Watson Pharmaceuticals, Inc. (WPI) recently announced that it expects 2009 earnings to meet or exceed guidance provided by the company in Nov. 2009. The company had earlier guided towards earnings in the range of $2.50 – $2.58 per share.
Watson also announced that it expects revenues to increase 9% year over year to $2.7 billion in 2009. The company’s shares reacted positively to the news, with the stock gaining roughly 3.5% since the announcement.
The statement, which was made at the 28th Annual J.P. Morgan (JPM) Healthcare Conference, is based on a preliminary review of the company’s performance in the fourth quarter and year-ended December 31, 2009.
Watson attributed the robust performance to strong contributions from its new generic and brand products, and significant growth in distribution revenues in the fourth quarter. We note that the preliminary results do not include any impact from Watson’s recently completed acquisition of the Arrow Group.
Watson intends to provide its outlook for 2010 on Jan. 21, 2010. Final results for the fourth quarter and full-year 2009 will be presented on February 23, 2010.
We believe Watson’s strong position in the generic market will help drive revenues going forward. Moreover, the company’s recent acquisition of Arrow will help Watson expand its footprint in ex-U.S. territories, and will also boost its product offerings and pipeline.
Importantly, Arrow has exclusive U.S. rights to launch the authorized generic version of Pfizer’s (PFE) Lipitor in November 2011, which should be a major contributor to the top-line. The acquisition will also provide Watson with operational expertise and manufacturing capability needed to support its long-term investment in bio-generics.
Although Watson operates in the highly competitive pharmaceutical industry, where it faces competition from generic players like Teva (TEVA), Mylan (MYL), Dr. Reddy’s (RDY), Sandoz and Par Pharma (PRX), among others, we believe that the company’s cost-savings initiative and new product launches, both brand and generic, will help drive growth. We currently have a Neutral recommendation on the stock.
Read the full analyst report on “WPI”
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Read the full analyst report on “RDY”
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