Recent success at Salix Pharmaceuticals could have an unexpected consequence: The Morrisville company is becoming a more attractive takeover target for bigger drug companies, one analyst said.
"It's always been thought that Salix had takeover potential," said Scott Henry, who follows the company for Roth Capital Partners in Newport Beach, Calif. "All this positive news lately makes them even more appealing."
Salix shares surged 51 percent Monday after the company reported positive clinical trial results for one of its treatments for a type of gastrointestinal disease called irritable bowel syndrome. That follows last week's regulatory approval for a new drug to treat a stomach ailment that afflicts diabetics.
Henry speculates that the stock jump Monday was at least partly a bet that the latest news will attract the interest of larger pharmaceutical companies seeking promising new products.
The irritable bowel syndrome drug will give Salix a potential blockbuster, with a market worth $1 billion or more, Henry said. Salix plans to seek regulatory approval for the drug in the first half of 2010.
Positive news will typically attract more Wall Street attention and possible suitors, said Adam Derbyshire, Salix's chief financial officer. "It's always out there when you're a publicly traded company" and Salix's board would have a fiduciary duty to consider any acquisition offers.
Wall Street speculation aside, Salix can easily "continue thriving on its own," Henry said. It continues to add new products and is successfully marketing them to physicians and patients.
Salix recently expanded its sales force, adding 64 more drug reps to promote its products. The company now has a sales team of 160 people.
Salix shares closed Monday at $20.22, up $6.84. The stock has more than tripled in the past year.