We recently downgraded Salix Pharmaceuticals, Ltd. (SLXP) to Neutral from Outperform.
Salix faced a setback in late July 2012 when the US Food and Drug Administration (FDA) issued a complete response letter (CRL) for the company’s supplemental new drug application (sNDA) for the use of Relistor in chronic non-cancer pain patients with opioid-induced constipation.
Salix has requested an End-of Review meeting with the FDA.
Relistor, a subcutaneous injection, is currently approved for the treatment of opioid-induced constipation in patients with advanced illness who are receiving palliative care, when response to laxative therapy has not been sufficient. Salix is looking to drive Relistor sales through label expansions and focused promotion efforts.
Salix has plans to bring an oral formulation of Relistor to market. The company presented impressive phase III data from a study conducted in patients with chronic, non-cancer pain and expects to file for approval in the third quarter of 2012.
Meanwhile, Salix’s key growth driver, Xifaxan, continues to perform well and should keep driving growth. The company is working on expanding Xifaxan 550 mg’s label for non-constipation irritable bowel syndrome with diarrhea (IBS-D). However, here too, Salix is facing a significant delay as the company received a CRL from the FDA for this indication in 2011. The IBS-D indication represents significant commercial potential and the delay in gaining approval for this indication is a big disappointment.
In keeping with the requirements of the FDA, Salix is conducting a phase III study (TARGET 3) with Xifaxan 550 for the IBS-D indication. With the study expected to be conducted over a two-year period, approval for the IBS-D indication is not likely to come before late 2014/early 2015. We expect investor focus to remain on development updates for the IBS-D indication.
We remain encouraged by Salix’s efforts to expand its product portfolio through acquisitions and the in-licensing of candidates in late stage clinical development. We believe Salix will continue seeking suitable in-licensing opportunities in order to grow revenues.
While pleased with the company’s second quarter 2012 performance, we were disappointed to see the FDA issue a CRL for Salix’s sNDA for Relistor. We currently have low visibility on the FDA’s requirements for this candidate and prefer to remain on the sidelines until the company’s meeting with the FDA regarding the CRL. Salix carries a Zacks #3 Rank (short-term ‘Hold’ rating).
SALIX PHARM-LTD (SLXP): Free Stock Analysis Report
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