Auxilium Pharmaceuticals' (AUXL) CEO Adrian Adams on Q1 2014 Results - Earnings Call Transcript

Auxilium Pharmaceuticals, Inc. (NASDAQ:AUXL)

Q1 2014 Earnings Conference Call

May 5, 2014 08:30 ET

Executives

Adrian Adams - President and Chief Executive Officer

Jim Fickenscher - Chief Financial Officer

Mark Glickman - Executive Vice President, Sales and Marketing

Keri Mattox - Senior Vice President, Investor Relations and Corporate Communications

Analysts

Marc Goodman - UBS

Gary Nachman - Goldman Sachs

Mario Corso - Mizuho

Joseph Schwartz - Leerink Partners

Annabel Samimy - Stifel

Thomas Wei – Jefferies

Eric Schmidt – Cowen and Company

Ram Selvaraju - Aegis Capital

David Friedman – Morgan Stanley

Natasha Effman – Sephora Fund

Difei Yang - R.F. Lafferty

Operator

Good day, ladies and gentlemen, and welcome to the First Quarter 2014 Auxilium Pharmaceuticals Inc. Earnings Conference Call. My name is Juanita, and I will be your operator for today. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the conference over to Mr. Adrian Adams, CEO and President. Please proceed.

Adrian Adams - President and Chief Executive Officer

Thank you, and good morning everyone and thank you for joining us for Auxilium’s webcast to discuss our first quarter 2014 financial results, updates to our 2014 financial guidance, portfolio performance and priorities for the remainder of 2014.

With me this morning are Chief Financial Officer, Jim Fickenscher; Executive Vice President of Sales and Marketing, Mark Glickman; and Senior Vice President of Investor Relations and Corporate Communications, Keri Mattox.

Before I proceed, I would like to ask Keri to read our forward-looking statements. Keri?

Keri Mattox - Senior Vice President, Investor Relations and Corporate Communications

Thank you, Adrian. Earlier today, we issued a press release summarizing our financial results and key achievements for the quarter ended March 31, 2014 which can found on our website at

Before we get started, I would like to remind everyone that we have a slide presentation to accompany our conference call this morning, which can be viewed at our website at www.auxilium.com. Additionally, I would like to remind everyone that we have a slide presentation to accompany our conference call this morning, which also can be viewed at our website. If you are listening to this call on your telephone, you may access a synchronized slide deck on our website by choosing the link on our Webcast Page that says, "Click here to listen."

This presentation contains a description of the non-GAAP calculations and reconciliations to the closest comparable GAAP measures, as well as the company’s rationale for what we believe to be the utility to investors of the non-GAAP measures it has elected to report. This description and reconciliation can be found in the appendix accompanying this presentation. The non-GAAP financial measures reported by the company should not be relied upon as an alternative to GAAP measures.

This conference call and presentation also contain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995 and which are described in detail in the first slide to the accompanying presentation. Our forward-looking statements convey management’s expectations, beliefs, plans and objectives regarding future financial and operational performance and are subject to a wide range of risks and uncertainties that could cause results to differ in material respects.

Today, our forward-looking statements will include, but will not be limited to statements relating to whether we will grow and build shareholder value, whether we will meet our expected milestones, financial projections and development and operational goals for 2014, including maximizing our current portfolio, advancing our development programs, pursuing CD&L opportunities and maintaining financial discipline, our future mix of custom contracted and non-contracted business, our future growth to net discount for Testim and any effect on our Testim inventory valuation, potential reduction in inventories of Testim by wholesalers, future demand trends for Testim and TRT demand and the size of a potential decline in TRT prescriptions, whether key opinion leaders will remain confident in TRT, whether our product portfolio is sufficiently diversified, the impact and growth potential of what we believe are our five growth products, STENDRA, TESTOPEL, XIAFLEX for Peyronie’s and for Dupuytren’s and Edex, the effect of first quarter buy-in on future TESTOPEL revenues, the continued support of urologists for injectable or implantable TRT products, the continued success of our U.S. launches of XIAFLEX for Peyronie’s and STENDRA, the ability of STENDRA to impact of PDE5 market dynamic, the demand and the size of the applicable market for XIAFLEX for Peyronie’s and for Dupuytren’s, whether and when the U.S. Food & Drug Administration will approve our submission of an sBLA requesting approval of XIAFLEX for the treatment of multiple Dupuytren’s concurrently, whether and when the FDA will approve the submission of the 15-minute onset of action label expansion for STENDRA and the timing of reporting results for our Phase 2 study for CCH for the treatment of cellulite and frozen shoulder syndrome.

Our actual results could differ materially from those described in this conference call and presentation. Information on various factors that could affect Auxilium’s results are provided in more detail on Slide 1 of the accompanying presentation, which I urge you to review in detail and are also detailed in the reports we file with the Securities and Exchange Commission. We undertake no obligation to publicly release the results of any revisions to these forward-looking statements.

With that, I will turn the call back over to Adrian.

Adrian Adams - President and Chief Executive Officer

Thank you, Keri. Before we begin, I want to take a moment to acknowledge that the past week has been a challenging one for Auxilium given the greater than expected decline in Testim revenues in the first quarter and our announcement of that news on Tuesday evening of last week. We understand that you all have questions around this announcement and we are going to our best to share information on today’s call about the first quarter performance and our revised expectations for the full year 2014.

Along those lines on Slide #3, you will find the agenda for this morning’s call. We will begin with a detailed discussion by Jim of the first quarter Testim revenues as well as an overview of our full financial results. I will then provide additional details of our corporate progress and performance in the first quarter 2014 and we will discuss highlights by product franchise. We will conclude with a brief updates on our research and development programs. And finally we will open the call for your valued questions.

With that let me turn the call over to Jim to discuss our financial results. Jim.

Jim Fickenscher - Chief Financial Officer

Thank you, Adrian. Please note that my comments this morning will discuss our results on a non-GAAP basis. I encourage all of you to review the appendix accompanying the presentation for a reconciliation of the non-GAAP financial measures to the closest GAAP financial measures and our reasoning as to why we believe these non-GAAP measures are useful for investors.

On Slide 4, we will start with Testim. Based on IMS total prescription data, the first quarter 2014 and historic information concerning the number of boxes per prescription, our WAC price and gross to net discounts, it would have been reasonable to expect gross first quarter revenues for Testim in the U.S. of approximately $55 million and net revenues of $39 million. This morning we reported U.S. revenues of approximately $11 million and this slide will layout the reasons for this significant shortfall. First, we mentioned on our fourth quarter 2013 earnings call that we believe that there was a buy in by the wholesalers in advance of our January 1 price increase of up to $8 million. We expected that some or all this amount will come out of the first quarter revenues. However, we believe that based on the slowing of the overall TRT gel market and Testim prescriptions in particular this whole – wholesalers appear to have pulled back their inventories by an incremental $7 million in the quarter for a total shortfall of approximately $15 million.

