Huge Potential For First Line Therapy For Frozen Shoulder
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Editor's Note: This article has been amended to better describe Auxilium's drugs and pipeline prospects. Motley Fool apologizes for the inaccuracies.
Xiaflex from Auxilium Pharmaceuticals (NASDAQ: AUXL) is used to treat Dupuytren’s contracture. The drug recently increased its revenue potential after announcing a positive outcome for the treatment of Frozen Shoulder Syndrome (FSS), a related disease that affects one in 20 adults worldwide. If approved, Xiaflex will be the only anti-FSS drug in the market.
FSS, or Adhesive Capsulitis, is a painful condition of the shoulder. It happens due to thickening of capsular collagen that affects contraction of shoulder joints. Patients are unable to move their shoulders and experience severe pain. It is estimated that nearly 2-5% of the adult population, especially women, develops FSS. Around 10-20% diabetic patients - 36% in case of insulin dependence - have FSS. The disease can last from one to 3.5 years. It is estimated that approximately 300,000 FSS patients are going through treatment every year.
Xiaflex is already approved by the FDA in the U.S., Europe and Canada to treat adults with Dupuytren’s contracture. It is a disease caused due to thickening and shortening of cords in the hand that lead to bending of one or more fingers toward the palm. This disease has similarities with FSS in the collagen accumulation; one disease is in fact called the other’s cousin. Most people who develop one develop the other disease because of similarities in cellular biochemistry – so it is not surprising that a treatment for one may be used to treat the other.
During the first quarter of 2013, Xiaflex sales were $20.7 million, up 39% compared to $14.9 million last year. The growth was due to significant rise in international sales compensating decreasing sales in the U.S.
Overall, Auxilium reported net revenues of $66.2 million, down by 10% compared to $73.6 million in the same period last year. The decline was due to 23% decrease in total sales of Testim, a treatment for males with low to no testosterone developed by Auxilium, and 5% decline in Xiaflex sales in the U.S. The company reported negative earnings due to high operating expenses resulting from SG&A and R&D expenses. Cash, cash equivalents and short term investments as of March 31, 2013 were $467.8 million, compared to $157.4 million as of December 31, 2012. That is a 3-fold increase.
Xiaflex has completed its Phase III trials for the treatment of Peyronie’s disease, for which it showed positive results, and in Phase I for Cellulite. Auxilium submitted a supplemental Biologics License Application (sBLA) to the U.S. Food and Drug Administration for the treatment of PD, which the FDA accepted on December 27, 2012. Under the Prescription Drug User Fee Act (PDUFA), the FDA is expected to take action on the application by September 6, 2013.
For Dupuytren’s contracture, Auxilium will compete with the Phase II candidate HTI-501 from Halozyme (NASDAQ: HALO). It is also believed that HTI-501 has the potential to treat Cellulite and Peyronie’s disease. Currently, HTI-501 is in Phase I study for Cellulite, a condition which affects more women than men.
In addition to Halozyme, Xiaflex will compete with AndroGel from AbbVie (NYSE: ABBV) and Axiron from Eli Lily for the treatment of Peyronie’s disease. Both AndroGel and Axiron currently compete with Auxillium’s Testim as treatment for adult males who have low or no testosterone. For 2012, Androgel (testosterone gel) and Axiron (testosterone solution) represent 66% and 12.8% of total TRT market respectively.
AndroGel is AbbVie's second highest revenue generator after the blockbuster Humira. In the last couple years, according to the annual report of the company, AndroGel sales increased slightly above 30% year on year, from $649 million in 2010, to $874 million in 2011, to $1.1 billion in 2012. Of all AbbVie's marketed products, AndroGel has shown the highest rate of growth in the last 2 years. However, its growth rate has decreased by 3%, while Humira's at 28% is an increase of 9% this year. AbbVie does continue to forecast full year double digit growth for AndroGel for 2013.
A company spends millions of dollars developing a drug candidate for one disease. If approved and marketed, it then makes, hopefully, many more millions of dollars from that single disease’s market. Getting that same drug approved for another disease is like a freebie. Looking at it from one angle, it is like developing a drug for the second disease without spending too many millions in R&D. From that perspective, and given that there are so many indications for which Xiaflex seems to be a cure-all, I think Auxiliam has a real windfall in the offing here.
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