Warner Chilcott (WCRX) recently announced that there will be a change at the helm of its research & development (R&D) division from the beginning of next year. The need for change arose following the decision of Warner Chilcott’s incumbent R&D chief, Dr. Fawzi, to resign. Warner Chilcott targets women’s healthcare, gastroenterology, dermatology and urology markets in the US and Western Europe.
Dr. Fawzi is expected to serve the company in his present capacity until the end of 2011. Warner Chilcott has formed a committee to oversee operations of the R&D division until the unit gets a new head. The committee will be headed by Dr. John King, a member of Warner Chilcott’s Board of Directors since 2005.
Dr. Fawzi has been with Warner Chilcott since October 2009 when the company purchased Procter & Gamble‘s (PG) global branded prescription pharmaceutical business. Following the purchase, Warner Chilcott entered the gastroenterology market with Asacol (ulcerative colitis) and the urology market with Enablex. The acquisition also added osteoporosis drug Actonel to the company’s portfolio.
However, the western European operations at Warner Chilcott have been hit badly following the loss of patent protection of Actonel in Western Europe late last year. Actonel accounted for approximately 70% of the revenues generated by Warner Chilcott from the Western European markets in 2010.
To counter the loss of revenues, Warner Chilcott announced in April 2011, that it will reorganize its operations in Western European nations such as Belgium, the Netherlands, France, Germany, Italy, Spain, Switzerland and the UK. Warner Chilcott intends to complete the restructuring by mid-2012. As a result of the restructuring, the workforce at Warner Chilcott is expected to be trimmed by approximately 500 employees.
Our View
We currently have a Neutral recommendation on Warner Chilcott in the long-run. The stock carries a Zacks #3 Rank (Hold rating) in the short-run. Although the company is facing patent expirations for many of its key drugs, we believe Warner Chilcott’s diversified product base will help withstand the generic threat.
Zacks Investment Research
