Piper Jaffray Comments On Salix Pharmaceuticals Following Recent Earnings Report

Last night, Salix Pharmaceuticals SLXP reported non-GAAP diluted EPS of $0.66, handily beating the Street estimate of $0.49. Xifaxan sales of $83M were in line with Piper Jaffray's estimate. We believe that management guided conservatively for 2011, and continue to believe there is significant earnings power in 2011 and beyond driven by continued steady growth in Xifaxan prescription volumes. Salix is guiding to 2011 revenue of $520M. SLXP noted that based on demand in early 2011, its top-line is already annualizing to $476M in sales, and the company conceded that it is guiding conservatively. With continued strength in total prescriptions for Xifaxan likely, Piper Jaffray believes 2011 Xifaxan sales are likely to come in well ahead of the company's estimated $340M annualized run rate. Piper Jaffray notes that the FDA is not raising concerns about short-term efficacy and safety. Further, Xifaxan enjoys largely unrestricted managed care access on most commercial plans in the wake of the label expansion in HE, and with pill counts for IBS patients lower than for HE patients, it is hard to envision pushback from managed care. Piper has an Overweight rating and $39 PT on SLXP SLXP closed Monday at $33.34