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Warner Chilcott plc (NASDAQ:WCRX)

Q4 2011 Earnings Call

February 24, 2012, 8:00 a.m. ET

Executives

Paul Herendeen - EVP & CFO

Roger Boissonneault - CEO, President & Director

Analysts

Gregg Gilbert – Bank of America/Merrill Lynch

Shibani Malhotra - RBC Capital

Randall Stanicky - Canaccord Genuity

Michael Tong (Brian) - Wells Fargo Securities

Marc Goodman – UBS

John Boris – Citigroup

Douglas Gale – Barclays Capital

Elliot Wilbur - Needham & Company

Andrew Finkelstein – Susquehanna Financial

Scott Henry – ROTH Capital Partners

Dewey Steadman - JPMorgan

Operator

Good day, ladies and gentlemen, and welcome to the Warner Chilcott fourth quarter and full-year 2011 financial results. 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).

As a reminder, today’s conference call is being recorded.

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

Paul Herendeen

Thank you, Allie. Good morning. This morning we issued a press release that details our fourth quarter and full-year 2011 results. The press release is available on our website, if you haven’t already seen it. Roger and I will take a few minutes to give a best general business overview, and I’ll provide some comments about our financial results, then we’ll end with the Q&A.

Before we get started, let me 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 our 2011 Form 10-K and other filings which are available on the SEC website.

Forward looking statements made during this call are made only as of the date of this call. The company undertakes no obligation to update such statements to reflect subsequent events or circumstances. In addition, we will make reference during the course of the call to non-GAAP financial measures as defined by the SEC. In accordance with SEC regulations, we have provided reconciliations of those measures in our press release issued this morning, to what we believe are the most directly comparable GAAP measures.

With that, let me turn things over to Roger Boissonneault, our President and CEO.

Roger Boissonneault

Thanks, Paul. 2011 was another busy year for us. To try to recap, we started the year with commercial launches of two products, the Atelvia and LO Loestrin. We are off to a good start with LO Loestrin and we’re ramping up on Atelvia. It’s been slower than we had hoped but our RX’s are picking up and Atelvia is currently the only branded bisphosphonate that is growing in the U.S.

In the fourth quarter, we had a favorable development with the respect to Asacol 400 when Roxane informed us that it will no longer pursue marketing approval for its generic version of Asacol 400, and the litigation was dismissed.

Our patent case against Par, which is seeking FDA approval of a generic version of Asacol 400 continues. In December, the FDA granted our citizen’s petition, confirmed the regulatory framework that requires ANDA filers to satisfy the FDA’s previously-announced bioequivalence guidance. We view this as a positive development and remain optimistic about the future prospects for our Asacol franchise.

During the course of the year we also announced a number of initiatives that we believe will position us to continue to deliver value to our shareholders. In April of 2011, we announced our Western European restructuring plan following the loss of exclusivity for Actonel in Western Europe. Over the course of 2011 we successfully transferred almost all of our Western European markets to a distributor model, which reduces our operating cost in these markets.

In the U.S. we reorganized our sales forces at the end of the year to improve targeting and focus in many of our therapeutic categories. We successfully completed a refinancing of our senior secure debt in March of 2011, reducing our interest expense by over 40 million in 2011, and extending our debt maturities.

We put our free cash flow to good use during the year by making optional prepayments of term debt totally $750 million. And in November 2011, we put in place a program to redeem up to $250 million of our ordinary shares. We’ll continue to look for value-enhancing strategic opportunities to utilize our strong cash flow, including business development, which remains a priority for us.

At this point, I’ll turn it over to Paul for some thoughts on our financial performance.

Paul Herendeen

Yes, thanks, Roger. Overall we had a solid fourth quarter and finished the year in line with our full-year revenue expectations, while adjusted cash debt income of $3.83 per share topped the high end of our guidance range. We continued to drive sales gains in many of our key promoted brands compared with the prior year quarter, and were able to gain additional leverage on operating cost.

Our cash interest cost decline due to a combination of financial deleveraging and a reduction of our interest rates, and all those factors enable us to deliver strong growth and cash net income in the quarter, up 17% compared with Q4 of 2010.

We continue to generate strong cash flow. For the year, we generated over $1.1 billion of free cash flow, which we used in part to prepayment our debt, and to redeem our shares starting in the fourth quarter of the year.

