Salix Pharma Q2 Results Miss Estimates; Trims 2014 Earnings Outlook

(RTTNews) - Pharmaceutical products and medical devices company Salix Pharmaceuticals, Ltd. (SLXP) reported Thursday a profit for the second quarter that plunged from last year, hurt by Santarus transaction costs as well as amortization and interest expenses.

Both adjusted earnings per share and quarterly revenues missed analysts' expectations. The company also provided earnings and revenue guidance for the third quarter, below Street view, and trimmed earnings forecast for the full-year 2014, while maintaining annual revenue outlook.

"Demand for key products remained robust in the second quarter with prescriptions for XIFAXAN 550, APRISO and UCERIS achieving strong year-over-year growth and accelerating trends quarter over quarter in 2014. The impact of this quarter's strong prescription growth was partially offset by adjustments in the supply chain as wholesalers managed inventory levels following the acquisition of the Santarus products," President and CEO Carolyn Logan said in a statement.

Raleigh, North Carolina-based Salix reported net income of $3.28 million or $0.04 per share for the second quarter, lower than $21.00 million or $0.32 per share in the prior-year quarter.

Results for the latest quarter include $8.2 million of transaction costs related to the acquisition of Santarus, which was completed on January 2, 2014, and the pending merger with Cosmo Technologies Ltd., agreed upon on July 8, 2014. It also includes amortization of $54.9 million and interest expense of $42.4 million.

Excluding items, adjusted net income was $120.0 million or $1.59 per share, compared to $49.6 million or $0.76 per share in the year-ago quarter.

On average, 18 analysts polled by Thomson Reuters expected the company to report earnings of $1.72 per share for the quarter. Analysts' estimates typically exclude one-time items.

Net product revenue surged 61 percent $382.00 million from $235.44 million in the same quarter last year, primarily driven by the Santarus acquisition, but missed seventeen Wall Street analysts' consensus estimate of $399.69 million.

Revenues primarily include Xifaxan sales of $140.5 million, Uceris sales of $42.5 million, Glumetza sales of $102.7 million, Apriso sales of $30.8 million, and Zegerid sales of $27.2 million.

Xifaxan 550 mg prescriptions grew 23 percent, and Apriso prescriptions increased 25 percent from last year. Uceris prescriptions soared 106 percent, and Relistor prescriptions improved 8 percent from a year ago.

Total costs and expenses and expenses soared to $333.55 million from $185.30 million in the year-ago quarter, including transaction costs of $8.2 million.

As a percentage of total net product revenues, R&D expenses declined 890 basis points to 10.3 percent, and SG&A expenses decreased 360 basis points to 30.5 percent from last year.

On July 8, the company agreed to merge itself with a subsidiary of Cosmo Technologies, with Salix as the surviving corporation and name changed to Salix Pharmaceuticals plc, being domiciled in Ireland. The deal is expected to be modestly accretive to Salix's earnings per share in 2016 and increasingly accretive thereafter. The deal is expected to close in the fourth quarter of 2014.

Looking ahead to the third quarter, Salix expects adjusted earnings of about $1.53 per share, on projected total net product revenues of about $395.0 million. Analysts expect earnings of $1.78 per share on quarterly revenues of $405.31 million for the quarter.

For fiscal 2014, the company trimmed adjusted earnings to about $6.16 per share from the prior forecast of about $6.33 per share, while continuing to project total net product revenues of about $1.6 billion. Street is currently looking for full-year 2014 earnings of $6.53 per share on annual revenues of $1.63 billion.

"Our third quarter outlook reflects our expectation for some adjustments in the supply chain to continue into the quarter as wholesalers more closely manage inventory levels. However, we expect to see a strong fourth quarter, which historically has been our strongest quarter, as the business continues to realize the combined impact of strong prescription growth and rising productivity of our new digestive disease sales force," CFO Derbyshire stated.

SLXP closed Thursday's regular trading session at $133.55, down $4.07 or 2.96% on a volume of 1.10 million shares. The stock lost a further $3.55 or 2.66% in after-hours trading.