Analysts size up Warner Chilcott's merits for sale

Is cash the key to a Warner Chilcott ($WCRX) sale? Bloomberg dug into the numbers to find the Irish drugmaker delivers some sweet free cash flow, about 10 times more than the median among other specialty drugmakers.

Earlier this week, Warner Chilcott confirmed it's entertaining potential buyers and exploring other strategic options. Even after the speculative run-up, the company's stock is cheap, one investor told the news service, partly because of that cash. "They generate a lot of free cash flow," Invesco's Derek Taner said. "The appeal of them to a strategic buyer would be the cost savings opportunities and the accretion that it would provide."

The company's revenues aren't secure, however. Its Actonel bone drug has seen sales erode on generic competition. Sales are predicted to drop 15% over the three years ending 2014 as generic rivals for the contraceptive pill Loestrin 24 FE enter the market. And since the potential deal hit the press--along with rumors that Bayer's in on the hunt--some analysts have said that the company might be a better buyer than seller.

Still, another drugmaker could nab Warner Chilcott at a decent price and benefit from cutting costs in the combined operations, Arcoda Capital Management's Michael Meyers told Bloomberg. Another drugmaker like AstraZeneca ($AZN), for instance.

- read the Bloomberg piece