Warner Chilcott Reports Operating Results for the Quarter and Six Months Ended June 30, 2006 |
DOVONEX(R) and Recently Launched Products, TACLONEX(R) and LOESTRIN(R) 24
FE, Fuel Strong Sales Growth
HAMILTON, Bermuda, Aug. 11 /PRNewswire/ -- Warner Chilcott Holdings
Company III, Limited today announced its results for the quarter and six
months ended June 30, 2006. Total revenue in the quarter rose to $187.0
million (+64.0%) from $114.0 million in the prior year quarter. The Company
reported a net loss of $27.5 million for the quarter compared with a net
loss of $42.2 million in the prior year quarter.
For the six months ended June 30, 2006 total revenue increased to
$353.4 million (+42.6%) from $247.8 million in the prior year period and
the Company reported a net loss of $46.1 million compared with a $403.9
million net loss for the same period last year. In the prior year period
the Company recorded a number of expenses directly related to the January
2005 acquisition of its predecessor company, Warner Chilcott PLC.
CEO Roger Boissonneault said, "We had another productive quarter. In
April we began promotion of two exciting new products; our oral
contraceptive LOESTRIN(R) 24 FE with a novel and patented 24-day dosing
regimen, and TACLONEX(R), the first dual action, once-a-day topical
treatment for psoriasis. The steps that we took during 2005 to prepare for
these launches enabled us to get off to a quick start with both of these
important brands."
References in this release to adjusted EBITDA mean the Company's
earnings before interest, taxes, depreciation, amortization and certain
other adjustments as defined in the indenture governing the Company's 8
3/4% Senior Subordinated Notes due 2015. A reconciliation of the Company's
reported results in accordance with U.S. GAAP to adjusted EBITDA for all
periods is presented in the table at the end of this press release.
Adjusted EBITDA increased 38.1% to $86.7 million for the quarter ended June
30, 2006 and increased 35.8% to $181.6 million for the six months ended
June 30, 2006 compared with the same periods in 2005.
Revenue
Revenue in the quarter ended June 30, 2006 increased $73.0 million or
64.0% over the same quarter last year. For the six months ended June 30,
2006 revenue increased $105.6 million or 42.6%. The January 1, 2006
acquisition of DOVONEX(R) was a significant factor driving the increases in
revenue in both the quarter and six month period. Sales of DOVONEX(R)
accounted for $34.3 million of the increase in revenue during the quarter
and $62.8 million for the six month period. TACLONEX(R) and LOESTRIN(R) 24
FE began commercial sales in March 2006 and together contributed $20.9
million and $25.6 million of revenue for the quarter and six months ended
June 30, 2006, respectively.
Sales of the Company's oral contraceptives increased $16.7 million in
the second quarter (+41.3%) and $25.8 million (+31.4%) in the six months
ended June 30, 2006 compared with the prior year periods. Beginning in
April 2006, LOESTRIN(R) 24 FE became the Company's top priority in
contraception with sales in the quarter and six months ended June 30, 2006
of $6.2 million and $7.6 million, respectively. During the period from July
2005 and continuing through March 2006, ESTROSTEP(R) was the Company's top
promotional priority in contraception, which resulted in strong growth in
filled prescriptions and drove an $8.3 million (+42.5%) increase in
ESTROSTEP(R) net sales in the current quarter and a $14.8 million (+38.5%)
increase for the six months ended June 30, 2006. OVCON(R) net sales in the
quarter and six months ended June 30, 2006 increased $2.2 million (+10.5%)
and $3.4 million (+7.8%), respectively, despite modest declines in filled
prescriptions compared with the prior year periods due to the July 2005
shift in promotional emphasis to ESTROSTEP(R). Average selling prices for
ESTROSTEP(R) and OVCON(R) increased approximately 8% for both the quarter
and six month period compared with the same periods in 2005.
In dermatology, sales of DORYX(R) increased $8.7 million (+52.2%) and
$9.8 million (+23.9%) in the quarter and six months ended June 30, 2006,
respectively, compared to the prior year periods. The increases were the
result of increased demand and higher pricing and a contraction of pipeline
inventory levels in the prior year periods. DORYX(R) prescriptions returned
to growth in the second half of 2005 as the Company deployed a specialty
dermatology sales force on July 1, 2005 and introduced, in September 2005,
a new delayed-release tablet form of the product. Filled prescriptions for
DORYX(R) in the quarter and six months ended June 30, 2006 were up more
than 10% compared with the prior year periods. Higher selling prices for
DORYX(R) during the quarter and six months ended June 30, 2006 also
contributed to the sales increases.
