Markets & Finance

Merrill Ups Watson Pharmaceuticals to 'Buy'

Merrill Lynch upgraded Watson Pharmaceuticals (WPI) to buy from neutral, and set a $40 target.

Analyst Greg Gilbert says he thinks investors are looking for ideas for new money, and are particularly focused on stocks that have reasonable valuations. Based on an improved fundamental outlook and compelling valuation, he thinks Watson is poised for a run.

Two key concerns had been the lack of a chief financial officer, and a relatively small generic pipeline relative to Watson's size. On Monday, Watson announced it was hiring a new CFO, and expanded its deal with Cipla, which greatly expanded Watson's generic pipeline.

Gilbert says the company now has 20 abbreviated new-drug applications, and 60 generic products under development. He sees $1.81 2003 earnings per share, and $2.00 for 2004.

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