Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Salix Pharmaceuticals Ltd (NASDAQ:SLXP)

Q3 2009 Earnings Call

November 9, 2009 5:00 pm ET

Executives

Mike Freeman - Associate Vice President, IR and Corporate Communications

Carolyn Logan - President and Chief Executive Officer

Adam Derbyshire - Executive Vice President and Chief Financial Officer

Bill Forbes - Senior Vice President, R&D and Chief Development Officer

Analysts

Michael Tong - Wells Fargo Securities

Scott Hirsch - Credit Suisse

David Amsellem - Piper Jaffray

Scott Henry - Roth Capital

Jim Molloy - Caris & Company

Liisa Bayko - JMP Securities

Bert Hazlett - BMO Capital Markets

Operator

Good day and welcome to the Salix Pharmaceuticals third quarter 2009 earnings release conference call. Today's conference is being recorded.

At this time, I'd like to turn the conference over to Mr. Michael Freeman, Associate Vice President of Investor Relations and Corporate Communications. Please go ahead, sir.

Michael Freeman

Good afternoon. Thank you for joining us today. I am Mike Freeman, Associate Vice President of Investor Relations and Corporate Communications for Salix Pharmaceuticals. With me today are Carolyn Logan, our President and Chief Executive Officer, and Adam Derbyshire, our Executive Vice President and Chief Financial Officer; and Dr. Bill Forbes, our Senior Vice President, Research and Development and Chief Development Officer.

Adam will begin the presentation with a review of the financial results for the third quarter of 2009. Carolyn then will review operations to complete the foremost segment of today's call. At the conclusion of these comments, management will respond to appropriate questions.

Various remarks that management might make during this conference call about future expectations, plans, and prospects for the company, constitute forward-looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results might differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in our press releases and SEC filings, including our Form 10-K for 2008. Specifically, the information in this conference call related to projections, development plans and other forward-looking statements is subject to the Safe Harbor.

I now will turn the call over to Adam Derbyshire, our Chief Financial Officer.

Adam Derbyshire

Thank you, Mike. Total product revenue was $65.7 million for third quarter of 2009, 53% increase, compared to $42.9 million for the third quarter 2008. Total product revenue for the first nine months of 2009 was $162.7 million, compared to $118.2 million for the first nine months of 2008.

The XIFAXAN revenue for the third quarter of 2009 was $42.7 million, compared to $41.4 million for the third quarter of 2008 and $93 million for the first nine months of 2009, compared to $56.1 million for the first nine months of 2008.

Our bowel cleansing products, MOVIPREP and OSMOPREP generated combined revenue of $16.4 million for the third quarter of 2009, compared to $14.8 million for the third quarter of 2008. Total combined product revenue for these two products was $47.6 million for the first nine months of 2009 and $44.4 million for the first nine months of 2008.

Total cost of products sold was $13.2 million for the third quarter and $34.5 million for the first nine months of 2009. Gross margin on total product revenue was 79.9% for the third quarter of 2009, compared to 81.9% for the third quarter of 2008 and 78.8% for the first nine months of 2009, compared to 81.3% for the first nine months of 2008.

The lower gross margins for 2009 relative to the comparable periods for 2008 were due to a change in the product revenue mix. We continue to expect gross margins for the year ending December 31, 2009 to be 79% to 80%.

Research and development expenses were $26.1 million for the third quarter of 2009 and $69.6 million for the first nine months of 2009, compared to $14.4 million and $57.3 million, respectively for the prior year periods.

Research and development expenses for the third quarter of 2009 include a $5 million up-front payment related to the acquisition of the exclusive U.S. right to Lupin`s proprietary bioadhesive technology for use in rifaximin.

Selling, general and administrative expenses were $29.6 million for the third quarter of 2009 and $83.6 million for the first nine months of 2009, compared to $23.4 million for the third quarter of 2008 and $67.6 million for the first nine months of 2008.

The Company reported a net loss of $7.3 million, or $0.15 per share, fully diluted, for the third quarter of 2009. Cash and cash equivalents were $69.1 million on September 30, 2009.

We continue to be pleased with the company’s ongoing product revenue growth. Our 53% year-over-year revenue growth was driven primarily by the increase in XIFAXAN revenue for the quarter.

