Can Warner Chilcott Start Growing Again?

Tomorrow, Warner Chilcott (NASDAQ: WCRX  ) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed kneejerk reaction to news that turns out to be exactly the wrong move.

Warner Chilcott is a modestly sized pharmaceutical company specializing in products related to women's health care, as well as treatments for conditions like overactive bladder, severe acne, and ulcerative colitis. Yet the company has seen turmoil over the past year, as its leading osteoporosis drug Actonel has seen declining sales and the company's attempt to sell itself off failed. Let's take an early look at what's been happening with Warner Chilcott over the past quarter and what we're likely to see in its quarterly report.

Stats on Warner Chilcott

Analyst EPS Estimate

$0.85

Change From Year-Ago EPS

(27%)

Revenue Estimate

$588.06 million

Change From Year-Ago Revenue

(14.2%)

Earnings Beats in Past 4 Quarters

4

Source: Yahoo! Finance.

Can Warner Chilcott's earnings heal its stock woes?
Analysts have gotten less optimistic about Warner Chilcott's earnings recently, knocking a nickel per share from their first-quarter estimates and cutting almost $0.30 per share from their full-year 2013 consensus. Yet the stock has managed a minor rebound, rising more than 6% since early February.

Warner Chilcott went on a roller-coaster ride last year, as the company said last April that it was looking to sell itself and was in preliminary talks with potential buyers. Yet those talks never led to anything, and the company instead issued a special dividend of $4 per share. While that was reasonably well-received, the decision of major institutional investors to dump 17% of Warner Chilcott's outstanding shares in a secondary offering led to concerns about the debt-laden drug company's future.

With the sale of the company off the table at least for now, investors have started focusing again on Warner Chilcott's poor sales. Procter & Gamble (NYSE: PG  ) developed lead drug Actonel, which was part of the pharmaceutical division that P&G sold to Warner Chilcott in 2009, and even though the drug has been off patent for years, sales still remained reasonably strong even after its expiration. Actonel remains the most trusted drug in the osteoporosis category, although sales have recently finally started to decline.

Warner Chilcott may even turn the tables and decide to be an acquirer. Rumors that the company might be involved in a potential bid for Endo Health Solutions (NASDAQ: ENDP  ) back in February haven't panned out, but an acquisition could help the company bolster its pipeline. At the same time, though, its current debt load could make a buyout difficult from a financial perspective.

Still, Warner Chilcott has seen good news on the development front. Its Doryx delayed-release oral antibiotic got Food and Drug Administration approval in its 200 mg form, with Warner Chilcott expecting to launch the drug in July. Just earlier today, the company had a new oral contraceptive approved by the FDA for an expected August launch.

In Warner Chilcott's earnings, look for the company to discuss its overall strategic plan going forward. With the drugmaker having apparently survived the worst of its tumultuous recent past, investors should hope that Warner Chilcott can make progress on getting its debt levels down and keep its drug pipeline flowing.

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