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Salix Pharmaceuticals (NASDAQ:SLXP)

Q1 2014 Earnings Call

May 08, 2014 4:30 pm ET

Executives

G. Michael Freeman - Associate Vice President of Investor Relations & Corporate Communications

Adam C. Derbyshire - Chief Financial Officer, Principal Accounting Officer and Executive Vice President of Finance & Administration

Carolyn J. Logan - Chief Executive Officer, President and Director

William P. Forbes - Chief Development Officer, Chief Medical Officer and Executive Vice President of Research & Development

Analysts

David Amsellem - Piper Jaffray Companies, Research Division

Andrew Finkelstein - Susquehanna Financial Group, LLLP, Research Division

Mario Vincent Corso - Mizuho Securities USA Inc., Research Division

Joshua Riegelhaupt - Stifel, Nicolaus & Company, Incorporated, Research Division

Roger Kumar - Goldman Sachs Group Inc., Research Division

Tim Lugo - William Blair & Company L.L.C., Research Division

David G. Buck - The Buckingham Research Group Incorporated

Operator

Good day, and welcome to the Salix Pharmaceuticals First Quarter 2014 Earnings Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Mike Freeman. Please go ahead, sir.

G. Michael Freeman

Good afternoon. Thank you for joining us today. With me are Carolyn Logan, President and Chief Executive Officer; Adam Derbyshire, Executive Vice President and Chief Financial Officer; and Bill Forbes, Executive Vice President, Medical Research and Development and Chief Development Officer. Adam will begin the presentation with a review of financial results for the first quarter of 2014. Carolyn will then review operations and key highlights for the quarter. And then, we will open up the call for appropriate questions.

Before I turn the call over to Adam, let me remind you that 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 2013. Specifically, the information in this conference call related to projections, development plans and other forward-looking statements is subject to this Safe Harbor.

Today, we will be, as usual, using both GAAP and non-GAAP measures. We believe these non-GAAP measures might provide investors additional relevant information in part for purposes of historical comparison. In addition, we use these non-GAAP measures to analyze our performance in more detail and with better historical comparability.

However, you should be aware that non-GAAP measures are not superior to nor a substitute for the comparable GAAP measures. And these non-GAAP measures might not be comparable to similarly named measures disclosed by other companies.

Please note that EBITDA is earnings before interest, taxes, depreciation, stock-based compensation expense and amortization. The noncash change in acquisition-related contingent consideration, one-time license payments, the cost of goods step-up for Santarus products and excluding transaction costs related to the Santarus acquisition.

Non-GAAP net income is comprised of EBITDA adjusted for cash, interest expense and interest income and the provision for income taxes based on non-GAAP income before tax. Non-GAAP EPS is non-GAAP net income divided by outstanding shares on a diluted basis.

With that, I'll turn the call over to Adam.

Adam C. Derbyshire

Thank you, Mike. I will start the financial results for the first quarter ended March 31, 2014, which includes the impact of the Santarus acquisition that was completed on January 2, 2014. Prior period results, however, do not reflect the acquisition.

For the first quarter of 2014, revenue, EBITDA and EPS came in ahead of our guidance, with strong contributions from Santarus products. Total net product revenue was $384.4 million for the first quarter of 2014 compared to $202.6 million for the first quarter of 2013, primarily driven by the Santarus acquisition.

Relative to the prior year period, first quarter 2014 revenue for XIFAXAN declined 25% while APRISO revenue was flat, despite strong year-over-year prescription growth of 19% and 58%, respectively. This was due to wholesalers and drug change which have had very thin inventories for Santarus products, focusing on securing additional product during the quarter to establish adequate inventories in accordance with our preferred inventory levels. This resulted in strong revenue growth for Santarus products in the first quarter.

With the wholesale inventories for Santarus products now at a more appropriate levels, we expect XIFAXAN 550 sales to exceed or to track in line with prescription demand in the second quarter of 2014, as wholesalers bring XIFAXAN 50 -- XIFAXAN 550 inventories back to more typical levels. We believe growth -- revenue growth for all of the company's products should track in line with prescription demand by the second half of the year.

