James E. Fickenscher - Chief Financial Officer and Principal Accounting Officer
Ying Huang - Barclays Capital, Research Division
Auxilium Pharmaceuticals, Inc. (AUXL) Barclays Global Healthcare Conference March 14, 2013 8:00 AM ET
Ying Huang - Barclays Capital, Research Division
Okay, good morning. I guess we'll kick off the third day of our conference here. My name is Ying Huang, and I'm the U.S. biotech analyst here at Barclays. I'm very pleased to have our first drug company this morning in biotech, it's Auxilium Pharmaceuticals. And we have Jim Fickenscher from the company, presenting. He's the CFO of Auxilium. And then also, we're pleased to have Will Sargent, the head of their investor relationship, here at Barclays. All right, with that, I'm just going to turn the podium to Jim.
James E. Fickenscher
Thank you, Ying, and good morning, everyone. I appreciate the -- I appreciate you being here, early on the last day of the conference. So this must be the crew that didn't go down the South Beach last night, or you're just very good at getting up very early. So thank you for being here with us today.
This morning, I am going to make some forward-looking statements, and so I would ask you to please take a look at our risk factors on our website, that can be found on www.auxilium.com, and our SEC registration statements.
Auxilium is a company that has 2 very nice products, and we've just laid out what our 6 core strategic objectives are. These core strategic objectives are things that we believe will drive shareholder value, and I'll kind of walk through each one of these but -- as we go through the presentation.
So let's start out by maximizing the value of our current products. We have 2 products, Testim and XIAFLEX. Looking to maximize the value of Testim in 2013, some of our key goals are: to maintain our #2 position and reduce the market share gap between us and AndroGel; we're looking to accelerate new patient starts in Testim for both our existing customer base, as well as the expanded target customers in primary cares, through the primary care physicians through our relationship with GSK; and in 2013, we're going to look to differentiate Testim through enhanced optimized messaging and promotion to drive physician and patient preference.
As I mentioned last year, we started a co-promotion on Testim with GlaxoSmithKline to expand our reach and frequency within the primary care audience. And we believe that we're going to be able to utilize them to successfully pull through on some current contracts, and we're going to continue to aggressively work for additional managed care contracts this year for the product.
Finally, this is a market that has seen significant growth. I'll talk a little bit more about that on the next slide. But we want to continue to capitalize on that market growth through focused initiatives to acquire and retain new patients.
So I mentioned the market. This is a market that has been growing extremely quickly. Last year, TRT revenues were up 31%, prescriptions were up 32% over the prior year, and the market, the gel market segment of the TRT market, is just under $2 billion as of the end of last year.
Within the gel market, we are seeing similar growth that we're seeing in the overall TRT market, prescriptions are up 31%, and that gel segment represents about just under 90% of the total TRT market by dollars.
So when we look at the market dynamics going forward, we want to continue to condition the awareness and diagnosis rates that are definitely improving. We got about 20% and 30%, respectively, among men aged 45 to 64. But that means that there's still a tremendous number of patients who can come into this market.
So currently, Abbott and -- excuse me, ABVI and Lilly have been spending tremendously on DTC. It's hard to turn on your TV and not see ads for AndroGel and AXIRON. They spent over $125 million last year, and that's clearly a key influence in driving patients and prescriptions in this market. We are obviously looking to benefit from that growth in the market through getting our share, if you will.
So we've had -- we knew that when we had the new products that were going to come into this market in 2011, that it was highly likely that we were going to lose market share. But we felt that given growth in the market, even with the declining market share, that we're going to be able to continue to see increasing prescriptions and revenues for Testim.
Last year, we signed a co-promotion agreement with GSK. And what this chart is indicating is that the change in our TRx market share quarter-over-quarter, what you could see is when GSK came on in the third quarter, that market share loss started to slow. It slowed significantly in the fourth quarter of 2012. And although it's only one data point in the month of January, we saw an actual increase in our market share for the month of January.
So part of our goal this year, and if you look at the guidance that we've given, is basically to say that we need to stabilize or slightly increase our market share in a market that we believe will continue to grow in high double digits and achieve about 1/2 of our price increase that we took on January 2 of 9.9%, and that's the way that we're going to grow this product in this year.
Let's turn now to Testim -- or excuse me, to XIAFLEX. XIAFLEX is a drug for Dupuytren's contracture. We were approved in 2010, began marketing it at March 2010, so this will be our third full year of marketing the product. And our goal here is to drive XIAFLEX to be the standard of care. We want to drive utilization amongst specialists. We're significantly expanding our physician advocacy efforts. We've got a new program with opinion leaders to drive advocacy on our behalf. We also have a very robust publication and presentation plan on the data that is coming available.
