Nearly every major generic-drug company bought out a smaller competitor or finished up an acquisition last year. Watson Pharmaceuticals
Well, since the Andrx deal just closed in early November, Watson's year-over-year results are not directly comparable. Regardless, Watson announced its fourth-quarter and year-end financial results yesterday, and we found out that revenue came in at $2 billion for the year, while gross margins were 38%, which is on the low end among companies in the industry. Adjusted earnings, meanwhile, were $1.03 per share last year, compared with $1.35 per share in 2005.
The lifeblood of generic-drug companies consists of the Abbreviated New Drug Applications (ANDA) they file with the FDA so they can market new generic products. Watson did a good job of churning out more ANDAs in 2006, having submitted 27 new ones last year, five more than in 2005.
For 2007, Watson gave revenue guidance in a range of $2.45 billion to $2.65 billion. Adjusted earnings per share are expected to come in between $1.20 and $1.30. On the conference call, management stated it was being conservative with this guidance, but the inclusion in these calculations of items such as the possible launch of a complex generic like Lovenox sounds extremely aggressive to me. So I wouldn't be surprised to see Watson not hit this guidance this year.
Watson is not my favorite generic-drug maker, because in this industry, size and scale are becoming a much more important requirement for continued success as margins get squeezed. With competitors such as Barr Laboratories
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