Watson Pharmaceuticals (WPI)
Q2 2010 Earnings Call
August 05, 2010 8:30 am ET
R. Joyce - Chief Financial Officer, Principal Accounting Officer, Senior Vice President, Corporate Controller and Treasurer
Patricia Eisenhaur - Vice President of Investor Relations & Corporate Communications
Paul Bisaro - Chief Executive Officer, President and Director
Thomas Russillo - Executive Vice President of Global Generics and President of the Global Generic Division
George Wilkinson - Executive Vice President of Global Brands
Ken Cacciatore - Cowen and Company, LLC
John Boris - Citigroup Inc
David Maris - Credit Agricole Securities (USA) Inc.
Ronny Gal - Bernstein Research
Richard Silver - Barclays Capital
Elliot Wilbur - Needham & Company, LLC
Michael Tong - Wells Fargo Securities, LLC
Timothy Chiang - CRT Capital Group LLC
Gregory Gilbert - BofA Merrill Lynch
Christopher Schott - JP Morgan Chase & Co
Randall Stanicky - Goldman Sachs Group Inc.
Marc Goodman - UBS Investment Bank
David Amsellem - Piper Jaffray Companies
Louise Chen - Collins Stewart LLC
Previous Statements by WPI
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Good morning. My name is Lori, and I will be your conference operator. At this time, I would like to welcome everyone to the Watson Pharmaceuticals Second Quarter 2010 Earnings Conference Call. [Operator Instructions] I'll now turn the call over to Patty Eisenhaur. Please go ahead.
Thank you, Lori, and good morning, everyone. I'd like to welcome you to Watson Second Quarter 2010 Earnings Conference Call. Earlier this morning, Watson issued a press release reporting its earnings for the second quarter and year-to-date period ended June 30, 2010. The press release is available on our website at www.watson.com and includes a reconciliation of our GAAP and adjusted financial results and forecasts. Additionally, we are conducting a live webcast of this call, which will also be available on our website after the call's conclusion.
With us on today's call are Paul Bisaro, our President and CEO, who will provide an overview of the second quarter within our Global Generics, Global Brands and Distribution Business segments. Todd Joyce, our Chief Financial Officer, will then provide additional details on the performance of our business segments, as well as our financial results for the quarter. Paul will conclude our presentation with our updated outlook for 2010. We'll then open the call up for questions and answers.
Also on the call and available during Q&A are Tom Russillo, Executive Vice President of our Global Generics division; Fred Wilkinson, Executive Vice President of Global Brands; Bob Stewart, Executive Vice President of Global Operations; and David Buchen, our General Counsel.
Please note that today’s call is a copyrighted material of Watson Pharmaceuticals Inc. and cannot be rebroadcast without the company’s expressed written consent. I’d also like to remind you that during the course of this call, management will make projections or other forward-looking remarks regarding future events or the future financial performance of the company. It's important to note that such statements about estimated or anticipated Watson results, prospects or other non-historical facts are forward-looking statements and reflect our current perspective of existing trends and information as of today’s date. Watson disclaims any intent or obligation to update these forward-looking statements, except as expressly required by law.
Actual results may differ materially from current expectations and projections, depending on a number of factors affecting the Watson business. These factors are detailed in our periodic public filings with the Securities and Exchange Commission, including but not limited to the Watson Form 10-K for the period ended December 31, 2009 and Form 10-Q for the period ended March 31, 2010.
With that, I'm pleased to turn the call over to Paul.
Thanks, Patty, and good morning, everyone, and thanks for joining us today. It was another strong quarter for Watson. Net revenue for the second quarter increased 29% to $875 million. Adjusted net income for the second quarter increased 22% to $103 million or $0.83 per share, and adjusted EBITDA for the second quarter increased 26% to $207 million.
Our performance during the quarter was driven by a number of factors, including significant generic product introductions in the U.S., particularly the 100 and 200 mg strengths of Metoprolol, continued strength in our Oral Contraceptive business, the addition of product sales from our international markets and adjusted gross margin growth of five percentage points in our Global Generics business helped round out a solid performance in our Global Generics segment.
In our Global Brand business, the highlights include greater than 25% sequential increase in prescriptions in the second quarter for RAPAFLO and greater than 20% increase in prescriptions for Gelnique. We expect both products will remain important contributors to our Global Brand business over the longer term.
We also saw the best segment contribution ever from our Anda Distribution business. It delivered a 24% increase in net revenues, driven by new product launches in the industry. While delivering strong financial results, we also invested in supporting future growth. Investment in R&D was up 49% to $44.6 million for generic R&D and up 36% to $17.2 million for brand R&D. We announced a significant number of patent challenges in the U.S., with six new Paragraph 4 filings in the quarter, bringing the number to 12 year-to-date.
We currently have over 110 ANDAs pending at the U.S. FDA and over 900 dossiers pending outside of the U.S. We also took significant steps to expand both our brand product portfolio and our brand product pipeline. TRELSTAR 6-month is our newest addition to the portfolio, and the recent launch has been met with enthusiasm due to its unique attributes, including low needle pain and no need for refrigeration.