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Auxilium Pharmaceuticals Inc. (NASDAQ:AUXL)

Q1 2008 Earnings Call

April 30, 2008 10:00 am ET

Executives

Will Sargent - VP - Investor Relations & Corporate Communications

Armando Anido - CEO & President

Roger Graham - EVP - Sales & Marketing

Tony DelConte - Chief Medical Officer

Jim Fickenscher - CFO

Analysts

Salveen Kochnover - Jefferies & Company

Marshall Urist - Morgan Stanley

Thomas Wei - Piper Jaffray

Greg Fraser - Merrill Lynch Global Securities

William Ho - Banc of America Securities

Leland Gershell - Cowen & Company

Lucy Lu - Citi

Matt Renna - Soleil

Operator

Good day, ladies and gentlemen, and welcome to the first quarter 2008 Auxilium Pharmaceuticals Incorporated Earnings Call. My name is Shaquana, and I will be your coordinator for today. (Operator Instructions).

I would now like to turn the presentation over to your host for today's call, Mr. Will Sargent, Auxilium Vice President in Investor Relations and Corporate Communications. Please proceed, sir.

Will Sargent

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

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 of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are all statements other than statements of historical fact, and generally may be identified by the words "believe," "may," "appear," "feel," "could," "will," "estimate," "continue," "anticipate," "see", "intend," "should," "plan," "hope," "potential" and "expect" and similar expressions.

Today our forward-looking statements will cover, among other things, our plans for what we believe to be the prospects for the company, including statements regarding the timing or reporting of top line results from CORD I and CORD II clinical trials for XIAFLEX clostridial collagenase for injection for the treatment of Dupuytren's contracture; our ability to get data from those studies published in a high-quality peer review journal; the timing of our BLA submission for XIAFLEX for the treatment of Dupuytren's contracture and related product approval; the development schedules for all of our product candidates; the timing of the initiation of Phase IIb study of XIAFLEX for the treatment of Peyronie's disease; the value of potential impact of our partnering opportunity for XIAFLEX in Europe, should it occur; the protection for Testim afforded by US Patent No. 7,320,968 and its listing in the Orange Book; the absence of an ANDA for a generic to Testim; the timing of enrollment of sites and patients in the TRiUS registry and the interpretation and value of data from the study, and Testim's sales and market growth and the factors underlying such growth.

Actual results may differ materially from those reflected in these forward-looking statements as a result of the delay of clinical trials for our product candidates, adverse events in our clinical trials, study results, changes in the regulatory requirements for our industry, our ability to -- our inability to compete effectively in our markets, our inability to manufacture XIAFLEX, the failure of our third party manufacturers or suppliers to meet their contractual obligations, as well as the various factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2007. Given these risks and uncertainties, you should not rely on any such factors or forward-looking statements.

Forward-looking statements provide the Company's expectations, plans and forecasts for future events and views as of the date hereof. 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 now pleased to turn over the call to our Chief Executive Officer and President, Armando Anido.

Armando Anido

Thank you, Will, and thanks to all of you who are joining us on the phone or via webcast. The subject of today's call is to bring you up to-date on our progress in the first quarter of 2008. Roger will provide you with an update on Testim performance. Tony will give an overview of the TRiUS Testim registry trial and updates on our anticipated release of top line data for the CORD I and CORD II trials, as well as the Peyronie's clinical program status. Jim will then take you through the financial results for the quarter, and I will conclude with an update on our key priorities for the balance of the year. We will then open up the call for your questions.

Before we get into the meat of the call, let me give you the Reader's Digest version of our first quarter accomplishments. One, we made tremendous progress developing XIAFLEX in the quarter. Over 1,000 patients have been dosed, and over 2,000 XIAFLEX injections have been given across all Dupuytren's contracture clinical trials. Included in the 1,000 plus patients, we have enrolled over 900 patients into our four ongoing Phase III XIAFLEX clinical trials, CORD I, CORD II, JOINT I and JOINT II, for Dupuytren's contracture. We expect to release top line results for CORD I and II in June and believe we are on track to submit the biologics license application, or BLA for Dupuytren's contracture in early 2009.

The FDA is currently reviewing the final report from our preclinical local effects tolerability study and the protocol design of the Phase IIb study. We expect to begin dosing patients in the Phase IIb study of XIAFLEX for the treatment of Peyronie's disease by the end of this quarter. Additionally, in the first quarter we began to explore partnering opportunities for XIAFLEX as part of our ongoing evaluation of options to maximize the product's potential in Europe.

