Not for sale, says new Actavis CEO. We're buying instead

Forest Laboratories CEO Brent Saunders

After serving as Bausch & Lomb's chief exec for just 5 months, incoming Actavis ($ACT) CEO Brent Saunders wants to keep his new job for awhile. So forget selling the company, fast-growing and attractive as it may be, Saunders is more interested in buying.

Here's the circumstantial evidence for an oncoming deal. Saunders stepped into Bausch & Lomb after a Warburg Pincus-led group took it private in 2007. He put some pizzazz back into the ophthalmology specialist--enough to entice Valeant Pharmaceuticals ($VRX) to buy it last year for $8.7 billion.

Next up: The CEO post at Forest Laboratories ($FRX), where he'd served for several years on the board. He'd hardly warmed his chair there before buying Aptalis Pharma to beef up his pipeline. And meanwhile, he and Actavis CEO Paul Bisaro started hatching their $25 billion merger, which is on the verge of closing.

Now, Bisaro will be chairman of the combined company, and Saunders is coming in as CEO. Rather than casting about for a buyout partner, Saunders faces the nitty-gritty job of combining Actavis and its vast generics network with Forest Laboratories' more specialized prescription-drugs operation. He'll also be eyeing deals for branded drugs, continuing Actavis' recent deal spree.

"This company is clearly not running any kind of sales process or even contemplating ever running one," Saunders told Bloomberg in an interview. "We have zero plans to sell."

As Bloomberg points out, the brand-and-generics hybrid isn't a common model. Though Big Pharma companies such as Novartis and Sanofi operate sizable generics businesses, their prescription drugs are much more valuable. The new Actavis is more evenly balanced.

So, growing the company comes with particular challenges. In the copycat drug business, margins are low and scale is key. R&D isn't as important as grabbing market access is. "Generics are all about being savvy with patent litigation and settlements," Canaccord Genuity analyst Corey Davis told the news service.

Branded drugs are something else altogether. Generic drugs don't need much marketing; price does that, as do relationships with distributors and pharmacies. Brands require expensive sales support, focused on physicians and payers--not to mention DTC advertising. "They are almost polar opposite business models," Davis told Bloomberg.

And these challenges are quite different from the challenges of turning a struggling company around, as Saunders has tended to do in the past. "You look at Actavis and it's neither a turnaround nor a situation where it needs to be rejuvenated," he told the news service. "Look at Paul's legacy. The real question is, as the CEO ... how do you follow that?"

- read the Bloomberg story

Special Reports: Pharma's top 10 M&A deals of 2013 - Actavis/Warner Chilcott | Top 10 generics makers by 2012 revenue - Actavis

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