Specialty pharmaceutical maker Actavis (formerly Watson) isn't content with leading a generic life. Although #3 in the global generics market behind Teva Pharmaceutical and Sandoz, Actavis is also expanding the number of branded drugs in its portfolio for better diversity. The company markets more than 750 generic products globally through operations in 60 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. The company took its current name, Actavis, and the #3 market spot in generics after Watson Pharmaceuticals acquired privately-held Swiss-based Actavis Group in 2012.
As a combined entity, Actavis' 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. Actavis' 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.
Actavis has global and US headquarters in Parsippany, New Jersey, and international headquarters in Zug, Switzerland. It maintains more than 30 manufacturing facilities and 18 R&D centers. The US contributed more than 80% of Actavis' sales in 2012, up from about 90% in 2011 due to international acquisitions completed in recent years.
The company divides its business into three main divisions. Actavis Pharma focuses on developing and manufacturing generics and accounts for three-fourths of revenues. The division makes 250 generic product lines which include 750 individual molecules in about 1,700 dosage forms. The Actavis Specialty Brands make and sells about 40 branded pharmaceutical products, including patent-protected offerings and off-patent products that are trademarked.
The Anda Distribution division -- accounting for more than 15% of revenues -- focuses on distributing generic, brand, and OTC products from more than 260 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 11,000 products. Anda is the fourth-largest generics product distributor in the US.
In addition to these businesses, Actavis' has a third-party business, Medis, which provides pharmaceutical development services and outlicenses more than 200 products to customers in more than 100 countries.
Sales and Marketing
The Actavis Pharma and Actavis Specialty Brands division sell to customers via wholesalers, retailers, and independent distributors, as well as directly to pharmacies, grocery stores, hospitals, clinics, and government agencies. Actavis' largest customers in 2012 were Walgreen (16% of revenues) and McKesson (14%).
Actavis reported a 29% increase in revenues to $5.9 billion in 2012 due to growth in all of its segments. The core generics (Actavis Pharma) segment was boosted 32% by acquisitions and by new product sales growth including versions of Concerta (ADHD) and Lipitor (cholesterol) introduced in 2011. The company also saw strong growth in net income, which rose more than 40% to $261 million in fiscal 2011.
Even before the Actavis/Watson merger, the company saw consistent revenue growth over the past decade from new products, acquisitions, and strategic alliances. Net income levels have fluctuated, however, rising in 2011 after two years of declining profits. Net income in 2012 dropped 63% to $97 million due to higher expenses included acquisition, integration, and restructuring costs.
Actavis' 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), Actavis 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 Actavis will continue to pursue. The company announced a collaboration agreement with Amgen in 2011 to develop and commercialize several oncology antibody biosimilar drugs, agreeing at that time agreed to contribute $400 million in co-development costs. In 2012 the company also formed a partnership with Bioton to develop new insulin products.
To focus on core medicine fields, in 2012 Actavis sold its Rugby-branded OTC product line to Harvard Drug Group for some $117 million. The company retained certain other OTC operations, including store-branded and nicotine gum product lines. In addition, in 2012 Actavis sold its stake in a Latin American generic drug venture (Moksha8) for some $47 million, while at the same time expanding a distribution agreement with Moksha8 for several of its products.
Mergers and Acquisitions
The mega €4.25 billion (about $5.5 billion) acquisition of Actavis Group was the largest purchase in Watson Pharmaceuticals' history and essentially was a culmination of its efforts to become a leading global player in generics. The deal was completed in October 2012, and Watson Pharmaceuticals changed its name to Activis, Inc. in January 2013. The transaction combined two growing, profitable companies into an even more formidable entity, whose strong cash flows are expected to enable rapid pay down of debt. Combined, the company boasts expanded manufacturing and supply chain capabilities and enhanced expertise in developing solid dosage, modified release, patch, gel, liquid, semi-solid, and injectable products.
While the dust was barely settled from the Watson/Actavis Group transaction, Actavis struck another large deal to acquire pharma company Warner Chilcott for some $5 billion in May 2013 (quelling rumors that it might be acquired itself by a larger drugmaker). The purchase of Warner Chilcott will expand Actavis' specialty pharmaceutical products and give it a better competitive edge in the niche drug markets of women's health and urology. It will also expand Actavis' operations into the new niche fields of gastroenterology and dermatology. An added benefit of the deal lies in Actavis' plan to reincorporate in Ireland (where Warner Chilcott is based) following the deal; the headquarters move will lower Actavis' tax rate.
And the hits just kept coming - in 2014 Actavis purchased drug maker Forest Laboratories for about $28 billion. The move creates a global drug powerhouse with branded and generic medications and a strong development pipeline expected to generate revenues of around $15 billion. Later that year, Actavis agreed to acquire Allergan (maker of Botox and other aesthetic products) in a $66 billion deal. With that transaction, the company will become 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 s and some 85 products under development, in a deal which will make Actavis the largest supplier of generics in the UK.