Warner Chilcott posts operating profits of €40.6m

Warner Chilcott, the Northern Irish drugs company formerly known as Galen, has posted better-than-expected results for the third quarter.

A strong performance from the company's oral contraceptive products helped offset the negative impact of the disposal earlier this year of its UK products business and one of its products, Loestrin. However, the group's antidepressant, Sarafem, confirmed market fears of disappointing sales, recording a near 70 per cent drop in sales to $6.7 million (€5.4 million) compared to market forecasts ranging from $14 million to $19 million.

Warner Chilcott reported operating profits of $40.6 million, down 6 per cent on the year-ago quarter, as revenues fell by 12.5 per cent to $118.8 million. However, sales from continuing operations were up by 13 per cent to $113.9 million.

Earnings per share before goodwill and exceptional items fell by 6 per cent to 25.1 cents in the three months to the end of June, reflecting the asset disposals, but came in ahead of the consensus analyst forecast of 23.3 cents.

The company said it was on track to deliver full-year EPS toward the top end of analysts' expectations, which range from $1-$1.10.

"We are strongly based for a good finish to the year," executive chairman Dr John King said.

Shares in Warner Chilcott, which have suffered lately amid nervousness ahead of the results and concerns about Sarafem's performance, gained 4.8 per cent in London to 576.5 pence sterling. In Dublin, they added 21 cents or 2.5 per cent to €8.56.

The company said trading in the third quarter showed "good growth, margin improvement and cash generation from continuing operations".

Sales of its oral contraceptive Ovcon were up by 22 per cent to $19 million while Estrostep sales posted a 46 per cent increase to $16.5 million.

Warner Chilcott's Doryx acne treatment also turned in a strong performance, posting a 44 per cent increase in sales to $18.3 million.

The only major product to show a decline in revenues was Sarafem. However, Dr King said Warner Chilcott expected Sarafem sales to "normalise" in the fourth quarter although the company has dropped its second half guidance of about $19 million of sales for Sarafem. Full-year Sarafem sales are now expected to be in the $60 to $65 million range compared to around $77 million previously.

The group operating margin rose to 53 per cent from 41 per cent a year ago, reflecting the disposal of its lower-margin UK business.

Selling, general and administrative costs fell by 11 per cent to $37.6 million in the quarter while research and development costs were down 18 per cent to $7.2 million.

The company said it had three new drug applications pending before the Food and Drug Administration (FDA) in the US. These include two HRT products - Femtrace and Femhrt - and a line extension to Doryx.

Meanwhile, the launch of a spearmint-flavoured, chewable version of the group's Ovcon contraceptive pill has been pushed back until 2005.

Warner Chilcott, which spent $15.1 million to buy back its own shares during the quarter, was likely to continue to repurchase stock periodically, Dr King said. It bought back a further 1.5 million shares yesterday at 576.8 pence per share.

The firm, which generated cash of $62.6 million during the quarter, remains on the lookout for acquisitions in women's healthcare and dermatology.

Net debt at the end of June stood at $15 million compared to $289 million a year earlier.