Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)

Warner Chilcott plc (NASDAQ:WCRX)

2012 Guidance Call

January 27, 2012 8:00 AM ET

Executives

Paul Herendeen – EVP & CFO

Roger Boissonneault – CEO, President & Director

Analysts

Chris Schott – JP Morgan

Gregg Gilbert – Bank of America/Merrill Lynch

Randall Stanicky – Canaccord Genuity

Gary Nachman – Susquehanna Financial

Shibani Malhotra – RBC Capital Markets

David Risinger – Morgan Stanley

Marc Goodman – UBS

Michael Tong – Wells Fargo Securities

Tim Chiang – CRT Capital

Greg Waterman – Goldman Sachs

Elliot Wilbur – Needham & Company

Douglas Tsao – Barclays Capital

Operator

Good day ladies and gentlemen, and welcome to the Warner Chilcott 2012 financial guidance call. at this time, all participants are in a listen-only mode. Later we will conduct a question and answer session and instructions will be given at that time. (Operator instructions)

I would now like to turn the conference over to your host, Mr. Paul Herendeen, CFO. Please go ahead.

Paul Herendeen

Thank you Halli. Good morning everyone. Thanks for joining the call. I am joined this morning by Roger Boissonneault, our President and CEO. This morning we issued a press release the outlines our financial guidance for the full year 2012, which I hope you got a chance to review. Copies of the press release are available on the company’s website.

I will take a few moments to provide some additional comments with regard to 2012 guidance, after which Roger and I will host a brief Q&A period. Please note that in the Q&A we will only address questions relating to our guidance for 2012. before I start, let me note that we are affirming our full-year 2011 financial guidance at this time. We expect to report our Q4 and full year 2011 results in late February.

During the Q&A period we cannot and will not provide any additional details with respect to the fourth quarter or full year 2011 results. I also want to point out that this call will include forward-looking statements. These statements are subject to a number of risks and uncertainties that could cause the company’s actual results to differ materially from such statements.

These risks and uncertainties are discussed in this morning’s press release, our 2010 annual report on Form 10-K and subsequent filings with the SEC, all of which are available on the SEC's website. Forward-looking statements made during this call are made only as of the date of this call and the company undertakes no obligation to update such statements to reflect subsequent events or circumstances.

In addition, we'll make reference to certain non-GAAP financial measures as defined by SEC regulations. In accordance with these regulations, we have provided reconciliations of these measures in our press release issued this morning to what we believe are the most directly comparable GAAP measures.

I want to spend a few minutes to talk about how you might think about our expectations for 2012 and beyond. I suspect that many of you either listen to or have read the transcript from our presentation at JP Morgan a few weeks back. in my prepared remarks, I encouraged people to think about Warner Chilcott as being comprised of two distinct pieces of value, a core business of branded products that is growing both in terms of revenue and profits, and the revenue and profit stream associated with the Actonel brand.

You simply look at Warner Chilcott in the aggregate, or rely on headlines with respect to our guidance. You will likely miss the underlying strength and value of our company. First let us talk about our core business, which is everything other than Actonel. The products that make up our core fall into one of three categories. The growers for 2012 that includes the Loestrin franchise, Asacol, Estrace Cream, and Atelvia; the steady group, that includes Doryx and Enablex, and like every other branded company we have our tail revenues that are declining.

Let us start with the Loestrin franchise. 2011 saw us gain good traction with Lo Loestrin following its launch at the beginning of the year. Our challenge in 2012 and beyond is to drive the growth of Lo Lo to agree that the Loestrin franchise in the aggregate grows. And we expect we can do that in 2012.

Looking out beyond 2012, we continue to work to develop new contraceptives to give us the prospect of maintaining a growth position in this attractive segment, just as we have in prior years when we faced the loss of exclusivity of our then key brands. We think of our overseas business as one that can be a source of revenue and profit growth for years to come.

Next let me comment on Asacol. Asacol is like a battleship. It is hard to change the trajectory of this brand all that much as the market turns over so slowly. The good news is that this battleship is moving in the right direction, up. Asacol units are relatively steady, and we are able to enjoy growth driven by improved net pricing. So we expect Asacol to fall into the grower category in 2012, and thereafter.

It is worth mentioning here that when we acquired Proctor and Gamble’s Pharma business, the asset we covered it was Asacol, and that was in large part because we believe the uncertain and potentially difficult regulatory pathway for generics could mean that Asacol may enjoy market exclusivity beyond the expiry of the patents around the brand. Based on events that have transpired since we acquired Asacol, we continue to be confident in the prospects for sustaining the Asacol franchise. Of course, one of the other elements of the Asacol franchise that appeals to us, was that the product lend themselves to the development of product improvements that are right in our sweet spot. So I would not expect that we would sit still with Asacol and hope to sustain it over the long haul. You should expect us to actively manage the life cycle of this important franchise.

Estrace Cream, Estrace Cream has been, I think an underappreciated asset. While we have supported the product with promotional resources, it has responded nicely with solid unit and net sales growth. we expect to continue to grow Estrace Cream into 2012 and we are encouraged by the long-term prospects for the brand. Looking out beyond 2012, we believe that we have the opportunity to maintain exclusivity in this space due to a combination of the challenging regulatory pathway for potential generics, and our efforts to develop and introduce improved products in this segment.

One year in with Atelvia, we have set the stage for the brand to continue to grow. During 2011, we made strong progress addressing the potential barriers to Atelvia gaining share, mainly ensuring that the brand has credible coverage of managed care so that the good work of our sales reps can be evidenced by field RXs at the pharmacy counter. As we think about 2012, we think of Atelvia as being an important contributor to sales growth.

Based on weekly IMS RX data, Atelvia entered 2012 at a run rate in excess of $50 million per year, and both NRXs and TRXs show a nice upward trajectory. Although we expect the market for bisphosphonates will continue to contract in 2012, we expect Atelvia as a clearly differentiated, better product, will continue to gain share.

So those are our growth drivers in 2012. our steady products include Doryx and Enablex. If you look at the past performance of Doryx, you might wonder why I would characterize Doryx as steady. You have to recap, in 2008 Doryx sales were 159 million, then 210 million in ’09, 173 million in ’10, and LTM to September 30 of 2011, back to 159 million.

Here is the thing. at the start of the period, we employed strategies to increase both the market share and net sales of Doryx, and in 2010 and into 2011, the market responded to those strategies, and the game changed. While the market for branded acne products continues to change, and I don’t mean for the better, we believe we have found a new equilibrium, where we can sustain our Doryx business. Our guidance assumes that we are able to maintain exclusivity with Doryx through 2012.