Regarding Testim, it achieved $27.1 million in revenues in the quarter, up 47.2% versus the first quarter 2007, a very strong performance. The 968 Testim patent was issued on January 22, 2008. We now believe that there was no ANDA for a generic to Testim filed prior to the issuance of the 968 patent, because three months have passed since we listed it in the Orange Book, and we would have expected an ANDA filer to have acted by now to preserve its first to file exclusivity.

We continue to add strength and depth to our management team with the addition of Will Sargent, our Vice President of Investor Relations and Corporate Communications, as well as Dr. Laura Offutt, Vice President of Medical Affairs.

Let me now turn the call over to Roger, who will share with you the specifics of our accomplishments with Testim in the first quarter. Roger?

Roger Graham

Thank you, Armando. Our performance in the first quarter of 2008 demonstrates our continued excellent progress in growing the Testim brand. Testim quarterly net revenues were up 47.2% over the comparable quarter of 2007. According to National Prescription Audit data from IMS Health, or IMS, the corresponding 120,500 total prescriptions that were reported in the first quarter of 2008 represent our highest quarterly level ever, up 31.2% versus the first quarter of 2007, while the overall gel market grew 12.9% in the first quarter of 2007.

Testim's total prescription market share at the end of March 2008 was 21.9%, up 3 points compared to 18.9% in March of 2007. According to IMS exponent data, we had a market share of approximately 41.3% in March 2008 within our highest prescribing urologists on whom we call, compared to 33.5% at the end of March 2007. We also continue to make strides with the highest prescribing primary care physicians on whom we call, with Testim market share achieving 29.2% in March of 2008, versus 24.4% in March of last year.

Our efforts in 2008 will continue to focus on a superior level of execution to drive share for Testim through a variety of branded initiatives developed for healthcare providers and their patients. These include, one, select initiatives in high-growth, high-potential metropolitan areas; two, an enhanced coupon program providing longer term value to our patients; and, three, revised sales routing, providing a higher level of service to our most valued physicians.

In addition to these branded promotional efforts, we believe it is strategically important to broaden the understanding of the value of testosterone replacement therapy, or TRT. Toward this end, in the first quarter of 2008, we began enrolling sites in the Testim registry in the US or TRiUS. This registry will assess long and short-term outcomes of Testim for the treatment of Hypogonadism. We believe the registry will further enhance the data set for Testim in order to provide additional insights on the value of Testim and testosterone replacement therapy.

At this point, I would like to turn the call over to our Chief Medical Officer, Dr. Tony DelConte.

Tony DelConte

Thank you, Roger. Expanding on your last comment, the TRiUS registry is one of the first initiatives of our plan to build our medical affairs group and support commercial efforts, develop thought leaders and expand medical information, communication, as well as educational programs. As Roger mentioned, we have already begun enrolling clinical sites in our TRiUS registry and expect that the first patient will be enrolled in this quarter.

The TRiUS registry is a large observational study designed to understand real-world usage and effectiveness of Testim in a variety of clinical practice settings. This registry will provide insight into diagnosis and treatment trends, patient population and efficacy of Testim, particularly as it relates to sexual function, depressed mood, as well as body composition. By the end of the study we plan to enroll approximately 100 sites and up to 1,000 patients across the United States, who have never used Testim or have not responded to other TRT treatments.

On the XIAFLEX front, as Armando mentioned, we expect to release top line data from the CORD I and II trials in June. As a reminder, the primary endpoint for CORD I and II is patients' achievement of a 0 to 5 degree contracture in a primary joint after up to three injections of XIAFLEX. This is effectively returning the patient's hand back to normal extension. We have been told by surgeons that this is a very high hurdle, as they often do not get this level of extension after performing surgery. CORD I, our second pivotal trial, is overpowered to hit this primary endpoint, as the number of patients required for the trial was determined by the US Food and Drug Administration's requirement for exposure of at least 100 patients for one year after their initial dose of XIAFLEX.