The current annualized run rate is based on dollarizing September monthly prescription data for XIFAXAN, our bowel cleansing products and our other products category, are approximately $117 million, $85 million and $34 million, respectively.

We continue to anticipate that R&D and SG&A expenses for 2009 to be approximately $93 million and $120 million, respectively. This SG&A guidance accounts for METOZOLV ODT launch expenses, primarily associated with the hiring of 64 sales representatives during the third quarter.

For the fourth quarter of 2009, we anticipate total company product revenue will be approximately $68 million and should generate a loss of approximately $0.14 per share, fully diluted.

We continue to believe that 2009 total company product revenue should be approximately $230 million, representing 29% growth over 2008 revenue. We should recognize a loss of approximately $0.90 per share, fully diluted, for the year ending December 31, 2009. This guidance incorporates the recognition of METOZOLV ODT revenue-based on prescription pull-through.

I will now turn the call over to Carolyn Logan, President and Chief Executive Officer.

Carolyn Logan

Thank you, Adam. The third quarter of 2009 was one of the most exciting and rewarding periods in the company’s history to-date. The milestones achieved during the quarter are the result of the dedicated efforts contributed by every employee of the company and most especially so, by our development group, led by Dr. Bill Forbes.

We remain committed to building the leading U.S. specialty pharmaceutical company providing innovative products to healthcare professionals to prevent or treat gastrointestinal disorders. We believe the accomplishments over the past several months are only the initial results of our focused efforts over the past several years.

We look forward to continued and ongoing growth as we build our business by leveraging our expanding product portfolio and our strong relationships with our customers and our 220-member strong specialty sales force.

In August the FDA accepted for filing our new drug application for rifaximin 550 milligram tablet for the maintenance of remission of hepatic encephalopathy and also announced that the NDA had been designated for Priority Review.

A Priority Review classification is granted to drugs offering major advances in treatment or providing a treatment where no adequate therapy exists. We believe this designation reflects and confirms our belief that rifaximin potentially represents a novel and substantial new therapeutic option for this debilitating condition.

The FDA also announced that it will convene an advisory committee in late February 2010 to discuss the application. Last week the FDA informed the company that they are extending the goal date by three months to provide time for a full review. The extended user fee goal date is March 24, 2010.

On September 4 METOZOLV ODT, our orally disintegrating tablet formulation of metoclopramide, was granted marketing approval by the FDA. We believe METOZOLV ODT again, demonstrates our commitment to provide innovative products to meet the unmet GI treatment needs of physicians and patients.

Our rapidly-dissolving tablet formulation should give diabetic gastroparesis and refractory GERD patients, a new treatment choice that may be more convenient than traditional metoclopramide tablets. We intend to launch METOZOLV ODT to physicians beginning mid-November.

During the third quarter of 2009, in anticipation of the approval and launch of METOZOLV ODT, we completed the hiring and training of 64 specialty sales representatives. The efforts of these new representatives combined with the ongoing coverage currently provided by our 96 specialty sales representatives, should serve to extend our reach and deepen our penetration to targeted physicians.

On September 14, we announced the successful outcome of our two Phase 3 randomized, double-blind, placebo-controlled, multicenter trials, TARGET 1 and TARGET 2. These trials with more than 600 patients each were designed to evaluate the efficacy and safety of rifaximin 550 milligram tablets in the treatment of patients with non-constipation irritable bowel syndrome or IBS.

In each trial, rifaximin-treated patients demonstrated a statistically significant improvement for both the primary endpoint and key secondary endpoint compared to placebo patients. Rifaximin delivered adequate relief of IBS symptoms and relief of IBS-related bloating over a one-month period, following the completion of a 14-day course of therapy.

The results of these two trials affirm the utility of a gut-selective antibiotic in the treatment of IBS and will serve as the basis for the company’s new drug application seeking marketing approval for rifaximin, as a treatment option for this widespread condition. The company continues to target submitting the NDA during the first half of 2010.

As part of the company’s lifecycle management strategy for rifaximin, we continue to broaden, strengthen and expand the intellectual property portfolio related to this compound. In October, we secured the exclusive right in the United States to Lupin’s bioadhesive drug delivery technology for use with rifaximin.

