Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Auxilium Pharmaceuticals, Inc. (NASDAQ:AUXL)

Q1 2009 Earnings Call

May 6, 2009 10:00 am ET

Executives

William Q. Sargent Jr. - Vice-President, Investor Relations and Corporate Communications

Armando Anido - President, Chief Executive Officer, Director

James E. Fickenscher - Chief Financial Officer

Roger D. Graham Jr. - Executive Vice President of Sales & Marketing

Jyrki Mattila M.D., Ph.D. - Executive Vice President of Business Development, Product Development and Technical Operations

Jennifer Evans Stacey - Executive Vice President, General Counsel, Human Resources, and Secretary

Anthony DelConte M.D. - Chief Medical Officer

Analysts

Eric Schmidt - Cowen & Co. LLC

Thomas Wei - Piper Jaffray & Co.

Salveen Kochnover - Collins Stewart, LLC

John Newman - Oppenheimer & Co.

Michael Yee - RBC Capital Markets

Eun Yang - Jefferies & Company, Inc.

Kim Lee -Wedbush Morgan Securities

Lucy Lu - Citigroup

Joseph Schwartz - Leerink Swann, LLC

Scott Henry -Roth Capital Partners, LLC

David Steinberg - Deutsche Bank Securities, Inc.

Operator

Good morning, my name is Kamisha and I will be your conference operator today. At this time I would like to welcome everyone to the First Quarter 2009 Auxilium Pharmaceuticals, Incorporated Earnings Conference Call. (Operator Instructions) As a reminder this conference is being recorded for replay purposes. I would now like to turn the call over to your host for today’s call Mr. Will Sargent, Vice-President of Investor Relations, and Corporate Communications. Please proceed sir.

Will Sargent

Thank you, operator, and good morning everyone. With me today are Armando Anido, President and Chief Executive Officer of Auxilium; Jim Fickenscher, Auxilium’s Chief Financial Officer; Roger Graham, Auxilium’s Executive Vice President of Sales & Marketing; Dr. Jyrki Mattila, Auxilium’s Executive Vice President of Business Development, Product Development and Technical Operations; Jennifer Evans Stacey, Executive Vice President, General Counsel, Human Resources and Secretary for Auxilium; and Dr. Tony DelConte Auxilium’s Chief Medical Officer.

Before we begin I would like to remind you that we will make various remarks during this conference call that constitute forward-looking statements for the purposes of the Safe Harbor Provisions under the Private Securities Litigation Reform Act of 1995.

Forward-looking statements are all statements other than historical factor statements of current conditions and may generally be identified by the words believe, may, appear, feel, could, will, estimate, continue, anticipates, see and should plan, hope, potential, expect, and similar expressions. The forward-looking statements will cover among other things or plans. What we believe to be the prospects for the Company including statements regarding the timing of action of the FDA on the Biologics license application for XIAFLEX for Dupuytren's contracture and the timing of the U.S. launch for XIAFLEX if approved, our ability to address any FDA concerns regarding XIAFLEX, recruitment of personnel and other actions to prepare for the U.S. commercial launch of XIAFLEX, timing of the publication of XIAFLEX data in a top tier journal, interpretation of clinical data, the timing of reporting of top line results from the phase IIb study for XIAFLEX for Peyronie's disease, timing of commencement of the phase III clinical program for Peyronie's disease and the use of the PR as a primary endpoint, the impact of our sales and marketing efforts on the growth of Testim revenues, the Company’s ability to achieve profitability through the receipt of upfront milestone payments from Pfizer, the timing of the filing of the market application, authorization application for XIAFLEX for Dupuytren's contracture by Pfizer, the Company’s expected financial performance during 2009 and the financial milestones we may achieve for 2009, including 2009 net revenues, research and development spending, selling general and administrative expenses, net loss and stock based compensation expenses.

Actual results may differ materially from those reflected in these forward-looking statements as a result of further evaluation of clinical data and market research, results of clinical trials, adverse events in our clinical trials, and market research. Changes to the regulatory environment for our industry, as well as the various factors discussed in our annual report on Form 10-K for the year ended December 31, 2008.

Given these risks and uncertainties you should not rely on any factors or forward-looking statements. Forward-looking statements provide the Company’s expectations, plans and forecasts for future events be used as of the date here of. While the Company may elect to update these forward-looking statements at some point in the future, the Company specifically disclaims any obligation to do so.

Also today’s call may not be reproduced in any form without our express written consent.

I am pleased to turn the call over to our Chief Executive Officer and President, Armando Anido.

Armando Anido

Thank you, Will, and good morning to all of you who are joining us this morning. During our call Tony will provide with an overview of the XIAFLEX regulatory process, a brief safety update and discuss the status of the Peyronie's clinical trial. He will also provide some insight on why we feel that the theoretical immunogenicity concerns that have been raised recently by the financial community have been adequately addressed.

Roger will provide you with an update on our XIAFLEX pre-commercialization efforts and on custom performance and Jim will then take you through the financial results for the first quarter.

I will then come back and provide you with updated financial and operational guidance for ’09 as a result of obtaining priority review for XIAFLEX and discuss our priorities for the balance of the year.

We will conclude by opening up the call for your questions.

Wow, what a great start to the year. The big news for us is the FDA’s decision to accept the XIAFLEX BLA filing for Dupuytren's contracture and the granting of a priority review. This was the result of outstanding work from our employees and we believe this recognition by the FDA of the need for a therapeutic alternative to surgery, like XIAFLEX for the treatment of this debilitating orphan disease.