We also want to drive patient referrals to experience injection -- injectors. So one of the things that we heard was that a number of primary care physicians, who are the people that make the primary diagnosis quite often, were reluctant to send their patients to hand surgeons in the past because they know that the only real option that they had was either needle aponeurotomy or surgery. And they didn't feel that it was appropriate necessarily for their patients to go through the surgical procedure. So they would hold on to them until it got to a point where their Dupuytren's contracture was so difficult to deal with that they felt that they'd be ready for surgery.
In fact, the awareness that there was a nonsurgical option amongst primary care physicians is very low. And so we started last year to have our Testim field force who calls on primary care physicians to try to generate some referrals, and we saw some positive traction on that. So we're looking to continue to build on that this year.
We're going to continue to optimize our acquisition and distribution process. We sell the product through a specialty pharmacy and specialty distributor. And while we don't have a lot of pushback on the patient co-pay, there are some plans that the patient cost can be relatively high. And on those, we've been addressing that with a co-pay program, looking to drive utilization of that to make sure there's no barriers for the patient from an out-of-pocket point of view.
So this chart shows a couple of different things on it. In the blue bar, these are the number of vials that are purchased on a quarterly basis. And you can see that we've seen nice steady growth since the beginning of the launch. You also start to see the pattern of seasonality where the first and the fourth quarter, the fourth quarter in particular of each year, is really the largest in the year. And then the line graph that shows there's a number of unique sites that are ordering within that quarter. So again, we're pleased to see that the number of unique sites that are ordering in any given quarter continues to rise along with the total number of vials.
So in 2012, XIAFLEX U.S. net revenues were $55.2 million, that's a 31% growth over 2011. And the fourth quarter was our best quarter ever that we had last year since the launch of the product with XIAFLEX. We had $17.5 million in revenue, which represented 30% growth over the fourth quarter of 2011. So, so far, since the launch of the product, we had 2,000, just over 2,000 sites, who have utilized XIAFLEX. And for those of you who may be new to the story, we have a REMS program, which requires us to give physicians to enroll both themselves as physicians but also the site where they treat into the program and basically the sites are where we deliver the product to. So that's the best ability to know how many different customers are using the product. That is an increase of 26% in sites that use the product in 2012, and we had about a 33% increase in vials. So again, another important aspect for us is that we're seeing the number of vials being used at each site also increasing. We went from 9.9 vials per site in 2011 to 10.5 vials per site in 2012.
This chart shows some of the market dynamics of the total procedures for Dupuytren's contracture. There's really 3 options: There's surgery, which is the top dark line, that you see on a decline; There's XIAFLEX, which is represented in blue line; And then, there's needle aponeurotomy in the orange line.
And you could see that, again, from total, there's about 70,000 procedures that are done on an annual basis, and XIAFLEX has been really nicely increasing the market share of the total procedures that we see. In the second quarter of -- excuse me, third quarter of 2012, which is the latest data that we have available to us, our market share was just under 30%. For the whole of 2012, we're probably just north of 25% market share of total procedures.
So our goal is to continue to see those lines converge and eventually have XIAFLEX crossover to become more than 50% of all procedures done during the year, and that's kind of our definition of standard of care. However, there's a little callout box there. We did some market research, and what we found was, when we talked to physicians and sites that are actually using XIAFLEX, while there are some who are just in the early stage of adopting and others who XIAFLEX is a predominant drug that they -- for treatment of Dupuytren's contracture, on average, we have about 45% of all procedures being done with XIAFLEX. So it's important for us to continue to enroll new sites and get physicians comfortable with using XIAFLEX, and then over time, deepen their use of XIAFLEX. So that we see that number of vials per site increasing over time as we saw last year.
Moving now to our R&D pipeline. Another one of our objectives is to advance the R&D pipeline and maximize the value of that. Our pipeline is focused around 3 different therapeutic areas: orthopedics, urology and dermatology.
In orthopedics, we're studying XIAFLEX in -- well, we have it on the market for Dupuytren's contracture, and we're studying it in frozen shoulder. We're expecting results of the Phase II study actually later this month. And so we're not announcing anything today on that, but the end of March is coming, and we will have results before the end of March on that. So we're very excited about that.
In urology, we obviously have Testim for hypogonadism on the market. We're also investigating Peyronie's disease, using XIAFLEX for Peyronie's disease, and I'll talk about that a little bit more depth. And we're also just in early stages of working on a revised testosterone gel, something that could be a successor to Testim at some point in the future.