Our other stable asset as we think about 2012 is Enablex. Throughout 2011, we continued the process of building out the sales team that promotes Estrace Cream and Enablex. And while you might have thought that would lead me to characterizing Enablex as a grower in 2012, we’re focusing that sales team first and foremost on growing Estrace Cream, as it has shown great promotional response and faces less gross to net pressures than Enablex. That said, Enablex is important to us, and we see the product as a steady contributor in 2012 with the prospect of moving into the grower category beyond 2012.

The third component of our core business is our tail revenue [ph]. Even though they are in decline, I still think of our tail revenues as being part of our core business because every pharma company deals with a tail. Our tail includes revenue from products such as femhrt, Femring, and Sarafem, (inaudible), the Western European local products such as (inaudible) and Previscan, and the revenue streams associated with royalties from third parties and contract manufacturing.

The tail products are not promoted. Several lost exclusivity and accordingly they have a natural downward trajectory. In the LTM to September 30 of 2011, our tail revenues totaled 242 million, and predictably continued their declining trend. Tail revenue in Q3 of ’11 totaled 45 million, probably a good starting point for a run rate going into 2012. we do our best to maximize the profit contribution from the tail, and the tail generates solid profit contribution, but they decline.

While we don’t guide to specific product revenue, our guidance contemplates that our core business, that includes everything other than the global Actonel revenue will grow in the low single digits in 2012, with the expectation that our core business can grow in the mid-to single digits into 2013 and beyond. Before I talk about our expectations for global Actonel revenues, let me call your attention to our guidance for 2012 operating cost, because other than the copromotion expenses associated with Actonel, you should think of our operating cost as being associated with our core business.

If you look at our guidance for operating cost, including co-promote expense, for 2012 of 800 million and 850 million, compare that to our guidance for 2011, of 925 million to 975 million, we have assumed that the aggregate amount of our copromotion expense to Sanafi in 2012 will be roughly equal to what it was in our 2011 financial guidance. That wouldn’t mean that we expect to reduce our operating costs other than copromotion expense by roughly 125 million in 2012 compared with 2011 financial guidance.

This is driven by reduced selling expenses as we have reduced the size of our US field forces from more than 900 territories at the start of 2011 to 750 territories in early 2012, and we moved to a distribution model in Western Europe. The reduced field forces, and the fact that we are not anticipating the launch of any new brands in 2012 also means lesser A&P costs.

G&A and R&D in ’12 are expected to be relatively consistent with our 2011 financial guidance. So think about this. On our core business, we’re expecting modest top line growth, and a reduction of operating costs of perhaps of 125 million, versus our 2011 financial guidance. That results in the core business that we expect we will see operating profit growth in the mid-to high teens, pretty good.

So in summary, looking at 2012, we think of our core business as delivering modest top line growth, and operating profit growth in the mid-to high teens. And we think we can sustain and grow that core business by continuing to do what we do. I submit that when viewed from this perspective, a reasonable investor would conclude, our core business all by itself is worth more than our current share value.

Wait, in addition to an attractive core business, shareholders also get a profit stream associated with Actonel. As I said before, we were attracted at the PGP by the Asacol franchise. But to get Asacol, we had to take Actonel. At the time we acquired PGP, Actonel’s LTM sales were more than 1.3 billion. We expected that Actonel would decline into half. Global Actonel revenues in 2010 were just more than 1 billion, and LTM to September 30 of ’11, Actonel revenue dropped to 825 million. The decline, which were expected, were driven mainly by the significant contraction of the US bisphosphonate market and the loss of exclusivity for the brand outside the US, beginning in 2010.

I would encourage you to think about Actonel in the same way that we do. There is little that we can do to change the trajectory of Actonel revenues, so we think of it as an asset we own, while declining at a rapid rate, it throws up a lot of profit. I like profit. Let me give you a few factoids that might help you think about the magnitude of the value of that Actonel profit stream.

LTM Actonel revenue to September 30 of ’11 was 825 million, of which 452 million was from the US, and the balance of 373 was outside the US. You will get the full year 2011 Actonel revenue number and breakout when we report our year-end quarter. but you have to assume that the revenue stream, whatever it turns out to be for 2011, continues to decline at a rapid pace into 2012, read 30 percentish. The decline could moderate in outer years as the market contracts and slows, but until we see that, I would assume a significant contraction continues.

The only direct cost associated with the Actonel revenue stream as we go forward, our cost of goods sold, which can be estimated at about 7% of Actonel revenue based on our expectations for 2012, and the co-promote payments to Sanafi. We expect Actonel co-promote expenses associated with Actonel in ’12 to be $175 million plus 20% of all US Actonel revenue, not exact but a good estimate.

Same for 2013, 175 million plus 20% of your estimate of all US Actonel revenue. And in 2014, the last year of the co-promote expense for Actonel, we expect it to be $125 million plus roughly 20% of all US Actonel revenue. If you do the math, you will find that even with Actonel revenues declining at a rapid rate, the pre-tax contributions from Actonel over the next several years are substantial, and they accrue to the benefit of all stakeholders at Warner Chilcott.

Before turning to specific guidance range for 2012, let me take a moment to discuss the key assumptions. Our 2012 financial guidance does not include the potential impact of 2012 activity under the share redemption program that we announced in November. The 2012 financial guidance anticipates that we will use our free cash flow to make additional, optional prepayments of our term debt. We don’t believe that you should view our optional prepayments of debt as precluding us from pursuing potential future business development opportunities, as we believe such prepayments reduce our interest expense, and increase our debt capacity to fund future opportunities when they arise.

We believe that our access to debt capital to capitalize on business development opportunities is quite good. With that let me turn to specifics of our guidance for ’12, which is detailed in the press release, and call your attention to a couple of items. First, we expect 2012 revenues to be in the range of $2.5 billion to $2.6 billion. The decline versus our current revenue guidance for 2011 is primarily related to the continued decline of global Actonel revenue, expected to be offset in part by sales gains in our core business.

Turning to cost of sales, our expected gross margin, we anticipate our gross margin on total revenue to be in the range of 87% to 88% in 2012, which is slightly below our guidance range for 2011. our forecast for ’12 takes into account the expected mix of product sales.

I covered the reductions in SG&A in my previous remarks, but just in case, our range of SG&A expense for ’12 is 800 million to 850 million, which is 125 million less than the current guidance range for 2011. This is reflective of the reduction of the number of US sales territories to 750 at the start of 2012, down from more than 900 at the start of 2011, reduced all US selling expense, as we completed the bulk of the restructuring to move to a distribution model in Western Europe, and reduced advertising and promotional cost in light of the smaller sales forces and the assumption of no new product launches in 2012.

