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Xifaxan: Valeant’s Secret Weapon?

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How Xifaxan could become a key revenue driver

Xifaxan is indicated for irritable bowel syndrome with diarrhea, or IBS-D, and hepatic encephalopathy. The drug is the largest revenue generator for Valeant Pharmaceuticals (VRX), contributing ~7.5% to the company’s total revenues, and it has the potential to generate over $1 billion in annual sales. Salix Pharmaceuticals, a wholly owned subsidiary of Valeant, received approval for the drug from the FDA (US Food and Drug Administration) on May 27, 2015.

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IBS and market competition

Around 35 million adult Americans suffer from the gastrointestinal disorder irritable bowel syndrome, or IBS. IBS-D, a subset of the disease, makes up 40% of the total IBS population.

Allergan’s (AGN) Viberzi and Amitiza, a collaboration product of Sucampo Pharmaceuticals (SCMP) and Takeda Pharmaceuticals (TKPYY), are Xifaxan’s two major competitors. Other therapy options for the disorder include drugs such as Lotronex, which was developed by GlaxoSmithKline (GSK). In 2008, Prometheus acquired the New Drug Application for the drug.

How Valeant plans to boost Xifaxan sales

Xifaxan directly competes with Allergan’s Viberzi. Comparatively, shorter treatment duration and higher safety profile would place Xifaxan ahead of Viberzi. So to fuel the growth of the drug, Valeant hired 100 sales representatives to be trained and functional by the end of 2Q16 because the drug is expected to generate over $1 billion sales.

Still, it’s often risky to invest directly in a pharmaceutical or biotech company because any news release for the success or failure of a drug can result in stock price volatility. So to remain on a comparatively safer side, you might consider the Vanguard Total World Stock ETF (VT), which holds 0.06% in Valeant.

Continue to the next part for a look at Valeant’s Brodalumab.

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