In November of last year, I wrote that Watson was a risk after a costly acquisition of Andrx and the increased competition in the generic drugs market.
One of my readers let me know the reasons he likes Watson now, and in doing some research, I think he is right on. Included in his reasoning: Not only has Watson resolved its patent infringement litigation with Glaxo, it also has a line-up of promising brand products entering Phase III trials with the FDA.
Goldman Sachs just this past week removed Watson from its "sell" list and moved the target price up to $30, citing the great distribution network gained through its acquisition of Andrx, its EPS targets being more in line with expectations, and its management efforts to reduce costs. Indeed, Watson plans to move over one half of its manufacturing to China and India in the next several years.
Based on these factors, I am pleased to update my earlier blog on Watson to a pick, rather than a pan.
Type of stock: A generic and brand drug developer, manufacturer and distributor that has promise in the upcoming years.
Price target: Currently trading at $26.57, the price hasn't changed much from November's blog. What has changed is my recommendation, from "hold off" to "buy!" Many signs now point to Watson reaching $40 by end of the year.