Within SG&A, our expected Actonel co-promote cost in 2012 will be similar to our cost included in the 2011 financial guidance. Finally in general and administrative expenses, we have previously communicated that the normalized run rate for G&A is between 70 million to 75 million a quarter. for 2012, this continues to be a good estimate as anticipated savings from the European restructuring will likely be offset by an increase in anticipated legal expenses versus 2011 based on the expectation of the number and timing of our pending legal matters.

Turning to R&D, we anticipate R&D spending to be in the range of 110 million to 130 million in 2012, consistent with the guidance range of 2011. We do not target a specific level of investment in R&D that we try to meet each year for example as a percentage of revenue. Instead we build our R&D investment plan based on the availability of projects that we believe represents good investments with appropriate levels of risk and rewards, which includes the focus on improving, protecting and growing our existing product franchise.

Below the operating line, let me provide you with our current estimate of the amount of amortization of intangible assets expected for 2012, 2013 and 2014. based on our most recent estimates, our forecast for amortization expense for the next several years is $518 million in ’12, $465 million in ’13, and $388 million in ’14. please note that changes to our expected amortization may occur as we progress through our normal periodic review of intangibles.

Our interest expense includes two components, our cash interest expense, and the non-cash write-offs or amortization of deferred loan costs. In 2012, we anticipate the write-offs or amortization of deferred loan costs to be roughly 27 million after-tax. Our estimate of cash interest expense takes into consideration our expected prepayments of debt, but excludes any share redemptions during 2012.

Turning to taxes, most of our product assets including substantially all of our product assets acquired from PGP are only held in our Puerto Rican entity, where we enjoy a 2% tax rate on specific income based on in agreement with the Puerto Rican taxing authorities. In the past, we expressed our anticipated tax rate as a percentage of earnings before taxes, and book amortization of intangibles, or EBTA. Although there is no specific magic behind this calculation, we believe this metric provides outside parties with a reasonably accurate means of estimating our total debt tax provision.

We anticipate in 2012, our tax rate on EBTA will be in the range of 12% to 13% of EBTA. Based on the above guidance, our 2012 GAAP net income is expected to be in the range of $397 million to $422 million. to arrive at cash net income per share, we add back the after-tax impact of the book amortization of intangibles at an estimated 5.5% tax rate, and the after-tax impact of the amortization of write-off of deferred financing costs at an estimated tax rate of 7% for the year 2012.

Cash net income for the full year 2012 is expected to be in the range of $913 million to $938 million, using 253.5 million ordinary shares, the company expects cash net income per share to be in the range of $3.60 to $3.70 per share for the full year. Note that the 253.5 million shares includes the impact of share redemptions through December 31, 2011.

Finally a couple of balance sheet items for you. We anticipate 2012 capital expenditures to be approximately 50 million, and that would be a reasonable assumption for years beyond 2012. At the end of the third quarter of 2011, we had a gross debt balance of 3.9 billion in cash on the balance sheet of 316 million. Note that we built our cash balance at September 30, to ensure that funds are available for our share redemption program.

I noted earlier that our 2012 guidance does not include the impact of shares redeemed in ’12 under the redemption program. Now 2012 financial guidance does however include the impacts of our plans for deleveraging. At this time we expect to continue to use free cash flow to reduce the in the absence of other compelling opportunities to use our available cash.

Before I turn to Q&A, let me tick off certain material assumptions that are included within our 2012 guidance. Our guidance does not account for any impact from any new generic entrants on our Doryx 150, Asacol 400, or Estrace Cream products in 2012. Also it does not account for the impact of any restructuring charges resulting from our previously announced Western European restructuring. As we have previously stated, we anticipated the majority of these costs to be incurred in 2011.

As we have done in 2011, any such charges that leak over into 2012 will be shown in a separate line-item in the P&L, it would be added back to GAAP net income, net of applicable taxes in our calculation of adjusted net income in 2012. Finally I note that our guidance does not take into consideration the impact of any future acquisitions, or new partnerships, or licensing transactions, or the potential settlement or resolution of any of our outstanding, or future litigation.

Again, for a detailed view of the company’s 2012 financial guidance, please refer to the table included in the press release we issued this morning. With that, Roger and I will take your questions. Halli, would you open the line please.

Question-and-Answer Session

Operator

(Operator instructions) Our first question comes from Chris Schott of JP Morgan. Please go ahead.

Chris Schott – JP Morgan

Great. Thanks very much. First question is, I know that you are asked this all this time, but can you give us an update of what you are seeing for the business development landscape at this point, and maybe given these kind of comments you made on Actonel, would you do another transaction that included a high cash flow, but rapidly declining asset like Actonel, which is clearly financially attractive, but seems to be an asset that The Street struggles to give you value for?

Roger Boissonneault

As far as in our business development, we are always looking, and you know the problem with business development is it is not linear. Opportunities arise, and we did the P&G acquisition, we did the Taclonex acquisition, then we sold it back to LEO. So that is constantly ongoing.

I do think as Paul pointed out, the Actonel wasn’t the focus of our acquisition. We were very interested in Asacol. But as a result of purchasing Actonel, we did see an opportunity to extend its life cycle in the US, but unfortunately the European market, then European regulatory authorities, there really isn’t an opportunity to extend its life cycle. But if you look on a pure cash basis, I think you do that deal 10 out of 10 times.

Paul Herendeen

Yes, Chris, it is a very provocative question. We got it in one of our one-on-one meetings at your conference here, a couple of weeks back, I was asked about there are some interesting product assets out there that are declining, and you might be able to buy them, and particularly when you have a tax structure where you could put them in, and you could optimize that and you could buy an asset. I’m just using nonsense numbers, if you buy assets worth a billion dollars for $750 million, and you know that value accrues to your shareholders.

You know, the issue is what we are seeing in the way the market views our company right now is it is so colored by the headline revenue number, and actually even in this case looking year-to-year by the way that that decline of that franchise impacts your growth, or what people want to see as growth of your income. I’m not sure as a public company, even though we will be very attractive that you would want to go for it because as you can see, we’re struggling to deal with it.

I will tell you that the – and I did my level best to give everybody the ability to estimate the hundreds of millions of dollars of profit contribution that will come from Actonel, but the flipside of that is because people look and say, well, gee, 2.6 b that doesn’t sound good. And then you pull it apart, and you say, gee, if I do that math, a couple of hundred million dollars of growth drag, that is what we start the year with, and we’re not going to overcome that. and the result is our stock trades where it does.

So I think, well, as a private company I would do that every day, as a public company, I think you have to think long and hard about it because the market struggles with the impact on your reported results.

Chris Schott – JP Morgan

Okay. I appreciate those comments, and again I appreciate the additional detail of starting to kind of help us understand those two separate businesses. Can you just, a final question there, and just switching gears a little bit, Doryx, what gives you comfort in terms of your assumption of no generic competition in 2012, and in general just given the dynamics of the dermatology industry at this point, what is the company’s focus and interest in dermatology longer term at this point? Thank you.