At the top line, let me direct your attention to some key factors that impacted our results for the fourth quarter. The Loestrin franchise sales were up $2 million versus the prior year quarter. That includes contribution from the launch of LO Loestrin in January of 2011, which generated net sales of $21 million in the fourth quarter and $63 million in its first year; pretty good.

Total prescriptions of LO Loestrin increased 38% from Q3 to Q4. Loestrin 24 net sales were down $19 million or 21% compared to the fourth quarter last year, it was down 33 million or 32% compared with the third quarter of 2011.

Before you reach any conclusions regarding the near-term prospects for Loestrin 24, let me provide you with additional color.

The decrease in Loestrin 24 net sales in the fourth quarter compared with the fourth quarter of 2010 was primarily due to a 20% decrease in fills Rx’s and certain gross-to-net factors that had a disproportionate impact on the fourth quarter.

We believe that Q4 revenue result, but Loestrin 24 is below our expected forward run rate. As a reminder, on our 2012 financial guidance call, we indicated that we expect the Loestrin franchise to grow in the single-digits in 2012.

Net sales of DORYX increased 43% this quarter compared with Q4 of 2010, partially due to an expansion of pipeline inventories.

In the third quarter of 2011, we proactively reduced pipeline inventories in connection with the launch of our dual-score DORYX 150. In the fourth quarter, we benefited from the expansion of DORYX pipeline inventories, as the channel rebalanced their inventories with the dual-scored product.

On a normalized basis, approximate net sales per RX for DORYX 150 were a respectable $250 in the quarter. We’re all waiting the results for the DORYX patent trial, but that’s for another day.

On to Estrace Cream. Estrace Cream grew in the quarter. Net sales were up 13% versus the prior year quarter. I always like to point out, Estrace Cream has responded nicely, growing both in terms of units and in net sales as we’ve increased our focus on the brand. We expect to continue to grow Estrace Cream throughout 2012.

Atelvia, which we began promoting it at the beginning of the year contributed $33 million of revenue in 2011. During 2011, we made excellent progress addressing the potential barriers to Atelvia gaining share, sharpening the focus of our sales force, and securing appropriate managed care coverage for the brand. We continue to make progress and think of Atelvia as being a contributor to sales growth in 2012 and beyond.

Turning to Actonel. Global Actonel revenues were down 23% in the fourth quarter compared with the prior year. Actonel revenues outside the United States declined by approximately 37%, mainly due to loss of exclusivity in Western Europe. U.S. Actonel sales declined 9% compared to the prior year quarter as fill RX’s the decrease 38% offset in part by price increases and an improvement of gross-to-net factors, and an expansion of pipeline inventories in Q4 relative to the prior year.

During the 2012 financial guidance call last month, I urged you to look at our business ex-Actonel as the anticipated declines of Actonel masked the solid results of our key promoted products.

Excluding Actonel, revenues from our core products increased slightly in Q4 of 2011 as compared with the prior year quarter. Below the revenue line, our gross profit margin as a percent of total revenue was 88%, which is flat when compared with the prior year quarter.

SG&A expenses in the quarter were $207 million, down 13% from the fourth quarter of last year, which was driven primarily by a decrease in Sanofi co-promotion expense, and savings resulting from the Western European restructuring. The co-promote was down in the quarter relative to the prior year quarter, due to the decrease in ex-U.S. Actonel revenues.

G&A was down $56 million – or I’m sorry, was $56 million, which was down 9% from the prior year quarter and below the $70 million run rate we believe is a more normalized quarterly run rate for our company.

R&D in the quarter was $26 million, a decrease of 15% as compared with Q4 of 2010. We noted that during our 2012 financial guidance call that we anticipate R&D expense to be in the range of $110 to $130 million this year.

No restructuring or repurposing costs were recorded in the quarter. For the year, we recorded $104 million in total restructuring cost. In addition, we recorded $31 million of repurposing expense related to our Manati facility in 2011. I’ll note that we recently finalized negotiations with local works councils and that should enable us to complete our restructuring plan in 2012, as originally forecast.

We will record additional restructuring charges in 2012 as a result, but will continue to call them out on a separate line item in our P&L, and as we did in 2011, we’ll add them back when we arrive at adjusted cash net income.

