Salix Pharmaceuticals, Ltd.
) posted second quarter 2013 earnings of 68 cents per share,
above the year-ago earnings of 56 cents. Excluding the impact of
stock-based compensation expense, the company reported second
quarter earnings of 76 cents per share, up 33.3% from the
year-ago quarter but below the Zacks Consensus Estimate of 85
Second quarter revenues increased 30.1% to $235.4 million and
surpassed the Zacks Consensus Estimate of $227 million.
Quarter in Detail
Key product Xifaxan (rifaximin) posted sales of $150.6
million, up 29% from the year-ago period. Growth was driven by
Xifaxan 550 mg, which gained FDA approval in Mar 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 - rifaximin soluble solid dispersion (SSD). A phase II,
double-blind, placebo-controlled, dose-ranging study was
initiated in Jun 2013 for the prevention of complications of
early decompensated liver cirrhosis.
Salix is also looking to develop an extended intestinal
release (EIR) version of rifaximin for Crohn's disease. Patient
enrolment in two phase III studies is expected to commence in the
second half of the year.
Salix's purgatives, MoviPrep and OsmoPrep, generated revenues
of $20.8 million, flat from the year-ago period. Apriso delivered
sales of $39.2 million, up 80% from the year-ago period. Apriso
scrips increased 45% during the quarter.
Salix' 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 48% from the prior-year quarter with sales coming in at
Salix is also promoting Solesta to physicians as an option to
treat fecal incontinence in adult patients who have failed
conservative therapy. Solesta sales were $1.5 million in the
reported quarter. The company launched Fulyzaq during the
quarter. Deflux sales were $5.9 million.
While research and development expenses increased 66.2% to
$45.2 million during the quarter, Salix recorded a 23% increase
in selling, general and administrative expenses which came in at
$80.3 million. The increase in SG&A spend reflected higher
personnel costs and increased marketing expenses related to new
products and higher legal costs.
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 Mar 2011. With the TARGET 3
study commencing in Feb 2012, Salix could gain approval for the
IBS indication in mid-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, an FDA advisory panel will review Salix and
) supplemental new drug application (sNDA) for Relistor for
opioid-induced constipation (OIC) in patients with chronic pain.
The FDA will act within 30 days of receiving an opinion from the
panel. Details regarding the meeting should be available by next
month. Salix and Progenics had received a CRL for their sNDA for
Relistor last year for the chronic, non-cancer pain
Salix is looking to seek FDA approval for budesonide foam for
the treatment of active mild to moderate ulcerative proctitis or
proctosigmoiditis by year end.
Revises 2013 Guidance
Salix changed certain aspects of its guidance for 2013. While
the company expects Apriso sales to be stronger than originally
expected, Fulyzaq and Solesta sales are expected to lag original
expectations. Overall revenue guidance remained unchanged at $920
million. However, the company now expects earnings of $3.20 per
share, below the earlier guidance of $3.37 per share reflecting
lower gross margins and a higher share count. The Zacks Consensus
Estimate is currently $3.42 per share, well above the new
Going by the current annualized run rate, Xifaxan,
Moviprep/Osmoprep, Apriso, Relistor and other product sales are
expected to be about $597 million (old guidance: $572 million),
$93 million (old guidance: $111 million), $128 million (old
guidance: $93 million), $45 million (old guidance: $44 million)
and $49 million (old guidance: $47 million), respectively. The
company expects R&D and SG&A spend of about $137 million
and $267 million, respectively, in 2013.
Third quarter 2013 earnings are expected to be about 84 cents
per share on product revenues of $238 million. The current Zacks
Consensus Estimate is much higher at 92 cents per share.
Salix' second quarter results were mixed with the company
beating on revenues and missing on earnings. While Apriso's
performance was strong, Xifaxan revenues were slightly soft on a
sequential basis. Meanwhile, Solesta's performance is
disappointing - Salix expects sales to pick up in the second half
Salix currently carries a Zacks Rank #5 (Strong Sell). We
expect investor focus to remain on updates on Relistor and data
from TARGET-3 (due later this year/early next year).
Companies that currently look well-positioned include
Questcor Pharmaceuticals, Inc.
). Both are Zacks Rank #1 (Strong Buy) stocks.
PHARMACYCLICS (PCYC): Free Stock Analysis
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QUESTCOR PHARMA (QCOR): Free Stock Analysis
SALIX PHARM-LTD (SLXP): Free Stock Analysis
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