WATSON PHARMACEUTICALS

Ticker Symbol: WPI

Exchange: NYSE

Market Price: $50.47

Mission Statement

Watson pursues a balanced strategy of generating revenue through a long-established off-patent business, joint venture income from Somerset, and revenue from a newly formed Somerset, and revenue from a newly formed branded pharmaceutical business. We will continue to seek and evaluate opportunities to acquire businesses, technologies and products to strengthen our presence in today's fast-changing pharmaceutical industry.

Company Overview

Watson Pharmaceuticals, Inc. is a developer, producer, marketer and distributer of both branded and off-patent pharmaceutical products.branded and off-patent pharmaceutical products.

Highly diversified with branded as well as generic products

Increased competitive advantage through joint ventures with potential competitors

Branded Products

Four specialty areas: Dermatology, Women’s Health Neurology/Psychology and Primary Care.

In January 1999, completed acquisition of In January 1999, completed acquisition of TheraTech, Inc.

In the Women’s Health specialty, Watson markets oral contraceptive and female hormone replacement products

Branded Products (continued)

In the Neurology/Psychology product line, Watson markets directly to physicians.

Off-Patent Pharmaceuticals

Watson markets over 90 off-patent prescription products in capsule or tablet form

Products include therapeutic and preventative Products include therapeutic and preventative agents generally sold by prescription or over-the-counter

Joint Ventures

Watson owns 50% stake in Somerset Pharmaceuticals, Inc.

Also owns a 50% interest in ANCIRCAlso owns a 50% interest in ANCIRC

Substantial investments in joint ventures with other pharmaceutical companies such as Mylan and Andryx

Industry

Solid unit-volume growth in medicines and a relatively favorable pricing environment

Generic drugs account for a larger percentage of Generic drugs account for a larger percentage of prescriptions than last year.

Competitors

Watson’s competitors include brand name manufacturers of pharmaceuticals

Although competitors have higher market Although competitors have higher market capitalization, Watson has more potential for growth due to its recent acquisitions and joint ventures.

Financial Highlights

For the fiscal year ended 12/31/00, total revenues rose 15% to $811.5 million.

Net income fell 7% to $170.7 million.

Financial Ratios

Profit Margin 21.0%

Price/Book 3.44

Price/Earnings 28.77Price/Earnings 28.77

Price/Sales 6.23

Return on Assets 8.34

Return on Equity 12.42

Financial Ratios (continued…)

Current Ratio 2.96

Quick Ratio 1.15

Total Debt to Equity 0.35Total Debt to Equity 0.35

Interest Coverage 0.34

Total Cash 237.6M

Beta 0.51

Stock Price History

Watson’s stock price has been increased steadily over the past five years and is likely to continue growing.

Year Stock Price

Price History

60

70

80

Year Stock Price

1996 24.75

1997 34.13

1998 63

1999 62.94

2000 71.5

0

10

20

30

40

50

60

1996 1997 1998 1999 2000

Year

Stock Price

Year

Stock Price

Risks

Low prices can work against generic-drug makers

Competition against Watson's older products could also hurt revenue. could also hurt revenue.

Rewards

The recent approval of its generic version of Bristol-Myers' BuSpar has not been priced into the stockthe stock

Bristol-Myers Squibb reported 1999 sales of BuSpar were $568 million.

Sales of the drug will have a more significant impact on the June quarter's earnings

Management

Allen Chao is a co-founder of Watson

and has been the CEO since 1985.

Ph.D. in Industrial and Physical Ph.D. in Industrial and Physical

Pharmacy from Purdue University in

1973.

Management (continued)

Michael E. Boxer has been the Senior

Vice President and Chief Financial

Officer since June 1999. Officer since June 1999.

Mr. Boxer received a M.B.A. from the

University of Chicago in 1991

Why buy Watson?

Strong Financial position

Competitive advantage in bio-pharmaceutical industry

Aggressive product development, while targeting Aggressive product development, while targeting difficult-to-product niche pharmaceutical products

Acquisitions and joint-ventures have helped Watson reach a strategic advantage that allows it to compete effectively in current healthcare environment

THE END