Warner Chilcott Ltd. (WCRX) reported second-quarter results Friday. The company’s GAAP net income came in at $56 million, or 22 cents per share, recording a robust 66.7% growth over the prior year quarter. Excluding certain non-cash items, earnings per share of 44 cents topped the Zacks Consensus Estimate by 5 cents, or nearly 13%.

Warner Chilcott, a leading specialty pharmaceutical company focused on women’s healthcare and dermatology segments in the U.S. market, has manufacturing facilities in Puerto Rico and Northern Ireland. The Rockaway, NJ-based company’s quarterly revenues expanded 7.1% year over year to $250.8 million, primarily driven by the sales of Doryx, Loestrin 24 Fe and Estrace cream products.

Sales of Oral Contraceptive products rose 5.6% year over year to $75.5 million. The growth was driven by the company’s flagship product, Loestrin 24 Fe, which grew 15% to $58 million due to higher average selling prices coupled with a 10.3% rise in filled prescriptions. The other major product in the segment, Femcon Fe expanded 14.7% to $12.4 million also on account of higher prices and prescription volumes.

Dermatology products logged a growth of nearly 11% year over year to $115.3 million. The performance was attributable to strong sales of Doryx, which surged 41.6% to $44.9 million mainly due to a 41.6% increase in prescriptions filled. The growth in prescriptions was driven by extensive promotions for Doryx 150mg, which was launched by the company last year. Sales of Taclonex slipped 5.9% to $36.5 million on lower prescription volumes and higher sales-related deductions. Dovonex recorded a marginal growth of 1.4% to $33.9 million on higher prices and lower sales-related deductions.

Revenues from Hormone Therapy products swelled 9.1% year over year to $47.4 million. The growth was driven by a 33.1% expansion in Estrace cream on account of promotional efforts, partially offset by a 19.9% reduction in Femhrt to $13.1 million as lower volumes and a contraction of pipeline inventories affected performance.

Warner Chilcott’s gross profit posted a growth of 11.3% year over year to reach $203.9 million, while gross margin grew 310 basis points (bps) to 81.3%. The expansion was primarily caused by the growth of higher margin products such as Doryx, partially offset by increased manufacturing costs. The company also lifted its full-year gross margin target to between 80% and 81%, against the prior outlook of 79% to 80%.

Operating expenses rose 8.1% year over year to $121.9 million, primarily due to a 12.6% increase in SG&A expenses largely on account of legal fees related to the company’s relocation to Ireland. Nevertheless, driven by robust sales, operating income expanded 16.3% year over year to $81.9 million, while operating margin grew 260 bps to $32.7%.

The company ended the quarter with cash and equivalents of $138.2 million, compared to $21.2 million in the prior-year quarter. Last year’s cash balance was affected by a cash outflow of about $115 million related to debt repayment and purchase of intangibles. Warner Chilcott generated $124.5 million of cash from operations during the second quarter and utilized it primarily on capital expenditure ($12.5 million), purchase of intangibles ($2.9 million) and debt repayment ($1.2 million).

Moving forward, Warner Chilcott continues to expect full-year revenues of $1.015 billion to $1.025 billion. However, the company has raised adjusted earnings guidance to between 1.60 and $1.65 per share, compared to previous outlook of $1.55 to $1.60. The updated forecast is well above the Zacks Consensus Estimate of $1.53, derived from 12 covering analysts, which has edged up a penny over the past month.Zacks Investment Research

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