You should read the following discussion together with our condensed consolidated financial statements and the related notes included elsewhere in this Form 10-Q and our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2008 ("Annual Report"). This discussion contains forward-looking statements, which involve risks and uncertainties. Our actual results may differ materially from those we currently anticipate as a result of many factors, including the factors we describe under "Risk Factors" in our Annual Report and elsewhere in this Form 10-Q.

Summary

The following are certain significant events that occurred during the quarter ended March 31, 2009:

• In January 2009, we entered into settlement and license agreements with Watson Pharmaceuticals, Inc. to resolve pending patent litigation relating to FEMCON FE and LOESTRIN 24 FE;

• In February 2009, we acquired the U.S. rights to NexMed, Inc.'s ("NexMed") topically applied alprostadil cream for the treatment of erectile dysfunction ("ED") and the previous license agreement between the Company and NexMed relating to the product was terminated. We paid an upfront fee of $2.5 million (which was included in research and development expense ("R&D") in the quarter ended March 31, 2009) and agreed to make an additional payment of $2.5 million upon Food and Drug Administration ("FDA") approval of the New Drug Application ("NDA");

• In March 2009, we paid $9.0 million to Dong-A PharmTech Co. Ltd. ("Dong-A"), which was included in R&D in the quarter ended March 31, 2009, upon the achievement of a developmental milestone under our existing agreement for the development of an orally-administered udenafil product for the treatment of ED;

• In March 2009, we received the FDA's response to our citizen petition requesting that the FDA impose a 30-month stay of approval on Abbreviated New Drug Applications ("ANDAs") referencing DORYX 100 and 75 mg that were filed prior to the listing of the 161 patent under the transition rules of the QI Program Supplemental Funding Act of 2008. In its joint response to our and several other petitioners' citizen petitions, the FDA took the position that a 30-month stay would not apply to approvals for such ANDAs. We do believe, however, that the FDA will stay for up to 30 months the approval of ANDAs submitted after the listing of the 161 patent by Impax Laboratories, Inc. and Mylan Pharmaceuticals Inc. for generic versions of DORYX 150 mg, while our lawsuits against such companies are pending in district court;

• In March 2009, we submitted an NDA for a low-dose oral contraceptive, to the FDA;

• On March 31, 2009, we made optional prepayments aggregating $100.0 million of our term loan indebtedness under our senior secured credit facility; and

• Our revenue for the quarter ended March 31, 2009 was $246.0 million and our net income was $43.3 million.

Operating Results for the quarters ended March 31, 2009 and 2008

Revenue

The following table sets forth our unaudited revenue for the quarters ended March 31, 2009 and 2008, as well as the corresponding dollar and percentage change:

                                               Quarter Ended
                                                 March 31,         Increase (decrease)
 (dollars in millions)                        2009      2008      Dollars        Percent
 Oral contraceptives
 LOESTRIN 24 FE                              $  52.4   $  46.9   $     5.5          11.7 %
 FEMCON FE                                      12.9      10.8         2.1          20.2 %
 ESTROSTEP FE*                                   5.1       4.7         0.4           9.9 %
 OVCON 35/50*                                    2.7       2.7          -             -

 Subtotal                                       73.1      65.1         8.0          12.5 %
 Hormone therapy ("HT")
 ESTRACE Cream                                  23.2      19.2         4.0          20.7 %
 FEMHRT                                         12.7      16.0        (3.3 )       (20.8 )%
 FEMRING                                         3.8       3.5         0.3           9.2 %
 Other HT products                               2.5       2.9        (0.4 )       (16.1 )%

 Subtotal                                       42.2      41.6         0.6           1.2 %
 Dermatology
 DORYX                                          50.4      35.1        15.3          43.4 %
 TACLONEX                                       36.6      36.9        (0.3 )        (0.8 )%
 DOVONEX*                                       28.0      33.2        (5.2 )       (15.6 )%

 Subtotal                                      115.0     105.2         9.8           9.3 %
 Pre-menstrual dysphoric disorder ("PMDD")
 SARAFEM                                         4.1       4.4        (0.3 )        (7.6 )%
 Other product net sales
 Other                                           0.9       0.2         0.7         363.5 %
 Contract manufacturing                          3.7       7.2        (3.5 )       (48.9 )%

 Total product net sales                       239.0     223.7        15.3           6.9 %
 Other revenue
 Royalty revenue                                 7.0       5.8         1.2          20.4 %

 Total revenue                               $ 246.0   $ 229.5   $    16.5           7.2 %

* Includes revenue from related authorized generic product sales from the date of their respective launch.

