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How Actavis Organizes Its Business

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Overview of business segments

In the third quarter of 2014, following the Forest Laboratories acquisition, Actavis (ACT) realigned its business structure. Now, the company operates through three business segments:

  • North American Brands
  • North American Generics and International
  • Anda Distribution

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North American Brands

Actavis’s North American Brands segment includes both patented and off-patented products that the company markets under its trademark name as branded products within North America. This segment has other revenues that consist primarily of royalties, milestone receipts, commission income, and revenue from licensing arrangements and co-promotion revenue.

In fiscal 2013 and 2014, this segment accounted for approximately 12% and 35.5% of Actavis’s total net revenues in fiscal 2014 and 2013, respectively. Hospira (HSP) is one of the leading specialty companies that competes directly with Actavis in this segment.

North American Generics and International

This segment includes revenues from the following sales channels:

  • sale of off-patented (unbranded generic) products in North America
  • international sales of patented and off-patented products (unbranded and branded generics)
  • over-the-counter (or OTC) products
  • third-party Medis business

North American Generics and International is Actavis’s largest segment, accounting for approximately 51.7% of total net revenues in fiscal 2014, 74.0% in fiscal 2013, and 75.2% in fiscal 2012. Teva (TEVA), Mylan (MYL), and Impax (IPXL) are the direct competitors of Actavis in the generic pharmaceutical products space.

Anda Distribution

This segment distributes both branded and generics products to independent pharmacies, pharmacy chains, pharmacy buying groups, and physician offices. Distribution consists primarily of generic products manufactured by the company and by third parties.

Anda, Inc. is the fourth-largest generics distributor in the US, accounting for approximately 13% of total net revenues in fiscal 2014 and 14% in fiscal 2013. Mylan (MYL) is another leading player that has its own distribution company, Sagent Agila.

Actavis’s growth potential can be capitalized through an investments in ETFs such as the Health Care Select Sector SPDR Fund ETF (XLV) and the iShares US Healthcare ETF (IYH).

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