Why Salix Pharmaceuticals' Shares Popped


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 gastrointestinal-focused drug and medical device company Salix Pharmaceuticals (NAS: SLXP) rose as much as 12% today after the company reported much better-than-expected third-quarter earnings results.

So what: For the quarter, Salix reported a 27% increase in total revenue to $185.1 million and a profit of $0.95 per share. Revenue came in slightly below the Wall Street consensus of $187.2 million, but absolutely trounced EPS estimates by $0.26. One of the big reasons for that beat are sales of Xifaxan, a treatment for travelers diarrhea and overt hepatic encephalopathy, which rose 43% over the previous year to $137.9 million. Not everything was peachy, however, as research firm Brean Capital pointed out when it lowered its price target on Salix to $44 from $53 and noted that higher costs and the possibility of additional trials for Relistor due to concerns from the FDA could hamper results.

Now what: It's pretty hard to argue against a $0.26 earnings beat, but it's a tad bit worrisome that 75% of Salix's revenue is tied solely to Xifaxan. As long as Xifaxan is on a roll, Salix should be as well, but I'd really like to see its three newer drugs -- Relistor for opioid-induced constipation, Deflux for the treatment of vesicoureteral reflux, and Solesta for the treatment of fecal incontinence -- step up to the plate and diversify Salix's product offerings. In the meantime, I'm happy adding Salix Pharmaceuticals to My Watchlist.

Craving more input? Start by adding Salix Pharmaceuticals to your free and personalized watchlist so you can keep up on the latest news with the company.

The article Why Salix Pharmaceuticals' Shares Popped originally appeared on Fool.com.

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