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Auxilium Pharmaceuticals, Inc. Announces First Quarter 2014 Financial Results

Companies mentioned in this article: Auxilium Pharmaceuticals, Inc.

CHESTERBROOK, Pa., May 5, 2014 /PRNewswire/ -- Auxilium Pharmaceuticals, Inc. (NASDAQ: AUXL), a fully integrated specialty biopharmaceutical company, today announced financial results for the first quarter ending March 31, 2014. The Company highlighted important commercial, regulatory and clinical development updates from the quarter and, as previously announced, revised its 2014 financial guidance, principally related to lower expectations for Testim(®) revenues for the year.

"While we were clearly disappointed with the performance of Testim in the first quarter, our launches of STENDRA(TM) for erectile dysfunction and XIAFLEX(®) for Peyronie's disease are advancing quite well and we continue to see potential for our growth products across our broadened and more diversified portfolio," said Adrian Adams, Chief Executive Officer and President of Auxilium. "We believe these growth products continue to present the opportunity for Auxilium to build value for our shareholders in 2014 and beyond."

After entering 2013 with only two products, Auxilium strategically broadened its portfolio to 12 products by the end of the year. The Company now has seven promoted products across men's healthcare and orthopedics, including five products with growth potential - STENDRA, XIAFLEX for Peyronie's disease (PD), XIAFLEX for Dupuytren's contracture (DC), TESTOPEL(®) and edex(®) - as well as Testim and Osbon ErecAid(®). The Company is advancing ongoing R&D programs in Frozen Shoulder Syndrome, with a Phase 2b trial ongoing and on track for anticipated data in the first quarter of 2015, and cellulite, with a Phase 2a trial ongoing and ahead of schedule with data now expected in the fourth quarter of 2014.

Recent Highlights & Corporate Milestones:

    --  Commercial launches in January 2014 of STENDRA, the first new drug entry
        into the erectile dysfunction market in nearly 10 years, and XIAFLEX in
        PD, the first and only FDA-approved treatment proven safe and effective
        for PD in men with a palpable plaque and a penile curvature deformity of
        30 degrees or greater at the start of therapy
    --  FDA acceptance of VIVUS' sNDA filing seeking a 15-minute onset of action
        label expansion for STENDRA - PDUFA date is September 20, 2014
    --  FDA acceptance of an sBLA filing requesting approval of XIAFLEX in DC
        for the concurrent treatment of multiple cords - PDUFA date is October
        20, 2014

First Quarter 2014 Financial Results:

