SLXP

Salix Pharmaceuticals, Ltd. (SLXP)

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Exchange: NASDAQ
Industry: Health Care
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Salix Pharmaceuticals Ltd. (SLXP)

Q2 2008 Earnings Call

August 04, 2008 5:00 pm ET

Executives

Michael Freeman - Associate VP of IR and Corporate Communications

Carolyn Logan - President and CEO

Adam Derbyshire - SVP and CFO

Analysts

Scott Hirsch - Credit Suisse

Michael Tong - Wachovia

Presentation

Operator

Good day, everyone and welcome to Salix Pharmaceuticals second quarter 2008 earnings release conference call. Today's conference is being recorded.

At this time, I will turn the conference over to Mr. Michael Freeman, Associate Vice President of Investor Relations and Corporate Communications. Mr. Freeman, please go ahead.

Michael Freeman

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 review of the financial results for the first 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 and plans for the company constitute forwarding-looking statements for purposes of 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.

Adam Derbyshire

Mike, thank you. Total product revenue was $41.1 million for the second quarter of 2008 compared to $66.7 million for the second quarter of 2007. Total product revenue for the first six months of 2008 was $75.3 million compared to $126.5 million for the first six months of 2007. The decrease in total product revenue for the quarter and six months was due to the genericization of COLAZAL on December 28, 2007.

XIFAXAN revenue for the second quarter of 2008 was $18 million, a 14% increase compared to the second quarter of 2007. XIFAXAN revenue for the first half of 2008 was $34.8 million compared to $31.2 million for the first half of 2007.

MOVIPREP, OSMOPREP and VISICOL, which comprise our bowel cleansing product line, generated revenue of $15.7 million for the second quarter of 2008, compared to $11.4 million for the second quarter of 2007. Total product revenue for our bowel cleansing product line was $26 million for the first half of 2008 and $22.4 million for the first half of 2007.

Total cost of products sold was $7.1 million for the second quarter and $14.4 million for the first six months of 2008. Gross margin on total product revenue was 82.7% for the second quarter of 2008 compared to 80.4% for the second quarter of 2007 and 80.9% for the first six month of 2008, compared to 80.2% for the first six months of 2007.

Research and development expenses were $15.4 million for the second quarter of 2008 and $41.3 million for the first six months of 2008, compared to $19 million and $40.8 million, respectively, for the prior year periods.

Selling, general, and administrative expenses were $23 million for the second quarter of 2008, compared to $21.8 million for the second quarter of 2007, and these expenses were $44.1 million and $43.2 million for the first six months of 2008 and 2007, respectively. The company reported a net loss of $7.1 million, or $0.15 per share, fully diluted, for the second quarter of 2008. Cash and cash equivalents were $90.9 million on June 30, 2008.

Combined product revenue from XIFAXAN, our bowel cleansing products and other products achieved year-over-year growth of 16% for the second 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 commercialization of 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 and acquisitions.

For the third quarter of 2008, based upon information currently available, we expect to generate product revenue of approximately $43 million and report a loss of approximately $0.30 per share, fully diluted. We continue to believe total company product revenue for 2008 will be approximately $180 million, assuming the approval and launch of granulated mesalamine during 2008. The current annualized run rates, based on dollarizing the latest prescription data, for XIFAXAN, our bowel cleansing product line and other products are approximately $73 million, $64 million, and $28 million, respectively.

With a second quarter loss of $0.15, we anticipate generating a loss of approximately $1.02 per share, fully diluted, for the year ending December 31, 2008 compared to our previous guidance of a loss of approximately $1.12 for the year. This improvement in loss per share guidance for 2008 reflects a change in the timing of approximately $5 million in operating expenses, primarily associated with the launch of balsalazide tablet, previously anticipated for 2008 and now anticipated for early 2009.

Read the rest of this transcript for free on seekingalpha.com