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`EX99.1 3 a041963_1ex99d1.htm EX99.1
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`
`NEWS RELEASE
`
`
`
`FOR IMMEDIATE RELEASE
`
`CONTACTS: Watson Pharmaceuticals, Inc.
`Patty Eisenhaur (Investors)
`(909) 4935611
`Chris Eso (Media)
`(909) 4934013
`
`WATSON PHARMACEUTICALS REPORTS EARNINGS
`PER SHARE OF $0.48 FOR FOURTH QUARTER 2003
`
`– Total Net Revenue Increases 23 Percent to Record $406 Million –
`
`– Company Provides Outlook for Growth in 2004 –
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`CORONA, CA – February 5, 2004 – Watson Pharmaceuticals, Inc. (NYSE: WPI), a leading specialty
`pharmaceutical company, today reported revenue and earnings for its fourth quarter and full year ended December 31, 2003.
`Net revenue increased 23 percent to a record $406.2 million, compared to $329.6 million for the fourth quarter ended
`December 31, 2002. Net income for the fourth quarter increased 23 percent to $52.9 million, compared to net income of
`$43.1 million for the same period of 2002. Earnings per diluted share increased 20 percent to $0.48, compared to $0.40 per
`diluted share for the prior year period.
`
`Net income for the fourth quarter 2003 includes a $10.3 million charge related to the expiration dating of a portion
`of inventory on hand of bupropion hydrochloride sustainedrelease tablets and approximately $20 million of impairment
`charges, primarily related to the Company’s interest in Halsey Drug Company, Inc., which includes a note receivable and
`warrants. Net income also includes approximately $20 million of gains realized from sales of securities during the period.
`
`Fourth Quarter 2003 Highlights
`
`Revenue from the Generic division increased 34 percent to $200.6 million for the fourth quarter of 2003, compared
`to $150.1 million in the prior year period, primarily as a result of the launches of our oxycodone acetaminophen and
`glipizide extendedrelease products, as well as growth in nicotine gum revenue.
`
`Revenue from branded products increased 15 percent to $194.9 million for the fourth quarter of
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`
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`2003, compared to $169.6 million in the prior year period, due to an increase in net revenues in our General Products and
`Women’s Health product lines, as a result of the May 2003 launch of our Oxytrol® product (oxybutynin transdermal system)
`and the December 2003 launch of TriNessa™, respectively.
`
`Other net revenue was $10.7 million in the fourth quarter of 2003, compared to $9.9 million in the fourth quarter of
`
`2002.
`
`
`Gross profit increased 30 percent to $227.8 million in the fourth quarter of 2003, compared to $175.4 million in the
`prior year period, primarily due to the launch of new Generic products and margin improvements in the Generic division.
`
`Research and development investment increased 28 percent to $27.5 million in the fourth quarter of 2003, compared
`to $21.5 million in the same period of 2002.
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`Selling, general and administrative expenses for the fourth quarter of 2003 increased 54 percent to $92.8 million,
`compared to $60.4 million in the prior year period. The increase was primarily due to increased sales and marketing
`expenses associated with the launch of Oxytrol®.
`
`As of December 31, 2003, cash and marketable securities were $573.7 million.
`
`Full Year Results
`
`For the year ended December 31, 2003, net revenues increased 19 percent to a record $1.46 billion, compared to
`$1.22 billion for the year ended December 31, 2002. Net income for 2003 increased 15 percent to $202.9 million, or $1.86
`per diluted share, compared to $175.8 million, or $1.64 per diluted share for 2002.
`
`"2003 was a tremendous year for Watson. We successfully launched over 25 products, achieved record revenues
`and solid 15 percent earnings growth," began Allen Chao, Ph.D., Watson’s Chairman and Chief Executive Officer. "In
`addition, we continued building our infrastructure and foundation for future growth, increasing our annual investment in
`research and development by 24 percent and significantly strengthening our sales and marketing presence. Late in the year,
`we launched three important products: glipizide extendedrelease and oxycodone acetaminophen and our newest oral
`contraceptive, TriNessaTM. These products, combined with more than 12 anticipated product launches, including bupropion
`150 mg. sustained release tablets, are expected to provide solid growth for Watson in 2004."
`
`2004 Financial Outlook
`
`
`Watson is providing financial forecasts for the first quarter and full year 2004 on a GAAP basis. These forecasts are
`based on the Company’s actual results for the fourth quarter 2003, current
`
`
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`prescription trends and future product launch forecasts. For the full year 2004, the Company estimates that total net revenue
`will increase to approximately $1.7 billion.