We will also be measuring several secondary endpoints in the CORD I and II trials, such as improvement in contracture greater than or equal to 50% of the original contracture, the pre and post-treatment contracture angles, change in range of motion, number of injections required to achieve 0 to 5 degrees of contracture and the time to meet the primary endpoint. These studies have been designed to enroll a wide cross-section of patients in terms of joints affected and severity of contracture. Although we know you are interested in the results for all of these endpoints as well as the safety profile, we will of course need to balance what we disclose in June with the long-term value of getting these data in these clinical trials published in a high-quality peer review journal.

Now, moving on to Peyronie's disease, we have submitted the full preclinical local effects tolerability study and protocol design for our proposed IIb study in Peyronie's disease to the FDA. So, the primary endpoint for the Phase IIb study will be a patient-reported outcome, or PRO, assessment that we have developed with Peyronie's and PRO experts. We anticipate starting the Phase IIb study by the end of this quarter.

At this point, I would like to turn the call over to our Chief Financial Officer, Jim Fickenscher, and ask him to take us through the financial details for the quarter.

Jim Fickenscher

Thank you, Tony, and good morning to everyone on the call.

For the quarter ended March 31, 2008, Auxilium reported net revenues of $27.1 million, compared to net revenues of $18.4 million in the first quarter of 2007. Total Testim units reported by IMS on a prescription basis exceeded total Testim units sold to our customers during the first quarter of 2008. We have estimated this shortfall in sales during the quarter to be approximately $1.3 million in net revenues.

Additionally, there were no shipments of Testim to our ex-US partners in the first quarter of '08, compared to $300,000 of shipments to these partners in the first quarter of 2007. The net loss for the first quarter of 2008 was $12.3 million, or $0.30 per share, compared to a net loss of $11.9 million, or $0.33 per share, reported for the first quarter of '07. Net loss for the first quarter of 2008 includes total stock-based compensation expense of $2.1 million, compared to $1.2 million for the first quarter of '07.

Gross margin on net revenues was 77.9% for the quarter ended March 31, compared to 72.4% for the comparable period in 2007. 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 increase in the gross margin rate reflects the impact of year-over-year price increases on US Testim revenues, a decline in lower margin international product shipments, the benefit of a one-time manufacturing fee rebate and the lack of expenses in 2008 related to Testim manufacturing and quality improvement programs that were carried out in 2007.

Research and development spending for the quarter ended March 31, 2008 was $13.2 million, compared to $8.7 million in 2007. The increase in R&D costs was primarily due to the increased spending for clinical development and manufacturing for XIAFLEX.

Selling, general and administrative expenses totaled $21 million for the quarter ended March 31, 2008 compared with $17.2 million for the year-ago quarter. The increase was primarily due to higher investment in promotional spending for Testim, pre-launch investments in market development and incremental personnel for XIAFLEX and higher stock-based compensation expense.

On March 31, 2008 Auxilium had $56.9 million in cash and cash equivalents, compared to $70.3 million on December 31, 2007. As of March 31, we had approximately 41.2 million shares of common stock outstanding, plus outstanding warrants to purchase approximately 1.9 million shares of our common stock and an additional 4.7 million outstanding employee stock options to purchase shares of common stock at varying prices.

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

Armando Anido

Thanks, Jim. Now let's talk about recent additions to our team. I am pleased to welcome two key additions to Auxilium to enhance our relationship with shareholders as well as key opinion leaders.

First, Will Sargent joined Auxilium in the role of Vice President, Investor Relations and Corporate Communications. Will is responsible for being the primary interface with the investment community and will also direct our internal and external corporate communication strategy. Many of you recognize Will as a former biotechnology equity analyst at Banc of America Securities, and he also brings 12 years of experience in the biopharmaceutical industry to the role, including prior brand marketing experience at Amgen and development experience at Immunex. Will received his undergraduate degree from the Johns Hopkins University and earned an MBA from the University of Washington.

Also, Dr. Laura Offutt joined Auxilium as Vice President, Medical Affairs, and will be responsible for providing medical support for current and future marketed products. Laura comes to us from Wyeth Research, where she was part of the clinical team in Neuroscience. She previously held positions in Global Safety Surveillance and Epidemiology group at Wyeth. She is a graduate of Columbia University, received her medical degree from Northwestern, followed by her residency at Jefferson Medical College. She is a Board Certified Internist. Welcome to both of them.

