Salix Pharmaceuticals, Ltd.
) posted second quarter earnings of 79 cents per share, well above
the Zacks Consensus Estimate of 47 cents and the year-ago earnings
of 54 cents. Second quarter revenues, which increased 35.9% to
$181.0 million, was just shy of the Zacks Consensus Estimate of
$182.0 million. Results were above the company's earnings and
revenue guidance of 51 cents per share and $180 million,
Quarter in Detail
Salix's second quarter performance was driven by its key product
Xifaxan, which posted sales of $116.7 million, up 34% from the
year-ago period. Prescriptions grew 22% during the quarter. Growth
was driven by Xifaxan 550 mg, which gained FDA approval in March
2010 for hepatic encephalopathy. Strong formulary coverage and
encouraging data should help drive Xifaxan 550 sales further.
Salix is working on the development of a next generation
rifaximin. The company is working on moving its next generation
rifaximin candidate(s) into clinical studies by year end.
Salix's bowel cleansing franchise, consisting of MoviPrep and
OsmoPrep, generated revenues of $20.9 million. Apriso scrips
increased 27% during the quarter with sales coming in at $21.8
million, up 45% from the year-ago period.
Recently launched products like Relistor, Solesta and Deflux
contributed $19.2 million to second quarter 2012 revenue.
Salix's sales force is promoting Relistor for the treatment of
opioid-induced constipation (OIC) in patients with advanced illness
who are receiving palliative care, when response to laxative
therapy has not been sufficient. Relistor scrips increased 89% from
the prior-year quarter. Relistor sales came in at about $10.8
Solesta and Deflux were launched in March 2012. While Deflux
sales were $7.9 million, Solesta sales were slightly above $0.5
While research and development expenses declined 4.3% to $25.8
million during the quarter, Salix recorded a 47.9% increase in
selling, general and administrative expenses which came in at $59.7
million. The increase in SG&A spend reflected higher personnel
costs related to the company's institutional sales force and
office-based sales force expansions and increased marketing
expenses related to Relistor and Solesta.
Salix is conducting a re-treatment study, TARGET 3, with Xifaxan
550 mg for the treatment of irritable bowel syndrome (IBS) with
diarrhea. The company had received a Complete Response Letter (CRL)
from the US Food and Drug Administration (FDA) for its supplemental
New Drug Application (sNDA) for Xifaxan 550 in March 2011. With the
TARGET 3 study commencing in Feb 2012, it could take 2 years for
Salix to gain approval for the IBS indication.
The delay in Xifaxan 550 mg's approval for the IBS diarrhea
indication is disappointing for Salix. Xifaxan is the company's
primary growth driver.
The timely approval of Xifaxan 550 mg for the IBS diarrhea
indication would have been a major boost for the company -- the IBS
diarrhea indication represents significant commercial
) faced a setback recently when the FDA issued a CRL for their sNDA
for Relistor. Salix was looking to gain approval for the
subcutaneous use of Relistor for the treatment of OIC in adult
patients with chronic, non-cancer pain. The FDA has asked the
company to provide additional clinical data. Salix is seeking an
End-of-Review meeting with the Division of Gastroenterology and
Inborn Errors Products in order to get a better understanding of
Meanwhile, a response on the NDA for crofelemer (control and
symptomatic relief of diarrhea in HIV/AIDS patients on
anti-retroviral therapy) should be out by September 5, 2012.
Salix has plans to bring an oral formulation of Relistor to
market. The company presented positive phase III data and expects
to file for FDA approval by September 2012.
EPS Guidance Up
Salix updated its financial guidance for 2012 to reflect the
impact of the CRL for Relistor's label expansion, the effect of the
March 16, 2012 placement of $690 million of convertible senior
notes and other adjustments. Salix' previous guidance had included
revenues as well as costs associated with the potential launch of
Relistor for an additional indication.
While Salix continues to expect product revenue of $735 million
in 2012, representing year-over-year growth of 36%, earnings are
now expected to come in at $2.86 per share (old guidance: $2.59 per
share). Revenue guidance includes Xifaxan sales of about $468
million, bowel cleansing product revenues of approximately $94
million, Apriso revenues of $73 million, Relistor US revenues of
$25 million and other product sales of $41 million.
The company cut its R&D and SG&A guidance for 2012.
While Salix expects R&D spend of $129 million (down from
previous guidance of $135 million), SG&A spend is expected to
be $236 million (down from previous guidance of $251 million).
Salix expects R&D spend to ramp up in the third quarter.
SG&A spend is expected to remain flat on a sequential
While revenue guidance was below the pre-earnings Zacks
Consensus Estimate of $748 million, earnings guidance was well
above the pre-earnings Zacks Consensus Estimate of $2.56 per
Salix expects third quarter earnings of 69 cents per share on
revenues of approximately $185 million. The Zacks Consensus
Estimate of 62 cents for the third quarter of 2012 is below the
We expect investor focus to remain on the outcome of the
company's End-of-Review meeting regarding the Relistor CRL.
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