QUOTE AND NEWS
newratings.com  11 hrs ago  Comment 
NEW DELHI (dpa-AFX) - The Indian rupee extended its early advance against the U.S. dollar in later deals on Thursday, as wholesale price inflation in India eased to a 5-month low in July. The figures from the Ministry of Commerce and Industry...
The Hindu Business Line  Aug 14  Comment 
Wholesale Price Index-based inflation for July came in at a five-month low of 5.19 per cent. This is lower than the 5.43 per cent recorded in the previous month. The latest inflation print is also...
The Economic Times  Jul 14  Comment 
The rise in the wholesale price index (WPI) compared with a 5.80 per cent year-on-year jump forecast by economists.
Commodity Online  Jul 14  Comment 
Index for food articles rose 2.2% due to higher prices of fruits, vegetables, coffee, masur, urad, port, condiments and spices, rice, arhar etc.
newratings.com  Jul 11  Comment 
BRUSSELS (dpa-AFX) - At 2:00 am ET Friday, Destatis is scheduled to release the German final consumer prices and wholesale prices reports for June. The statistical agency is expected to confirm its annual and monthly consumer price inflation...
The Economic Times  Jun 16  Comment 
Wholesale prices-based inflation in May accelerated to a five-month high of 6.01 percent, driven up by higher food and fuel costs, government data showed.
The Hindu Business Line  May 15  Comment 
Aided by a sharp slide in the fuel index, wholesale price index (WPI) in April came in at a lower-than-expected 5.2 per cent as against 5.7 per cent in the previous month. There was also...
The Economic Times  May 15  Comment 
Traders say good dollar buying being seen from state-run banks, likely on behalf of the central bank, will limit further fall in the pair.
The Hindu Business Line  May 6  Comment 
Why we need a producer price index to replace the WPI
The Hindu Business Line  May 4  Comment 
High-level panel suggests change in base year, calculation method




 

Watson Pharmaceuticals (NYSE:WPI) is the third largest generic pharmaceutical manufacturer in the United States based on total prescriptions dispensed. Watson is a firm in transition. Watson's main products are easily replicable generics. While the market for these products has been expanding rapidly in recent years, competition has also increased resulting in downward pressure on Watson's margins. The company earned $2.8 billion in revenue and $222 million in net income in 2009.[1]

In an effort to turn around its fortunes, the company has taken several steps to both lower costs and increase revenues. Watson has lagged behind its larger competitors in moving manufacturing to countries like China with lower labor costs. Watson plans to move as much as 50% of its manufacturing capacity overseas in the next few years. Andrx gives Watson access to 15 different controlled release technologies. Controlled release drugs generally require very specific chemical delivery technologies, putting them outside of the realm of expertise of most generic companies and making them less susceptible to competition and less price sensitive. At the end of 2009, the company acquired Arrow Group, a fast growing generic pharmaceutical company.[2]

Company Overview

Watson produces both branded and generic drugs, but it is primarily focused on the latter, marketing 170 different generic and only 25 brand drugs. Watson focuses on developing its own generic products, but it also partners with other companies in development.[3]

Walgreen Company (WAG) and McKesson (MCK) account for 13% and 11% of Watson's sales respectively.[4]

Segments[5]

  • Global Generic - the Global Generic segment develops, manufactures, markets, sells and distributes generic products that are the therapeutic equivalent to their brand name counterparts and are generally sold at prices significantly less than the brand product. As such, generic products provide an effective and cost-efficient alternative to brand products. When patents or other regulatory exclusivity no longer protect a brand product, opportunities exist to introduce off-patent or generic counterparts to the brand product.
  • Global Brand - the Global Brand segment includes promoted urology products such as Rapaflo®, Gelnique® and Trelstar® and a number of non-promoted products.
  • Distribution - the Distribution business distributes generic and certain select brand pharmaceutical products manufactured by third parties, as well as by Watson, primarily to independent pharmacies, pharmacy chains, pharmacy buying groups and physicians’ offices. Sales are principally generated through an in-house telemarketing staff and through internally developed ordering systems.

Business Growth

FY 2009 (ended December 31, 2009)[1]

  • Net revenue increased 10% to $2.8 billion. The company attributes the increase to new product launches.
  • Net income fell 7% to $222 million.

Trends and Forces

  • Growing generic market increases sales opportunities: The US generic market has grown significantly in recent years. The aging population in the United States, rising health care costs, and insurance companies' attempts to minimize costs could all contribute to a further increase in demand for generic products. Medicare has been increasingly encouraging greater use of generics. In Watson's specific area of expertise, controlled-release products, the market has been growing enormously over the past decade. In 1993, the market for controlled-release products was approximately $4 billion, and this number climbed to $15 billion by the end of the decade.
  • Manufacturing in Asia: Watson is years behind its larger competitors in moving its manufacturing overseas. The main draw for relocating manufacturing and R&D services is the cheaper labor available abroad. This makes it much cheaper to develop and manufacture drugs. Watson has engaged in several acquisitions through out India and China, with the purpose of expanding its manufacturing capacity in these destinations. By the end of the decade, the company plans to have moved nearly 50% of its manufacturing overseas.

Competition

In terms of the third party distributor, Watson competes most heavily with Teva Pharmaceutical Industries (TEVA). Anda, Watson's distribution division, distributes products from Watson and other companies.

Watson faces competition both from generic and brand name drug producers. Some of its top competitors include:

  • Mylan Laboratories (MYL) is the third largest generic producer in the US. Mylan also owns subsidiaries that produce proprietary drugs and hospital packages.
  • Barr Pharmaceuticals (BRL): is a split generic/brand manufacturer with about 75% of its sales in generics. Its main product line is contraceptives, and it is dominant in this market.
  • Teva Pharmaceutical Industries (TEVA). Teva Pharmaceuticals USA is one if the largest producers of generic drugs. Its products include therapeutic areas such as anti-infective, cardiovascular, oncology, dermatological and anti-inflammatory.
  • Dr. Reddy's Laboratories (RDY) is one of the largest generic manufactures in the US by revenue. It also manufactures branded products. Dr. Reddy's products include those for hypertension, allergies, urological disorders, cardiovascular, and antibiotics.

References

  1. 1.0 1.1 WPI 2009 10-K "Selected Financial Data" pg. 44
  2. WPI 2009 10-K "Acquisition of Arrow" pg. 3-4
  3. WPI 2009 10-K "Generic Product Portfolio" pg. 6
  4. WPI 2009 10-K "Customers" pg. 10-11
  5. WPI 2009 10-K "pg. 47-50
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