Second, we have seen a dramatic shift in our business which caused us to recognize an incremental $13 million in discounts during the first quarter. We expected that the price increase taken in January would be used to pay for a higher level of rebates and discounts to the managed care plans that we won in 2013, many of which became effective in January of 2014. While we did see absolute increases in prescriptions to these managed care plans, which we refer to them as our contracted business, we also experienced a greater than expected decline in our non-contracted business, which represents our most profitable segment of our revenues. As a result our gross to net discounts on an ongoing basis has increased approximately 10 percentage points even after factoring in the January price increase.

Applying this, higher gross to net discounts to our $65 million in gross revenues caused revenue through the channel to decline by approximately $7 million incrementally. Further more, accounting principles require us to recognize a liability for all discounts that we expect to pay in the future. This liability needs to consider all units that we believe are in the wholesale and retail channels at the end of the quarter. Therefore when we take this higher per unit discount and apply them as all the inventory in the wholesale and retail channel, we have recognized approximately $6 million in additional discounts for all units that are still in with the channel.

So moving forward with the assumption that our mix of contract and non-contracted business remains fairly consistent with what we saw in the first quarter, we expect that our gross to net discounts for the balance of 2014 should be in a level slightly north of 50%. If that indeed turns out to be accurate, then we would not expect to see another large adjustment for channel inventory. With respect to what the wholesalers will do with their inventory levels, this is more difficult to forecast, because we see the TRT gel market and Testim prescriptions shrinking we have assumed that there will be some further reduction in inventories likely in the second quarter of 2014.

Turning to Slide #5, let’s discuss what may be driving the TRT market decline. We had seen continued decline in the TRT general market which steadily shrank over the course of 2013. In January, we saw a significant drop in our prescription trends, which at the time we attributed to what we believe was confusion caused by the shuffling of TRT product formularies for a significant number of managed care plans. From this lower base, we believe that the trends in the month of January predicted a slow decline in the overall TRT market. This end of January IMS prescription data was what we had in hand at the time we finalized our original guidance for 2014. Unfortunately, what we believe was the then current trend of demand decline took a significant turn for the worse shortly after this time and through the latest standpoints that we have, we do not see any sign of stabilization. Through the middle of February, the TRT gel market has declined 11% versus the same time period of 2013. The latest weekly data points indicate that the overall gel market prescriptions are down 23% versus the same week last year while new to brand prescriptions are 57% lower than the same week last year. These trends are the basis for our revised belief that the total TRT prescriptions for the 2014 gel market could decline by 25% from the full year compared to 2013.

Clearly, defining and understanding the reasons for this decline is difficult. In speaking with key opinion leaders in the field, we have repeatedly heard that they remain confident in testosterone replacement therapy. And as you may have seen some of them have been publicly vocal about their support. However, we believe it is possible that patients and therefore patient demand have been significantly impacted by the media coverage of recent journal publications evaluating TRT gel safety, the FDA safety communication around testosterone and the inundation of product liability litigation advertising by plaintiffs’ attorneys.

While our original guidance anticipated a significant reduction in Testim revenues this year, this mix of an accelerating decline in the TRT gel market, unfavorable net realized selling price, and reductions in inventories by the wholesalers has meaningfully shifted our forecast for Testim revenues and as a result, our financial guidance for 2014.

Moving on to Slide #6, let’s discuss the first quarter financial results. As a result of the addition of the active products to our portfolio and contributions from our newly launched products, revenues increased by 34% in the first quarter of 2014 over the comparable period ‘13. This chart also illustrates how the strategic conditions of new products to our portfolio have diversified our revenue stream. We started 2013 with only two products, but ended the year with a broad portfolio of 12 products. 7 of which are promoted and 5 of which are growth products. These products are important contributors from Auxilium as we move forward.

Slide#7 presents the first quarter income statement for 2013 and 2014. As we have already discussed total revenues, I will start my comments on gross margin. Gross margin on net revenues was 80% for the first quarter of 2014 compared to 77% in the first quarter pf ‘13. This increase is due to the higher margin contribution of Actient products partially offset by a decrease in Testim net margin from a lower selling price.

R&D and SG&A expenses for the first quarter of ‘14 were $10.3 million and $73.7 million respectively. The increase in SG&A compared to the $41.3 million for the first quarter of 2013 was driven primarily by added expenses of the acquired Actient operations and an increase in marketing and advertising spend related to the January 2014 margins in XIAFLEX for the treatment of Peyronie’s disease and STENDRA.

Net loss for the first quarter 2014 was $19.4 million or $0.39 a share compared to a net loss of $2.3 million or $0.05 per share for the same period in ‘13. As of March 31, 2014, we have $76.7 million in cash, cash equivalents and short-term investments compared to $71.2 million at December 31, 2013.

Moving to Slide #8, as we announced last week, we have revised our 2014 financial guidance. To reiterate, for global net revenues, we expect to be in the range of $380 million to $420 million. It is important to note that this revised 2014 guidance continues to assume final approval of an Upshur-Smith Laboratories’ TRT gel product with a BX Therapeutic Equivalence rating, although we cannot rollout the possibility that their products are receiving an AB rating from the FDA.

We have also highlighted here our expectations for non-GAAP R&D expenses of $40 million to $45 million, SG&A expenses of $255 million to $260 million and net interest expense of $20 million to $22 million. We expect non-GAAP net income to be between breakeven at a $15 million loss. And finally, we expect to realize a gross margin of 79% to 80%.

And now, I would like to turn the call back over to Adrian. Adrian?

Adrian Adams - President and Chief Executive Officer

Thanks Jim. Let’s turn to Slide #9, to talk about our progress across the rest of the Auxilium portfolio. As you will recall, 2013 was an important year for Auxilium as we significantly broadened our product portfolio and established a position as a leader in men’s healthcare. We are working to define and realize the value we believe exists across this broadened portfolio and the first quarter was a critically important time for the company for several reasons. First, we are extremely pleased with the initial launch traction and momentum from our new product STENDRA for erectile dysfunction and XIAFLEX for Peyronie’s disease.

Second, we continue to see growth and market penetration from key products like TESTOPEL, XIAFLEX for Dupuytren’s contracture and Edex. And we are appropriately investing into these products and our other growth assets in an effort to fully maximize their value. Third, we made continued progress across our Phase 2 clinical programs. And finally and most importantly, we remain confident in the potential of our product portfolio. Now let’s talk about some important updates for select products across this portfolio.

On Slide 10, let’s first discuss TESTOPEL. TESTOPEL is an important product for Auxilium and we remain encouraged about its growth potential and our anticipated ability to improve this product’s momentum in 2014. TESTOPEL, as you know is the only FDA approved long-acting implantable testosterone pellets available. In the first quarter, we saw a 31% increase in the number of pellets shipped and we have realized TESTOPEL net revenues of $32 million. We should note that we estimate the $12 million to $14 million of these revenues are tied to a buy-in in March of this year in advance of the 15% price increase taken on TESTOPEL on April 1, 2014. And we expect that buy-in to temper second quarter sales.

