884629--3/1/2007--WATSON_PHARMACEUTICALS

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS Risks Related to Our Business Our operating results and financial condition may fluctuate. Our operating results and financial condition may fluctuate from quarter to quarter and year to year for a number of reasons. The following events or occurrences, among others, could cause fluctuations in our financial performance from period to period: As a result, we believe that period-to-period comparisons of our results of operations are not necessarily meaningful, and these comparisons should not be relied upon as an indication of future performance. The above factors may cause our operating results to fluctuate and adversely affect our financial condition and results of operations. If we are unable to successfully develop or commercialize new products, our operating results will suffer. Our brand pharmaceutical expenditures may not result in commercially successful products. Loss of revenues from Ferrlecit , a significant product, could have a material adverse effect on our results of operations, financial condition and cash flows. As a part of our business strategy, we plan to consider and, as appropriate, make acquisitions of technologies, products and businesses, which may result in us experiencing difficulties in integrating the technologies, products and businesses that we acquire and/or experiencing significant charges to earnings that may adversely affect our stock price and financial condition. These risks are particularly relevant with respect to our acquisition of Andrx. If we are unsuccessful in our joint ventures and other collaborations, our operating results could suffer. If we are unable to adequately protect our technology or enforce our patents, our business could suffer. If pharmaceutical companies are successful in limiting the use of generics through their legislative, regulatory and other efforts, our sales of generic products may suffer. If competitors are successful in limiting competition for certain generic products through their legislative, regulatory and litigation efforts, our sales of certain generic products may suffer. From time to time we may need to rely on licenses to proprietary technologies, which may be difficult or expensive to obtain. Third parties may claim that we infringe their proprietary rights and may prevent us from manufacturing and selling some of our products. Our distribution operations are highly dependent upon a primary courier service. Our distribution operations concentrate on generic products and therefore are subject to the risks of the generic industry. If we are unable to obtain sufficient supplies from key suppliers that in some cases may be the only source of finished products or raw materials, our ability to deliver our products to the market may be impeded. Our policies regarding returns, allowances and chargebacks, and marketing programs adopted by wholesalers, may reduce our revenues in future fiscal periods. Investigations of the calculation of average wholesale prices may adversely affect our business. The design, development, manufacture and sale of our products involves the risk of product liability claims by consumers and other third parties, and insurance against such potential claims is expensive and may be difficult to obtain. The loss of our key personnel could cause our business to suffer. Rising insurance costs could negatively impact profitability. Implementation of enterprise resource planning systems could cause business interruptions and negatively affect our profitability and cash flows. Significant balances of intangible assets, including product rights and goodwill acquired, are subject to impairment testing and may result in impairment charges, which will adversely affect our results of operations and financial condition. Issuance of debt or equity securities could materially change our operating results and financial condition. Our business could suffer as a result of manufacturing difficulties or delays. Unanticipated changes in our tax rates or exposure to additional income tax liabilities could affect our profitability. Extensive industry regulation has had, and will continue to have, a significant impact on our business, especially our product development, manufacturing and distribution capabilities. Federal regulation of arrangements between manufacturers of brand and generic products could adversely affect our business. Healthcare reform and a reduction in the reimbursement levels by governmental authorities, HMOs, MCOs or other third-party payors may adversely affect our business. The pharmaceutical industry is highly competitive.

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884629--3/1/2007--WATSON_PHARMACEUTICALS_INC