Growth of promoted products and reduced operating costs continue to drive solid earnings growth.
ST. DAVID'S, Bermuda, Nov. 10 /PRNewswire-FirstCall/ -- Warner Chilcott Limited (Nasdaq: WCRX) today announced its results for the quarter ended September 30, 2008. Revenue in the quarter ended September 30, 2008 totaled $231.9 million, an increase of 2.4%, over the prior year quarter. The primary drivers of the increase in revenue were the net sales of our promoted products DORYX, LOESTRIN 24 FE, TACLONEX, and FEMCON FE, which together contributed $35.3 million of revenue growth for the quarter ended September 30, 2008 compared to the prior year quarter. The growth delivered by these products was offset primarily by significant declines in ESTROSTEP FE and SARAFEM net sales due to generic competition.
The Company reported net income of $40.1 million ($0.16 per diluted share) in the quarter ended September 30, 2008, compared with net income of $5.8 million ($0.02 per diluted share) in the prior year quarter. Cash net income ('CNI') in the quarter ended September 30, 2008 was $96.5 million, an increase of $36.0 million, compared to $60.5 million in the prior year quarter. Included in the quarter ended September 30, 2007 was a $9.0 million expense related to the settlement of the OVCON 35 litigation. Excluding the after-tax impact of this settlement in the quarter ended September 30, 2007, adjusted CNI increased $27.2 million, or 39.2%, to $96.5 million compared to adjusted CNI of $69.3 million in the prior year quarter.
References in this release to 'cash net income' or 'CNI' mean the Company's net income adjusted for the after-tax effects of two non-cash items: amortization of intangible assets and amortization (or write-off) of deferred loan costs related to the Company's debt. Reconciliations from the Company's reported results in accordance with US GAAP to cash net income, adjusted cash net income and adjusted EBITDA for all periods are presented in the tables at the end of this press release.
Revenue
Revenue in the quarter ended September 30, 2008 was $231.9 million, an increase of $5.4 million, or 2.4%, over the prior year quarter. The primary drivers of the increase in revenue were the net sales of our promoted products DORYX, LOESTRIN 24 FE, TACLONEX, and FEMCON FE, which together contributed $35.3 million of revenue growth for the quarter ended September 30, 2008, compared to the same quarter last year. Changes in the net sales of our products are a function of a number of factors including changes in: market demand, gross selling prices, sales-related deductions from gross sales to arrive at net sales and the levels of pipeline inventories of our products held by our customers. We use IMS Health estimates of filled prescriptions for our products as a proxy for market demand.
Net sales of our oral contraceptive products decreased $1.2 million, or 1.8%, in the quarter ended September 30, 2008, compared with the prior year quarter. LOESTRIN 24 FE generated revenue of $50.8 million in the quarter ended September 30, 2008, an increase of 32.9% compared with $38.2 million in the prior year quarter. The increase in LOESTRIN 24 FE net sales was primarily due to a 22.3% increase in filled prescriptions over the prior year quarter and, to a lesser extent, higher average selling prices. FEMCON FE generated revenue of $11.4 million in the quarter ended September 30, 2008, compared to $9.4 million in the prior year quarter. The increase in FEMCON FE net sales was primarily due to a 42.5% increase in filled prescriptions over the prior year quarter, offset partially by the impact of higher sales-related deductions in the quarter ended September 30, 2008. ESTROSTEP FE net sales decreased $13.7 million, or 76.6%, in the quarter ended September 30, 2008, compared to the same quarter last year. The decrease in ESTROSTEP FE net sales was primarily due to an 83.2% decline in filled prescriptions versus the prior year quarter as a result of the introduction of generic versions of ESTROSTEP FE in the fourth quarter of 2007, including our authorized generic Tilia(TM) FE. Our revenue from net sales of Tilia(TM) FE partially offset the decline in ESTROSTEP FE net sales.
Net sales of our dermatology products increased $15.1 million, or 15.9%, in the quarter ended September 30, 2008, compared to the prior year quarter. Sales of DORYX increased $15.6 million, or 53.3%, in the quarter ended September 30, 2008, primarily due to an expansion of pipeline inventories primarily resulting from the launch of DORYX 150 mg in the quarter ended September 30, 2008. Also contributing to the increase, to a lesser extent, were higher average selling prices and a 12.9% increase in filled prescriptions compared to the prior year quarter. Net sales of TACLONEX increased $5.1 million, or 15.3%, to $38.2 million in the quarter ended September 30, 2008, compared to $33.1 million in the prior year quarter. The increase was primarily due to the introduction of TACLONEX scalp in June 2008, higher average selling prices and an increase in the average grams per filled prescription in the quarter ended September 30, 2008 compared to the prior year quarter. Sales of DOVONEX decreased $5.6 million, or 17.6%, in the quarter ended September 30, 2008, compared to the prior year quarter. The decline in DOVONEX net sales was due primarily to a 25.4% decrease in filled prescriptions and increases in sales-related deductions in the third quarter of 2008, which was partially offset by higher average selling prices. The decline in filled prescriptions of DOVONEX was due primarily to the introduction of generic versions of DOVONEX solution into the market in the second quarter of 2008, including our authorized generic, and, in part, due to customers switching to other therapies.
