Watson Ups Generic Count - Analyst Blog


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Watson Pharmaceuticals Inc. ( WPI ) recently announced the launch of an authorized generic version of Abbott Laboratories' ( ABT ) drug Prometrium. Prometrium is available for use in the prevention of endometrial hyperplasia in non hysterectomized postmenopausal women who are receiving conjugated estrogen tablets. The drug is also used for the treatment of secondary amenorrhea.

Watson Pharma launched its generic drug under a supply agreement with Abbott Labs. According to the agreement, Abbott Labs will manufacture and supply all dosages of the authorized generic product to Watson Pharma, who will then market and distribute the same in the US. The companies will be sharing the profits depending on sales figures.

According to IMS Health data, Prometrium sales amounted to $198 million for the twelve months ended January 31, 2012.

We note that Watson Pharma also has an agreement with Pfizer Inc. ( PFE ) to market the authorized generic version of Lipitor in the US. Last year in November, Watson Pharma launched its authorized generic version of Lipitor, which is used as an adjunct to diet to reduce elevated total cholesterol, LDL (bad cholesterol), triglycerides and to increase HDL (good) cholesterol.

According to the supply and distribution agreement, Pfizer manufactures and supplies all dosage strengths of the authorized generic product to Watson Pharma, who, thereafter, markets and distributes the drug in the US. In return, Pfizer receives a share of the net sales from Watson Pharma. The agreement, which runs until November 30, 2016, is expected to add about 75 cents per share to Watson Pharma's 2012 earnings.

Our View

We currently have a Neutral recommendation on Watson Pharma. The stock carries a Zacks #3 Rank (Hold rating) in the short run.

We expect new generic product launches over regular intervals to help drive the company's Global Generic segment's sales, which climbed 46% during 2011 to $3.32 billion, driven by the generic launch of Lipitor and Concerta. Concerta is originally marketed by Johnson & Johnson ( JNJ ) for the treatment of attention deficit hyperactivity disorder (ADHD).

ABBOTT LABS ( ABT ): Free Stock Analysis Report
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WATSON PHARMA ( WPI ): Free Stock Analysis Report
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