Salix Pharmaceuticals, Ltd.
) posted third quarter earnings of 95 cents per share, well above
the Zacks Consensus Estimate of 64 cents, the year-ago earnings
of 77 cents and the company's earnings guidance of 69 cents per
share. Third quarter revenues increased 27% to $185 million,
missing the Zacks Consensus Estimate of $188 million, but in line
with the company's guidance.
Quarter in Detail
Salix's third quarter performance was driven by its key
product Xifaxan (rifaximin), which posted sales of $137.9
million, up 43% from the year-ago period. Prescriptions grew 20%
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 in the first half of
Salix's bowel cleansing franchise, consisting of MoviPrep and
OsmoPrep, generated revenues of $13.3 million. Apriso scrips
increased 24% during the quarter with sales coming in at $19.7
million, up 31% from the year-ago period.
Recently launched products like Relistor, Solesta and Deflux
contributed $12.1 million to third 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 $4.9 million.
Solesta and Deflux were launched in March 2012. While Deflux
sales were $7 million, Solesta sales were about $0.6 million.
While research and development expenses increased 40.8% to
$31.4 million during the quarter, Salix recorded a 49.3% increase
in selling, general and administrative expenses which came in at
$55.7 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 Xifaxan 550 and Solesta. R&D
expenses increased due to the company's investment in the phase
III retreatment study of Xifaxan 550 for irritable bowel syndrome
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 FDA for its supplemental New Drug
Application (sNDA) for Xifaxan 550 in March 2011. With the TARGET
3 study commencing in February 2012, Salix could gain approval
for the IBS indication in the first half of 2014.
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
Meanwhile, there continues to be uncertainty regarding the
path forward for the subcutaneous use of Relistor for the
treatment of OIC in adult patients with chronic, non-cancer pain.
) had received a CRL for their sNDA for Relistor earlier this
year for the chronic, non-cancer pain indication. Salix had an
end of review meeting in October in order to gain a better
understanding of the CRL. Given concerns regarding a risk
associated with the chronic use of new opioid antagonists in
patients taking opioids for chronic pain, the company may be
required to conduct a very large, well-controlled chronic
According to Salix, currently available post-marketing,
clinical and preclinical data could be enough to gain approval.
We expect to hear more on the path forward in 2013.
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 in the first quarter of
EPS Guidance Up
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 $3.13 per share (old
guidance: $2.86 per share). Revenue guidance includes Xifaxan
sales of about $495 million, bowel cleansing product revenues of
approximately $108 million, Apriso revenues of $87 million,
Relistor US revenues of $32 million and other product sales of
Salix expects third quarter earnings of 72 cents per share on
revenues of approximately $198 million.
Neutral on Salix
We currently have a Neutral recommendation on Salix, which
carries a Zacks #3 Rank (short-term 'Hold' rating). Xifaxan
continues to perform well and should keep driving growth. We
believe Salix will continue seeking suitable in-licensing
opportunities in order to grow revenues. However, we still have
low visibility on the path forward for Relistor's label
expansion. We expect investor focus to remain on the company's
plans for Relistor.
PROGENICS PHARM (PGNX): Free Stock Analysis
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