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Warner Chilcott’s second quarter 2013 earnings (excluding special items) of 92 cents per share beat the Zacks Consensus Estimate of 85 cents. The company earned $1.02 per share in the second quarter of 2012. Lower revenues and higher costs led to the year-over-year decline.

Revenues in the second quarter of 2013 declined 4% to $613 million. The decline was primarily attributable to lower sales of its osteoporosis drug Actonel due to generic competition and contraction in the U.S. oral bisphosphonate market. Warner Chilcott acquired Actonel from Procter & Gamble Company (PG - Analyst Report) in 2009. Moreover, reduced sales of Doryx (dermatology), Enablex (urology) and Asacol (gastroenterology) hurt revenues in the second quarter of 2013. Revenues, however, beat the Zacks Consensus Estimate of $594 million.

Quarterly Details

Revenues from osteoporosis products declined 31.3% to $114 million at Warner Chilcott. Actonel sales declined 36% to $96 million. The loss of patent exclusivity of the drug in Western Europe in Dec 2010 hurt revenues in the quarter. Bulk of the revenues (63.5%) came from the U.S. market.

U.S. sales of the drug declined 32% in the second quarter of 2013 due to an increase in sales-related deductions and 34% reduction in filled prescriptions.

Warner Chilcott, which expects Actonel sales to continue declining, believes that osteoporosis therapy Atelvia (approved in the U.S. in the fourth quarter of 2010) will help counter the loss of revenues from Actonel in the U.S. Atelvia contributed $18 million to total revenue in the second quarter of 2013, up 12.5%.

Revenues from oral contraceptives climbed 15.6% to $156 million. Sales of Lo Loestrin FE (launched in the U.S. in 2011) jumped 73.5% to $59 million in the second quarter of 2013. Sales of Loestrin 24 FE declined 6% to $91 million. Sales of Loestrin 24 FE declined due to a 27% reduction in filled prescriptions.

Sales of hormone therapy products climbed 20.7% to $64 million. Bulk of the sales came from Estrace cream, which increased 15.2% to $53 million. Sales of Estrace cream increased due to an 8% up tick in filled prescriptions. Sales of dermatological product Doryx declined 4% to $22 million owing to generic competition for the 150 mg version of the drug.
Sales of ulcerative colitis drug Asacol plummeted 25% to $140 million in the second quarter of 2013. A 27.8% reduction in U.S. sales primarily contributed to the decline. The decline in U.S. sales was primarily attributable to the company’s decision to stop trade shipments of the 400 mg version of Asacol in the U.S. following the approval and launch of Delzicol in the first quarter of 2013. Delzicol performed very well with sales of $67 million in the second quarter of 2013. Sales of Enablex (urology) plummeted 27% to $30 million in the second quarter of 2013. A 45% reduction in filled prescriptions hurt sales of the drug during the quarter.

Selling, general and administrative (SG&A) expenses were up 17% in the reported quarter to $202 million. The rise was primarily attributable to the 112% increase in general and administrative expenses. Research and development (R&D) expenses climbed 43% to $33 million in the second quarter of 2013.

2013 View Adjusted

Warner Chilcott, which will be acquired by Actavis, Inc. (ACT - Analyst Report) by year-end, maintained its earlier issued guidance for 2013 with respect to most of the items. Warner Chilcott still expects total revenues of $2.3–$2.4 billion in 2013. The Zacks Consensus Estimate is $2.4 billion. Gross margin is still expected at 87%. Warner Chilcott still expects adjusted R&D expenses in 2013 in the range of $115–$135 million.

However, adjusted SG&A expenses are now expected in the range of $725- $775 million (previous guidance: $725-$775 million). Based on the second-quarter results, Warner Chilcott upped its view for adjusted earnings per share. Warner Chilcott now expects to end 2013 with adjusted earnings in the range of $3.30-$3.40 per share (previous guidance: $3.20 to $3.30). The Zacks Consensus Estimate is $3.34 per share.

Warner Chilcott carries a Zacks Rank #4 (Sell). Cadence Pharmaceuticals Inc. appears to be well-placed with a Zacks Rank #1 (Strong Buy).

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