(Source: PRNewswire-FirstCall)
MORRISTOWN, N.J., July 29 /PRNewswire-FirstCall/ -- Watson Pharmaceuticals, Inc. , a leader in generic and specialty branded pharmaceuticals, today reported net income of $53.0 million, or $0.46 per diluted share. Excluding special items as detailed in the reconciliation table below, adjusted net income for the second quarter was $70.4 million, or $0.61 per diluted share, an increase of $15.8 million or 29 percent. Adjusted EBITDA for the second quarter 2009 was $164.1 million.
Net revenue for the second quarter 2009 was a record $677.8 million, an increase of $55.1 million or nine percent from the second quarter 2008. Cash flow from operations was $91.7 million and cash and marketable securities were $650.9 million as of June 30, 2009.
"Fourteen percent growth in Generic product sales and the launches of Rapaflo(TM) and Gelnique(TM) in our Brand business were among the key highlights of our second quarter," said Paul Bisaro, Watson's President and Chief Executive Officer. "Based on our performance in the first six months of 2009 and our expectations for the remainder of the year, we are again raising our full-year 2009 outlook to an adjusted diluted EPS range of $2.50 to $2.58."
"During the quarter, we also took important strategic steps to further position Watson for long-term success, which culminated in the announcement of our intent to acquire the Arrow Group," Mr. Bisaro continued. "With the completion of this transaction anticipated later this year, Arrow will expand our global footprint and leverage our assets across many developed and emerging markets around the world."
Second Quarter 2009 Business Segment Results Generic Segment Information Three Months Ended Six Months Ended June 30, June 30, -------- -------- (Unaudited; $in millions) 2009 2008 2009 2008 ---- ---- ---- ---- Generic Segment Contribution Product sales $393.8 $344.3 $789.0 $686.7 Other revenue 7.4 32.4 13.9 56.7 ---- ---- ---- ---- Net revenue 401.2 376.7 802.9 743.4 Operating expenses: Cost of sales 234.1 227.6 472.6 457.3 Research and development 29.9 29.1 60.0 51.7 Selling and marketing 11.4 13.8 24.1 27.9 ---- ---- ---- ---- Segment contribution $125.8 $106.2 $246.2 $206.5 ====== ====== ====== ====== Segment margin 31.4% 28.2% 30.7% 27.8% Adjusted gross profit (1) $175.2 $138.5 $345.7 $288.6 Adjusted gross margin 43.7% 38.3% 43.1% 39.6% (1) Adjusted gross profit represents adjusted net revenue less adjusted cost of sales and excludes amortization of acquired intangibles. Pro forma adjustments for the respective periods include the following: Global supply chain initiative $8.1 $4.4 $15.4 $17.5 Legal settlements - (15.0) - (15.0)
Generic product sales for the second quarter of 2009 increased $49.5 million or 14 percent to $393.8 million, reflecting the addition of new products, including potassium-chloride extended-release capsules. Generic other revenue decreased $25.0 million to $7.4 million. Generic other revenue for the second quarter 2008 included a $15.0 million sales milestone from Barr Pharmaceuticals, Inc. following a 1999 legal settlement.
Adjusted Generic gross profit was $175.2 million in the second quarter of 2009, compared to $138.5 million in the second quarter of 2008 and $170.5 million in the first quarter of 2009. Adjusted Generic gross profit for the second quarter excludes approximately $8.1 million in costs related to Watson's Global Supply Chain Initiative and was positively influenced by the launch of new products and product mix.
Generic research and development expense increased $0.8 million or three percent to $29.9 million. Watson currently has approximately 60 ANDAs on file with the Food and Drug Administration (FDA).
Brand Segment Information Three Months Ended Six Months Ended June 30, June 30, -------- -------- (Unaudited; $in millions) 2009 2008 2009 2008 ---- ---- ---- ---- Brand Segment Contribution Product sales $97.6 $101.5 $195.8 $200.5 Other revenue 17.7 16.5 31.5 32.8 ---- ---- ---- ---- Net revenue 115.3 118.0 227.3 233.3 Operating expenses: Cost of sales 22.0 24.4 46.2 51.9 Research and development 12.7 10.1 24.9 25.5 Selling and marketing 39.1 29.6 76.0 57.6 ---- ---- ---- ---- Segment contribution $41.5 $53.9 $80.2 $98.3 ===== ===== ===== ===== Segment margin 36.0% 45.7% 35.3% 42.1% Adjusted gross profit (1) $93.3 $93.6 $181.1 $181.6 Adjusted gross margin 80.9% 79.3% 79.7% 77.8% (1) Adjusted gross profit represents net revenue less adjusted cost of sales and excludes amortization of acquired intangibles. Adjusted cost of sales for the six months ended June 30, 2008 includes a $0.2 million adjustment for Global Supply Chain Costs.
