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How Actavis Has Emerged through Mergers and Acquisitions

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Key mergers and acquisitions

Actavis (ACT) has grown both organically and inorganically. The present scale of the company is largely a result of several mergers and acquisitions, driven by diversification in both its products and geography. Since 2011, the company acquired pharma assets worth more than $120 billion.

Actavis will be the largest player in the US generic pharmaceutical market based on revenues, followed by Teva (TEVA). This is due to the acquisition of Allergan, which was completed in March 2015. The combined entity is expected to have pro forma revenues of more than $23 billion in 2015.

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Access to new products

The key benefits derived through these acquisitions include access to new products. The acquisition of Arrow Group provided access to the development of biosimilars. For more information on this, please read Complex Generics Are Attractive Due to High Margins, as the company owned ~36% of Eden Biodesign.

Eden Biodesign is a biopharmaceutical company that offers development and manufacturing services to early-stage biotechnology companies. In January 2010, Actavis purchased the remaining interest in Eden for $15 million. The acquisition of Actavis and Furiex provided access to modified release and controlled release drugs.

Access to new markets

In October 2012, Actavis (previously Watson Pharmaceuticals) completed the acquisition of Actavis Group. In 2013, the company’s revenues outside the US increased to 29% from 16% in 2012. The acquisition of Actavis Group and Arrow Group provided a platform for both established and emerging markets.

The acquisition of Furiex Pharmaceuticals, Ascent Pharmahealth Ltd., and Specifar Pharmaceuticals gave access to markets in Japan, Australia and Southeast Asia, and Europe, respectively. Allergan is expected to expand its commercial reach to international markets, including Canada, Europe, Southeast Asia, China, India, the Middle East, and Latin America.

In 2015, Mylan (MYL) acquired Abbott’s non-US developed markets specialty and generics business.

Lower tax structure

To facilitate the acquisition of Warner, the company created a new entity called Actavis Plc, with its corporate headquarters in Ireland and its administrative headquarters in the US. This resulted in a favorable tax status for the company, resulting from the lower Irish corporate tax rate (17% versus 35% in the US).

The company’s growth potential can be capitalized through investments in ETFs such as the SPDR S&P Biotech ETF (XBI) and the iShares US Healthcare ETF (IYH).

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