Cash net income per share for the fourth quarter, which adds back the book amortization of intangibles and amortization write-off of deferred financing fees was $0.95 per share, using fully diluted shares of $253 million in the quarter.

On to liquidity. We generated cash flow from operations totally roughly $394 million in the quarter, compared to $332 million of cash from operating activities in the prior year. I’ll note that the Q4 and full-year cash from operations is a bit higher than normal, with quotes around it, due to the timing of working capital trends.

Another item of interest, during the quarter we used $56 million of cash to redeem $3.7 million of our ordinary shares at an average aggregate cost of about $15.15 per share. We did not make any optional prepayments of debt in the fourth quarter, but in January of 2012, we elected to make an optional prepayment of $150 million under our new senior secured credit facilities.

We ended 2011 with $616 million of cash-on-hand. On a net-debt basis, our leverage was roughly 2.25 times – I’m sorry, 2011 EBITDA, a meaningful reduction from roughly 2.9 times at December 31, 2010.

We ended the quarter with $3.9 billion of gross debt, comprised of $2.6 billion of term debt under our new senior secure credit facilities, and $1.25 billion face amount of 7.75% senior unsecure notes.

Lastly, let me confirm our 2012 financial guidance, which we provided on January 27, of 2012.

Before we start with the Q&A session, I want to let you know that we’re not going to comment on the DORYX trial at this time. The trial is complete and we await the judge’s decision. At this point, we believe we have a valid and infringed patent. We’ll communicate appropriately when we know any outcome.

And with that, Allie, will open up the line for our Q&A.

We would ask, in the interest of time, I know there are some other things going on this morning, we would ask you to limit yourself to one question so we can get to as many people as possible. Thank you.

Question-and-Answer Session

Operator

(Operator instructions). Our first question comes from Gregg Gilbert of Bank of America, please go ahead.

Gregg Gilbert – Bank of America/Merrill Lynch

Hi. I’ve got a question about the trial, Paul. I was hoping you could frame the possible EPS impact if you do lose that case and possibly come in on the opportunity set for transactions that you are looking at right now. Or how would you count that opportunity set for M&A? Thanks.

Paul Herendeen

Sure, I’ll take that. With respect to DORYX, we’re not going to comment, just to say, everyone understands there are four possible outcomes here. You know, there are two parties on the other side, win-win, win-lose, lose-win and lose-lose. Each of those have its own outcome and when we know what the outcome is we will communicate appropriately with respect to how that would impact us.

With respect to the BD environment, yes, the BD environment continues to be what has been in the past. We continue to see a flow of opportunities and we, as I have said in the last couple of calls, we are very interested in pursuing this development opportunities, but we want it to be the right one. And we’re confident that over time we will find transactions that we can conclude that will add value for our company and our shareholders.

Gregg Gilbert – Bank of America/Merrill Lynch

Thank you.

Operator

Our next question comes from Shibani Malhotra of RBC Capital, please go ahead.

Shibani Malhotra - RBC Capital

Hi, guys. Can you – if you are willing to comment on the disclosure about the subpoena, we needed to see if in marketing did you receive [inaudible] – you know, how you are looking at that and if anything you can get tell us in terms of whether or not you could in fact, you know, sales and marketing practice.

Paul Herendeen

Yes, it’s Paul, Shibani. I mean, I would put us in the category of something that, you know, we are not happy about it; however, it’s something that if you are in this business, it happens.

On this twenty-second deal, we received a subpoena, we read certain – our non-executive employees received subpoenas from the U.S. Attorney’s Office from the District of Massachusetts, and that was regarding a wide range of matters including sales in marketing activities, and employee training, remain in all of our key products. You know, we’re in the process of responding to the subpoena and we intend to fully cooperate with the U.S. Attorney’s Office. And for further information on that, I just say see our annual report, and [inaudible] which are available – you know, it happens.

Shibani Malhotra

Okay, thank you.

Operator

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

Randall Stanicky - Canaccord Genuity

Great, thanks, guys. Can you just comment, Paul, on maybe some of your pricing flexibility? I’m thinking more around the Loestrin 24 franchises, and then just a quick follow up on your share buyback at what from here, thanks.

