Salix Pharmaceuticals Shares Popped: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of drugmaker Salix Pharmaceuticals (NAS: SLXP) climbed as high as 10.5% on Tuesday after the company reported positive phase-3 data for an oral version of its constipation treatment, Relistor.

So what: While exact numbers weren't given, the "highly statistically significant" results increase the odds that the treatment will become a game-changer for Salix and especially for its much smaller partner Progenics Pharmaceuticals (NAS: PGNX) . In fact, a Jefferies analyst estimated that an oral form of Relistor could drive annual revenues of $500 million-$800 million a year.

Now what: I wouldn't be so quick to ride Salix's momentum. Management plans to submit the New Drug Application for oral Relistor in mid-2012, but judging from the stock's 65% price surge over just the past three months and its current P/E of 35, Mr. Market already seems to have baked in much of the upside. In fact, at the time of this writing, the stock is up only 5%, so investors might be starting to "sell the news."

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At the time thisarticle was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

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