With Allergan buy, Actavis could achieve its branded-drug ambitions

Actavis Chairman Paul Bisaro--Courtesy of Actavis

As Big Pharma's big patent cliff took hold a few years ago, generics makers enjoyed the sales boost of one newly off-patent blockbuster after another. But savvy execs knew that the unprecedented party would end soon enough--and generics companies would be facing a sort of patent cliff of their own.

What to do? Some companies, such as Mylan ($MYL), have diversified geographically and expanded their portfolios of generics, with a few brands thrown in here and there. Actavis ($ACT) Chairman (then CEO) Paul Bisaro wanted to do the opposite: He set out to become a brand-generics hybrid, figuring that the higher prices and margins on branded meds would complement the low-margin, low-price, high-volume business of generics.

Hence Actavis' deal for Warner Chilcott last year and Forest Laboratories earlier this year. Both brought a chunk of branded drug revenue and some pipeline products. Warner's colitis drug Asacol, for instance, and its $800 million in revenue. Or Forest's new antidepressant Viibryd and blood pressure drug Bystolic.

They also brought the particular challenges of the branded drug business: expensive sales support, doc detailing, payer pitches--not to mention R&D. Handling all of that requires an entirely different skill set.

Unlike Bisaro, analysts weren't sure that Actavis would be able to deal. "Generics are all about being savvy with patent litigation and settlements," Canaccord Genuity analyst Corey Davis told Bloomberg at the time. "They are almost polar opposite business models."

Now, Actavis is reportedly eyeing a $60 billion deal for Allergan ($AGN). That would put the brand side of Actavis' business in the forefront. Allergan would bring along Botox, of course, the $2.2 billion wrinkle-fighter with a growing list of medical indications, too. Then there's a group of dermatology treatments, plus a portfolio of eye drugs.

Actavis has a new CEO, Brent Saunders, who joined the company with the Forest buy. He happens to have run Bausch + Lomb in the recent past, so he's full of experience in ophthalmology. Before that, he worked at Schering-Plough, so he has some Big Pharma expertise.

Actavis CEO Brent Saunders

With Bisaro as chairman and Saunders as CEO, Actavis could have the management power to play both sides of the pharma fence. Allergan is looking for a way to escape cost-cutter extraordinaire J. Michael Pearson and Valeant Pharmaceuticals ($VRX). It just might be a match.

Meanwhile, Actavis may jumping into the branded field in the biggest way, but it isn't the only generics company growing a branded business. India's Lupin has been scouting around for buyouts and licensing deals in the branded arena. Among the projects Mylan has taken on in emerging markets is biosimilars, with the launch of a Herceptin version in India with partner Biocon.

And then there's Teva ($TEVA), which bought Cephalon back in 2011 and is looking to use drug-delivery technology to create branded formulations of existing meds. It's also in biosimilars, having launched a version of Amgen's ($AMGN) Neulasta--which it calls Lonquex--in Europe. And so on.

- read the Reuters 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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