The two companies entered into an agreement to collaborate in the development and commercialization of a new formulation of rifaximin that combines Lupin’s proprietary technology of both bioadhesion, as well as extended release characteristics.

Additionally, Lupin has agreed to exclusively supply Salix with rifaximin active pharmaceutical ingredient in the United States and Salix has agreed to make up-front and regulatory milestone payments, as well as, royalties on sales of the product.

We believe a next-generation rifaximin product incorporating Lupin’s drug delivery platform with our gut-selection and targeted antibiotic might prove to provide a number of clinical advantages, including patient compliance and patient convenience.

Also in October we secured the exclusive right in the United States to Cipla’s amorphous rifaximin PCT Patent Application. The acquisition of the rights to Lupin’s and Cipla’s respective

proprietary rights should serve to further protect rifaximin’s intellectual property position.

In recent weeks, two additional patents relating to rifaximin were issued by the United States Patent and Trademark Office. One patent provides further protection relating to a previously-issued patent that covers several physical states or polymorphous forms of rifaximin. Documents have been filed with the FDA to list the patent in the Orange Book. This patent should provide protection until June 2024.

A second patent provides protection for rifaximin relating to treating bloating caused by small intestinal bacterial overgrowth, associated with irritable bowel syndrome. The patent will be listed in the Orange Book if and when marketing approval is granted to rifaximin for the treatment of IBS. The patent should provide protection until August 2019.

The development of crofelemer and budesonide progressed during the third quarter of 2009. In August, we completed the dose selection stage, Stage 1 of the ADVENT trial, our Phase 3 trial of crofelemer for the treatment of chronic diarrhea in people living with HIV or HIV-associated diarrhea, and initiated the final stage, which is Stage 2.

Stage 2 of ADVENT involves the enrollment of 150 additional patients with HIV-associated diarrhea. Enrollment for Stage 2 is anticipated to be completed in the first half of 2010. Currently we anticipate filing the crofelemer NDA during the second half of 2010. The FDA reviewed and granted the protocol for this trial as a Special Protocol Assessment or SPA, and granted the crofelemer IND fast track designation.

In early October we submitted an IND to the FDA to conduct two identically designed Phase 3, multi-center, double-blind, randomized, placebo-controlled studies, evaluating the effectiveness and safety of budesonide rectal foam for the treatment of mild to moderate ulcerative proctitis or proctosigmoiditis.

The studies are designed to compare budesonide foam dosed twice-a-day for 2 weeks, followed by once-a-day dosing for 4 weeks, versus placebo foam. Each study is targeted to enroll approximately 430 subjects, and currently enrollment is scheduled to begin by the end of 2009.

We are extremely pleased with the progress that was made during the quarter in advancing our products and product candidates, along their respective development and regulatory path ways. In addition to these product development advances, the company also continues to make progress in strengthening and expanding the commercial opportunities for our marketed products.

During the quarter, Medco Health Solutions, a leading pharmacy benefits manager with the nation's largest mail order pharmacy operations, informed 8,400 gastroenterologists that APRISO with a preferred medication on their Rx selections and preferred prescriptions formulary.

Similarly, HAP health plan added APRISO to their formulary as a preferred medication. It is significant to note that APRISO was the only once a day mesalamine product included on these two formularies. These formulary wins are great start for this product that was launched earlier this year.

Also, I'm pleased to report that Salix recently was selected by the Healthcare Distribution Management Association to receive its “Achievement for Excellence in 2009 Award”. This industry Oscar is awarded to companies that distinguish themselves by setting the standard of excellence in new product introductions, product promotions, and business practices.

This recognition is particularly gratifying and that the judges for the award are wholesale customers. We are honored to receive this recognition and pledge to continue our efforts to provide the highest level of service possible to our valued customers.

As a reminder, we are hosting an Analyst Day in New York on Wednesday, November 18th, from 10:00 am until noon at the Essex house. Lunch will be provided, and if you would like to attend and have not registered, please e-mail your request to analyst_luncheon@salix.com. This completes my comments. Thank you for your participation in today's call.

Now I will turn the call over to the operator to begin the question and answer session. Thank you.