The prescription drug user fee act or PDUFA date has been set for August 28, 2009. We have been preparing for this potential acceleration in timelines and we are thrilled. Obviously, we have a full docket of activities to be prepared before launch and we believe that we have the plans and people in place to be successful.

At this point, I will turn the call over to Tony, who will provide you with an update on our clinical and regulatory efforts with XIAFLEX.

Tony DelConte M.D.

Thank you, Armando, good morning. I believe that the first three months of 2009 demonstrate phenomenal execution by Auxilium’s medical, clinical, quality, regulatory, manufacturing and project management organizations. After locking our clinical trial database in December of 2008 we were able to compile, complete, and submit our BLA for XIAFLEX in Dupuytren's contracture approximately two months later.

We recently found out that our hard work paid off with the FDA’s acceptance and designation of our BLA for priority review and subsequent PDUFA date of August 28, 2009. This was a tremendous accomplishment by a hard working team of people here at Auxilium and I wish to thank them publicly for their dedication.

Now that we have our PDUFA date set with the FDA we have turned our attention and resources to ensuring that we are prepared for the activities that will take place in the coming months to support the review of XIAFLEX by the FDA. This includes preparing for inspections at our Horsham manufacturing facility, Malvern clinical and QA functions and clinical investigation sites, the possibility of an FDA advisory committee and of course responding to any questions that may be raised during the BLA review. You can be sure that these activities will be our top priority within the teams at Auxilium over the coming months and we believe that we have prepared ourselves for the sprint to approval.

The Medical Affairs Group is continuing its XIAFLEX pre-commercialization ramp up and we have hired a team of experienced regional medical liaisons or RMLs that will engage national and regional thought leaders in discussions on Dupuytren's contracture. I am very pleased and impressed with the caliber of candidates that we have attracted and I believe that we are assembling a world-class group that will be instrumental in the success of XIAFLEX.

In April we implemented a call center to handle medical questions and safety reporting from patients and physicians. We are currently using the system with our Testim commercial organization and as a result we plan to have the same call center seasoned and ready for use for XIAFLEX once approved. Additionally, we have submitted the Cord I manuscript to a top tier journal and still anticipate having the publication of the XIAFLEX data in our sales reps hands around the time of approval.

In recent weeks there has been a significant amount of discussion in the financial community concerning the risk of systemic hypersensitivity reactions to XIAFLEX based on a theoretical concern associated with IgE antibody formation in early phase II trail. I want to assure you that through out the development of XIAFLEX we have recognized that dosing of a non-human protein had the possibility of causing an antibody response and potential hypersensitivity reactions. As a result we believe that we have been highly vigilant in evaluating any clinical signal for systemic hypersensitivity and to date in over 1,000 patients and 2,600 injections, even with some patients having greater than six months between doses and up to eight total injections, we have not seen any systemic hypersensitivity signals in either clinical or preclinical studies.

Furthermore, we’ve had a handful of patients who were in the 303 study in 2005 who participated in Cord I with almost three years between injections. We also had a handful of patients who were in the Interrupted trial in 2006 and received injections in Cord I over one year later. Again, we did not see any clinical signs or signals for systemic hypersensitivity in any of these patients.

As part of our normal dialogue with the FDA we have discussed multiple times the antibody data generated from XIAFLEX clinical trials including the IgE data generated by Dr. Hamilton, as well as the possibility of systemic hypersensitivity reactions. We have followed the FDA’s recommendations for immunogenicity data collection during our clinical development of XIAFLEX.

We continue to monitor safety in our Dupuytren's contracture program on an ongoing basis and have not seen any new safety signals. This lack of any signals of systemic hypersensitivity leads us to believe that this issue remains hypothetical and speculative and we believe that we will be prepared to address any potential immunogenicity or hypersensitivity concerns with the FDA during the review process.

I would also like to provide a brief overview of our safety update that was included in our BLA filing. As I just mentioned, we saw no new safety signals through the 12-month update and XIAFLEX’s safety profile remains similar to what has been previously reported. I am also pleased to report that the patient recurrence rate observed at 12 months in the Cord I study, which followed over 100 patients for 12-months from the initial injection is comparable to what we saw in the early single-center phase III trial at the same time point. You may recall that the 303 study indicated that the rate was approximately 6% at 12 months.

In conclusion, we have completed dosing in our phase IIb study for XIAFLEX for Peyronie's disease. We will continue to monitor these patients for an additional six months and collect data on the duration of their response both through clinical metrics and success on our patient reported outcomes or PRO through 36 weeks from the first dose. We anticipate being able to update you on top line results from this study near the end of the fourth quarter of this year. If validated, we believe the Peyronie’s PRO should be the primary endpoint of our phase III clinical program for XIAFLEX in Peyronie’s disease and we anticipate that we could begin those trials in 2010.

I will now turn the call over to Roger who will share the specifics of our commercial preparedness and accomplishments with XIAFLEX and Testim respectively in the first quarter of 2009.

Roger Graham

Thank you, Tony, and good morning everyone. In the first quarter of this year we completed the hiring of our Malvern based XIAFLEX commercial team and continued to expand our pre-commercialization efforts for XIAFLEX with a plan to optimize the launch in Dupuytren's and prepare for the opportunity to launch this year. Now that we have a target date to build our launch plans around we have begun selectively recruiting highly experienced and successful sales managers and specialists for our commercial organization. We plan to follow this effort with the recruitment of a similar caliber of sales reps and give offers to these sales reps that will be contingent upon the approval of XIAFLEX. Once we receive approval we plan to bring those sales reps on board and execute a swift ramp-up and commercial launch approximately 60 days from the approval date.

