Watson Pharmaceuticals (WPI)

Anokhee Mepani Piyusha Eluri Rajiv Shah Kyle Millar-Corliss

Agenda
Agenda Arrow Acquisition Healthcare Bill Acquisition of Production Facilities Risks Valuation

Company & Industry

Healthcare Bill

Arrow Acquisition

Production Capabilities

Eden Acquisition

Risks

Company Overview
Global Pharmaceutical Company
3rd largest generics drug manufacturer

Segments:
Global Generics Global Brands Anda Distribution

Company & Industry

Healthcare Bill

Arrow Acquisition

Production Capabilities

Eden Acquisition

Risks

Contribution Margin by Segment

5% 23%

Generic Brand Distribution

72%

Company & Industry

Healthcare Bill

Arrow Acquisition

Production Capabilities

Eden Acquisition

Risks

Global Generics

Plus additional growth of generics

Company & Industry Healthcare Bill Arrow Acquisition Production Capabilities Eden Acquisition

Risks

Global Brands - Pipeline

Company & Industry

Healthcare Bill

Arrow Acquisition

Production Capabilities

Eden Acquisition

Risks

Industry Overview
GENERIC BRAND

- 1984: Hatch-Waxman Act opened up industry

- Not patent-protected

- Same ingredients required by FDA

- Patent-protected products
- Generally more specialized drugs - Smaller market, bigger companies

- 69% of all prescriptions

- No marketing and development costs

Company & Industry

Healthcare Bill

Arrow Acquisition

Production Capabilities

Eden Acquisition

Risks

Top Generic Competitors

Watson Pharmaceutical Teva Pharmaceutical Mylan Pharmaceutical Novartis

Company & Industry

Healthcare Bill

Arrow Acquisition

Production Capabilities

Eden Acquisition

Risks

Industry Growth
Between 2009 and 2014: - U.S. generic drug market projected to increase 9.7% - Global market projected to grow 9%

Company & Industry

Healthcare Bill

Arrow Acquisition

Production Capabilities

Eden Acquisition

Risks

Healthcare Bill
Health-insurers and governments encourage patients to use lower cost drugs Generic drug-makers encouraged to create more drugs mimicking brand drugs

Company & Industry

Healthcare Bill

Arrow Acquisition

Production Capabilities

Eden Acquisition

Risks

Healthcare Bill
Government subsidizes Generics Generic drugs in direct competition with brand drugs Only 12-year patents will be issued to brandname drugs

Company & Industry

Healthcare Bill

Arrow Acquisition

Production Capabilities

Eden Acquisition

Risks

Arrow Acquisition
Increased production capabilities from 17 billion doses per year to 20 billion Contract to sell generic Lipitor Acquired 36% of Eden Biodesign through Arrow
Acquired remaining 64% early this year

Company & Industry

Healthcare Bill

Arrow Acquisition

Production Capabilities

Eden Acquisition

Risks

Arrow Acquisition
Watson Cobalt

Arrow Generics

Arrow Generiques

Company & Industry

Healthcare Bill

Arrow Acquisition

Production Capabilities

Eden Acquisition

Risks

Production Capabilities
Production Capabilities
Arrow provided key facility in Malta Lower labor cost, EU access, Lower Taxes Applying to distribute products in the EU, using Cobalt, Arrow Generics, and Arrow Generiques to do so quickly

Company & Industry

Healthcare Bill

Arrow Acquisition

Production Capabilities

Eden Acquisition

Risks

Company & Industry

Healthcare Bill

Arrow Acquisition

Production Capabilities

Eden Acquisition

Risks

Acquisition of Eden Biodesign

36% of Eden through Arrow Acquisition January 29, 2010
Completed acquisition for ~ $15 million Incorporated into Global Brands Division

Company & Industry

Healthcare Bill

Arrow Acquisition

Production Capabilities

Eden Acquisition

Risks

Eden Biodesigns
Globally-integrated biopharmaceutical company offering:
Consultancy Biopharmaceutical design Process development, and cGMP manufacturing services

Much more than a traditional CMO

Company & Industry

Healthcare Bill

Arrow Acquisition

Production Capabilities

Eden Acquisition

Risks

Diversification Through Eden

Will Continue Contract Services Model Proven biopharmaceutical development and manufacturing capabilities

Company & Industry

Healthcare Bill

Arrow Acquisition

Production Capabilities

Eden Acquisition

Risks

Risks
Generic Competition
Porters Five Forces Analysis

Patent Encroachment Lawsuits Rejection of New Products in Pipeline

FDA Regulation

Debt Maturities

Company & Industry

Healthcare Bill

Arrow Acquisition

Production Capabilities

Eden Acquisition

Risks

Relative Valuation

Company & Industry

Healthcare Bill

Arrow Acquisition

Production Capabilities

Eden Acquisition

Risks

Appendix

Company & Industry

Healthcare Bill

Arrow Acquisition

Production Capabilities

Eden Acquisition

Risks

Appendix

Company & Industry

Healthcare Bill

Arrow Acquisition

Production Capabilities

Eden Acquisition

Risks