Gross margin, excluding $54.9 million in amortization and product rights and intangible assets and an $18 million step-up in value of Santarus inventory in connection with the acquisition, was 74.6% for the first quarter of 2014, compared to 83.7% for the first quarter of 2013. The lower gross margin in the first quarter of 2014 was due primarily to the inclusion of sales of GLUMETZA, which carry lower gross margins than other products and was the largest contributor to the company's product revenue mix in the first quarter. We continue to expect 80% gross margin for the full year 2014.

Research and development expenses were $52.8 million for the first quarter of 2014 compared to $30.3 million for the same period last year, with the increase driven primarily by higher expenses associated with license and patent agreements and development programs. As a percentage of revenue, however, R&D expenses declined to 13.7% for the first quarter of 2014 from 15% for the same period a year ago.

Excluding $86.4 million of Santarus-related transaction costs, selling, general and administrative expenses were $108.8 million for the first quarter of 2014 compared to $76.3 million for the same period last year. The increase was primarily due to the inclusion of additional personnel and marketing costs related to the Santarus acquisition and increased legal expenses.

As a percentage of revenue, SG&A expenses declined to 28.3% for the first quarter of 2014 from 37.6% for the first quarter of 2013. EBITDA for the first quarter of 2014 was $149.2 million compared to $69.7 million for the same period last year.

GAAP net loss for the first quarter of 2014 was $43.9 million or a loss of $0.69 per share fully diluted compared to GAAP net income of $22.4 million or $0.35 per share fully diluted for the first quarter of 2013. First quarter 2014 non-GAAP net income was $77.8 million or $1.05 per share fully diluted compared to $40.1 million or $0.63 per share fully diluted for the same period a year ago.

Turning to the balance sheet. Cash and cash equivalents were $385.1 million at March 31, 2014. We continue to focus on optimizing our cash flows to decrease our leverage with the goal of reducing our debt-to-EBITDA multiple from its current 5.3x down from 6.1x December 31, 2013, to 3x in less than 3 years. Additionally, we remain opportunistic with respect to business development opportunities.

Let's now review our outlook for second quarter and full year 2014. We continue to believe we are on track to achieve our goal of $1.6 billion for total net product revenue and anticipate increasing revenue growth for the balance of the year, as our newly created Digestive Disease specialty sales force and expanded gastroenterology sales force gained traction in their respective primary care and gastroenterology markets.

We continue to expect EBITDA of approximately $650 million in 2014, excluding expenses associated with the acquisition of Santarus. We also continue to expect net income on a non-GAAP basis for 2014 to be approximately $475 million.

However, considering the effect of the company's higher share price, on a fully diluted share count calculation, we now expect 2014 non-GAAP EPS to approximate $6.33 per share, assuming a fully diluted share count of 75 million shares. Our full year guidance continues to assume a cash income tax rate of approximately 12%.

Based on this full year guidance, we anticipate total company product revenue for the second quarter of 2014 to be approximately $395 million and EBITDA, excluding expenses associated with the acquisition of Santarus, to be approximately $152.7 million. We also expect non-GAAP net income for the second quarter to be approximately $120.3 million or $1.63 per share fully diluted, which assumes a cash income tax rate of approximately 4% and a fully diluted share count of 74 million shares.

The current annualized run rate based on dollarizing March 2014 prescription data for XIFAXAN, UCERIS, APRISO, GLUMETZA, ZEGERID, MOVIPREP/OSMOPREP, RELISTOR and Salix's other products are approximately $694 million, $109 million, $152 million, $224 million, $111 million, $109 million, $42 million and $80 million, respectively.

Long term, we continue to believe Salix is well positioned to deliver strong growth in product revenue and profitability, led by our currently marketed products and the potential for additional indications for rifaximin, as well as new product development opportunities supported by our expanded sales and marketing resources.

I'll now turn the call over to Carolyn.

Carolyn J. Logan

Thanks, Adam. Overall, we continued to experience positive momentum in the business during the first quarter, demonstrated by strong prescription growth for XIFAXAN 550, APRISO and UCERIS, with all 3 key products reaching new record highs for total monthly prescriptions in the month of March. We were also pleased to see APRISO reach a new record high for market share.

