmaceutical company, today announced financial results and operational highlights for the quarter ended September 30, 2011. For the third quarter of 2011, Auxilium reported net revenues of $66.7 million compared to net revenues of $53.6 million in the third quarter of 2010.  The net loss for the third quarter of 2011 was $(4.1) million, or $(0.08) per share, compared to a net loss of $(12.8) million, or $(0.27) per share, reported for the third quarter of 2010.

"We believe that the progress we made in the third quarter of 2011 will drive long term shareholder value.  XIAFLEX® revenues showed sequential growth over the second quarter of 2011, despite a slight decrease in overall Dupuytren's procedure volumes, and new XIAFLEX data were well received by physicians attending the American Society for Surgery of the Hand meeting.  We remain encouraged by the physician and patient success stories and believe that XIAFLEX will become the standard of care for Dupuytren's contracture," said Armando Anido, Chief Executive Officer and President of Auxilium.  "Testim® continued to perform well, despite continuing competition in the testosterone replacement market, with prescriptions posting growth over the third quarter of 2010 and over the second quarter 2011."  

Third Quarter and Recent Operational Highlights:

XIAFLEX:

• Worldwide net revenues for XIAFLEX were $13.1 million for the third quarter 2011, up 130% versus the third quarter of 2010.
• Net revenues of XIAFLEX in the U.S. were $10.3 million in the third quarter 2011, up 124% versus the third quarter of 2010.  
• At the 2011 ASSH meeting in early September, physician attendees expressed interest around newly announced XIAFLEX data covering an encouraging 18-month commercial safety update, detailed positive three-year recurrence dynamics, no unexpected safety events from a pilot multicord study and improved outcomes with usage of XIAFLEX in a real-world post approval setting.
• In August, Auxilium and BioSpecifics Technologies Corp. ("BioSpecifics") announced dismissal of all pending litigation and plans to develop additional indications using XIAFLEX.  Auxilium announced plans to initiate a phase I study for the treatment of cellulite in the first quarter of 2012 and BioSpecifics announced plans to initiate studies for the treatment of human and canine lipomas in the near future.  Auxilium also announced plans to initiate a phase IIb trial of XIAFLEX for the treatment of Frozen Shoulder syndrome in the fourth quarter of 2011.
• The Company announced that the active dosing phase for the double-blind placebo-controlled phase III program of XIAFLEX for the treatment of Peyronie's disease was completed by the end of August.  Top-line data is expected in the second quarter of 2012.
• In October, Auxilium announced that the first patient has been enrolled in a XIAFLEX phase IIIb Dupuytren's contracture multicord study.  The study is anticipated to enroll approximately 60 patients and top-line results are expected in the second half of 2012.
• In the third quarter, the Company achieved a $7.5 million regulatory milestone under the license agreement with its EU partner, Pfizer Inc. (Pfizer), for the first sale of XIAPEX® for the treatment of Dupuytren's contracture in Spain.  Including this payment, which was received in early October 2011, the Company has received $60 million in regulatory milestones, offset by $3.9 million in costs incurred by Pfizer for the development of XIAPEX which costs were permitted, by contract, to be deducted from such sales milestones.  XIAPEX is now available for sale in Austria, Denmark, Finland, Germany, Norway, Spain, Switzerland, Sweden, and the UK.  Auxilium is eligible to receive up to $15 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 $53.6 million, up 12% over the third quarter of 2010, with $52.9 million of these revenues earned in the U.S.
• According to IMS Health, Inc., a pharmaceutical market research firm ("IMS"), over 195,000 total prescriptions for Testim were dispensed in the third quarter of 2011, a growth of 13% over the third quarter of 2010.
• Total prescriptions within the gel segment of the testosterone replacement therapy market in the U.S. increased 17% versus the third quarter of 2010, according to IMS.
• Testim ended the month of September with a 20.8% share of total prescriptions for testosterone gels in the U.S., compared to 21.9% at the end of September 2010, according to IMS.    

Third 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 XIAFLEX distributors.  XIAFLEX 2010 revenue recognition methodology recorded sales of XIAFLEX when units are sold from XIAFLEX distributors to physician offices.

Third Quarter 2011 Financial Details

The net loss for the third quarter of 2011 was $(4.1) million, or $(0.08) per share, compared to a net loss of $(12.8) million, or $(0.27) per share, reported for the third quarter of 2010.  Net loss for the third quarter of 2011 included total stock-based compensation expense of $3.8 million, compared to $3.5 million for the third quarter of 2010.

Gross margin on net revenues was 79.7% for the quarter ended September 30, 2011 compared to 78.4% for the year-ago quarter.  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 the result of the contribution of high margin XIAFLEX product sales.    

Investment in research and development for the quarter ended September 30, 2011 was $14.2 million, compared to $14.4 million for the comparable period in 2010.  The slight decrease in expense results from lower costs related to development of a larger scale production process and increased charges related to the phase III XIAFLEX clinical trials for Peyronie's disease.

Selling, general and administrative expenses totaled $43.3 million for the quarter ended September 30, 2011 compared with $40.3 million for the year-ago quarter. The increase was primarily due to the promotional and training activity in support of the launch of XIAFLEX for Dupuytren's in the U.S.

As of September 30, 2011, Auxilium had $149.6 million in cash and cash equivalents compared to $151.8 million on June 30, 2011.