Warner Chilcott plc (WCRX) recently upped its adjusted earnings per share projection to $3.60 to $3.70 from the earlier guided range of $3.45-$3.55. The Zacks Consensus Estimate is $3.55 per share.
The higher forecast is based on the reduced cash interest expense (post tax) following completion of the refinancing of the company’s prior senior secured credit facilities.
Warner Chilcott, which targets women’s healthcare, gastroenterology, dermatology and urology markets in the US and Western European countries, used the proceeds from term loan borrowings (under the $3.25 billion new senior secured credit facilities) and the approximately $279 million cash balance to repay existing debt and trim borrowing costs.
Warner Chilcott continues to expect 2011 revenues in the range of $2.7 billion-$2.8 billion. The forecasted revenue range is in line with the Zacks Consensus Estimate of $2.76 billion.
The revenue guidance provided by the Ireland based company is based on certain assumptions. For example, it is inclusive of the impact of the loss of patent protection on Actonel in Western Europe, the launch of osteoporosis drug Atelvia and birth control drug Lo Loestrin Fe in the US. We note that Actonel was acquired from Procter & Gamble Co. (PG) in 2009.
Warner Chilcott maintained its 2011 for other items as well. Gross profit margin is expected in the range of 88%-89%. Selling, general and administrative (SG&A) expenses in 2011 are forecasted to be in the range of $900 million-$950 million. The spend on research & development (R&D) for 2011 is projected in the range of $150 million-$170 million.
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.
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