Salix Pharmaceuticals, Ltd.
) posted third quarter 2013 earnings of 80 cents per share, above
the year-ago earnings of 69 cents. Excluding the impact of
stock-based compensation expense, the company reported third
quarter earnings of 89 cents per share, up 15.6% from the
year-ago quarter. Third quarter earnings missed the Zacks
Consensus Estimate of 95 cents.
Third quarter revenues increased 29% to $238.2 million,
in-line with the Zacks Consensus Estimate.
Quarter in Detail
Key product Xifaxan (rifaximin) posted sales of $165.9
million, up 20% from the year-ago period. Growth was driven by
Xifaxan 550 mg, which gained FDA approval in Mar 2010 for hepatic
encephalopathy. Scrips grew 24% from the year-ago period. 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 by
Salix' purgatives, MoviPrep and OsmoPrep, generated revenues
of $19.2 million. Apriso delivered sales of $38.1 million, up 93%
from the year-ago period. Apriso scrips increased 53% during the
Relistor scrips increased 28% from the prior-year quarter with
sales coming in at $4.3 million. Solesta and Deflux sales were
$1.8 million and $6.6 million, respectively.
While research and development expenses increased 16.5% to
$38.2 million during the quarter, Salix recorded a 9.3% increase
in selling, general and administrative expenses which came in at
$67.2 million. The increase in SG&A spend reflected higher
personnel costs 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 the second half of 2014.
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
on Mar 10-11 2014. The FDA will act within 30 days of receiving
an opinion from the panel. Salix and Progenics had received a CRL
for their sNDA for Relistor last year for the chronic, non-cancer
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.
To Acquire Santarus
Apart from announcing third quarter results, Salix announced
its intention to acquire specialty biopharmaceutical company,
). The companies have signed a definitive merger agreement under
which Salix will acquire all the outstanding common stock of
Santarus for $32.00 per share in cash (without interest). This
represents a 36% premium to Santarus' closing price on Nov 6. The
deal, valued at approximately $2.6 billion, is slated to close in
the first quarter of 2014.
This acquisition will expand Salix' product portfolio as well
as pipeline and strengthen its position in the gastrointestinal
market. With the addition of marketed products like Uceris,
Glumetza and Zegerid to its portfolio, Salix' product offering
and revenue base will be diversified.
The Santarus acquisition is expected to be significantly
accretive in 2014. Additional synergies will lead to higher EPS
accretion in 2015.
Salix provided preliminary guidance for 2014 and expects
earnings of $5.00 per share without taking into consideration
revenue synergies, product launches or label expansions. The
Zacks Consensus Estimate for 2014 is currently $4.01 per
Salix maintained its 2013 revenue and earnings guidance at
$920 million and $3.20 per share respectively. The Zacks
Consensus Estimate is currently $3.46 per share, well above the
Going by the current annualized run rate, Xifaxan,
Moviprep/Osmoprep, Apriso, Relistor and other product sales are
expected to be about $630 million (old guidance: $597 million),
$106 million (old guidance: $93 million), $128 million
(unchanged), $46 million (old guidance: $45 million) and $48
million (old guidance: $49 million), respectively.
Fourth quarter 2013 earnings are expected to be about 90 cents
per share on product revenues of $243.8 million. The current
Zacks Consensus Estimate is much higher at $1.06 per share.
Salix currently carries a Zacks Rank #2 (Buy). We expect
investor focus to remain on updates on Relistor, data from
TARGET-3 and the Santarus acquisition. The Santarus acquisition
will not only be accretive, it will also help Salix strengthen
its position in the gastrointestinal market. Shares of both Salix
and Santarus were up in after-hours trading.
Companies that currently look well-positioned include
), a Zacks Rank #1 (Strong Buy) stock.
PROGENICS PHARM (PGNX): Free Stock Analysis
SHIRE PLC-ADR (SHPG): Free Stock Analysis
SALIX PHARM-LTD (SLXP): Free Stock Analysis
SANTARUS INC (SNTS): Free Stock Analysis
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