As Warner Chilcott (NASDAQ: WCRX) acknowledged in an announcement Monday that it is considering strategic options, it’s good time to look at what the company has to offer a prospective buyer in what has become a busy M&A landscape.
The Irish company’s products were mostly acquired from Bristol-Myers Squibb, Lilly, Pfizer and Procter & Gamble. The strategy has kept research and development expenses low. The Achilles’ heel for the women’s specialty pharmaceutical company appears to be that more than 70 percent of its revenue comes from three drugs either losing patent protection or poised to lose it by 2014. This includes its osteoporosis drug Actonel, according to its 2011 annual report. This week it failed to prevent two generic rivals to its acne drug Doryx, which generated $264 million in sales in 2011.
Because other pharmaceutical companies are in the same boat and also using acquisitions to ease themselves out of this predicament, Warner Chilcott looks that much less attractive. Still, the company is more than just the sum of its successfully commericalized parts. Although women’s healthcare can be quite competitive on price since there is so much product overlap, its pipeline also includes urology and dermatology. It has a urology drug in Phase 3 development – PDE5 inhibitor, udenafil, for erectile dysfunction, the product of a collaboration with Korean manufacturer Dong A. The same drug is in Phase 2 development to treat enlarged prostate. It also has a five-year-old agreement with Paratek for some rights under a novel group of tetracycline to treat acne and rosacea. Phase II studies are expected to begin sometime this year.
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The company, which has U.S. offices in Rockaway, New Jersey, has several hormonal contraceptive and hormone therapy products in various stages of development. It is also developing a new generation of osteoporosis drugs in postmenopausal women, but is in preclinical development. Treatments to combat ulcerative colitis are in clinical development.
In an interview with Reuters, Jefferies analyst Corey Davis suggested that the M&A traffic in the pharmaceutical industry had returned to a sufficient level to make such a big acquisition more realistic.
“I’ve always seen Warner as more of acquirer than acquiree given their declining revenue stream, but bigger companies are completely loaded with cash and there’s tons of M&A going on.”
