Warner Chilcott (WCRX) recently presented disappointing guidance for 2012 based primarily on the assumption of continued sales erosion of its osteoporosis drug, Actonel.
The Irish company expects to earn in the range of $3.60-$3.70 per share (on an adjusted basis) on revenues between $2.5 billion-$2.6 billion. The projections were below the Zacks Consensus revenue ($2.68 billion) and earnings ($4.00 per share) estimates.
We remind investors that Actonel (acquired from Procter & Gamble Company (PG) in 2009) went off-patent in Western Europe in late 2010 thus significantly hampering revenues at Warner Chilcott. Actonel accounted for approximately 70% of the revenues generated by Warner Chilcott from the Western European markets in 2010. Moreover, the contraction of the US bisphosphonate market is also expected to hamper US Actonel sales in 2012.
However, Warner Chilcott expects products such as Lo Loestrin FE (oral contraceptive), Atelvia (osteoporosis), Estrace Cream (hormone therapy) and Asacol (ulcerative colitis) to perform well in 2012.
The company expects selling, general and administrative (SG&A) expense in 2012 in the range of $800 – $850 million (2011 expectation $925-$975 million). Research and development (R&D) expenses in 2012 are expected in the range of $110 – $130 million (same as 2011 expectations).
2011 Projection Backed
Apart from providing guidance for 2012, Warner Chilcott reaffirmed its previous guidance for 2011. Warner Chilcott expects 2011 revenues in the range of $2.7 -$2.8 billion. 2011 adjusted earnings are projected in the range of $3.70-$3.80 per share. The Zacks Consensus Estimate for 2011 hints at earnings of $3.77 per share on revenues of $2.74 billion.
The company intends to disclose its fourth quarter and full year 2011 financial results in late February this year.
Our Recommendation
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.
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