Watson Pharmaceuticals' CEO Discusses Q1 2012 Results - Earnings Call Transcript

Watson Pharmaceuticals (WPI)

Q1 2012 Earnings Call

April 30, 2012 8:30 am ET


Patricia L. Eisenhaur - Vice President of Investor Relations & Corporate Communications

Paul M. Bisaro - Chief Executive Officer, President and Director

R. Todd Joyce - Chief Financial Officer, Executive Vice President, Principal Accounting Officer, Corporate Controller and Treasurer

Albert Paonessa - Chief Operating Officer of Distribution Division and Executive Vice President of Distribution Division

George Frederick Wilkinson - Executive Vice President of Global Brands

Sigurdur Oli Olafsson - Executive Vice President of Global Generics


Michael Faerm - Crédit Suisse AG, Research Division

Randall Stanicky - Canaccord Genuity, Research Division

Timothy Chiang - CRT Capital Group LLC, Research Division

Corey B. Davis - Jefferies & Company, Inc., Research Division

Gregory B. Gilbert - BofA Merrill Lynch, Research Division

Christopher Schott - JP Morgan Chase & Co, Research Division

David G. Buck - The Buckingham Research Group Incorporated

Jami Rubin - Goldman Sachs Group Inc., Research Division

Frank H. Pinkerton - SunTrust Robinson Humphrey, Inc., Research Division

Gary Nachman - Susquehanna Financial Group, LLLP, Research Division

David Risinger - Morgan Stanley, Research Division

David Amsellem - Piper Jaffray Companies, Research Division

Marc Goodman - UBS Investment Bank, Research Division

Elliot Wilbur - Needham & Company, LLC, Research Division

Shibani Malhotra - RBC Capital Markets, LLC, Research Division

Ken Cacciatore - Cowen and Company, LLC, Research Division



Good morning. My name is Therese, and I will be your conference operator today. At this time I would like to welcome everyone to the Watson Pharmaceuticals First Quarter Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Patty Eisenhaur. Go ahead, Patty.

Patricia L. Eisenhaur

Thank you, Therese, and good morning, everyone. I'd like to welcome you to Watson's First Quarter 2012 Earnings Conference Call. Earlier this morning, Watson issued a press release reporting its earnings for the first quarter ended March 31, 2012. The press release is available on our website at www.watson.com. 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 our first quarter results; Todd Joyce, our Global Chief Financial Officer, will then provide additional details on the performance of our business segments, as well as our consolidated financial results for the quarter. Paul will conclude our presentation with an updated outlook for 2012. We'll then open the call up for questions and answers.

Also on the call and available during the Q&A are Siggi Olafsson, President of Global Generics; Fred Wilkinson, President of Global Brands and Biosimilars; Bob Stewart, President of Global Operations; Al Paonessa, Executive Vice President and Chief Operating Officer of our Anda Distribution Division; and David Buchen, our Global Chief Legal Officer.

Please note that today’s call is 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. Factors are detailed in our periodic public filings with the Securities and Exchange Commission, including but not limited to, Watson's Form 10-K for the period ended December 31, 2011.

With that, I'll turn the call over to Paul.

Paul M. Bisaro

Thanks, Patty, and good morning, everyone, and thank you for joining us this morning. Watson is off to a great start in the first quarter of 2012. Net revenues increased 74% to $1.5 billion. Non-GAAP earnings per diluted share were up 84% to $1.64 per share. Adjusted EBITDA increased 70% to $367 million in the quarter. If you exclude the $0.52 contribution from the sales of generic LIPITOR this quarter, non-GAAP earnings per share were up 26% from last year. We also had a very busy quarter in terms of strategic global expansion of our company. We are aggressively integrating the Ascent business acquired in late January, which made us the fifth largest generic company in Australia and the leader in Southeast Asia. The integration is progressing very well and many financial and IT-related items have already been completed. Last Wednesday, we announced the further expansion of our Global Generics business with the agreement to acquire Actavis. When completed, this acquisition will transform Watson. We will more than double our reach outside the U.S. and we will have access to new markets with exciting growth trajectories. In addition, the acquisition will expand our range of product offerings in all markets into semi solids, liquids and injectables. We are pleased to have been able to capitalize on this opportunity and look forward to working with Actavis leadership to complete this transaction and then move rapidly to execute the integration of the combined company.

Among other highlights in our generic -- our Global Generics business, we saw continued strong U.S. sales of generic Concerta, and we launched 3 new products in the first quarter, including generic versions of LOVENOX, YAZ and Prometrium and in the second quarter, launched generic VANCOCIN.

All of our key international markets experienced growth in the quarter, including U.K., France, Greece and Australia. We continued to expand our pipeline globally with 6 new patent challenges in the U.S. and 28 new product submissions globally. In our Global Brands business, we had strong sales of key promoted products including RAPAFLO, Generess Fe, Gelnique and CRINONE. We also launched last week Gelnique 3% pump. The new product is available in a convenient metered-dose pump that is shown to be effective and safe, and a safe treatment for OAB. We initiated a Phase III U.S. trial of Esmya for the treatment of anemia associated with uterine fibroids. The trial is expected to be completed by early 2013, and we also plan to submit the NDS for the product in Canada by mid-2012.

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