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Santarus Tops, Focus on Zegerid

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Santarus, Inc. reported fourth quarter 2012 earnings of 8 cents per share, well above the year-ago earnings of 3 cents per share and the Zacks Consensus Estimate of 1 cent per share.

Quarterly revenues increased 65% to $70.2 million, well above the Zacks Consensus Estimate of $62 million, with performance being driven by Glumetza and Zegerid.

Full-year earnings came in at 27 cents per share, well above the year-ago earnings of 7 cents per share and the Zacks Consensus Estimate of 20 cents per share. Full-year revenues increased 83.5% to $218 million, above the Zacks Consensus Estimate of $210 million.

Quarter in Detail

During the quarter, Glumetza revenues increased 49.5% to $42.6 million. Total prescription volume shot up 24% compared to the year-ago quarter.

Zegerid revenues came in at $20.8 million, recording significant growth from year-ago sales of $9.4 million. Higher prescription volume along with pricing of the authorized generic version of Zegerid led to the improved sales.

Revenues of Cycloset increased 18.4% to $4.5 million. Fenoglide revenues were $1.5 million. The product was launched in Feb 2012.

Research and development expenses increased 4% to $7.7 million. Selling, general and administrative expenses increased 28.2% to $25 million. Sales force expansion and higher costs associated with the Uceris launch led to the increase in SG&A spend.

2013 Guidance

Santarus expects to report earnings of 63 cents to 68 cents in 2013 on total revenues of $320−$325 million. The Zacks Consensus Estimate of 66 cents is within the company’s guidance range. On an adjusted basis, the company expects earnings of 92 cents to $1.00 per share.

Santarus expects research and development expenses in the range of $34−$38 million. Selling, general and administrative expenses are estimated to be $131−$134 million. Santarus earmarked $38−$40 million for the expansion of its sales force and other promotional costs related to the launch of Uceris and the re-launch of Zegerid.

We remind investors that in Jan 2013, Uceris received approval from US Food and Drug Administration (FDA) for the induction of remission in patients suffering from mild-to-moderate ulcerative colitis. The product was launched in the US in Feb 2013.

We also note that in Sep 2012, the US Court of Appeals for the Federal Circuit had reversed a part of an earlier decision issued by the US District Court for the District of Delaware regarding patent protection of Zegerid capsules and powder for oral suspension prescription products. As a result, Santarus resumed promotion of Zegerid in Feb 2013 and is looking to stem the decline in prescription trends for the branded product.

Meanwhile, Santarus plans to file a Biologics License Application (BLA) to the FDA for Ruconest in the second quarter of 2013 for the treatment of acute attacks of angioedema in hereditary angioedema (HAE) patients.

Santarus carries a Zacks Rank #3 (Hold). We expect investor focus to remain on the Zegerid re-launch and the performance of Uceris. Currently, stocks like Celldex Therapeutics, Inc. (CLDX - Free Report) , GTX Inc. (GTXI - Free Report) and Array BioPharma, Inc. (ARRY - Free Report) look more attractive. They all carry a Zacks Rank #2 (Buy).

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