This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Investors Expect too Much of Salix

Stocks in this article: SLXPABBVJNJWMGIACHNGSKSNTS

NEW YORK (TheStreet) -- It's become cliched to talk about Wall Street's hatred for uncertainty. But that's only when it's convenient. The Street also shamelessly discriminate with what it chooses to fear and/or ignore. In the case of specialty drug company Salix Pharmaceuticals (SLXP), whose stock is up 115% in the trailing twelve months, there's no question the Street cares very little about the risks that still surrounds this company.

While Salix continues to be an incredible growth story, the company is marred in a battle with the Food and Drug Administration over a recent rejection of a subcutaneous form (injection) of key drug Relistor, which is used to treat constipation -- the type caused by pain medicines called opioids. While Salix has filed an appeal to the rejection, a response won't be issued by the FDA until March 2014.

Plus, there's also the risk associated with the company's rifamycin-based antibiotic drug Xifaxan, which is used to treat (among other things) irritable bowel syndrome and poor liver conditions. Although Xifaxan is posting some gaudy numbers, including 20% growth in the third quarter, the fact that this one drug accounts for 70% of Salix's total revenue is -- as I see it -- cause for some anxiety.

[Read: Digging Into the Dow; Buyable Oil Stocks: Jim Cramer's Best Blogs]

I will grant that Salix is not alone when it comes to this sort of "product overreliance." Although companies strive for better diversification, very rarely is it ever achieved in Big Pharma. AbbVie (ABBV), which I discussed recently, takes in 60% of its global revenue from rheumatoid arthritis drug Humira. The same goes for Johnson & Johnson (JNJ), whose cancer drug Zytiga does all of the heavy lifting -- growing in the recent quarter by 70% year over year.

But unlike Johnson & Johnson, which also has strong devices business, not to mention growing segments like nutrition and orthopedics, Salix still has to prove the lasting power of Xifaxan, which is still in Phase III research for IBS. What this means is that not only does Salix have to rely on positive data during the study, but that data has to be convincing enough for the FDA to grant approval. And this is while the company waits on appeal response for the Relistor.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,715.22 +253.90 1.54%
S&P 500 1,960.34 +33.23 1.72%
NASDAQ 4,470.1440 +87.2970 1.99%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs