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Auxilium CEO Goes Against Type, Buying Instead of Selling

Stocks in this article: AUXL

CHESTERBROOK, Penn. ( TheStreet) -- Adrian Adams was named chief executive officer of Auxilium Pharmaceuticals (AUXL) in December 2011 with the reputation as a great salesman. His prior CEO posts at Inspire Pharmaceuticals, Kos Pharmaceuticals and Sepracor had all ended with the companies being bought out for handsome premiums. Naturally, investors speculated Adams would do the same with Auxilium.

Except Adams hasn't sold Auxilium. Instead, the salesman has turned into a buyer. On Monday, Auxilium acquired privately held Actient Holdings, a marketer of urology products, for $585 million in cash plus Auxilium stock contingencies and warrants.

Auxilium shares are down 7% to $14.89 in early Monday trading.

Adams, in a statement, says the Actient deal will expand Auxilium's drug portfolio, accelerates the company's growth and will be immediately accretive to the company's adjusted earnings.

But the timing of the deal also comes as Auxilium's base business is weakening. The company reported net total revenue of $66.2 million in the first quarter, a 10% drop from one year ago. Analysts were expected revenue of $81.23 million the quarter, so reported sales missed expectations by a wide margin.

Both of Auxilium's core products were weak. Sales of Testim, a testosterone replacement therapy for men, fell 23% year over year; sales of Xiaflex, which treats Dupuytren's contracture, dropped 10%.

Auxilium lowered revenue guidance for both Testim and Xiaflex for the remainder of 2013.

With that context, Auxilium acquires Actient Holdings, which sells six products, including a long-acting implantable testosterone therapy and a vacuum pump that helps men achieve erections. Total revenue in 2012 was $125 million, so on the cash basis alone, Auxilium is paying just under five times sales to acquire Actient.

Adding in Actient revenue, Auxilium is now forecasting 2013 revenue in the range of $360 million to $415 million, up from previous guidance of $325 million to $355 million. Auxilium won't say how much the Actient acquisition will add to the bottom line, only that it will be "accretive" to the company's previous 2013 guidance of net income of $18 million to $23 million on a non-GAAP basis.

-- Reported by Adam Feuerstein in Boston.

Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.

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