Paul Herendeen

Well, we always liked the Doryx asset. I mean, Doryx was introduced to the market in 1985. It really had no generic competitor. So that is probably what gives us comfort going forward, and we have continually improved the dose form. We do like – the dermatology area is a nice area, but you have to have assets big enough to operate in dermatology. And I think that is one of the good things about acne, and you do know strategically that we’re developing a new class, within this class of tetracycline an NCE, which is the strategic goal. And the idea is to develop a tetracycline that is perhaps more powerful than the current tetracyclines, and so attack some of that Accutane use in severe acne. So that is where our positioning is long-term.

Chris Schott – JP Morgan

Okay. Thanks very much.

Operator

Our next question comes from Gregg Gilbert of Bank of America/Merrill Lynch. Please go ahead.

Gregg Gilbert - Bank of America/Merrill Lynch

Good morning. I have a couple. Paul you mentioned you thought that the core revenue growth could accelerate in 2013, what would drive that?

Paul Herendeen

Yes, it is, we are in a transition phase here with our oral contraceptives as we launched Lo Lo, as I said we got terrific traction, and we expect that franchise to be a grower in ’12 and we have the expectation that we can do better than that in the outer years. And importantly not just better than that, but better that and be able to continue to sustain ourself and grow in that segment as we look forward. That is one of the key drivers.

Secondly, Asacol, if you looked – now when you get into the growth discussion, we think ’13 could be better than ’12 as well. I mean, talking in terms of rate, the rate of growth as compared with just higher in ’13 than ’12. So those are the two main drivers, plus as I mentioned there are certainly some swing factors in Enablex and Doryx depending on what happens that they can flip into the grower category as well.

So I think low single digits is what we are thinking about in the core in ’12, and we think we have the prospects for accelerating that into ’13. Also by the way it is healthier, of course, it gets growing off of a small base, but it is growing. I mean I have mentioned it because people have the perception that Atelvia is nowhere, or I definitely heard that from some folks. Atelvia is at a pretty decent run rate as we exit 2011 going into ’12. That should be a grower as well and that is going to help.

Gregg Gilbert - Bank of America/Merrill Lynch

Then your comments for core growth acceleration in ’13, probably depend upon Doryx remaining exclusive as well, right?

Paul Herendeen

Yes, that is correct. We will need to maintain a presence in there, in our core spaces.

Gregg Gilbert - Bank of America/Merrill Lynch

Sure. When you announced the special dividend a while back, around a debt-to-EBITDA ratio of 2 times, and that is a level that we think you returned to in the next year or so. Is that a relevant metric for us to consider, sort of a backup plan if you can’t transact in the way that you like to over the next year or so?

Paul Herendeen

Well, first we are very hopeful that we can transact here over the course of the next year. We want to list the priorities of one through ten, one through nine would be, let us do a BD [ph] deal. If it turns out that we are a year or more out where we have lots and lots of debt capacity in the market. So, yes, we consider it, I think we demonstrated by action when we did it last time that we would certainly consider that.

Gregg Gilbert - Bank of America/Merrill Lynch

Lastly for Roger, given the changes that have been made in sales and marketing over the past several quarters, are there any metrics that are heading in the right direction that could translate into improved script performance that could perhaps be better than your guidance. We all see script data, but are there other metrics, signs you are seeing internally that things are turning in the right direction? Thanks.

Roger Boissonneault

Thanks Gregg. Yes, I think if you take a look, Paul mentioned some as far as the brands, and what we can do perhaps a better job with the OCs, but you have seen we have been doing some fine tuning with the sales force as far as targeting is concerned. Last year was launching Atelvia and Lo Lo, and what we had done was put all the targeting on hold because when you are launching two brands like that, you don’t want to have that type of confusion.

So we have been doing a lot of fine tuning. It is interesting in the OCs, we are actually seeing more primary care use, new to brand in OCs, which has caused us to do some more fine tuning and an opportunity. We also see excellent growth with Estrace Cream, and we see that as an opportunity to expand the universe [ph], because we are not reaching all these marketplaces, and I think you will see over the – at least the beginning of 2012, better reach in frequency to more productive targets.

Operator

Our next question comes from Randall Stanicky of Canaccord Genuity. Please go ahead.

Randall Stanicky - Canaccord Genuity

Great. thanks guys for the question. just back to Doryx for a second, can you maybe remind us of the legal and regulatory path, we’re going to get some color here near term, and then where your comfort level is highest. And then, Paul, maybe just a very specific question, can you talk about your strategy to back fill what is going to be a loss [ph] in 2014 in Europe space [ph]? Thanks.

Roger Boissonneault

Okay, as far as, legally where Doryx fits is we are going to have, the trial begins next week. And that will test the validity of the patent. As far as there is no approvals for Doryx, so other than a tentative approval for impacts, but that product has not been launched into the market. And that product basically is a single score.

So, however, whatever goes on next week, and trying to speculate on that is really related to the patent for Doryx. The second issue is their path for dual score Doryx. I think that pretty much sums that up. You talked about backfill for Lo Lo and Loestrin 24, and that is ongoing. You know that we don’t really comment on our new oral contraceptives, but you do know that we continue to improve our oral contraceptives on an ongoing basis. And I promise you that that is being done as we speak.

Roger Boissonneault

Sorry, Randall, let me follow on with respect to the oral contraceptives. That is a very important space for us. I think all the spaces in which we compete, it is one where we demonstrate as a company over the years that we can develop, gain approval for and launch products in this segment.

And we could be a player in this space, and we certainly look at that Loestrin 24, and Lo Lo franchise and say, we are fighting hard to be at 10% now plus market share participate in this space. We have not given that up. We have no intention of giving that up. Looking forward, can we tell you exactly how we intend to get it out beyond the end of ’13 when they could potentially be at an entrant on LOE 24. No, but we can tell you that we are developing strategies in order to protect it, and that we were going to be a player in that space.

Randall Stanicky - Canaccord Genuity

And I am assuming your guidance today does not contemplate any new pipeline launches, which I know we don’t have a ton of color around, but is it possible that perhaps in the latter half of the year we could see something come out?

Paul Herendeen

It is possible. It is, but again you should focus on – we are always either preparing products for submission, we will submit some NDAs certainly in 2012. How they navigate their way through the FDA is sometimes to say now it is hard to predict.

Randall Stanicky - Canaccord Genuity

Okay, great. Thanks guys.

Paul Herendeen

Thanks Randy.

Operator

Our next question comes from Gary Nachman - Susquehanna. Please go ahead.