We are very pleased with the progress we made in the first quarter toward achieving our development objectives for XIAFLEX and plan to release the results of CORD I and CORD II trials in June. Additionally, we believe we remain on track to start the Phase IIb study in Peyronie's disease by the end of the quarter. Finally, our Testim net revenues in the first quarter 2008 demonstrate our continuing success in growing the Testim brand.

In concluding, let me thank our shareholders for your continued support. 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 truly excited about the prospects, opportunities and potentials for success in front of us. Thank you.

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

Question-and-Answer Session

Operator

Thank you. (Operator Instructions). Your first question comes from the line of Salveen Kochnover, with Jefferies & Company. Please proceed.

Salveen Kochnover - Jefferies & Company

Sure. Hey, guys, good morning.

Armando Anido

Good morning, Salveen.

Salveen Kochnover - Jefferies & Company

Thank you for taking my questions. Could you just, on Testim, can you comment on why the scripts are up and pricing was increased in the first quarter, yet sales -- quarter-over-quarter sales seemed relatively flat, and then on the -- why there was no ex-US shipment?

Armando Anido

Yes, I think that -- let me make an initial comment. I think what we saw is that we are seeing some stocking changes occurring in throughout the channel. And what we saw is that fewer boxes were shipped out to the wholesalers this quarter than what we saw in prescription demand. So, I think that it's probably a temporary thing that is probably a timing issue that should correct itself throughout the balance of the year.

Salveen Kochnover - Jefferies & Company

Great, and then in terms of XIAFLEX, did the FDA provide you with guidance that 1,000 patients dosed with XIAFLEX is sufficient to meet the safety requirements?

Armando Anido

That is correct, Salveen. They actually, back a couple of years ago when we had a call with them, actually suggested that in order to meet their requirements for the BLA that over a 1,000 patients was the appropriate number that needed to be included in the BLA.

Salveen Kochnover - Jefferies & Company

Okay. And then in terms of the safety profile of XIAFLEX, when we get the top line data in June, in terms of the AE rates associated with the drug, are they going to be disclosed on an injection basis, a joint basis or a per patient basis?

Armando Anido

I think that, as Tony highlighted, there are a number of different endpoints that are being evaluated. And the exact way that we will release the information will really be to balance out what information we need to get to you all while at the same time trying to maintain the balance to get this into a high-quality peer review journal. I don't know, Tony, if you want to add any more to that.

Tony DelConte

I think the team is on schedule to get all the data in, reconciled, analyzed, and when we look at it we'll determine the best way to report it out to strike that balance.

Salveen Kochnover - Jefferies & Company

And would it be reported as of all patients in all the Phase III trials to that time point, or would it just be the CORD I and CORD II studies that we'll get the safety data on?

Armando Anido

We will determine at the time exactly -- if we're just releasing CORD I and CORD II or all of it at that point.

Salveen Kochnover - Jefferies & Company

Okay. And just one last question, could you just maybe comment on how the ex-US XIAFLEX partnership discussions are going, and what you're looking for on terms here?

Armando Anido

I think that we're not going to talk about terms, but I can tell you that there has been a high level of interest from big companies as well as small companies in the European opportunity, and those conversations are ongoing as we speak, really nothing else to comment on at this particular point. We will do our assessment of whether or not a partner is the best option for us or still whether or not we should do it on our own after we finish the discussions.

Salveen Kochnover - Jefferies & Company

Perfect. Thank you, guys.

Armando Anido

Thanks.

Operator

Your next question comes from the line of Marshall Urist, with Morgan Stanley. Please proceed.

Marshall Urist - Morgan Stanley

Yes, hey, guys. Good morning. So, I was wondering if you guys could talk a little bit about the rate-limiting steps to reporting the data. I know you've talked about the last patient visit was like late March, early April. So, what are the boxes that need to be checked from here, and then what's kind of -- in terms of June, what's driving that guidance?

Armando Anido

Tony can answer that.

Tony DelConte

I think as with all clinical trials, there's a data collection period, getting data in house. Then there's a query resolution process, where there's data clarification, which involves going back to the sites, clearing up any discrepancies, and then data gets put onto a database. It involves a lot of programming steps. If you can imagine, there are tens of thousands of pages of data to go in, each one containing up to 30 or 40 different fields. So, then that goes through the programming steps. Programmers come out with listings. We look at that to assess the quality of it. And then there are additional programming steps to get tables, figures and listings. And at that point we get our first look before the analysis. So, quite a few steps, but I can tell you it's all on schedule.

