(Source: PRNewswire-Firstcall)
ARDEE, Ireland, Aug. 7 /PRNewswire-Firstcall/ -- Warner Chilcott Limited today announced its results for the quarter ended June 30, 2009. Revenue in the quarter ended June 30, 2009 increased 7.1% to $250.8 million over the prior year quarter. The primary drivers of the increase in revenue were the net sales of DORYX, LOESTRIN 24 FE and ESTRACE Cream which were partially offset by net sales declines of other products, primarily ESTROSTEP FE, SARAFEM and FEMHRT.
The Company reported net income of $56.0 million ($0.22 per diluted share) in the quarter ended June 30, 2009, compared with net income of $33.6 million ($0.13 per diluted share) in the prior year quarter, an increase of 66.9%. Cash net income ("CNI") in the quarter ended June 30, 2009 rose to $109.2 million ($0.44 per diluted share), an increase of 29.6% over 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 (including impairments, if any) of intangible assets and amortization (including write-offs, if any) of deferred loan costs related to the Company's debt. Reconciliations from the Company's reported results in accordance with US GAAP to CNI and adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA") for all periods are presented in the tables at the end of this press release.
Revenue
Revenue in the quarter ended June 30, 2009 was $250.8 million, an increase of $16.6 million, or 7.1%, over the prior year quarter. The primary drivers of the increase in revenue were the net sales of DORYX, LOESTRIN 24 FE and ESTRACE Cream, which together contributed $28.0 million of revenue growth for the quarter ended June 30, 2009. The growth delivered by these products was partially offset by net sales declines in certain other products, primarily ESTROSTEP FE, SARAFEM and FEMHRT. Period over period 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 direct and indirect customers. The Company uses IMS Health, Inc. estimates of filled prescriptions for our products as a proxy for market demand.
Net sales of our oral contraceptive products increased $4.2 million, or 5.6%, in the quarter ended June 30, 2009, compared with the prior year quarter. LOESTRIN 24 FE generated revenues of $58.0 million in the quarter ended June 30, 2009, an increase of 15.5% compared with $50.2 million in the prior year quarter. The increase in LOESTRIN 24 FE net sales over the prior year quarter was primarily due to higher average selling prices and an increase in filled prescriptions of 10.3%, offset in part by the impact of higher sales-related deductions and a contraction of pipeline inventories relative to the prior year period. FEMCON FE generated revenues of $12.4 million in the quarter ended June 30, 2009, an increase of $1.7 million, or 14.7%, versus the prior year quarter. The increase in FEMCON FE net sales was primarily due to higher average selling prices and an increase in filled prescriptions of 6.3% in the quarter ended June 30, 2009, offset in part by a contraction of pipeline inventories relative to the prior year quarter.
Net sales of our dermatology products increased $11.3 million, or 10.9%, in the quarter ended June 30, 2009, compared to the prior year quarter. Net sales of DORYX increased $13.2 million, or 41.6%, in the quarter ended June 30, 2009, compared to the prior year quarter, primarily due to a 41.6% increase in filled prescriptions and an expansion of pipeline inventories compared to the prior year period, which were offset, in part, by higher sales-related deductions. The increase in filled prescriptions primarily relates to DORYX 150 mg, which we launched in the third quarter of 2008 and to which we have dedicated significant promotional efforts, including our recently launched customer loyalty card program. DORYX 150 mg accounted for 76% of new DORYX prescriptions and 72% of total DORYX prescriptions in the quarter ended June 30, 2009. Increased utilization of the customer loyalty card for DORYX 150 mg drove the increase in sales-related deductions in the quarter. Net sales of TACLONEX decreased $2.3 million, or 5.9%, to $36.5 million in the quarter ended June 30, 2009, compared to $38.8 million in the prior year quarter. The decrease in TACLONEX net sales is primarily due to a 5.7% decrease in filled prescriptions, as well as higher sales-related deductions, offset in part, by the impact of higher average sales prices. Net sales of DOVONEX increased by $0.4 million, or 1.4%, in the quarter ended June 30, 2009, compared with the prior year quarter. The increase in net sales of DOVONEX was due to higher average sales prices and a reduction in sales-related deductions, which more than offset a 24.6% decline in filled prescriptions as compared to the prior year quarter.
