Warner Chilcott‘s (WCRX) fourth quarter 2011 earnings (excluding special items) of 95 cents per share surpassed the Zacks Consensus Estimate by 5 cents and the prior-year earnings by 14 cents. Lower operating and interest expenses offset decline in revenues to boost earnings in the final quarter of 2011.
Revenues in the reported quarter declined 7% to $645.8 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 oral contraceptives also hurt revenues in the reported quarter. Revenues were well short of the Zacks Consensus Estimate of $656 million.
Revenues from osteoporosis products declined 19.2% to $193 million. Actonel sales declined 23.1% to $180 million. The loss pf patent exclusivity of the drug in Western Europe in December 2010 hurt revenues in the quarter. Moreover, US sales of the drug were also down in the fourth quarter of 2011 due to a 38% decrease in filled prescriptions. Warner Chilcott, which expects Actonel sales to continue declining, believes that osteoporosis therapyAtelvia (launched in December 2010) will help counter the loss of revenues from Actonel in the US. Atelvia contributed $13 million to total revenues in the final quarter of 2011 as opposed to $5 million in the year-ago quarter.
Revenues from oral contraceptives went down 6.8% to $103.0 million. Reduced sales of Loestrin 24 FE (down 21% to $71.0 million) due to lower filled prescriptions hurt revenues. Sales of hormone therapy products declined 3.7% to $52 million in the fourth quarter of 2011 mainly due to lower sales of Femhrt because of generic competition.
Sales of dermatological product Doryx climbed 43.8% to $46 million. Sales of gastroenterology product, Asacol, climbed 1.1% to $198 million. The increase was driven by higher sales in the US aided by higher prices. Sales of urology product Enablex declined 11% to $40 million. An increase in sales related deductions coupled with a decrease in filled prescriptions hurt revenues during the quarter.
For the full year 2011, Warner Chilcott’s adjusted net income was $973.6 million as against $889.7 million in 2010. Annual revenues fell to $2.73 billion from $2.97 billion in 2010. The Zacks Consensus Estimate for 2011 was $2.74 billion.
Restructuring operations to be completed in 2012
Apart from announcing financial results, Warner Chilcott announced that it will complete the restructuring of its operations in Western European nations such as Belgium, the Netherlands, France, Germany, Italy, Spain, Switzerland and the UK in 2012. The restructuring was announced in April 2011.
Warner Chilcott undertook this move to counter the loss of revenues due to the loss of exclusivity of Actonel in Western Europe in late 2010. Warner Chilcott expects to incur $30 million in restructuring costs in 2012. As a result of the restructuring, the workforce at Warner Chilcott is expected to be trimmed by approximately 500 employees.
2012 Projection Backed
Warner Chilcott reaffirmed the guidance for 2012 provided by it last month. The company expects to earn in the range of $3.60-$3.70 per share (on an adjusted basis) on revenues between $2.5 billion and $2.6 billion. The Zacks Consensus Estimate currently hints at earnings of $3.70 per share on revenues of $2.59 billion.
Our Recommendation
We currently have a Neutral recommendation on Warner Chilcott in the long run. The stock carries a Zacks #4 Rank (Sell rating) in the short run.
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