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Watson Slices Profit Estimate; Stock Sinks 15%

June 29, 2004|From Bloomberg News

Watson Pharmaceuticals Inc., the largest U.S. maker of birth-control pills, cut second-quarter sales and profit estimates Monday and said it would fire half of its sales force. Its shares slid 15% on the news.

The Corona firm said contraceptive sales fell short of forecasts because of increased competition from rivals like Barr Pharmaceuticals Inc.

Watson projected it would earn 31 cents to 33 cents in the second quarter, down from its previous estimate of 50 cents to 52 cents. A year ago, net income was 47 cents a share.

The company said revenue would come in at $400 million, $10 million less than previously forecast.

Watson also said it would cut 300 of its 600 sales jobs as it reorganized to focus on urology, kidney disease and generic drugs. It also plans to shut a factory in Miami and end a contract sales pact with Ventiv Health Inc., helping save as much as $90 million a year.

"The situation in the generic [oral contraceptive] market is worse than we thought," Morgan Stanley analyst Marc Goodman wrote in a note to clients. "We are very disappointed with the company's announcements."

Goodman lowered his rating on Watson to "equal-weight" from "overweight," saying he wasn't convinced the focus on urology and nephrology would provide sustainable growth.

Watson shares fell $4.80 to $27.49 on the New York Stock Exchange.

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