Warner Chilcott’s (WCRX) fourth quarter 2010 earnings (excluding special items) of 81 cents per share surpassed the Zacks Consensus Estimate by 7 cents and the prior-year earnings by 16 cents. Higher revenues accounted for increased earnings.
Revenues in the reported quarter climbed 1.2% to $694.4 million. Revenues in the final quarter of 2010 were driven by the products acquired from Procter & Gamble Co. (PG) and Novartis (NVS), primarily inflammatory bowel therapy Asacol and Enablex approved for treating patients with overactive bladders.
Revenues from osteoporosis products climbed 8% to $239 million. Revenues from Actonel, acquired from Procter & Gamble in October 2009, climbed 5.3% to $233.7 million in the final quarter of 2010. There was a 28% decline in filled prescriptions of the drug, which is facing generic competition, in the US in the reported quarter.
Warner Chilcott, which expects Actonel sales to continue declining, believes that newly launched osteoporosis therapy Atelvia will help counter the loss of revenues from Actonel in the US. Atelvia contributed $5.3 million to total revenues in the reported quarter.
Revenues from oral contraceptives went up 15% to $103.3 million. Improved sales of Loestrin 24 FE (up 24% to $89.9 million) helped boost revenues. Sales of women’s healthcare products in the fourth quarter of 2010 climbed 9.8% to $413.1 million.
Gross profit margin (on an adjusted basis) came in at 87.8% in the reported quarter as against 89.4% a year ago. The 160 basis points decline was attributable to the product mix, including the effects of the Enablex purchase.
Research & development (R&D) expenses at Warner Chilcott, which focuses on women’s healthcare, gastroenterology, dermatology and urology markets in the US and Western European countries, climbed 5% to $30.8 million due to costs incurred relating to the addition of projects related to R&D from Procter & Gamble coupled with other costs related to R&D.
Reported (including special charges) selling, general and administrative (SG&A) expenses declined to $238.1 million, mainly due to a 48% fall in general and administrative (G&A) expenses.
For the full year 2010, Warner Chilcott’s adjusted net income was $848.2 million as against $823.6 million in 2009. Annual revenues climbed to $2.97 billion from $1.45 billion in 2009. The Zacks Consensus Revenue Estimate for 2010 was $2.77 billion.
Our View
We currently have a Neutral recommendation on Warner Chilcott, which is supported by a Zacks #3 Rank (short-term Hold rating). 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.
NOVARTIS AG-ADR (NVS): Free Stock Analysis Report
PROCTER & GAMBL (PG): Free Stock Analysis Report
WARNER CHIL PLC (WCRX): Free Stock Analysis Report
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