Watson Incontinence Patch Rejected

Watson Pharmaceuticals Inc. said U.S. regulators rejected a skin patch for urinary incontinence that analysts called the generic-drug maker’s most important new product. Watson shares fell 12%.

The Food and Drug Administration asked for more clinical data on the patch, called Oxytrol. The company has research not yet seen by the FDA, comparing Oxytrol to Pharmacia Corp.’s Detrol, that may resolve the agency’s concerns, Watson Chief Executive Allen Chao said during a conference call.

Analysts estimated Oxytrol’s potential sales at as much as $500 million a year and said its approval was crucial to ensure Watson’s growth.

The FDA’s rejection, the second in 24 hours involving a Watson product, is a blow to the company’s strategy of shifting to higher-profit brand-name products.

Shares of Corona-based Watson tumbled $3.65 to $27.09 on the New York Stock Exchange, their biggest one-day decline in more than four months.

If the FDA accepts Watson’s research comparing Oxytrol and Detrol, the company expects to file an amendment to its application with the agency by the end of the second quarter, said Charles Ebert, senior vice president of research and development.

Watson said the delay in getting Oxytrol approved will lower 2002 revenue, which it expects to be $1.2 billion to $1.25 billion, down from a previous forecast of as much as $1.28 billion.

Still, Watson said earnings this year will be higher than previously forecast because the company won’t have to spend as much as it had planned to introduce Oxytrol.

Watson expects to report first-quarter earnings of 33 cents or 34 cents a share, in line with analyst expectations; and 2002 earnings of $1.60 to $1.70 a share, higher than an earlier estimate of $1.55 to $1.60.