`
`
`
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`Net Revenue Estimates
`By Product Line
`For the Twelve Months Ended
`December 31, 2004
`
`Generic Division
`Brand Division
`Women’s Health
`General Products
`Nephrology
`Other
`Total estimated net revenues
`
`$
`
`860 million
`
`410 million
`$
`235 million
`$
`165 million
`$
`30 million
`$
`$ 1,700
`
`
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`Research and development investment is expected to increase to approximately $130 million, or 8 percent of
`revenues in 2004, primarily due to an increase in clinical study costs associated with Watson’s product pipeline. Selling,
`general and administrative expenses for 2004 are expected to be approximately 20 percent of revenues. Interest and other
`expense is expected to decline slightly in 2004 due to a reduction in interest expense associated with Watson’s 7 1/8 senior
`notes. Separately today, Watson is announcing that it is launching a tender offer to purchase up to $150 million of its 7 1/8
`percent senior notes. The expected interest savings associated with the senior note repurchase will be used to help fund
`Watson's increased investment in research and development.
`
`Earnings per diluted share is expected to increase to between $2.10 and $2.20. Excluded from the earnings per share
`forecast is the dilutive effect of approximately 14.4 million shares, related to the potential conversion of Watson’s $575
`million contingent convertible debentures.
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`First Quarter 2004 Outlook
`
`
`For the first quarter 2004, Watson estimates total net revenue will be approximately $410 million and earnings per
`diluted share will be between $0.49 and $0.51. This forecast does not include potential revenues from bupropion
`hydrochloride 150 mg. sustainedrelease tablets, should Watson be able to launch the product during the first quarter.
`
`Research and Development Outlook
`
`
`Watson currently has 22 Abbreviated New Drug Applications (ANDAs) on file with the Food and Drug
`Administration (FDA), representing brand sales of over $10 billion.
`
`
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`In Watson’s brand product pipeline, the Company expects to initiate a number of Phase 3 programs in 2004. Pivotal
`studies are anticipated on the Company’s transdermal contraceptive patch, its Ferrlecit® intravenous iron product for
`chemotherapy patients and a new sustainedrelease pain product. With regard to Watson’s topical antifungal nail patch, the
`Company previously announced that in one clinical trial, the product failed to demonstrate a statistically significant greater
`number of complete cures, as compared to placebo. After careful review and analysis of the study findings, the Company has
`decided to discontinue development of this product.
`
`"During 2003, we made tremendous progress on our product pipeline," continued Dr. Chao. "We have over 70
`generic products in development, representing over $40 billion in brand sales, and expect to submit over 20 new ANDAs
`with the FDA in 2004. In addition, we have several exciting opportunities in our brand pipeline moving into latestage
`development. These products will form the foundation from which we will grow for the long term."
`
`Webcast and Conference Call Details
`
`
`Watson is hosting a meeting with Wall Street investors and analysts today at 5:00 p.m. Eastern Standard Time to
`discuss fourth quarter and full year 2003 results and the Company’s outlook for 2004. The meeting will be webcast live, and
`can be accessed by logging onto http://www.talkpoint.com/viewer/starthere.asp?pres=104941 and selecting the investors
`meeting icon link displayed on the home page, as well as in the Investors section. A live audio broadcast of the meeting can
`also be accessed by dialing (877) 2517980, or from international locations, dial (706) 6431573. A replay of the webcast
`will also be available on Watson’s web site until February 19, 2004.
`
`About Watson Pharmaceuticals, Inc.
`
`
`Watson Pharmaceuticals, Inc., headquartered in Corona, California, is a leading specialty pharmaceutical company
`that develops, manufactures, markets, sells and distributes branded and generic pharmaceutical products. Watson pursues a
`growth strategy combining internal product development, strategic alliances and collaborations and synergistic acquisitions
`of products and businesses.
`
`
`For press releases and other company information, visit Watson Pharmaceuticals’ Web site at
`http://www.watsonpharm.com.
`
`ForwardLooking Statement
`
`
`Statements contained in this press release that refer to future events or other nonhistorical facts
`
`
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`about Watson are forwardlooking statements that reflect Watson’s current perspective of existing trends and information as
`of the date of this release. Except as expressly required by law, Watson disclaims any intent or obligation to update these
`forwardlooking statements. Actual results may differ materially from Watson’s current expectations depending upon a
`number of factors affecting Watson’s business. These factors include, among others, market acceptance of and continued
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`demand for Watson’s products, including the impact of competitive products and pricing; patents and other intellectual
`property rights held by competitors and other third parties; the inherent uncertainty associated with financial projections; the
`timing and success of the tender offer for the Company’s 7 1/8 percent senior notes, the inherent uncertainty of predicting the
`timing or outcome of product development efforts and regulatory egency approvals and actions; successful compliance with
`governmental regulations; and other risks and uncertainties detailed in Watson’s periodic public filings with the Securities
`and Exchange Commission, including but not limited to Watson’s Annual Report on Form 10K for the year ended
`December 31, 2002 and its Quarterly Report on Form 10Q for the quarters ended March 31, June 30, and September 30,
`2003.