We continue to advance our efforts on the marketing aspects of XIAFLEX. We have fine tuned our product positioning, expanded our understanding of multiple reimbursement scenarios, modeled strategies for distribution and access, and listened to patients discuss the current treatment paradigm. We believe we are on track to comprehensively incorporate these results into our launch campaign and we will be well prepared for our anticipated U.S. launch of XIAFLEX.

We believe these efforts, along with the extremely talented team we have assembled here at Auxilium, will position us well for the successful launch of XIAFLEX for Dupuytren's contracture.

Now switching to Testim, according to IMS approximately 138,200 total prescriptions for Testim were dispensed in the first quarter of 2009, which is an increase of 14.1% over the first quarter of 2008. This performance was essentially in line with the overall gel market which grew 14.9% for the comparable period.

In the first quarter of 2009 we are seeing the effect of some changes in managed care coverage and like many we find ourselves operating in a challenging economic environment; however, in the last few weeks we are encouraged by prescription growth and market share increases.

Testim’s total prescription market share of the gel market at the end of March was 21.6% down 30 basis points compared to 21.9% at the end of March ’08. According to IMS exponent data we had a market share of approximately 42.7% at the end of March 2009 with the highest prescribing urologist on whom we call, remaining unchanged from the market share among the same group for the comparable year ago period. We also continue to make strides with the highest prescribing primary care physicians on whom we call, with Testim market share achieving 30.6% at the end of the first quarter of 2009 versus 29.3% at the end of the comparable period in 2008.

Despite some challenges in the first quarter of ’09 we believe that increasing market share with the highest prescribing urology and PCP patients’ remains key to our continuing growth in ’09 and that our successful commercial team is clearly up to the challenge. We believe that we remain on track to achieve the Testim revenue goals we set for ourselves in our 2009 guidance.

With that I will turn the call over to Jim.

Jim Fickenscher

Thank you Roger, good morning everyone. For the quarter ended March 31, 2009 Auxilium reported net revenues of $34.7 million compared to net revenues of $27.1 million for the first quarter of 2008. This figure included $900,000.00 of revenue recognized from the $75 million Pfizer up front payment.

Shipments of Testim and milestones to our X U.S. partners in the first quarter of ’09 were $1.3 million, which is $1.1 million more than the first quarter of 2008.

The net loss for the first quarter of ’09 was $13.2 million or $0.31 per share compared to a net loss of $12.3 million or $0.30 per share, reported for the first quarter of 2008.

Gross margin on net revenues was 77.3% for the quarter ended March 31, compared to 77.9% for the comparable period in 2008. Gross margin reflects the cost of product sold as well as royalty payments made to the Company's licensor on the sales of Testim. The decrease in gross margin rate is the result of a 2008 one-time manufacturing fee rebate and higher coupon usage in 2009, partially offset by the impact of year-over-year price increases on U.S. Testim revenues and the increase in amortization of upfront and milestone payments.

Research and development spending for the quarter ended March 31, ‘09 was $13.5 million, compared to $13.2 million in 2008. Although the overall spending was comparable year-over- year, there was a significant reduction in clinical development costs primarily related to fewer XIAFLEX related clinical trials being conducted in 2009, offset by increases in regulatory costs and manufacturing costs at our Horsham manufacturing facility.

Selling, general and administrative expenses totaled $26.4 million for the quarter ended March 31, ‘09 compared with $21.0 million for the year-ago quarter. The increase was primarily due to higher compensation costs associated with FAS 123R, costs incurred in defense of our Testim intellectual property and investments in preparing for the potential U.S. launch of XIAFLEX.

You may notice that for the first time we have recognized a tax expense. This is the result of $75 million up front payment received from Pfizer in 2008. The tax laws allow us to defer recognition of this income until 2009 and the majority of this income can be offset with NOL carryovers that are available to us. However, the alternative minimum tax rules do not allow us to offset all income with NOLs, which has resulted in our recognizing a tax expense this year.

On March 31, 2009 we had $90.2 million in cash and cash equivalents compared to December 31, 2008 when Auxilium had $113.9 million. The reduction in cash of almost $24 million deserves a few words.

In addition to the normal first quarter pay down of accrued expenses from December 31, we paid $6.4 million to BTC for their share of the $75 million payment from Pfizer, and approximately $3 million in transaction related costs from the Pfizer deal. As of March 31, ‘09 we had approximately 42.7 million shares of common stock outstanding plus outstanding warrants to purchase approximately $1 million shares of our common stock and $5.2 million outstanding employee stock options.

Thank you very much for your attention. I will turn the call back over to Armando.

Armando Anido

Thanks Jim. Just a few more topics I wanted to update you on. First, our partner Pfizer continues to progress its regulatory and commercialization plans for XIAFLEX in Europe and we believe they remain on track for a 2010 filing of a marketing authorization application or MAA for Dupuytren's contracture in Europe. We have had multiple joint Auxilium Pfizer team meetings that have been constructive, and we believe have reconfirm our choice of Pfizer as an experienced and valuable commercialization partner.

Second, we continue to add world-class talent to our senior management team. Dr. Jim Tursi joined Auxilium as Vice President, Clinical Affairs and comes to us from GlaxoSmithKline Biologicals where he directed the cross-functional team preparing their cervical cancer vaccine for launch in North America.

For our commercial team we have hired several seasoned executives to leadership roles in our sales, managed markets, and reimbursement teams. They have joined Auxilium after having served in senior leadership roles, most recently at MedImmune, Allergan, and OSI. We believe that their deep experience and success in the biologics space in sales, managed markets, and reimbursement will serve us well as we prepare for and launch XIAFLEX.