Gary Nachman - Susquehanna Financial

Hi, good morning. Paul, understanding some of the top line pressures you face, I thought they would still be some more operating leverage to grow earnings as a total company year-on-year. And I understand you lowered SG&A meaningfully for the core business, but are there other levers that you have from here, if you end up seeing further pressure on the top line, and for example, what might happen if you do see a generic Doryx during the year?

Paul Herendeen

Sure. I will start with the operating leverage. First of all, $125 million of operating leverage in one year is pretty damn good. You know, that involves basically the tough decisions we took with respect to restructuring in western Europe. And that also included some difficult decisions regarding the aggregate size of our field resources here in the United States. Who know us for a long time, we don’t sit still with respect to assets that we invest in.

If we want more sales resources, we want to add them, and to the extent that those field resources are not driving the improved revenue and profitability that we are expecting from them, then we will cut them. And so the answer is, we continue to have the ability to scale the business based on what we see as the prospects for the portfolio that we are currently managing.

You know, with respect to Doryx, first of all is that we are anticipating that we will maintain exclusivity through 2012. If that were to prove to be an incorrect assumption, we need to look at the resources that we have committed to that space, and decide whether we want to maintain those resources in order to support a future endeavor in dermatology, or if we would those resources. but that is a decision that would be for another day, and based on something that is not controlled by our guidance.

Gary Nachman - Susquehanna Financial

Okay, thanks for that. And why is the cash tax rate coming in a little higher than it was previously, you know, now at the 12% to 13% range, and do you think it is going to stay there now for the next few years or is there a chance actually to bring it back down I think to the 11% that you had it at previously?

Paul Herendeen

Yes, I mean, I think the tax rate is dynamic. I will just give you one factoid because I think you can go back and piece that with prior data. The one asset that we own in the US is Estrace Cream, and so it is an asset that has a marginal tax rate that is much higher than every other asset. As it grows, it impacts your tax rate. Can impact it the way we describe it as the cash tax rate, you know in real way. So, I think of our guidance for 2012 as being broadly consistent with where we were in 2011. So, it moves around, and bumps around, could it bump down? Sure. Could it bump up 50 basis points in ’13? Sure. But I don’t see it doubling or anything like that (inaudible).

Gary Nachman - Susquehanna Financial

Right, okay. And then lastly, either for you or for Roger, just back on the BD, what is the market out there right now for deals, we do characterize it as robust, and are there specific therapeutic areas that you are focused on maybe that would even be outside of the core business right now, and also I am assuming you wouldn’t be doing any deals outside the US at this point?

Roger Boissonneault

Good morning. You have to clarify, do you mean good deals or bad deals. You know it is hard to – you know, I hate to say this, robust or there is more deals going on, and as you know Gary, it is really, is there a good deal out there that really fits us, are we so selective. And as we have demonstrated in the past, I mean we have got this question with you have Actonel, and we said we would never buy a company. We ended up buying P&G. So, it is very difficult to predict what is going to happen in the future, and yes we do look at everything.

Are we looking for something outside the US that of course wouldn’t be our target at this particular moment. But then again, if it brings us potential US assets, then again it could be a target. So and as Paul said, we continue to look at deals. They are interesting, right now we haven’t pulled the trigger.

Paul Herendeen

And also I would be interested to get out there as well. I mean I mentioned in my prepared remarks, our access to debt capital remains quite good, you know, those of you who follow our bonds. They are trading with the yield in the low 6s. that market would be receptive to a deal, and so I think to the extent that we’re so fortunate as to be in position to try to close a deal, I think we would be very successful closing that deal.

So this is very important to us, as I have said to many of you as we sat down on one-on-ones, we get it. We get the focus on BD. We understand that when we close our business development transaction, we get a nice lift in value. We all love it. we are shareholders too, when that deal is available to be done we will do it as quick as we can, but predicting it is very difficult.

Gary Nachman - Susquehanna Financial

Okay. Thank you.

Operator

Our next question comes from Shibani Malhotra of RBC Capital Markets. Please go ahead.

Shibani Malhotra - RBC Capital Markets

Thank you. First, back to business, I would say more like capital allocation, you know, you have often talked about different things that you could do, can you talk about valuation as well with your business development. I know Paul you have been very sensitive to valuation, and now that you just referred to good deals versus bad deals, but does there come a point where you are willing to pay more for assets you know, just to make I guess get shareholders more comfortable given where the stock is. and then finally would you consider going private if your stock continues to perform as it has right now? the second question is on (inaudible), do we have an update there, is there some things you are still working on, and then finally, on Asacol, can you talk about your expectation for when we may see a generic on the surface dissolution studies, which is what the agency requires. Pretty straightforward, but clearly in Asacol’s case they are pretty complicated. So could you just talk us through what the challenges actually are with generics, I think which brought up, and what you believe is a fair assumption in terms of a generic entrant? Thank you.

Paul Herendeen

I will start with the answer I think to the question about round valuation on looking at business development opportunities. Would we do, we don’t want to do a bad deal. I mean, I think to say would you push valuation, yes, sure. In an environment where you know you are rewarded for closing a deal, would we stretch to do a deal if we thought that was necessary, the answer is yes, we would push it.

Would we push it to the point where we felt like we were overpaying for an asset, the answer is no. We would not. If we had to pay $2 billion for an asset that was worth $1.5 billion, we wouldn’t do it. If we really thought it was worth $1.5 billion, would we nibble around the edges of that, sure, because you are always facing it off of your assumptions about what you can do with that asset, and I think we’re pretty good at doing things with assets.

But we would not be in favor of doing a deal that was worth $1.5 billion for $2 billion because ultimately you look backwards and say, gee, I wish I didn’t do that. With respect to someone taking the company private, we are not going to speculate on that. I mean that is I guess always a prospect for any company that is publicly traded.

Roger Boissonneault

Well, I guess because we did it once before, you know. But anyway, Paul is absolutely right. As far as, (inaudible) are we still working on it, yes, we are still working on it. PDs are complicated products to bring forward. There are multiple studies you have to do, and we want to make sure that we are consistent with what FDA, and FDA guidance is dynamic, so we want to just make sure that we’re doing everything the FDA wants us to do.

But yes, it is moving forward, and we plan on having a meeting with the FDA soon. As per Asacol and the prospects for Asacol in the generic, and Shibani it is not – dissolution is an issue, but bioequivalence is the bigger issue. And is the bioavailability of Asacol, is there high durability around this, and the FDA has issued some guidance. We are working on identifying the variability in this.

We are – we have talked to the FDA, and we are continuing to try to identify is there a route [ph], or isn’t there a route because of inherent variability associated with Asacol delivery. But it is not dissolution, it is really bioequivalence.