Enhancing our critical mass in ulcerative colitis with UCERIS, as well as expanding our sales coverage to primary care physicians were key tenets of our acquisition of Santarus. Since the successful integration of our respective sales forces in February, we have been focused on achieving our goals for our combined sales force of over 500 specialty sales representatives. I'm pleased to announce that we are making progress on those fronts, with early reports from the field demonstrating increases in new prescribers and other encouraging indicators as a result of the increased reach and frequency of those expanded sales efforts.

March marks the first full month in the field for our new, fully trained Digestive Disease specialty sales force. This new sales force has allowed us to increase our reach to approximately 20,000 additional health care providers treating patients for the reduction in risk of overt hepatic encephalopathy recurrence.

Similarly, our expanded gastroenterology specialty sales force has allowed us to broaden the promotion of UCERIS to more gastroenterologists and expand our reach for the brand to over 15,000 health care providers. UCERIS finished its first full year on the market in February and continues to grow in new prescribers, new prescriptions and total prescriptions. In fact, since the end of 2013, we have seen prescribers for UCERIS grow over 17% to more than 8,200 prescribers by the end of the first quarter.

I'm pleased to announce that, once again, the Salix's sales force has been voted #1 in an independent survey conducted by IMS Health. In 2013, gastroenterologists voted Salix #1 in all 5 attributes considered in rating the performance of sales representatives. These attributes are: Product knowledge, sensitivity to physician time constraints, professional demeanor, provision of sufficient product samples and unbiased product comparisons. We are extremely proud of this recognition and of the dedication and commitment to excellence demonstrated each and every day by our team of specialty representatives as they strive to provide solutions for physicians and patients.

Progress continued during the quarter on numerous fronts throughout the business. Let me provide you with just a quick update on some of our products in development. At the end of January, we completed patient enrollment in the double-blind phase of TARGET 3, our Phase III study to evaluate the efficacy and safety of repeat treatment with rifaximin 550 milligrams TID for IBS with diarrhea. We now anticipate top line data from the study by early July 2014 and a subsequent decision from the FDA during the first quarter of 2015.

Regarding rifaximin SSD, we are continuing patient enrollment for our Phase II dose-ranging study, which is being investigated for the prevention of complications and subjects with early decompensated liver cirrhosis. If approved, this formulation could potentially expand the use of rifaximin to treat not only hepatic encephalopathy, but also additional decompensating liver events. We anticipate completing the enrollment process by the end of 2014. A patent for rifaximin SSD provides protection until 2031.

As far as our development of EIR rifaximin, which is a more soluble formulation, we plan to initiate a Phase III Crohn's disease program during the second quarter of 2014. Based on input provided by the FDA and other regulatory agencies, we intend to conduct 2 Phase III double-blind 52-week studies comparing EIR rifaximin to placebo in induction of remission and mucosal healing. A patent for EIR rifaximin provides protection until 2027.

Moving on to RELISTOR. We continue to make every effort to gain approval for the expanded use of this product for patients with chronic non-cancer pain. The FDA has tentatively scheduled June 11 and 12, 2014 for an advisory committee meeting. At which time, the committee will discuss the use of mu-opioid receptor antagonist for opioid receptor antagonist for opioid-induced constipation, including RELISTOR.

The FDA's action to convene an advisory committee was taken in response to the appeal by Salix of the complete response action taken by the FDA on July 27, 2012, regarding the RELISTOR sNDA for chronic pain. The FDA has stated that it will take action under the appeal within 30 days after receiving input from the advisory committee.

Just over 2 weeks ago, we announced that the submission to the European Medicines Agency of RELISTOR subcutaneous injection for the treatment of opioid-induced constipation in adult patients with chronic non-cancer pain had been accepted for review. If approved, this will add to the current marketing authorization in the European Union, which allows for the use of RELISTOR in advanced illness patients.

Turning to SOLESTA. 2 manuscripts have been accepted for peer-reviewed publications and we expect these to be available during the second quarter of 2014. One publication reports data demonstrating the long-term safety and efficacy of SOLESTA over 3 years and the second publication reports data regarding cost-effectiveness. We believe both publications should help facilitate consistent and improved coverage for SOLESTA among commercial payers.