Further more, to continue our focus on Testim, we are welcoming a senior leader from King Pharmaceuticals as our national director for the Testim sales organization. We believe that her complete focus on Testim will assure that we maintain our efforts to maximize this very valuable asset.

Third, over the next 12 months we plan to focus on meeting the key milestones for our two key assets XIAFLEX and Testim: for Testim that means growing the prescription volume in ’09 to achieve our revenue guidance.

For XIAFLEX we expect to deliver on the following strategic priorities: One, preparing our commercial organization to execute a successful launch in the U.S. for XIAFLEX in Dupuytren’s contracture approximately 60 days after our approval date. Two, completing the XIAFLEX for Peyronie’s disease phase IIb trial and releasing top line results in the fourth quarter of ’09.

Finally, allow me to discuss the revised guidance that we are providing as a result of receiving priority review with XIAFLEX.

We are not including any sales of XIAFLEX or the cost of the 75 to 100-person XIAFLEX sales force that we anticipate hiring, including certain training and marketing costs in our updated guidance because the amount of such sales and costs that may be realized in ’09, if any, are dependent upon the launch date of XIAFLEX which is not yet known.

We continue to believe we will achieve net revenues of $150 to $155 million which is unchanged from earlier guidance. We believe that we will be spending between $45 and $50 million down from $49 to $53 million on R&D. This reduction is primarily related to our ability to share certain costs with Pfizer related to the European development of XIAFLEX and the impact of capitalizing certain Horsham related costs to inventory.

We now believe that selling general and administrative costs will be in the range of $120 to $130 million up from $116 to $121 million. While these estimated do not include the cost of the sales force, they do reflect that we are accelerating the hiring of the regional medical liaisons, sales managers, and reimbursement specialists and implementing additional marketing and medical programs that we feel are critical for the launch of a product with the potential of XIAFLEX.

As a result of the changes in the expenses that we have made, we now believe that our net loss guidance will increase approximately $5 million and range from $55 to $60 million in 2009.

Based on our current business plans and assumptions we continue to believe that our existing cash resources are sufficient for the Company to reach profitability and that total stock based compensation expenses will remain in the range of $16 to $19 million.

Let me thank our shareholders for your continuing support of our efforts. Additionally, I want to give a special thanks to our employees for their untiring energy, spirited enthusiasm, and relentless commitment to making Auxilium a success. We are extremely excited about the prospects, opportunities, and potential for success in front of us and will endeavor to live up to those expectations. Thank you.

We are now going to open up the call for your questions. Operator, please review the procedure for questions from the audience.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from Eric Schmidt from Cowen & Co.

Eric Schmidt - Cowen & Co.

Good morning, congratulations on the acceptance for the PLA. My question is on the review process. It seems like the FDA has got a lot to do in the next four months here and those are summer months of course. You mentioned that they need to complete inspections of Horsham and your clinical sites and obviously we think a panel is likely. So the question is are you getting their full attention, are they very much engaged and have any of these events already been scheduled?

Armando Anido

Eric, thank you very much and that is a great question. I can tell you that pretty much from the moment that we submitted the application back in late February that we are getting the full attention of the Food and Drug Administration and the Reviewing Division. They have been actively questioning us and actively working with us and we anticipate that they will live up to the PDUFA date of August 21 of ’09.

Eric Schmidt - Cowen & Co.

Armando, has a panel been scheduled and which advisory group do you expect might review this product?

Armando Anido

The Reviewing Division is the Division of Anesthesia, Analgesia, and Rheumatology, otherwise known as DAAR. We do anticipate that we will and we have been preparing for an advisory panel, but nothing is set at this point.

Eric Schmidt - Cowen & Co.

So the Rheumatology Advisory Panel as well?

Armando Anido

It will be the DAAR group.

Eric Schmidt - Cowen & Co.

Okay, thank you.

Operator

Your next question comes from Thomas Wei from Piper Jaffray & Co.

Thomas Wei - Piper Jaffray & Co.

I have a couple of questions on the hypersensitivity controversy. It might be helpful if you could share with us exactly what was seen in the phase III trials on antibodies and in particular how that antibody profile changed over time with successive injections.

Armando Anido

Let me take the question to begin with. As we have seen previously we do see antibodies that do form with the compound and for the most part almost all patients eventually do get antibodies that form to AA4500 and they happen usually in almost all patients at probably between doses three and four that they get there.

Thomas Wei - Piper Jaffray & Co

What about the IgE antibodies?

Armando Anido

We have been asked by the FDA to follow total immunoglobulin. We have not been asked to follow IgE levels in spite of the fact that they have seen all of the data that have previously been reported.

Thomas Wei - Piper Jaffray & Co

What about the titer of the antibodies over time?

Armando Anido

It obviously does go up but then after they stop dosing it starts to come down.

Thomas Wei - Piper Jaffray & Co

Maybe a statistical question here, is there a certain rate of hypersensitivity reactions that you can’t rule out statistically based on the current size of the safety data base and the amount of exposure?

Tony DelConte M.D.

We’ve been working with the FDA throughout this development project and we have an agreement on the number of patients that were required for safety and efficacy to evaluate this, so we’re certainly operating within those guidelines of having 1,000 patients.

Thomas Wei - Piper Jaffray & Co

I just wanted to check, in the 12 months this open label extension period you are continuing to monitor for antibodies?

Tony DelConte M.D.

Yes, we continue to follow the patients, yes.

Thomas Wei - Piper Jaffray & Co

Okay thanks.

Operator

Your next question comes from Salveen Kochnover from Collins Stewart.

Salveen Kochnover - Collins Stewart, LLC

In terms of the extended periods between dosing, can you maybe comment on how many patients have had greater than a six-month break between doses?