Paul Herendeen

I’m sorry, Randall, on the lesser, what were you looking for?

Randall Stanicky - Canaccord Genuity

Your pricing flexibility, how much would you be thinking about your pricing ability here for increases?

Paul Herendeen

Yes, with the respect to the Loestrin franchise, we continue to have the opportunity to increase the, you know, the gross selling price. I think, as I think I pointed out during the guidance calls, the bigger question is how much of that pricing can you get to stick through gross to net.

Interestingly, our gross to net with Loestrin 24, you know, if you think about it, was part of our, say, revenue base in both fourth quarter of ’11 and fourth quarter of ’10, our gross to net was substantially better in 2011 than what it was in the prior year. And that was reflective of changes to our required program and the like.

We have the opportunity to continue to take normal price increases. I would say, across our portfolio at the gross level, the more difficult question is how that translates into net sales per RX. And I would say with respect to the OC Franchise, better gross to net in 2011 than 2010. However, anybody that’s in this business, when you think about gross to net, gross to net, it generally does not get better over time. You should think of it as potentially creeping down, you know, in the basis points range as we look forward.

Secondarily, with respect to the share buyback deal, our buyback deal is, as I mentioned the number of shares and the average price per share during the quarter ended – quarter ended December 31, you know, that program remains an active program. We are in the market on most days buying shares under a program where we just – we’ll continue to buy and I think a reasonable assumption might be something like a similar run made of share purchase that you saw in 24.

Randall Stanicky - Canaccord Genuity

And that, Paul, that’s reflected in guidance right now?

Paul Herendeen

Yes, it is.

Randall Stanicky - Canaccord Genuity

Okay, thank you.

Operator

Our next question comes from Michael Tong of Wells Fargo Securities, please go ahead. Pardon me Michael, you line is open, please go ahead.

Michael Tong (Brian) - Wells Fargo Securities

This is actually Brian (Gee) for Michael Tong. I’m curious about use of cash. In the fourth quarter you ended with a pretty solid cash balance; $150 million in prepayments in January, but still a pretty solid cash balance. How should we think about prepayments and share repurchases going forward?

Paul Herendeen

Yes, Brian, the 600-plus million of cash that we have at the end of the year is well above what I would expect us to carry on an ongoing basis. We maintained some additional cash on hand for two reasons at the end of the year, one was, you know, to continue with the share repurchase program, but secondarily, the timing of payments made particularly with respect to the share, I’m sorry, the Western European restructuring, you know, as well as some new liabilities we expect, like doughnut hole and the like caused us to want to maintain a higher cash balance after December 31, then what we normally would.

We did prepay a 100.5 at the end of – optionally prepaid a 100.5 of our term debt at the end of January and I would expect that we would continue to use a large portion of our pre-cash flow to relocate two debt prepayments in the absence of some other need, you know, meaning there would be the opportunity or some other internal need for that cash.

As I said, it gives me opportunity to [inaudible]. The 1.1 billion that we generated cash from operations in 2011 is a bit higher than what you would expect on a normalized basis, if you, you know, go through the math and see if the range of our cash net income guidance, you know, for 2012 is a – I think it’s 913 million to 938, you know, and not being – you should round those numbers, but – you know, round numbers is just a bit north of 900 million. There is a pretty good proxy for what you would expect us to generate in terms of free cash flow, and of that amount, you should expect us to use a pretty good portion of prepaid debt in the absents of something else.

Michael Tong (Brian) - Wells Fargo Securities

Thank you.

Operator

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

Marc Goodman – UBS

Yes, good morning. Can you all update us on the pipeline? And second of all, Paul, the gross-to-net adjustment on the Loestrin franchise was I guess just much bigger than I would have expected in this type of quarter. Is this just because it was fourth quarter and this was just a massive trough? And was it mainly in the Loestrin? Thanks.

Paul Herendeen

Do you want to take the pipeline one?

Roger Boissonneault

Yes. Hey, Marc, I guess as far as the pipeline is concerned, the progress goes on. We have no significant updates as far as filing of any MDAs, which we would tell you about. But I can reassure you that we continue to make progress. We are continuing to be on our – I guess the previous guidance of what we told you the status of these projects are. And we expect to have a good 2012 as far as approvals, as far as I know at this point. You know, once you have submitted an MDA, there are some variability's associated with it, so we do not like to comment until we actually get the approval.

