Salix to buy rights to drug

Treatment would reduce bleeding

Salix Pharmaceuticals will pay up to $14 million to broaden its lineup of products and prepare for the possibility that its best-seller will face generic competition as early as January.

The company announced Tuesday that it acquired the rights to market, sell and distribute a medicine that promises to reduce life-threatening bleeding in the esophagus, a complication of late-stage liver cirrhosis. The drug is being developed by Debiopharm Group, a drug development company based in Switzerland.

The treatment, called Sanvar, has yet to receive U.S. regulatory approval, and the type of bleeding it controls is considered rare. The drug, an infusion that is being tested in U.S. patients, could become available by the end of next year.

It would be the first treatment available to emergency room physicians to gain time until a burst blood vessel can be repaired.

The Food and Drug Administration has granted Sanvar protection against competition because the drug would treat a condition that affects fewer than 200,000 Americans.

Sanvar is expected to generate up to $30 million in annual sales.

Salix is aiming to reduce its reliance on Colezal, a treatment for ulcerative colitis that is projected to make up about 54 percent of the company's expected $155 million in annual revenue this year.

But Colezal stands to lose its market exclusivity in January, which would expose it to generic competition.

Since 2004, Salix has increased the number of gastrointestinal treatments it sells to eight. A ninth product received regulatory approval in August, but it is not on the market yet. Sanvar would be No. 10.

"This appears to be a modestly interesting opportunity," said Robert Hazlett, an analyst with BMO Capital Markets who tracks Salix. "But given the questions concerning Colezal, it makes sense for the company to diversify."

Based on the considerable amount of test data available for Sanvar, Salix thinks the drug's chances for regulatory approval are good, said Adam Derbyshire, Salix's chief financial officer.

It also has the potential to broaden Salix's sales to hospitals, Derbyshire said.

Colezal and Xifaxan, an antibiotic approved for traveler's diarrhea, are mostly sold through pharmacies and mail orders.

"We haven't had much exposure [in hospitals] before," Derbyshire said.

Based on Sanvar reaching regulatory and sales milestones, Salix agreed to pay Debiopharm up to $14 million.

Debiopharm specializes in developing drugs, but has no salespeople, said Jeff Skinner, Debiopharm's associate director for business development. The company is also working on treatments for cancer, hepatitis and Alzheimer's disease.

Salix shares, which are down 27 percent this year, closed at $12.87, down 50 cents.