Armando Anido

We have not actually disclosed the total number of patients. I would say that it is not an extensive number. Tony, do you want to add to that?

Tony DelConte M.D.

It is a significant number of patients and it really has to do with how the studies were conducted. We had a double-blind period. Then they literally had to wait until we completed that portion and broke the line. It is a substantial number. It wasn’t obviously all of the patients, but there were enough there that it gives us reassurance that there are a lot of patients who stopped and started, stopped and started, and that would be a perfect set up; if an immune response related to hypersensitivity would occur we should have seen that in some of those patients.

Armando Anido

Salveen, maybe just to give you some dates that makes it easier to conceptualize, remember that the Cord I study started in September of 2007. There are patients who would have gotten their first injections at that time in the first month or two, lets say and then having had a success, if they had a second cord which they wanted to get treated in the open label extension they wait for the blind to be broken up. The line wasn’t broken until the April time frame and so by the time they got scheduled back in that is what gets you that six-month gap.

Salveen Kochnover - Collins Stewart, LLC

Okay great. Then have you seen any immunogenicity signals in the Peyronie's studies?

Armando Anido

We don’t comment specifically on an ongoing trial since it is still in a double-blind phase, but I think if we would have seen anything different than what we expected we would have had to make changes to the study.

Salveen Kochnover - Collins Stewart, LLC

Do you have any color to give on the European regulatory pathways for XIAFLEX? Do you think an additional trial versus surgical comparator arm would be required for approval?

Armando Anido

I think that as we have talked before, our friends at Pfizer and us have been looking at the data. We believe that we have a strong package that we submitted to the U.S. Food and Drug Administration. I think that they are evaluating whether or not there are other things that need to be done, but they are still committing to a 2010 submission with the EMEA.

Salveen Kochnover - Collins Stewart, LLC

Great, thank you.

Operator

Your next question comes from John Newman from Oppenheimer & Co.

John Newman - Oppenheimer & Co.

I know that you have said during the phase III studies you haven’t seen any evidence of systemic hypersensitivity which is encouraging. Have you seen any evidence for something like Uticaria or local reactions and if so was that something that is common or is that something that is uncommon?

Armando Anido

Local reactions are things that happen with a lot of patients and that is stuff that we have talked about previously. We believe that it is due predominantly to the action of the drug and the breakdown of the collagen core.

Tony DelConte M.D.

Yes, we do see local reactions, but we see those independent of which injection they get, so we actually see patients who have these local reactions even on the first injection. That is one of the attributes that makes us believe that it is not due to a hypersensitivity, but can be due to other causes as well.

We also know that if you inject small collagen fragments in animals you will see similar types of reactions. We also know if you inject inactivated collagenace you don’t see a reaction. So we believe that part of it is at least explained in part by a pharmacologic effect or just the effect of the drug. But, we do see a lot of different reactions such as swelling and redness and bruising.

John Newman - Oppenheimer & Co.

Approximately how long does it take for the antibody titers to settle down after the injections have stopped?

Tony DelConte M.D.

It varies across the different patients. We start to see a maximal effect somewhere around the third or fourth injection and then just over time it tends to trail off. So it is variable.

John Newman - Oppenheimer & Co.

Okay, thank you.

Operator

Your next question comes from Michael Yee from RBC Capital Markets

Michael Yee - RBC Capital Markets

Can you discuss the powering or what you are trying to show on the primary endpoint for Peyronie’s? Specifically, what do you think is clinically meaningful or what the FDA thinks is clinically meaningful, whether that is a percent of improvement on the PRO etc…

Roger Graham

That is part of the process and that will be part of the discussion at the end of phase II meeting. We have a questionnaire with four domains in it and we will be looking and figuring out what the clinically meaningful differences are. As part of what we will eventually get agreement that this will be our primary outcome in the phase III studies. So, we are working now with the experts in PROs and the ones that have developed the same outcome measures for Viagra and the IIEF, so that process is ongoing now.

Armando Anido

Let me just add in. The phase IIb is really to one, to validate the PRO. So to really know exactly hat the change in the PROs score will be that signifies the clinical difference that we see is something that we won’t be able to look at until after the study is completed. We are doing traditional safety and efficacy measurements as well. We will tie that together with the PRO and the validation and at the end of the day have the discussion with the FDA on one, is it validated and two, what is the minimal clinical difference that you need.

Michael Yee - RBC Capital Markets

Okay and then on the European side, are there any discussions on whether or not to start another Peyronie’s study out there, to get that indication moving out there? In terms of the filing I know there was a question earlier about the filing in 2010. Should we expect that earlier revenue later? It is hard to expect that two years to file an MMA is on the long time of things.

Armando Anido

The phase IIb study I think both us and Pfizer are looking for the results of that before we initiate phase III, but our plan is that pending the results of the phase II b, assuming success there, that we will do a global Peyronie’s disease phase III trial or trials. I think that our plan would be that we will work collaboratively with the guys at Pfizer in order to make sure that it meets both the U.S. as well as the rest of world requirements for potential licensure in Peyronie’s disease.

Our plan would be that in 2010 we would initiate those phase III studies.

Michael Yee - RBC Capital Markets

Okay thanks.

Operator

Your next question comes from Eun Yang from Jefferies & Company, Inc.

Eun Yang - Jefferies & Company, Inc.

Now that the BLA has been filed and accepted are we going to see a [inaudible] open label Joint I into the study or do we have to wait until the publication comes out?

Armando Anido

You are asking about the safety and the like on the Joint I and Joint II?

Eun Yang - Jefferies & Company, Inc.

Yes.