Paul Herendeen

And point I will drive Shibani that the news around that, I did sort of allude to this in my prepared remarks, the pieces of data that we obtained since we closed the deal with PGP, have continued to support our thesis that this is a long life franchise. Yes, we had a situation where we had multiple P4 filers [ph] against Asacol 400. At this moment in time we have one still standing unclear whether or not that party, which is far, will go forward, I mean, you can ask them. But we see this as a franchise that we expect that we can sustain, and as I also said, we are not going to sit still here either. We will continue to work to protect and grow this franchise for the long term.

Shibani Malhotra - RBC Capital Markets

Okay. Thank you.

Operator

Our next question comes from David Risinger of Morgan Stanley. Your line is open. Please go ahead.

David Risinger - Morgan Stanley

Thanks very much. I have a couple of questions for you Roger and Paul, I guess the first is historically, Warner Chilcott in January of each year has guided pretty conservatively, maybe you could just characterize how you provide guidance to investors in January. And then second, could you just focus us on the key pipeline events to watch for Warner Chilcott over the next year or so, at least things that you will be expecting to be communicating with investors on over the next year or so? Thank you.

Paul Herendeen

David, it is Paul. With respect to our guidance, I mean our norm since we went public in ’06 had been to provide guidance towards the tail end of January, when we had a pretty good look at how we ended up the prior year, and felt confident that we can provide a credible set of guidance figures to The Street. How do we view it? I mean, we view it as by the way we should I think view it as, when we put it out we think of it as kind of a commitment, and something that we want to deliver.

And of course like everybody else, we like to over deliver. You know, our plan is based on our expectations as we sit here today, both on the revenue side and all the assumptions that we make, and we are saying this year 2.5 to 2.6 and 3.60 to 3.70, those being the key stats. But consistent with what we have done in prior years. The only difference was last year we provided a little bit late because we had two products in launch mode. We wanted to see a little bit more data, but this is normal for us.

Roger Boissonneault

As far as pipeline events, David, as I think you are aware of how we work on the pipeline, I think some people focus on 2013 and 2014, and perhaps risk associated with some assets, and maybe going off patent, or they may be ending their 30 month legal windows. And as in the past, and in the future, you look for new versions or improvements of some of those assets.

And that should be coming you know late, probably in that 2013 time or perhaps 2012. But you should look for those new product improvements, those new assets that will be the future of Warner Chilcott to be introduced in that type of time frame.

David Risinger - Morgan Stanley

Great. Thank you.

Operator

Our next question comes from Marc Goodman of UBS. Please go ahead.

Marc Goodman - UBS

A couple of questions. First question is on the western franchise. Are you getting any pricing at all or you know, net pricing. Should we assume any price increases, and for the total franchise are you assuming double-digit growth this year or are we moving into single-digit growth and then I'll ask the others after.

Roger Boissonneault

Okay. I think the pricing – the pricing has been pretty static. I can't say that there are you know, huge pressures on pricing, and if you looked at (inaudible), the issue really isn’t a gross to net issue. It is really going the RXs, and if we grow those RXs they translate pretty much into improved net sales. As far as double-digit in force model, I believe Paul has put in single-digit growth.

Paul Herendeen

Single-digit in the franchise. Let me, it is Paul, let me buttress the remarks around net pricing because it raises an interesting question which applies to not just us but to all participants in the pharma space. If you think of our various franchises across our core franchise, we have the opportunity to increase our gross selling price. You know, that's part of the equation. The second part is, you know, all of us need to factor in how each individual product vary based on the characteristics of that product how you expect gross to net sales to behave with respect to that product.

Here is the, you know, the kind of the bad news is gross to net doesn't go up. It only goes down and the question is when you take a gross selling price increase how much of that can you make stick. You know, with respect to our OCs we are able to get upward pricing you know, in other words if we were nonsense number, were to take a 5% price increase, a good portion of that price increase would flow through in the form of increased net selling price up for RX.

If I said that same thing with respect to Actonel the answer is very different. If I said that same thing with respect to Doryx the answer is different, meaning you're not going to get significant benefit and it is a function of, you know, Actonel with very broad managed care coverage, very expensive managed-care coverage that moves in a direction that is only unfavorable.

So, you know, that you need to think about that with respect to each of them just to categorize Asacol product market leader, been there for years. I think that patients who are on Asacol will be very angry if someone said, here, it's not covered. And so in that situation we have a product where managed care is not as or cannot be as aggressive with us, and therefore we have solid pricing ability to take you to realize the benefits of price increases in that space.

You know, ROCs we get the benefit of realizing in the space. Interestingly, in Atelvia, our managed-care strategy there is a bit different from Actonel, where what we're working for there is access, not trying to buy our way up to Q2, and pay lots of money as we have with Actonel. We just want access because it's a better product in the space and so you got to – when you think about the impact of both pricing and gross to net it's different for each space. Sorry I prattled on there.

Marc Goodman - UBS

That was good. Thanks. Second question is why would you need to be more aggressive with the share buyback given where the stock is?

Paul Herendeen

Yes, when we announced, this is Paul again. When we announced the share buyback you know, the way I would characterize it as in our hierarchy of how we would like to deploy capital one through nine is for business development opportunities, and then 10 I actually said you know, maybe think about a special dividend at some point in the future.

Or you know, other transactions involving our equity capital. We put the plan in place for $250 million in November last year that the program will continue to run, I think its natural life concludes at the end of March, and yes, we have been and would expect to continue buying shares. At that point in time we obviously have the ability to think about it and go forward and either put in a new program or increase the scale of the program or you know, do some other form of program that's always within our inability but for now the way we thought about it was we'd love to keep our powder dry to activate those business development opportunities that everybody would love to see us execute.

You know, however looking at our share price the way it has performed it's too attractive an opportunity to ignore for us, and so you know, we have continued to buy shares under that program starting in November and it will continue on, you know, presumably until its natural end in March and then we can revisit whether we want to continue it. It has certainly been a good program for us.

Marc Goodman - UBS

Last question is can you comment about 2013 for a second and I guess is this a growth year in earnings.

Paul Herendeen

Yes, I would think that's relatively easy because it is math. You know, the good news here is the Actonel franchise shrinks you know, the impact that it has on your growth, your growth of both profitability and revenue. It lessens, it is just the algebra. So yes, we would expect that our core business can you know, can kind of turn around and overcome those declines in ’13 and ’14 and frankly beyond.

Roger Boissonneault

But then again Paul hasn’t factored anything that we haven't seen on the horizon that might be good to happen.

Paul Herendeen

Yes that would even be better than that. We are talking about the static business here. You know, that's what I would – anything good that you wouldn't be aware of that we would drop into the equation. So yes, I think that as the Actonel business continues to run off it makes it easier for us to grow our core business to the point where we deliver C&I growth.

Marc Goodman - UBS

Thanks.