On January 1, 2006 the Company acquired the product rights to
DOVONEX(R) from Bristol-Myers and in March 2006 began commercial shipments
of TACLONEX(R). The addition of these two products to the Company's
dermatology portfolio added $49.0 million and $80.8 million to revenue in
the quarter and six months ended June 30, 2006, respectively, compared with
the prior year periods. In 2005 the Company promoted DOVONEX(R) for
Bristol-Myers and earned $5.6 million and $10.9 million of co-promotion
revenue in the quarter and six months ended June 30, 2005.
Sales of hormone therapy (HT) products increased $6.0 million (+20.5%)
and $3.1 million (+4.6%) in the quarter and six months ended June 30, 2006,
respectively, compared with the prior year periods. The increases were
primarily attributable to Estrace Cream which increased $4.9 million
(+44.3%) and $8.6 million (+35.5%) in the quarter and six months ended June
30, 2006, respectively, compared to the prior year periods. The Company
believes that sales of its HT products in the quarter and six months ended
June 30, 2005 were reduced due to contractions in the levels of pipeline
inventories. This was a significant factor in producing the sales growth of
the HT products in the quarter and six months ended June 30, 2006 in
comparison with the prior year periods.
Sales of the PMDD product, SARAFEM(R), declined $2.0 million (-17.0%)
and $3.6 million (-15.1%) in the quarter and six months ended June 30,
2006, respectively, compared to the prior year periods due to decreased
prescription demand, which was offset slightly by price increases.
Cost of Sales (excluding amortization of intangible assets)
Cost of sales increased $22.8 million in the quarter ended June 30,
2006 compared with the same quarter in 2005 primarily due to the 72.4%
increase in product net sales. Net sales of DOVONEX(R), acquired January 1,
2006, and the launch of TACLONEX(R) accounted for a significant portion of
the increase in product net sales and an even larger portion of the
increase in cost of sales in the quarter. The cost of sales for DOVONEX(R)
and TACLONEX(R), expressed as a percentage of product net sales, are
significantly higher than the cost of sales for the Company's other
products. Cost of sales as a percentage of product net sales increased to
19.9% in the quarter ended June 30, 2006 from 13.2% in the quarter ended
June 30, 2005.
Cost of sales in the six months ended June 30, 2006 were $69.0 million,
a $13.1 million increase over the prior year. Cost of sales in the six
months ended June 30, 2006 and 2005 included $1.5 million and $22.4
million, respectively, representing the increased values of inventory
recorded through the allocation of acquisition purchase prices and flowing
through cost of sales in the periods. Excluding the impact of these items,
the Company's adjusted cost of sales for the six months ended June 30, 2006
increased $34.0 million over the prior year period. The addition of
DOVONEX(R) and TACLONEX(R) net sales were the principal factors generating
the increase in adjusted cost of sales and the increase in the adjusted
cost of sales percentage in the six months ended June 30, 2006 relative to
the same period in the prior year.
Selling, General and Administrative ("SG&A") Expenses
SG&A expenses for the quarter ended June 30, 2006 were $60.9 million,
an increase of $24.3 million, or 66.3% from $36.6 million in the prior year
quarter. SG&A expenses for the six months ended June 30, 2006 were $99.2
million, an increase of $16.0 million, or 19.1% from $83.2 million in the
prior year period. The increase in both periods was mainly due to the
initiation of promotional activities in support of the launches of
LOESTRIN(R) 24 FE and TACLONEX(R) during the quarter. The Company incurred
significant promotional and advertising expenses during the quarter
including a direct to consumer campaign for LOESTRIN(R) 24 FE. Included in
the six months ended June 30, 2005 were $5.9 million of general and
administrative costs incurred in connection with the closing of the
acquisition of the Company in January 2005, which were mainly employee
retention compensation.
Research and Development ("R&D") Activities
Investment in R&D totaled $5.1 million in the quarter ended June 30,
2006 compared with $7.8 million in the prior year quarter. Investment in
R&D totaled $14.7 million in the six months ended June 30, 2006 compared
with $12.8 million in the prior year period. Included in the six months
ended June 30, 2006 was $3.0 million representing the Company's cost to
acquire an option to purchase certain rights to a topical dermatology
product currently in development by LEO Pharma.