Armando Anido

Okay, I think that as we have said that most of the BLA submission that what we would look for would be a medical meeting where we would hopefully be able to get that information out. I think that it is probably likely that in the earliest U.S. meetings are probably in September.

Eun Yang - Jefferies & Company, Inc.

Okay and my second question is, if I understand it correctly, I think that it is a milestone payment to buyer’s specifics upon the BLA acceptance. Have you disclosed the amount that may be booked in the second quarter?

Jim Fickenscher

No, we have not disclosed the exact amount, but it is for us a material number.

Eun Yang - Jefferies & Company, Inc.

Okay thank you.

Armando Anido

Eun, one other final thing is that all of the data Tony talked about, the 12 month data that Tony discussed, we have not seen anything new in the safety database at this particular point, so now at this point it appears that the drug has most of its activity in the first three months while dosing is going on and we haven’t seen any new signals at all. In addition, the recurrence rate is pretty low. It is comparable to what we saw in the study that Dr. Herston [Badelomonte] did a the Single Center back at Stony Brook a few years ago where they only saw 6% recurrence rate at 12 months.

Eun Yang - Jefferies & Company, Inc.

Great, thank you.

Operator

Your next question comes from Kim Lee from Wedbush Morgan Securities

Kim Lee – Wedbush Morgan Securities

Switching over to Testim, what exactly were Testim revenues versus other revenues?

Jim Fickenscher

Let me walk you through that. What we had was Testim revenues really were about $33.8 million. We had $900,000.00 worth of recognition of the deferred revenue from the Pfizer transaction. Now Kim, within the $33.8 million we had shipments to Europe and Canada to our partners as well as some recognition of various deferred revenues there as well. So, that is the situation for Testim.

Kim Lee – Wedbush Morgan Securities

Okay and I think when you provided some guidance earlier you mentioned that you were reiterating Testim guidance. Can you remind us what your Testim guidance was?

Jim Fickenscher

We have actually never given specific Testim guidance. What we have said is that our total revenue which includes the slightly north of $3 million in the recognition of the Pfizer milestones will be between $150 and $155.

Kim Lee – Wedbush Morgan Securities

Okay and just to clarify that revenue guidance does not include potential XIAFLEX

Sales, is that correct?

Jim Fickenscher

That is correct. Until such time as we know an exact date and finish some of the variables regarding pricing etc. it is really too early for us to try to give some guidance today on what XIAFLEX revenues would be. Similarly that is the reason why we excluded the cost of the 75 to 100 person sales force as well as the launch costs that will only occur once we actually have an approval and a launch of the drug.

Armando Anido

One other piece to add to the Testim discussion is as we normally see in the first quarter of at least the last three or four years we do see wholesale inventories that do come down somewhat. In the first quarter our prescriptions were about $1.7 million higher than what we actually sold. So that may be one of the things that you’re looking to try to true up.

Kim Lee – Wedbush Morgan Securities

Okay, great. Thanks for the clarification. I have one last question regarding the safety aspects for XIAFLEX. You did cover immunogenicity, but I just want to clarify, have you seen any new tendon ruptures since the last update?

Roger Graham

No, we haven’t seen any.

Kim Lee – Wedbush Morgan Securities

Okay, great. Thanks.

Operator

Your next question comes from Lucy Lu from Citigroup.

Lucy Lu - Citigroup

My first question is in terms of the recurring rate of around 6% consistent with your prior study,

When the Cord comes back can you describe the severity of the recurrence? Is it mild, moderate, severe, versus prior contractures?

Armando Anido

I think that maybe Tony can just give us what the definition of recurrences that was used in this trial and comparable to what had been used previously to help explain that.

Tony DelConte M.D.

Yes. We just define it as a recurrence of greater than 20°. So it just has to come back and there has to be a cord there and it has to be obviously recognized by the investigator so it is a fairly simple definition which may or may not be consistent with what is in the surgical literature, because they may have more stringent and it may have to get to the point where they require surgery. So, it is a pretty simple definition that is defined in the protocol.

Lucy Lu - Citigroup

Okay great. My second question is I understand that the clinical study material, the enzyme came from two facilities. One is the cohort the other one is the consortium. I am just wondering if you measured immunogenicity results of the two groups of patients treated by different enzymes. Where they different in any way? Is that something that you actually did during the process of establishing that the two enzymes are the same?

Armando Anido

We in essence did analytical comparability. It was in vitro work that was done in order to prove that the cobra material and the Horsham material were comparable. There doesn’t appear to be any difference at all in immunogenicity because they are comparable in terms of their overall activity. We do have confirmation from the FDA that the materials are comparable.

Lucy Lu - Citigroup

So, how about the clinical immunogenicity, sort of the total immunoglobulin titers from the two facilities?

Joseph Schwartz - Leerink Swann, LLC

At this point we don’t see any difference at all.

Lucy Lu - Citigroup

Great, thank you.

Operator

Your next question comes from Joseph Schwartz from Leerink Swann.

Joseph Schwartz - Leerink Swann, LLC

I wanted to start with Peyronie’s and I am wondering if you can discuss what you learned from phase IIa about the dose response when you stratified by lesion severity, which patients, and how that has led to the patients that you are enrolling in the phase IIb

Armando Anido

I think one of the key lessons that we learned from the earlier trials are one, the three intervals is important. I think if you compare it to the earlier trials there were two different ways that it was handled, one that only had two intervals and the other one that had three. So, we think that three is an important factor. The other thing that we learned from it is that you probably by giving three injections at each interval may be too many. That because you do see swelling and bruising that the third injection tends to probably not get into the plaque area as intended. So, we reduced the number of weekly doses to two and we believe that that is really some of the key learning that we had from it and put us down the pathway of the phase IIb being done in the format.

