Watson Steps Up Offshore Capability To Face Competition From International Firms
This article was originally published in The Pink Sheet Daily
Executive Summary
Product development and manufacturing capability in India, China will help Watson compete amid growing price pressures, firm says.
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Watson is aiming to improve cost efficiency within its generic unit by establishing offshore product development and manufacturing capability, CEO Allen Chao said during the company's fourth quarter and year-end earnings presentation Feb. 16. The effort will help Watson counter growing pricing pressure on generic drugs, fueled in part by international competition from firms in regions like India and China, the chief exec said. "As a generic competitive business, longer-term we cannot ignore the offshore competitors," Chao said. "We are establishing our own offshore capabilities to be able to have global options, flexibility." Watson plans to establish a generic product development center in India in 2006, building on strategic steps already taken. For example, Watson recently entered into an agreement to acquire an Indian company that owns an FDA-approved active pharmaceutical manufacturing facility, Chao said. In addition, during Q4, Watson acquired a manufacturing facility in Goa, India that will produce solid dosage generic products for the U.S. market and increased its investment in an FDA-approved Chinese/Taiwanese company specializing in development and manufacture of APIs, the company said. "I believe China will be a little slower. They have very strong API today, but it will probably be a few more years," Chao stated. "However, it will be here, so we are setting ourselves, getting ready to beat the competition." Sales of Watson's generic drugs were roughly flat in 2005 at $1.24 bil. Consolidated sales also were approximately flat at $1.65 bil. Net income fell 7.9% to $138.2 mil., including a $25.1 mil. asset impairment charge related to the discontinuation of operations at the company's Puerto Rico facility. As of Dec. 31, Watson had 47 ANDAs on file, representing more than $35 bil. in annual brand product sales. Of those, nine have received tentative approval and seven are potential first-to-file or shared exclusivity opportunities, Watson said. The company plans to submit over 20 ANDAs to FDA in 2006. -Jessica Merrill |