In addition to expanding the potential of our existing products, we continue to seek opportunities to bolster our GI franchise. In late February, we announced that we had licensed the worldwide exclusive rights to an early development stage encapsulated formulation for bowel preparation and rights to other purgative developments from RedHill Biopharma.

This is an exciting opportunity for Salix to build on its success in this area with MOVIPREP and OSMOPREP. If approved by the FDA, the availability of a tasteless, solid, oral formulation bowel prep could potentially help increase patient compliance associated with bowel cleansing prior to colonoscopy and other abdominal procedures.

Salix continues to succeed in its mission of being the leading specialty pharmaceutical company licensing, developing and marketing innovative products to health care professionals to prevent or treat gastrointestinal disorders. With the acquisition of Santarus, we have solidified our position as the largest U.S. gastroenterology-focused, specialty pharmaceutical company and have created opportunities to expand our digestive disease expertise into other key specialties.

Looking ahead, we are optimistic about the future trajectory of the business, driven by organic growth from our expanded sales force and through product expansion initiatives. The next several months will bring some important milestones, which have the potential to significantly grow our base business. Additionally, the acquisition and commercialization of new products, such as our recent licensing agreement with RedHill Biopharma, provide new growth opportunities in large and attractive markets.

Considering the rapid growth and development of our company over the years and our recent acquisition of Santarus, we believe it's an opportune time to host an Investor Day to provide you with an update on our strategic initiatives and our growth trajectory expectations. As such, we ask that you save the date of July 9, when we will host our Investor Day in New York City.

This completes my comments. Thank you for your participation in today's call. And now, I'd like to turn the call over to the operator to begin the question-and-answer session. Thank you.

Question-and-Answer Session

Operator

[Operator Instructions] And we will take our first question from David Amsellem at Piper Jaffray.

David Amsellem - Piper Jaffray Companies, Research Division

Just a couple of questions. So first, I just want to make sure I understand the inventory dynamics here. Why would the addition of the Santarus assets necessarily impact your inventory patterns on your existing products like XIFAXAN? And then, secondly, to be clear, would -- should we expect the Santarus sales to be down sequentially in 2Q? And then, the second question is sort of a more general question on XIFAXAN. If the TARGET 3 study were to fail, how do you think about pricing power given that the label would be in essentially an orphan indication in HE?

Adam C. Derbyshire

Sure, David. I'll handle your first question. I don't know -- you may or may not be aware that Santarus did have inventory management agreements in place. And so shortly after the acquisition closed, we terminated those agreements, which I think caused a little angst with wholesalers with respect to their products. So they were focused and we were focused on wanting to make sure those inventory levels got to the level that we're comfortable with, which is typically in that 10 to 12 weeks. We didn't quite achieve that. We're probably more in the 2- to 3-month range with the Santarus products. So again, they were focused on getting there. We were focused on that as well. And they had existing inventories at the legacy Salix products, which they were comfortable with. So what we expect in second quarter is that XIFAXAN 550 will rebound and more than likely exceed demand. And then, we would expect the Santarus products to come in line with demand for the remainder of the year and then all products to come in line with demand for the second half of the year. And then, in terms of TARGET 3 study...

Carolyn J. Logan

On the pricing, if IBS were to fail, I guess, we would have to assess why it failed and we would have to determine what action we would take relative to that. But in the scorched-earth scenario, if it failed and we decided not to pursue IBS with this formulation, then we could get more aggressive in price. But keep in mind that we couldn't double our price overnight or triple our price overnight because we are calling on gastroenterologists who know about IBS and they would view an overnight extraordinary type of increase. We think that could affect our credibility and damage our reputation. So we could get more aggressive and maybe do 1 or 2 price increases a year in the mid-single or high single digits. But we wouldn't do a doubling or tripling overnight, but we would definitely get more aggressive on price very quickly.

Operator

And our next question comes from Andrew Finkelstein at Susquehanna Financial Group.

Andrew Finkelstein - Susquehanna Financial Group, LLLP, Research Division

And maybe you can clarify the comment about the inventory levels. You said 10 to 12 weeks and 3 months for -- if you can just clarify for each of your products and the Santarus products where it stood at the end of the year and where it stood -- stands now since the difference between the run rates you gave and the 1Q sales for some of these products indicate a swing of several months' worth of demand trends. And then, on a different note, just about the spending progression throughout the year, how you're thinking about SG&A and R&D relative to your previous guidance and sort of the progression as we go throughout the year?

