Dan;
Here's something new for you. SmithKline doesn't appear to want to give up market share. Does GUMM make product for Watson?
Best Regards,
Mad2
Copyright 1999 The Press Enterprise Co.
THE PRESS-ENTERPRISE (RIVERSIDE, CA.)
September 14, 1999, Tuesday , ALL ZONES
SECTION: BUSINESS; Pg. C01
LENGTH: 790 words
HEADLINE: Watson takes hit on Wall Street: Corona company's stock falls 10 percent on heels of a judge's order to halt sale of its new nicotine gum.
BYLINE: Leslie Berkman, The Press-Enterprise
BODY:
Watson Pharmaceuticals' stock value took a 10 percent hit
Monday, the first trading day after a federal judge ordered the
Corona firm to halt sales of its new generic nicotine gum
designed to help people stop smoking.
Watson shares closed at $ 33, down $ 3.75 from Friday's close and
dipping near the 52-week low of $ 30.50. The company's stock lost
about $ 367 million in value.
Analysts said the judge's order, which also includes a recall of
gum already shipped to retailers, produced a more negative reaction
by investors than is justified by the expected impact on Watson's
bottom line. On Monday, Watson projected the court ruling could
cost the company $ 10 million in the third quarter, including lost
sales and product launching costs. The company said the expected
loss equates to six or seven cents per share. In the second
quarter, Watson earned 47 cents a share on sales of $ 170 million.
Analysts said the psychological damage occurred on Wall Street
because the judge's granting of a preliminary injunction request by
SmithKline Beecham, which has alleged that Watson violated
copyright law, follows a deluge of other problems at the
Corona-based company. They include government complaints about
quality control at Watson's Corona manufacturing plant and chief
executive Allen Chao's surgery for stomach cancer.
"You have a company that at this stage couldn't afford any more
bad news," said Andrew Forman, an analyst with Warburg Dillon Reed.
Rather, he said, Watson's investors had greeted Watson's launching
of the industry's first generic smoking-cessation gum with relief,
hoping that it "would turn the company's prospects around. "
Instead, SmithKline Beecham immediately sued Watson, claiming
that the user's guide and audiotape Watson packaged with its gum
are nearly identical to those SmithKline Beecham sells with its
well-known branded product, Nicorette.
Watson has contended that the U.S. Food and Drug Administration
requires generic drug manufacturers to duplicate the original
branded pharmaceutical company's labeling, including product
instructions.
However, U.S. District Judge Denny Chin on Friday prohibited
Watson from selling or shipping its Nicotine Polacrilex Gum with a
user guide or audio cassette that is "substantially similar" to
SmithKline Beecham's.
Watson officials said that on Thursday, Chin received a letter
from Dr. Janet Woodcock, director of the FDA's Center for Drug
Evaluation and Research, that contradicted Watson's understanding
of FDA labeling requirements. "The letter simply said the labeling
need not be identical," said Robert C. Funsten, Watson senior vice
president and general counsel.
Watson spokesperson Sara Swee said the company found Woodcock's
letter "very perplexing. " Funsten and Swee said Watson will seek
clarification of the FDA's labeling requirements before deciding
what step to take.
A court hearing on the merits of the suit has not been scheduled,
Funsten said.
Watson officials say they remain determined to market their
nicotine gum again, although they can't be certain when that will
happen.
Elliot Wilbur, a pharmaceutical analyst at CIBC Oppenheimer, said
he "found it hard to fathom" SmithKline Beecham's success so far in
court. He contends the lawsuit was intended primarily to ward off
competition.
"It was a hail Mary pass by Smithkline and it paid off," Wilbur
said.
Wilbur said he believes the gum will generate, at best, sales of
around $ 200 million and profits of $ 150 million over its lifetime.
"If those are the profits at risk," he added, "the market clearly
overreacted. " He said also that the stock price dive presents " a
rather unique and substantial buy opportunity" for Watson stock. He
said he expects the stock to "rebound rather quickly . . . once the
market has a chance to sit back and realistically assess the impact
of this event. "
But Forman said the market reacted reasonably Monday to Watson's
failure to kick off marketing of a new product after "a dearth of
new product launches" this year. He expects Watson's stock "will
probably be languishing in the low 30s for the rest of the year,"
although he judges the company a good investment over the longer term.
Forman said the legal war between Watson and SmithKline Beecham
shows the clout that large pharmaceutical companies can wield over
smaller manufacturers of generic drugs.
"Time and time again we are reminded that the major
pharmaceutical industry has enormous power . . . They have the
resources that can in effect create entry barriers and extend the
life cycle of certain products beyond the technical patent
expiration," he said.
LANGUAGE: ENGLISH
LOAD-DATE: September 15, 1999
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