Salix Pharmaceuticals, Ltd.
) posted fourth-quarter earnings of 71 cents per share, missing
the Zacks Consensus Estimate of 80 cents and well below the
year-ago earnings of $1.18. Fourth-quarter revenues, however,
increased 27.7% to $198.2 million. Revenues were just shy of the
Zacks Consensus Estimate of $200 million.
Salix reported full year earnings of $2.80 per share, down
0.7% from the year-ago period and well below the Zacks Consensus
Estimate of $2.91 per share. Revenues increased 36.1% to $735.4
million, just below the Zacks Consensus Estimate of $736
Quarter in Detail
Key product Xifaxan (rifaximin) posted sales of $147 million,
up 37% from the year-ago period. Prescriptions grew 25% during
the quarter. 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. The company is working on moving its next generation
rifaximin candidate into clinical studies in the first half of
Salix's bowel cleansing franchise, consisting of MoviPrep and
OsmoPrep, generated revenues of $8.4 million. Apriso scrips
increased 28% during the quarter with sales coming in at $13.7
million, up 24% from the year-ago period.
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 90% from the prior-year quarter.
While research and development expenses increased 91.6% to
$36.6 million during the quarter, Salix recorded a 30.8% increase
in selling, general and administrative expenses which came in at
$70.9 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, Relista and Solesta as
well as pre-marketing expenses for Fulyzaq and Giazo. R&D
expenses increased due to the company's investment in the phase
III retreatment study of Xifaxan 550 for irritable bowel syndrome
with diarrhea and higher personnel 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 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 last 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 administration trial.
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.
Provides 2013 Guidance
Salix expects to earn $3.37 per share on product revenues of
$920 million in 2013. Revenue guidance includes Xifaxan sales of
about $555 million, Moviprep/Osmoprep revenues of approximately
$117 million, Apriso revenues of $92 million, Relistor revenues
of $45 million and other product sales of $40 million. The Zacks
Consensus Estimate for earnings and revenues currently stands at
$3.17 per share and $922 million, respectively.
Salix currently carries a Zacks Rank #2 (Buy). We expect
Xifaxan to continue performing well in 2013. Meanwhile, investor
focus will remain on the TARGET 3 study and the development path
for Relistor for the chronic, non-cancer pain indication.
) look more attractive with both carrying a Zacks Rank #1 (Strong
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