Fitch Revises Watson Pharmaceutical Inc.'s Outlook to Positive.

Business Editors

CHICAGO--(BUSINESS WIRE)--March 3, 2003

Fitch Ratings has affirmed the 'BBB-' senior unsecured and bank loan credit rating for Watson Pharmaceuticals, Inc. (Watson). The Rating Outlook has been changed to Positive from Negative.

Watson's strategic direction of focusing on branded drug products with less emphasis on the generic business continues to be a priority as demonstrated most recently by the February 26, 2003, FDA approval of the internally developed Oxytrol product, the oxybutynin transdermal patch for over-active bladder. Also, the October 2002 in-licensing agreement with Ortho McNeil (J&J) regarding three oral contraceptive products and the February 2003 acquisition of the Novartis pain management products - Fiorinal and Fioricet, also strengthens the branded drug business. Fitch anticipates that Watson will continue to strengthen the branded drug offering through internal research and development, product acquisitions and licensing agreements. The revenues and earnings stemming from branded (and branded generic) products offset volatility of revenues and earnings inherent with the generics business, improving the credit profile of the company.

Additionally, Fitch recognizes that Watson successfully addressed current good manufacturing practices (cGMP) compliance concerns with FDA, continued to reduce the debt load, and increased the breadth of the generic product portfolio. The Corona, CA and Phoenix, AZ (Steris) facilities remain under FDA consent decree, however the company has abided by the terms of the consent decrees, resulting in no product manufacturing delays, fines or shutdowns at the Corona facility and allowing products to be re-introduced through the Steris facility. The generic business had been bolstered by the approval of 8 abbreviated new drug application (ANDAs) in 2002, with future revenue growth to be derived from internal development, strategic alliances and licensing agreements. These developments support the change of the Rating Outlook to Positive from Negative.

Fitch concerns regard the volatility of revenues derived from the generics business (representing approximately 45% of total company revenues), the impact of aggressive competition in the oral contraceptive market, the risk of large acquisitions, and the effect to operations of continued consent decrees. Watson had cash and cash equivalents of approximately $230 million and a net debt position of approximately $200 million at the end of 2002. Leverage as measured by total debt-to-EBITDA was 1.1 times (x) and interest coverage as measured by EBITDA-to-interest incurred was 16.8x at December 31, 2002.