We saw market growth with a 6% increase the number of implanting sites in the first quarter of 2014 compared to the fourth quarter 2013. And while the TRT market dynamics remain a key factor, it is important to note that that injectable portion of the market has demonstrated a growth rate of 11%. We think that this maybe June to be increase in sustained interaction of urologists with patients receiving an injection or implantable products and those physicians support for the safety and benefits of testosterone replacement therapy. Overall, we continue to anticipate growth of TESTOPEL in 2014.

Now let’s move on to our erectile dysfunction franchise. Turning to Slide #11, we will focus on STENDRA. STENDRA is the first new erectile dysfunction drug in nearly 10 years and we have launched it with a marketing campaign that is new, young, vibrant and fresh. Our STENDRA strategy is built around our targeted product launch. In January 2014, our 150 person Primera sales force rolled out the product to urologists and high prescribing primary care physicians. This focused approach was designed to reach 45% of the PDE5 inhibitor prescriptions written in anyone year to take advantage of the high switch rates among the erectile dysfunction patients and to leverage our sales force’s established relationships with the urologists community.

We believe that STENDRA offers an exciting and distinct product profile that could impact the PDE5 market dynamics, given first its rapid effect. STENDRA can be taken approximately 30 minutes before sexual activity per our product label. Second, its ability to be taken without undue concern regarding food and modest alcohol consumption, a key point we believe that patients’ real world use. Third, its favorable side effect profile, STENDRA is designed to be a selected PDE5 inhibitor with a low incidence and adverse events in clinical trials. We believe this exciting product profile paired with our focused and targeted marketing approach has yielded excellent early market traction. We have been extremely pleased with the launch to-dare.

Now let’s turn to Slide #12, you will see have this profile is driving product sales, a total of $11.6 million in revenues in the first quarter. Please note that we have realized this revenue at the time of product shipment to the wholesalers. While it is still early in the product rollout new prescriptions and total prescriptions are trending positively. Here on this job you will see that our new prescriptions are growing month-over-month and our total prescriptions topped 13,500 in March. We are very pleased with this early progress and with the favorable anecdotal feedback we have been receiving from leading urologists and primary care physicians about patient exposure.

On Slide #13, you will see our progressing capturing share in the erectile dysfunction market. These data show the first several weeks of launch, where STENDRA has already captured 2.3% of new prescriptions in the overall market according to IMS data released just last Friday. It is especially important to note that in our target prescriber base both urologists and high prescribing primary care physicians that write 45% of all PDE5 inhibitor prescriptions, we have already captured 6% of the new prescription market.

Additionally, even without direct sales force marketing to our non-target physicians, STENDRA has a 0.7% share of new PDE5 inhibitor prescriptions with this group, which we believe illustrates patient demand and overall physician awareness for this new product. Here on Slide #14, we see STENDRA’s growing share of the total prescription market. We have now captured 2.9% of our target market and 1.2% of all PDE5 prescriptions. We believe that visibility to gain market share so early in the launch is exciting evidence that our focused and highly targeted rollout of STENDRA appears to be working.

Moving to Slide #15, you will see here some interesting data regarding the breakdown o9f STENDRA prescriptions. The blue portion of these bars shows the compelling proportion of STENDRA prescriptions that are new therapy starts. These are patients that are not being on any PDE5 inhibitor treatment in the past 12 months before starting on STENDRA and could signify potential patient opportunity and market expansion. The yellow portion represents those PDE5 inhibitor patients for our switching to STENDRA from another drug. You may remember with approximately 60% of patients in this market switch each year, presumably looking for a more effective or tolerable therapy.

We saw this as a key opportunity to drive growth for STENDRA. Also important to note is the purple portion of these bars will show patients continuing on STENDRA those getting refills and staying on the drug over time. While it is still early we are very happy to see that segment growing as we continued to build on launch momentum. Finally, there is a small proportion of STENDRA prescription that are lost to other treatments, which is not surprising given the high switch rate and we talked about earlier. We are pleased to see that this is a small percentage others not seeing to be significantly accelerating, which further supports our belief that STENDRA’s overall traction is strong.

Now on slide number 16, we are seeing a look a little bit patient switches to STENDRA coming from and it’s a very interesting mix. A large proportion, 37% of switches, appears to be coming from Viagra and more than half of the total patient switches appear to be coming from Cialis, 22% from Cialis as needed, the on-demand treatment and 29% from Cialis Daily. In summary, we continued to be extremely encouraged by the launch of STENDRA and its growth potential.

Next, let’s look at XIAFLEX, on Slide #17, we have outlined our total U.S. revenues in the first quarter of this year $16.6 million or 38% from $12 million in the first quarter of last year.

It is difficult for us to accurately break out the Peyronie’s disease revenues from the Dupuytren’s contracture revenues as some XIAFLEX vials are sold to hospital systems and centers that treat both conditions. Therefore, we will provide total revenues for XIAFLEX moving forward, but we will share our estimates on vials sold or used by indication. Overall, we are very pleased with the initial trajectory in Peyronie’s disease following our January 2014 launch and we see stable growth Dupuytren’s contraction. So let’s talk first about the XIAFLEX and Peyronie’s disease.

Moving on to slide number 18, as you know in January, we launched XIAFLEX for Peyronie’s disease but person only FDA approved treatment proven effective for this condition. Patients can receive total of up to eight injections of XIAFLEX. There is four treatment cycles of two injections per cycle and there are six weeks between each treatment cycle, so it maybe for the patient’s overall treatments and therefore vial sales and revenues can occur over the course of a four to five months period.

Now, let’s turn to Slide #19, our initial launch strategy is focused on the approximately 5,000 to 6,500 patients who received surgery of verapamil injections each year and the approximately 400 physicians who performed 90% of the surgeries. With this disciplined product rollout we are aiming to build a beachhead with those leading physician experts and then grow and expand XIAFLEX penetration is the broader and we believe substantial Peyronie’s disease market.

Now turning to Slide #20, let’s talk about our initial launch momentum with those target physicians. To achieve our goal of a disciplined product rollout, we focused our early REMS certification efforts on a subset of those 400 target urologists. This core group now consists of 235 physicians and I am very pleased to report that as of April 30, 92% of them are already certified. This is also a nice progress from our fourth quarter call in late February went just over 80% had been certified. We are also pleased to see overall market and patient demand driving physician interest beyond our core targets. To-date we successfully certified 853 total physicians and 459 sites. Importantly, we working closely with these physicians to ensure they have the support needed for a smooth and seamless product rollout and patient experience.

Moving to Slide #21, you will see that as of April the 30 of 2014, we now have more than 2,300 Peyronie’s patients submitted into our Auxilium Advantage program. We are extremely please with this number as we believe it shows considerable patient demand for XIAFLEX and growing use of this white glove product, which is designed to assist patients in securing reimbursement approvals and streamlining the treatment scheduling and experience. Importantly you will also see a chart that maps XIAFLEX vials shipped in the first quarter for Peyronie’s patient treatments, a total of 524 as well as the total 498 vials shipped just in April. We are very happy to see this growth and our vial total of 1022 to-date.