Revenue in the quarter ended March 31, 2009 was $246.0 million, an increase of $16.5 million, or 7.2%, over the same quarter in the prior year. The primary drivers of the increase in revenue were the net sales of DORYX, LOESTRIN 24 FE and ESTRACE CREAM, which together contributed $24.8 million of revenue growth for the quarter ended March 31, 2009, compared to the prior year quarter. The growth delivered by these products was partially offset by net sales declines in certain other products, primarily DOVONEX and FEMHRT. Changes in the net sales of our products are a function of a number of factors including changes in:
market demand, gross selling prices, sales-related deductions from gross sales to arrive at net sales and the levels of pipeline inventories of our products held by our direct and indirect customers. We use IMS Health ("IMS") estimates of filled prescriptions for our products as a proxy for market demand.

Net sales of our oral contraceptive products increased $8.0 million, or 12.5%, in the quarter ended March 31, 2009, compared with the prior year quarter. LOESTRIN 24 FE generated revenues of $52.4 million in the quarter ended March 31, 2009, an increase of 11.7%, compared with $46.9 million in the prior year quarter. The increase in LOESTRIN 24 FE net sales was primarily due to an increase in filled prescriptions of 8.1% in the quarter ended March 31, 2009 and higher average selling prices compared to the prior year quarter, offset in part by the impact of higher sales-related deductions. FEMCON FE generated revenues of $12.9 million in the quarter ended March 31, 2009, compared to $10.8 million in the prior year quarter. The increase in FEMCON FE net sales in the quarter ended March 31, 2009 was primarily due to an increase in filled prescriptions of 15.8% and higher average selling prices compared to the prior year quarter.

Net sales of our dermatology products increased $9.8 million, or 9.3%, in the quarter ended March 31, 2009 as compared to the prior year quarter. Net sales of DORYX increased $15.3 million, or 43.4%, in the quarter ended March 31, 2009, compared to the prior year quarter, primarily due to a 22.6% increase in filled prescriptions, as well as higher average selling prices. The increase in filled prescriptions, primarily relating to DORYX 150 mg, was due to increased promotional efforts behind DORYX 150 mg, including our recently launched customer loyalty card program. Net sales of TACLONEX decreased $0.3 million, or 0.8%, to $36.6 million in the quarter ended March 31, 2009, compared to $36.9 million in the prior year quarter. As filled prescriptions on a per-gram basis were essentially flat compared to the prior year quarter, the decrease in net sales was primarily the result of higher sales-related deductions during the quarter ended March 31, 2009 and a contraction in pipeline inventories relative to the prior year period. This decrease was partially offset by higher average selling prices compared to the prior year quarter. Net sales of DOVONEX decreased $5.2 million, or 15.6%, in the quarter ended March 31, 2009 compared to the prior year quarter. The decline in DOVONEX net sales in the quarter ended March 31, 2009 was due primarily to decreases in filled prescriptions of 24.6% and increases in sales-related deductions during the 2009 quarter, which were partially offset by higher average selling prices and an expansion of pipeline inventories relative to the prior year period. The decline in filled prescriptions was due primarily to customers switching to other therapies, as well as, the introduction of generic versions of DOVONEX Solution into the market in the second quarter of 2008, including our authorized generic product. We expect DOVONEX net sales to continue to decline due to competition from other therapies and generic competition, specifically related to DOVONEX Solution.

Net sales of our hormone therapy products increased $0.6 million, or 1.2%, in the quarter ended March 31, 2009 compared to the prior year quarter. Net sales of ESTRACE Cream increased $4.0 million, or 20.7%, in the quarter ended March 31, 2009 compared to the prior year quarter. We began modest promotional efforts for ESTRACE Cream during the quarter ended March 31, 2009. As a result, filled prescriptions of ESTRACE Cream increased 15.4% compared to the prior year quarter. Also impacting net sales of ESTRACE Cream were higher average selling prices as compared to the prior year quarter, offset in part by a contraction of pipeline inventories relative to the prior year period. Net sales of FEMHRT decreased $3.3 million, or 20.8%, in the quarter ended March 31, 2009 compared to the prior year quarter. Filled prescriptions of FEMHRT decreased 14.7% in the quarter ended March 31, 2009 compared with the prior year quarter. The resulting decrease in net sales from decreased prescription demand, coupled with higher sales-related deductions was partially offset by higher average selling prices compared to the prior year quarter.

