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Salix Pharmaceuticals Reports 2Q2012 Results

Net income on a non-GAAP basis, excluding the loss on extinguishment of debt and non-cash adjustments related to the repurchase of a portion of our 2028 Notes in March 2012, the difference between income taxes paid and income taxes expensed, and non-cash depreciation, amortization, stock-based compensation and convertible debt interest expense, was $50.1 million, or $0.79 per share, fully diluted, for the three-month period ended June 30, 2012 and $94.8 million or $1.48 per share, fully diluted for the six-month period ended June 30, 2012. 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. A reconciliation of our non-GAAP measures to the comparable GAAP measures is provided in the accompanying financial table.

Cash and cash equivalents were $715.9 million as of June 30, 2012.

Adam Derbyshire, Executive Vice President and Chief Financial Officer, stated, “XIFAXAN 550 mg continued to perform well during the second quarter of 2012. During the quarter our XIFAXAN prescription business, comprised of XIFAXAN 200 mg tablets and XIFAXAN 550 mg tablets, demonstrated impressive growth, on a milligram basis, of 22% compared to the second quarter of 2011. APRISO also demonstrated strong prescription year-over-year growth of 27% for the second quarter of 2012 compared to the second quarter of 2011. RELISTOR prescriptions increased 89% year-over-year for the second quarter of 2012 compared to the second quarter of 2011, when our commercial team launched the product.

“We are updating our estimate of 2012 financial guidance. Prior 2012 financial guidance incorporated anticipated costs and revenue associated with the expansion of our sales force and incremental RELISTOR sales that would have been triggered by a July 27, 2012 FDA approval of the expanded indication for RELISTOR subcutaneous injection. Due to the receipt of a Complete Response letter on July 27, 2012, our updated estimate of 2012 financial guidance does not incorporate these anticipated RELISTOR-related costs and revenue. Additionally, our updated estimate of 2012 adjusted net income includes the effect of the March 16, 2012 placement of $690 million of convertible senior notes and adjustments relating to the impact of the following non-cash items: loss on extinguishment of debt, depreciation, amortization, stock-based compensation, convertible debt discount amortization and the difference between income taxes paid and income taxes expensed. Reconciliation to GAAP guidance is in the table following this paragraph. Our estimate of 2012 total Company product revenue remains approximately $735 million, representing 36% growth over 2011 revenue. However, we are increasing our estimate of 2012 adjusted net income to approximately $183 million or $2.86 per share, fully diluted on a non-GAAP basis for the full year ending December 31, 2012.

2012 Guidance      
(In millions except per share data) 2012 2012 2012
 

GAAP

Guidance

Adjustments

As

Adjusted

Revenues:
Net product revenues $ 735     $ 735  
Costs and Expenses:
Cost of products sold 145 145
Amortization of product rights and intangible assets 42

(42)

 

-
Research and development 136

(7)

 

129
Selling, general and administrative   258    

(22)

 

  236  
Total costs and expenses 581

(71)

 

510
 
Income from operations 154 71 225
Loss on extinguishment of debt

(14)

 

14
Interest expense

(57)

 

37

(20)

 

Interest and other income   12    

(9)

 

  3  
Income before income tax 95 113 208
Income tax expense   43    

(18)

 

  25  
Net Income $ 52   $ 131   $ 183  
 
Income per share, basic $ 0.90   $ 2.26   $ 3.16  
Income per share, diluted $ 0.81   $ 2.05   $ 2.86  

Shares used in computing net income per share, basic

 

  58     58     58  

Shares used in computing net income per share, diluted

  64     64     64  

“The current annualized run rates, based on dollarizing the June 2012 prescription data for XIFAXAN, MOVIPREP/OSMOPREP, APRISO, RELISTOR (U.S.), and our ’other products’, are approximately $468 million, $94 million, $73 million, $25 million, and $41 million, respectively. In line with the full year 2012 guidance provided above, for the third quarter of 2012 we anticipate total Company product revenue should be approximately $185 million and adjusted net income should be approximately $44 million, or $0.69 per share, fully diluted, on the non-GAAP basis described above.”

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