Operator

Our next question comes from Michael Tong of Wells Fargo Securities. Please go ahead.

Michael Tong - Wells Fargo Securities

Good morning Roger and Paul. Just a couple of follow-ups to some of the earlier questions, so can you clarify based on your last comment that 2013 being a growth year is dependent upon your current book of business and not necessarily any pipeline products coming through, and then secondly given the fact that we have limited visibility into your BD effort, and what you might be looking at when and how big. Have you considered giving a little bit more visibility in terms of the pipeline as far as progress or will we be seeing data that could give us a better handle on the pipeline because that's the second part of your growth strategy? Thanks.

Roger Boissonneault

Let me try to, I think as far as 2013 (inaudible) Paul projection, correct me if I am wrong Paul, is based on our current book of business, and that that we make any acquisitions or we have any new products to be introduced. So that's I think the point that we want to make. As far as business development I think we're pretty clear on what our business development strategy is. As far as pipeline and giving perhaps more guidance on pipeline or what's going on, I mean you get into this competitive sort of issue and the other thing is certainty, as you guys all know you would not really ascertain that you have the product until it is approved by FDA, and some of our pipeline might be a little bit confusing because we may have one, two or three projects that are going on at the same time and depending on you know, the viability and how they move through the pipeline we are going to choose one of them.

In the case of oral contraceptives, you already saw it happen or with Lo Lo and then we had a second product, which was a Femcon [ph] and we got both the products approved in nearly the same timeframe, and we chose to license one of the products out. So you know, that's the kind of flexibility that you have to have in pipelines, and I think sometimes you know, it potentially could be confusing but the other thing is from a competitive point of view we like to keep this close to our vest.

Operator

Our next question comes from Tim Chiang of CRT Capital. Please go ahead.

Tim Chiang - CRT Capital

Hi thanks. Paul I know there has been a lot of questions about acquisitions potentially you know, how much does the tax rate affect your decisions for potential acquisition at this point?

Paul Herendeen

Tim, certainly the tax rate factors into the value that we believe that we can obtain from an asset. I may give you an example, you know, somebody asked earlier, I think Shibani, would you push it on the valuation front. It will be awesome if we’re the only one out there with a very low tax rate and that gave us this you know, a natural advantage because we could bid up the price, and still see our way clear earning appropriate returns on that investment, and you know, it will be kind of like a synergy whenever you try and buy the business and take the benefits of your tax structure.

The reality is most of the parties we compete with for assets have opportunities to do that in the tax advantaged way, but we certainly take our tax rate into consideration when looking at an asset and it can be a very substantial benefit for us. I think in the hierarchy if we were to buy a product asset from anywhere around the world, and drop it into our structure, it will be terrific because you'd be able to obtain the tax, favorable global tax rate on that asset immediately.

If you look at a company acquisition sometimes that can take a period of time to morph that or move that company into your tax structure, but at the end of the day you will have those opportunities. You know, we feel that our structure which we believe is you know, sustainable, it is a solid structure, is a very valuable long-term asset for our company. So it certainly comes into play when we think about buying either products, companies or both.

Tim Chiang - CRT Capital

That's great. I just had one follow up Paul. You know, how much additional leverage do you think you have on the SG&A line, I mean, certainly you're cutting costs there. I mean looking to 2013, 2014 is there more room for cost cutting on that line?

Paul Herendeen

Yes, yes. Tim, there always is. If you followed us, those of you who’ve known us for a long time we are a, I use to describe it as a notoriously, you know, frugal company. You know, we are always looking for ways that we can drive down all cost categories, including P&A and including you know, that investment and sales resources if they're not warranted. I mean, think about what we're doing here 2012 via ’11 where, you know, you take down your number of territories in the US by 150 territories and these are averages around numbers, but 150 territories I would summit that you know, that is a fairly sizable decrease year-over-year, and if it were warranted or the situation changed and we're looking at ’13 and 700 is not the right number, it is 600.

Yes, that's another you know, $25 million of potential operating leverage that you could get in the field force and that sets aside the work that we continue to do to drive all of our G&A costs down as well. So there is still some leverage there.

Tim Chiang - CRT Capital

Okay, great. That’s very helpful. Thanks Paul.

Paul Herendeen

Thanks Tim.

Operator

Our next question comes from Greg Waterman of Goldman Sachs. Please go ahead.

Greg Waterman - Goldman Sachs

Thanks for taking the question. On Asacol, you mentioned that lifecycle management is a key focus and strategy to drive this franchise longer-term. I just want to get a sense unlike the derm space, prescriptions in the UC space turn over pretty slowly, which I think extended to slow product transitions. I'm just wondering how you think about this relative to your lifecycle management efforts?

Paul Herendeen

If you think that you know, the other ones are slow, Asacol creeps. You know, when you look at you know, when I look at new brands versus new RXs, versus total RXs there are significant multipliers there. So when someone is put on Asacol for their ulcerative colitis, it is likely that they put on the product 20 to 30 years old, and they are probably going to be taking that product for the rest of their lives, because it prevents the disease, and every once in a while they get a flare, and then you have to use corticosteroids to bring it back, and they certainly become – I mean it is indeed a great product but it is a product that is used in the long term.

And so I mean getting to the fact how quickly do you put that product into another product and that would be obviously very slowly. The issue around Asacol, it's a very unique product in the way it is delivered. You almost have to think of it as a topical product and it has a unique pH trigger associated unlike any other of the mesalamine type products. So the idea with Asacol is to try to get as distal as possible because a lot of people start their ulcerative colitis with proctitis, and it works its way up the colon. So it's a very variable delivery system and it is intended to be that way because it improves its clinical efficacy. It's a very, very difficult product to duplicate.

Greg Waterman - Goldman Sachs

Okay, just – and if I am reading correctly, it sounds like many transitions would be slow but in the context of high barriers, that’s fine.

Roger Boissonneault

Yes.

Paul Herendeen

Yes, Greg it’s Paul. That’s right. Yes, this is an area where you need time, and what we would summit is you know, Asacol 400 and HD we expect that those products have life spans that are longer than what would be indicated by the patent, which runs out the end of ’13.

Greg Waterman - Goldman Sachs

Great, sorry.

Paul Herendeen

We need time. We think we have time and we will you know, continue to work on additional product in that space.

Roger Boissonneault

Just for the avoidance of doubt, we spend a lot of time becoming the experts on mesalamine. We know mesalamine inside-outside, every analog mesalamine we have people that work – we have gastroenterologists on our staff. We look to the future. We look into inflammation in general and we’re looking at the disease state. You know, this is a disease state that we’re very interested and we make you know, we make significant investments.

Greg Waterman - Goldman Sachs

That's really helpful. Thank you.