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`
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`# # #
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`Watson Pharmaceuticals, Inc.
`Consolidated Statements of Income
`(Unaudited; in thousands, except per share amounts)
`
`The following table presents Watson’s results of operations for the three and twelve months ended December 31,
`2003 and 2002:
`
`
`
`
`
`Net revenues
`Cost of sales
`Gross profit
`
`Operating expenses:
`Research and development
`Selling, general and administrative
`Amortization
`Total operating expenses
`Operating income
`
`Other income (expense):
`Equity in earnings (losses) of joint ventures
`Gain (loss) on investments
`Gain on sale of subsidiary
`Loss on early extinguishment of debt
`Loss on asset impairment
`Gain on legal settlement
`Interest income
`Interest expense
`Other income (expense)
`Total other income (expense), net
`
`
`Income before income tax provision
`Provision for income taxes
`Net income
`
`Per share amounts:
`Diluted earnings per share
`Diluted weighted average shares outstanding
`
`
`
`
`
`
`
`
`
`
`
`$
`
`$
`
`$
`
`2003
`
`Three Months Ended
`December 31,
`
`406,164
`178,343
`227,821
`
`
`$
`
`2002
`
`
`329,574
`154,184
`175,390
`
`
`27,470
`92,781
`17,834
`138,085
`89,736
`
`
`(1,411)
`20,366
`—
`—
`(20,040)
`—
`1,219
`(6,907)
`(334)
`(7,107)
`
`82,629
`29,768
`52,861
`
`
`0.48
`110,200
`
`$
`
`$
`
`21,503
`60,412
`17,304
`99,219
`76,171
`
`
`9
`(2,335)
`—
`—
`—
`—
`1,378
`(5,391)
`(1,423)
`(7,762)
`
`68,409
`25,311
`43,098
`
`
`0.40
`107,559
`
`2003
`
`Twelve Months Ended
`December 31,
`
`1,457,722 $
`624,651
`833,071
`
`
`2002
`
`
`1,223,198
`571,882
`651,316
`
`
`102,083
`320,201
`71,874
`494,158
`338,913
`
`
`(1,274)
`25,876
`15,676
`(2,807)
`(35,905)
`—
`5,506
`(25,808)
`(2,065)
`(20,801)
`
`318,112
`115,248
`202,864 $
`
`
`1.86 $
`108,927
`
`82,178
`238,458
`61,316
`381,952
`269,364
`
`
`(3,750)
`(2,335)
`—
`—
`—
`32,000
`6,524
`(22,081)
`(632)
`9,726
`
`279,090
`103,294
`175,796
`
`
`1.64
`107,367
`
`$
`
`$
`
`$
`
`
`
`Watson reclassified its assets held for disposition for its Steris Laboratories, Inc. and Marsam Pharmaceuticals, Inc.
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`facilities to assets held and used as of January 1, 2003. The company reclassified assets in its Condensed Consolidated
`Balance Sheets and operating expenses in its Condensed Consolidated Statements of Income for the 2002 periods to conform
`to current period presentation, which had no affect on net income, total assets or retained earnings.
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`
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`The following table presents Watson’s Condensed Consolidated Balance Sheets as of December 31, 2003 and 2002:
`
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`Watson Pharmaceuticals, Inc.
`Condensed Consolidated Balance Sheets
`(Unaudited; in thousands)
`
`
`
`
`Assets
`
`
`Cash and cash equivalents
`Marketable securities
`Accounts receivable, net
`Inventories
`Other current assets
`Property and equipment, net
`Investments and other assets
`Product rights, net
`Goodwill
`Total assets
`
`
`Liabilities & Stockholders’ Equity
`
`
`Current liabilities
`Longterm debt
`Deferred income taxes and other liabilities
`Stockholders’ equity
`Total liabilities & stockholders’ equity
`
`December 31,
`2003
`
`December 31,
`2002
`
`
`
`
`
`
`553,353
`20,368
`211,174
`393,393
`145,201
`424,995
`77,226
`1,001,295
`455,595
`3,282,600
`
`
`
`338,685
`722,535
`164,034
`2,057,346
`3,282,600
`
`$
`
`$
`
`$
`
`$
`
`
`230,155
`42,649
`178,563
`348,773
`113,311
`304,667
`110,031
`889,027
`446,288
`2,663,464
`
`
`
`375,465
`331,877
`157,838
`1,798,284
`2,663,464
`
`
`
`
`
`
`
`
`
`$
`
`$
`
`$
`
`$
`
`
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