Auxilium's Low-T woes put sales reps in line for layoffs

Auxilium CEO Adrian Adams

Maybe it's a cautionary tale about over-reaching in the pharma business. Or maybe it's just a sign that sales folks remain at the top of the list when drugmakers cut jobs. Thanks to plummeting sales of its testosterone gel Testim, Auxilium ($AUXL) is hacking 30% of its workforce, or about 190 jobs, including a big chunk of its sales organization.

The company plans to "strategically consolidate" its three sales forces into two groups, Auxilium said in a statement. The idea is to beef up its support for urology drugs--including the newly launched Stendra for erectile dysfunction and its Xiaflex injection for penile curvature. It also wants to maintain the sales group focused on selling Xiaflex for its other indication in Dupuytren's contracture, a hand deformity caused by thickening of tissues beneath the skin.

Apparently, the reps focused on Testim are among those in the target zone, though we couldn't confirm that. A company spokeswoman told FierceBiotech that Auxilium isn't saying which individual departments will be hit. But CEO Adrian Adams blamed the restructuring on "significant challenges," but the only one he cited was "a dramatic decline in the testosterone therapy market."

If you've been following the news on "Low T," you know why: Testosterone replacement therapies face new questions about cardiovascular safety. Meanwhile, market-watchers have said they're being used not only by men with clinically low testosterone levels, but also by those who simply want a lifestyle boost. And drugmakers have been accused of tailoring their marketing pitches to appeal to the low-energy, low-libido--but not clinically Low T--group of men, fueling big increases in sales.

Now, sales are on the downswing, and the entire testosterone market is suffering, with Testim being far from the only drug to suffer. But because Auxilium is far smaller than the Big Pharma companies that sell Low-T treatments, the loss of sales is having a disproportionate effect on the company. "We are making difficult but necessary changes ... to strengthen our balance sheet, reinforce our competitive position and, we believe, drive shareholder value," Adams said in the statement.

Auxilium may not be offering much detail, but big decisions have been made already, because the company says most of the layoffs will be immediate. Besides the sales restructuring, the company plans to "focus its R&D efforts and expenditures," which hints at cuts there. Among the lucky programs: Developing Xiaflex as a treatment for cellulite. The company announced positive data from a phase IIa study last month. And it's looking to improve manufacturing efficiency, which could mean cuts in that area. The total savings are targeted at $75 million a year.

Meanwhile, Auxilium is moving forward with a tax-friendly merger with the Canadian biotech QLT. The company agreed in June to pay $345 million for the company, planning to use some of its tax savings to invest in R&D and buyouts.

- read the Auxilium release