Net Interest Expense
Net interest expense for the quarter ended June 30, 2006 was $46.0
million, an increase of $7.3 million from $38.7 million in the prior year
period. Net interest expense for the six months ended June 30, 2006 was
$91.1 million, an increase of $23.8 million from $67.3 million in the prior
year period. The increase in interest expense for both periods was
primarily due to: (1) additional borrowings on the senior secured credit
facility of $240.0 million used to fund the purchase of DOVONEX(R) and the
milestone payment for TACLONEX(R) to LEO Pharma and (2) an increase in
interest rates on un-hedged variable rate debt. In June 2006, the Company
entered into two additional interest rate swap contracts covering $375.0
million notional principal amount of variable rate debt which will become
effective in future periods.
Tax Rate
The Company operates in five primary tax jurisdictions: the United
Kingdom, the United States, the Republic of Ireland, Bermuda and Puerto
Rico. The difference between the statutory and effective tax rates for the
three and six month ended June 30, 2006 was predominantly due to the mix of
taxable income among the various tax jurisdictions, a valuation allowance
offsetting certain state loss benefits and other U.S. permanent items which
result in recording a tax provision on a book loss. The effective income
tax rate for interim reporting periods is volatile due to changes in income
mix among the various tax jurisdictions in which we operate.
Balance Sheet and Cash Flows
At June 30, 2006, the Company's cash and cash equivalents totaled $44.4
million and funded debt outstanding totaled $2,177.5 million with no
borrowings outstanding under the Company's revolving credit facility. The
Company generated $40.6 million of cash from operating activities in the
quarter ended June 30, 2006 compared with $9.2 million in the quarter ended
June 30, 2005. Cash generated from operations in the six months ended June
30, 2006 was reduced by increased investment in working capital mainly due
to the acquisition of DOVONEX(R). Capital expenditures in the quarter
totaled $5.2 million and included continued investments in the Fajardo,
Puerto Rico manufacturing facility and the implementation of a
corporate-wide enterprise resource planning system.
Subsequent and Other Events
On June 9, 2006, the Company's ultimate parent Warner Chilcott Holdings
Company, Limited filed an S-1 Registration Statement with the Securities
and Exchange Commission for a proposed initial public offering of its
common stock.
On or about June 27, 2006, LEO Pharma received notice of a Paragraph IV
certification from Hi-Tech Pharmacal Co., Inc. regarding LEO Pharma's
DOVONEX(R) solution. DOVONEX(R) solution is marketed and sold in the United
States by the Company under a license agreement with LEO Pharma. The
Hi-Tech certification letter sets forth allegations of non-infringement and
invalidity of LEO Pharma's patent which covers DOVONEX(R) solution. On or
about July 24, 2006, LEO Pharma received notice of a Paragraph IV
certification from Altana Pharma regarding DOVONEX(R) solution. The Altana
certification letter sets forth allegations of non-infringement of LEO
Pharma's patent. LEO Pharma and the Company continue to evaluate these
certification letters.
On July 28, 2006 the Company filed suit against Watson Laboratories,
Inc. and Watson Pharmaceuticals, Inc. alleging infringement of the
Company's U.S. patent that protects LOESTRIN(R) 24 FE. The lawsuit was in
response to an ANDA filed by Watson regarding Watson's intent to market a
generic version of LOESTRIN(R) 24 FE prior to the expiration of the
Company's patent. The Company has full confidence in, and will continue to
vigorously defend and enforce, its intellectual property rights protecting
LOESTRIN(R) 24 FE.
Investor Conference Call
The Company will host a conference call, open to all interested
parties, on Tuesday, August 15, 2006 beginning at 10:00 AM EDT. The number
to call within the United States is (800) 862-9098. Participants outside
the United States should call (785) 424-1051. The conference ID is
"WARNER". A replay of the conference call will be available from August 15,
2006 through August 29, 2006 and can be accessed by dialing (888) 567-0013
from within the United States or (402) 220-6939 from outside the United
States.
The Company
Warner Chilcott is a leading U.S. specialty pharmaceutical company
focused on developing, manufacturing, marketing and selling branded
prescription products in the women's healthcare and dermatology therapeutic
categories.
Forward Looking Statements
This press release contains forward-looking statements, including
statements concerning our operations, our economic performance and
financial condition, and our business plans and growth strategy and product
development efforts. These statements constitute forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. The words "may," "might,"
"will," "should," "estimate," "project," "plan," "anticipate," "expect,"
intend," "outlook," "believe" and other similar expressions are intended to
identify forward- looking statements. Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of
their dates. These forward-looking statements are based on estimates and
assumptions by our management that, although we believe to be reasonable,
are inherently uncertain and subject to a number of risks and
uncertainties.