    --  Total revenues for the three-month period ended March 31, 2014 were
        $88.5 million, compared to $66.2 million for the first quarter of 2013 -
        this 34 percent increase was primarily due to the addition of revenues
        from the products acquired as part of the Actient acquisition in April
        2013, as well as the launch of STENDRA and XIAFLEX for PD during the
        first quarter of 2014 and was partially offset by a decline in Testim
        revenues. Product revenues for the first quarter included:
        --  STENDRA U.S. net revenues of $11.6 million (revenues are recognized
            by the Company at the time product is shipped to wholesalers) -
            initial product launch traction is positive with STENDRA already
            gaining a 6.0 percent share of all new PDE5 prescriptions and a 2.3
            percent share of total PDE5 prescriptions amongst Auxilium's target
            physician population, those doctors responsible for 45 percent of
            all PDE5 prescriptions
        --  XIAFLEX U.S. net revenues (for PD and DC combined) of $16.6 million,
            representing a 38% increase from the first quarter of 2013 - initial
            launch momentum for XIAFLEX for PD is strong with 853 physicians
            REMS certified, 2,373 patients submitted to the Auxilium Advantage
            program for payer reimbursement for treatment and an estimated 1,022
            product vials shipped to physicians through the end of April
        --  Edex U.S. net revenues of $5.5 million - with product market share
            reaching 52 percent
        --  TESTOPEL U.S. net revenues of $32.0 million - including a product
            buy-in in March 2014 ahead of a 15 percent product price increase
            announced on March 1 and effective on April 1, 2014, which the
            Company estimates could account for approximately $12 to 14 million;
            TESTOPEL was acquired as part of the Actient transaction on April
            26, 2013 and thus the Company had no TESTOPEL revenues in the first
            quarter of 2013
        --  Testim U.S. net revenues of $10.9 million - U.S. revenues for the
            first quarter of 2014 declined 76 percent compared to the same time
            period in 2013; the Company believes this decrease was due, in part,
            to:
            --  The accelerating decline of prescriptions in the testosterone
                replacement therapy (TRT) gel market, which could be due to the
                January 2014 TRT product safety communication from the U.S. Food
                and Drug Administration, recent medical journal publications
                suggesting potential health risks associated with TRT products,
                extensive advertising regarding litigation against companies
                marketing TRT products and the commencement of such litigation
                against companies marketing TRT products, including Auxilium
            --  Greater than expected destocking of Testim inventory in the
                wholesale and retail channels
            --  Greater than expected decrease in the Company's highest margin,
                non-contracted prescriptions, resulting in a higher than
                anticipated gross-to-net discount applying to all first quarter
                Testim sales
            --  Specifically for the first quarter 2014, the requirement to
                accrue a liability for the higher than anticipated rebates and
                allowances on all Testim units estimated to be in the wholesale
                and retail distribution channels
        --  Other products acquired in the Actient transaction on April 26, 2013
            totaled $7.8 million
        --  See Table 1 attached for further details on revenues
    --  Gross margin on net revenues was 80 percent (non-GAAP basis) for the
        first quarter 2014 compared to 77 percent for the same period in 2013 -
        this increase is due to the higher margin contribution of the Actient
        products, partially offset by a decrease in Testim net margin from a
        lower net selling price
    --  R&D spending was $10.3 million (non-GAAP) compared to $11.2 million for
        the first quarter of 2013 - this decrease resulted principally from
        lower spending on XIAFLEX Phase 3 clinical trials in DC and PD and was
        partially offset by increased spending on the ongoing XIAFLEX Phase 2
        trials for cellulite and Frozen Shoulder Syndrome
    --  Selling, general and administrative costs were $73.7 million (non-GAAP)
        compared to $41.3 million for the first quarter of 2013 - this increase
        was primarily due to the added expenses of the acquired Actient
        operations and an increase in marketing and advertising spend related to
        the January 2014 launches of XIAFLEX for the treatment of PD and STENDRA
    --  Net loss for the first quarter 2014 (non-GAAP) was $19.4 million, or
        $(0.39) per share (basic and fully diluted) compared to a net loss of
        $2.3 million or $(0.05) per share (basic and fully diluted) for the
        first quarter of 2013 - this increase in net loss was primarily due to
        decreased Testim revenues and increased selling, general and
        administrative costs
    --  As of March 31, 2013, Auxilium had $76.7 million in cash, cash
        equivalents and short-term investments, compared to $71.2 million at
        December 31, 2013, and outstanding debt of $296.6 million ($350.0
        million at par value) in 2018 convertible senior notes and $252.5
        million ($262.0 million par value) in a secured term loan

Updated Financial Guidance
The following outlines Auxilium's previously announced revised financial expectations for the twelve months ending December 31, 2014 (all numbers in $ millions except gross margins):


                               Revised
                               -------

    Total Revenues                        $380 - 420

    Gross Margin Rate                      79% - 80%

    R&D Expense (non-GAAP)                  $40 - 45

    SG&A Expense (non-GAAP)               $255 - 260

    Net Interest Expense
     (non-GAAP)                             $20 - 22

    Net Income (Loss) (non-
     GAAP)                                 $0 - (15)

Use of Non-GAAP Financial Measures
The foregoing descriptions of our First Quarter Financial Details contain non-GAAP financial measures. Non-GAAP financial measures should not be relied upon as an alternative to GAAP measures. A description of the non-GAAP calculations and reconciliation to the closest comparable GAAP measure, as well as the Company's rationale for the utility to investors of the non-GAAP measures it has elected to report, is provided in the accompanying Table 2.

Conference Call
Auxilium will hold a conference call today, Monday, May 5, 2014 at 8:30 a.m. ET, to discuss first quarter 2014 results. The presentation slides to be used during the call will be available on the "Investors" section of Auxilium's web site under the "Presentations" tab at 8:30 a.m. ET. A question and answer session will follow the presentation. The conference call and the presentation slides will be simultaneously webcast on the "Investors" section of Auxilium's website under the "Events" tab. The conference call will be archived for future review until August 5, 2014.


    Conference call details:

    Date:                            Monday, May 5, 2014

    Time:                            8:30 a.m. ET

    Dial-in (U.S.):                  866-515-2915

    Dial-in (International):         617-399-5129

    Web cast:                        http://www.auxilium.com

    Passcode:                        AUXILIUM

    To access an audio replay of the
     call:

    Access number (U.S.):            888-286-8010

    Access number (International):   617-801-6888

    Replay Passcode #:                                       78509201

About Auxilium
Auxilium Pharmaceuticals, Inc. is a fully integrated specialty biopharmaceutical company with a focus on developing and commercializing innovative products for specialist audiences. With a broad range of first- and second-line products across multiple indications, Auxilium is an emerging leader in the men's healthcare area and has strategically expanded its product portfolio and pipeline in orthopedics, dermatology and other therapeutic areas. Auxilium now has a broad portfolio of 12 approved products. Among other products in the U.S., Auxilium markets edex(®) (alprostadil for injection), an injectable treatment for erectile dysfunction, Osbon ErecAid(®), the leading device for aiding erectile dysfunction, STENDRA((TM)) (avanafil), an oral erectile dysfunction therapy, Testim(®) (testosterone gel) for the topical treatment of hypogonadism, TESTOPEL(®) (testosterone pellets) a long-acting implantable testosterone replacement therapy, XIAFLEX(®) (collagenase clostridium histolyticum or CCH) for the treatment of Peyronie's disease and XIAFLEX for the treatment of Dupuytren's contracture. The Company also has programs in Phase 2 clinical development for the treatment of Frozen Shoulder syndrome and cellulite. To learn more, please visit www.Auxilium.com.

