Salix Pharmaceuticals, Ltd. (SLXP)
Q3 2008 Earnings Call Transcript
November 5, 2008, 5:00 pm ET
Michael Freeman – Associate VP, IR and Corporate Communications
Carolyn Logan – President and CEO
Adam Derbyshire – SVP, Finance & Administration, and CFO
Bert Hazlett – BMO Capital Markets
Michael Tong – Wachovia Capital
Scott Hirsch – Credit Suisse
Previous Statements by SLXP
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Thank you. Good afternoon. Thank you for joining us today. I am Mike Freeman, Associate Vice President of Investor Relations and Corporate Communications for Salix Pharmaceuticals. With me today are Carolyn Logan, our President and Chief Executive Officer, and Adam Derbyshire, our Senior Vice President and Chief Financial Officer.
Adam will begin the presentation with a review of the financial results for the third quarter of 2008. Carolyn then will review operations to complete the foremost segment of today's call. At the conclusion of these comments, management will respond to appropriate questions.
Various remarks that management might make during this conference call about future expectations, plans, and prospects for the company constitute forward-looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995.
Actual results might differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in our press releases and SEC filings, including our Form 10-K for 2007. Specifically, the information in this conference call related to projections, development plans, and other forward-looking statements is subject to this Safe Harbor.
I now will turn the call over to Adam Derbyshire, our Chief Financial Officer.
Thank you, Mike. Total product revenue was $42.9 million for the third quarter of 2008 compared to $67.4 million for the third quarter of 2007. Total product revenue for the first nine months of 2008 was $118.2 million compared to $193.8 million for the first nine months of 2007. The decrease in total product revenue for the quarter and nine months was due to the genericization of COLAZAL on December 28, 2007.
XIFAXAN revenue for the third quarter of 2008 was $21.4 million, a 33% increase compared to the third quarter of 2007. XIFAXAN revenue for the first nine months of 2008 was $56.1 million compared to $47.3 million for the first nine months of 2007, an increase of 19%.
MOVIPREP, OSMOPREP and VISICOL, which comprise our bowel cleansing product line, generated revenue of $15.5 million for the third quarter of 2008, compared to $12.1 million for the third quarter of 2007, a 28% increase. Total product revenue for our bowel cleansing product line was $41.5 million for the first nine months of 2008 and $34.6 million for the first nine months of 2007, a 20% increase.
Total cost of products sold was $7.8 million for the third quarter and $22.1 million for the first nine months of 2008. Gross margin on total product revenue was 81.9% for the third quarter of 2008 compared to 80.6% for the third quarter of 2007 and 81.3% for the first nine months of 2008, compared to 80.3% for the first nine months of 2007.
Research and development expenses were $14.4 million for the third quarter of 2008 and $55.7 million for the first nine months of 2008, compared to $16 million and $56.8 million, respectively, for the prior year periods.
Selling, general, and administrative expenses were $23.4 million for the third quarter of 2008, compared to $20.9 million for the third quarter of 2007, and these expenses were $67.6 million and $64.1 million for the first nine months of 2008 and 2007, respectively. The company reported a net loss of $5.4 million, or $0.11 per share, fully diluted, for the third quarter of 2008. Cash and cash equivalents were $121.9 million on September 30, 2008.
Combined product revenue from XIFAXAN and our bowel cleansing products achieved a year-over-year growth of 31% for the third quarter of 2008. We continue to believe several factors should contribute to an increase in product revenue over the coming years, namely the continued growth of our currently marketed products, the launch of new products currently undergoing FDA review, the expanded contribution of rifaximin, if additional indications are approved and the further expansion of our product portfolio via development activities, licensing, and acquisitions.
In August, the company closed on a $60 million convertible note offering. This funding should facilitate our ability to finance development and licensing activities and acquisitions in a timely fashion.
We believe total company product revenue for 2008 will be approximately $178 million to $180 million, including the revenue associated with the initial stocking of APRISO. The current annualized run rates based on dollarizing the latest prescription data for XIFAXAN, our bowel cleansing product line, and other products are approximately $84 million, $67 million, and $31 million, respectively.
With a third quarter loss of $0.11, we anticipate generating a loss of approximately $0.90 per share, fully diluted, for the year ending December 31, 2008 compared to our previous guidance of a loss of approximately $1.02 for the year. This improvement in guidance for 2008 reflects a change in research and development expenditures for the year. Even though enrollment in our two Phase III IBS trials is progressing ahead of goal, research and development expense for the year will be approximately $8 million less than previous guidance, primarily due to the timing of certain smaller supportive studies and the elimination of other smaller studies related to rifaximin and the timing of the initiation of studies related to budesonide foam.