* Says preliminary discussions may lead to offer
* Hires Goldman Sachs as adviser
* Shares up as much as 24 percent
* Loses Doryx patent case to Mylan, sees charge
(Adds company estimate of charge in patent case)
By Bill Berkrot
April 30 (Reuters) – Specialty pharmaceutical company Warner
Chilcott Plc said it would explore strategic options,
including preliminary talks with potential buyers, sending its
shares up as much as 24 percent.
The company, which makes women’s healthcare and dermatology
products and other specialty drugs, said it hired Goldman Sachs
as its financial adviser.
The announcement comes after speculation that Bayer AG
would make a bid for the Irish drugmaker at $32 per
share. Warner Chilcott declined to comment on the Bayer rumor.
Some analysts suggested that other options, such as selling
certain assets or declaring a special dividend, were as likely
as a sale of the company. Warner picked up potentially
attractive products with its 2009 purchase of Procter & Gamble’s
pharmaceuticals business, including the osteoporosis
drug Actonel and the ulcerative colitis drug Asacol.
Last week, sources told Reuters that the German drugs and
plastics maker Bayer was close to making a multibillion-euro
acquisition to strengthen its healthcare division.
“I don’t know about Bayer as a buyer. This doesn’t seem to
me that that gets them anything that they’d need,” said
Jefferies & Co analyst Corey Davis.
“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,”
Davis said, adding that he believes that “this is really more
the start of the process than nearing the end.”
In January, Warner Chilcott had forecast a weak 2012 on
lower sales and loss of market exclusivity for Actonel in
Western Europe.
And the generic threat to its acne drug Doryx has come to
pass after a court ruled in favor of Mylan Inc in a
patent infringement case. Mylan said on Monday it would begin
shipping its generic version immediately.
Warner, which reported Doryx sales of $46 million in the
fourth quarter, said it would appeal the ruling. It expects an
impairment charge of $90 million to $108 million due to the
court decision, cutting into its 2012 profits.
ASSET SALE SEEN POSSIBLE
Asked what Warner has to offer a potential buyer aside from
cash flow, Davis said, “a women’s health franchise and the
durability of Asacol are probably their two biggest strategic
assets right now.”
Asacol has annual sales of about $800 million and is still
growing, albeit slowly.
Morningstar analyst David Krempa also said he would be
surprised if Bayer were interested in Warner Chilcott and
suggested that it may be looking to sell off Actonel rather than
the entire company.
Actonel had sales of $180 million in the fourth quarter of
2011, a 23 percent decline.
“Their product portfolio has a lot of patent issues coming
up, which will kind of limit the amount of people that are
interested in buying the whole company,” Krempa said.
“If they could get someone interested in the entire company,
they would definitely be open to that,” Krempa said. “But if
they can’t, then I think they would still be open to selling
only certain assets.”
The company said it would not discuss further developments
until the board has approved a course of action or deems further
disclosure to be appropriate or required.
Acquisition activity in the healthcare sector has been
extremely robust in recent weeks. Earlier on Monday, Medical
device maker Hologic Inc said it agreed to buy
diagnostic test maker Gen-Probe Inc for $3.75 billion.
Last week, Watson Pharmaceuticals Inc said it would buy
rival generic drugmaker Actavis Group for $5.6 billion and
British drugmaker AstraZeneca said it would buy Ardea
Biosciences for $1.26 billion.
Meanwhile, Illumina Inc, Human Genome Sciences Inc
and Amylin Pharmaceuticals are all in play
after rejecting takeover bids by large drugmakers.
Warner Chilcott was purchased and taken private in 2004 by
private equity buyers. It returned as a publicly traded company
two years later but its three largest shareholders, which
account for about 30 percent of company ownership, remain
private equity firms Bain Capital LLC, CCMP Capital Advisors LLC
and Thomas H. Lee Partners, according to Thomson Reuters data.
Warner Chilcott shares were up about 24 percent for the year
prior to Monday’s announcement. But the company remains
relatively inexpensive.
“Trading at roughly five times 2012 estimated earnings per
share, Warner Chilcott’s valuation remains at the very low end
of the historical specialty pharma range,” JP Morgan analyst
Chris Schott said in a research note.
Warner Chilcott shares closed up $3.02, or 16.1 percent, at
$21.81, off an earlier high of $23.28.
(Reporting By Bill Berkrot in New York; additional reporting by
Zebi Siddiqui and Vidya P L Nathan in Bangalore; Editing by
Gopakumar Warrier, Matthew Lewis, Dave Zimmerman)