Paul Herendeen

It's Paul. With respect to the gross to net which I call that with respect to Loestrin, the Managed Care programs, with respect to all of our products, they are ongoing, whether we add or change the nature of these programs to the extent that we change and add new contracts into the net, it has the potential to proportionately hit the quarter in which you execute the agreement. I would say, with respect to Loestrin, it is a meaningful hit in the quarter. That is why I called that one, and said if you look at the 71 million of revenue that was reported in the quarter and said that was the run rate, that would not be a good assumption; it is certainly higher than that.

Marc Goodman – UBS

So, you knew about the Managed Care contract in the adjustment, before you had given the guidance already, and that is why you are very comfortable with the Loestrin guidance for '12.

Paul Herendeen

Yeah, this was not a surprise. That is why I say, when you are looking at any pharma product that has any kind of variability in gross net, if you look at anything on a quarterly basis, pick a 90 day period and you look at it, you could fake yourself out by determining, whoa, it is really low, or gee, it is really high. You could go either way. The longer the time period you look at, the more normalized look you get at gross to net for a brand.

As I said a moment ago, if you look at 2011 for the Loestrin franchise, and mainly it is Loestrin 24 because Lo-Lo was just launched this year, the gross net overall in the franchise '11 is much better than it was in 2010. That doesn't mean that it will go up in 2012, it is just that when you are looking at the fourth quarter, you have a low gross to net with respect to Loestrin 24. That is not the normal run rate.

Operator

Our next question comes from John Boris of Citi. Please go ahead.

John Boris – Citigroup

Good morning, guys. Thanks for taking my question and congrats on the quarter.

Following the FDA panel meeting on bisphosphonate, have you had any further dialogue or communication with the FDA or are you anticipating any label changes from that meeting?

It seems as though a lot of time has transpired. Then, I have a follow-up to my question.

Roger Boissonneault

Hey, John, it is Roger.

No, we have not had a follow-up with the FDA. I guess we have anticipated some label changes, but I think I have to direct the fact that I do not think it is a bisphosphonates issue. I think it is an Osteoporosis issue, because bisphosphonates wasn't the only medication in that category that have been negatively affected.

It is interesting, if you look at western Europe at the use of drugs to treat Osteoporosis, it has remained fairly stable here. It maybe a commentary on our healthcare system, and how we treat our physicians, and within this Medicare frame and are treating the elderly patients.

I think it is really an issue around Osteoporosis and prevention of Osteoporosis and drugs as a whole that are being used in this therapy, rather than focus on bisphosphonates.

John Boris – Citigroup

Thanks.

On the pipeline on Udenifil, have you met with the FDA, and if so are there any additional pre-clinical trials that you are required to do there?

Paul Herendeen

No, we do not have any requirements, John. We have not met with the FDA yet. We do have a scheduled meeting. Sometimes it takes a while to get these things set up, but we do plan to have a meeting. Hopefully, we will get this accomplished in the next quarter, and get it quite right, until we get that meeting done, then we can get some clarity to the situation.

John Boris – Citigroup

Last question, on Doryx. Obviously, we have seen a pretty nice acceleration, and I take it you have not done anything additional - any promotional strategy, still using discount cards and everything is status quo on the promotion of Doryx?

Paul Herendeen

Yeah, I hope it is execution, John. I think we like to take credit for that; it wasn't a random act.

I do think they are actually getting very nicely around the DORYX situation.

John Boris – Citigroup

Thanks.

Operator

Our next question comes from Douglass Gale of Barclays Capital. Please go ahead.

Douglas Gale – Barclays Capital

Hi, good morning.

Paul, I was hoping you could perhaps provide a little bit more color in terms of the contract in activity that you had experienced with the Loestrin franchise in the fourth quarter, and how we should think about that back then, [inaudible] in 2012.

Paul Herendeen

No, I am sorry, but we are not going to comment specifically on Managed Care accounts that we added with respect to any of our products in Q4. That is a level of detail…

Douglas Gale – Barclays Capital

I understand, but we interpret that as an expansion of [inaudible] and access to the products back then, and how that could affect [inaudible] in the year.