Net sales of our hormone therapy products decreased $0.6 million, or 1.4%, in the quarter ended September 30, 2008 as compared to the prior year quarter. Net sales of ESTRACE CREAM increased $1.7 million, or 9.5%, in the quarter ended September 30, 2008 compared to the prior year quarter. The increase was primarily due to higher average selling prices, which were partially offset by a contraction of pipeline inventories relative to the prior year quarter. Net sales of FEMHRT decreased $2.2 million, or 13.2%, in the quarter ended September 30, 2008 compared to the prior year quarter, due to a 15.1% decrease in filled prescriptions, which was offset partially by higher average selling prices.
Net sales of SARAFEM decreased $8.2 million, or 79.9%, in the quarter ended September 30, 2008 compared to the prior year quarter, due primarily to a 66.1% decline in filled prescriptions. Generic versions of SAFAFEM capsules were introduced in May 2008 and negatively impacted our net sales of SARAFEM during the quarter ended September 30, 2008.
Cost of Sales (excluding amortization of intangible assets)
Cost of sales increased $1.3 million, or 2.9%, in the quarter ended September 30, 2008, compared with the prior year quarter. Our gross profit margin, as a percentage of total revenue, decreased to 79.8% in the quarter ended September 30, 2008 from 79.9% in the prior year quarter.
Selling, General and Administrative ('SG&A') Expenses
SG&A expenses for the quarter ended September 30, 2008 were $45.9 million, a decrease of $14.9 million, or 24.4%, from $60.8 million in the prior year quarter. Advertising and promotion ('A&P') expenses for the quarter ended September 30, 2008 decreased $2.1 million, or 17.8%, compared with the prior year quarter, primarily due to a $1.6 million decrease in direct-to-consumer advertising, as well as an overall decrease in promotional spending. Selling and distribution expenses for the quarter ended September 30, 2008 decreased $0.7 million, or 3.0%, compared with the prior year quarter, primarily due to a reduction in average headcount in the quarter ended September 30, 2008 compared to the prior year quarter. General, administrative and other ('G&A') expenses in the quarter ended September 30, 2008 decreased $12.1 million, or 45.9%, compared with the prior year quarter. The decrease in G&A is due, in part, to a reduction in legal fees of $3.4 million in the quarter ended September 30, 2008 as compared to the prior year quarter. In addition, the quarter ended September 30, 2007 included a $9.0 million expense related to the settlement of a class action lawsuit in connection with the Company's OVCON 35 litigation.
Research and Development ('R&D')
Our investment in R&D for the quarter ended September 30, 2008 was $10.0 million, a decrease of $14.1 million, or 58.5%, compared with the prior year quarter. Included in R&D in the quarter ended September 30, 2007 was a $4.0 million upfront payment to Paratek Pharmaceuticals, Inc. to acquire certain rights to novel tetracyclines for the treatment of acne and rosacea. Also included in the quarter ended September 30, 2007 was a $10.0 million milestone payment to LEO Pharma A/S, which was triggered by the U.S. Food and Drug Administration's acceptance of LEO Pharma A/S's new drug application submission for TACLONEX scalp. Excluding the $14.0 million of payments during the quarter ended September 30, 2007, R&D was essentially flat period over period. Our product development activities are mainly focused on improvements to our existing products, new and enhanced dosage forms and new products delivering compounds which have been previously shown to be safe and effective.
Net Interest Expense
Net interest expense for the quarter ended September 30, 2008 was $23.6 million, a decrease of $4.7 million, or 16.4%, from $28.3 million in the prior year quarter. Included in net interest expense in the quarter ended September 30, 2008 was $1.3 million relating to the write-off of deferred loan costs associated with the optional prepayment of $90.0 million of indebtedness under our senior secured credit facility, as compared to $1.1 million in the quarter ended September 30, 2007 as a result of the optional prepayment of $60.0 million of indebtedness under our senior secured credit facility.
