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.
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.
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.
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: