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Salix Pharmaceuticals Ltd. Reports Operating Results (10-Q)

August 09, 2012 | About:
10qk

10qk

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Salix Pharmaceuticals Ltd. (SLXP) filed Quarterly Report for the period ended 2012-06-30.



Highlight of Business Operations:

For the six-month periods ended June 30, 2012 and 2011, 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 six-month periods ended June 30, 2012 and 2011 was 15.3% and 14.5% for rebates, chargebacks and discounts and was 3.1% and 3.4% for product returns excluding the Colazal return reserve, respectively.

Costs and expenses for the three-month period ended June 30, 2012 were $137.0 million, compared to $102.3 million for the corresponding three-month period in 2011, and $269.7 million for the six-month period ended June 30, 2012, compared to $200.8 million for the corresponding six-month period in 2011. Higher operating expenses in absolute terms were due primarily to increased selling, general and administrative costs due to the acquisition of Oceana in December 2011 and increased cost of products sold related to the corresponding increase in product revenue. These increases were partially offset by decreased research and development costs due to the completion of several clinical programs in 2011.

Cost of products sold for the three-month period ended June 30, 2012 was $33.3 million, compared with $25.2 million for the corresponding three-month period in 2011. Cost of products sold for the six-month period ended June 30, 2012 was $67.4 million, compared with $43.8 million for the corresponding six-month period in 2011. The increase in cost of products sold in absolute terms was due to the increase in net product revenues discussed above.

Gross margin on total product revenue, excluding $11.3 million and $2.9 million in amortization of product rights and intangible assets for the three-month periods ended June 30, 2012 and 2011, respectively, was 81.6% for the three-month period ended June 30, 2012 and 81.0% for the three-month period ended June 30, 2011. Gross margin on total product revenue, excluding $22.7 million and $5.1 million in amortization of product rights and intangible assets for the six-month periods ended June 30, 2012 and 2011, respectively, was 80.8% for the six-month period ended June 30, 2012 and 81.7% for the six-month period ended June 30, 2011. The period-to-period changes in gross margin are due to the product revenue mix in the respective periods.

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 collaborators. 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, 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 the Company 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. On March 16, 2012 the Company closed an offering of $690.0 million in convertible senior notes due March 15, 2019 (2019 Notes), with net proceeds of approximately $668.3 million. As of June 30, 2012, we had an accumulated deficit of $105.5 million, and $716 million in cash and cash equivalents, compared to $292.8 million as of December 31, 2011.

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