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Salix Pharma Hits A New High On Bullish Clinical-Trial Data

Biotech and pharma stocks rallied Tuesday as several leading players reported good news amid a buoyant market day.

IBD 50 specialty drugmaker Salix Pharmaceuticals (SLXP) shot up to a new high of 143.98 before closing up 13.5% at 140.02. Salix said Tuesday that sufferers from irritable bowel syndrome with diarrhea showed statistically significant improvement in symptoms when they took its drug Xifaxan in a phase-three clinical trial.

Xifaxan is already Salix's best-selling drug, sold for travelers' diarrhea and hepatic encephalopathy. Salix tried to get the drug approved for IBS back in 2011, but the FDA rejected it, sending Salix back for more research.

Salix's statement didn't mention an FDA refiling, but Leerink analyst Jason Gerberry wrote in a research note Tuesday that the company plans to file in late August and launch the new indication for the drug early next year. Gerberry forecast that the new label will add $700 million in annual sales by 2019.

Sterne Agee analyst Shibani Malhotra added that the new revenue should come at very low cost, since Salix can deploy the large sales force that it already has in place.

Generic-drug maker Akorn (AKRX) rose nearly 3% to 34.19, vaulting to a new high of 37.08 intraday. Needham analyst Elliot Wilbur raised his price target to 40 from 30. He cited last week's news that Israeli rival Taro Pharmaceutical Industries (TARO) had increased the price of its topical generics, including a steroid called clobetasol that Akorn also sells.

"If AKRX simply matches Taro's increases (500% to 2000%) and no other dynamics change (volume remains stable), the impact to AKRX's business could be game-changing — potentially generating pretax margin of $290.0 million ($1.45 in EPS)," Wilbur wrote.

Meanwhile, big French pharma Sanofi (SNY) plans to lift its stake in Regeneron Pharmaceuticals (REGN) to 22.5% from 20.5%, an SEC filing revealed. Sanofi and Regeneron are partners in developing several monoclonal antibodies, including the hot new anti-PCSK9 cholesterol-fighting group. The alliance allows Sanofi to buy up to 30% of the smaller company. Regeneron's stock leapt 7% to close at 303.39.

Other high-rated drug stocks rallied with no particular accompanying news. Teva Pharmaceutical (TEVA) rose 2% to 53.56. Jazz Pharmaceuticals (JAZZ) climbed 3% to 151.46, but on light volume.