Why Auxilium Pharmaceuticals Shares Tanked
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Auxilium Pharmaceuticals , a specialty biopharmaceuticals company, shed as much as 13% after the company reported its first-quarter earnings results and announced an acquisition.
So what: For the quarter, Auxilium saw sales of both of its FDA-approved drugs fall in the U.S. Xiaflex, which treats Dupuytren's contracture, saw global sales rise 39% to $20.7 million overall, but total sales in the U.S. dipped 5%. Similarly, testosterone drug Testim delivered a 23% drop in sales to $45.5 million. Auxilium blamed lower sales of Testim on fewer health-care plans that will cover the drug. All told, Auxilium lost an adjusted $0.05 per share compared to expectations from the Street for a $0.03 profit.
If that wasn't enough to digest, Auxilium also announced the purchase of urology products company Actient for $585 million. Auxilium is financing the transaction with cash on hand, and it also initiated a $225 million term loan to finance the purchase.
Now what: Yeah, I'd say that pretty much sums up the day! Both of Auxilium's approved drugs are struggling to secure sales in the U.S., which is where it derives most of its revenue, and the company is spending a good chunk of its cash on hand and taking out debt to purchase a company few investors have heard of previously. That is certainly a good way to introduce uncertainty onto investors' plates and send the stock down 13% on the day.
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