NEW YORK (AP) -- Shares of Warner Chilcott PLC dropped to a three-year low Thursday after the Irish drugmaker disclosed that its three largest shareholders are selling most of their stock in the company.
THE SPARK: After the market closed Wednesday, Warner Chilcott disclosed that Bain Capital Partners, JPMorgan Partners, and Thomas H. Lee Partners plan to sell a combined 42 million shares of company stock. The three firms are Warner Chilcott's biggest shareholders, with each one holding a 10.2-percent stake in the company. After selling the shares, they will each own 4.6 percent of Warner Chilcott shares.
Executives of Warner Chilcott are selling about 900,000 additional shares. Most of that stock is being sold by Chief Financial Officer Paul Herendeen.
THE BIG PICTURE: Warner Chilcott's revenue is being hurt by declining sales of its osteoporosis treatment Actonel. It has reported decreasing U.S. prescriptions for the drug, and sales in Western Europe have decreased after the company lost marketing exclusivity. Revenue from its drug Doryx, which is used to treat acne and other medical conditions, is also declining because of generic competition, and Warner Chilcott recently took a large impairment charge to account for an expected decrease in Doryx sales.
In late April, Warner Chilcott said it was exploring a range of possible options to improve value for shareholders and was in talks with several companies that might be interested in buying it. In early August the company said it had ended talks about a possible sale, and said it would borrow $600 million to help fund a large special dividend. Warner Chilcott plans to pay a special dividend of $1 billion, or $4 per share, before the end of the third quarter.
THE ANALYSIS: Cantor Fitzgerald analyst Irina Rivkind said the firms may be concerned about the company's strategy and its ability to acquire new drugs. Rivkind said Warner Chilcott needs to gain some new assets soon because generic versions of its osteoporosis drugs Actonel and Atelvia and its low-dose Lo Loestrin FE contraceptives could all reach the U.S. market in 2014.
She said that asset acquisitions may take longer than expected. The analyst downgraded Warner Chilcott shares to "Hold" from "Buy" on the news, and cut her price target to $14 per share from $22.
"This offering comes on the tail of an unexpected outcome in the strategic review process, ahead of a highly visible patent cliff in 2014, and signals decreased insider confidence, in our view," she wrote.
SHARE ACTION: Warner Chilcott stock skidded $1.42, or 10 percent, to $12.77 in afternoon trading. Earlier the shares fell to $12.62, their lowest price since May 2009. Warner Chilcott shares closed at $21.81 after the company said it might sell itself, and going into Thursday's trading they had lost 34.9 percent of their value since.