Blue Ridge Capital and Actavis
Blue Ridge Capital initiated new positions in Marathon Petroleum Corp. (MPC), Actavis Plc (ACT), Apple Inc. (AAPL), SanDisk Corp. (SNDK), and Cheniere Energy Inc. (LNG). Notable positions that were exited include Ralph Lauren Corp. (RL) and Tenet Healthcare Corp. (THC).
Blue Ridge opened a new position in specialty pharmaceutical company Actavis Plc (ACT) that accounts for 2.27% of the fund’s portfolio. We recently reported that Farallon Capital too has opened a new position in Actavis last quarter.
Shares surged after Actavis agreed to buy Forest Laboratories Inc. (FRX) for about $25 billion last month. If successful, the transaction will combine two of the world’s fastest-growing specialty pharmaceutical companies, with combined annual revenues of over $15 billion anticipated for 2015. The per-share consideration represents a premium of approximately 25% per share over Forest’s stock price, and a premium of approximately 31% over Forest’s ten-day volume-weighted average stock price, as of the close of trading on February 14, 2014.
Activist investor Carl Icahn is the second-largest shareholder at Forest Labs, and he will gain from the deal. Icahn has been campaigning for change at Forest Labs, and he tweeted following the deal, “Since our involvement, $FRX shrholders enjoyed gain in market value of apprx $17 bln; over 193%.” In June of last year, Forest Labs appointed a representative of Icahn as an independent member to its board. According to news reports, Icahn was instrumental in planning the exit of Forest Laboratories’ longtime CEO Howard Solomon and the selection of new CEO Brent Saunders. Icahn was earlier critical of the company’s management and initiated proxy fights after acquiring a 9% stake. He also felt the company was not well prepared to deal with the patent expirations of its highest selling drugs—the antidepressant Lexapro and Alzheimer’s treatment Namenda.
The combined company will create blockbuster product franchises in the central nervous system, gastroenterology, women’s health, urology, and cardiovascular therapeutic categories. It will have emerging and sustainable portfolios in infectious disease, respiratory, cystic fibrosis, and dermatology therapeutic categories. Five Forest products are at the NDA stage of development, including treatments for Alzheimer’s disease, cardiovascular disease, infectious disease, schizophrenia and bipolar disorders, and COPD.
Earlier known as Watson Pharmaceuticals Inc., the company acquired the Switzerland-based Actavis and took on the Actavis name. Last year, it acquired Warner Chilcott Plc for $9.2 billion and also secured an Irish corporate domicile that reduced its tax rate to 17%.
Actavis PLC’s 4Q net revenue increased 59%, to $2.779 billion compared to $1.75 billion in the fourth quarter of 2012. On a non-GAAP basis, diluted earnings per share increased to $3.17, compared to $1.59 per diluted share in the fourth quarter 2012. For full-year 2013, net revenue increased 47%, to $8.7 billion, compared to net revenue of $5.9 billion for full-year 2012. In the branded pharmaceuticals business, growth in 2013 was driven by strong sales of core products in the U.S., including the Rapaflo and Generess Fe franchises, which saw double-digit prescription growth on a year-over-year basis. Growth in the U.S. generic business was driven by strong product launches of generic versions of Suboxone Sublingual tablets, Lidoderm, and Cymbalta.
Actavis saw revenue growth at all of its three segments: Actavis Pharma, Actavis Specialty Brands, and Anda Distribution. The Actavis Pharma segment includes off-patent pharmaceutical products that are therapeutically equivalent to proprietary products. The Actavis Specialty Brands segment includes patent-protected products and certain trademarked off-patent products that Actavis sells and markets as brand pharmaceutical products. The Anda Distribution segment distributes generic and brand pharmaceutical products manufactured by third parties, as well as by Actavis, primarily to independent pharmacies, pharmacy chains, pharmacy buying groups, and physicians’ offices.