In dermatology, again, it's focused around XIAFLEX or CCH, which is collagenase clostridium histolyticum, the generic name for the drug, and we're looking at cellulite. And our partner DTC, who would license XIAFLEX serum, is looking at canine and human lipomas.
So let's talk a little more about Peyronie's, a really devastating disorder that is caused by a scarring or a plaque of collagen forming on the shaft of the penis. And upon erection, you get a bend in the penis, which can make it virtually impossible to engage in sexual intercourse. And today, there's really no good treatment for this. Patients will start out on vitamin E and topical creams and things like that. Urologists really don't have very much that they can do. They will try to -- some will use injections of Verapamil. But again, no proven efficacy that's been repeatable in any study that has been done. And surgery is really a last resort when it comes to these patients. So they try to do everything they can to avoid surgery.
We studied XIAFLEX in this, in what we called our IMPRESS studies, and we were very pleased to see that we had statistically significant improvements in both co-primary endpoints of the EMPRESS I and II studies. The 2 co-primary endpoints were improvement in penile curvature deformity and improvement in Peyronie's disease bother, a patient-reported outcome questionnaire.
XIAFLEX is very well tolerated with most of the common adverse events local to the site of injection. And if approved, XIAFLEX will be the first and only FDA-approved biologic treatment for Peyronie's disease. Our PDUFA date is September 6, 2013.
So on average, what we saw in the IMPRESS studies was an improvement of 28 degrees, a 38% improvement. This picture is a photo of a patient who has a 45-degree curvature, which is pretty close to the average that we saw in the studies. And what I want to do is I want to show you the post-treatment photo because I think it's sometimes difficult to understand what is a 28-degree improvement or a 38% improvement means to a patient. And what you can see is that, that is a 28-degree improvement. So I think going from that to there with a 38% improvement really brings it home to show that this is something that we think is really going to be exciting for the patients and the physicians to have as a weapon to fight this terrible disease.
In terms of the size of the market, we believe that there's between 65,000 and 120,000 patients diagnosed on an annual basis. What you can see on the left-hand side of the chart is what we think is the primary target for us upon launch of the product if approved, and that is -- those patients who gets surgeries. There's about 1,500 to 2,000 surgeries done on an annual basis, and there's about 3,500 to 4,500 patients who are treated using some type of an invasive nonsurgical technique, like Verapamil injections.
So when we look at this, one of the benefits that we see is there's a very focused group of physicians who treat Peyronie's patients today. There's about 1,000 urologists who treat using surgery or injectable Verapamil, and there's about 400 urologists that account for greater than 90% of all the surgeries. So these are a very small group of physicians. We know all of them. Many of them were involved in the clinical studies, and they're very anxious to have a product to be able to use.
Over time, we believe that the other patients, those who are on vitamin E to topicals to seeing other things like that, that they are an opportunity for us to expand the market as well. But just looking at the way that the product will be used in this disease, we expect in our clinical studies greater than 90% of patients received at least 6 injections. So assuming that we're somewhere in that 5 to 6 injections with a vial price of just over $3,000, we're looking at kind of an $18,000 to $20,000 per patient revenue opportunity.
So you can see that even if you just look at the 5,000 to 6,500 patients at somewhere between $18,000 to $20,000, it's a pretty significant market that we're going to focus on right out of the gate.
So what are key success factors for us with respect to the launch of Peyronie's if approved later this year? Well, the first and primary thing, in the center of the screen there, is to define XIAFLEX as a solution to unmet medical needs for a very serious condition.
So one of the things that I think will be critical for us is to make sure that this is seen as correction of a deformity as opposed to some type of a lifestyle improvement. And so that's really something that's critical. What we need to do is we need to make sure that we do a really thorough job of training the physicians on the injection and modeling procedure, and that's certainly well underway. We're starting to talk with some of the payers about optimizing coverage and mitigating our access issues. We've got some plans in place for what we call white glove service that we're going to put in place, so we're kind of taking the learnings that we have from Dupuytren's and making sure that we're improving on that to make sure that reimbursement doesn't become an issue. I think it will still be the gating issue on the launch because it is an expensive therapy, no doubt about that.
We're also looking to activate product champions. So again, something that's a very different dynamic than what we have with the Dupuytren's launch is there are patient groups that are already out there. And the urologists themselves tell us over and over again, "The last thing I want to do is surgery, and what I really want is I want to have an option for these patients." Because it is just physically and psychologically devastating for the patients to feel like they can't treat them. And then the last thing that we'll do is we'll focus our targeting on those high-value doctors that I talked about on the previous slide.
