UPDATE: Watson Pharma 2Q Net Down 12%; Toprol Seen Boosting Fiscal Year
July 29 2009 - 12:28PM
Dow Jones News
Watson Pharmaceuticals Inc. (WPI) reported a 12% drop in
second-quarter earnings, due to items, but raised its 2009
financial expectations citing the expected approval of a generic
version of AstraZeneca Plc's (AZN) blood pressure treatment Toprol
XL.
The Morristown, N.J., drug maker reported strong growth in its
generic division in the quarter and now expects the contribution of
Toprol to be greater than previously expected for the remainder of
the year. Although the drug went generic in 2006, manufacturing
issues have squeezed supply and could provide pricing advantage and
higher margins for Watson.
Watson shares recently rose 29 cents, or 0.8%, to $34.94.
Looking forward, Watson expects adjusted earnings of $2.50 to
$2.58 a share, above a Wall Street average estimate of $2.45 a
share, according to Thomson Reuters.
The company had previously increased its adjusted earnings
projection in April from its initial February guidance of $2.18 to
$2.28 a share.
It also increased its revenue guidance to $2.7 billion from a
previous view of $2.65 billion. Analysts had widely expected a
stronger topline number, currently projecting $2.72 billion.
Watson said that the raised projections don't include any
contribution from Arrow Group, a privately held generic company it
agreed to buy in June for $1.75 billion. The acquisition is
expected to close later this year.
The guidance includes increased revenue expectations for a Food
and Drug Administration approval of Toprol "shortly" and an
immediate launch, Chief Executive Paul Bisaro said on a conference
call Wednesday.
Bisaro said he had confidence in the coming approval, based on
conversations with the FDA, for the 25 milligram and 50 mg pills,
with approval for the 100 mg and 200 mg versions coming later in
the year.
The company has been awaiting the approval for months and Bisaro
has said that the agency was being cautious in light of recent
issues surrounding the drug.
Last year, Sandoz, the generic unit of Novartis AG (NVS),
recalled generic Toprol XL after the FDA sent a warning letter
about a manufacturing facility. K-V Pharmaceutical Co. (KVA, KVB),
another generic supplier, stopped manufacturing and shipping all of
its products in January and recalled most products already on the
market, including Toprol, as it deals with an FDA
investigation.
The shortage became a windfall for AstraZeneca, which ramped up
production of both the branded version and an authorized generic it
makes for Par Pharmaceutical Cos. (PRX). For the three months ended
March 31, sales of Toprol XL rose to $176 million, compared with
$295 million for all of 2008. Astrazeneca reports second-quarter
results on Thursday.
Watson's expected entrance has been watched by Wall Street and
Bisaro noted that lack of competition in the market has provided
"attractive" pricing that should improve margins.
For the three months ended June 30, Watson earned $53 million,
or 46 cents a share, down from $60.3 million, or 53 cents a share,
a year ago.
The latest quarter included increased acquisition and licensing
charges, while the year-ago quarter included gains from legal
settlements.
Excluding items, earnings were 61 cents a share, beating analyst
expectations of 57 cents a share.
Revenue rose 8.8% to $677.8 million, also exceeding expectations
of $664 million.
Watson reported that generic sales rose 14% to $393.8 million
during the period, driven by the sales of new products, including a
generic version of K-V Pharmaceuticals' potassium booster Micro-K,
which is among that company's halted products.
-By Thomas Gryta, Dow Jones Newswires; 212-416-2169;
thomas.gryta@dowjones.com