Question-and-Answer Session

Operator

Thank you. The question-and-answer session will be conducted electronically. (Operator Instructions). We'll go first to Michael Tong with Wells Fargo Securities.

Michael Tong - Wells Fargo Securities

Adam, is there anything strange going on with the XIFAXAN revenue for the quarter, seems quite a bit high? Secondly, do you have APRISO and COLAZAL sales figures for quarter as well?

Adam Derbyshire

With respect to XIFAXAN, as we pointed out in our press release, we had 15% growth in prescriptions; we had about 20% in price year-over-year. We did also have numerous quarters in 2008 where demand outpaced ex-factory sales. Then I think what else is happening is that wholesalers are anticipating the 550 formulation approval, and also have realized that we've just created a second sales force.

I think there may have been some forward buying occurring in the quarter with respect to XIFAXAN. In terms of COLAZAL and APRISO we had shipments of APRISO of roughly combined actually as an IBD line it was roughly about 1 million.

Michael Tong - Wells Fargo Securities

Okay. Then the other thing had to do with XIFAXAN prescription trend. It seems to be doing okay. However, not that you are promoting it off-label, but are you a little surprised that prescription trends haven't picked up based on the results that you have presented in IBS as well as in HE so far?

Adam Derbyshire

Well, okay I mean 15% year-over-year, and 5% sequentially for a product that we're not promoting and having incentivized our sales force to promote for four years, we consider it to be substantial growth, but maybe Carolyn has comments on that as well.

Carolyn Logan

No, as Adam mentioned, we have not had incentive compensation on this product for four years or more. So while some data has been released to grassroots gastroenterologists or physicians, this is not widely publicized, because as you pointed out Michael we are definitely not promoting this drug off-label. We're doing everything to prevent that. So I agree with Adam, we're quite pleased with the progress this drug is making.

Operator

We'll now hear from Scott Hirsch with Credit Suisse.

Scott Hirsch - Credit Suisse

Thanks. Do you know what the average number of days per RX is now out for XIFAXAN?

Carolyn Logan

In which indication?

Scott Hirsch - Credit Suisse

Just average across the full cycle, the full scope.

Adam Derbyshire

We can give you the average prescription size, which is in the low 80s.

Scott Hirsch - Credit Suisse

Low 80s. 80 pills per Rx.

Adam Derbyshire

Correct.

Carolyn Logan

I think it would vary by for what indication they're prescribing it for as to the length of days of treatment. Something that we see as a huge opportunity for us in some of the HE market research we've done in hepatic encephalopathy, the average length of treatment is far shorter than we anticipate it would be if we are so fortunate to be granted this indication.

Scott Hirsch - Credit Suisse

Then you noted the new PDUFA, I think you said it just to confirm, is March 24th?

Carolyn Logan

That's right.

Scott Hirsch - Credit Suisse

How many sales reps do you have now on hand, and how much of that was reflected in the third quarter SG&A?

Carolyn Logan

We have 96 representatives in one sales force and 64 in the other, so for a total of 160 representatives.

Adam Derbyshire

In terms of expense around the second sales force of 64 representatives, I would say about a half of that is included in the third quarter.

Scott Hirsch - Credit Suisse

Half of it is included in fourth quarter. I got you. Then I guess just lastly, the $5 million milestone was included in your R&D. Any reason why that's not one time and culled out?

Adam Derbyshire

We did cull that out as a one-time payment. We didn't feel we needed to do a non-GAAP analysis around it, if that's what you're going to but, no, it is a one-time $5 million payment, correct.

Scott Hirsch - Credit Suisse

So the average run rate here, though, is really 26, less to $5 million, so we're in the 21...

Adam Derbyshire

I wouldn't say that's a run rate. R&D can be quite lumpy. I would expect, on an absolute basis, for fourth quarter, obviously we gave the guidance, so you can tell where R&D is going to come in, so it's going to be down from third quarter, but if you pull out the $5 million on an absolute basis, it is going to be up from that number.

Operator

We'll move on to David Amsellem with Piper Jaffray.

David Amsellem - Piper Jaffray

Just on the bowel prep franchise, can you just say if the sales number is reflective of underlying demand? Any wholesaler movement during the quarter that we should know about?

Adam Derbyshire

It's not. Actually, demand came in roughly $5 million ahead of except-factory sales.

