Magnetar and Actavis
In the fourth quarter, Magnetar increased its exposure to Actavis (ACT). It bought 42,107 shares in the pharmaceutical firm. It represents 1.5% of the fund’s 4Q14 portfolio.
Overview of Actavis
Actavis develops and manufactures generic and branded pharmaceutical products. Actavis also provides OTC (over-the-counter) products and biosimilars in various therapeutic segments—like oncology and women’s health.
Actavis is involved in the development and out-licensing of generic products through Medis—its third-party business.
The company operates through three business segments:
- North American Brands
- North American Generics and International
- Anda Distribution
Actavis evolved through a series of M&A (mergers and acquisitions). Watson Pharmaceuticals was the first company. It was listed on the NYSE in 1997 under the ticker WPI. In 2012, Watson acquired Actavis Group—a Swiss generic drug manufacturing company. The company’s name changed to Actavis. The ticker changed from WPI to ACT.
To facilitate the business combination between Actavis—formerly Watson—and Warner Chilcott Plc (WCRX), a new Actavis was formed. It became Actavis Plc (ACT)—a public limited company headquartered in Ireland.
Actavis completes Allergan acquisition
In March 2015, Actavis acquired botox maker, Allergan (AGN) in a transaction valued at $70.5 billion. The combined entity is set to generate revenue in excess of $23 billion. It will create the tenth largest global pharmaceutical company—measured by sales. Some of the chief motives behind the acquisition were:
- A minimum of $1.8 billion in synergies are projected primarily from cost cutting through job cuts and other savings—mainly $400 million in R&D (research and development) and $400 million from sales and marketing.
- A footprint expansion will be created across 100 international markets.
- The combined entity will be able to generate organic revenue at a CAGR (compound annual growth rate) of 10% in the future.
Through the acquisition, Actavis will have access to 100 markets for commercialization. The combined company expects to have a robust product pipeline with ~23 products in the late stage across therapeutic areas. Also, its expects to have ~15 projects in near-term and mid-term development to add to the company’s product pipeline. Annually, the company intends to invest ~$1.7 billion in R&D.
The addition of Allergan’s portfolio will enhance Actavis’ position in the branded business. This is expected to bring better profitability because branded products have higher margins than generic products.
Actavis’ growth can be monetized through ETFs like the iShares US Healthcare ETF (IYH). IYH covers generic and specialty companies like Actavis, Hospira (HSP), Mallinckrodt Plc (MNK), Impax (IPXL), and Perrigo (PRGO). They account for about 5.38% of the fund’s total holdings.
For a more detailed look at Actavis’ operations, read Actavis Emerges As a Top 10 Global Pharmaceutical Company.
In the next part of this series, we’ll discuss Magnetar’s increased position in Enbridge.