Salix Pharma: Still Has Room To Run

| About: Salix Pharmaceuticals, (SLXP)

Salix Pharma finished 2011 on a hot streak, up over 60% in the fourth quarter as the company’s drugs continue to penetrate the market.

The company develops and markets prescription pharmaceutical products for the prevention and treatment of gastrointestinal diseases. Salix's strategy is to in–license late–stage or marketed proprietary therapeutic drugs, complete any required development and regulatory submission of these products, and market them through the company's gastroenterology specialty sales and marketing team.

Salix’s recent quarterly results have been strong. On November 8, the company reported Q3 results. Total product revenue was $146.2 million, an 81% increase compared to $80.6 million for the third quarter of 2010. The company also boosted 2011 guidance. Salix said that its new estimate of 2011 total product revenue is approximately $535 million. The revised 2011 revenue guidance represents 59% growth over 2010 revenue. Salix also noted because of net operating loss carryforward, it anticipates recognizing an effective tax rate of less than 10% for the full year 2011.

The company also added commentary about its products:

Xifaxan continues to grow sequentially, with prescriptions, on a milligram basis, increasing 6% for the third quarter of 2011 compared to the second quarter of 2011. Xifaxan prescriptions exceeded one billion milligrams for both August and September. Apriso also continued to exceed the company's expectations during the quarter. Apriso prescriptions increased 7% during the third quarter of 2011 compared to the second quarter of 2011. Relistor prescriptions increased 18% during the third quarter of 2011 compared to the second quarter of 2011.

Based on recent results and its valuation, SLXP has more room to run. SLXP is trading for just 17.2x FY12 EPS despite projected revenue growth of nearly 36% in 2012. SLXP also might have new products online soon. On December 14, the company announced that it submitted to the FDA a New Drug Application for Crofelemer for the proposed treatment of HIV-associated diarrhea.

One question that has come up is its inclusion on on December 22. However, it seems unlikely that this is a fair inclusion as it has a number of major institutions holding the stock and its coverage by nearly 20 analysts.

According to the website, is a public service dedicated to ending penny stock schemes. The website further states that the people behind it do “not short stocks.” However, funding for the website has to come from somewhere. The reasons and the motives behind the 50+ stocks mentioned on the website are not quite clear. What is clear though is that the website is hurting the reputation of the companies mentioned on the website. None of the stocks mentioned are appreciating this kind of publicity. There also may be some hidden motives that are not being disclosed. For example, there may be compensation that occurs that are not disclosed. However, I am not a legal expert and do not how this works.

Here are two other stocks trading on one of the three major exchanges that have received questionable mentions on the website.

Carver Bancorp (NASDAQ:CARV) – The company was mentioned for whatever reason on the PUMPS & dumps website on December 5. Carver Bankcorp is Nasdaq-listed and has been public for nearly 20 years. Carver Bancorp is the holding company for Carver Federal Savings Bank. The holding company conducts business as a unitary savings and loan holding company, and the principal business of the holding company consists of the operation of its wholly-owned subsidiary, Carver Federal. Carver Federal was founded in 1948 to serve African-American communities whose residents, businesses and institutions had limited access to mainstream financial services. The bank remains headquartered in Harlem, and predominantly all its nine branches and nine stand-alone 24/7 ATM Centers are located in low- to moderate-income neighborhoods. Many of these historically underserved communities have experienced unprecedented growth and diversification of incomes, ethnicity and economic opportunity, after decades of public and private investment.

Vringo (VRNG) – Vringo received a mentioned on the PUMPS website on December 21. It is listed on the American Stock Exchange and has been public for about 18 months. With its award-winning video ringtone application and mobile software platform, Vringo transforms the basic act of making and receiving mobile phone calls into a highly visual, social experience. By installing Vringo's application, which is compatible with more than 200 handsets, users can create or take video, images and slideshows from virtually anywhere and make it into their personal call signature. Vringo's patented VringForward technology allows users to share video clips with friends with a simple call. Vringo has launched its service with various international mobile operators and dozens of content partners, and maintains a library of more than 5,000 video ringtones. One of Vringo’s products, the Mobile Video Remix, was launched with rapper T-Pain.

Disclosure: I am long SLXP.

Additional disclosure: Additional disclosure: I receive compensation for providing research coverage. We agreed to provide coverage for one sponsored article on the topic. The views expressed are purely our own.

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