The other piece that we are testing is whether or not modeling works or doesn’t work. One of the studies had modeling, the other one didn’t. The one that had modeling in the previous IIa had somewhat higher and a more sustained effect, but we are testing that at this particular point in the trial.

Joseph Schwartz - Leerink Swann, LLC

Okay and I realize it would be post talk, but is there any data that you were able to glean from those studies on the endpoint that you are using in the phase IIb or the individual components of that endpoint? Whether it was pain or any of the other items gathered?

Armando Anido

Yes. We actually had the main endpoints previously were change in angle greater than 25% as well as plaque size. We also did a patient global assessment, but it was not through a validated instrument and the FDA, in our discussions with them prior to the initiation of this trial, really encouraged us to go down the pathway of developing the patient reported outcomes, because they believe that a greater than 25% reduction in angle, if it doesn’t translate into meaningful improvement in sexual activity, reduction in pain, and some of the other domains, probably isn’t a valid objective endpoint.

Joseph Schwartz - Leerink Swann, LLC

Okay, but there was no data on these items from the earlier trial, correct?

Armando Anido

There was no PRO previously.

Joseph Schwartz - Leerink Swann, LLC

It was just global assessment patient physician outcomes.

Roger Graham

But the two objective measures of reduction in the angle of deviation as well as plaque size that were in the previous phase II trials, we are measuring those items in the phase IIb study. Those will be some of the measures that will help us to validate the PRO; you want to see reduction in score associated with a change in the angle and reduction in plaque size.

Joseph Schwartz - Leerink Swann, LLC

Then if I can ask a question on, it probably refers to both Dupuytren's and Peyronie’s, but more near term for Dupuytren's. Do you have data ready for pairs to demonstrate that these conditions are debilitating, especially at the less severe [wash coal], so they can’t deny coverage in a more austere economic environment?

Roger Graham

That is one of the things, certainly, that we’re paying particular attention to and though even within the data and the primary endpoints that the current studies show the range of motion is certainly a benchmark that physicians look to in terms of a patient’s ability to be able to function once they have received the treatment and been successful in that. So, we think within not only the clinical work that we have now on the primary endpoints, but certainly the strength of the secondary endpoints and what they were able to achieve and show will provide us with the ammunition that we’re going to need in that environment.

Needless to say, in terms of reimbursement access it is one of those areas in which we are paying particular attention to and as we alluded to in the script at hiring those people and getting those people on boarded currently we are well prepared for that when it does get here.

Joseph Schwartz - Leerink Swann, LLC

Thank you.

Operator

Your next question comes from Scott Henry with Roth Capital Partners, LLC.

Scott Henry -Roth Capital Partners, LLC

For starters, when we think about the XIAFLEX launch in the U.S. we are looking at approval potentially at the end of August, 60 days until launch. It would seem that any sort of delays could bump you up against the Thanksgiving and Christmas holiday season. Is there sort of a cut off at which point you would push the launch into 2010? Related to that, what are the key conferences that someone would want to launch this product into?

Armando Anido

Let me start and then I will let Roger kind of jump in. I think that we will be very much prepared to launch within 60-days after we receive the approval. The timing of that, obviously, depends on the FDA and them coming through with the PDUFA date on August 28. As you get closer and closer to the holiday season obviously there are some things you have to take into consideration, but we think that this is a product that has a high-unmet need. That there are patients that are currently waiting for this therapy to be available and I think it would be not prudent on our part if we didn’t make it available as rapidly as we possibly could from the day that we get approval. That is what we are focusing on at this particular point.

Waiting for a congress for us to launch the product, I don’t think would be appropriate in any way. I think that if the product is approved at the end of August, we’ve got the ASH meeting happening in September. We already have plans for a very significant presence there in a pre-launch mode with our medical affairs team. If all of a sudden we know we have approval I could bet that Roger and his team will be ready for ASH as quickly as we possibly can be. Roger?

Roger Graham

Armando is right on the groups are obviously excited and ready to get their hands on this product. First of all patients, in doing the research that we’ve done we know that there is going to be that demand sitting there. Certainly physicians are looking for an alternative to surgery today that they don’t have. So those are obviously the groups in which we focus on and want to provide this product to as soon as we possibly can.

Don’t forget that as well we have an organization here that is ready to go and wants to launch this thing as soon as we can get our hands on it. I think that if we held it back from them longer than necessary we would have some others to answer to. So, we have three primary groups, but the patients and the physicians are really wanting to get their hands on this product.

We are getting out in front of that now with our RMLs being on board and getting out and getting to know this community better and getting prepared to train them. It will be an important part of that. We are building a distribution network that is going to be highly flexible that will allow physicians to go to institutions and get the product. It will allow them to buy and bill it, as well as allow them to go through specialty pharmacies if they so desire.

From a reimbursement front, in hiring those reimbursement managers and getting them on board and setting up a reimbursement hotline and getting that ready. Those are the three key things that we’ve got to do to be prepared to go out the door and we will have that ready to go as soon as we possibly can after the approval and we can get those reps hired and on board.

Scott Henry -Roth Capital Partners, LLC

Okay, thank you. Based on your contact right now with the physician community are you sensing that there will be any warehousing of patients ahead of the launch? Are you getting any color from the people that you talk to?

Roger Graham

You are saying will they delay like doing surgeries to treat those patients?

Scott Henry -Roth Capital Partners, LLC

Yes and it may be a bit early to get that sense, but I thought I would ask.

