Watson profit up on lower costs

Watson Pharmaceuticals Inc. reported a 66% gain in second-quarter profit on lower expenses as it struggled to expand sales in the increasingly competitive U.S. market for generic drugs.

Net income rose to $60.3 million, or 53 cents a share, from $36.4 million, or 33 cents a share, a year earlier, the Corona-based company said. Revenue rose 3% to $622.6 million, trailing the $627.7-million average estimate of analysts surveyed by Bloomberg.

Watson has been focusing on U.S. sales as rivals Mylan Inc. and Barr Pharmaceuticals Inc. fund growth with acquisitions in other countries. Generics already account for 65% of prescriptions dispensed in the U.S., and analysts say drug makers will need to reach faster-growing and more profitable markets overseas to survive.

“Watson is still too highly exposed to the U.S. generics market,” said Corey Davis, an analyst at Natixis Bleichroeder in New York.

Watson shares fell 60 cents to $29.20. The company raised its forecast for full-year net income by 20 cents to the range of $1.90 to $2 a share and reiterated its estimate of $2.5 billion in annual revenue.

Revenue from generic drugs rose 9% to $376.6 million in the quarter. Revenue from brand-name drugs increased 7% to $118 million, and the distribution business lost 13% to $128 million because of fewer introductions of new products.