Operator

Our next question comes from Elliot Wilbur with Needham & Company. Please go ahead.

Elliot Wilbur - Needham & Company

Thanks good morning. I have two quick questions probably for Roger and then a bigger picture question for Paul. First for Roger, with respect to Estrace Cream obviously become much more important driver for the company over the years, and we don't really sort of talk about the possibility of a generic threat to that asset very often. Can you just help us from kind of a threat level assessment perspective, you know, think about you know, what the risks are at least from your vantage point. I mean I know there was a citizen petition filed seven or eight years ago but it has been pretty quiet ever since, and I guess obviously that's a good sign, but just help us on that a little bit. And then with respect to the Loestrin franchise in total, (inaudible) have been kind of locked in a range now for some time, I'm just wondering if the cannibalization from Lo Loestrin is where you expect it or maybe a little bit higher than you expected. And if so what can be done to sort of address that and then the question for Paul is you did an excellent job of sort of, you know, highlighting the Warner Chilcott valuation paradox that everyone faces and you know, I'm wondering if you know, you would consider some sort of monetization transaction for the Actonel as not so much from a strategic perspective or strategic buyer vantage point, but maybe from a financial buyer vantage point. Obviously you have to give something up in terms of the EMPB [ph] of the asset but you could potentially before the cash proceed is paid down on debt buyback shares, EPS impact may not be all that great and arguably you would allow folks to really see sort of the underlying growth, and you know, in theory anyway there should be a big valuation upgrade as a result. Thanks.

Paul Herendeen

Thanks Elliot that was easy. As far as Estrace Cream there is guidance out there, but then again this is another variable product because even the dozing of Estrace Cream you begin with one dose, and then you move to less frequent use, and it is very difficult to measure the blood level because the blood level isn’t the efficacy marker. It’s actually the vaginal mucosa and what happens with the use of this type of cream, the vaginal mucosa actually becomes improved and affects blood levels and you're using less products.

So the issue is you know, how do you duplicate something like that because again you have to think of Estrace Cream as a topical product with a moving efficacy marker. As far as the Loestrin franchise is concerned, and yes what's happening here are we taking business from 24, or moving it to Lo Lo, or are we improving our own franchise and we’ve taken a hard look at that as how we define our franchise, who we are calling on.

Actually what gives us comfort in this whole market place is you know, new to brand or new starts in the market place are still auto. And they don't even you know, they currently don't have a sales force. So we've got to take a hard look on you know, is that piece of the market available to our sales reps, so we are targeting that market effectively, and we're not taking one brand and from one side of the pocket and put them into the other. We have to expand the whole Loestrin franchise, and I do think going into you know, we get people that continue to grow Loestrin 24, some continue to promote Lo Lo. I think we have to focus our emphasis on Lo Lo, and I think the future is in 10 mcg products.

Roger Boissonneault

With respect to that, it's a good question Elliot around would you monetize that asset, I will say it's a terrific idea from a value perspective. To actually execute it will be complicated, and I would just say to you that something that I think about and I think about it a lot is how do we address the value that we all know is there within Actonel, but is clouding the performance of our base business.

Yes, so I'm not continuing to say we're going to do that tomorrow but I will tell you that we're thinking about it a lot. Those that have seen us speak here over the course of the last couple of months, yes, we are trying to highlight it for everybody, every opportunity that we get because underneath that aggregate business is a nice space business that’s a grower, and then there is the value of that franchise. So if there is a way that we can try it apart from the rest of the business it's certainly something that we would consider but it is complicated.

Operator

Ladies and gentlemen due to time constraints we will only be able to take one more question. For those of you – we're not able to have their questions answered please contact the investor relations. Our final question comes from Douglas Tsao of Barclays Capital. Please go ahead.

Douglas Tsao - Barclays Capital

Hi good morning. Thanks for taking the question. Paul I was just hoping you could give us an update in terms of coverage for Atelvia, where it is now as well as where you hope it to be and some of the uptick recently. Has that been driven by greater access or has it been certain ability to drive scripts from you know, territories that already had coverage or decent coverage but you know, I know in the past you sort of noted there was some that had, you know, there was inconsistency across your territories in terms of performance and conversion rates?

Paul Herendeen

Sure, I’ll start and I’ll have to hold Roger back if he is going to come in and talk about the sales rep piece of it too. You know, first of all I would say that we exited 2011 with what I will call credible coverage with Atelvia and managed care. Yes, think of that in the range of somewhere between 50% and 60% coverage and contrast that with roughly 70%ish for Actonel.

So yes we’re approaching the level that we continue to work to make sure that we have coverage out there for the product. But that's not gaining factor per se. We are seeing the gains is within the sales force. Those reps that are doing a good job have done a good job even when they didn’t have a credible managed care coverage, and we’re you know, trying to basically take that good performance in territories and re-create or replicate it in other territories across the country. We actually over the course of from 2011 into 2012 we have focused that sales force, it is a smaller sales force, better targeted and we think what you're seeing at the tail end of 2011 is a continuation of the changes that we started in mid year ’11 and well, we would expect to continue on into ’12.

So Roger, you want.

Roger Boissonneault

Yes, it’s kind of – I mean Paul has spoken to at the difference of being Tier 2 or Tier 3 and perhaps better off with Atelvia, because it has a distinct clinical advantage to be on Tier 3, but what we're seeing here and it is quite right that you know, we have some – you know, and it is a kind of it is a bimode distribution I guess of sales reps who’ve executed very well, and they understand the benefits of Atelvia as far as you can take Atelvia with the meal, for the patients with high GI upset and so what we've done is we will say, well, we’re going to take those reps and spread them over the territories of the reps that haven't done so well.

So what you're doing is now you're spreading the impact area of the good reps versus and these are districts and control if you have here is they've done well, when Atelvia had no coverage and they continue to do well when Atelvia has coverage. So we believe that the variable here is the execution on the part of the sales force, and what we've done is we've focused the execution on the part of the reps and the district sales managers that seem to get it.

Douglas Tsao - Barclays Capital

Okay, great. Thank you very much.

Paul Herendeen

Thank you.

Operator

I would now like to turn the conference back over to management for any closing remarks.

Paul Herendeen

Sure. It’s Paul. Thanks all for being, yes, being on the call this morning where our intention was to provide you with the color around our guidance for 2012, and a little bit of insight into how we think about our business beyond 2012 to the extent that through providing that information we raise questions for you. Everyone I think knows how to reach us. So thanks very much for being on the call.

Operator

Ladies and gentlemen this does conclude today's conference. You may all disconnect and have a wonderful day.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Warner Chilcott CEO Discusses 2012 Guidance (Transcript)

Check out Seeking Alpha’s new Earnings Center »

This Transcript
All Transcripts