Warner Chilcott Tops, View Raised - Analyst Blog

Warner Chilcott' s ( WCRX) third quarter 2012 earnings (excluding special items) of 99 cents per share handsomely beat the Zacks Consensus Estimate of 78 cents and the year-ago earnings of 89 cents per share. Lower selling, general & administrative costs boosted earnings in the reported quarter.

Revenues in the reported quarter declined 7% to $606 million. The decline was primarily attributable to lower sales of its osteoporosis drug, Actonel -- acquired from Procter & Gamble Co. ( PG ) in 2009 -- due to generic competition. Moreover, reduced sales of dermatological product Doryx also hurt revenues in the reported quarter. Revenues, however, beat the Zacks Consensus Estimate of $601 million

Quarterly Details

Revenues from osteoporosis products declined 22% to $138 million. Actonel sales declined 28% to $119 million. The loss of patent exclusivity of the drug in Western Europe in December 2010 hurt revenues in the quarter. Bulk of the revenues (64.7%) came from the US market. US sales of the drug were down 7% in the third quarter of 2012 due to a 36% decrease in filled prescriptions.

Warner Chilcott, which expects Actonel sales to continue declining, believes that osteoporosis therapy Atelvia (launched in December 2010) will help to counter loss of revenues from Actonel in the US. Atelvia contributed $19 million to total revenue in the third quarter of 2012, up 18.8% sequentially.

Revenues from oral contraceptives inched up 1% to $131 million. An increase of 43% in the sales of Lo Loestrin FE (launched in the US in 2011) to $33 million more than mitigated the 8.7% decline in the sales of Loestrin 24 FE. Sales of Loestrin 24 FE declined due to lower filled prescriptions coupled with an increase in sales-related deductions.

Sales of hormone therapy products climbed 10% to $56 million in the third quarter of 2012, driven by increased sales of Estrace cream (up 7% to $45 million). A 13% increase in filled prescriptions along with higher average selling prices led to the rise in Estrace cream sales in the reported quarter.

Sales of dermatological product Doryx declined 31% to $20 million. Generic competition and an increase in sales-related deductions hurt sales of the drug during the reported quarter. We remind investors that on April 30, 2012, a US district court issued a verdict regarding Mylan ( MYL ) and Impax Laboratories ' ( IPXL ) applications to the US Food and Drug Administration (FDA) to sell their generic versions of the drug. The court ruled that the generic versions of neither of the companies infringed the patent of Doryx.

Sales of gastroenterology product Asacol and urology product Enablex were more or less flat at $191 million and $45 million, respectively.

Selling, general and administrative (SG&A) expenses were down 15% in the reported quarter to $183 million. The decline was attributable to cost savings as a result of the move to the distributor model in Western Europe, reduced co-promotion expenses as a result of lower Actonel sales in ex-US markets and a reduction in the US field sales forces. Research and development (R&D) costs declined 3.8% to $25 million in the third quarter of 2012.

2012 Earnings Outlook Upped

Apart from announcing its third quarter 2012 results, Warner Chilcott upped its 2012 adjusted earnings guidance. The company now expects adjusted earnings in the range of $3.75-$3.85 per share (previous guidance: $3.55-$3.65).

The company also trimmed its guidance for SG&A expenses to $725-$775 million (previous guidance: $775-$825 million). Cost savings due to the restructuring of the company's operations in Western European nations such as Belgium, the Netherlands, France, Germany, Italy, Spain, Switzerland and the UK contributed to the reduced guidance. R&D expenses are now projected in the range of $90-$110 million (previous guidance: $100-$120 million).

Warner Chilcott continues to expect revenues in the range of $2.4 billion and $2.5 billion. The Zacks Consensus Estimate currently hints at earnings of $3.88 per share on revenues of $2.49 billion for 2012.

IMPAX LABORATRS (IPXL): Free Stock Analysis Report

MYLAN INC (MYL): Free Stock Analysis Report

PROCTER & GAMBL (PG): Free Stock Analysis Report

WARNER CHIL PLC (WCRX): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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