Watson Profit Falls on Plant Sale
Generic drug maker Watson Pharmaceuticals Inc. said Tuesday that its fiscal fourth-quarter earnings declined 6.9% because of costs related to a sale of a manufacturing plant.
Net income fell to $43.1 million, or 40 cents a share, from $46.3 million, or 43 cents, in the same period of 2001. Revenue jumped 12% to $329.6 million from $293.9 million, helped by sales of birth-control pills and new products.
Watson, based in Corona, is boosting spending on its own brand-name products, which are more profitable than generic medicines. Sales of Watson’s branded drugs climbed 14% to $169.6 million. Revenue from generics rose 7% to $150.1 million. The company introduced eight generic versions of brand-name medicines in 2002.
“The branded business was buoyed by the women’s health franchise again, despite additional competition in that area,” said Megan Murphy, an analyst at Natexis Bleichroeder, which doesn’t rate the stock. “The generic business looked a lot stronger than most were expecting.”
Watson shares fell 7 cents to $30.02 on the New York Stock Exchange.
“We are very pleased with our fourth-quarter results, having achieved our third consecutive quarter of record revenues,” said Allen Chao, chairman and chief executive.
Watson, the second-biggest U.S. maker of oral contraceptives behind Johnson & Johnson, expects higher demand for its birth-control pills and an incontinence treatment it plans to begin selling in the second quarter to help lift this year’s revenue as much as 16%.
Sales in Watson’s women’s-health unit jumped 35% to $90 million in the quarter, company President Joseph Papa said during a conference call with analysts.
Excluding expenses of $5.3 million, or 5 cents a share, related to a sale of a Phoenix-based plant, profit would have been $48.4 million, or 45 cents. On that basis, profit beat the 44-cent average estimate of analysts polled by Thomson First Call.
Watson acquired the Phoenix plant, which had been cited by U.S. regulators for manufacturing flaws, in its 2000 purchase of Schein Pharmaceutical Inc.
Watson last month estimated its profit was 44 cents to 45 cents a share, exceeding its forecast of 42 cents to 44 cents.
Fourth-quarter profit excluding the asset-sale expenses climbed 21% from profit before some expenses and gains of $40 million, or 37 cents, in the same quarter the year before.
Watson is the third-biggest publicly traded generic drug maker, behind Pittsburgh-based Mylan Laboratories Inc. and industry leader Teva Pharmaceutical Industries Ltd. of Israel.