The following represent some, but not necessarily all, of the factors
that could cause actual results to differ from historical results or those
anticipated or predicted by our forward-looking statements: our substantial
indebtedness; competitive factors in the industry in which we operate; our
ability to protect our intellectual property; a delay in qualifying our
manufacturing facility to produce our products or production or regulatory
problems with either third party manufacturers upon whom we may rely for
some of our products or our own manufacturing facility; pricing pressures
from reimbursement policies of private managed care organizations and other
third party payors, government sponsored health systems, the continued
consolidation of the distribution network through which we sell our
products, including wholesale drug distributors and the growth of large
retail drug store chains; the loss of key senior management or scientific
staff; an increase in litigation, including product liability claims and
patent litigation; government regulation affecting the development,
manufacture, marketing and sale of pharmaceutical products, including our
ability and the ability of companies with whom we do business to obtain
necessary regulatory approvals; our ability to successfully complete the
implementation of a company-wide enterprise resource planning system
without disrupting our business; our ability to manage the growth of our
business by successfully identifying, developing, acquiring or licensing
and marketing new products, obtain regulatory approval and customer
acceptance of those products, and continued customer acceptance of our
existing products; and other risks detailed from time-to-time in our
financial statements and other investor communications.
We caution you that the foregoing list of important factors is not
exclusive. In addition, in light of these risks and uncertainties, the
matters referred to in our forward-looking statements may not occur. We
undertake no obligation to publicly update or revise any forward-looking
statement as a result of new information, future events or otherwise,
except as may be required by law.
Reconciliation of Adjusted EBITDA to GAAP Earnings
To supplement its condensed consolidated financial statements presented
in accordance with accounting principles generally accepted in the United
States of America ("GAAP"), the Company is providing a summary to show the
computation of adjusted earnings before interest, taxes, depreciation and
amortization (EBITDA) taking into account certain charges that were taken
in the periods ended June 30, 2006 and 2005. The computation of adjusted
EBITDA for the periods ended June 30, 2006 and 2005 is based on the
definition of "EBITDA" in the indenture governing the Company's 8 3/4%
Senior Subordinated Notes due 2015. The Company believes that the
presentation of adjusted EBITDA provides useful information to both
management and investors concerning the approximate impact of the above
items. The Company also believes that considering the effect of these items
allows management and investors to better compare the Company's financial
performance from period-to-period, and to better compare the Company's
financial performance with that of its competitors. The presentation of
this additional information is not meant to be considered in isolation of,
or as a substitute for, results prepared in accordance with GAAP.
Financial Report for the Quarter Ended June 30, 2006
Copies of the Company's Report on Form 10-Q as of and for the quarter
ended June 30, 2006 are available on EDGAR or directly from the Company
beginning on August 11, 2006. Requests for the report should be e-mailed
tobkozinski@wcrx.com.
WARNER CHILCOTT HOLDINGS COMPANY III, LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands of U.S. dollars)
(Unaudited)
Quarter Quarter Six Months Six Months
Ended Ended Ended Ended
Jun-30-06 Jun-30-05 Jun-30-06 Jun-30-05
REVENUE:
Product net sales $186,970 $108,447 $353,431 $236,839
Other revenue - 5,583 - 10,933
Total revenue 186,970 114,030 353,431 247,772
COSTS & EXPENSES:
Cost of sales (excludes
amortization) 37,211 14,352 69,018 55,883
Selling, general and
administrative 60,866 36,593 99,152 83,233
Research and development 5,086 7,841 14,657 12,784
Amortization of intangible
assets 63,148 59,400 121,974 120,700
Acquired in-process R&D - - - 280,700
Transaction costs - - - 35,975
Interest income (381) (359) (785) (657)