Adam C. Derbyshire

Yes. So we would expect by the end of second quarter that in -- ideally, all of our inventories for all of our products would be in that 10- to 12-week range. Clearly, we'd be in a 2- to 3-month range, so we would fully expect that. Keep in mind that the shipments, especially the Santarus products, were happening very early in the quarter -- in first quarter and so here we are in May. And so inventories are, again, at that 2- to 3-month timeframe. We would like for it to be 10 to 12 weeks and we expect it to be there by the end of second quarter. In terms of...

Carolyn J. Logan

And I think our wholesalers and drug chains view us as being a more aggressive marketing company than Santarus. And we're putting a lot of people on these products. And I think they expected us to grow at a faster rate than Santarus.

Adam C. Derbyshire

And we've over-doubled our sales force, too. So that was a prudent thing for us to do.

Carolyn J. Logan

And Santarus just had razor-thin inventories, but what -- for whatever reason, but they really didn't have enough to support the retail demand that we expected to pull through with prescriptions.

Adam C. Derbyshire

And in terms of expenses, as you can see from our guidance, we've kept our expenses the same for the full year. I think if you look at R&D and SG&A on a consensus basis, we came in below what was expected from consensus. But for now, we want to keep our SG&A and R&D the same. And then if we see that we are not spending to that level, we can make an adjustment to that and provide that in -- on another call when we give the year-end guidance.

Operator

And our next question comes from Mario Corso at Mizuho USA.

Mario Vincent Corso - Mizuho Securities USA Inc., Research Division

I guess, as a corollary to the wholesaler inventory moves, were there any associated price increases across the Santarus line or on XIFAXAN? I guess, secondary to that, on the R&D side, was there anything unusual in the quarterly number there, on the $52 million? Or is that a decent run rate for now? And then, on RELISTOR, I'm just wondering how you're thinking about the FDA's response, 30 days post the panel. I mean, are you expecting a concrete yes or no? Or could it be a "Well, we need to discuss the recommendations from the panel and come to some kind of agreement"?

William P. Forbes

Mario, this is Bill, and I'll take your last question first, I guess. And regarding the RELISTOR panel, I think as everybody understands, right now, that's going to -- it's scheduled for June 11 and 12. And we anticipate that the Federal Register will have an announcement on this early next week if, in fact, it gets confirmed at that point. So somewhere on Monday, Tuesday, you may see something in the Federal Register announcing that advisory committee. But as far as the response to our formal appeal on RELISTOR and the sNDA for non-cancer pain, I think that's hard to really know at this point in time whether or not that would come with a response that either has complete directions and finality to it or if they would actually be something that they might ask to go back to the GI Division for discussion. So I think that's a little bit of the unknown that we have right now of -- around this process. And I'm sorry if we're not answering your question more directly, but I think most people that have followed this story realize that we're in an unusual situation. So I think, for right now, the best I can tell you is I can't really know for sure exactly how that response will play out. I just know that the ODE3, which is the department that oversees GI amongst other therapeutic departments, will give us a response at that point in time.

Adam C. Derbyshire

And Mario, about your question on the price increase, we did have an 8% price increase in the quarter on UCERIS. And then, in terms of activity within R&D, the -- as you pointed out, the GAAP number is $50 million -- rounds to $53 million and the non-GAAP number is $36 million. And the difference in those had to do with the RedHill Biopharma deal, the encapsulated bowel prep and then a payment to -- for patent issuance, a payment to Cipla and then a payment to Dr. Falk Pharma related to the budesonide NDA being accepted. So that was about $14.4 million that occurred in the $53 million in the quarter that's one-time.

Operator

And our next question comes from Annabel Samimy at Stifel.

Joshua Riegelhaupt - Stifel, Nicolaus & Company, Incorporated, Research Division

This is Josh Riegelhaupt in for Annabel. So we've heard anecdotally a little bit that there's been some troubles with switching of UCERIS in the pharmacies for Entocort. I was wondering if you had any commentary on that and kind of what you're doing to fight that. And then next, I was wondering if -- now that you have Santarus on the books for a couple of quarters, even though you didn't guide to any of your finances, if there's any cost synergies that you think might help you throughout the year.