Roger Graham

I think it is, certainly. What I can tell you is in terms of the interest for the compound that they are looking for an alternative to surgery and what they do. We talked to many physicians and a great number of them tell us that obviously this is not an easy surgery. It comes with many complications and there are a lot of other surgeries that they would rather perform rather than this one. So, providing a non-surgical choice, a non-surgical alternative for them and their patients is something that they are certainly looking to get their hands on.

Scott Henry -Roth Capital Partners, LLC

Okay. The Company somewhat reiterated its target of filing XIAFLEX in Europe in 2010. There have been a couple of products that have been delayed in Europe because of a lack of clinical data generated there. Specifically the Daytrana patch, the ADHD patch as well as Vivatrol. Both of those products suffered delays because they didn’t have a lot of clinical data in Europe.

My question is really simple as opposed to the color on it. Has Pfizer acquired any new information since the deal or is this really just a restatement of their prior targets?

Roger Graham

I think that all along Pfizer continues to get new information, as we do, on everything. They are still aligned with a 2010 submission, so I don’t think there is anything that has caused us to change that nor them to change that at this point.

Scott Henry -Roth Capital Partners, LLC

Thank you for taking the questions.

Operator

Your next question comes from David Steinberg from Deutsche Bank.

David Steinberg - Deutsche Bank Securities, Inc.

I think you said in your comments that Testim was growing kind of mid teens which is pretty much along the lines of the TRT category. Just a few months ago, I think in late last year it was growing at sort of mid 20s growth rate. So it is a pretty significant drop off. I was just wondering in your view what is going on? Is it more aggressive counter detailing from solve, is it the maturity of the product, was it some managed care accounts that changed? Any thoughts on what is going on there?

Armando Anido

There are a number of things that we see three and as we had mentioned there are puts and takes in the world of managed care and that goes on, on a year-to-year basis, but those are reflective of our guidance for the year. We still feel confident that in spite of those puts and takes we are in a good position to hit our guidance as we head into the balance of this year.

Obviously it is a market place that continues to be very competitive from that perspective. There are a number of other issues that are going on economically. You see a number of insurers that are losing enrollees on a regular basis, so we see people losing coverage there. The fact that IMS is predicting a 2% overall reduction in the pharmaceutical marketplace can certainly be another factor. So there are a number of factors that are playing on the marketplace today that we’re paying particular attention to.

Nonetheless, again, I think in terms of [audio gap] and the growth that we are experiencing we feel very good about where we’re at with our primary care growth. That is obviously the biggest volume of prescriptions in this marketplace and we are continuing to grow there as we head into the first quarter. We have kind of held serve with urologists, and we anticipate that throughout the year we will pick up our growth there as well.

Jim Fickenscher

One other final point on that is really that as the product has grown you get to the law of large numbers and to continue to run at a 2x rate to the market becomes more and more difficult as time goes on and I think that remember, we have 147 representatives out there against 600+ folks on the Solvay-Watson front and you get to a certain point where it makes it a little tougher to generate share as well as continuing to grow to xx rate.

David Steinberg - Deutsche Bank Securities, Inc.

That’s fair. Do you think there are any initiatives you can put in place to increase your growth rate or get it close to where it was or should we think about sort of mid teens growth going forward?

Jim Fickenscher

I think that this year we projected going from $125 to $150 to $155 range. We feel good about the $150 to $155 as our number for this year, so I think that that seems to be reasonable at mid teens to almost 20%.

David Steinberg - Deutsche Bank Securities, Inc.

In the Obama plan and the generalities, they talked about possibly trying to end settlements between branded companies and generic companies. Obviously you have some litigation ongoing. Do you have any thoughts on how that might change your timeline as you move towards ending the 30-month stay etc…etc…?

Armando Anido

We still believe very strongly in our patent protection. We are going to defend it as much as we possibly can. At this particular point it is progressing along the pathway of going into our suit against them, their suit against us and ultimately the courts will decide where we are. I don’t think at this point the Obama stuff is something that I am too concerned about yet.

David Steinberg - Deutsche Bank Securities, Inc.

Okay thanks.

Operator

Your next question is a follow up question from Thomas Wei from Piper Jaffray.

Thomas Wei - Piper Jaffray & Co.

Do you have handy the number of patients who got more than three injections of XIAFLEX in the database and do you have how many total cords were treated in the package that you submitted?

Armando Anido

We have in the BLA submitted, have given the FDA a distribution of the total number of patients that had one, two, three, up to eight doses. That is something that we have not really at this point publicly described, but at some point that will probably become public.

Thomas Wei - Piper Jaffray & Co.

What about the total number of cords treated?

Roger Graham

We have that too, the cords, the ends, the joints, we have it all broken down every which way,

Thomas Wei - Piper Jaffray & Co.

Are you willing to share with us at least in total number of cords?

Armando Anido

What we have disclosed is 2,600 injections in 1,082 patients. So, that is about it for the time being.

Roger Graham

Maybe as an idea towards helping towards the math, on average each cord took 1.5 injections. So you have the 2,600 injections. The number was pretty consistent on the injections per cord, so you can probably get to a fairly close number based on that data.

Thomas Wei - Piper Jaffray & Co.

Thanks, that is helpful.

Operator

At this time we have no questions in queue. I will now turn the call over to Mr. Anido for closing remarks.

Armando Anido

Great, thank you very much operator and thank you all for listening in. We look forward to updating you at our next call. Take care.

Operator

Thank you for your participation in today’s conference. This concludes your presentation.

(Operator Instructions) Have a wonderful day.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Auxilium Pharmaceuticals, Inc. Q1 2009 Earnings Call Transcript
This Transcript
All Transcripts