We can see more patient details on our next slide, Slide #22. Specifically this chart gives us a better sense of where those 2373 patients are in the reimbursement approval process. A total of 1111 of them have received the yes decisions for their payer reimbursement and we are working through the process with insurance carriers for the 183 patients that received an initial note and over 1079 patient decisions are in progress and we continued to manage that process using our Auxilium Advantage system importantly almost 55% of patients where reimbursed decisions have been made, we are seeing a very nice 86% approval rating.

To-date, we are also very pleased to report that all eight of the Medicare administrative contractors are MACs have confirmed XIAFLEX for all these disease coverage. This means that all $47 million mdeicare Part B covered lines how access Xiaflex designed for Peyronie’s disease coverage. This means that 47 million Medicare Part B covered lives have access to XIAFLEX for Peyronie’s disease should they suffer from this condition. Additionally 15 major commercial plans representing a total of nearly 82 million insured lives or about 50% of commercial health plan lives in the United States have approved patients seeking treatment and in some cases of already instituted formal policy changes. Finally, XIAFLEX for Peyronie’s disease is also now a covered benefit at the VA and at TriCare. Overall, we are encourage by this significant coverage progress only four months into the product launch. And we will continue to keep you updated as we secure additional coverage.

In summary the XIAFLEX launch in Peyronie’s disease is exceeding our initial expectations and we are encouraged by its early traction with patients and top urologists. Let’s move now to our XIAFLEX for Dupuytern’s contracture. Turning to Slide #23, while the fist quarter brought expected seasonality, we continued to see stable growth of XIAFLEX in Dupuytern’s contracture. Overall our vial sales have climbed steadily with a 10% increase over the same period last year. Additionally, we continue to see stable market share for XIAFLEX and Dupuytren’s hitting 28% in February of this year. Broadly and over time, we have seen both increased awareness in demand for treatments for Dupuytren’s contracture.

Now, let’s take a look at our research and development pipeline programs. Here on Slide #24, you will see a brief overview of our two ongoing programs, Frozen Shoulder Syndrome and cellulite. For Phase 2b study of CCH and Frozen Shoulder is ongoing and on track with data anticipated in the first quarter of 2015. Our Phase 2a study of CCH in cellulite advanced nicely and we are pleased to announce that we recently completed study enrollment ahead of schedule. As a result, we now expect to report results in this trial in the fourth quarter of this year.

Turning to look at the rest of 2014, on Slide #25, you will see our priorities and upcoming milestones. We have outlined our key goals for this year. First, we will work to maximize the value of our current product portfolio, including the launch of two exciting new products and products that we believe represent key opportunities for the company. Second, we expect to advance our promising development programs in Frozen Shoulder and cellulite to support these efforts to obtain FDA approval for the 15-minute label expansion for STENDRA to the PDUFA date of September 20 and to work to secure the multi-cord label expansion to XIAFLEX, which has a PDUFA date of October 20 of this year. Third, we will be opportunistic and entrepreneurial around the potential for new corporate developments on licensing opportunities, and fourth and finally, we will endeavor to maintain financial discipline and manage financial performance.

As we move to our final Slide #26, let’s take about Auxilium’s future product growth potential. Here, you will see a non-GAAP snapshot of the net revenues from all of the products across our portfolio with the expansion of Testim. We believe that reporting our revenue on a pro forma basis without testing revenues provides the investors with a usual tool to understand where management sees opportunity for future revenue growth. Importantly, what we see across that portion of our portfolio is a 66% expected growth rate in 2014 compared to 2013. While we continue to address the TRT gel market challenges and manage Testim as a mature product, we believe this projected revenue growth really represents the future of Auxilium.

In summary, while there are challenges, this continues to be an exciting and important time for Auxilium. We believe that in 2014, our broad and diverse product portfolio positions us as a leader in men’s healthcare. We will continue to strategically invest into our assets to support our launches and our key products. And we will remain focused on executing our corporate strategy. We thank you for your continued interest and support.

I would now like to open up the call for your valued questions. Operator, can you please give the instructions?

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from the line of Marc Goodman with UBS. Please proceed.

Marc Goodman - UBS

Yes, couple of things. On expenses, can you talk about what changed in your guidance, what programs have been stopped or delayed into next year and how we should think about the progression of the spending? SG&A was pretty heavy in the quarter and given the guidance, that means it’s coming down pretty hard. So, just help us with the second, third, fourth quarter, how to think about it? Second, can you talk….

Adrian Adams

Sorry, carry on.

Marc Goodman - UBS

I was going to say – and then second, can you talk about Peyronie’s, what is your best guess on the sales of the Peyronie’s relative to the Dupuy’s? And then also can you address Edex?

Adrian Adams

Well, that’s four questions. So, I will address the first one and ask Jim to comment on the second. As it relates to research and development, I think as you well know, we had a very focused approach to investments in those programs. And I am happy to say that the core aspects of Frozen Shoulder Syndrome and cellulite remain very much on track. The tweaks in our R&D overall spend patterns for this year did not impact the key value drivers as it relates to moving our research and development programs forward. On the SG&A side?

Jim Fickenscher

Yes, on the SG&A side, I – obviously, we had a big number for the first quarter that represents the investments that we are making into the launches. So certainly $74 million non-GAAP number would not be what we would expect as a normal ongoing run rate. We don’t give guidance by quarter, Marc, so again they have – how we see the spend over the rest of the year. But I think our expectation was that we tried to get out with as much of the expenses in the first quarter as we could make sure that we had successful launch and over the rest of the year that number should temper but to be within our guidance of $2.60 and $0.280.

Adrian Adams

And on the third point, I think, which was related to how do we see things progressing in Peyronie’s versus the Dupuytren’s launch, I think clearly I think we have talked on past calls about the very significant differences in relation to the Peyronie’s launch versus the Dupuytren’s. And we are seeing a lot of that manifest into practice. We are very pleased with the early progress which as we mentioned we are exceeding expectations. The number of patients that have already been put into the system is higher than we anticipated. We also believe that the Auxilium Advantage program, which is working very effectively, we are now starting to see some very good evolution in patients moving through the system.

So I think those important differences that we saw particularly as it relates to the motivation in this area by physicians and indeed patients, I think represents in a very significant difference in the momentum with the assets. So we are very encouraged by what we see – we have remained very focused and disciplined. As I mentioned I think we want to make sure we develop this strong beachhead of performance and that is most certainly happening. So we remain very pleased with progress to-date. And on Edex again I think would be with the products I think the they will just tend to be a little bit of seasonality with this brand in terms of selling patterns. I am very happy to see the market share evolves quite nicely. In the very most recent data points, we have seen that market shares of around about 54%. So we are very encouraged with Edex and how that is progressing.

Operator

Your next question comes from the line of Michael Yee with RBC Capital Markets. Please proceed.