Roger Boissonneault

It is Roger.

You should not speculate on that. You do know that when you contract, by the time you sign the contract, some of these are retroactive, how it is recognized, there are some variabilities around that, and all Paul is saying is that some of this had to be recognized at the end of the fourth quarter and I would not read too much in to it.

Paul Herendeen

Not a change that you should alter the way you think about our trajectory with the overall Loestrin franchise. As I said, unfortunately, the gap accounting for these programs is such that the programs were essentially being placed throughout the year, but the impact was realized mostly in Q4.

Douglas Gale – Barclays Capital

Okay, and in terms of business development environment today, are you seeing any difference - are you focused largely on acquiring products, or is it a cost perception of companies as well?

Roger Boissonneault

I got to reassure you that we look at everything. There is a number of projects that we look at and we evaluate from a scientific perspective, but unfortunately, this is not a linear process.

You obviously look at a lot of deals. Sometimes, we look a deeper look at any particular deal. We have worked on deals for over a year before we have come up with taking an option.

There are a lot of products out there, and if there is something of interest in women's healthcare, and interest in the Osteoporosis, generally, we feel pretty good about saying.

Douglas Gale – Barclays Capital

Okay, great. Thank you.

Operator

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

Elliot Wilbur - Needham & Company

Thanks, just real quickly for Paul, I guess, could you just maybe walk us through some of the drivers in terms of the sequential performance of Actonel in the US? Obviously, it has been quite some time since we have actually seen a sequential increase in revenue, and certainly the scripts still concern you two, to move downward, so maybe just thinking about on a sequential basis, relative pipeline, inventory and also differentials in gross net that may have accounted for that.

Thanks.

Paul Herendeen

Yeah, I think if you had, interestingly as we just talked about the gross to net impact on Loestrin, the Loestrin franchise in Q4, you had the opposite impact with the Actonel franchise in the fourth quarter. You had, basically, a moderate expansion of the pipeline during the quarter - and I want to say, I am talking moderate. I am not saying this was a giant change.

Overall, Eliot, you focus on what the Rx trends are, and overtime, that will point you in the direction of the overall franchise.

It is helpful for us from the standpoint that we love the to sell more than less, it is helpful to us that Actonel had a strong performing Q4, but it surely does not change the way we think about Actonel in 2012, because we had a strong quarter.

It was [inaudible] that helped us have a good fourth quarter that [inaudible] result with Actonel that is not something that is sustainable.

Roger Boissonneault

I think if you look at the overall market place, the market place has stabled a bit.

If you look at Rx's, you have to remember that all Rx's are not created equal. There is a gross to net calculation that goes along with it, so simply by looking at Rx's and thinking you are going to come up with an economic answer - the wisest thing to do all depends on the business mix, but I do think we are seeing a melioration decline in Osteoporosis drugs in general.

Operator

Our next question comes from Andrew Finkelstein with Susquehanna Financial

Andrew Finkelstein – Susquehanna Financial

Thanks, it's Andrew Finkelstein with Susquehanna Financial. I was hoping you could give more comments on the Asacol franchise in terms of the trends in the quarter, and if there is anything you are thinking about in terms of how you promote it in the coming year, given the situation with the generics unlikely to be approved, and where you see the promotional sensitivity of that franchise.

Thanks.

Roger Boissonneault

I think we have seen a stabilization of the Asacol franchise. The market itself grows modestly. We have a declining share, now, and we have maintained our share. We do have the dominant share in this particular marketplace.

I think the changes perhaps was the focus on moving from 400-800. I think we will look, perhaps, more on the franchise as a whole rather than moving to the HD or the 800 milligram dose. There is a place for the 400 and it provides a lot of flexibility. Certainly, in the pediatric area, the 400 is an important product. I think we are looking, perhaps, versus last year or the previous year, we look, perhaps at the franchise of Asacol, because it is a PH release type of product and it has advantages, but I think we are doing quite well on Asacol. I would look forward to growth in our market share.

Paul Herendeen

Andrew, it is Paul. With Asacol, we think of that as kind of a steady, single-digit grower in '12 and beyond.

Andrew Finkelstein – Susquehanna Financial

Okay, and is there any additional color you can give in terms of figuring out the right gross to net end price for Rx that we should be thinking about for that, compared to the levels in the quarter?

