WASHINGTON (AFX) - Pharmaceutical company Warner Chilcott Holdings Co. filed Friday with the Securities and Exchange Commission to go public by selling as much as $1 billion of its shares on the Nasdaq Stock Market.
Although specific price terms haven't been set and the final size could change by the time Warner Chilcott goes public, the offering could be the third this year worth more than $1 billion.
MasterCard Inc. completed its $2.4 billion offering last month, and San Diego technology-research company Science Applications International Corp. is expected to sell as much as $1.73 billion in stock some time this fall.
Warner Chilcott, headquartered in Bermuda, develops prescription drugs for women's health issues and dermatological uses. It focuses on hormonal contraceptives and hormone therapy, as well as treatments for psoriasis and acne.
The company has had six drugs approved by the Food and Drug Administration since March 2003. Among the products it sells are oral contraceptive Ovcon, hormone therapy cream Estrace, and psoriasis ointment Dovonex.
In its prospectus, Warner Chilcott claims that large pharmaceutical companies' focus on blockbuster products creates opportunities for specialty companies such as itself to compete effectively in smaller markets. Warner Chilcott's first-quarter revenue rose 24 percent to $166.5 million, and its net loss narrowed by 92 percent to $27.3 million, compared with the same period a year ago.
Warner Chilcott, which was a unit of Warner-Lambert Co. until it was sold to an Irish firm in 1996, was acquired for $3.1 billion in January 2005 by private-equity specialists Bain Capital, DLJ Merchant Banking, JP Morgan Partners and Thomas H. Lee Partners.
The company has reported net losses since then. The transaction led to a write-off of acquired research and development, increased interest expense from debt used to pay for the transaction, and increased amortization expenses, all of which dragged the company into the red.
The acquisition was notable for the hard feelings that came out during a bidding war: the initial bidders, a group including Goldman Sachs Group Inc., Texas Pacific Group, Blackstone Group and Kohlberg Kravis Roberts & Co. lost out on the transaction, and their resulting anger was one of the reasons JPMorgan Chase & Co. and Credit Suisse Group AG decided to reduce their involvement in the private-equity business.
The private-equity acquisition resulted in a significant increase in Warner Chilcott's intangible assets and goodwill.
The company's intangible assets, which include trademarks, license agreements and acquired patents, represented 53 percent of the company's total assets at the end of the first quarter.
Goodwill -- the excess cost over the fair value of the net assets the private equity group acquired -- is 39 percent of its total assets.
The company warns that it may never realize the full value of its intangible assets, and could face write-offs in the future. The company's total debt clocks in at $2.2 billion, some of which is at variable interest rates, which could rise.
Among the issues facing Warner Chilcott is recent research focusing on the medical risks associated with hormone therapy products used by women to relieve menopause symptoms.
The company makes a variety of estrogen and combined estrogen-progestogen therapy products, including Estrace, and the American College of Obstetricians and Gynecologists has recommended that women use these products in the lowest possible dose for the shortest possible duration.
Warner Chilcott said in its prospectus that it believes the publicity surrounding hormone-therapy risks has resulted in a significant industry-wide decrease in the number of prescriptions being written for estrogen and estrogen-progestogen drugs, which may reduce the company's revenue growth rate.
The shares are expected to trade on the Nasdaq under the symbol 'WCRX.'
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