Salix shares fall six percent

08/08/2014 1:10 PM

08/08/2014 1:11 PM

Salix Pharmaceuticals shares were trading 6 percent lower Friday afternoon after the Raleigh drug company posted second-quarters results that failed to measure up to Wall Street's expectations.

Some analysts, however, continued to be bullish on the company's prospects.

Sterne Agee analyst Shibani Halhotra lowered her near-term earnings-per-share projections but continued to rate the stock a "buy."

"We are buyers as we view Salix as one of the best organic growth stories in the sector," she wrote.

She noted that demand for Salix's key products remains strong but "inventory swings" impacted the second-quarter results, which were released Thursday after the markets closed.

Salix's revenue rose 62 percent in the quarter and non-GAAP net income more than doubled, but analysts had loftier expectations. The year-earlier results didn't include sales of drugs that Salix acquired earlier this year with its $2.6 billion purchase of specialty drug company Santarus.

Analyst Tim Lugo of William Blair & Co. also maintained his "outperform" rating on the stock.

"Wholesale levels cause confusion for second straight quarter despite robust Xifaxan prescription growth," Lugo wrote. Xifaxan is Salix's best-selling drug.

Salix expects its merger with Cosmo Pharmaceuticals, a subsidiary of an Italian drug company, to close in November. That deal is expected to significantly lower Salix's tax rate; the combined company's headquarters will be in Raleigh.

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