Actavis

2012 Generics Revenue: $4.4 billion

Actavis wouldn't be where it is on this list if CEO Paul Bisaro didn't have such a passion for making deals. These days, when it comes to M&A, Actavis ($ACT) seems to have its fingers in every pie. The company can trace that back to 2011, when Watson Pharmaceuticals began putting together a string of small deals. Among them were Greek generics maker Specifar and India-based Strides Arcolab's Australian generics business, Ascent Pharmahealth.

But the crowning jewel was Actavis, which Watson grabbed for $5.9 billion in 2012 to become the world's third-largest generic drugmaker. The combined company took the Actavis name, which held more clout in certain key markets like Russia. And when the two put their assets together, they had operations in more than 60 countries. Thanks to Watson, the U.S. maintained its title as the merged company's largest commercial market, totaling 81% of net revenues for 2012.

The Watson-Actavis merger put the heat on smaller companies to follow suit or risk being eclipsed by their rapidly combining peers. Actavis didn't stop there, either. This April, it seemed all but ready to merge with the similarly deal-happy Valeant Pharmaceuticals ($VRX) before talks fell apart. At that time, rival generics player Mylan ($MYL) made a $15 billion play for Actavis, which it promptly shot down. Instead, Actavis pivoted to the buyers' role again, grabbing Ireland's Warner Chilcott ($WCRX) in an $8.5 billion stock swap.

Watson brought with it one of the first generic versions of Lipitor, the best-selling drug of all time. In December 2011, in their first few days on the market, Watson's authorized version of atorvastatin, and a copy from Ranbaxy Laboratories together captured 14.6% of Lipitor's market share. Watson accounted for 97.6% of those sales. Though Actavis would stop selling the authorized generic in early 2013, under an agreement with Pfizer ($PFE), it's entitled to receive royalties through 2015. Together with a copy of Johnson & Johnson's ($JNJ) ADHD drug Concerta, atorvastatin brought in 21% of Actavis' 2012 revenue.

Atorvastatin did so well, in fact, that the sales growth it generated proved a nearly impossible act to follow, with Actavis' fourth-quarter 2012 earnings sinking 70%. But analysts didn't worry. They pointed to the company's stock performance; over the 5 previous years, shares had vaulted 231%. And they highlighted Actavis' other prospects, such as its 2011 deal to develop biosimilars with Amgen ($AMGN). That collaboration covers copies of some of the world's most lucrative drugs, including blockbusters Herceptin, Avastin and Rituxan from Roche ($RHHBY), and Erbitux from Merck KGaA.

The company also stands poised for success in emerging markets, particularly former Soviet Union countries like Kazakhstan. As Bisaro sees it, petroleum resources equate to disposable income for the middle class, who can then afford better healthcare. In 2012, Actavis' pharma business derived a quarter of its revenue from outside the U.S., mainly in Western Europe, Canada and Australia. But the Watson-Actavis merger brought the company leading market-share positions in more than 33 markets, including Russia.

Like Teva ($TEVA) CEO Jeremy Levin, Bisaro hopes to move toward higher-margin products--brands. Actavis currently has a small portfolio of brands that it's looking to expand through acquisition and "significant investments" in R&D. Warner chipped in more than 20 products, including an ulcerative colitis treatment that generated nearly $800 million last year.

While Actavis has shifted the M&A climate in the generics industry, it also recently found itself at the center of a broader issue: pay-for-delay deals. That's the Federal Trade Commission's nickname for patent settlements that involve a cash payment from a branded drugmaker to a generics challenger. In a case centered on a patent settlement between Watson and Solvay, the Supreme Court ruled that the practice can be anticompetitive. The ruling preserved the FTC's right to challenge reverse-payment settlements--to drugmakers' dismay.

For more:
Special Reports: Top Biopharma M&A Deals 2012 - Watson Pharmaceuticals/Actavis | The 25 most influential people in biopharma today - 2013 - Paul Bisaro
Supreme Court slaps pharma aside in pay-for-delay ruling
Actavis nabs Warner Chilcott in a $8.5B stock swap
Actavis nixed a $15B offer from Mylan to zero in on Warner Chilcott
On verge of $13B merger, Valeant and Actavis stop talking
Actavis future very bright despite tough quarter

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