Salix Pharmaceuticals Ltd. (SLXP) yesterday announced that the U.S. Food and Drug Administration (FDA) has granted priority review status to its new drug application (NDA) for  rifaximin 550 mg. Salix is seeking approval for the use of rifaximin for the maintenance of remission of hepatic encephalopathy (HE).

Priority review status is granted to drugs, which offer major advances in treatment or provide a treatment where no adequate therapy is available. Rifaximin has also been granted Orphan Drug designation in the U.S. for the HE indication.

While the FDA has issued an action date of Dec 24, we believe the FDA decision will be pushed back by a few months as the candidate is expected to come up for review by an FDA advisory committee in late February 2010.

According to the company, the HE market in the U.S. represents commercial opportunity in the range of $600 million. Hepatic encephalopathy occurs frequently in patients with cirrhosis as a result of their end-stage liver disease. There are reported to be more than 100,000 patients in the United States with overt HE.

In addition to the HE indication, Salix is also studying rifaximin for the treatment of irritable bowel syndrome. We believe that the IBS indication represents significant commercial opportunity for the company. Salix estimates that the IBS market could represent commercial opportunity of about $2.2 billion.

Rifaximin tablets (200 mg) are currently approved in the U.S., under the trade name Xifaxan, for the treatment of patients, 12 years of age or older, with travelers’ diarrhea caused by non–invasive strains of Escherichia coli. Xifaxan took over the position of key growth driver for Salix ever since generic versions of Colazal hit the market in late 2007.

With the genericization of Colazal, we believe the company’s future is dependent on gaining approval for new indications of rifaximin.

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