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This news release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995, which discuss matters that are not facts, and may include words to indicate their uncertain nature such as "believe," "expect," anticipate," "intend," "plan," "could," "estimate," "project," "will," and "target." Our forward-looking statements convey management's expectations, beliefs, plans and objectives regarding future performance of the Company and are based upon preliminary information and management assumptions. No specific assurances can be given with respect to: whether we will achieve our financial guidance for 2014; the degree to which our actual results will meet our projections; the exact reasons for the first quarter decline in Testim sales; whether our product portfolio is sufficiently diversified; whether what we believe are our five growth products will continue to grow; whether we will successfully advance our R&D pipeline in orthopedics and dermatology and the timing of receiving and announcing data from those studies; whether we are well positioned to, or will, drive increased shareholder value; the success of the launch of two new products: STENDRA and XIAFLEX for PD; and whether and when the FDA will approve the sBLA filed for the concurrent treatment of multiple cords with XIAFLEX for DC or the sNDA for the label expansion for STENDRA. While the Company may elect to update the forward-looking statements made in this news release in the future, the Company specifically disclaims any obligation to do so. Such forward-looking statements are subject to a wide range of risks and uncertainties that could cause results to differ in material respects, including those relating to product development, revenue, expense and earnings expectations, intellectual property rights, results and timing of clinical trials, success of marketing efforts, the need for additional research and testing, and the timing and content of decisions made by regulatory authorities, including the FDA, and those risks discussed in our reports on file with the Securities and Exchange Commission (the "SEC"). Our SEC filings may be accessed electronically by means of the SEC's home page on the Internet at http://www.sec.gov or by means of the Company's home page on the Internet at http://www.auxilium.com under the heading "For Investors - SEC Filings." There may be additional risks that the Company does not presently know or that the Company currently believes are immaterial which could also cause actual results to differ from those contained in the forward-looking statements.



    Auxilium Contacts:

    Keri P. Mattox / SVP, IR &     Nichol L. Ochsner / Senior Director, IR &

    Corporate Communications       Corporate Communications

    Auxilium Pharmaceuticals, Inc. Auxilium Pharmaceuticals, Inc.

    (484) 321-5900                 (484) 321-5900

    kmattox@auxilium.com           nochsner@auxilium.com


                                       AUXILIUM PHARMACEUTICALS, INC.

                                  Table 1- 1st Quarter 2014 Revenue Details

                                    (In millions, except for percentages)

                                                 (Unaudited)



                                                            3 Months Ended March
                                                                     31,               Increase
                                                           --------------------

                                                               2014               2013       (Decrease)
                                                               ----               ----        ---------


    Testim revenues-

                           Net U.S. product sales             $10.9              $45.3               -76%


                           International revenues               0.9                0.2               350%
                                                                ---


                           Total Testim revenues              $11.8              $45.5               -74%
                                                              -----


    XIAFLEX revenues-

                           Net U.S. product sales             $16.6              $12.0                38%


                           International revenues               3.2                8.7               -63%
                                                                ---


                           Total XIAFLEX revenues             $19.8              $20.7                -4%
                                                              -----


    TESTOPEL U.S. revenues                          $32.0                     -        N/A


    STENDRA U.S. revenues                           $11.6                     -        N/A


    Edex U.S. revenues                               $5.5                     -        N/A


    Other Actient U.S.
     revenues                                        $7.8                     -        N/A
                                                     ----                   ---        ---


                           Total net revenues                 $88.5              $66.2                34%
                                                              =====


                            Note: International revenues represent
                            amortization of deferred upfront and milestone
                            payments received on our licensing agreements,
                            together with royalties earned on product sales
                            by licensees.


                                                                                                                            AUXILIUM PHARMACEUTICALS, INC.