Unidentified Analyst

Hi, thanks. This is John on behalf of Michael Yee. Just two questions, first we see that the top line guidance was reduced by $70 million both on the top and the low end. And last week, in the press release you mentioned that you expect Testim 2014 sales to be less than 85. So then is it safe for us to think that your original expectation for Testim was no higher than $155 million. And then just second, so it seems like just in last two months since you last reported, things have changed dramatically with regards to Testimm then can you just give us more color on what you may have learned in that same period that were new or different versus your original expectations for the other products. And how that gives you confidence in the recent launch products including XIAFLEX and STENDRA? Thank you.

Adrian Adams

Yes. So on the latter point, I think which we have covered in the call I think what we mentioned if one looks at the overall dynamics within the market and in particular I think the prescription trends and new to brand trends. I think we have seen a significant decline overall in the market. We have seem to gather pace in the late February, March and we see not continue and as we progress through the year. That reflects our view that we – overall for this year we will see a decline around about 25% versus 2013. And so that in essence has been driving and also lot of the revised guidance that we gave on Testim. As it relates to the overall TRT market, but I think the other point in relation to the overall expense, I will just ask Jim to comment on that.

Jim Fickenscher

I think part of John’s question was the $70 million specific to Testim was our original number $155 million. Obviously, we didn’t give product like product revenue guidance. And so I don’t know so I would say that its appropriate assumption to just say that that was our original number for Testim. Obviously, if you go through and you do a reforecast and refresh your guidance we take a look at all the data and we are certainly seeing and believe that Peyronie’s and STENDRA are doing better than our original expectation. We will talk about bringing Testim down significantly. So we look across all of our products when we do a reforecast. And I think that’s really what leads us to overall guidance that we have at this point in time.

Unidentified Analyst

Thank you.

Adrian Adams

Thank you.

Operator

Your next question comes from the line of Gary Nachman with Goldman Sachs. Please proceed.

Gary Nachman - Goldman Sachs

Hi, good morning. Couple of questions. First, with the revised guidance, Jim, it doesn’t seem you will be able to generate any real cash flow this year and pay down some debt. Is there any risk to your covenants that we should be aware of? And then on STENDRA, how much of the $11 million was stocking, what was the gross to net in 1Q and how should we think of that gradually improving over time? And how much could the 15-minute onset help if you ultimately get that?

Jim Fickenscher

So, on the cash flow, I would say that the term loan agreement that we have is called the covenant-lite agreement and so there are no requirements for us to maintain any level of liquidity, things like that. So, we basically need to make the interest payments and the very modest 5% amortization of the term loan at the end of the year. So, I don’t believe that there is anything with respect to covenants that would cause us problems this year. So, with respect to your question on STENDRA, obviously the revenue that we booked is the revenue to the wholesalers.

If you look at the gross revenue, if you look at the number of prescriptions and the number of pills per prescription, which for the quarter averaged out around 4.5 pills per prescription. Our gross revenues would have probably been somewhere just under $3 million. With respect to the gross to net, that’s a very competitively sensitive number. So, I am going to avoid talking specifically about that. I mean, obviously, in the early part of this year, we are giving high level of coupon activities both for the three free, as well as the reduction in the co-pay for the patient.

And I think that as we talked about our RAR gross to net is high for the first quarter, but as we see continuation of refills of those prescriptions and the three free coupons become much smaller proportion of the total prescriptions. We think that that number would normalize quite nicely. So, at this point, that’s probably about as much, because we want to get into STENDRA. And Adrian, I don’t know if you want to talk about impact to the 15-minute claim.

Adrian Adams

Yes. I think, I mean, our strategy remains simple and seamless in that regard. I think clearly, I think we are excited about the possibilities with the 15-minute claim, should it be approved by the FDA and interactions are on board in that regard. I think critical to the success of that, of course, is the positioning of STENDRA within the marketplace. And as we mentioned during this call, we have been very pleased with how things are evolving with the STENDRA after a relatively short time on the market. I think to have captured close to 6% of new prescriptions within our target audience after such a short time, we believe speaks well for the asset.

And from a focus point of view, if we can maintain that momentum as we lead up to the potential 15-minute indication should it be approved by the FDA. I think that will position the asset very nicely to take advantage of that. And we believe the important aspect with STENDRA is not just the differentiation of 30 minutes versus the profile of Viagra and Levitra and Cialis. But clearly, I think 15-minute difference to both assets we believe is a potential game changer. It opens up a very significant aspect of the overall on-demand, true on-demand marketplace, but critical to that is making sure we maintain the momentum, which to-date we have been very pleased with.

Gary Nachman - Goldman Sachs

Okay. Adrian, one quick follow-up just to maximize the potential of STENDRA, but will you consider more aggressive DTC at some point and is that factored at all into your SG&A guidance for this year? Thanks.

Adrian Adams

It certainly not factored into our SG&A guidance. I think we are leveraging all aspects of things like social media or in internet marketing. We are closely watching the momentum that we have at this particular point in time and we are looking at all potential scenarios as it relates to investments in this area. Obviously, I made comments about the 15-minute indication should it be approved by the FDA? We do believe that, that could be a potential game changer. And in anticipation of that, some of the scenarios we are looking up to may well involve the DTC area, but we have some time to think about what I am very focused on in the organization is very focused on is making sure that the strong momentum that we have seen continues during the second quarter and it gives us the strategic flexibility we believe to make the appropriate investments in the asset to maintain that momentum given that this is the first drug that’s been available in this market for 10 years.

Jim Fickenscher

And Gary, one comment to Adrian’s is that the revenues that we have in for our guidance also do not assume a DTC campaign as well.

Gary Nachman - Goldman Sachs

Okay, alright, thanks.

Operator

Your next question comes from the line of Mario Corso with Mizuho. Please proceed.

Mario Corso - Mizuho

Good morning. I am wondering if you could talk a little bit about the current quarter for Testim and what we might see there. So, I would imagine the expectation is revenues trend upward. And I think you talked about kind of the $30 million maybe baseline Q1 number before some of the additional discounting and the wholesaler changes and I guess market decline from there continuing and then perhaps a little more in the wholesaler side. So, are we expecting a trend upward in Q2 and then maybe another trend upward in the second half of the year? Is that the right way to think about it? Then secondarily, for Peyronie’s, do you have any sense yet of vials per patient? Is it one order, are there more than one orders or how do you see that playing out? Thank you.

Adrian Adams

Yes. The second point, I think clearly was still early in the launch evolution of XIAFLEX in Peyronie’s, so I don’t know obviously as you saw the first quarter number of vials and the vials that we have shipped in April alone, we are seeing some very strong evolution with the asset. And clearly, one of the metrics that we are following over the course of time is the number of patients who move to Cycle 2 to Cycle 3, Cycle 4, we are clearly monitoring that and will certainly based on the momentum that we have, we are very pleased, but that’s a metric that we will probably be able to share with more granularity on our next call as patients we move through the system, but suffice it to say that, at the moment, where the launch has exceeded our expectations. It’s going very strongly.

