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First Quarter 2008 Results
Net revenue for the first quarter 2008 was $626.9 million and net incomewas $50.6 million, or $0.45 per diluted share. Net income for the firstquarter 2008 included charges related to the Company's Global Supply ChainInitiative, a milestone payment, debt repurchase costs, and a gain on the saleof securities. Excluding special items as detailed in the reconciliationtable below, adjusted net income for the first quarter was $62.1 million, or$0.55 per diluted share. Adjusted EBITDA for the first quarter 2008 was$149.3 million and cash flow from operations was $66.6 million. Cash andmarketable securities were $186.7 million as of March 31, 2008.
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"As we enter the year, we are pleased to report strong financial resultsand tremendous progress made on our 2008 goals," stated Paul Bisaro, Watson'sPresident and Chief Executive Officer. "The successful resolution of ourOfficial Action Indicated status at our Davie, Florida manufacturing facilityannounced earlier this week will provide us with important new productopportunities and allow us to transfer new products to the site, as part ofour ongoing Global Supply Chain Initiative."
"Our Brand division posted solid results and continues to move our urologypipeline products, silodosin and topical oxybutynin gel, closer to market. Asthe recent approval of the Trelstar(R) MixJect(TM) delivery systemdemonstrates, we look to offer products and services that improve the qualityof patients' lives, and meet the needs of physicians who specialize in thediagnosis, management, and treatment of urological disorders. While wecontinue to believe that fiscal 2008 will be a transitional year for Watson,we remain focused in our efforts to drive earnings growth and shareholdervalue," concluded Mr. Bisaro.
Generic product sales for the first quarter of 2008 decreased $69.0million to $342.5 million, primarily related to the loss of revenue fromoxycodone HCl extended-release tablets following the termination of adistribution agreement. This was partially offset by the addition of newdistributed products, such as alendronate sodium.
Generic other revenue increased $11.1 million to $24.3 million, dueprimarily to the addition of royalties from Sandoz's sales of metoprololsuccinate extended-release tablets 50mg.
Gross margin for the Generic segment increased from 36 percent in thefirst quarter 2007 to 37 percent in the first quarter 2008 due to the increasein other revenue and an improvement in product mix. Cost of sales for thefirst quarter includes approximately $13 million in costs related to Watson'sGlobal Supply Chain Initiative, which includes the planned closure of itsCarmel, New York facilities.
Brand product sales for the first quarter of 2008 increased 9 percent or$8.4 million to $99.0 million, primarily due to higher sales of Ferrlecit(R)and Trelstar(R), slightly offset by a decline in sales of non-promotedproducts. Brand other revenue increased $5.4 million to $16.3 million, dueprimarily to increased revenue from the Company's licensing arrangements.
Gross margin for the Brand segment increased from 75 percent in the firstquarter 2007 to 76 percent in the first quarter 2008, due to the increase inother revenue.
During the first quarter 2008, Watson's New Drug Application (NDA) forsilodosin, a new chemical entity under development for the treatment of thesigns and symptoms of benign prostatic hyperplasia, was accepted for filing byFDA. Watson expects to have an NDA on file with FDA for its topical gelformulation of oxybutynin for overactive bladder by mid 2008. In the secondhalf of 2008, Watson expects to submit a supplemental NDA for its six-m
