Warner Chilcott's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Warner Chilcott Limited (WCRX)

Q2 2012 Earnings Call

August 3, 2012 8:00 am ET


Paul Herendeen – Executive Vice President, Chief Financial Officer

Roger M. Boissonneault – President and Chief Executive Officer


Randall Stanicky – Canaccord Genuity

David Risinger – Morgan Stanley

Douglas Tsao – Barclays Capital Inc

Gary Nachman – Susquehanna Financial Group

Gregg Gilbert – Bank of America/Merrill Lynch

Mark Verman – UBS

Shibani Malhotra – RBC Capital Markets Equity Research

Chris Schott – JPMorgan

William Tanner – Lazard Capital Markets

Elliot Wilbur – Needham & Company, LLC



Good day, ladies and gentlemen, and welcome to the Warner Chilcott Second Quarter 2012 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. (Operator instructions) As a reminder, this conference call is being recorded.

I would now like to turn the conference over to your host, Mr. Paul Herendeen, you may begin.

Paul Herendeen

Thank you, Meenie. Good morning, everyone. This morning, we issued a press release that details our operating results for the second quarter 2012. The press release is available on our website.

Roger will make a few opening comments and then I’ll provide some additional color around the financial results for the quarter. And 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 of risks and uncertainties that could cause the company’s actual results to differ materially from 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 statements 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 those 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 CEO.

Roger M. Boissonneault

Thanks, Paul. Good morning and thanks for joining our call. We posted another strong cash net income quarter and with half the year behind us, we have reasons for optimism for the balance of the year and beyond. We are quite busy, we were quite busy I should say during the quarter with regular business of promoting and developing our franchises.

For the first half, revenue for our core products of business which excludes ACTONEL grew by 2% compared with the first half of last year. Paul will provide more details. Though we posted sales growth in many of our key products including LO LO, ASACOL, ESTRACE Cream, and ATELVIA, in addition you will note that, as a result of our continued promotion and support of our DORYX brand in the phase of generic competition, we’ve been able to maintain a reasonable share of that business today.

Turning to R&D, we continue to work our next-generation products within the women’s healthcare, gastroenterology, dermatology and urology segments of branded pharmaceutical market. In the second quarter, we made a milestone payment to Paratek as our novel tetracycline for acne entered Phase II studies. We are excited about the advancement of this product and our long-term presence in the dermatology space.

Lastly, I want to provide you with an update on the status of a warning letter for our Fajardo manufacturing facility. We take this matter seriously. We submitted our written response to the FDA in April and believe we are making good progress in addressing the items outlined by the FDA. We look forward to resolving the warning letter as soon as possible.

I know that many of you are interested in the status of our review of strategic alternatives. We do not have any specific to share with you this morning. And we’ll just assure you that we continue to explore a broad range of strategic alternatives to enhance shareholder value. We believe in the fundamentals of our company. We continue to look for opportunities that could help us to strengthen and grow our business going forward.

In summary, one of the most important things we can do to deliver value is to drive the profitability of our current product portfolio. And I believe that over the first half of 2012, we have done a good job. We are gaining total RX share in the OC segment and the ASACOL franchise is a solid contributor to the bottom line.

Our promotional focus on key projects, the steps we took last year to restructure our Western European business and our continued effort to optimize our investment in U.S. sales force resources have enabled us to overcome the expected decline of ACTONEL net sales and the loss of exclusivity for DORYX 150 milligram products and still deliver growth in adjusted cash net income.

Let me turn it back to Paul to provide more details about our financial performance.

Paul Herendeen

Thanks, Roger. And starting at a high level, good quarter. We continued to do what we do best, which is to generate solid cash and income from our portfolio of marketed products. Total revenue in the quarter was in line with our expectations, while our gross profit margin was a bit better than expected in the quarter.

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