David Amsellem - Piper Jaffray

That's helpful. Secondly, on METOZOLV, can you talk about what your managed care strategy is? Looking at the pricing, it looks fairly expensive, so is it safe to say the product will be mainly a Tier 3 or probably up-product, given the wide availability of generic medical providers?

Carolyn Logan

We're expecting it to be Tier 3. I mean, that's been our plan all along.

David Amsellem - Piper Jaffray

Then one last question, just on the Lupin transaction. Any comment on when you may move that formulation into clinical studies, and is it your plan to position that or test that as a possible once or twice daily dosing for non constipation IBS?

Bill Forbes

Hi David, this is Bill Forbes. Our hope is to be moving that into development sometime next year, and we don't have any further update on exact timing on that, but of course we have BID in hepatic encephalopathy, and TID in IBS and so we see opportunity in both of those.

Probably, originally we actually may look at travelers diarrhea, which is three times a day, and that would be probably the fastest way to approval of the formulation, but we're weighing all our options right now and we're working with Lupin to try to make sure we do the best thing going forward with the franchise.

David Amsellem - Piper Jaffray

That's great, thank you.

Adam Derbyshire

David this is Adam. I just wanted to follow up on Carolyn's comment on the Tier 3 status with METOZOLV. As you know we will be couponing and bound to have vouchers available for patients to offset their copay for that.

Carolyn Logan

With copay cards.

Adam Derbyshire

Right, with copay cards.

Operator

Our next question comes from Scott Henry with Roth Capital.

Scott Henry - Roth Capital

Thank you. Good afternoon. For starters, how long do you expect it to take you to launch XIFAXAN for HE upon approval. I mean obviously you should detailing it right away but in terms of an official launch, about how long will that take from approval to launch?

Carolyn Logan

It generally takes us about eight weeks. METOZOLV took a little bit longer because of the way it's packaged. Rifaxmin will be tablets in a bottle so we can’t do bright stock and shave off a couple of weeks that way.

Scott Henry - Roth Capital

That's helpful. Then how should we think, I forgot, I think you’ve commented on before, but how should we think about the METOZOLV ramp in Q4? Will there be significant stocking? I forget how you are going to account for that.

Adam Derbyshire

We're going to recognize revenue based on a pull through recognition. So it's going to be essentially be prescription generation. So we will do a distribution, but we will defer that revenue, and recognize it as prescriptions pull through.

Scott Henry - Roth Capital

Okay. Shifting over to the IBS indication, when do you expect that we could see a little more data on that indication, just kind of curious if we might see a little at the analyst meeting. I wouldn't expect full disclosure until DDW, but might there be incremental data coming out before then?

Bill Forbes

This is Bill Forbes again. Hopefully we'll be able to add a little more color around the data at the analyst meeting coming up here on November 18th, but really what we're targeting is we're putting abstracts together now for DDW in May of 2010, obviously ACG is further back in October. We actually have the first draft of the publication which we're working on right now as well. We're moving as quickly as we can to get this through the publication circles.

Scott Henry - Roth Capital

Then one question on the intellectual property and obviously you have a lot of moving parts, but it's very clear that the HE indication with orphan drug exclusivity is clean cut and a very strong protection from generics. The IBS indication a little bit less so, at least to me and they are the same dose, so you do have the threat of someone substituting IBS for HE.

Maybe if you could just talk about how when you prioritize the IP strategy behind the IBS indication, are there some patents that we should focus more on than others? I just want to get a general overview of the intellectual property for IBS, and how one should go through it in terms of priority, if possible?

Adam Derbyshire

Scott, this is Adam. I will just point out that we have now two Orange Book list of all patents around IBS. The one is around that use and the other is around bloating with respect to small intestinal bacterial overgrowth. So we'll have two patents that will be listed in the Orange Book and we feel very good about this patents and the strength of those patents.

You should expect other patents pending to hopefully issue in the future. So we're just building a lot of intellectual property around the various uses and anything we can find on the compound as well.

Scott Henry - Roth Capital

Okay. So it's just focused on those two patents, fair enough?

Adam Derbyshire

As for now and so, we do have patents pending, other patents pending that we hope will issue soon.

