Watson Pharmaceuticals Inc., the generic-drug maker that bought Andrx Corp. for $1.9 billion last week, said third-quarter profit dropped 12 percent as prices fell for its copies of brand-name medicines.
Net income dropped to $34.4 million, or 31 cents a share, from $39.1 million, or 35 cents, a year earlier, Watson, based in Corona, Calif., said Tuesday in a statement. Revenue rose 7.4 percent to $440.5 million. At the same time, greater pricing pressure helped drive up the cost of sales 22 percent.
Watson said its profit margin for generic drugs fell to 32 percent from 41 percent a year earlier. The company derives about three-fourths of its revenue from cheaper copies of birth-control pills, painkillers and other drugs, and it has struggled to introduce new products as more makers of generic drugs compete for its customers.
"The generic picture overall doesn't look that great, but it's been a work in progress for Watson," Mark Taylor, an analyst at Roth Capital Partners in Newport Beach, Calif., said Tuesday in a telephone interview. "The focus now should be on the merger between Watson and Andrx and the opportunities for Watson to realize the savings."