Deutsche Bank Slashes Price Target On Salix Pharmaceuticals

Deutsche Bank cut its price target Sunday on Salix Pharmaceuticals, Ltd. SLXP from $134 to $102 and maintained a Hold rating.

Analyst Gregg Gilbert noted that "following SLXP’s 3Q miss and disclosures about excessive wholesaler inventory levels for its key products, we updated our model to reflect significant destocking. We had previous flagged the inventory risk...but were very surprised by the magnitude of the issue that has developed."

"While SLXP expects to reduce inventory to three months by the end of 2016, a level that would still be well above industry norms, we are preliminarily modeling reductions to two months by the end of 2015. Based on these changes, and lower assumptions for net sales per prescription in 2016+, we lowered our 2014/15/16 EPS estimates to $4.87/1.52/5.20 (from $5.60/5.92/6.36)," according to Gilbert.

The report concluded that "we rate the shares Hold given unknowns about how the inventory situation developed and the potential repercussions beyond inventory headwinds (eg, higher legal costs, financial penalties, possible restatements). We note that it is difficult to have confidence in management’s previous statements, particularly related to product demand vs. inventory levels."

Salix Pharmaceuticals recently traded at $93.37, up 2.08 percent.