Salix Pharmaceuticals Ltd. Reports Operating Results (10-K)
Salix Pharm-ltd has a market cap of $2.73 billion; its shares were traded at around $49.45 with a P/E ratio of 21.2 and P/S ratio of 8.1.
Highlight of Business Operations:For the years ended December 31, 2011, 2010 and 2009, our absolute exposure for rebates, chargebacks and product returns grew primarily as a result of increased sales of our existing products, the approval of new products and the acquisition of products, and also as a result of the approval of generic balsalazide capsule products. Accordingly, reductions to revenue and corresponding increases to allowance accounts have likewise increased. The estimated exposure to these revenue-reducing items as a percentage of gross product revenue in the years ended December 31, 2011, 2010 and 2009 was 14.6%, 14.9% and 9.8% for rebates, chargebacks and discounts and was 3.9%, 2.9% and 5.5% for product returns excluding the Colazal return reserve, respectively.
Cost of products sold were $95.4 million, $68.7 million and $52.0 million for 2011, 2010 and 2009, respectively. Gross margin on total product revenue, excluding $10.9 million, $10.4 million and $11.5 million in amortization of product rights and intangible assets for 2011, 2010 and 2009, respectively, was 82%, 80% and 78% in 2011, 2010 and 2009, respectively. The increase in cost of products sold in absolute dollars from 2010 to 2011 was primarily due to increased sales of Xifaxan, Apriso, MoviPrep, and Apriso. Included in cost of products sold for 2010 are $6.2 million of costs related to Metozolv that was expensed. The increase in cost of products sold in absolute dollars from 2009 to 2010 was primarily due to increased sales of Xifaxan and Apriso, partially offset by decreased sales of OsmoPrep and MoviPrep. The lower gross margin in 2009 compared to 2010 is due to the product revenue mix in the respective periods. Cost of products sold does not include amortization of product rights and intangibles. Refer to Critical Accounting PoliciesIntangible Assets and Goodwill above.
Research and development expense was $104.4 million, $73.3 million and $89.5 million for 2011, 2010 and 2009, respectively. This represents a reduction in research and development expenses as a percentage of net product revenues to 19.3% for 2011 from 21.8% for 2010 and 38.4% for 2009, as we have significantly increased revenues over this period.
Selling, general and administrative expenses were $187.0 million, $156.1 million and $120.0 million for 2011, 2010 and 2009, respectively. This represents a reduction in selling, general and administrative expenses as a percentage of net product revenues to 34.6% for 2011 from 46.3% for 2010 and 51.5% for 2009, as we have significantly increased revenues over this period.
From inception until first achieving profitability in the third quarter of 2004, we financed product development, operations and capital expenditures primarily from public and private sales of equity securities and from funding arrangements with collaborative partners. Since launching Colazal in January 2001, net product revenue has been a growing source of cash. In August 2008 we closed an offering of $60.0 million in convertible senior notes due 2028 (the 2028 Notes), with net proceeds of $57.3 million. In November 2009 we closed an offering of 6.3 million shares of our common stock, with net proceeds of $128.4 million. On June 3, 2010 we closed an offering of $345.0 million in convertible senior notes due May 15, 2015 (2015 Notes), with net proceeds of approximately $334.2 million. As of December 31, 2011, we had $292.8 million in cash and cash equivalents, compared to $518.0 million as of December 31, 2010.
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