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Sunday, according to The Wall Street Journal, specialty drug maker Warner Chilcott Ltd. (WCRX) is acquiring the prescription-drug business of consumer goods giant Procter & Gamble Co. (PG). The report stated that the pharmaceutical unit could fetch about $3 billion, and that the official announcement on a deal could be made as early as Monday. The company's Ohio-based pharmaceutical unit was on the block for sale since December 2008.
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| | | | | Ardee, Ireland-based Warner Chilcott, which recently shifted base from Rockaway, New Jersey, is expected to run the acquired business as a wholly-owned unit. Both the companies were unavailable to comment. The report stated that others in the fray to buy the unit were private equity firm Cerberus Capital Management LP and rival drug-maker Forest Laboratories Inc. (FRX).
Analysts suggest that Warner Chilcott was at an advantage to win the deal as it is well positioned to squeeze maximum synergies and costs savings out of the acquisition. Warner Chilcott focuses on the women's healthcare and dermatology segments of the U.S. pharmaceuticals market. Its products include oral contraceptives and hormone therapy. The prescription-drug business of Procter & Gamble also focuses on women's health, musculoskeletal disorders and gastrointestinal problems.
Meanwhile, drugmakers have turned in mixed results this earnings season.
Bolstered by strong sales performance across its major drugs and lower costs, Genzyme Corp. (GENZ) reported profit for the second-quarter that more than doubled from last year. However, the company's shares fell nearly 8%, after the biotech company slashed its full-year outlook, citing estimated impact of the temporary Allston shutdown and timing of the expected availability of Lumizyme in U.S. Healthcare giant Merck & Co. Inc. (MRK) reported a 12% decline in second-quarter profit to $1.59 billion, hurt mainly by lower revenues as well as merger and restructuring costs. The Dow component's second-quarter GAAP net income attributable to company was $1.56 billion or $0.74 per share, compared with $1.77 billion or $0.82 per share last year. On an adjusted basis, earnings per share was $0.83 per share, lower than $0.86 in the year-ago quarter.
British pharma giant GlaxoSmithKline Plc (GSK ,GSK.L) reported a rise in profit for the second quarter, aided by strong performances in emerging markets and increased sales from new products and flu drug Relenza. Looking ahead, the drug maker said it expects improvement in earnings to continue into the second half of fiscal year 2009. Glaxo also said it closed the acquisition of privately held US dermatology company, Stiefel Laboratories Inc., in a deal valued about $3.6 billion.
The proposed acquisition would be the largest global deal, as well as the fourth largest U.S. deal, involving a leveraged loan in 2009, according to data from Dealogic. The report stated that six lenders led by Bank of America Corp (BAC) and JPMorgan Chase & Co (JPM) would provide up to $4 billion in financing, including $1 billion to refinance Warner Chilcott's debt. Leveraged loans are extended to companies that already have considerable amounts of debt, and they tend to be more costly to borrowers. The financiers also include Credit Suisse Group (CS), Citigroup Inc. (C), Barclays PLC (BCS) and Morgan Stanley (MS).
In December, Procter & Gamble said it would not make any new investments in research and development in its prescription drugs unit, and that it might sell it. Procter & Gamble's prescription drugs include the blockbuster women's osteoporosis drug Actonel, ulcerative colitis drug Asacol, female sexual-dysfunction drug Intrinsa and overactive bladder treatment drug Enablex. Procter & Gamble would now focus on its health business of over-the-counter products such as Pepto Bismol and Prilosec.
Since 2006, the company has slowed down its in-house drug discovery due to the stiff competition in the pharmaceutical industry. Meanwhile, the company forged deals with small bio-pharmaceutical companies and universities for drug discovery.
Procter & Gamble's pharmaceuticals business began in the late 1970s when the work of a Specialty Products group developed three products in the U.S., Osteocan, a diagnostic bone-scanning agent, Didronel, and Topiciclyne for acne. Buoyed by early discoveries, P&G expanded its pharmaceutical operations with the acquisition of Norwich Eaton Pharmaceuticals in 1982. Norwich gave P&G an innovative pharmaceutical Research & Development group that discovered and developed more prescription products including Entex, Macrodantin and Dantrium.
Through the 1980s, P&G hired more researchers, modernized and expanded its R&D facilities and focused its research efforts. In 1995, the company opened a 1.3 million square foot facility based in Cincinnati, to serves as its global health care head quarters for pharmaceuticals, over-the-counter, and oral care businesses.
However, Cincinnati, Ohio-based maker of Pampers diapers hired Goldman Sachs (GS) in February to help it sell its prescription brands or find other ways to exit the pharmaceutical business. The company's prescription drugs unit markets about 40 prescription drugs worldwide and have annual global sales of more than $2 billion, and makes about $800 million in operating profit.
Analysts reportedly said last month that Procter & Gamble could look to exit businesses such as Duracell batteries, Pringles snacks, pet food and pharmaceuticals. Earlier, the company sold off Jif peanut butter, Crisco shortening and most recently Folgers coffee in November 2008. Meanwhile, Procter & Gamble has acquired brands in the personal-care and beauty industries in the past few years, with Clairol and Wella being notable conquests, as well as its biggest buy in the company's history, the Gillette Co. acquisition in 2005.
Procter & Gamble is the world's leading maker of household products with a major market share and billion-dollar names. It's divided into three global units: health and well being, beauty, as well as household care. The company also makes pet food and water filters and produces soap operas. Some 25 of P&G's brands are billion-dollar sellers, including Fusion, Always/Whisper, Braun, Bounty, Charmin, Crest, Downy/Lenor, Gillette, Iams, Olay, Pampers, Pantene, Pringles, Tide, and Wella, among others.
In late May, the maker of Tide detergents and Gillette shaving razors reported a 18% year-over-year decline in profit for the fourth quarter, hurt by a stronger dollar and reduced demand across all categories as consumers scaled back on spending amid the economic downturn. This was partially offset by improved operating margins. Excluding the net impact from the sale of the Folgers coffee business, the company's adjusted earnings per share for the quarter increased 6.4%. Quarterly net sales declined 11% to $18.66 billion from $20.89 billion last year.
Earlier in the month, Warner Chilcott posted a 66% surge in profit for the second quarter on an increase in revenues resulting from higher sales of Doryx, Loestrin 24 FE and Estrace cream as well as lower expenses. Net income increased to $56.02 million or $0.22 per share from $33.57 million or $0.13 per share in the same quarter last year. Excluding charges, cash net income increased 29.6% to $109.20 million or $0.44 per share from last year. Quarterly revenues grew 7.1% to $250.82 million from $234.22 million a year ago.
WCRX closed Friday's regular trading session at $16.06, up $0.49 or 3.15% on a volume of 2.53 million shares, higher than the three-month average volume of 1.10 million shares. In the past 52-week period, the stock has been trading in a range of $9.24 to $17.25.
PG closed at $53.58, up $0.56 or 1.06% on a volume of 13.27 million shares, higher than the three-month average volume of 12.70 million shares. In the past 52-week period, the stock has been trading in a range of $43.93 to $73.57.
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