Jim Fickenscher

On your first question, Mario, so referring back to Slide 4 in our deck, your original assumption pretty well-grounded, I mean $39 million based on the net that we would have expected using last year’s RAR rate of around 40%. You take that number down by the $7 million that we talked about at the higher rebates that went through the channel, because we are now at that 50% plus RAR. So you are kind of starting at a $32 million number adjusted at Q1. So, what could happen? Without quarter giving a specific number, I think obviously we will have to look at where the continuing trends are in prescriptions for Testim in the second quarter versus the first quarter.

I do believe that there is possibility that the wholesalers will continue to bleed out some inventory in the second quarter, because this is the dilemma that you face in a shrinking market is that they bring their inventories down, but their sales to their customers are lower and so they need less inventory. So, I think it really surprised me to see some additional inventory reductions in the second quarter. It’s really hard to quantify that as to how much that will be, but at a point, you kind of get your demand and inventory in balance. And so from there, I think it’s really looking at what happens with the prescription trends for the balance of the year. So, obviously if you kind of put that $32 million x3 to $96 million, we recognized $12 of million would be well in excess. So I think you could see that we are assuming in our guidance that there will be continued decline in Testim prescriptions as well as some professionally incremental effect in the back half of the year on inventories.

Operator

Your next question comes from the line of Joseph Schwartz with Leerink Partners. Please proceed.

Joseph Schwartz - Leerink Partners

Thanks very much. My first question would be on Peyronie’s and I was wondering if you could give us any color on how long it takes generally to get patients who are in the Auxilium Advantage program to initiate their treatment?

Adrian Adams

Yes, I will ask Mark Glickman to comment on that, it’s a good question.

Mark Glickman

Thank you. Right now, it’s taking approximately six weeks from the time that the physician puts a prescription for Auxilium Advantage and the appointment is scheduled. That’s about in line with what we had anticipated and it seems like as we are going through that six week is holding pretty steadily right now.

Joseph Schwartz - Leerink Partners

Okay. Thanks. And then as far as the patients that are actually electing to go on therapy after they enter the Auxilium Advantage program, do you have any estimates on the proportion of patients that maybe don’t follow through with the treatment after entering the program?

Mark Glickman

I think right now, it’s a fairly small percentage. There is a lot of patients being scheduled. I mean with the amounts of approvals that we had, we have had only a handful of patients who declined to have the procedure and by handful, I am in single digits. But there is a lot of appointments that are being scheduled right now. It does appear that these early patients that are coming in are the motivated patients who have been awaiting therapy with Peyronie’s, very few patients walk away.

Joseph Schwartz - Leerink Partners

Right, okay. Thanks. And then can you just give us some color on and maybe walk us through your selling and sales and marketing infrastructure for Testim and how much is “expandable” and no longer needed or superfluous in the new world for these TRT products versus how much you would like to use it to sell other products like STENDRA?

Adrian Adams

Well, I think as we have pointed out I think we have moved from 2013 to 2104 from 2 to 12 products, 7 of which promoted and 5 of which are growth assets. And as a consequence of that, the way in which we have organized the commercial infrastructure is in line with the availability and leverage of those assets. Within the Primera sales force the 150 people they are responsible for STENDRA or Testim and for Edex. And clearly I think the amount of momentum that we are seeing with STENDRA I think in our target universe and the select primary care physicians we believe on it’s own strongly leverages that particular sales force. It is true to say that clearly I think if one looks at the amount of spend that we have on Testim, we have already been managing that asset as a mature product.

And so clearly I think at this particular point in time we think the overall kind of mix in relation to the way in which we are leveraging the Primera sales force and the momentum and potential we see for STENDRA we believe we will fully leverage that particular sales force. On the Innovia side of the business, the 60% sales force that sells XIAFLEX for Peyronie’s and TESTOPEL that is a very strong leverage to sales force’s performing very nicely and we see that continuing as we progress through the course of this year. And then on the Dupuytern’s side we have 47 sales representatives who continued to deliver good productivity in a growing marketplace.

Joseph Schwartz - Leerink Partners

Okay, very good. Thank you.

Operator

Your next question comes from the line of Annabel Samimy with Stifel. Please proceed.

Annabel Samimy - Stifel

Hi. Thanks for taking my question. I just wanted to get a little bit of clarity on XIAFLEX, you had mentioned you have seen 10% unit increase in Dupuytern’s, so is it fair to say that you are actually seeing some pretty market declines in the Dupuytern’s indication in the first quarter, if you would just explain that. And then I had a follow-up question on the testosterone market?

Adrian Adams

Yes, on the – as we commented on Dupuytern’s we have always referenced that we see this being a stable momentum. You are correct, we referenced the 10% increase versus the same quarter last year and that reflects very similar seasonality trends to what we are seeing during the course of 2013. So I think – so as we have projected this year and I think again in anticipation of the potential for a multi-cord indication label expansion in the fourth quarter this year subject to FDA approval, we see that as being a sign where we may see a potential inflection point moving into 2015. Meanwhile I think, we are seeing the seasonality from the base of our assumptions for 2014 and so we are continuing to be encouraged by that.

Annabel Samimy – Stifel Nicolaus

Okay. And then just on the testosterone franchise, I find it interesting that – I mean there are a number of players in the market obviously and they have all seen declines in their products related to the market, but nothing as unusually strong as Testim. So why isn’t anyone else seeing the inventory draw-downs that you are seeing. And on the flipside, you have got TESTOPEL, which is growing phenomenally well. And I just want to understand the dynamics there as well and then if you could comment on Avid entering the marketplace and telling us how you think that might disrupt your TESTOPEL opportunity?

Adrian Adams

I mean on the latter two points, I think firstly on the – what’s the trends we see in the non-gel segment of the market. We commented a little bit on this during the call, but we see continued growth in that market, it has grown out by 11% versus the declines we have seen in the gel marketplace. We think there are number of aspects that drive that particular metric I think we’ve see that’s the segments of the market, but is driven predominant by the urologist community and I think who appears to be very acknowledgeable in experience and the use of testosterone products. And most certainly I think the referenced during our call that they have obviously have different views in relation to some of the aspects of our concern that seem to come as a result of the JAMA and plus articles. So we believe that’s very supported in relation to you how that segment to the market as continue to grow and also TESTOPEL’s position within that. So on the other points?

Jim Fickenscher

Yes. So, Annabel, on your question about how we are disproportionately effect that and obviously we are all disappointed with the outcome for Testim and I hope that we have walked you through together understanding of what the shortfall was what we could have expected at 39%, $39 million of net revenues based on the TRxes. It is difficult from your comment on our competitors what I can tell you is that if you look at the total prescription in the first quarter of this year versus first quarter of 2013, our four products that are in the gel market were down some of the between 11% and 19%. Two of the four products had increases in sales in the first quarter of 14 versus the first quarter of 15. That doesn’t make a lot of sense to me but here there are much larger companies with a portfolio of products that spans a lot around and what we have. So, we probably do not have the call that other companies may have – we have a limited number of products, although it is better than what we have last year. And so from our point of view we are explaining DC which there is obviously a trend where there is a fairly large pull back on the wholesaler inventories. I don’t know it just matter of time for the others experience something like that but certainly from a prescription trend, you would have thought that everyone would have reported slightly lower sales in the first quarter of ‘14 versus ‘13.

