UPDATE 3-Watson 4th-qtr profit, 2009 view top expectations

* Q4 EPS ex-items of 53 cents vs 50 cent Street view

* Sees 2009 EPS $2.18-$2.28 vs $2.09 estimate

* 2 generic opportunities could further boost '09

* Shares rise 5.5 percent in morning trading (Adds analyst comments, company comments, updates shares)

NEW YORK, Feb 19 - Watson Pharmaceuticals Inc posted a higher-than-expected quarterly profit on Thursday, helped by increased sales of both its generic and brand medicines, and forecast 2009 profit that could far exceed current analyst expectations.

Shares of Watson, one of the largest U.S. generic drugmakers, rose 5.5 percent, extending its 2009 gains.

Watson's forecast amounts to earnings per share growth of 7 percent to 12 percent this year, with the possibility of stronger growth if the company can capitalize on two generic product opportunities.

"The fact that they're growing a healthy EPS growth rate...clearly is positive," said Louise Chen, an analyst with Collins Stewart.

Chen noted Watson's 2009 outlook compares favorably to the 6 percent to 12 percent growth expected by Teva Pharmaceutical Industries Ltd, the world's largest generic drugmaker.

Watson shares have risen 15 percent this year, compared to a 12.5 percent drop for the S&P 500 index .SPX>, as the weak economy shines a favorable light on makers of low-cost generic drugs.

Watson's fourth-quarter net income rose to $56.4 million, or 50 cents per share, from $38.4 million, or 34 cents per share, a year earlier.

Excluding items, earnings of 53 cents per share were 3 cents above analysts' average estimate, according to Reuters Estimates.

Revenue rose 3 percent to $645.2 million, about $12 million above analyst expectations.

Sales of Watson's generic products rose 6 percent to $365 million, helped by new product launches.

Its brand name product sales rose 9 percent to $102.3 million. Watson recently won approval for two urology medicines it hopes will significantly boost its brand business.

Watson forecast 2009 earnings, excluding items, of $2.18 to $2.28 per share. Analysts are looking for $2.09.

Watson's forecast includes a modest contribution from two generic drugs, for which it stands to benefit because rivals are struggling with supply disruptions.

The California-based company said it is likely to "significantly exceed" its forecast should the competitive landscape for those products remain similar and should Watson gain timely approval for one of the products, a generic version of AstraZeneca Plc's heart drug Toprol XL.

Watson forecast net revenue of about $2.65 billion for this year, a 4 percent increase over 2008.

CEO Paul Bisaro said the company expects sales from newly launched brand products to offset declines from older brand drugs, including its Ferrlecit iron deficiency treatment.

Investors are concerned Watson will be unable to compensate for losing Ferrlecit sales next year, should a partnership with Sanofi-Aventis SA come to an end.

The fate of Ferrlecit is keeping a lid on the shares as is the possibility that Watson could do a major international acquisition that hurts near-term earnings, Chen said.

Watson has consistently said it is looking for a deal that would give it a marketing footprint outside the United States. Chief Financial Officer Mark Durand told analysts on a conference call the company has "significant" resources available to be opportunistic with acquisitions.

Watson shares rose $1.56 to $30.49 in late morning trading on the New York Stock Exchange.