Salix Pharmaceuticals: What The Gut Tells You

That Full Feeling
Salix Pharmaceuticals (SLXP ) is the small fry in gastrointestinal drugs, with Johnson & Johnson (JNJ ) and GlaxoSmithKline (GSK ) the biggies. But Salix is a pure play in that growing market, says Peggy Farley of Ascent Capital Management, which owns shares. Its chief product, Colazal, treats colitis -- inflammation of the colon. Its other drug, Xifaxan, is for travelers' diarrhea. On Oct. 3, Salix completed a purchase of InKine Pharmaceutical, whose products diagnose and treat stomach ills. InKine's new drug is a tablet used prior to colonoscopy. Farley says InKine should add at least $60 million to Salix' revenues and 2 cents a share to earnings. On Nov. 8, Salix posted third-quarter results that beat analysts' forecasts, driving the stock up from 17.40 to 19.44 that day. Farley sees the stock at 24 by the end of 2005 and 36 in 12 months. Deborah Knobelman of Piper Jaffray (PJC ) just raised her 2005 earnings estimate from 61 cents to 69 cents a share on sales of $151 million, including InKine's sales. In 2004 it earned 18 cents on sales of $105 million.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

BY GENE G. MARCIALBy Gene G. Marcial

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