uploads/2015/03/Branded-Portfolio1.jpg

3 Key Therapeutic Segments Drive Branded Revenues

By

Updated

Significant revenue increase

Actavis’s (ACT) North American Brands segment revenue increased significantly by 336% year-over-year (or YoY) to $4,631.4 million in 2014 from $1,062.5 million in 2013. This was primarily driven by the acquisition of Forest Laboratories and the strong sales of key products such as Namenda, Linzess, Delzicol, Lo Loestrin, and Estrace cream. The percentage contribution of these products to segmental revenue follows:

  • Namenda: 19.4%
  • Delzicol: 12.2%
  • Lo Loestrin: 6.0%
  • Estrace cream: 5.6%

Article continues below advertisement

Key therapeutic segments

In 2014, three core therapeutic segments contributed significantly—over 60%—to the segmental revenues, as follows:

  • Central Nervous System (or CNS) contributed ~25%
  • Gastroenterology (or GI) contributed 22%
  • Women’s Health contributed 21%

The remaining core therapeutic segments are:

  • Urology
  • Cardiovascular
  • Respiratory and Acute Care
  • Infectious Disease
  • Dermatology

The core therapeutic areas represent a total opportunity of ~$6.2 billion, of which CNS leads with a market of ~$2.3 billion, followed by:

  • GI: ~$1.3 billion
  • Women’s Health: ~$0.9 billion
  • Cardio: ~$0.6 billion
  • Urology: ~$0.1 billion
  • Anti-infectious: ~$0.1 billion
  • Dermatology and Established Products: ~$0.9 billion.

Teva (TEVA) is the direct competitor to Actavis in the following therapeutic segments: CNS, Respiratory, and Women’s Health in its specialty segment. Mylan (MYL) is another player that competes directly with Actavis in the Respiratory segment.

Gross margins

Actavis’s gross margin declined to 64% in 2014 from 68% in 2013. This resulted from the increase in the cost of sales after the acquisition of Forest Laboratories, which had royalty payments on certain key products such as Namenda and co-promotional payments on Linzess. However, the adjusted basis gross margin improved by over 100 basis points.

In 2014, Teva (TEVA) had a gross margin of 87.1%, up by 40 basis points from 86.7% in 2013 in its specialty segment. Other players like Hospira (HSP) and Mylan (MYL) discuss gross margins on a consolidated basis.

The profitability of the branded business can be capitalized through investing in pharmaceutical ETFs like the iShares US Healthcare ETF (IYH) and the SPDR S&P Biotech ETF (XBI).

Advertisement

More From Market Realist