Brand product sales for the second quarter of 2009 decreased slightly to $97.6 million, due primarily to lower sales of INFeD as a result of a temporary disruption in supply and lower sales of Ferrlecit . This decline was offset in part by the launch of new products Gelnique(TM) and Rapaflo(TM). Brand other revenue increased $1.2 million to $17.7 million.
Brand selling and marketing expense for the second quarter of 2009 increased 32 percent to $39.1 million, due primarily to the launches of Rapaflo(TM) and Gelnique(TM). Watson's urology sales force began promoting Rapaflo(TM) on April 7, 2009 and the specialty sales force began promoting Gelnique(TM) on May 18, 2009.
Distribution Segment Information Three Months Ended Six Months Ended June 30, June 30, -------- -------- (Unaudited; $in millions) 2009 2008 2009 2008 ---- ---- ---- ---- Distribution Segment Contribution Net revenue $161.3 $128.0 $315.0 $272.9 Operating expenses: Cost of sales 137.0 107.9 263.0 230.8 Selling and marketing 15.7 14.1 31.8 28.1 ---- ---- ---- ---- Segment contribution $8.6 $6.0 $20.2 $14.0 ==== ==== ===== ===== Segment margin 5.3% 4.7% 6.4% 5.1% Adjusted gross profit (1) $24.3 $20.1 $52.0 $42.1 Adjusted gross margin 15.1% 15.7% 16.5% 15.4% (1) Adjusted gross profit represents net revenue less cost of sales and excludes amortization of acquired intangibles.
Distribution segment net revenue increased 26 percent or $33.3 million to $161.3 million for the second quarter of 2009. The increase was primarily due to higher brand sales and new products launched in the second quarter, including the launch of a generic version of Adderall XR. Distribution revenue excludes sales of Watson products.
Distribution segment adjusted gross margin was 15.1 percent in the second quarter of 2009 compared to 15.7 percent in the second quarter 2008.
Other Operating Expenses
Consolidated general and administrative expenses for the second quarter 2009 increased $15.3 million to $62.1 million, primarily reflecting the inclusion of $11.9 million of expenses related to the acquisition of Arrow Group.
Amortization expense for the second quarter 2009 increased $1.9 million to $22.1 million, reflecting the addition of product rights acquired from Teva Pharmaceutical Industries, Ltd.
2009 Financial Outlook
Based on actual results for the first six months of 2009 and the forecast for the remainder of the year, Watson is adjusting its estimates for the full year 2009. Watson has increased its estimates for GAAP earnings per diluted share to between $2.13 and $2.21, and as detailed in reconciliation Table 6, adjusted earnings per diluted share is now estimated to be between $2.50 and $2.58. Excluding special items as detailed in the EBITDA reconciliation Table 7 below, adjusted EBITDA is now estimated to be between $668 and $685 million.
Watson estimates total net revenue for the full year of 2009 at approximately $2.70 billion. Estimates for segment revenue are as follows:
-- Total Generic segment revenue between $1.55 billion and $1.65 billion. -- Total Brand segment revenue between $445 million and $470 million. -- Total Distribution segment revenue between $630 million and $660 million.
Watson's estimates are based on the Company's actual results for the first six months of 2009, and management's current belief about prescription trends, pricing levels, inventory levels and the anticipated timing of future product launches and events. Watson's forecast for 2009 excludes the impact of the acquisition of Arrow Group, which is expected the close in the second half of 2009.
Webcast and Conference Call Details
Watson will host a conference call and webcast today at 8:30 a.m. Eastern Daylight Time to discuss second quarter 2009 results, the outlook for 2009 and recent corporate developments. The dial-in number to access the call is (877) 251-7980, or from international locations, (706) 643-1573. A taped replay of the call will be available by calling (800) 642-1687 with access pass code 18892418. The replay may be accessed from international locations by dialing (706) 645-9291 and using the same pass code. This replay will remain in effect until midnight Eastern Daylight Time, August 14, 2009. To access the live webcast, go to Watson's Investor Relations Web site at http://ir.watson.com/.
About Watson Pharmaceuticals, Inc.
Watson Pharmaceuticals, Inc. is a global leader in the development and distribution of pharmaceuticals with a broad portfolio of generic products and a specialized portfolio of brand pharmaceuticals focused on Urology, Women's Health and Nephrology/Medical.