Annabel Samimy – Stifel Nicolaus

Okay and if you could just comment on Avid?

Adrian Adams

Yes, on Avid, I think as we commented in the past I think we developing our plans for TESTOPEL and our modeling around that would all over always assumed the availability on date. Our assumption is also but wouldn’t be it will get approved and it would get approved with a very restricted label and not certainly turn out to be the case. From our perspective, it remains very early days in relation to the evolution of Avid and we’ve seen no specific feedback at this particular point in time on how it is being received in practice. I will perhaps ask Mark to comment any further on that.

Mark Glickman

Thank you, Adrian. And exactly in line with what you had just preliminary feedback is our issues, the positions regarding to the label and reinvestment asset. But we continue to take it as a serious competitor making sure that we had our action replace but early on is performing, I would say exactly, as we had predicted it.

Annabel Samimy – Stifel Nicolaus

Okay, thank you.

Adrian Adams

Thank you.

Operator

Your next question comes from the line of Thomas Wei with Jefferies. Please proceed.

Thomas Wei – Jefferies

Thanks. Just a couple of questions. Actually, just to follow up on TESTOPEL, so if we take out the buy-in, demand looks like it would have been $18 million to $20 million, maybe a touch less than what you reported in the fourth quarter. So I know you are saying it’s growing on a year-over-year basis, but are we starting to see some sort of impact on TESTOPEL from this testosterone situation or are you very confident that from here TESTOPEL can continue to grow going forward? And then on Peyronie’s, if you mapped out the curve for enrollment of patients into Auxilium Advantage, how has that looked over time and I guess in particular have we seen anything in the most recent trends that make these early numbers look more like a bolus effect, thanks.

Adrian Adams

Yes. On the latter two points, I think as it relates to trends on Peyronie’s, clearly, I think we’ve had this question a lot in relation to whether or not given the highly motivated niche of physicians and patients and indeed physicians in this early segment as to whether or not that’s a bolus treatment and if I actually looked across the board, one other things that we have been very encouraged by is the utility of XIAFLEX in Peyronie’s and the number of physicians that have started to use is broad. And we think the number of instances that reflect any bolus treatment is relatively limited. So all that points to the fact that we’ve been very encouraged and what we’ve seen and more certainly, the effective successful use of the Auxilium Advantage program, the dynamics of which very different from what was the case in the Dupuytren’s contracture area.

Jim Fickenscher

On your first question, Thomas, around TESTOPEL, so you’re right, the quarter-over-quarter is down slightly if you adjust the build that we saw in the fourth quarter versus what we expect from the buy-in. I don’t know so I can conclude that that’s anything more than just kind of normal cyclical patterns, I mean typically the fourth quarter in testosterone replacement therapy across the board is largest in the year and so we still feel comfortable about the full year growth potential in the product. Now, obviously I would – I think it’s may be obvious, but I will state it, with this buy-in in the first quarter, we expect most of that to reverse in the second quarter. So, I think when we get to the second quarter revenues for TESTOPEL, we would expect to see that buy-in is going to affect the second quarter numbers. But overall for the year, we’re also confident that there is good growth potential for the year.

Adrian Adams

And simplistically, as we’ve mentioned, I think with TESTOPEL, part of our strategy is relates to increase the depth of the number of implants amongst current users and also broaden that use over time. So that’s why we’re encouraged by the fact that we saw a 6% increase in the number of new implanters in the first quarter versus the fourth quarter, that’s a very important part as we broaden the reach with this asset and as we mentioned here in the call, they remained confidence in the growth of the asset during this year.

Operator

Your next question comes from the line of Eric Schmidt with Cowen and Company. Please proceed.

Eric Schmidt – Cowen and Company

Thanks for taking my question, maybe one more on the TESTOPEL dynamics. It looks like the 10-Q that you issued this morning has a new disclosure about the FDA looking into these safety events and potentially making a consistent labeling change around testosterone products, including Testim and TESTOPEL. Could you talk to your latest discussions there and what, if any, impact you think a new label might have?

Adrian Adams

Well, I think – obviously we can’t speculate in a lesson to what action the FDA may or may not take in this area. I think our interactions would be the FDA has been minimal to-date. I think they are going through their overall account of process. So, I think we have no additional information to give with – in relation to that particular review that is taking place and therefore, speculations to what may or may not happen would not be appropriate. As it relates to TESTOPEL, I think one thing that we have commented on during the call is that clearly I think there has been some very strong reaction to a number of these – to these studies. The JAMA article in particular by the broad urologist community. I think obviously are very acknowledge and experienced in this area. And I think that is broader reflected in the continuing growth within the injectable implantable side of the marketplace. And bear in mind that the majority of patients that are on TESTOPEL have been on gel treatments. In the past, they have progressed through gels and injectable products to be on implantable products and on relatively stable and have very strong relationships with urologists, most of whom, feel that they have a very good handle on the overall risk profile of assets in this area.

Eric Schmidt - Cowen and Company

And Adrian, a lot of questions last week on the communication around the preannouncement, can you just share with us why maybe it took longer into the month of April for you to get the news out?

Adrian Adams

Well, as I mentioned, Eric, as soon as it became evident to us that the Testim revenue number was going to be significantly less than we had anticipated, I felt that I wanted to get out and talk about that as soon as possible ahead of the call and we felt that, that the right judgment decision to make.

Jim Fickenscher

And it’s really closely tied into the guidance as well. So as we get through the first quarter close, we are realizing change in the next business and really that change in mix, Eric is something that is not easy to get your hands around, until actually you have closed the books and you start to get all of the actual invoices from the various managed care players. So it was in my opinion part of it was the mix of the business seeing the impact of that on both the units that were sold through the channel as well as the reserve required on the units in the channel and then projecting that forward with the expectation that the POC market was going to continue to decline. We have had a lower net selling price and wholesalers are cutting back on their inventories that at the end of the day, we have realized that the Testim number that we had originally expected was going to come dramatically down and that we weren’t going to be able to offset that with some of the positives that we talked about on other products. And so we have always taken our responsibility around guidance very seriously. And as soon as we got to the point that we have got that – we realized that we were not going to be able to stay within our guidance that really became a key trigger as Adrian said.

Eric Schmidt - Cowen and Company

Got it. Thanks, guys.

Jim Fickenscher

Thank you.

Operator

Your next question comes from the line of Ram Selvaraju with Aegis Capital. Please proceed.

Ram Selvaraju - Aegis Capital

Thanks very much for taking my questions. I just had two questions regarding the ex-U.S. potential for XIAFLEX in Peyronie’s disease and additional indications. Can you comment on Sobeys’ strategic positioning there, as well as that of Actelion with particular emphasis on Peyronie’s, but also on cellulite and Frozen Shoulder?

