Salix Q1 Earnings Boosted by Santarus Acquisition - Analyst Blog


Salix Pharmaceuticals, Ltd. ( SLXP ) posted first quarter 2014 earnings of 92 cents per share, far above the Zacks Consensus Estimate of 42 cents and the year-ago earnings of 53 cents per share. Excluding the impact of stock-based compensation expense, the company reported first quarter earnings of $1.05 per share, up 66.7% from the year-ago quarter.

First quarter revenues increased 90% to $384.4 million. Results were positively impacted by the Santarus acquisition.

Quarter in Detail

Xifaxan (rifaximin) posted sales of $114.3 million, down 25% from the year-ago period. Xifaxan 550, which gained FDA approval in Mar 2010 for hepatic encephalopathy, scrips grew 19% from the year-ago period.

Salix reported that Xifaxan 550 sales lagged scrip demand as wholesalers and drug chains focused on securing Santarus' products to establish adequate inventories. The company expects Xifaxan 550 sales to be in line with or surpass scrip demand in the second quarter as inventory levels normalize.

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. Enrollment is scheduled to complete by year's end.

Salix is also looking to develop a delayed release version of rifaximin for Crohn's disease. The phase III program is scheduled to commence in the second quarter.

Salix's purgatives, MoviPrep and OsmoPrep, generated revenues of $7.1 million. Apriso sales were just $14.2 million even though scrips increased 58% during the quarter. Here too sales were affected as wholesalers and drug chains focused on securing Santarus' products to establish adequate inventories.

Favorable market dynamics, including the discontinuation of coverage of two competitive products by a major prescription benefits manager should boost Apriso's sales going forward.Relistor sales were $4.9 million. Deflux sales were $ $5.9 million.

Santarus products like Uceris, Glumetza, Zegerid and Cycloset posted sales of $62.9 million, $130.3 million, $37.6 million and $10.1 million, respectively. 

While research and development expenses increased 74.3% to $52.8 million during the quarter, Salix recorded a 42.6% increase in selling, general and administrative expenses which came in at $108.8 million. The inclusion of additional personnel and marketing costs related to the Santarus acquisition and increased legal expenses led to higher SG&A spend.

Pipeline Update

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 results from the TARGET 3 study due by early July, Salix could gain approval for the IBS indication in the first quarter of 2015.

Meanwhile, an FDA advisory panel will review Salix and Progenics Pharmaceuticals' ( PGNX ) supplemental new drug application (sNDA) for Relistor for opioid-induced constipation (OIC) in patients with chronic pain. The review, which was initially scheduled for Mar 10-11, 2014, was postponed by the FDA and will now be held most likely on Jun 11-12. 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 pain indication.

A response on Ruconest should be out by Jul 16, 2014. Salix is seeking FDA approval for Uceris rectal foam for the treatment of active mild to moderate ulcerative proctitis or proctosigmoiditis - a response should be out by Sep 15, 2014.

2014 Guidance

Salix expects 2014 revenues and earnings of $1.6 billion and $6.33 per share, respectively. The Zacks Consensus Estimate for revenues and earnings is $1.6 billion and $4.61, respectively.

Going by the current annualized run rate, Xifaxan, Uceris, Apriso, Glumetza, Zegerid, Moviprep/Osmoprep, Relistor and other product sales are expected to be about $694 million, $109 million, $152 million, $224 million, $111 million, $109 million, $42 million and $80 million, respectively.

Second quarter 2014 earnings are expected to be about $1.63 per share on product revenues of $395 million.

Salix is a Zacks Rank #3 (Hold) stock. We expect investor focus to remain on the TARGET results and the advisory panel for Relistor. Some better-ranked stocks in the health care sector include Alexion Pharmaceuticals, Inc. ( ALXN ) and Gilead Sciences Inc. ( GILD ). Both are Zacks Rank #1 (Strong Buy) stocks.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: SSD , CRL , ALXN , GILD , PGNX

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