Warner Chilcott Looking Craftier in Deal Making (WCRX, PG)
Warner Chilcott plc (NASDAQ: WCRX) may have figured an even cheaper way of acquiring the pharma business from Procter & Gamble (NYSE: PG). The company is effectively selling its licensing rights of its topical psoriasis treatments to Leo Pharma, who is reacquiring the licensing rights from Warner Chilcott for about $1 billion. The deal will result in a one-time gain of roughly $450 million and will net Warner Chilcott roughly $980 million in cash.
Leo will also regain the rights to Taclonex, Taclonex Scalp, Dovonex and all products in the developer’s pipeline. Warner Chilcott will continue marketing these drugs for Leo, through the end of the year. Warner Chilcott is to also further assist with the transition for up to a year. The companies have been partners since 2003.
Warner Chilcott will use the funds to pa down its senior secured facilities and also to help finance the acquisition of Proctor & Gamble’s pharma division.
As long as the figures come to pass as we have been told through 2010 by Warner Chilcott and P&G, then it seems as though Warner Chilcott has figured out how to be rather crafty in its strategy.
Shares are up over 1% at $19.99 today and the 52-week trading range is $9.24 to $22.94.
JON C. OGG
Warner Chilcott, a Rare Winner as an Acquirer (WCRX, PG)
This morning’s merger announcement where The Procter & Gamble Company (NYSE: PG) announced the sale of its global pharmaceuticals business to Warner Chilcott plc (NASDAQ: WCRX) was a strange deal for more than one reason. For starters, this is entirely a cash payment of a sum of $3.1 billion. Another issue is that very few consider P&G as a having a drug company, but more strange is that the acquirer saw its stock rise substantially. P&G’s portfolio of branded pharmaceutical products includes the following:
- Asacol® HD (mesalamine) Delayed-Release Tablets for ulcerative colitis,
- Actonel® (risedronate sodium) for osteoporosis,
- the co-promotion rights to Enablex® (darifenacin) for the treatment of overactive bladder,
- and P&G’s prescription drug product pipeline and manufacturing facilities in Puerto Rico and Germany.
The majority of the 2,300 employees working on P&G’s pharmaceuticals business are also being transferred to Warner Chilcott in a merger that is expected to close by the end of this calendar year. The deal is pending necessary regulatory approvals, although a deal of this size will probably face very little if any reviews.
Warner Chilcott believes that this will transform the business into a global pharmaceutical company with an expanded presence in women’s healthcare and the urology market ahead of the planned launch of its own erectile dysfunction treatments. It will also add in gastroenterology therapies to the company’s prpduct list.
The sale price $3.1 billion will result in a one-time earnings increase for P&G of approximately $1.4 billion after-tax, or approximately $0.44 per share. P&G also sees dilution in the range of $0.10 to $0.12 off of earnings per share in fiscal year 2010 due to the lost earnings from the business and from stranded overhead costs.
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A New Fight Against Female Sexual Dysfunction
There is new news on the fight against sexual dysfunction in women. Noven Pharmaceuticals, Inc. (NASDAQ: NOVN) has entered into global license and supply agreements with Procter & Gamble (NYSE: PG) under the consumer product giant’s Pharmaceuticals unit for the development and commercialization of prescription transdermal patches for the treatment of Hypoactive Sexual Desire Disorder in women. The condition is called HSDD. You can hear thousands of husbands cheering right now.
Noven has granted P&G an exclusive worldwide license to a testosterone patch for the treatment of HSDD in women, as well as potential next-generation patches in the same therapeutic category.
As part of this arrangement, Noven will receive royalties and manufacturing fees as well as development and sales milestones relating to the licensed products. P&G will also fund any clinical development costs and is also responsible for any regulatory filings and marketing applications associated with the licensed products.
Noven successfully formulated the licensed testosterone patch utilizing its patented DOT Matrix® transdermal delivery technology pursuant to a development agreement between Noven and P&GP established in 2003.
This is just one more product for P&G, but for Noven this might be a windfall. Its market cap is only $310 million and its total revenues for 2007 were listed as $83.161 million. This is supposed to be the crossover profitability year for Noven as well on a non-GAAP basis with analysts looking for estimates of $0.61 EPS on $102.3 million in revenues.
Jon C. Ogg
August 21, 2008
After Partner Quits, What's Left at ARYx? (ARYX, PG)
ARYx Therapeutics, Inc. (NASDAQ: ARYX) is a stock in trouble today. The company announced late Wednesday that its partner, Procter & Gamble (NYSE: PG) opted out of its drug collaboration pact with the company.
The collaboration was developing a gastrointestinal disorder drug to treat chronic constipation and functional dyspepsia, and ARYx had indicated that positive safety data was evident. The company believes there is merit and it will continue the study if it can find a new partner.
As this is often a cause for major concern about a small biotech’s future, we wanted to look under the hood and see what else ARYx has going for it.
The company does have about $60 million in liquidity as of March 31, but total liabilities were also $41.45 million. Its market cap based on today’s 22% drop is now $89.7 million.
The company currently has a Phase II/III clinical study going on for anticoagulation under enrollment. It also is in mid-stage trials for atrial fibrilation and an early stage study in psychotic disorders.
This company doesn’t look dead by any means. But it is definitely injured as a result of yesterday’s actions.
At 10:40 AM EST we have seen a 22% drop, but there has only been 12,000 shares trade hands.
Jon C. Ogg
July 3, 2008
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