Salix rises after analyst upgrades on Xifaxan

Shares of Salix Pharmaceuticals Ltd. rose Monday after a Credit Suisse analyst upgraded the stock, saying sales of the company's drug Xifaxan could more than triple if it is approved to treat new illnesses.

Xifaxan, which is approved to treat traveler's diarrhea, recorded U.S. sales of $79.9 million last year. Salix is also testing the drug against hepatic encephalopathy, a neurological disorder caused by liver failure, and against irritable bowel syndrome.

On June 1, the company presented positive results from a late stage clinical trial. It said Xifaxan reduced hospitalizations and reduced "breakthrough" symptoms of hepatic encephalopathy.

Credit Suisse analyst Scott Hirsch said sales could grow to more than $300 million per year if Xifaxan is used against hepatic encephalopathy. He upgraded the stock to "Outperform" from "Neutral" and raised his price target to $14 per share from $11.

Hirsch said that Xifaxan could get a marketing exclusivity period of seven years for hepatic encephalopathy, meaning the Food and Drug Administration would not approve any similar drugs over that time. He added that irritable bowel syndrome is also a "big market opportunity" for the drug.

In midday trading, shares of Raleigh, N.C.-based Salix rose 56 cents, or 5.7 percent, to $10.43. Over the last year, Salix stock has traded between $5.07 and $12.64.

Hirsch's price target implies the stock will rise 42 percent over the next 12 months.