Salix Pharmaceuticals Ltd. Earnings Call Insights: Fulyzaq and Apriso

Salix Pharmaceuticals, Ltd. (NASDAQ:SLXP) recently reported its first quarter earnings and discussed the following topics in its earnings conference call.

Fulyzaq

Ami Fadia – UBS: I have got three questions. Firstly on FULYZAQ, could you give us some more details around the number of reps you’ve hired and some of your plans with respect to the doctors you are going to target, the managed care coverage for the product? And in relation to that how should we think about the progression of SG&A as the quarter’s progress? Then I’ve got two other questions.

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Carolyn J. Logan – President and CEO: I’ll start off with your first question and then I am sure Adam will comment on the last portion of it. One of our sales forces, which is approximately a 100 representatives will have a certain number of target for each representative and then we have hired some HIV therapeutic specialist for the major HIV markets where there are so many physicians concentrated and patients concentrated. Our initial talks with payers we hear from our national account management group who runs the managed markets areas, they tell us they don’t anticipate any problems with coverage. It appears as though this is a category of drug for these patients of course who are in great need of therapy where they are very lenient in being able to cover drugs. So, we don’t really anticipate any coverage issues.

Adam C. Derbyshire – EVP, Finance and Administration, and CFO: Ami regarding the progression of SG&A. For second quarter 2013, we actually expect SG&A to be flat over first quarter and then for it to come down in the second half of the year. So, our guidance for 2013 non-GAAP SG&A is $267 million. On a GAAP basis it is $291 million.

Ami Fadia – UBS: The other question is on the EIR formulation. You’d previously expected to start the studies in the first half what changed – and I wasn’t aware that there was a discussion within the FDA with respect to the endpoints. If you could give us some more color around that? And then just the third question if you could give us the details around the product sales for RELISTOR, APRISO or MOVIPREP etcetera?

William P. Forbes – EVP, Research and Development, and Chief Development Officer: This is Bill Forbes. Let me start with taking your question regarding EIR and obviously since we are developing in Crohn’s. I certainly don’t intend to speak on behalf of the FDA. But one of the areas that they have mentioned certainly to us and to other companies and I think they’ve also mentioned publicly a little bit is around they are concerned using the Crohn’s disease activity index, in general. The Crohn’s disease activity index is actually as the name would imply an index of eight different components. The ones that are awaited the most or contribute the most to significant are actually abdominal pain, liquid stool frequency and general wellbeing. Those three actually often times drive the overall Crohn’s disease activity index score which is what is used and has been used for primary endpoints in clinical trials. What the division – the GI division has made very clear to us is that they have every intention to work collaboratively with the EU to make sure that we move things forward in a meaningful way for Crohn’s studies in general, but that really – drugs that are being developed in Crohn’s could be effective on healing endoscopically seen healing of the GI tract or they could be efficacious as far as symptoms, and what they are looking for is to start to move towards understanding better when drugs are approved, which drugs will do, which of those two components either healing or symptom relief and what the physicians and the patients can count on for them. So, given that we’ve had some discussion with the GI division. I think we’re very close right now to coming to a conclusion. They’ve come up with and we’ve been able to show data around the response in the Phase 2 program, which has over 400 patients in it, and I think right now using some of the components of the Crohn’s Disease Activity Index, we’re going to be able to accommodate both the European authorities use of that overall index, which is what we envision to begin with as well as to satisfy analysis for the GI division looking primarily at probably abdominal pain and liquid stool frequency. We also have an interest in the general well-being score that the patients are reporting as well, but I think the GI division has less of an interest in that particular component based on our discussion. So, I mean that’s probably perhaps the best description I can give you from our interactions with the GI division, but again, I don’t think this is new to some of the companies that have been discussing this with the GI division. I’ll go through the individual product revenue for the quarter, our IBD, which is our inflammatory bowel disease and the vast majority of that is APRISO as you know, that’s $18 million. XIFAXAN, that was in the press release of $153 million, our bowel cleansing franchise was $14 million and RELISTOR rounds up to $8 million, it’s $7.6 million.

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Apriso

Andrew Finkelstein – Susquehanna Financial: Maybe you can talk a little bit about APRISO; we’ve seen some upturn in the scripts reported by MS, since one of your competitors started transitioning patients to a new formulation? And also, if you could talk about your comfort with the patent situation with that product and what the risk might be if one of the other products in the category goes generic at some point in the future?

Carolyn J. Logan – President and CEO: That’s a multi-part question, so let me start back at the beginning on why the recent uptick in scripts. I think everybody is probably aware that Warner Chilcott discontinued Asacol 400 milligram tablet, and that was the market leader. They have introduced a product called DELTACO. But in the switching process patients that were on Asacol 400 milligram tablet the maintenance patients would need to be switched to another product. So for maintenance patients, while all patients need to switched, but we’re only indicated for maintenance. So those are the only patients that we are trying to get. But it’s just a great opportunity for us because they’re going to be switched to something. So we’re in there trying to get our fair share of maintenance patient switch to APRISO and we’re having some success with that. We’ve also got excellent managed care coverage. We’ve got very good formulary placement and our federal accounts group, which focuses on VA Department of Defense they have a very high APRISO market share. So it’s physicians rotate through VA’s, which often times they do especially in fellowship programs they get a lot of exposure to APRISO and see how the patients respond and how efficacious the drug is, and so all of that is coming together, but we are clearly benefitting from Warner Chilcott discontinuing Asacol 400 milligram. Did that answer your question around that part of your question?

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Andrew Finkelstein – Susquehanna Financial: Yeah. Then in terms of the IP for you, and how you could see the category changing if there were a generic to one of your competitors at some point down the road?

Adam C. Derbyshire – EVP, Finance and Administration, and CFO: Well, as you know for APRISO we do have a patent listed in the Orange Book to 2018. We also have additional patents that we expect to issue and can be listed that have a much longer life than 2018. You also are aware that we have a P4 challenge related to APRISO, so we are working through that and there was some fairly significant news today for Lialda, which is the other once a day product in the market, although it’s approved for induction of remission and maintenance of remission. So we would expect that product to stay branded for a considerable period of time. So we don’t see anything in the 5-ASA, specially the 5-ASA once-a-day maintenance of remission market that would threaten APRISO.

Carolyn J. Logan – President and CEO: We could probably add, when COLAZAL went generic, you did not see managed care or physicians switching patients on other branded drugs to generic (indiscernible).