Auxilium Pharmaceuticals (AUXL) is a specialty biopharmaceutical company focused on acquiring and developing therapies in urology and sexual health. With a PDUFA date coming up on December 6, 2013, for the company's treatment for Peyronie's disease, Xiaflex, many traders and investors are closely watching the stock, as the FDA decision of whether to approve Xiaflex will have a large impact on Auxilium's share price. However, there are some serious red flags that investors should be aware of.
Peyronie's disease is a fibrous inelastic scar of the tunica albuginea, a membrane present inside the penis, leading to penile deformity, penile curvature, shortening, narrowing, and painful erections that subsequently lead to painful or unsatisfying sexual intercourse.
Auxilium released topline data on June 2012, from two Phase III trials (IMPRESS I and IMPRESS II) of Xiaflex for the treatment of Peyronie's disease. Each trial had the same two co-primary endpoints - penile curvature and Peyronie's Disease Questionnaire (PDQ) bother domain. The reduction in penile curvature deformity endpoints were statistically significant in each trial, but the questionnaire endpoints were borderline significant in each trial (p=0.0451 and 0.0496). Although arbitrary, a p-value of 0.05 has been widely accepted as the threshold for a positive study - a p-value less than 0.05 can establish causality or an effect, greater than 0.05 rejects the possibility of an effect. The FDA analyzes data as it sees fit (the Peyronie's trials were not conducted under an SPA) and the p-values were so close to 0.05 that inclusion of only one or a few extra patients could result in non-significance, fairly easily. Moreover, the FDA's calculations of p-values are typically less favorable than a company's calculations. If this trend occurs with Xiaflex, the questionnaire results may not be statistically significant in both trials. This issue could be the reason why Pfizer (PFE) terminated its partnership with Auxilium several months after the readout of the Phase III Peyronie's trials.
Morgan Stanly analysts point out that while primary endpoints were positive, the overall Phase III data suggest 1) a small anatomical benefit vs. placebo, and 2) little functional benefit vs. placebo with mostly missed secondary endpoints. Analysts at Brean Capital expect FDA rejection of Xiaflex in Peyronie's disease primarily due to their view that the Peyronie's PDQ generated borderline statistical significance and that there were many dropouts not included in the analysis. Dr. Bart Classen, the Chief Scientific Officer at Summer Street Research agrees with the hypothesis and believes that the trials need to reach close to p=0.025 to be statistically significant.
The problem exists because Auxilium performed a modified intent-to-treat analysis that excluded, among other things, people who did not have sex after enrolling in the trial. In total, there were 78 of 277 and 72 of 274 patients excluded from the analysis of the Xiaflex arms in the IMPRESS I and II studies, respectively. This analysis is arguably not proper, because if treatment caused adverse events, such as a flaccid or painful penis, a patient would not have sex. By excluding those who did not have sex, Auxilium excludes a population of potential drug failures. The FDA is likely to perform an intent-to-treat analysis, and results may not even be close to statistical significance for the questionnaire endpoints. That said, according to the analysts, the most likely outcome will be a Complete Response Letter (CRL) for the reasons stated above.
In addition, Xiaflex is also associated with measurable adverse events. The most concerning aspect of the adverse event profile was the penile hematoma, which occurred in 61.7% of Xiaflex patients versus 13.6% in the placebo population. Some patients with hematoma required drainage, and what is considered minor surgery that needed several stitches. Moreover, the penile pain was 43% in the Xiaflex arm compared to only 7.9% in the placebo arm, and the penile swelling was 41.2% versus only 0.7% in the placebo arm. The overall treatment-emergent serious adverse events (SAEs) were 27 (9.7%) out of the entire intent to treat (ITT) population versus 7 (5%) in the placebo arm in the IMPRESS I trial. The IMPRESS II trial showed fewer treatment-emergent SAEs of 12 (4.4%) out of 274 ITT patients versus placebo of 4 (2.8%) out of 141 patients. Noteworthy is that both the IMPRESS I and II trials had SAEs of hematoma and corporal rupture (total n=6) versus none in either placebo arm. Given the adverse event profile of Xiaflex, patients could exhaust other options before using Xiaflex, and the positive placebo outcome could also increase the risk of FDA approval given the adverse event profile.
Additionally, there is an argument stating that the FDA will not approve the application without holding an advisory committee meeting. No drug or biologic has ever received FDA approval for Peyronie's disease, and Xiaflex is the first one the agency has ever considered. Given the novelty of the decision, and given there is no meeting, there is a doubt that Xiaflex will be approved.
The FDA approves drugs when the benefit outweighs risks. For Xiaflex, the benefit-risk equation is a tough call. Efficacy is modest at best and comes with significant side effects. Some men with Peyronie's are helped by Xiaflex, but does the drug do enough to be approved? After looking at the data and the way the studies were conducted and analyzed, I say no. Close, but no.
- Adam Feuerstein, senior biotech columnist at TheStreet.
On July 2013, Auxilium entered into a collaboration agreement with Swedish Orphan Biovitrum AB (GM:BIOVF) for the development, supply and commercialization of Xiaflex (called Xiapex in Europe) in 71 ex-U.S. countries. SOBI will obtain rights in Dupuytren's contracture and for any potential future use in Peyronie's disease. Auxilium is entitled to tiered double digit royalties and up to $40 million in potential aggregate sales milestones. However, it is unclear why Auxilium would give SOBI its ex-U.S. Xiapex rights in Dupuytren's contracture and Peyronie's disease for no upfront payment if there was a high expectation that the upcoming Peyronie's PDUFA was likely to result in approval and thus increase at least the perception of the drug's ex-U.S. chances. A positive PDUFA would have a material impact on the economics that Auxilium could have received, even though the approval is in a different geography.
Xiaflex has generated positive, but somewhat inconsistent data in Peyronie's disease, and has shown a statistically significant, but moderate magnitude of benefit versus placebo in terms of penile straightening, and improvement in Peyronie's bother. Xiaflex also did not show a meaningful effect on decreasing penile pain, an endpoint believed to be of important interest to the FDA. The drug is also associated with measurable adverse events, including hematoma, bruising, contusion, and injection site hemorrhage. The agency may deem Xiaflex efficacy as not meaningful versus placebo, and the safety profile as concerning, resulting in FDA rejection. Pfizer terminated the partnership with Auxilium in November 2012, most likely due to these issues.
Moreover, with cash of $125 million and debt of $550 million, Auxilium is not exactly in the most desirable financial position either, given that a Xiaflex's rejection in Peyronie's disease should impede profitability. In conclusion, there is a high chance that the FDA will issue a Complete Response Letter for Xiaflex on December 6, resulting in a downward pressure on Auxilium's share price. Brean Capital analysts have rated AUXL as a "Sell" and set a price target of $13, suggesting a 36% downside to the stock's Friday's closing price of $20.41.