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Watson Fourth Quarter 2010 Net Revenue Increases 21% to $953 Million

-- Fourth Quarter 2010 Non-GAAP EPS $0.93
-- Full Year 2010 Net Revenues of $3.6 Billion
-- Full Year 2010 Non-GAAP EPS $3.42

MORRISTOWN, N.J., Feb. 15, 2011 /PRNewswire via COMTEX/ --Watson Pharmaceuticals, Inc. (NYSE: WPI) today reported net revenue increased 21 percent to $952.7 million for the fourth quarter ended December 31, 2010, compared to $785.7 million in the fourth quarter 2009. On a non-GAAP basis, net income for the fourth quarter 2010 was $116.5 million or $0.93 per share, an increase of 23 percent, compared to $94.4 million or $0.85 per share in the fourth quarter 2009. GAAP earnings per share for the fourth quarter 2010 were $0.15, compared to $0.51 in the prior year period.

 

For the fourth quarter 2010, adjusted EBITDA increased 17 percent to $220.8 million, compared to $188.8 million for the fourth quarter 2009. Cash and marketable securities were $293.9 million as of December 31, 2010. Refer to the attached reconciliation tables for adjustments to GAAP earnings.

Full Year 2010 Results

For the full year 2010, net revenue increased 28 percent to $3.6 billion, compared to net revenue of $2.8 billion for full year 2009. On a non-GAAP basis, net income increased 22 percent to $425.4 million, or $3.42 per share for the full year 2010, compared to 2009 net income of $348.8 million, or $3.04 per share. GAAP earnings per share were $1.48 for the full year 2010, compared to $1.96 in 2009.

For the full year 2010, adjusted EBITDA was $838.2 million, an increase of 22 percent from the full year 2009. Cash flow from operations was $571.0 million.

"2010 was an extremely successful year for Watson. From a financial perspective, revenues grew by 28 percent and non-GAAP earnings per share increased by 13 percent. Additionally, strong cash flow from operations of over $570 million enabled us to reduce our debt to adjusted EBITDA ratio to approximately 1.2x, which provides us the flexibility to capitalize on future opportunities to grow the Company," said Paul Bisaro, President and CEO. "We also reported continued progress in our Global Brands and Generics businesses. During the year we launched 7 new generic products in the U.S., disclosed the initiation of 17 new patent challenges, and announced an agreement that will enable us to launch generic Concerta(R) in May 2011. Investing for the future, we filed 34 Abbreviated New Drug Applications in the U.S. and over 145 applications globally."

"In our Global Brands business, we launched three new products in the U.S., completed the phase III study with Columbia Labs on Prochieve(R) 8% for the prevention of pre-term birth in women with a short cervix, and announced an alliance with Gedeon Richter to develop Esmya(R) for the treatment of uterine fibroids. We also licensed our first biologic, recombinant follicle stimulating hormone (rFSH)," Bisaro continued.

"During 2010 we continued to successfully integrate our assets in key international markets and invested in the new and exciting high growth markets of Brazil and Mexico through our joint venture with Moksha8. We also realized significant enhancements to our global supply chain through our Operational Excellence Initiative," concluded Bisaro.

Fourth Quarter and Full year 2010 Business Segment Results

 

 

 

 

 

 

 

 

 

 

 

 
 

Global Generics Segment Information

 

 
 

 

Three Months Ended


 

Twelve Months Ended

 

 

December 31,


 

December 31,

 

(Unaudited; $ in millions)

2010


 

2009


 

2010


 

2009

 

 

 

 

 

 

 

 

 
 

Product sales

$ 607.9


 

$ 460.5


 

$ 2,268.9


 

$ 1,641.8

 

Other revenue

38.1


 

6.8


 

69.5


 

26.4

 

 

Net revenue

646.0


 

467.3


 

2,338.4


 

1,668.2

 

Operating expenses:


 

 

 

 

 

 

 
 

 

Cost of sales

315.3


 

270.4


 

1,198.9


 

947.1

 

 

Research and development

53.7


 

43.4


 

194.6


 

140.4

 

 

Selling and marketing

31.0


 

18.0


 

111.9


 

53.8

 

Segment contribution

$ 246.0


 

$ 135.5


 

$ 833.0


 

