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Watson Profit Drops 31% in 2nd Quarter

August 04, 2004|From Reuters

Watson Pharmaceuticals Inc. said Tuesday that its second-quarter profit fell 31% as rival products cut into sales of the company's oral contraceptives.

Watson, based in Corona, said net income was $34.9 million, or 32 cents a share, compared with $50.7 million, or 47 cents, a year earlier. Excluding special charges, the company earned 40 cents a share.

Revenue rose 12% to $399.4 million as a 39% increase in sales of Watson's generic drugs more than offset an 11% drop in sales of branded drugs.

Even so, CIBC World Markets analyst Elliot Wilbur said sales of generics, at $224 million, were below his forecast of $230 million. He called that "somewhat surprising," given Watson's recent launches of generic drugs for pain, diabetes and depression.

Shares of Watson tumbled to a 20-month low June 28 when the company cut its second-quarter earnings forecast to 39 cents to 41 cents a share, excluding special charges.

But Tuesday the stock rose $2.27 to close at $26.97 on the New York Stock Exchange.

"People are breathing a sigh of relief that things didn't turn out worse than they did," said one drug industry analyst, who asked not to be identified.

The company said it expected third-quarter earnings per share of 38 cents to 40 cents on revenue of about $390 million.

Excluding special charges, Watson forecast profit of 44 cents to 46 cents a share.

The company in June also trimmed its full-year forecast to $1.85 to $1.90 a share before special items, and reaffirmed that forecast Tuesday.

Watson, which said it expected 2004 revenue of $1.6 billion, is attempting to concentrate more on branded drugs and on urology and kidney treatments.

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