Armando Anido

I think, Marshall, one of the other things is, we overenrolled the trial, so there were a greater number of patients that were enrolled. And unfortunately we are still using a paper-based case report form, which does go to Tony's comment about the tens of thousands of pages that have to be compiled. So, I think that those add to that. But as we have said all along, second quarter is when we would release the data. I think today we're giving you a little bit more clarity that it'll be in June.

Marshall Urist - Morgan Stanley

Okay, great. And then in terms of the cleanup process, has it been sort of what you expected, or has there kind of been more work in terms of going back to the sites than maybe was first anticipated?

Armando Anido

No. I think we actually, as Tony mentioned, we're on track, and we obviously have our own internal goals on what we wanted to do, and everything is moving along as planned in getting the information from all of the sites.

Marshall Urist - Morgan Stanley

Okay, great. And then I know that there you guys have talked about using some of the Horsham material in JOINT I and JOINT II in terms of validating that from a manufacturing perspective. So has that happened yet?

Armando Anido

I can tell you we have started to dose some patients in the trials with Horsham material.

Marshall Urist - Morgan Stanley

Okay, great. And then lastly, on Peyronie's, it sounds like you guys are incrementally more confident that the animal study is going to support going on to Phase -- going on to the Phase IIb study. So, is that just from your interpretation of the path, or is that kind of initial feedback from the FDA?

Armando Anido

Well, I think that it is probably more related to our confidence around the data that we have submitted to the FDA, and I think that we still believe that we're on track to be able to dose the first patient by the end of the quarter. So, I think that we feel reasonably well about it at this point.

Marshall Urist - Morgan Stanley

Okay, great. I'll stop there. Thanks, guys.

Armando Anido

Great, thanks a lot, Marshall.

Operator

Your next question comes from the line of Thomas Wei, with Piper Jaffray. Please proceed.

Thomas Wei - Piper Jaffray

Thanks. I had a couple of questions on the CORD data, one just in relation to all the concerns that people have been arising around the tendon ruptures. Can you just review for us what preclinical data you have on XIAFLEX and tendons, and is there anything hypothetically or specifically that physicians might be able to do in terms of screening patients or treating patients to mitigate whatever tendon rupture risk there would be hypothetically with XIAFLEX?

Armando Anido

Yeah, I mean, I could say these are experienced hand surgeons, who are very knowledgeable about the structures in the hands, including cords, tendons, nerve, arteries, veins. So, we've recruited sites with a high degree of experience. They know, where these structures are. There was training that was done that was done uniformly across the sites with some of the initial experts at Stony Brook, who started the early, early trials. So, it was very uniform. There was careful training done. And these are groups that are very knowledgeable about the anatomy.

Operator

Your next question comes from the line of Greg Fraser, with Merrill Lynch. Please proceed.

Greg Fraser - Merrill Lynch

Thanks. Good morning, guys.

Armando Anido

Good morning, Greg.

Greg Fraser - Merrill Lynch

How is your coupon program for Testim changing this year, if at all?

Roger Graham

Good morning, Greg. Roger Graham. We have made a decision to extend that out. We initially were extending that out to about seven months to assist the patients with their co-payments. And recently we did an analysis on that and decided to extend that out to 12 months. So, now a patient can get assistance for a full year with that coupon program.

Greg Fraser - Merrill Lynch

Okay. And can you quantify the manufacturing fee rebate?

Armando Anido

Yes, Jim can.

Jim Fickenscher

We haven't given anything specifically. Obviously, that's competitive information. But I would say that we feel that they're fairly reasonable for the size company that we are dealing with the three. So, we're not going to get into specific numbers of the fee for service for them.

Roger Graham

No, no, no, it was the manufacturing rebate.

Greg Fraser - Merrill Lynch

The one-time.

Roger Graham

The manufacturing rebate.

Jim Fickenscher

Oh, I'm sorry. I'm sorry. Sorry about that.

Armando Anido

I thought you were asking about rebates to managed care plans.

Jim Fickenscher

Yes, so we have a contract with our contract manufacturer that has different tiers of production, and the more that we buy the more that -- the better the pricing is that we get. And so based on some batch reviews from prior years, we actually realized that we were due in incremental dollars about $300,000 of rebate that we got that really related to last year's production, and so that came through in the first quarter of this year.