$ 526.9

 

Segment margin

38.1%


 

29.0%


 

35.6%


 

31.6%

 

 

 

 

 

 

 

 

 
 

Adjusted gross profit (1)

$ 314.2


 

$ 218.3


 

$ 1,154.2


 

$ 764.6

 

Adjusted gross margin

50.6%


 

46.7%


 

49.9%


 

45.8%

 

 

 

 

 

 

 

 

 

 

 

 
 

 

 

 

 

 

 

 

 

 

 

 
 

(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:


 

 

 

 

 

 

 
 

 

 

 

 

 

 

 
         

 

 

 

 

 

 

 

 

 

 

 
 

 

 

Acquisition and licensing adjustments (other revenue)

$ (25.0)


 

$ -


 

$ (27.5)


 

$ -

 

 

 

Global Supply Chain Initiative

8.5


 

7.2


 

30.3


 

29.3

 

 

 

Purchase accounting adjustments

-


 

14.2


 

11.9


 

14.2

 

 

 

 

 

 

 

 

 

 

 

 
 
                       

Global Generics net revenue for the fourth quarter 2010 increased 38 percent to $646.0 million. Product sales increased due to the addition of our international business and new products, including metoprolol succinate extended-release, Zarah(R) and diltiazem extended-release. Other revenue increased primarily as a result of the contribution from our international markets. Fourth quarter international net revenue was $148.6 million, and includes a $25 million payment from a development partner. Our non-GAAP financial results exclude this payment.

Adjusted Global Generics gross margin increased 3.9 percentage points to 50.6 percent in the fourth quarter 2010, compared to 46.7 percent in the fourth quarter 2009. Adjusted Global Generics gross margin was positively influenced by increased sales of extended-release products, partially offset by lower gross margins in our international business.

Global Generics R&D investment for the fourth quarter 2010 increased 24 percent to $53.7 million, primarily due to the inclusion of international R&D investments beginning in December 2009.

For the full year 2010, Global Generics net revenue increased 40 percent to $2.34 billion, including product sales of $2.27 billion and other revenue of $69.5 million. Product sales were driven by increased sales of extended-release products, the launch of new products and the addition of product sales from our international markets. Global Generics other revenue for 2010 increased $43.1 million compared to 2009, due primarily to higher other revenue from our international business. International net revenues for the full year 2010 were $472.0 million.

Adjusted Global Generics gross margin increased from 45.8 percent in 2009 to 49.9 percent in 2010, due to the launch of new products, an increase in extended-release products and enhanced operational efficiencies resulting from the Company's Operational Excellence Initiative.

Global Brands Segment Information

 

 
 

 

Three Months Ended


 

Twelve Months Ended

 

 

December 31,


 

December 31,

 

(Unaudited; $ in millions)

2010


 

2009


 

2010


 

2009

 

 

 

 

 

 

 

 

 
 

Product sales

$ 84.6


 

$ 101.8


 

$ 316.3


 

$ 393.7

 

Other revenue

18.7


 

19.2


 

81.5


 

67.3

 

 

Net revenue

103.3


 

121.0


 

397.8


 

461.0

 

Operating expenses:


 

 

 

 

 

 

 
 

 

Cost of sales

20.3


 

22.4


 

88.4


 

89.3

 

 

Research and development

45.3


 

17.1


 

101.5


 

56.9

 

 

Selling and marketing

35.6


 

36.0


 

137.8


 

144.5

 

Segment contribution

$ 2.1


 

$ 45.5


 

$ 70.1


 

$ 170.3

 

Segment margin

2.0%


 

37.6%


 

17.6%


 

36.9%

 

 

 

 

 

 

 

 

 
 

 

 

 

 

 

 

 

 
 

Adjusted gross profit (1)

$ 83.0


 

$ 98.6


 

$ 309.4


 

$ 371.7

 

Adjusted gross margin

80.3%


 

81.5%


 

77.8%


 

80.6%

 

 

 

 

 

 

 

 

 
 

(1) Adjusted gross profit represents net revenue less adjusted cost of sales and excludes amortization of acquired intangibles.


 

 

 

 

 

 

 
 

 

 

 

 

 

 

 
     

 

 

 

 

 

 

 
     

Posted: February 2011


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