Carolyn Logan

Of course, there is a broader polymorph patent that, a new patent just issued that further strengthens and broadens that as well, so.

Scott Henry - Roth Capital

Certainly, a valid point. Final question, just when I start thinking about 2010 and EPS trajectory, it looks like Q3 and Q4 looks like a lot of orders slipped into Q3 from Q4, but everything netted the same.

When we think about the 2010 trajectory I mean, it almost looks like Q1 should be strong, and then you go into investment mode for a couple of quarters, and then you probably come out the other side in Q4. I mean is that a fair way to think about the trajectory in 2010? I mean, obviously a lot of moving parts.

Adam Derbyshire

When you refer to trajectory, what are you referring to?

Scott Henry - Roth Capital

Just kind of the earnings progression, I mean it looks like you would possibly be profitable in Q1. So you may not be in the middle of the year because of the two launches, or the one launch?

Adam Derbyshire

Yes. I mean our expectation is that if [ODT] gets approved and launched within the first half of the year, we still expect to be profitable for 2010.

Operator

We'll move on now to Jim Molloy with Caris & Company.

Jim Molloy - Caris & Company

In the ulcerative colitis market, have you seen any impact there with what's going on with the Warner Chilcott, Procter & Gamble? It looks like APRISO, perhaps looking a little weak. Is that a fair characterization or how would you talk about that market in the event of what's been happening there?

Carolyn Logan

Hi Jim, this is Carolyn. Really, from an internal point of view, APRISO is very closely following what we did when we launched COLAZAL. So, internally I mean we'd obviously like for it to be growing faster, but it's pretty much on track with what we had expected at this point in time. As far as Warner Chilcott, we are still seeing the Asacol promotions in the offices. We are seeing the reps there.

They are launching their hard dose Asacol. It's not bioequivalent to the current formulation or the previous formulation, but they are promoting it in offices. So as you know, Shire is promoting [LIALDA]. We're promoting APRISO and Asacol out there as well. So, it’s really the two once-a-days are going after the drug that's got the history out there, which is Asacol.

Jim Molloy - Caris & Company

It sounds like no real big change. Okay.

Carolyn Logan

No.

Jim Molloy - Caris & Company

It was a pleasure seeing you last week in Boston at that the hepatic encephalopathy presentation that was put on. Thoughts on the minimal HE indication, it was something that discussed at the meeting, and certainly a large opportunity should that become a more widely diagnosed indication. Any thoughts on how that may be progressing or if minimal HE will in fact be a significant portion of your business going forward?

Bill Forbes

This is Bill again. We actually expect over the next year or so to get some traction on minimal HE in the form of having the number of clinicians actually understand better how to assess minimal HE. So, as far as whether or not we’ll run a program in that, right now there are no plans open up for program in minimal HE.

So clearly, I think that there is number of groups, one in Virginia and one out in California, that are making a lot of head way on this. So I think that probably over next few months to year, so, we'll get some great traction on it.

Carolyn Logan

Of course Jim, getting the indication for HE is what is really going to drive our business in that hepatic encephalopathy arena. So, we're very much looking forward to getting that indication and be able to talk about hepatic encephalopathy with our physicians.

Jim Molloy - Caris & Company

Yes, absolutely, first things first, I agree. Then maybe following up on Scott’s thoughts on the [ISP] two quick questions. Any update on the Novel Labs and that IP challenge? Then maybe any update on potential generic challenges for the 200 milligram strength there, an old concern?

Carolyn Logan

On Novell, everything is just progressing as it normally would. In that regard, there is nothing unusual or there is really no update to give. As far as the 200 milligram rifaximin to our knowledge, no one has filed. We certainly hadn't been notified of the challenge. We believe that every patent’s that we get issued and as you can see we're pretty active in this area, just further strengthens our case and hopefully minimizes the opportunity for a challenge.

Operator

We'll now hear from Liisa Bayko with JMP Securities.

Liisa Bayko - JMP Securities

First, could you maybe characterize some of the dialogues, if any that you had with FDA for the HE indication, thus far?

Bill Forbes

I would consider it typical dialogue at this point. They have asked us a few questions. We've been able to answer those. At this point in time I think there is one that they've asked recently that we're working on still, but for the most part we've been able to handle all other questions. So the dialogue as I said would be considered typical at this point.

