Warner Chilcott’s (WCRX) third quarter 2011 earnings (excluding special items) of $0.89 per share fell short of the Zacks Consensus Estimate by $0.01. The company earned $0.86 on an adjusted basis in the year-ago quarter.
Revenues for the reported quarter declined 7% to $655.5 million. The decline was primarily attributable to lower sales of its osteoporosis drug, Actonel (acquired from Procter & Gamble Co. (PG) in 2009) coupled with weakness in the dermatological segment. Revenues fell short of the Zacks Consensus Estimate of $656 million by a whisker.
Actonel sales declined 38.1% to $166 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 third quarter of 2011. Revenues from oral contraceptives went up 34.0% to $130 million. Improved sales of Loestrin 24 FE (up 23.8% to $104 million) helped boost revenues. Sales of hormone therapy products declined 8.9% to $51 million in the third quarter of 2011.
Sales in the dermatological segment declined 23.7% to $29million. The reduction was attributable to the $9 million reduction in Doryx sales due to lower demand in the US.
Sales of gastroenterology product, Asacol, climbed 5% to $190 million. The increase was driven by increased sales in North America. Sales of urology product Enablex climbed 95.6% to $45 million. Warner Chilcott acquired the US rights of Enablex from Novartis (NVS) in October 2010. Following the purchase of the US rights, Warner Chilcott records revenues from the drug on a gross basis as against the prior method of recording Enablex revenue on a contractual percentage basis.
2011 Outlook
Apart from disclosing financial results, Warner Chilcott provided an outlook for 2011. The company continues to expect to end 2011 with adjusted earnings in the range of $3.70 – $3.80 per share on revenues of $2.7 billion-$2.8 billion. The current Zacks Consensus Estimate for 2011 hints at earnings of $3.78 per share on revenues of approximately $2.74 billion, within the guidance range provided by the company.
The company trimmed its projection for expected R&D expenses for 2011. The company now expects to incur R&D expenses in the range of $110 million – $130 million versus the earlier expected range of $120 million – $140 million.
The reduction is attributable to changes in the expected timing of expenses related to certain R&D projects at Warner Chilcott.
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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