Auxilium Pharmaceuticals Inc reported a big drop in quarterly sales in the United States for both of its drugs, and said it acquired Actient Holdings LLC to bolster its urology business.
Shares of Auxilium closed regular trading on Monday down 12.7 percent at $14, after falling as much as 13.5 percent to $13.87, a year-and-a-half low.
Revenue fell 10 percent in the first quarter to $66.2 million, below analysts' average estimate of $81.2 million, according to Thomson Reuters I/B/E/S.
Sales of Auxilium's testosterone gel, Testim, almost all of which come from the United States, fell 23 percent to $45.5 million.
Chief Executive Adrian Adams blamed the slide on slowing growth of the testosterone replacement market, competition and reduced coverage of the drug by managed care plans.
In the first quarter, 71 percent of patients had access to Testim under their managed care plans, down from 83 percent in the fourth quarter
Endo Pharmaceuticals Inc's Fortesta, which won some big managed care contracts, could have affected Testim sales by competitive pricing, Stifel Nicolaus analyst Annabel Samimy said.
"It seems like the competitive environment is overwhelming them. They were going to depend on market growth to maintain their sales level."
U.S. sales of Auxilium's Xiaflex, a drug that treats thickening of the fibrous tissue layer underneath the skin of the palm and fingers, fell 5 percent to $12 million. When international sales are included, however, drug's total sales, grew 39 percent.
Auxilium, based in Chesterbrook, Pennsylvania, cut its forecast range for 2013 global Testim sales to $210 million to $240 million from $250 million to $265 million.
The company reduced its U.S. sales forecast for Xiaflex — also being developed as a treatment for Peyronie's disease, a curvature of the penis caused by scar tissue — by $10 million to between $65 million and $80 million.
Separately, Auxilium announced the acquisition of Lake Forest, Illinois-based Actient from private equity firm GTCR for $585 million plus contingent payments.
"You've got a deal that was done on the same day as they reported unfortunate performance for their base products, so it calls into question the urgency of the deal," Samimy said.
"It feels a bit like a defensive move for Auxilium."
Actient's testosterone replacement therapies, Testopel and Striant, and erectile dysfunction products such as Edex complement Auxilium's drugs.
The combined company will sell 11 products for urology, orthopedic and respiratory ailments.
"With a broader portfolio we will have a more diverse revenue stream, reducing our reliance on any single product," CEO Adams said.
Auxilium had been in talks with Actient for the past several months and was one of several companies interested in buying Actient, according to people familiar with the situation who wished to remain anonymous because they are not allowed to speak to the media.
Auxilium expects the deal to contribute $85 million to $95 million to 2013 revenue and immediately add to adjusted net income. It now expects 2013 revenue of $360 million to $415 million, up from $325 million to $355 million forecast earlier.
The company said it would fund the deal with cash on hand and a $225 million loan from Morgan Stanley Senior Funding Inc.
Morgan Stanley and Centerview Partners advised Auxilium on the deal and Jefferies LLC advised Actient. The legal advisers to Auxilium were Willkie Farr & Gallagher and Morgan, Lewis & Bockius LLP. Kirkland & Ellis LLP and Hogan Lovells US LLP provided legal advice to Actient.
Auxilium recorded a net loss of $8.2 million, or 17 cents per share, in the first quarter, compared with a loss of $1.7 million, or 4 cents per share, a year earlier.
(Reporting By Vrinda Manocha in Bangalore; Additional reporting by Jessica Toonkel in New York)