Ahead of the Bell: Warner Chilcott

Warner Chilcott shares rise in premarket on optimism about potential combination with Actavis

Associated Press

NEW YORK (AP) -- Shares of Warner Chilcott PLC rose before Monday's opening bell on optimism that it will eventually reach a deal to combine with fellow drugmaker Actavis Inc.

The companies confirmed Friday that they're in early talks about a possible combination, but haven't reached a deal yet.

Cantor Fitzgerald analyst Irina Rivkind boosted her price target for Warner Chilcott's stock by $4 to $23, pointing to the company's better-than expected first-quarter profit and predicting that its 2013 results will come in ahead of its own guidance.

Rivkind, who also backed her "Buy" rating for the stock, said she thinks a deal with Actavis could go through, noting that Actavis has said that it's looking for ways to reduce its tax rate and that Warner Chilcott is an Irish company with a low cash tax rate. She added that there is some overlap in the two companies' businesses, as both are active players in women's health and urology.

Susquehanna Financial Group analyst Andrew Finkelstein, who backed his "Positive" rating for Warner Chilcott and "Neutral" rating for Actavis, said a deal between the companies could be "financially compelling and worth exploring."

Finkelstein added that he was surprised with the steep jump in both companies' stocks on Friday, saying that it shows how investors have are eager for additional consolidation in that industry.

Sales at Ireland-based Warner Chilcott have declined over the last two years after low-cost generic versions of its osteoporosis drug Actonel went on sale in Western Europe and Canada in 2010. At the same time, sales of drugs like Actonel have fallen in the U.S. The company expects sales to keep slipping in 2013.

Warner Chilcott's products include the ulcerative colitis treatment Asacol, which is its top-selling drug, and Delzicol, an ulcerative colitis medication that was approved in February. The company also sells oral contraceptives including Lo Loestrin FE.

Parsippany, N.J.-based Actavis, one of the world's biggest generic drug companies, was formed in October through a $5.6 billion combination of Watson Pharmaceuticals of New Jersey and Actavis of Switzerland.

It sells versions of the deep vein thrombosis treatment Lovenox, asthma medication Xopenex, attention deficit hyperactivity disorder drugs Adderall XR and Concerta, heart drug Toprol XL, cholesterol fighter Lipitor, contraceptive Generess FE, and pain drug Kadian among many other products.

In premarket trading, Warner Chilcott shares rose 59 cents, or 3.3 percent, to $18.30, while Actavis shares fell $2.96, or 2 percent, to $117.

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