Zacks_Analysts' Blog : Warner Chilcott Announces Arbitration Decision - Analyst Blog

Warner Chilcott (WCRX) announced that an arbitration panel recently issued a verdict that the company’s co-development and marketing agreement with Sanofi-Aventis (SNY) regarding osteoporosis drug Actonel would come to an end on January 1, 2015 as was originally agreed.

Per the agreement, Actonel is co-developed and marketed by the two companies on a global basis, except Japan. The agreement allows Warner Chilcott to market Actonel’s next generation product Atelvia in the US. Atelvia was launched in the US in January 2011.

We remind investors that Warner Chilcott also had a tablet supply agreement with Sanofi in connection with the above collaboration agreement. Warner Chilcott decided to terminate the tablet supply agreement from May 2012. Per the supply agreement, Sanofi manufactured and supplied part of Warner Chilcott’s requirements of Actonel.

Warner Chilcott requested a resolution whether the termination of the tablet supply agreement would cause the collaboration agreement to end on May 2012. The arbitration panel decided that the termination of the tablet supply agreement would have no impact on the tenure and the commercial terms of the co-development and marketing agreement.

Accordingly, Sanofi and Warner Chilcott will continue to jointly market Actonel and Atelvia until January 1, 2015. However, effective January 2, 2015, Warner Chilcott will be solely responsible for marketing and promoting Actonel and Atelvia on a global basis, except Japan.

We note that Actonel was added to Warner Chilcott’s product portfolio following its purchase of Procter & Gamble's (PG) global branded prescription pharmaceutical business in October 2009.

Our Recommendation

We currently have a Neutral recommendation on Warner Chilcott in the long-run. The stock carries a Zacks #3 Rank (Hold rating) in the short-run. Although the company is facing patent expirations for many of its key drugs, we believe Warner Chilcott’s diversified product base will help withstand the generic threat.