In line with expectations, Salix Pharmaceuticals, Ltd. (SLXP) received a Complete Response Letter (CRL) from the US Food and Drug Administration (FDA) for Xifaxan (rifaximin) 550 mg. Salix had submitted a supplemental New Drug Application (sNDA) for Xifaxan 550 mg for the treatment of non-constipation irritable bowel syndrome (non-C IBS) and IBS-related bloating.

Salix said that the FDA has asked for re-treatment information. The CRL doesn’t come as a surprise as in late February, Salix had announced that the FDA had communicated its intention to issue a CRL.

Potential Delay in Approval Disappointing

The delay in Xifaxan 550 mg’s approval for the IBS indication is disappointing for Salix. Xifaxan has become the company’s primary growth driver following the introduction of generic versions of Colazal in December 2007 by several players, including Mylan Inc. (MYL).

The timely approval of Xifaxan 550 mg for the IBS indication would have been a major boost for the company — the IBS indication represents significant commercial opportunity.

Salix has been working on new indications of Xifaxan to help drive long-term growth. Xifaxan 550 mg was launched in 2010 for the reduction of the risk of the recurrence of overt hepatic encephalopathy (HE) in adult patients. The HE indication should have excellent incremental potential.

Salix enjoys orphan drug designation for the HE indication, which means that Xifaxan 550 mg should enjoy 7 years of marketing exclusivity. The company estimates that the product may be able to grab $200 million – $300 million of this market.

Low Visibility on Path Forward

With the company only mentioning the FDA’s requirement for re-treatment information, we currently have low visibility on the candidate’s future development and regulatory path. Salix intends to request a meeting with the agency following which it will fix future development plans for the candidate.

Depending on the FDA’s requirements, the approval of Xifaxan 550 mg for the IBS indication could be pushed out by more than a year. We expect to gain more visibility in May.

Neutral on Salix

We currently have a Neutral recommendation on Salix, which is supported by a Zacks #3 Rank (short-term Hold rating). We expect investor focus to remain on the regulatory path for Xifaxan 550 mg.

 
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