Specialty pharmaceutical maker Allergan (formerly Actavis) isn't content with leading a generic life. Although #3 in the global generics market behind Teva Pharmaceutical and Sandoz, Allergan is also expanding the number of branded drugs in its portfolio for better diversity. The company markets more than 1,000 generic products globally through operations in 100 countries, including treatments for central nervous system and cardiovascular ailments. The brand-name drugs in its portfolio are principally geared at urology and women's health. In 2015 Allergan agreed to a $160 billion merger with US-based Pfizer. That deal, the largest ever health care merger, will create the world's largest drug maker.
The firm changed its name from Actavis to Allergan three months after acquiring Botox-maker Allergan in 2015. Its US and Canada generics operations continue to operate under the Actavis name.
In 2014, after acquiring Forest Laboratories, then-named Actavis reorganized its business structure. Its new North American Brands segment is responsible for patent-protected and off-patent products sold in North America. The North American Generics and International segment sells and markets off-patent products in North America and all products, including over-the-counter products in international markets; it also includes the third-party business, Medis, which provides pharmaceutical development services and outlicenses more than 200 products to customers in more than 100 countries.
The Anda Distribution division -- accounting for about 15% of revenues -- focuses on distributing generic, brand, and OTC products from more than 350 drug manufacturers to pharmacies, hospitals, doctors' offices, and other health care providers. Distribution is handled by subsidiary Anda, Inc., and its divisions, which stock more than 12,000 products. Anda is the fourth-largest generics product distributor in the US.
The Actavis + Allergan Brand portfolio includes franchises in the dermatology and aesthetics, central nervous system, eye care, women's health and urology, gastrointestinal and Cystic Fibrosis, cardiovascular, and infectious disease therapeutic areas.
As a combined entity, Allergan's global generics business holds leadership positions in North America, Europe, and Asia/Pacific. It holds top 10 positions in more than 30 markets, including the US, Canada, the UK, Russia, and Australia. Among other strong growth regions are South America, South Africa, and Southeast Asia. Allergan's branded drugs business is a leader in urology and women's health in the US and is expanding into Canada, Latin America, and markets outside of the Americas.
Allergan has global and US headquarters in Parsippany, New Jersey, and international headquarters in Dublin, Ireland. It maintains about 25 manufacturing facilities and 15 R&D centers. The US contributed about 50% of the company's sales in 2014, down from about 90% in 2011 due to international acquisitions completed in recent years.
Sales and Marketing
The group sells to customers via wholesalers, retailers, and independent distributors, as well as directly to pharmacies, grocery stores, hospitals, clinics, and government agencies. Its largest customers in 2014 were Amerisource Bergen (28% of revenues), McKesson (21%), and Cardinal Health (13%).
The Anda Distribution segment distributes to independent pharmacies, alternate care providers, and pharmacy chains; it also sells some products to physicians' offices.
The company took the #3 market spot in generics (and the Actavis name) after Watson Pharmaceuticals acquired privately held Swiss-based Actavis Group in 2012. Even before the Actavis/Watson merger, the company saw consistent revenue growth over the past decade from new products, acquisitions, and strategic alliances. The company reported a 51% increase in revenues to $13.1 billion in 2013, primarily due to 335% growth in its North American Brands segment. Those operations grew largely as a result of the Forest Laboratories and Warner Chilcott acquisitions. The other segments also saw growth: Anda Distribution rose 51% (due to higher earnings in the US related to higher volume and sales prices) and North American Generics and International rose 5%.
Although revenue has been rising year over year, net income has been on the decline since 2012. The company's net loss increased by 117% to $1.6 billion in 2014 due to higher operating expenses, including expenses related to the Forest Laboratories purchase.
Cash flow from operations rose 88% that year to $2.2 billion due to numerous factors including a change in accounts payable and accrued expenses.
Allergan's strategy is centered on its desire to push expansion of the generics business worldwide and to buy and develop branded drugs that provide higher profit margins. In addition to internal development of new products (both in generics and branded fields), Allergan is seeking opportunities to acquire, license, or partner on additional products to keep its business healthy and diverse. Growth in certain overseas markets is looking particularly attractive, especially in emerging markets such as Russia.
Building a portfolio of biosimilars -- generic versions of biotechnology drugs -- is another area of potential growth that Allergan will continue to pursue.
The company has a strong commitment to R&D, on which it plans to spend some $1.7 billion in 2015, as it works to develop new products across all platforms. In 2015 it received US FDA approval for Saphris (youth bipolar disorder), Liletta (long-term birth control), Avycaz (abdominal infections and urinary tract infections), and Namzaric (dementia). It also received approval in Europe to market Xydalba for the treatment of acute bacterial skin and skin structure infections. The company also launched a generic version of Fougera's corticosteroid Temovate.
The firm has also shed some operations, mostly units acquired as part of its acquisition streak. In 2015 it sold the respiratory business that it gained through the Forest Laboratories purchase to AstraZeneca for some $600 million. In a similar move, it plans to sell certain of Forest's manufacturing plants and contract manufacturing agreements to private equity firm TPG. It sold a Lincolnton manufacturing facility to G&W NC Laboratories for $21.5 million in 2014.
In 2014 the firm opened a regional office in Singapore; that location became the company's headquarters for its Asia/Pacific and Africa regions.
Mergers and Acquisitions
While the dust was barely settled from the 2012 Watson/Actavis Group transaction, Actavis struck another large deal to acquire pharma company Warner Chilcott for some $5 billion in 2013 (quelling rumors that it might be acquired itself by a larger drugmaker). The purchase of Warner Chilcott expanded its specialty pharmaceutical products and gave it a better competitive edge in the niche drug markets of women's health and urology. It also expanded the company's operations into the new niche fields of gastroenterology and dermatology. An added benefit of the deal lied in Actavis' move to Ireland (where Warner Chilcott was based) following the deal; the headquarters move lowered Actavis' tax rate.
In late 2015, Allergan agreed to a $160 billion merger with Pfizer in a transaction that will move Pfizer's tax base from the US to Allergan's home in Ireland. The deal will create the world's largest drug maker, surpassing Johnson & Johnson. The US has implemented rules to prevent such inversion deals (and the taxes it expects to lose from these deals); although the rules have curtailed certain mergers, some firms (such as Pfizer) have moved forward with their plans anyway. If the deal is approved, Pfizer and Allergan may be required to sell off certain assets.
The company has been no stranger to large deals. In 2014 it purchased drug maker Forest Laboratories for about $28 billion. The move created a global drug powerhouse with branded and generic medications and a strong development pipeline expected to generate revenues of around $15 billion. The following year, Actavis acquired Allergan (maker of Botox and other aesthetic products) in a $66 billion deal. With that transaction, the company became a top 10 global pharmaceutical firm with revenues expected to top $23 billion in 2015. The firm also plans to buy Auden Mckenzie, maker of more than 650 generic medications and some 85 products under development, in a deal which will make Allergan the largest supplier of generics in the UK.
Other completed deals include the 2014 purchases of Durata Therapeutics ($724.5 million), Furiex Pharmaceuticals ($1.2 billion), and Silom Medical Company ($103 million). The company also purchased Tretin-X, a product formerly marketed by Onset Dermatologics, from Valeant Pharmarceuticals for $70 million.