Cost of Sales (excluding amortization of intangible assets)

The tables below show the calculation of cost of sales and cost of sales
percentage for the quarters ended March 31, 2009 and 2008:



                                            Quarter Ended          Quarter Ended            $        Percent
(dollars in millions)                       March 31, 2009         March 31, 2008        Change      Change
Product net sales                          $          239.0       $          223.7       $  15.3         6.9 %

Cost of sales (excluding amortization)     $           48.8       $           47.8       $   1.0         2.1 %

Cost of sales percentage                               20.4 %                 21.4 %

Cost of sales increased $1.0 million, or 2.1%, in the quarter ended March 31, 2009 compared with the prior year quarter, primarily due to the 6.9% increase in product net sales. Our cost of sales, as a percentage of product net sales, decreased from 21.4% in the quarter ended March 31, 2008 to 20.4% in the quarter ended March 31, 2009. The decrease is primarily due to the mix of products sold, offset in part by increases in manufacturing costs.

Selling, General & Administrative ("SG&A") expenses

SG&A expenses were comprised of the following expenses for the quarters ended March 31, 2009 and 2008:

                                               Quarter Ended        Quarter Ended          $          Percent
(dollars in millions)                          March 31, 2009       March 31, 2008      Change        Change
Advertising and Promotion ("A&P")             $            7.7     $           17.2     $  (9.5 )       (55.5 )%
Selling and Distribution                                  22.9                 23.6        (0.7 )        (3.2 )%
General, Administrative and Other ("G&A")                 16.2                 14.4         1.8          12.8 %

Total SG&A expenses                           $           46.8     $           55.2     $  (8.4 )       (15.3 )%

SG&A expenses for the quarter ended March 31, 2009 were $46.8 million, a decrease of $8.4 million, or 15.3%, from $55.2 million in the prior year quarter. A&P expenses for the quarter ended March 31, 2009 decreased $9.5 million, or 55.5%, compared with the prior year quarter, due primarily to an $8.1 million decrease in direct-to-consumer advertising and

a decrease in other promotional spending. Selling and distribution expenses for the quarter ended March 31, 2009 decreased $0.7 million, or 3.2%, compared to the prior year quarter, primarily due to a reduction in the size of our field sales forces beginning in the first quarter of 2009. G&A expenses in the quarter ended March 31, 2009 increased $1.8 million, or 12.8%, compared to the prior year quarter, primarily due to an increase in compensation expenses, including non-cash stock-based compensation, and an increase in professional fees.

R&D

Our investment in R&D for the quarter ended March 31, 2009 was $23.9 million, an increase of $11.7 million, or 96.0%, compared with the prior year quarter. Included in the quarter ended March 31, 2009 was a $9.0 million payment to Dong-A upon the achievement of a developmental milestone under our existing agreement for an orally-administered udenafil product for the treatment of ED. Also included in the quarter ended March 31, 2009 was a $2.5 million payment to NexMed in connection with our acquisition of the rights to its topically applied alprostadil cream for the treatment of ED. Excluding the $11.5 million of payments to Dong-A and NexMed during the quarter ended March 31, 2009, R&D expenditures were essentially flat compared to the prior year quarter.

Amortization of intangible assets

Amortization of intangible assets in the quarters ended March 31, 2009 and 2008 were $57.0 million and $52.6 million, respectively. The increase in the quarter ended March 31, 2009 compared to the prior year quarter was due to the acceleration of amortization of the OVCON / FEMCON FE product family in the quarter ended December 31, 2008. We continuously review our products' remaining useful lives based on each product family's estimated future cash flows. Our amortization methodology is calculated on either an accelerated or a straight-line basis to match the expected useful life of the asset, with identifiable assets assessed individually or by product family.