Adrian Adams

Well, on the cellulite and Frozen Shoulder, I think at this point in time, it’s too early to say. And clearly the arrangements that we have with the parties outside the United States predominantly revolve around Dupuytren’s and Peyronie’s disease. As it relates to Swedish Orphan, I would first of all comment that we have been very, very pleased with the performance of Swedish Orphan across all the countries in which they are responsible for. And I think the transition to them is going very smoothly and that is reflected in some good momentum within the European markets. Obviously, we have been very focused on that. And we have been focusing working with them to pull together the submission in Peyronie’s. That’s been our number one priority, our joint priority to do that. And clearly as part of that as we are looking to submit that I think and clearly I think Swedish Orphan will have responsibility for commercialization of that. They are doing a lot of work in relation to assessment of the potential market opportunity that exists there. And so overall, I think quite encouraging I think. As it relates to Auxilium, we have ongoing discussions with Actelion in relation to leverage of the Dupuytren’s and indeed Peyronie’s in most markets that are their responsibility. And Asahi Kasei are our partner in Japan, they are progressing nicely towards Phase 3 initiation.

Ram Selvaraju - Aegis Capital

Okay. And then the second question is – sorry and then the second question is with respect to STENDRA usage, have you seen significant use of STENDRA along with other PDE5 inhibitors? I am just curious about usage patterns of short-acting PDE5 inhibitor versus a long-acting PDE5 inhibitor and how much overlap there is in patients for the use of these products together and maybe you could comment on usage patterns there?

Adrian Adams

Most certainly, I think as we have number of urologists who made reference to that. All major metrics that we are monitoring relate to where it is being used from a switch environment and the data we show today, I think which we have very encouraged by, not just the evolution in new prescriptions on TRx’s. I think but if you look at the profile of where the business is coming from, a higher than we expected proportion of new patients who have never get on the PDE5 prescription before and on the switching from Viagra and Cialis I think reflects what we believe is a nice positioning of STENDRA within the overall marketplace. I think any kind of anecdotal feedback we get from positions who see STENDRA being given alongside perhaps other more chronic treatments. I think they are anecdotes at this point in time is not a metric but we specifically follow and this most certainly not a metric that we drive from a promotional point of view.

Ram Selvaraju - Aegis Capital

Thank you.

Operator

Your next question comes from the line of David Friedman with Morgan Stanley. Please proceed.

David Friedman – Morgan Stanley

Hi, thanks for taking the questions. Just two on XIAFLEX. The first is, of the units that shipped for Peyronie’s during the first quarter, sorry, during the first quarter. Do you have a breakdown of how many shipped in March versus January? And then the other question is for the urology prescribers. Are you seeing a different mix of buy and bill versus patient filling prescription and do the buy and bill physicians buy it directly from the company or from a warehouse? Thanks.

Jim Fickenscher

So a couple of questions there, David, I think with respect to breakdown by month, I mean obviously all we closing today is the quarter I think we launch a product and middle of January so patients were just began getting through the treatments, some in January and more in February and then building through March, but I think that’s the data when we have now. With respect to the buy and bill versus the assignment of benefit, I think it’s a correct statement to say that a significant proportion of physicians are using the assignment of benefit at this point in time, because there are really in the reimbursement process.

I think we believe over time that more will use the buy and bill. And when they get the buy and bill, it is directly from our wholesaler. So we sell through we’ve got very limited number of wholesalers, specialty pharmacies, specialty distributors who we sell product to and then they will ship directly to the physician who wants to do the buy and bill or they will use the specialty pharmacy if they want to do the assignment of benefit. Mark, any other comments you want make on that.

Mark Glickman

Specifically urologists, it does appear to be highlighted from urologists to want to buy and bill and just start to see those trends just now, the early parts of shifting towards the buy and bill especially if Medicare comes now that we have all the Medicare MAC covered.

Jim Fickenscher

They have to go buy and bill through Medicare…

Mark Glickman

Yes. So not at all for (indiscernible).

David Friedman – Morgan Stanley

Thank you.

Adrian Adams

Time for two more questions.

Operator

Your next question comes from the line of Natasha Effman with Sephora Fund. Please proceed.

Natasha Effman – Sephora Fund

Hello, thank you for taking my questions. You mentioned that you are still very active in business development and in-licensing. Could you maybe remind us your debt structure and how do you plan to be active alongside with this debt? Thank you.

Adrian Adams

Yes. First of all, I will comment on the broader aspects from a strategic point of view and then comment on the substance of your question I mean as we clearly articulated I think, entrepreneurial and obviously broader corporate licensing remains a very important goal as far as we are concerned. I think clearly I think we continue to assess a lot of different opportunities. And as it relates to different ways in which one might transact or do certain aspects, I think there are many, many different ways in which you can approach those aspects. And will continue to assess the strategic flexibility involve within that. As it relates to our wherewithal to do those things perhaps you can comment on that.

Jim Fickenscher

Sure. So we have two types of debt. We have a convertible debt instrument, which is $350 million in par value that becomes due in 2018. That’s an interest-only instrument until such time as the payment will either pay that down in cash or convert. Our intent today is to pay that down in cash. With respect to the term loan, we have $275 million that generally has about 6.25% interest rate on that with annual 5% amortization as the balance due in 2017 when that becomes due. So that is our overall structure, obviously. We are highly leveraged. And the loss of the Testim revenues that and EBITDA will certainly make that leverage more challenging for a longer period of time than we had anticipated, but as Adrian said, I think our first and foremost thing is to find the right transaction. And then one of the key metrics is….

Adrian Adams

Thank you very much. Well, we have time for one more question.

Operator

Your next question comes from the line of Difei Yang with R.F. Lafferty. Please proceed.

Difei Yang - R.F. Lafferty

Thank you for taking my question. Just a quick one on STENDRA, I have noticed that in terms of TRx’s growth, the growth from February to January, it was very impressive, that growth appears to slow down in March, would you help us to understand what might be contributing to the slowdown of the growth?

Adrian Adams

Most certainly, I think as we have looked at the overall market share evolution, I think as you expect within the first initial launch period events have the kind of ups and downs, but we have been very encouraged. I mean we have moved through the Easter period where there generally tends to be a softness in relation to the overall market. And the most recent data points, we have been very encouraged by those. I think – and we monitor two aspects as we talked about on our call, one is the overall market and the other one is within our target universe and I think – and most certainly the target universe that represents 45% of all PDE5 prescriptions. We believe to have moved up to a 6% of new prescriptions in that area is very soon in the early launch cycle. I think we think is pretty encouraging. And most certainly I think we are very pleased with the way things are moving. And of the most recent data points, we have continued to see that momentum moving in excess of what we were anticipating.

Difei Yang - R.F. Lafferty

Yes, thank you.

Operator

And this concludes the Q&A section for today’s call. I would now like to turn the call back over to Mr. Adrian Adams for any closing remarks.

Adrian Adams - President and Chief Executive Officer

Thank you, operator and I’d like to thank everyone for joining us this morning and we look forward to updating you on our continued progress and corporate milestones on our next quarter and indeed in between. Thank you so much.

Operator

Ladies and gentlemen that concludes today’s conference. Thank you for your participation. You may now disconnect. Have a great day.

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