Specialty pharmaceutical company Watson Pharmaceuticals Inc. (WPI) on Wednesday posted a decline in profit for the third quarter, but sales rose from last year. However, adjusted per share earnings grew from last year and topped the Street view. In addition, the company updated its earnings outlook for the full year.
The Corona, California-based company's third-quarter net income was $63.0 million or $0.55 per share, compared to $71.1 million or $0.62 per share in the year-ago quarter.
On an adjusted basis, net income advanced to $76.1 million or $0.66 per share from $54.0 million or $0.47 per share a year ago. Adjusted net income, adjusted for interest on CODES, totaled $77.7 million, up from $56.0 million reported in the prior-year quarter.
On average, 15 analysts polled by Thomson Reuters expected the company to post earnings of $0.65 per share. Analysts' estimates typically exclude special items.
Quarterly net revenues advanced 3% to $662.1 million from the previous year's $640.7 million. Fourteen Wall Street analysts had a consensus revenue estimate of $688.53 million for the quarter.
Paul Bisaro, Watson's President and Chief Executive Officer, said, "Adjusted net income for the quarter increased over 40 percent, driven by sustainable margin improvements resulting from operating efficiencies delivered by our Global Supply Chain Initiative as well as the contribution of new products."
Key generic products such as metroprolol extended-release, potassium chloride and Next Choice contributed to a 9% growth in generic revenue, while brand revenue for the quarter exceeded $112 million, the result of contributions from new products such as Rapaflo and Gelnique, and promoted products such as AndroGel and Femring.
The company's generic segment generated third-quarter revenue of $398.0 million, an increase of 11% from the prior-year's revenue of $363.8 million, reflecting the addition of new products, including metoprolol extended-release, potassium-chloride extended-release capsules, and Next Choice. The increase was partially offset by lower sales from omeprazole 40mg. Generic other revenue dropped to $5.7 million, primarily due to a decline in royalties from Sandoz's sales of metoprolol extended-release tablets 50mg.
Brand segment reported quarterly revenues of $112.7 million, higher than the $106.0 million in the same quarter of last year, due primarily to sales of new products, including Rapaflo and Gelnique, and increased sales of Androderm. This increase was offset in part by lower sales of Ferrlecit. Brand other revenue increased to $16.6 million, due primarily to increased revenue from the company's promotion of AndroGel and Femring.
Third-quarter net revenues at Watson's distribution segment totaled $151.4 million, a decline of 11%, compared to $170.9 million a year earlier, primarily due to fewer third-party generic new product launches in the third quarter, partially offset by an increase in brand product sales. Distribution revenue excludes sales of Watson products.
Consolidated general and administrative expenses for the most recent quarter grew to $60.1 million, primarily as a result of higher legal expenses and expenses related to the acquisition of Arrow Group. General and administrative expenses for the prior-year period reflect a $5.9 million favorable settlement of a tax-related liability due to the resolution of an Internal Revenue Service audit. Amortization expense for the latest quarter increased to $22.2 million, reflecting the addition of product rights acquired from Teva Pharmaceutical Industries Ltd.
For the nine-month period, the company reported net income of $165.1 million or $1.45 per share, compared to $182.0 million or $1.60 per share in the prior-year period.
Adjusted net income increased to $213 million from $170.6 million in the year-earlier period. Adjusted per share earnings rose to $1.85 from $1.50 in the nine-month period of 2008.
Adjusted net income, adjusted for interest on CODES, grew to $218.5 million from $176.5 million reported in the comparable period of the previous year.
Net revenues for the nine months ended September 30, 2009 were $2.01 billion, up from $1.89 billion reported in the comparable period of the previous year.
Looking ahead, the company projects fiscal 2009 GAAP net income to range between $228.9 million and $237.5 million. The company now expects earnings per share to be in the range of $2.04 - $2.12 per share, versus its prior outlook range of $2.13 - $2.21 per share.
Adjusted net income for the full year is expected to be in the range of $282.0 million - $290.6 million. Watson continues to see 2009 adjusted per share earnings between $2.50 and $2.58 per share. Further, Watson anticipates reporting 2009 adjusted net income, adjusted for interest on CODES, in the range of $287.5 million - $296.1 million. Analysts are looking for earnings of $2.55 per share for the full year.
Watson shares, which have been trading between $20.19 and $38.48 in the past 52 weeks, are currently trading at $34.51, down 83 cents or 2.35%.
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