After laying the groundwork last year, Salix Pharmaceuticals Ltd. should have a breakthrough year in 2002, with huge gains in sales of its colitis drug and a possible expansion of its portfolio, officials say.

Salix released its fourth-quarter and year-end financial results Tuesday, showing a loss for the year of $17.5 million, or $1.13 per share, compared with a loss of $3 million, or 26 cents a share, in 2000.

Investors didn’t take the news well: After closing Monday at $17.26 per share, Salix (Nasdaq: SLXP) opened Tuesday at $15.17, down 12 percent. By late Tuesday, the Raleigh-based drug development firm had recovered slightly, closing at $15.70 per share.

Higher marketing costs

Salix’s revenue for 2001 was up 54 percent, to $22.4 million from $14.5 million in 2000, following the rollout of its first drug, Colazol, which treats ulcerative colitis.

Carolyn Logan, senior vice president of sales and marketing, says more than half of the 7,800 gastroenterologists the company is targeting to prescribe the drug had done so by the end of the year. Fourth-quarter prescriptions rose to 24,000 from 17,000 in the third quarter. Also, she says Colazol is stocked in about 20,000 pharmacies, more than double the market presence it had last summer.

But the added revenue hasn’t come without a price. A massive marketing campaign and a doubling of the telephone and field sales force, to more than 60 people, caused expenses to spike to $40.4 million last year, up from $17.8 million in 2000.

President and Chief Executive Bob Ruscher says the effort was worth the cost, predicting that Colazol is now positioned to generate between $30 million and $35 million in sales this year. The company hopes to encourage doctors to prescribe the drug not just for acute conditions but also in lower doses over longer periods for what he calls “maintenance situations.”

Ruscher says the larger sales force also can begin preparing the market for Salix’s second drug, Lumenax, which treats travelers’ diarrhea and other intestinal infections. The company submitted its new drug application for Lumenax to the U.S. Food & Drug Administration in late December, and he says clinical trials have shown the drug delivers targeted antibiotics to the gastrointestinal tract with minimal impact on the rest of the body.

Building a “franchise”

In addition to expanding internally with Lumenax, Ruscher says Salix is on the prowl for potential acquisitions and licensing deals to broaden its product line. To that end, officials announced plans for a secondary stock offering of 4 million shares, which would raise about $62 million at Tuesday’s stock prices. The offering is being underwritten by UBS Warburg, Wachovia Securities, SunTrust Robinson Humphrey, Thomas Weisel Partners and Leerink Swann.

Salix spokesman Mike Freeman says a number of deals have been discussed with other drug firms, but it’s too early to say which, if any, will pan out. “We want to develop a franchise around the gastroenterology field, so everything we’re looking at is in that area,” he tells LocalTechWire.

Logan says that the sales force in place is adequate to cover the push for Lumenax and any new drugs Salix might pick up. But she adds that the company will have to invest in a huge advertising blitz to spur interest in them and reach the same sales success Colazol has achieved.

In other pharmaceutical news:

BioStratum Inc. of Research Triangle Park filed an Investigational New Drug Application with the FDA for its anti-cancer drug, Angiocol, and was given permission to commence Phase I clinical trials. Angiocol is a recombinant protein derived from collagen and has been shown in pre-clinical studies to inhibit the growth of tumors and new blood vessels.