(By Mani) Warner Chilcott plc (Nasdaq:WCRX) said Monday that it is exploring a broad range of strategic alternatives to enhance shareholder value, which include preliminary discussions with potential bidders. Goldman Sachs is the financial adviser to the company in this regard.
The announcement came after The Times (of London) reported last Friday that Germany's Bayer AG could offer as much as $32 per share for Warner Chilcott, implying a premium of 70 percent over Warner Chilcott's closing price on March 27.
Ireland-based Warner Chilcott is a leading specialty pharmaceutical company currently focused on the women's healthcare, gastroenterology, dermatology and urology segments of the branded pharmaceuticals market, primarily in North America.
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The acquisition of Procter & Gamble's global branded pharmaceuticals business in October 2009 transformed Warner Chilcott into a global pharmaceuticals company with significant scale and geographic reach.
"Assuming a (conservative) fundamental share value of $24, we have tried to gauge the premium a bidder would be willing to pay for Warner Chilcott. We estimate a range of $27- $32 per share could be entirely feasible," RBC Capital Market analyst Shibani Malhotra wrote in a note to clients.
A potential bidder could remove 10 percent to 30 percent of Warner Chilcott's total selling, general and administrative and R&D costs. Based on increased visibility into the pipeline, would recognize an incremental 50-125 percent of R&D in value for this. The bidder would be willing to give 50 percent of the synergy value and 100 percent of incremental recognized pipeline value to Warner Chilcott shareholders
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Malhotra said Bayer could be looking to increase its SG&A infrastructure in the US. It appears that Bayer's pharmaceuticals commercial infrastructure is mostly ex-US whereas Warner Chilcott has a strong US presence.
In addition, Bayer's global reach offers a meaningful opportunity to market Warner Chilcott's portfolio globally, particularly in emerging markets. As of March 31, Bayer has about 1.31 billion Euros in cash and cash equivalents.
With a strong cash balance, Bayer could take Warner Chilcott's oral contraceptive franchise as well as products such as Asacol global. In 2011, Asacol generated $743 million in sales.
Bayer could be interested in Warner Chilcott's oral contraceptive portfolio given the issues with its own YAZ franchise.