Watson Pharmaceuticals Inc. (WPI) has grabbed a large share of the market for a generic version of AstraZeneca PLC's (AZN, AZN.LN) blood pressure treatment Toprol XL, and is seeking regulatory approval to launch additional dosages.

The summer launch of the drug prompted the Morristown, N.J., drug maker to boost its 2009 financial expectations in July, as manufacturing issues at competitors made the opportunity more lucrative. Generic medicine prices are generally very competitive, but the reduced competition in the market has provided higher pricing and, thus, better margins for Watson.

The company's stock has performed well; it is up 74% in the last year and recently traded at $41.53. Adam Greene, an analyst with RBC Capital Markets believes that the upside from Toprol still isn't adequately reflected in the stock.

"Although that may depend on competitive landscape and how long the party lasts," he said.

Watson's version of the 50 milligram pill, known generically as metoprolol, had a 50% market share of total prescriptions in December, according to SDI, a drug-data research firm, and the less popular 25 milligram pill had a 46% share.

Watson is seeking Food and Drug Administration approval of the 100 milligram and 200 milligram strengths as well. A company spokeswoman said the launch has gone as expected, but declined to comment on the agency's approval timeline.

"We expect metoprolol ER will continue to be significant contributor for us in 2010," she said. Watson will host an investor day on Thursday, where it is expected to provide 2010 financial projections.

In 2008, Sandoz, the generic unit of Novartis AG (NVS, NOVN.VX), recalled generic Toprol XL after the FDA sent a warning letter about a manufacturing facility. K-V Pharmaceutical Co. (KVA, KVB), another generic supplier, stopped manufacturing and shipping all of its products in early 2009 and recalled most products already on the market, including Toprol, as it deals with an FDA investigation.

Watson hasn't been the only beneficiary of the Toprol manufacturing problems. The drug was once a big U.S. seller for AstraZeneca, bringing in sales of $1.4 billion in 2006, the last year before it went generic. But the shortage reinvigorated sales for both the branded version and an authorized generic it makes for Par Pharmaceutical Cos. (PRX).

AstraZeneca cornered the market and U.S. sales of Toprol XL in the first half of 2009 rose to $474 million, compared with $295 million for all of 2008. AstraZeneca reports full-year results Jan. 28.

But that grip has been slipping since Watson launched, and the current market split won't last forever.

Greene notes that Par and Watson are "playing nice" and not waging a price battle in order to grab market share, as sometimes happens in generic drug markets.

That dynamic may shift if Sandoz or K-V Pharmaceutical are able to return to the market, although regulators have been very cautious when it comes to allowing generic Toprol on the market, as Watson knows from its previous and ongoing reviews.

"We hope to resume distribution, but it is too early to indicate a specific date given ongoing discussions and submission of a supplement to the FDA Office of Generic Drugs," said a Novartis spokeswoman. "The supplement was submitted in September 2009, and approval could take up to 12 months."

Officials from K-V weren't immediately available to comment.

-By Thomas Gryta, Dow Jones Newswires; 212-416-2169; thomas.gryta@dowjones.com
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