Salix Pharmaceuticals, Ltd. (SLXP) reported a net loss of 45 cents per share in the first quarter of 2010, 6 cents better than the Zacks Consensus Estimate. The company had guided towards a net loss of 50 cents. Salix reported a net loss of 29 cents in the year-ago period. Net loss increased from the year-ago period mainly due to an increase in costs and a slight decline in revenues.
First quarter revenues declined slightly (1.6%) to $44.1 million, mainly due to decreased unit sales of MoviPrep, OsmoPrep, Apriso and Pepcid. This was partially offset by increased unit sales of Xifaxan and price increases. Xifaxan sales increased 23.9% to $29.9 million with prescription demand growing 15% during the quarter. The bowel cleansing franchise, consisting of MoviPrep and OsmoPrep generated revenues of $10.5 million, down 17.1%. OsmoPrep prescriptions declined 38% mainly due to the boxed label warning announced by the FDA in late 2008.
Gross margin was almost flat from the year-ago period at 77.8%. While research and development expenses declined to $20.1 million during the quarter, Salix recorded an increase in selling, general and administrative expenses, which came in at $36.5 million.
2010 Guidance Maintained
Salix maintained its financial guidance for 2010. The company expects to earn 4 cents per share on product revenues of approximately $334 million in 2010. Revenues should be driven by continued growth of currently marketed products, new product launches, and label expansions for Xifaxan. The Zacks Consensus Estimate is in-line with the guidance provided by Salix.
The revenue guidance includes Xifaxan sales in the range of $126 million, bowel cleansing product revenues of approximately $89 million, Apriso revenues of $26 million and other product sales of $35 million.
Salix expects to spend approximately $100 million towards its research and development efforts. The company has plans to submit new drug applications (NDAs) for Xifaxan (for irritable bowel syndrome) and crofelemer (for HIV-associated diarrhea) in 2010. While the Xifaxan NDA filing should take place by June, Salix expects to file the crofelemer NDA by year end.
The company also provided guidance for the second quarter. Salix expects to earn 10 cents on product revenues of $93 million. The guidance includes the impact of the launch of Xifaxan 550 mg which should hit the market later this month.
Salix received approval for the use of Xifaxan 550 mg in March 2010. While product shipment to wholesalers commenced in late April 2010, the product will be launched to physicians in the last week of May. The company’s 96-member Integra sales force and 64-member Futura sales force will promote Xifaxan 550.
We currently have a Neutral recommendation on Salix. We believe the main potential for Salix lies in gaining approval for additional indications for Xifaxan (rifaximin). As such, we were pleased to see the company gain approval for Xifaxan 550 for the hepatic encephalopathy indication.
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