Salix Pharmaceuticals, Ltd. (SLXP) received a huge boost recently with the US approval of Xifaxan 550 mg. The Food and Drug Administration (FDA) granted approval for the use of Xifaxan 550 mg in reducing the risk of the recurrence of overt hepatic encephalopathy (HE) in adult patients.
The approval was in-line with expectations as the drug had received a favorable recommendation from the FDA’s Gastrointestinal Drugs Advisory Committee in Feb 2010.
The additional indication for the drug is a major positive for Salix. Xifaxan is currently the primary growth driver at Salix following the entry of generic versions of Colazal in December 2007. Xifaxan (200 mg) is indicated for the treatment of patients 12 years of age and older with ‘travelers diarrhea’ caused by non-invasive strains of E coli.
The HE indication should have excellent incremental potential. It is estimated that there are about 200,000 patients in the US who suffer from episodic overt HE.
Salix enjoys orphan drug designation for the HE indication which means that Xifaxan 550 mg should enjoy 7 years of marketing exclusivity. Salix estimates that the product may be able to grab $200 million – $300 million of this market. Salix intends to launch the product in May 2010.
In addition to the HE indication, Salix is working on developing Xifaxan for non-constipation irritable bowel syndrome (IBS). We believe that the IBS indication represents significant commercial opportunity for the company. According to Salix, the IBS market is worth about $2.2 billion. The company intends to file for approval of the IBS indication in June 2010.
We currently have a Neutral recommendation on Salix. While we believe the main potential for the company lies in gaining approval for additional indications for Xifaxan, we remain concerned about the possibility of a generic company initiating a patent challenge for Xifaxan.
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