Adam C. Derbyshire

Sure, I can handle your cost -- or cost -- the cost synergies are built into our full year guidance. But as you can see, R&D and SG&A are both coming down as a percent of sales. So you can see that we're able to realize those synergies. And then, in terms of switching, Carolyn, do you want to...

Carolyn J. Logan

I have not heard that back from the field that it's a big issue. And in fact, for March, we had the highest number of riders for, I think, all across the board, for XIFAXAN, for APRISO and for UCERIS. So the highest number of riders is usually a good indicator of good uptake. And we had -- I mean, we had all-time highs several weeks during that timeframe as well. So I don't think it -- I don't think our field management team thinks that's a huge issue at this point. I'm sure it could happen on occasion, but that has not risen to a senior management level in this organization. And certainly, the all-time rider highs and the all-time highs on prescription numbers wouldn't indicate that.

Operator

And our next question comes from Gary Nachman at Goldman Sachs.

Roger Kumar - Goldman Sachs Group Inc., Research Division

This is Roger Kumar stepping in for Gary. Just had a couple ones here. First, I was wondering if you guys could maybe quantify on a dollar basis how much inventory contributed to maybe UCERIS and how much drawdown contributed to XIFAXAN? And also just wondering if you guys could comment on where you guys are with the integration of the sales force. And how long should we expect to see an impact to XIFAXAN in HE and primary care and also with UCERIS with the Salix sales force?

Adam C. Derbyshire

Yes, so I'll handle your first question. So if you look at the run rate as a surrogate for that and you do the math, what you'll come up with on the Santarus products that upon shipment, it was roughly 4 months of inventory. And then, obviously, that's been working down ever since. So again, at the end of second quarter, we would expect to be in that 2- to 3-month range. And then, if you look at the run rate for XIFAXAN and apply it to what was shipped, so the run rate would be about $175 million and we shipped $114 million. So that would imply that 1.5 months or so of inventory was -- came down.

Carolyn J. Logan

And on the sales force, we have fully integrated and our -- all of our sales people now are trained and in position. March was the first full month that we had everybody trained and everybody out there, with few exceptions. There are always vacant territory here or there or someone out having a baby, something like that. But for the vast majority of the field sales force, it was in position for March for the first time this year. So we have said that we thought we would start to see an inflection point across the board, really, on HE and primary care, as well as the increased attention to UCERIS probably in the second half of this year, maybe more towards third quarter. Historically, some of the summer months are lighter for us. But then, we usually have a pretty robust third quarter and fourth quarter, especially for XIFAXAN. So we would expect that to continue this year.

Operator

[Operator Instructions] We'll take our next question from Tim Lugo with William Blair.

Tim Lugo - William Blair & Company L.L.C., Research Division

I'm just curious as to why the adjustment of shares expected now, I believe, the last time you reported, in late February, your share price was around $107 and you actually boosted the non-GAAP EPS estimate.

Adam C. Derbyshire

I'm not sure if I understand your question, Tim.

Tim Lugo - William Blair & Company L.L.C., Research Division

I believe you're taking -- you're assuming increased shares for the remainder of the year and taking down...

Adam C. Derbyshire

Yes, when that calculation is done, it's not a spot price. It's an average of the period you're comparing it to. So even though our stock may have been trading at $1.07, then -- but we were applying it to a period and so we were probably tracking what the average was January through February and that was in $107. So we really don't try to be in the business of predicting what our stock price is going to do until we -- at the point in time when we're providing the guidance, we peg it to roughly where the stock is trading at that point in time and depending on how much visibility we have into the average stock price for the period we're addressing, we provided the guidance based on that. So that's why, originally, we were saying 72 million for the quarter. It bumped up to 74 million because the average price for the period was higher. Previously, for year end, our fully diluted share count was 73.5 million. Now, we bumped that up to 75 million based on what we know today.

Tim Lugo - William Blair & Company L.L.C., Research Division

Understood. And maybe can you just address the script trends? I know year-over-year the comps looked great. Quarter-over-quarter, it did look a bit down. Can you just maybe discuss how you expect scripts to look until we see the TARGET 3 data?

