Warner Chilcott Limited

Warner Chilcott found its groove by focusing on oral contraceptives and dermatology products to surprise on estimates by 15.38% in the fourth quarter. The company trades with a P/E of 12.03 and a price-to-book of 2.95.

Full Analysis

Warner Chilcott Ltd. (WCRX - Snapshot Report) is a specialty pharmaceutical company that manufactures prescription drugs in two segments: women’s healthcare and dermatology. The company's strategy is to focus on the smaller markets.

WCRX's strongest segment is in the hormonal contraceptive and hormone therapy drugs categories. In April 2006, WCRX launched Loestrin 24 Fe, an oral contraceptive with a patented 24-day dosing regimen.

In the dermatology category, the company manufactures Dovonex and Taclonex, external creams and ointments for treatment of psoriasis, and Doryx, an oral tetracycline for the treatment of acne.

Warner Chilcott, a Zacks #1 Rank (Strong Buy), is seeing the investment in the new drugs and products pay off on the bottom line. On Feb 29, the company reported fourth-quarter earnings that beat analysts' estimates by four cents, or 15.38%.

WCRX reported fourth-quarter net income of $19.7 million, or 8 cents per share, compared with a net loss of $8.5 million, or 3 cents per share in the year-ago period. Adjusted net income was 30 cents a share. Analysts' estimates had called for 26 cents per share. Revenue rose 10.3% to $227.7 million.

The quarter saw a rise in revenues of both oral contraceptives and dermatology products. Sales of oral contraceptive products increased 13.9%, aided by a 93.8% rise in filled prescriptions for Loestrin 24 FE. Loestrin 24 FE generated revenues of $41.6 million in the quarter compared to $21.5 million in the year-ago period.

Sales in the dermatology category rose 14.3%. Filled prescriptions for Taclonex increased 33.8% compared to the year-ago period. Sales of Doryx increased $4.5 million, or 16.4%, in the quarter compared with 2006. The company said the increase in Doryx sales was due to increased demand and higher average selling prices.

Brokerage analysts raised earnings for the year in response to the fourth-quarter earnings report. In the last week, four out of eight covering analysts raised by two cents to $1.28 from $1.26 per share.

WCRX surprised on estimates by 15.38% in the fourth-quarter and has surprised for the last four quarters on average of 19.71%.

The company has a P/E of 12.03 and a price-to-book of 2.95. Through the end of 2007, WCRX had an outstanding one year return on equity (ROE) of 19.98%.