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Lone Pine Capital Sells Its Stake in Actavis

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Lone Pine cuts position in Actavis

Lone Pine Capital sold its position in Actavis (ACT) in the fourth quarter of 2014. The position had accounted for 2.34% of the fund’s total 3Q14 portfolio.

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Overview of Actavis

Actavis is an integrated global specialty pharmaceutical company. It develops, manufactures, markets, sells, and distributes generic, branded generic, brand name, biosimilar, and OTC (over-the-counter) pharmaceutical products.

Actavis has global headquarters in Dublin, Ireland. Its US administrative headquarters are located in Parsippany, New Jersey, and it has operations in more than 60 countries. However, the US is its largest commercial market, representing more than half of the company’s total net revenue in 2014.

Actavis develops biosimilar products within the Actavis Specialty Brands segment. It also distributes generic and select brand pharmaceutical products. The products are manufactured by third parties through the Anda Distribution segment.

Actavis has more than 35 manufacturing and distribution facilities around the world. Annually, it has a capacity of ~40 billion units. Actavis’s Global Operations includes Anda, Inc., which is the fourth largest generic pharmaceutical product distributor in the US.

Actavis completes $70.5 billion Allergan acquisition

In November 2014, Actavis announced that it would acquire Allergan, which makes Botox, to become one of the biggest pharmaceutical companies in the world. The combined entity is expected to have an annual revenue of $23 billion. Actavis’s management also stated that it will generate long-term, double-digit growth. Allergan had previously rebuffed a takeover by Valeant Pharmaceuticals (VRX).

Actavis has a 4.09% exposure to the iShares US Healthcare ETF (IYH). Healthcare peers Johnson & Johnson (JNJ), Pfizer (PFE), and Merck (MRK) make up 21.9% of IYH and comprise the top three holdings of this ETF.

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ACT raises $21 billion through bonds

In March 2015, Actavis sold $21 billion in bonds, and the proceeds will help pay for the $66 billion acquisition of Allergan. According to analysts, Actavis received orders for ~$90 billion from investors for the bond sale. This reflected strong demand from investors.

4Q14 results beat estimates

In February 2015, Actavis announced its 4Q14 results, reporting revenues of $4.06 billion. This beat analyst estimates of $3.88 billion. However, the firm reported a net loss of $732.9 million, or $2.76 per share. For the full year 2014, Actavis reported revenues of $13.06 billion. Plus, it reported net loss of $1.63 billion, or $7.42 per share.

Compared to the S&P 500 Index, Actavis’s stock price went up by almost 11%. The index went up by 2% since the beginning of 2015. In addition to this, the firm’s stock price increased by over 50% in the last 12 months.

The next part of this series will discuss the fund’s exit from LPL Financial Holdings.

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