Net sales of our hormone therapy products increased $3.9 million, or 9.1%, in the quarter ended June 30, 2009, compared with the prior year quarter. Net sales of ESTRACE Cream increased $7.0 million, or 33.1%, in the quarter ended June 30, 2009, compared to the prior year quarter due to increased demand and higher average selling prices. We began promotional efforts for ESTRACE Cream in early 2009 resulting in an increase in filled prescriptions of 21.2% in the quarter ended June 30, 2009 compared with the prior year quarter. Net sales of FEMHRT decreased $3.3 million, or 19.9%, in the quarter ended June 30, 2009 compared to the prior year quarter due to a decrease in filled prescriptions of 12.0% and a contraction of pipeline inventories relative to the prior year quarter, which were offset, in part, by higher average selling prices compared to the prior year quarter.
Cost of Sales (excluding amortization of intangible assets)
Cost of sales decreased $4.1 million, or 7.9%, in the quarter ended June 30, 2009, compared with the prior year quarter. Our gross profit margin as a percentage of total revenue increased to 81.3% in the quarter ended June 30, 2009 as compared to 78.2% in the prior year quarter, primarily due to a favorable mix of products sold as compared to the prior year quarter, offset in part, by increases in manufacturing costs.
Selling, General and Administrative ("SG&A") Expenses
SG&A expenses for the quarter ended June 30, 2009 were $53.0 million, an increase of $5.9 million, or 12.6%, from $47.1 million in the prior year quarter. Advertising and Promotion ("A&P") expenses for the quarter ended June 30, 2009 increased $0.2 million, or 1.7%, compared with the prior year quarter, due primarily to increased sampling activities. Selling and distribution expenses for the quarter ended June 30, 2009 decreased $2.7 million, or 11.7%, compared to the prior year quarter primarily due to a reduction in the size of our field sales forces, offset, in part by, promotion expenses related to FEMRING. General, Administrative and Other ("G&A") expenses increased $8.4 million, or 61.1%, in the quarter ended June 30, 2009, as compared with the prior year quarter. The increase is due in large part to increases in professional and legal fees primarily in connection with our proposed redomicile to Ireland and, to a lesser extent, to increases in compensation expenses, including non-cash stock-based compensation, and other costs.
Research and Development ("R&D")
Our investment in R&D for the quarter ended June 30, 2009 was $11.9 million, a decrease of $0.6 million, or 4.8%, compared with the prior year quarter. Our internal R&D expenditures fluctuate based on the nature and timing of our on-going R&D programs. We expect our internal R&D spend in the second half of 2009 to increase over the first six months of 2009.
Net Interest Expense
Net interest expense for the quarter ended June 30, 2009 was $15.2 million, a decrease of $9.4 million, or 38.2%, from $24.6 million in the prior year quarter. Included in net interest expense in the quarter ended June 30, 2008 was a $1.1 million expense relating to the write-off of deferred loan costs associated with the optional prepayment of $70.0 million of indebtedness under our senior secured credit facility. The Company did not make any optional prepayments of debt during the quarter ended June 30, 2009. The decrease in net interest expense in the 2009 period was primarily the result of cumulative reductions in outstanding debt during 2008 and the first half of 2009 which reduced the average debt balance outstanding from $1,198.2 million in the quarter ended June 30, 2008 to $861.1 million in the quarter ended June 30, 2009. The cumulative reduction in the average debt level is the result of optional prepayments and purchases made using cash flows from operations and cash on hand, net of investing activities.
Net Income and Cash Net Income
For the quarter ended June 30, 2009, reported net income was $56.0 million, or $0.22 per share, and CNI was $109.2 million, or $0.44 per share, based on 250.7 million diluted Class A common shares outstanding. In calculating CNI, we add back the after-tax impact of the amortization (including impairments, if any) of intangible assets and the amortization (including write-offs, if any) of deferred loan costs. These items are tax-effected at the estimated marginal rates attributable to them. In the quarter ended June 30, 2009, the marginal tax rate associated with the amortization of intangible assets was 8.4% and the marginal tax rate for amortization (including write-offs) of deferred loan costs was 19.9%.
Liquidity, Balance Sheet and Cash Flows
As of June 30, 2009, our cash and cash equivalents totaled $138.2 million and our total debt outstanding was $859.8 million. There were no borrowings outstanding under the revolving portion of our senior secured credit facility. We generated $124.5 million of cash from operating activities in the quarter ended June 30, 2009, compared with $122.8 million in the prior year quarter, an increase of $1.7 million.
Recent Events
The Company recently announced that at a special court-ordered meeting of shareholders held on August 5, 2009 (the "Special Meeting"), its shareholders approved a scheme of arrangement between the Company and such shareholders.
