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Thursday, July 26, 2012

Flying and Soaring Watson Pharmaceuticals

I estimated and you beat it. That is what Watson Pharmaceuticals (NYSE: WPI) has done to me! WPI has always been my favorite healthcare pick alongside Novo Nordisk for a year. Strong fundamentals, eye-catching financials, robust pipeline and stupendous expansion- this is what WPI stands for to me. Today Watson released their 2Q 2012 earnings and they beat all estimates. Whether you give credit to generic Lipitor(r) or to generic Lovenox(r) or any of the above qualities I mentioned, Watson has been delivering.

Watson is one of the biggest and fastest growing generics manufacturing company in the world. As per above figure, its global brands business complements its rapidly expanding global generics and anda distribution businesses. 2Q 2012 results do not reflect the effects of recently passed Healthcare Reform Bill which provides rosy outlook for generics. Moreover, it does not reflect the recent acquisition of Actavis. If WPI gains the expected synergy from Actavis acquisition during 4Q 2012, it will prepare WPI to set 2012 annual revenues to beat the street estimates.

When I ran the valuation model few months ago, I got the price target of approximately $73. And WPI is above that right now. It was and it is a "strong buy" to me.

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