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Fourth Quarter 2007 Results
Net revenue for the fourth quarter 2007 was $627.3 million and net incomewas $38.4 million, or $0.34 per diluted share. Excluding special items asdetailed in the reconciliation table below, adjusted net income for the fourthquarter was $39.7 million, or $0.35 per diluted share. Adjusted EBITDA forthe fourth quarter 2007 was $136.9 million and cash flow from operations was$171.5 million. Cash and marketable securities were $216.4 million as ofDecember 31, 2007.
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Full Year 2007 Results
For the year ended December 31, 2007, total net revenue increased to$2.50 billion, as compared to $1.98 billion for 2006. The company recordednet income for 2007 of $141.0 million, or $1.27 per diluted share, compared toa net loss of $445.0 million, or a loss of $4.37 per diluted share, for 2006.On an adjusted basis, as detailed in the attached reconciliation table, netincome for 2007 was $152.0 million, or $1.37 per diluted share, as compared toadjusted net income of $111.0 million, or $1.02 per diluted share, for thesame period of 2006. Watson's 2006 results include two months of contributionfrom Andrx, which was acquired in November 2006. Adjusted EBITDA was$545.4 million and cash flow from operations was $427.2 million.
"We are pleased with the solid 2007 performance across all of Watson'sdivisions, particularly the progress made in expanding both our brand andgeneric product pipelines," began Paul Bisaro, Watson's President and ChiefExecutive Officer. "We filed 21 ANDAs with the FDA and completed pivotalstudies on two exciting new brand products: silodosin for BPH and oxybutynintopical gel for overactive bladder. In addition, in early 2008, FDA acceptedour NDA filing for silodosin."
"We continue to make strides on our strategic initiatives aimed atimproving our overall cost structure and enhancing operating efficiencies,"continued Mr. Bisaro. "In 2007, we achieved more than $30 million in costsavings which resulted from the closure and sale of our Puerto Rico andPhoenix manufacturing facilities, respectively. In addition, our Goa, Indiafacility received FDA clearance to manufacture products for the U.S. market,and we recently shipped our first product made at that facility to the UnitedStates. These efforts to improve operating efficiencies will continue in 2008and beyond, and include the decision to close our Carmel, New Yorkmanufacturing facilities by the end of 2010."
"We will continue to build on the momentum we have generated. Ourmanagement team and employees recognize the challenges and opportunities infront of us and are committed to drive earnings growth and maximizeshareholder value for years to come," concluded Mr. Bisaro.
Generic product sales for the fourth quarter of 2007 decreased$69.0 million to $343.7 million, primarily related to the loss of revenue fromoxycodone HCl controlled-release tablets. This was offset by new productlaunches in 2007 of bupropion hydrochloride extended-release 300mg, fentanyltransdermal patch, and Tilia(TM) Fe.
Generic other revenue increased $21.5 million to $30.2 million, dueprimarily to the addition of royalties from Sandoz's sales of metoprololsuccinate extended-release tablets 50mg and GlaxoSmithKline's sales ofWellbutrin XLP(R) 150mg.
Gross margin for the Generic segment increased from 29 percent in thefourth quarter 2006 to 40 percent in the fourth quarter 2007 due to theincrease in other revenue, an improvement in product mix and enhancedoperational efficiencies.
For the full year 2007, Generic segment product sales decreased 6 percentor $92.