Adam C. Derbyshire

We're actually pretty pleased. I mean, sequential growth for -- and keep in mind, this was a quarter that was highly disruptive. I mean, we had -- all of our reps were getting trained on Santarus' products, all of Santarus' reps on our products. New reps coming in, getting trained on all the products, the National Sales Meeting, which was a full week and just jelling as a group. And we still have some vacancies with some training occurring. So a very disruptive month. But even with that, sequential growth of XIFAXAN was 2%, sequential growth of APRISO was 3%. Sequential growth for UCERIS was 4%. So we feel very good about that, especially in a quarter where there was a lot of disruption. And so we expect in the second half of the year, the digestive disease specialty sales force of 161 representatives, the new gastroenterology sales force named Willow of approximately 100 sales representatives will kick in very nicely.

Operator

And we'll take our final question from David Buck at Buckingham Research.

David G. Buck - The Buckingham Research Group Incorporated

Okay. Adam, just in terms of the overall revenues, I know, you gave for a couple of products, I'm wondering if you have an analysis of what the net impact of inventory changes was overall in the -- it looks like versus our number of $367 million and around $371 million, I guess, for consensus, the $384 million was above, but I'm wondering how much of that was inventories. And more importantly, for Carolyn, I guess, how are we going to be measuring the success of the cross-selling efforts? Is there a target that you have for how much of primary care XIFAXAN prescriptions you're getting and -- as well for UCERIS? And can you give us some metrics that you're tracking internally and how we should measure this success?

Carolyn J. Logan

I'll answer your second question first. Yes, internally, our sales and marketing people have a -- excuse the sirens. I'm not sure what's going on outside our window. You would think we were in New York City. But yes, they have all kinds of internal metrics depending on the brand. If the -- if market share's appropriate, they're looking at how we're growing market share, they're looking at how we're growing prescriptions. We certainly have corporate objectives for our key promoted brands, target prescription numbers. And then, we also watch new prescribers very closely, because generally, the more prescribers you have, the more prescriptions you have. It's almost without fail. So we obviously want to get the people that are using the product to use more, but bringing new riders into the fold is very important. And of course, with XIFAXAN, with HE, keeping patients on the drug, keeping them out of the hospital, keeping them from having repeat recurrences is very important not only to us, but especially so to the patient. But yes, there is -- I mean, we look at data just about every way you could possibly look at it. But as an overall riding theme, we have corporate prescription goals because our board is very well aware that revenues can fluctuate but that prescriptions really carry the day. And so to have a 19% growth on prescriptions for XIFAXAN 550 for about a $700 million brand is something we're pretty excited about. So yes, for all of that, we do have a lot of metrics for measuring.

Adam C. Derbyshire

And David, on your question regarding the revenue that's made up more of inventory than demand for GLUMETZA and UCERIS, by the end of the quarter -- end of March that is, it roughly represented about 2 to 3 months of inventory, which is exactly where we want to keep it. And then, for XIFAXAN, it represented a decrease in inventory of a little over a month.

David G. Buck - The Buckingham Research Group Incorporated

Okay. So I'll guess have to extrapolate the dollar figure. But just one final one. The impact on gross margin was mix related, as you mentioned, from the Santarus products. What should the gross margin swing be as we look at second quarter and third quarter?

Adam C. Derbyshire

Yes, we're expecting gross margins -- we're still anticipating gross margins to be 80% for the full year.

David G. Buck - The Buckingham Research Group Incorporated

Which means they need to be higher, I guess, in second or third quarter or...

Adam C. Derbyshire

Correct. Second, third and fourth, exactly.

Carolyn J. Logan

Yes. Any time XIFAXAN is a larger percentage of the revenue mix, we're going to have higher margins.

Adam C. Derbyshire

Right.

Operator

And that does conclude the question-and-answer session. I'll now turn the call back to Carolyn Logan for any closing remarks.

Carolyn J. Logan

Yes. Just want to say thank you for joining us today and we look forward to speaking with you on our next call. Have a great evening. Thank you. Bye.

Operator

And that does conclude today's conference. We thank you for your participation.

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