Watson Pharmaceuticals Inc. (WPI) recently announced the tentative approval of its rosuvastatin zinc tablets by the US Food and Drug Administration (FDA). The regulatory body approved 5, 10, 20 and 40 mg formulations of the drug.
Watson Pharma’s rosuvastatin zinc tablets are a new salt form of AstraZeneca plc's (AZN) cholesterol drug, Crestor. The salt form of a drug is characteristic of improved bioavailability, stability, manufacturability, and patient compliance.
Watson Pharma had filed a New Drug Application (NDA) with the FDA to market its rosuvastatin zinc tablets in July last year. Thereafter, in October, AstraZeneca filed a lawsuit against Watson Pharma in the United States District Court for the District of Delaware, and hence prevented the regulatory body from approving Watson Pharma’s NDA until April 1, 2013 or until the court resolves the matter, whichever occurs earlier.
Recent Developments
Last month, Watson Pharma announced the launch of Amethia (levonorgestrel/ethinyl estradiol and ethinyl estradiol), the generic version of Teva Pharmaceutical Industries Ltd.’s (TEVA) birth control drug, Seasonique.
According to IMS Health, Seasonique sales for the twelve months ended April 30, 2011 amounted to $110 million.
Also last month, Watson Pharma reported its financial results for the second quarter of fiscal 2011. The company’s second quarter earnings (excluding special items) of $1.01 per share surpassed the Zacks Consensus Estimate by a penny and the year-ago earnings by 18 cents. Higher revenues helped boost earnings. These results were inclusive of the results of Specifar Pharmaceuticals, which was acquired in May 2011.
Quarterly revenues jumped 24% to $1.08 billion, beating the Zacks Consensus Estimate of $992 million. Revenues increased mainly due to higher generic and branded drug sales.
Following the second quarter financial results, Watson Pharma increased its guidance for 2011. For 2011, the company now expects earnings (on an adjusted basis) in the range of $4.25 to $4.50 per share (previous guidance: $3.95 – $4.20) on revenues of about $4.5 billion (revised from earlier forecast of $4.2 billion).
Our Take
We currently have an Outperform recommendation on Watson Pharma. The stock carries Zacks #2 Rank (Buy rating) in the short-run.
We expect the new generic product launches over regular intervals to help drive the company’s Global Generic segment’s sales. Additionally, Specifar Pharmaceuticals will contribute to the company’s earnings through its commercial presence in key European markets.
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