Interest income and interest expense ("Net interest expense")

Net interest expense for the quarter ended March 31, 2009 was $18.0 million, a decrease of $6.0 million, or 25.0%, from $24.0 million in the prior year quarter. Included in net interest expense in the quarter ended March 31, 2009 was $1.3 million relating to the write-off of deferred loan costs associated with the optional prepayment of $100.0 million of indebtedness under our senior secured credit facility. We did not make any optional prepayments of debt during the quarter ended March 31, 2008. The decrease in net interest expense in the quarter ended March 31, 2009 was primarily the result of cumulative reductions in outstanding debt during 2008 which reduced the average debt balance outstanding from $1,200.2 million in the quarter ended March 31, 2008 to $962.6 million in the quarter ended March 31, 2009. The cumulative reduction in the average debt level is the result of optional prepayments and purchases made using cash flows from operations and cash on hand, net of investing activities.

Income taxes

Our effective tax rates for the quarters ended March 31, 2009 and 2008 were 16.0% and 10.7%, respectively. The increase in the effective tax rate for the quarter ended March 31, 2009 was due primarily to our current expectation that a higher proportion of our consolidated pretax income will be earned in the U.S. compared to the prior year quarter. The effective income tax rates for interim reporting periods is volatile due to changes in income mix among the various tax jurisdictions in which we operate, as well as the overall level of consolidated income before income taxes.

Net income

Due to the factors described above, we reported net income of $43.3 million and $33.7 million in the quarters ended March 31, 2009 and 2008, respectively.

Financial Condition, Liquidity and Capital Resources

Cash

At March 31, 2009, our cash on hand was $30.3 million, as compared to $35.9 million at December 31, 2008. As of March 31, 2009 our debt, net of cash on hand, was $830.7 million and consisted of $481.0 million of outstanding borrowings under our senior secured credit facility and $380.0 million aggregate principal amount of our outstanding 8.75% Senior Subordinated Notes due 2015 ("Notes").

The following table summarizes our net (decrease) in cash and cash equivalents:

                                                     Quarter Ended           Quarter Ended
(Dollars in millions)                               March 31, 2009           March 31, 2008
Net cash provided by / (used in) operating
activities                                          $         105.3         $           (2.7 )
Net cash (used in) investing activities                        (9.4 )                   (9.8 )
Net cash (used in) financing activities                      (101.5 )                   (2.0 )

Net (decrease) in cash and cash equivalents         $          (5.6 )       $          (14.5 )

Our net cash provided by operating activities for the quarter ended March 31, 2009 increased $108.0 million compared with the prior year quarter. We reported net income of $43.3 million for the quarter ended March 31, 2009 compared with net income of $33.7 million in the prior year quarter. In the quarter ended March 31, 2009 we paid $9.9 million in respect of income taxes as compared to $69.3 million in the prior year period. During the quarter ended March 31, 2008, the income tax payments were made primarily based upon (1) estimates of the amounts payable in connection with the anticipated final settlement of U.S. federal tax audits related to the tax periods ended September 30, 2003, September 30, 2004, January 17, 2005 and December 31, 2005, (2) estimates of U.S. income taxes for the December 31, 2007 and 2008 tax years, and
(3) amended income tax returns filed for the tax year ended December 31, 2006 resulting from the APA signed with the IRS. Our liability for unrecognized tax benefits (including interest) under FIN48 which is expected to settle within the next twelve months is $2.3 million. Our liability for unrecognized tax benefits (including interest) under FIN48 which is expected to settle after twelve months is $1.9 million. Also impacting our cash flows from operating activities relative to the prior year quarter was a $9.0 million cash payment made in the quarter ended March 31, 2008 relating to the final settlement of our OVCON 35 litigation which was included in net income in the year ended December 31, 2007.

Our net cash used in investing activities during the quarter ended March 31, 2009 totaled $9.4 million, consisting of $2.9 million of contingent purchase consideration paid to Pfizer in connection with the 2003 acquisition of FEMHRT, and $6.5 million relating to capital expenditures. The cash flows used in investing activities in the quarter ended March 31, 2008 consisted of $2.9 million of contingent purchase consideration paid to Pfizer in connection with the 2003 acquisition of FEMHRT and $6.9 million of capital expenditures. We expect our capital expenditures in 2009 to increase significantly over the 2008 levels primarily due to continued investments in our Fajardo, Puerto Rico manufacturing facility.

Our net cash used in financing activities in the quarter ended March 31, 2009 was $101.5 million and included scheduled repayments of $1.5 million and optional prepayments of $100.0 million of indebtedness under our senior secured credit facility. We currently intend to use future cash flows provided by operating activities, net of cash used in investing activities, to make optional prepayments of our long-term debt or purchases of such debt in privately negotiated or open market transactions, by tender offer or otherwise. Our net cash used in financing activities in the quarter ended March 31, 2008 was primarily the result of our repayment of $2.1 million of debt under the senior secured credit facility.

Senior Secured Credit Facility

On January 18, 2005, Warner Chilcott Holdings Company III, Limited ("Holdings III") and its subsidiaries, Warner Chilcott Corporation ("WCC") and Warner Chilcott Company, LLC ("WCCL"), entered into a $1,790.0 million senior secured credit facility with Credit Suisse as administrative agent and lender, and other lenders. The senior secured credit facility consisted of $1,640.0 million of term loans (including $240.0 million of delayed-draw term loans) and a $150.0 million revolving credit facility, of which $30.0 million and $15.0 million are available for letters of credit and swing line loans, respectively, to WCC and WCCL. The senior secured credit facility also contemplates up to three uncommitted tranches of term loans up to an aggregate of $250.0 million. However, the lenders are not committed to provide these additional tranches. Holdings III, WCC and WCCL are each borrowers and cross-guarantors under the senior secured credit facility. In addition, Holdings III's significant subsidiaries are guarantors, including WC Luxco S.à r.l. and WC Pharmaceuticals I Limited which became guarantors on May 5, 2009, shortly after their formation in April 2009. The term loan and delayed-draw term loan facilities mature on January 18, 2012, with scheduled quarterly repayments of principal totaling $4.9 million annually beginning in the second quarter of 2008. The revolving credit facility matures January 18, 2011. As of March 31, 2009, there were no borrowings outstanding under the $150.0 million revolving credit facility.

8.75% Notes

On January 18, 2005, WCC, our wholly-owned U.S. subsidiary, issued $600.0 million principal amount of 8.75% Notes due 2015. In October 2006, we redeemed $210.0 million of the Notes using a portion of the proceeds from our initial public offering. In 2008, WCC purchased and retired $10.0 million aggregate principal amount of its Notes, at a discount, in privately negotiated open market transactions. As of March 31, 2009, the Notes were guaranteed on a senior subordinated basis by the Company, Holdings III, Warner Chilcott Intermediate
(Luxembourg) S.à r.l., our U.S. operating subsidiary (Warner Chilcott (US), LLC)
and WCCL (collectively, the "Guarantors"). Interest payments on the Notes are due semi-annually in arrears on each February 1 and August 1. The issuance costs related to the Notes are being

amortized to interest expense over the ten-year term of the Notes using the effective interest method. The Notes are unsecured senior subordinated obligations of WCC. As of March 31, 2009, the Notes were guaranteed on an unsecured senior subordinated basis by the Guarantors and ranked junior to all existing and future senior indebtedness, including indebtedness under the senior secured credit facility. On May 5, 2009, WC Luxco S.à r.l. and WC Pharmaceuticals I Limited guaranteed the Notes on an unsecured senior subordinated basis.

Components of Indebtedness

As of March 31, 2009, our outstanding funded debt included the following
(dollars in millions):



                                                    Long-
                            Current Portion      Term Portion      Total Outstanding
                                 as of              as of                as of
                            March 31, 2009      March 31, 2009      March 31, 2009
   Revolving credit loan   $              -    $             -    $                -
   Term loans                            4.9              476.1                 481.0
   Notes                                  -               380.0                 380.0

   Total                   $             4.9   $          856.1   $             861.0

As of March 31, 2009, mandatory principal repayments of long-term debt in the remainder of 2009 and each of the five years ending December 31, 2010 through 2014 and thereafter were as follows:

                                                  Aggregate
                                                 Maturities
                    Year Ending December 31,    (in millions)
                    2009                       $           3.7
                    2010                                   4.9
                    2011                                   3.7
                    2012                                 468.7
                    2013                                    -
                    2014                                    -
                    Thereafter                           380.0

                    Total long-term debt       $         861.0

The carrying amount reported for long-term debt, other than the Notes, approximates fair value because the underlying debt not covered by an interest rate swap (fair value of $(6.6) million as of March 31, 2009) is at variable rates and reprices frequently. Our Notes are publicly traded securities. The fair value of the Notes, based on available market quotes, was $364.8 million as of March 31, 2009.