QUOTE AND NEWS
The Economic Times  Jul 15  Comment 
Wholesale prices slipped further in June, marking the eighth straight month of deflation and going against the trend in retail inflation.
The Economic Times  Jul 14  Comment 
Industrial production in May slowed to 2.7 per cent from 5.6 per cent a year ago, dragged down by manufacturing, strengthening the case for an RBI rate cut.
The Economic Times  Jul 14  Comment 
"As far as our internal estimates show, the core inflation, the core WPI inflation has in fact moved down to minus 0.91."
The Hindu Business Line  Jul 14  Comment 
Remains in negative territory at (-) 2.4% in June
The Economic Times  Jun 15  Comment 
Analysts are divided over whether the trend will prompt the central bank to cut rates further.
The Economic Times  Jun 15  Comment 
"If you look into the services CPI data, the service inflation has in fact gone up this month, even though on a minor basis to around 3.8%."
The Economic Times  May 17  Comment 
WPI inflation is expected to decline further to about (-)3 per cent in May despite concerns over weak monsoon and strengthening crude prices.
newratings.com  May 14  Comment 
NEW DELHI (dpa-AFX) - The Indian rupee climbed further against the U.S. dollar in afternoon deals on Thursday, as further contraction in India's wholesale prices in April spurred speculation that the Reserve Bank of India may cut interest...
The Economic Times  May 14  Comment 
Wholesale prices fell at a faster-than-expected annual rate of 2.65 per cent in April. Wholesale prices in January declined 2.17 per cent year-on-year.
The Economic Times  May 14  Comment 
If the index fails to build on momentum, it may retest its crucial psychological level of 8,200 in trade today.




 

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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