Interest expense 46,403 39,017 91,899 67,963
(LOSS) BEFORE TAXES (25,363) (42,814) (42,484) (408,809)
Provision (benefit) for
income taxes 2,183 (581) 3,617 (4,937)
NET (LOSS) $(27,546) $(42,233) $(46,101) $(403,872)
RECONCILIATION TO ADJUSTED
EBITDA:
Net (loss) $(27,546) $(42,233) $(46,101) $(403,872)
+ Interest expense, net 46,022 38,658 91,114 67,306
+ Provision for income taxes 2,183 (581) 3,617 (4,937)
+ Stepped up basis of inventory
in cost of sales - - 1,464 22,381
+ Transaction related expenses
in SG&A - 1,908 - 7,787
+ Sponsors' management fee in
SG&A 1,250 1,250 2,500 2,431
+ Non-cash share-based
compensation expense 263 1,758 1,025 1,949
+ Depreciation 1,378 631 2,973 1,264
+ Amortization 63,148 59,400 121,974 120,700
+ Permitted Investments
expensed as R&D - 2,000 3,000 2,000
+ Acquired in-process research
and development - - - 280,700
+ Transaction costs - - - 35,975
ADJUSTED EBITDA $ 86,698 $ 62,791 $181,566 $133,684
WARNER CHILCOTT HOLDINGS COMPANY III, LIMITED
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of U.S. dollars)
(Unaudited)
As of As of
June 30, 2006 December 31, 2005
ASSETS
Current assets:
Cash & cash equivalents $ 44,370 $ 11,502
Accounts receivable, net 39,851 29,765
Inventories 47,563 31,398
Prepaid expenses & other current
assets 47,131 46,900
Total current assets 178,915 119,565
Property, plant and equipment, net 43,943 37,102
Intangible assets, net 1,650,808 1,519,847
Goodwill 1,260,777 1,260,777
Other non-current assets 78,956 80,924
TOTAL ASSETS $3,213,399 $3,018,215
LIABILITIES
Current liabilities:
Accounts payable $6,737 $17,629
Accrued expenses & other current
liabilities 128,962 114,054
Current portion of long-term debt 16,400 14,000
-
Total current liabilities 152,099 145,683
Other liabilities:
Long-term debt, excluding current
portion 2,205,500 1,975,500
Other non-current liabilities 128,499 128,597
Total liabilities 2,486,098 2,249,780
SHAREHOLDER'S EQUITY 727,301 768,435
TOTAL LIABILITIES & SHAREHOLDER'S
EQUITY $3,213,399 $3,018,215
WARNER CHILCOTT HOLDINGS COMPANY III, LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(in thousands of U.S. dollars)
(Unaudited)
Quarter Ended Six Months Ended
June 30, June 30, June 30, June 30,
2006 2005 2006 2005
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net (loss) $(27,546) $(42,233) $(46,101) $(403,872)
Adjustments to reconcile net
(loss) to net cash provided
by/(used in) operating
activities:
Depreciation 1,378 631 2,973 1,264
Amortization of intangible
assets 63,148 59,400 121,974 120,700
Acquired in-process
research & development 0 0 0 280,700
Amortization of debt finance
costs 2,757 2,687 5,514 4,861
Stock compensation expense 263 1,758 1,025 1,949
Changes in assets and
liabilities: 0 0
Decr / (incr) in accounts
receivable, prepaid and
other assets 779 3,998 (7,375) (7,057)
Decrease / (increase) in
inventories 9,798 (6,313) (16,164) 15,113
(Decrease) / increase in
accts payable, accrued &
other liab's (1,026) 1,899 1,814 (22,316)
(Decrease) in income taxes
and other, net (8,974) (12,653) (1,309) (23,225)
Net cash provided by/(used in)
operating activities $ 40,577 $ 9,174 $ 62,351 $(31,883)
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of intangible
assets (7,200) (7,200) (252,936) (14,400)
Purchase of business, net of
cash acquired 0 0 0 (2,922,555)
Proceeds from sale of fixed
assets 0 0 0 48
Capital expenditures (5,227) (1,639) (8,383) (2,217)
Net cash (used in) investing
activities $(12,427) $ (8,839) $(261,319)$(2,939,124)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Borrowings under bank term
credit facility 0 0 240,000 1,400,000
Proceeds from issuance of
senior subordinated notes 0 0 0 600,000
(Repayments) on predecessor
long-term debt 0 0 0 (195,000)
(Repayments) under senior
secured credit term loan
facility (4,100) (3,500) (7,600) (3,500)
Borrowings under revolving
credit facilities 0 0 20,000 20,000
(Repayment) of revolving
credit facilities 0 (20,000) (20,000) (20,000)
Proceeds from share capital
issue, net of expenses 0 685 0 1,282,851
Payments for debt finance
costs 0 0 0 (82,662)
Other (489) (3) (564) (2)
Net cash (used in) / provided
by financing activities (4,589) (22,818) 231,836 3,001,687
Net increase / (decrease) in
cash and cash equivalents $ 23,561 $(22,483) $ 32,868 $ 30,680
SOURCE Warner Chilcott Holdings Company III, Limited
back to topRelated links:
CONTACT:
Paul Herendeen, Executive Vice President and
CFO, +1-973-442-3369, pherendeen@wcrx.com
