Warner Chilcott plc (WCRX)

Q1 2012 Earnings Call

May 4, 2012, 8:00 a.m. ET


Paul Herendeen - EVP & CFO

Roger Boissonneault - CEO, President & Director


Randall Stanicky - Canaccord Genuity

John Boris – Citi

Gary Nechman – Susquehanna Financial Group

Chris Schultz – JP Morgan

Tim Chiang - CRT

Marc Goodman – UBS

Shibani Malhotra - RBC Capital

Gregg Gilbert – Bank of America/Merrill Lynch

Elliot Wilbur - Needham & Company

Douglas Gale – Barclays Capital

Michael Tong – Wells Fargo Securities

Jim Molloy - ThinkEquity

David Buck – Buckingham Group

Irina Rivkind – Cantor Fitzgerald



Good day, ladies and gentlemen, and welcome to the Warner Chilcott Announces First Quarter 2012 Financial Results conference call. At this time, all participants are in a listen-only mode. Later we’ll have a question-and-answer session and instructions will follow at that time. (Operator instructions). As a reminder, today’s conference is being recorded for replay purposes.

I would now like to turn the conference over to your host for today, Mr. Paul Herendeen, Chief Financial Officer. Sir, you may begin.

Paul Herendeen

Thank you, Mary. Good morning. This morning we issued a press release that details our operating results for the first quarter of 2012. The press release is available on our website if you don’t already have it.

Roger will make a few general comments and then I’ll provide some additional color around our financial results for the quarter. And then, as usual, we will end with a Q&A period.

Before we get started, let me point out that this call will include forward-looking statements. These statements are subject to a number risk and uncertainties that could cause the company’s actual results to differ materially for such statements. These risks and uncertainties are discussed in our 2011 Form 10-K and other filings which are available on the SEC’s website. The forward-looking statement made during this call are made only as of the date of this call and the company undertakes no obligation to update such statements to reflect subsequent events or circumstances.

In addition, we will make reference during the course of the call to non-GAAP financial measures as defined by the SEC. In accordance with SEC regulations, we have provided reconciliations of these measures in our press release issued this morning to what we believe are the most directly comparable GAAP measures.

With that, let me turn things over to Roger Boissonneault, our President and Chief Executive Officer.

Rober Boissonneault

Thanks, Paul. We’re off to a good start in 2012. In the first quarter we grew our core business and reduced our operating expenses as we nearly completed our Western European restructuring.

In our core business, we saw significant contributions from the Estrace Cream, Asacol and Loesterin franchise. Atelvia is also picking up and [inaudible] grew each month this quarter and we expect the trend to continue.

While conversion is slower than initially expected, we believe that we will get there – we will get there. Those are are RXs and they will be maintained.

Asacol HD continues to grow it’s share of the Asacol franchise. During the first quarter, Asacol HD grew almost a share point, and is now 13% on the total RX basis. These HD scripts are also more profitable.

There continues to be opportunities to grow the oral contraceptive franchise. We are focusing our efforts on Lo Loestrin, which we believe will strategically benefit the franchise.

We were disappointed to receive a warning letter on our Fajardo manufacturing facility earlier this year in March. We are working to address the items outlined in the warning letter and aim to get those resolved as quickly as possible.

Rather than speculate on timing, I will reassure you the revolution is a top priority for us; one we take seriously and are highly focused on.

As most of you probably have seen, early this week we learned the Judge’s decision at the Doryx trial. The Judge determined that our Doryx patent is valid, but not infringed by either Mylan or Impax. And consequently, we learned that Mylan entered the market with a generic equivalent of our Doryx 150.

Paul will discuss how this impacts our guidance. You should understand, we are committed to the derm space and plan to continue sales and marketing, R&D and business development efforts in this area.

Speaking of business development, we issued a press release earlier this week disclosing our preliminary discussions with potential offers as well as our valuation of a broad range of strategic alternatives to enhance shareholder value. We will not, repeat, not comment further today on this topic.

With that, let me turn it over to Paul for some thoughts about our first quarter financial performance.

Paul Herendeen

Yes, thanks, Roger. As Roger mentioned, but I do want to reiterate, 2012’s off to a strong start with several of our key ramp brands delivering revenue growth in the quarter, including Estrace Cream, Loestrin franchise, Asacol and Atelvia. The performance of these key brands, coupled with favorable gross margins in the period and our success in gaining additional leverage over our operating costs, allowed us to deliver a solid growth in adjusted cash on our income in the quarter; up 9% compared with Q1 of last year.

Note that on a per-share basis, adjusted cash on income further benefited from a reduction of shares due the share redemption program we initiated during the fourth quarter of last year and adjusted cash on income per share grew 11% versus the prior year.

Let me spend a minute and talk about each of our several key brands. Estrace Cream, net sales continue to grow, up 49% compared with the first quarter of 2011 and up 24% sequentially compared with the fourth quarter.

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