Liisa Bayko - JMP Securities

Do you think about the label for HE indication, do you expect it to specify over, or do you think it might just be for broad HE, where you could start to engage in a dialogue with the physicians about the minimal indication? How do you see the label playing out?

Adam Derbyshire

I think that that's one of the reasons why they would like to have an advisory committee meeting is to make sure that they get the labeling correct using their advisors. Our hope is to have a label that talks about prevention of recurrent HE. They obviously may have some things to think about or say on that, so I think probably the best place to defer it to is the February advisory committee.

Liisa Bayko - JMP Securities

Can you maybe describe some of the marketing of sales, sort of internal ramping efforts that you are doing in preparation for the HE launch? Have you begun any of those? What do you foresee between now and launch?

Carolyn Logan

Lisa, this is Carolyn. Obviously a lot market research is being done, and Bill has certainly met with a lot of people that are thought leaders or experts or treat a lot of hepatic encephalopathy patients and discuss the data with them, getting their opinions and their advice, and so we have done quite a bit of meeting with physicians in that regard. We can't launch the drug until we get the indication. Basically, our activities right now are confined more in that area.

Liisa Bayko - JMP Securities

Will you be hiring additional sales reps ahead of an official approval?

Carolyn Logan

Not for hepatic encephalopathy. We will need to hire some additional people prior to getting the IBS indication, or around the time we get IBS, but not for hepatic encephalopathy. We definitely have enough representatives to cover that.

Liisa Bayko - JMP Securities

Then are you going to be having sort of pre, I don’t like to call it a pre-NDA or whatever you call it for the IBS applications specifically with FDA before you file?

Adam Derbyshire

Yes, there will be a pre-NDA meeting with them, and we've got that scheduled already.

Liisa Bayko - JMP Securities

When will that be?

Adam Derbyshire

It will be held in December. Next month.

Liisa Bayko - JMP Securities

Then just one additional question, if I may, and that's just, IBS partnering what are your thoughts on that topic? Obviously a big indication, I'm sure there's sufficient interest amongst some of the pharma companies?

Carolyn Logan

We are evaluating all options around that, and trying to make sure that we pick the very best solution that provides the greatest opportunity for the drug and for the opportunity. So we have not made any final decisions yet how we will manage IBS in primary care. We're looking at everything, ranging from partnering with someone, to doing it ourselves.

Operator

We'll now hear from Bert Hazlett with BMO Capital Markets.

Bert Hazlett - BMO Capital Markets

Just one quick question, given that we're up to, I guess, 80 pills per script, which is a nice healthy growth in continuation of recent trends, do you have any update on utilization of rifaximin in HE and IBS off-label indications? We're very aware that you're not promoting them in that, but as the data roll out continues do you have any update on really the percentage of overall use of the therapy in those indications off-label?

Carolyn Logan

Bert, we don't have hard data but certainly when the average number of tablets per prescription starts to creep up, that is an indication of increased use in hepatic encephalopathy. We believe that we are getting some increased use, but we really are not going to see a huge inflection point until we have the indication and until we can start marketing it appropriately.

Bert Hazlett - BMO Capital Markets

That’s helpful. I believe you just said, regarding the GP indication that again one of the considerations might be managing that, the marketing of that indication yourself. If that's the case, could you just verify that? If that is the case also, when might we get clarity on when you are going to make that decision? I know there are obviously multiple parties need to be involved, but is there a drop-dead date by the time you will need to make that decision?

Carolyn Logan

No, we aren't prepared to discuss a drop-dead date. We obviously have some internal time lines that we're working towards, but we are considering the possibility of that, but as I've said, we have not reached a definitive solution to this yet. We just want to make sure that we do the right thing for the brand and for our ability to maximize the potential of this really important indication.

Operator

There are no further questions. I will now turn the call back to Carolyn Logan for closing remarks.

Carolyn Logan

I would like to thank our stockholders, our employees, and other supporters for their continued confidence. I look forward to speaking with you in the future. Thank you very much.

Operator

That does conclude our conference. We thank you for your participation.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Salix Pharmaceuticals Ltd Q3 2009 Earnings Call Transcript
This Transcript
All Transcripts