Salix Pharmaceuticals (SLXP) Price Target Reduced to $102 at Goldman Sachs

Goldman Sachs maintained a Neutral rating on Salix Pharmaceuticals (NASDAQ: SLXP) and lowered its price target to $102.00 (from $147.00). The change follows a disappointing Q3 update and the resignation of its CFO.

"3Q was clearly disappointing, but even more surprising was SLXP’s revelation of how high its inventory levels are for key products and how that will dramatically impact results for the next couple of years as it works them down," said analyst Gary Nachman.

"Management highlighted that its inventory levels for key products were 9 mos. for Xifaxan and Apriso, 7 mos. for Glumetza and 5 mos. for Uceris, which we view as very high and particularly disappointing given that SLXP had previously indicated in the first two quarters that it was working down the inventory levels from a range of ~10-12 weeks. SLXP plans to enter distributor service agreements with the wholesalers in 1Q15 to increase visibility into the channel and work the inventory levels down to 3 mos. by the end of 2016 (Glumetza to 1 mo. by end of 2015)," continued the analyst.

"The Board’s Audit committee hired outside counsel and is conducting an independent review into the inventory issues and perhaps other matters as well. SLXP guided to lower 4Q sales resulting from disruptions in the sales force after the SNTS deal that caused Rx growth to be less robust than expected and is driving higher discounts and rebates. We think this raises even more questions about the credibility of the company’s financials," he added.

For an analyst ratings summary and ratings history on Salix Pharmaceuticals click here. For more ratings news on Salix Pharmaceuticals click here.

Shares of Salix Pharmaceuticals closed at $138.55 yesterday.

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