The world of pharmaceutical companies is filled with many
diverse product niches, scientific disciplines, and business
) is a uniquely focused and profit-growing company that specializes
in finding, developing, and marketing high-potential
gastrointestinal disease products.
And the Salix growth story just got a boost recently when analysts
raised estimates and price targets after the company reported solid
first quarter results and reiterated its guidance of $920 million
in revenues and non-GAAP EPS of $3.37 for 2013.
Digest These Gains
Below is a look at the price breakout to new all-time highs above
$56 after their May 9 report. As analysts reacted, the stock became
a Zacks #2 Rank (Buy) on May 14 and then a Zacks #1 Rank (Strong
Buy) on May 15 before it powered through $60 and hit new highs last
Friday at $62.10.
A Stomach for Fast Growth
Salix's strategy is to in-license late-stage or marketed
proprietary therapeutic drugs, complete any required development
and regulatory submission of these products, and market them
through the company's gastroenterology specialty sales and
Their flagship prescription drug Xifaxan brought in $153 million in
sales vs. total revenues of $202 million for the quarter. While a
handful of other gastrointestinal treatments are considered stable
revenue sources, Xifaxan is seen as having strong double-digit
growth for several years.
Given another quarter of gross profit margins solidly above 80%,
it's no wonder analysts are raising price targets and revenue
projections as you can see in this unique table from Zacks
Also worth noting is the heavy institutional participation in SLXP.
In Q1, big money was a net buyer of shares, with 115 funds adding
or initiating positions in aggregate of 7.8 million shares. I track
this "whale" component of the market for my Follow The Money
The Biopharma Opportunity
Two weeks ago, I wrote a special report for Zacks Confidential
members where I profiled the diverse opportunities in biotech
investing and explained why I told investors in late January to
"buy biotech now."
It was the best performing sub-industry of the best performing
sector, Healthcare, for those four months.
With over 250 companies in the Zacks universe that fall under the
"biopharma" umbrella, there's always a handful that end up with a
high Zacks Rank. But this year, the two industries that hold these
stocks have been on fire as analysts keep raising estimates for
lots of biopharma companies.
Be sure to look at all the highly-ranked names in these two
Biotech and pharmaceutical investing have their own unique risks
with the ever-present FDA gauntlet. But if you can follow the trail
of rising earnings estimates and spread your bets among a few solid
companies, you can beat the market by a healthy margin.
Kevin Cook is a Senior Stock Strategist with
where he runs the Market Timer and Follow The Money
ISHARES NDQ BIO (IBB): ETF Research Reports
SALIX PHARM-LTD (SLXP): Free Stock Analysis
SPDR-HLTH CR (XLV): ETF Research Reports
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