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Watson Pharmaceuticals 3Q Falls 11%; Earns Beat Target

DOW JONES NEWSWIRES

Watson Pharmaceuticals Inc.'s (WPI) third-quarter profit fell 11% as charges and prior-year gains skewed comparisons, while generic-drug sales increased and helped core earnings top Wall Street's expectations.

But revenue fell shy of analysts' estimates.

Chief Executive Paul Bisaro said the company boosted product-development spending 15% and Watson continued to invest in sales and marketing.

Watson is also eying international growth through its proposed $1.75 billion acquisition of Arrow Group, a closely held London firm which obtained more than 40% of its sales last year abroad. Arrow also owns U.S. rights to sell an authorized generic version of cholesterol-lowering drug Lipitor after the blockbuster Pfizer Inc. (PFE) medicine loses patent protection in November 2011.

Watson's profit fell to $63 million, or 55 cents a share, from $71.1 million, or 62 cents a share, a year earlier. Excluding restructuring and other charges in the latest quarter and investment and other gains last year, earnings rose to 66 cents from 47 cents.

Revenue rose 3.3% to $662.1 million.

On average, analysts polled by Thomson Reuters were expecting earnings, excluding items, of 65 cents on revenue of $689 million.

Revenue in Watson's generics business rose 9.4%, while branded-drugs sales rose 6.3%. Revenue from Watson's distribution operations fell 11% amid fewer new-product launches.

Shares of Watson, which reaffirmed its 2009 target, closed at $35.34 and didn't trade premarket. The stock is up one-third the past year.

-By Mike Barris, Dow Jones Newswires; 212-416-2330; mike.barris@dowjones.com

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