Salix Pharmaceuticals, Ltd.
) posted first quarter earnings of 67 cents per share, well above
the Zacks Consensus Estimate of 54 cents and the year-ago earnings
of 34 cents. First quarter revenues, which increased 61.6% to
$171.1 million, exceeded the Zacks Consensus Estimate of $168
million. Results were above the company's earnings and revenue
guidance of 52 cents and $170 million, respectively.
Quarter in Detail
Salix's first quarter performance was driven by its key product
Xifaxan, which posted sales of $112.9 million, up 40% from the
year-ago period. Prescriptions grew 27% during the quarter. Growth
was driven by Xifaxan 550 mg, which gained US Food and Drug
Administration (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 $22.4 million. Apriso scrips
increased 36% during the quarter with sales coming in at $15.1
Recently launched products like Relistor, Solesta and Deflux
also contributed to revenue growth.
Salix's sales force is promoting Relistor for the treatment of
opioid-induced constipation in patients with advanced illness who
are receiving palliative care, when response to laxative therapy
has not been sufficient to physicians. Relistor sales came in at
about $12.2 million.
Solesta and Deflux were launched in March 2012. While Deflux
sales were $7.4 million, Solesta sales were slightly above
While research and development expenses increased 25.9% to $25.6
million during the quarter, Salix recorded a 27.4% increase in
selling, general and administrative expenses which came in at $55.9
EPS Guidance Revised
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 $2.59 per share (old guidance: $2.45 per
share). Revenue guidance includes Xifaxan sales of about $442
million (up from $371.7 million in 2011), bowel cleansing product
revenues of approximately $104 million, Apriso revenues of $71
million, Relistor US revenues of $28 million and other product
sales of $44 million.
Expenses are expected to increase significantly in 2012. While
the company expects R&D spend of $135 million (up from $104.4
million in 2011), SG&A spend is expected to be $251 million (up
from $187 million in 2011). Salix's SG&A guidance reflects the
company's plans to increase its gastroenterology sales force from
160 reps to 192 reps over the over the next few months. The company
has already expanded its institutional sales force from 25 key
account managers (KAMs) to 40 KAMs.
The expanded sales force will continue focusing on
gastroenterologists, colorectal surgeons and hepatologists. While
half the sales force will promote Xifaxan 550, Relistor and Apriso,
the remainder will promote Solesta, Xifaxan 550, Moviprep/Osmoprep
Both revenue and earnings guidance were above the Zacks
Consensus Estimate of $746 million and $2.40 per share,
Salix expects second quarter earnings of 51 cents per share on
revenues of approximately $180 million. The pre-earnings Zacks
Consensus Revenue and Earnings Estimates were $181 million and 58
cents per share, respectively. The company expects second quarter
expenses to increase.
Salix initiated a re-treatment study, TARGET 3, in Feb. 2012
with Xifaxan 550 mg for the treatment of irritable bowel syndrome
(IBS) with diarrhea. The company had received a Complete Response
Letter (CRL) 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
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
Salix is also facing regulatory delays for two other candidates.
) recently announced a three-month extension of the review period
for the use of Relistor in chronic non-cancer pain patients with
With the FDA extending the review period by three months, a
response on Relistor's label expansion should be out by July 27,
2012. If approved, Salix will most likely launch Relistor for the
new indication in early 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 by September 5, 2012 instead
of June 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 in the third quarter of 2012.
Salix expects to achieve $1 billion in sales in 2013, provided
it gains approval for Relistor for OIC in chronic, non-cancer
Neutral on Salix
We currently have a Neutral recommendation on Salix, which
carries a Zacks #3 Rank (short-term 'Hold' rating).
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