Salix: Containing Our Frustration – Seeing Steep Selloff As A Bit Overdone, Says Brean Capital


In a research report released today, Brean Capital analyst Jonathan Aschoff reaffirmed a Buy rating on Salix Pharmaceuticals (NASDAQ:SLXP) with a price target of $150, following the company’s third-quarter results, posting revenue of $355 million, missing consensus of $392 million and Salix’s guidance of $395 million.

Aschoff wrote, “As Salix addresses its wholesaler inventory issues, the company revised downward its full year 2014 revenue and earnings guidance, with full year net product revenue expected to be $1.4 billion, down from $1.6 billion. Recall that destocking of wholesaler inventory levels was the reason given for missing consensus for the past few quarters, and now Salix found that as of September 30, 2014, wholesalers had 9 months of inventory for Xifaxan 550 and Apriso and 5 months for Uceris, which are significantly higher than the company’s intended 3 months of wholesaler inventory levels and likely explains the CFO’s departure, in our view. Salix will enter into distribution services agreements with its principal wholesalers for each of its products in order to have better visibility into wholesaler inventory levels and help the company better forecast product revenues. We expect continued inventory destocking over the next few quarters until inventory levels come down to the targeted 3 months level.”

According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Jonathan Aschoff has a total average return of 11.2% and a 57.6% success rate. Aschoff has a 54.2% average return when recommending SLXP, and is ranked #250 out of 3364 analysts.