                                                                                                                 Table 2- Reconciliation of GAAP to Non-GAAP Net Loss

                                                                                                                        (In millions, except per share amounts)

                                                                                                                                      (Unaudited)


                                                                                3 Months Ended March 31, 2014                                     3 Months Ended March 31, 2013
                                                                              -----------------------------                                  -----------------------------

                                                                                      GAAP                    Adjustments                                         Non-GAAP            GAAP         Adjustments           Non-GAAP
                                                                                      ----                    -----------                                         --------            ----         -----------           --------

    Net revenues                                                                                $88.5                     $         -                                          $88.5        $66.2                                  $66.2

    Operating expenses:

                                                 Cost of goods sold                              18.1                            (0.0)       (a)                                18.1         15.1              (0.0) (a)            15.1

                                                 Research and development                        11.0                            (0.7)       (b)                                10.3         11.9              (0.7) (b)            11.2

                                                  Selling, general and
                                                  administrative                                 78.0                            (4.3)       (c)                                73.7         44.3              (3.0) (c)            41.3

                                                  Amortization of purchased
                                                  intangibles                                    19.8                           (19.8)       (d)                                   -            -                 -                    -

                                                 Contingent consideration                         7.7                            (7.7)       (e)                                   -            -                 -                    -


                                                     Total operating expenses                   134.6                           (32.5)                                         102.1         71.3              (3.7)                67.6
                                                 ----------

    Loss from operations                                                                        (46.1)                           32.5                                          (13.6)        (5.1)              3.7                 (1.4)

    Interest income (expense), net                                                               (9.6)                            4.1        (f)                                (5.5)        (3.1)              2.2  (f)            (0.9)
                                                                                                 ----                             ---                                           ----         ----               ---                 ----

    Loss before income taxes                                                                    (55.7)                           36.6                                          (19.1)        (8.2)              5.9                 (2.3)

    Income tax benefit (expense)                                                                 (0.3)                              -                                           (0.3)                             -                    -
                                                                                                 ----                             ---                                           ----                            ---                  ---

    Net loss                                                                                   $(56.0)                          $36.6                                         $(19.4)       $(8.2)             $5.9                $(2.3)
                                                                                               ======                           =====                                         ======        =====              ====                =====



    Basic and diluted net loss per common share                                                $(1.12)                                                                        $(0.39)      $(0.17)                                $(0.05)
                                                                                               ======                                                                         ======       ======                                 ======



    Shares used to compute basic and diluted net                                                 49.8                                                                           49.8         49.2                                   49.2

         loss per common share


                                                                                                                                                     3 Months                     3 Months

                                                                                                                                               Ended March 31, 2014        Ended March 31, 2013
                                                                                                                                               --------------------        --------------------

    Adjustments to:
    ---------------

    (a) Costs of goods sold:

                                              Employee stock-based compensation (1)                                                                                  (0.0)                       (0.0)


    (b) Research and development:

                                              Employee stock-based compensation (1)                                                                                  (0.7)                       (0.7)


    (c) Selling, general and administrative:

                                              Employee stock-based compensation (1)                                                                                  (3.4)                       (3.0)

                                              Acquisition related transaction and integration costs (2)                                                              (0.9)                          -

                                                 Total                                                                                                              $(4.3)                      $(3.0)



    (d) Amortization of purchased intangibles (3)                                                                                                                   (19.8)                          -


    (e) Change in contingent consideration (4)                                                                                                                       (7.7)                          -


    (f) Interest income (expense), net

                                              Non-cash interest expense related                                                                                       4.1                         2.2

                                                   to term loan and convertible debt (5)



                                               The effects of employee stock-based compensation are excluded because of varying available
                                               valuation methodologies and subjective assumptions.  We believe this is a useful measure for
                                               employees because such exclusion facilitates comparison to peer companies who also provide
                                               similar non-GAAP disclosures and is reflective of how Auxilium management internally manages
    (1)                                        the business.


                                               The effects of expenses related to the Actient acquisition and integration are excluded because
                                               of the non-recurring nature of these expenses, and we believe such exclusion facilitates
                                               investors' ability to more accurately compare our operating results to those of our peer
                                               companies.  Additionally, the amounts excluded are not indicative of anticipated ongoing
    (2)                                        operations.


    (3)                                        The effects of amortization of  intangible assets acquired in the Actient acquisition are
                                               excluded because this expense is non-cash, and we believe such exclusion facilitates
                                               investors' ability to more accurately compare our operating results to those of our peer
                                               companies.


                                               The effects of change in contingent consideration are excluded due to the nature of this
                                               charge, which is related to the change in the fair value of the liability for contingent
                                               consideration in connection with the acquisition of Actient. We believe such exclusion
                                               facilitates investors' ability to more accurately compare our operating results to those of
    (4)                                        our peer companies.


    (5)                                        The effects of non-cash interest related to the term loan as well as the convertible senior
                                               notes due 2018 are excluded.  We believe such exclusion facilitates an understanding of the
                                               effects of the debt service obligations on the Company's liquidity and comparisons to peer
                                               group companies, and is reflective of how Auxilium management internally manages the business.

SOURCE Auxilium Pharmaceuticals, Inc.