Plagued By Inventory Problems, Salix Pharmaceuticals, Ltd. Finally Brings In Advisors to Explore Sale

January 21, 2015
By Mark Terry, BioSpace.com Breaking News Staff

Raleigh, N.C.-based Salix Pharmaceuticals, Ltd. has hired investment bank Centerview Partners Holdings LP to help the company assess its options for a potential sale.

In November 2015, Salix was close to finalizing an acquisition agreement with Allergan Inc. when due diligence showed problems with Salix’s inventory levels. During the company’s third quarter earnings call it also indicated that key drugs had piled up inventory. This and other information caused Salix stock to drop more than 49 percent day-over-day.

In addition to the failure of the Allergan deal, Salix ditched plans to acquire Italy’s Cosmo Pharmaceuticals SpA . The reasons for this were changes in U.S. regulations regarding tax inversion deals, where a U.S. company buys a foreign company, then shifts its headquarters to the country with the lower tax rate.

As a result of the inventory issues, the company’s Chief Financial Officer Adam Derbyshire resigned. Timothy Creech, a senior vice president, stepped up as an interim CFO.

In January the company announced that its chief executive, Carolyn Logan, was planning to retire. Effective Jan. 30, 2015, Tom D’Alonzo, chairman of Salix’s Board of Directors, will step up as acting chief executive officer. William Bertrand, Jr., senior vice president and general counsel, will be appointed acting chief operating officer, pending Salix hiring a permanent CEO.

“What Carolyn has accomplished in the 12-1/2 years she has led our Company is remarkable,” said D’Alonzo in a statement. “The Board extends Carolyn its deepest gratitude for taking Salix from an early-stage commercial company with a market capitalization of approximately $200 million, one product and less than $25 million in annual revenues, to a leading gastroenterology-focused specialty pharmaceutical company with a multi-billion dollar market capitalization, more than 20 products and over $1.0 billion in annual revenues.”

The company’s lead products are Xifaxan and Apriso. Xifaxan is an antibiotic used to fight bacterial infection in the intestines, such as for traveler’s diarrhea. Apriso is a medication for the treatment of ulcerative colitis.

Salix announced on Jan. 8, 2015, that the first patient had been treated in Phase 2 trials of Ruconest, a drug for prophylaxis in patients with hereditary angioedema (HAE). The study will look at HAE patients deficient in C1 inhibitor with a history of at least four attacks per month. The studies will be conducted in Canada, Europe, Israel and the U.S.

It’s not clear yet what recommendations Centerview Partners may make regarding a sale of Salix, or if they will recommend remaining independent. The market liked the news, however, jumping from a price of $117.65 on Jan. 16, 2015 to a current price of $126.06 this morning.

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