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How Bayer Could Benefit From Potential Warner Chilcott Buyout
By: Mani   Tuesday, May 1, 2012 2:48 PM
Symbols: AZN, GPRO, HOLX, WCRX, WPI
The franchise has been declining due to the highly publicized cardiological safety concerns for women using YAZ products.

Conversely, Warner Chilcott's Loestrin franchise has been growing due to the successful launch of the company's low hormone oral contraceptive Lo Loestrin, which garnered $63 million in reported sales in 2011.

Recently, there have been robust M&A activity in the healthcare sector. On April 30, medical device maker Hologic Inc. (NASDAQ:HOLX) agreed to buy diagnostic test maker Gen-Probe Inc (NASDAQ:GPRO) for $3.75 billion.

Last month, Watson Pharmaceuticals Inc (NYSE:WPI) struck a deal to acquire generic drugmaker Actavis Group for $5.6 billion, and London-based drugmaker AstraZeneca (NYSE:AZN) said it would buy Ardea Biosciences (RDEA) for $1.26 billion.

Warner Chilcott itself was taken private in 2005 for $3.1 billion by private equity firms including Bain Capital Partners LLC, DLJ Merchant Banking III, Inc., J.P. Morgan Partners, LLC and Thomas H. Lee Partners, L.P.

The company went public again in 2006, with Bain Capital and Thomas H. Lee Partners still being its largest shareholders. If Warner Chilcott is acquired, then the major shareholders would get back more than double their investment.

In 2011, the company's earnings remained flat with last year at $171 million, or 67 cents a share as revenue fell 8 percent to $2.72 billion. For 2012, the company expects GAAP earnings of $397 million to $422 million, or $1.57 to $1.66 a share. Excluding items, the company expects to earn $3.60 to $3.70 per share for the full year 2012.

Total revenue for 2012 is expected to be in the range of $2.5 to $2.6 billion. Analysts expect earnings of $3.67 a share on revenue of $2.54 billion, a decline of 6.7 percent from last year.

The company also warned that its Actonel revenues would decline in 2012 due to the continued volume decreases expected in the U.S. bisphosphonate market and the ongoing impact of the loss of exclusivity in Western European markets in late 2010. Actonel accounted for 29 percent of the company's total revenues in 2011.

Shares of Warner Chilcott were down 5 percent in the last one year and is trading below its 52-week high of $25.92. However, the shares have gained 32 percent in the last 5 days, driven by takeover rumors.


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