Market Overview

Sterne Agee Says Salix Pharmaceuticals Accounting Concerns Are 'Overdone'

Related SLXP
Bill Ackman To Investors: 'Deeply And Profoundly' Sorry For The Valeant Fiasco
BMO Still Believes Valeant Is Undervalued

Sterne Agee commented on Salix Pharmaceuticals, Ltd. (NASDAQ: SLXP) Tuesday with analyst Shibani Malhotra suggesting that “accounting concerns may be overdone.”

Malhotra noted, “Post last month’s disclosure by Salix management that inventory levels for key products were closer to nine months than the previously stated roughly three months, the stock has lost 27.3 percent in market cap. This has been driven in part by investor fear that there is "another shoe to drop" and that an earnings restatement will be required.

“We have sifted through the company’s disclosures and conducted a back of the envelope analysis of historical wholesaler inventory levels since 2010 that leads us to believe that these levels have been consistently high, suggesting that historical earnings may indeed be accurate, while management’s prior characterization of the situation was likely misleading.”

According to Malhotra, “Overall inventory levels have consistently ranged from five months to as high as over nine months every quarter since 2010. Most important, our analysis found that inventory levels at Salix have consistently been elevated since 2010 and show no significant period of a ramp in months' inventory.”

The analyst note also concluded that “revenue recognition has likely been appropriate.”

The firm maintained a Buy rating and $130 price target.

Salix Pharmaceuticals closed Monday at $101.59, down 1.07 percent.

Latest Ratings for SLXP

Mar 2015JefferiesDowngradesBuyHold
Feb 2015UBSDowngradesBuyNeutral
Feb 2015Cantor FitzgeraldDowngradesBuyHold

View More Analyst Ratings for SLXP
View the Latest Analyst Ratings

Posted-In: Shibani Malhotra Sterne AgeeAnalyst Color Price Target Analyst Ratings


Related Articles (SLXP)

View Comments and Join the Discussion!