Greg Fraser - Merrill Lynch

Okay. That's helpful. And just to follow up on your comment about the high level of interest from partners for Europe, are the companies that you're talking with interested in helping in the US, and are you open to that possibility?

Armando Anido

The discussions with these folks is strictly about the European opportunity, and it's strictly about the two indications, Dupuytren's and Peyronie's disease. So, there is no discussion going on about anything other than that.

Greg Fraser - Merrill Lynch

Okay. And lastly, BioSpecifics conducted an open label study using Collagenase to treat flexor tendon adhesions. Do you know the status of that study, and have you seen any data from it? Thanks.

Armando Anido

No, we haven't seen any data on that at all.

Greg Fraser - Merrill Lynch

Okay. Thank you.

Armando Anido

Great, thanks, Greg.

Operator

Your next question comes from the line of William Ho, with Banc of America Securities. Please proceed.

William Ho - Banc of America Securities

Hey, guys. Thanks for taking my question.

Armando Anido

Hey, Will. How are you?

William Ho - Banc of America Securities

Good. I guess the first question is just with respect to your safety database and the 1,000 patients that you're looking for, now, with the FDA, what are they comparing the safety profile to? Is that versus surgery, or what will satisfy the FDA that this is a safe product?

Armando Anido

I think that the FDA is interested in a significant number of exposures, and the agreement was a greater than 1,000 patient safety profile. I think that the FDA has no real pharmaceutical product to compare it to at this particular point. And our impression would be because of the orphan drug status of this that we would anticipate that they will look at it versus placebo, one, for regulatory approval, but, two, will also take a look at the benefit-risk profile versus what the current option is, which is surgery.

William Ho - Banc of America Securities

Great, and then secondly, just with respect to Peyronie's, can you give us any additional detail as to what that Phase II will look like, how large it'll be and how long, and what the trial design might be?

Armando Anido

I think that what we will do is actually as we announce that we are enrolling our first patient, we will then give a little bit more clarity on what the exact protocol is. That is one of the things that the FDA is reviewing, as well as the protocol for the IIb trial. So, until we have feedback from them on that I don't want to comment yet.

William Ho - Banc of America Securities

Okay, great. And then I guess just going back to XIAFLEX, one final question. As you get closer to commercialization, do you have any additional clarity as to what might be a competitive price?

Roger Graham

I think in the past we've stated that we anticipate that we'll price that'll be comparable to really replacing surgery here in the US. For Dupuytren's that's going to range in the neighborhood of $4,500 to $5,000. Publicly in the past we've stated that -- so we'll price in the range of about $1,500 to $1,600 per injection. Now, that's an initial look. And, as you can well imagine, we'll make that final decision right up at the point of launch. And of course between here and there we'll continue to do a significant amount of work around pricing. Because we believe that there may be some opportunities there to look at not only the cost of surgery, but the additional cost in terms of the cost to the patient, cost to employers, that could be on top of that. So, we'll continue to work on that and do a significant amount of research to assess that going forward and then make that decision as we get closer to launch.

William Ho - Banc of America Securities

Great, thanks for taking my call.

Armando Anido

Great, thanks, Will.

William Ho - Banc of America Securities

Good luck.

Armando Anido

Thanks.

Operator

Your next question comes from the line of Leland Gershell, with Cowen & Company. Please proceed.

Leland Gershell - Cowen & Company

Good morning. Thanks for taking my question. Most of my questions have been asked and answered. My one question is, on the ex-US side, do you have any update on discussions with EU regulatory agencies on what might be required for XIAFLEX in ex-US regions?

Armando Anido

Yes. We continue to have some meetings with EU regulators at this particular point, and have received feedback from numerous countries, continue to get that. At this particular point don't have a firm strategy on what the regulatory process will be there.

Leland Gershell - Cowen & Company

Okay. Would we expect an EU partner then to come in and then for those discussions to finalize, or is there any expectation on kind of timing of when those would be sequenced?

Armando Anido

Yes, I think we're continuing to seek the advice from the countries regardless of whether there's a partner or not, because it's still open to that we may go and do it on our own. So, it really is not timed with that. Obviously, if we do get to a partnership prior to getting all the final advice from the countries, then obviously the partner will also help to shape exactly what the strategy will be.