So moving now to cellulite. So cellulite is a phase -- we just completed of Phase Ib dose escalation study. The reason why we would use -- consider using XIAFLEX for this is that cellulite basically is caused by septae that tether the skin to the muscle. And in women, these are columnar as opposed to a mesh that you see with men. And as adipose tissue fills around the edges, it can cause a tension, and basically, the dimpling on the skin that you see with cellulite.
So in the Phase Ib study, we looked at multiple doses in various volumes and concentrations. We put 1 vial of XIAFLEX into a template that was an 8 by 10 template, 8 by 10 centimeter template over a primary dimple, and we had 6 cohorts that we followed for 90 days. We were pleased with the results that we have, and our goal today is to get into a Phase 2 study by the end of this year.
This is some 3D photography that we showed. And what you could see is that on the -- there's 2 different patients that are here. On the left-hand side is day 1, and the right-hand side is day 2. The depth of the dimple is indicated by the color, so red is the deepest part of the dimple, with blue, basically, being just surface area. And so what we saw on these 2 patients was one having about a 31% improvement and the other having a 42% improvement.
So again, this is -- it's a little difficult to get a good feel for how successful it's going to be when we're only targeting 1 dimple. I think some of the things that we're going to look to do next time is to treat an entire quadrant if you look at each buttock and posterior thighs as the 4 quadrants that are likely to need -- be needed for treating.
We're also looking at XIAFLEX in shoulder -- frozen shoulder syndrome or adhesive capsulitis. This diagram shows that the cause of frozen shoulder is actually a sheet of collagen that builds up on the shoulder capsule that makes it thick and stiff and inflamed. And today, the options for patients with frozen shoulder are pretty limited. It's basically physical therapy, which can go on oftentimes for 2 to 3 years. And some patients will go under anesthesia and have their shoulders actually rotated under anesthesia to try to break up some of that collagen. But again, the idea here is that we know that, that thick -- that it is collagen that's causing this stiffness. And so basically, what we're doing is injecting XIAFLEX. Again, we're looking at a couple of different volumes and concentrations, to bathe the outside of the shoulder capsule with XIAFLEX, eliminate some of that collagen and allow the patient to have better movement in their arm.
So the goal of our study was to assess the safety and efficacy of XIAFLEX in the treatment of frozen shoulder. We have 2 different doses that were given under ultrasound guidance. We had approximately 50 subjects and 5 cohorts. 4 of those cohorts involved XIAFLEX and the last one was an exercise-only arm so that we can try to see because each one of the patients got XIAFLEX and exercise, and then the fifth cohort was exercise-only.
We were giving up to 3 injections 21 days apart, and we followed the subjects for 90 days. So the efficacy endpoint will be the range of motion parameters for the affected shoulder compared to the exercise-only group. And as I said, we'll have data on that in the next couple of weeks.
So our -- one of our next strategic objectives is to aggressively pursue opportunities in specialty areas through corporate development and licensing. Our group is very focused. We're looking to find products or companies that can generate revenue in the 2013, 2014 timeframe. And in the future, we would look at some potential pipeline products and areas of focus. We're going to look at urology, orthopedics, endocrinology and dermatology. We'll be open for some other specialty areas, such as rheumatology, G.I. and orphan.
And we're going to look at kind of 2 different pathways of how we'll find the famous string-of-pearls approach to finding bolt-on acquisitions or products. And we'd also be interested in larger transformative details -- deals if feasible and create good shareholder value.
So 2012 revenues were $395.3 million, but that included just over $94 million in revenue recognized as a result of a termination of an agreement that we have with Pfizer. So if you look at the yellow bar and the blue bar, you see that Testim grew by 14% and XIAFLEX, 31%.
Financially, this is our P&L from last year. Again, there are some GAAP to non-GAAP reconciliation, but to cut to the chase on this, even if we exclude that one-time income that we recognized as a result of the Pfizer termination, 2012 represented our first year, full year of profitability. So we're very happy to achieve that goal and look to build on it going forward.
This is our guidance for this year. Total revenues of $325 million to $355 million, with Testim revenues of $250 million to $265 million. U.S. XIAFLEX revenues of $65 million to $75 million. And again, we're looking on a non-GAAP basis to increase our income from $17 million in 2012 to $18 million to $23 million this year, about a 20% increase.
So this is the last slide that I'm going to show, it's the key objectives that we have for 2013. And they really follow each one of those strategic objectives. This is going to be something that we'll continue to show throughout the year as we make progress on that.
So with that, I'm out of time. Thank you very much, for your attention, and I believe we have time for Q&A in the breakout session following this. Thank you very much.
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