Salix Pharmaceuticals (NASDAQ:SLXP) closed Friday at $13.38. The stock crossed earlier 52-week high of $13.99 and touched a new 52-week high at $21.34 in Monday's morning trade. But since then has given up some of its gains. Will it again set a new 52 week high in the remainder of 2009?
The company announced Monday morning that rifaximin, versus placebo treated patients, demonstrated a statistically significant improvement for the primary endpoint of the adequate relief of non-constipation irritable bowel syndrome (IBS) symptoms in two Phase 3 trials. Salix currently markets 200 mg rifaximin tablets under the name Xifaxan. That drug is approved as a treatment for traveler's diarrhea. Salix said non-constipation irritable bowel syndrome includes the most common types of IBS and estimated the size of the U.S. market at $2.2 billion. Salix said the drug also was better at reducing bloating. That news sparked the Monday rally in the stock. The company is expected to ask for FDA approval in the first half of 2010.
Technical Analysis
Since the start of 2009 till the first week of September, the stock's upper Bollinger band remained flat at $13. The stock almost hit the upper band on August 18 and reversed the trajectory falling to $12.64 three days later. It once again reversed the trajectory and almost hit the upper band on August 21. On September 1, the stock broke the lower band only to reverse the trend breaking the upper band on September 10. On September 11, it entered the band only to reverse the trend once again. This time, the bands have widened implying that if the stock falls below the top band then it could touch a low of $10.
The current stock price is significantly above the exponential 50 day moving average indicating a likely sustained uptrend. Investors have pumped money into the stock during last Wednesday and Thursday. Investors could book profits as confirmed by Tuesday early morning trade. Since volumes are lower, we feel institutional investors are yet to book profits. The stock may reverse the trend and enter the band soon but I don't feel it will touch the 52 week low of $5.07 any time in 2009 unless a major concern surfaces.
On Monday, 12.99 million shares changed hands compared to the typical daily volume of 370,500 over the past 6 months. Though currently bearish indicators are strong the stock has support below at $13.56. The stock is more likely to settle at $12.6 by end 2009, giving an annual price appreciation of 41%.