Leland Gershell - Cowen & Company

Great, thanks a lot for the update.

Armando Anido

Great, thanks, Leland.

Operator

(Operator Instructions). Your next question comes from the line of Lucy Lu, with Citi. Please proceed.

Lucy Lu - Citi

Good morning. Thank you.

Armando Anido

Good morning, Lucy.

Lucy Lu - Citi

Quick question on the XIAFLEX Phase III program, I think you enrolled about 200 patients more than you initially planned. Can you just let us know most of these patients were in the CORD studies or in the JOINT studies? And if in the JOINT studies, is it US or the European study?

Armando Anido

We actually enrolled extra in all of the trials, in CORD I, CORD II, JOINT I and JOINT II. So all of them had greater enrollment than was originally planned and I think it reflects a little bit about the high level of interest from the investigators and from patients.

Lucy Lu - Citi

All right. Thank you.

Armando Anido

Thank you.

Operator

Your next question comes from the line of Matt Renna, with Soleil. Please proceed.

Matt Renna - Soleil

Good morning, guys. A couple of quick questions. I know you guys have a lot on your plate in terms of R&D. But can you maybe give us a sense of at what point you'd look at additional indications that are being developed by BioSpecifics? And then maybe could you remind us of the economics owed to BSTC?

Armando Anido

Yes. I think that one of the other indications we already have is the frozen shoulder syndrome indication. And it is one that we are continuing looking at ways to further develop that particular indication. Cellulite is another one that a lot of people have interest in, intriguing 10-patient data that they've presented previously. It's not one that we actually have the worldwide rights to yet, but based on the contract we have with BSTC, we actually could acquire that indication for $1 million.

Any other indications? Very little information or data at this particular point on any other indications, though we do have -- we have the ability to acquire worldwide rights for any other indication for $500,000. From a -- what their take is on it at the end of the day, they get low double-digit royalty on net sales of the product.

Matt Renna - Soleil

Great and then, just last question for Jim. Can you give us any color on the absolute inventory levels for Testim now, given that there's a little bit of de-stocking? Can we maybe expect that levels are at the low end historical range should scripts track with sales pretty evenly going forward?

Jim Fickenscher

Yes. We don't get real specific. I think what we've said in the past, Matt, is the inventory management agreement that we have with the wholesalers generally targets around a 30-day level of inventory. So, certainly at least with respect to the wholesalers, those inventories bump up and down by a couple of days. Obviously the retail channel can also affect what happens in terms of prescriptions versus what they buy from the wholesalers and the trickle-on effect. So, I wouldn't necessarily say that we're at a low point on inventory. We did see the same phenomenon last year, where the overall channel inventories tend to go down in March after being higher at the end of the year.

But I would say overall what's important to us is seeing a relationship between the scripts and the shipments to the wholesalers. Just to reiterate, we do not provide our wholesalers with any type of incentive at any quarter to take product or not take product. So, from that point of view we just kind of let the chips fall. And the results from time to time end up having higher prescriptions than sales to wholesalers or vice versa.

Matt Renna - Soleil

Great, thanks for taking my questions, guys.

Armando Anido

Great, thanks, Matt.

Operator

(Operator Instructions). You have a follow-up question from the line of Thomas Wei, with Piper Jaffray. Please proceed.

Armando Anido

Right.

Thomas Wei - Piper Jaffray

Sorry, can you hear me?

Armando Anido

Sure.

Thomas Wei - Piper Jaffray

I wanted to ask you just about whether or not you had submitted a placeholder for the hand surgery meeting in September. It looks like the deadline for abstract submission has passed.

Armando Anido

Thomas, we really don't comment on whether or not we actually submit abstracts or not until we actually have an abstract approved or a presentation approved.

Thomas Wei - Piper Jaffray

Okay. Thank you.

Operator

At this time there are no further questions. I would now like to turn the call over to Mr. Armando Anido for closing remarks.

Armando Anido

Great, thank you all very much. Thanks for your high level of interest in Auxilium. And I want to reiterate our wonderful first quarter that we had in the development of XIAFLEX as it continues to move down the path as well as our progress that we're making with Testim. And thanks particularly to all of our employees that continue to deliver day in and day out. Thank you all very much.

Operator

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect, and have a good day.

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Source: Auxilium Pharmaceuticals Inc. Q1 2008 Earnings Call Transcript
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