Paul Herendeen

I encourage you, offline we would be happy to chat with you about it, but I want to point out that the beauty of Asacol for us is, with respect to gross to net, it is one of our better products. It has been a market leader for quite some time, it is a relatively high gross to net product for us and has not seen the kind of variability that you see in Doryx or even in the Loestrin franchise.

Andrew Finkelstein – Susquehanna Financial

Okay, so relatively stable going forward. Thanks.

Operator

Our next question comes from Scott Henry, ROTH Capital. Please go ahead.

Scott Henry – ROTH Capital Partners

Thank you. Most of my questions have been asking already.

I did not want to ask about the merits of the Doryx case, so just a simple question; is there generally a timeline when you would get a decision with a case like this? Is there any sort of window one could put around expectations of when a decision could be coming?

Roger Boissonneault

Scott, that would be difficult to speculate, and we are not going to speculate because we really do not know.

Scott Henry – ROTH Capital Partners

Okay, fair enough.

Roger Boissonneault

It is in the judges hands, and the judge will decide when he decides.

Scott Henry – ROTH Capital Partners

Okay. Thank you.

Operator

Our final question comes from Dewy Steadman of JP Morgan. Please go ahead.

Dewey Steadman - JPMorgan

Hi, good morning guys, and thanks for taking my question.

I just wanted to ask you guys about, given the noise in the category for all of our contraceptives in the fall, what is your outlook for overall volume growth in 2012 and beyond, just given the drugs [inaudible] issues?

Roger Boissonneault

I think it is not just about [inaudible], but there is a lot of press out there about all contraceptives. All you have to do is turn on the nightly news, and we do not want to get in the center of that one.

Even the president has issues around this, and definition of - I think even he is confused about who actually pays for contraceptives, either insurance companies or employers, so it is a political issue and it is probably best we stay away from political issues.

Dewey Steadman - JPMorgan

Okay. In terms of the APA, is there any update there, and can you remind us of what a worst case scenario would be if you were to operate for an extended period without an APA in place?

Paul Herendeen

Dewy, it is Paul and that is a good question.

First of all, we are continuing to pursue and APA for not just the US, but frankly for all other higher tax jurisdictions in which we operate, because having an APA is good. If you have it, it gives you most closer to certainty with respect to the economics around your transfer pricing from one jurisdiction to the next.

Operating without an APA - most companies operate without an APA. It is only really in the last several years that there has been a flood of parties that say, gee, that would be a great thing to have, and I think that is part of why we are having a slower go of getting our next APA. There is a lot of demand for APA's, that maybe five, six, seven, eight years ago there was not, but operating without it is fine.

I always say, the hardest one to get is the first one, and when you get the first one, that is when the APA office appropriately looks under every rock and your structure to make sure it is sound. Then, you reach an agreement with respect to the economics, and as you go forward from there, if you are operating without it, it is a pretty good assumption, I think, that the economics from your former APA should apply to the current periods as well. If you are going to be wrong, you should not be wrong by all that much, and as I have said in some other public forums, as the CFO, I think it is probably safe to assume that we provide - as you see in our footnotes - a little bit of additional provision under the understanding that as we try to negotiate this next APA it is likely that the economics will be slightly higher in favor of the US treasury than they were when we negotiated the original APA.

So, we feel comfortable with our transfer of pricing - the economics of our transfer pricing - but we would very much like to have that APA in place, and it remains a priority for us. We go as fast as we can and are waiting on the other side to engage with us, and hopefully that will occur soon.

Dewey Steadman - JPMorgan

All right, thanks.

Operator

I would like to turn the call back over now to Mr. Paul Herendeen for any closing remarks.

Paul Herendeen

Sure, my closing remarks - my handler pointed out to me that I misspoke earlier when the question came up with respect to share repurchase. Share repurchase, after 12/31 is not contemplated in the share count that we use with respect to our guidance for 2012, so I wanted to correct that on this call.

With that, thank you for participating in our call. We think we had a solid end to 2011, and we are off to restore it in 2012 and we look forward to talking to you again here shortly.

Thanks very much.

Operator

Ladies and gentlemen, this does conclude today's conference.

You may all disconnect, and have a wonderful day.

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