Actavis deal for Allergan would be huge bet on branded drugs

Wed Oct 8, 2014 6:30pm EDT
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By Bill Berkrot

Oct 8 (Reuters) - If Actavis Plc proceeds with a purchase of Botox maker Allergan Inc for potentially more than $60 billion, it will represent the biggest bet yet by one of the traditional generic drugmakers on the upside of expanding branded medicine holdings.

Reuters reported on Tuesday that Actavis plans to approach Allergan about a potential merger, providing an alternative to the hostile pursuit by Valeant Pharmaceuticals International that Allergan had repeatedly rebuffed.

Such a transaction would accelerate a trend by the world's biggest generic drugmakers to build up their branded medicine portfolios and make Actavis one of the biggest players in specialty pharmaceuticals. Industry experts say the move would further break down the distinctions between generics, pharmaceuticals and biotechnology players.

"Biotech is becoming even more complex, while big pharma is now where biotech was 10 years ago in terms of what they're looking for with cancer and orphan drug indications," said Sanford Bernstein analyst Ronny Gal, referring to expensive medications for rare diseases. "And the generics are pushing in to where pharma used to be."

As the U.S. generics business becomes saturated, with more than 80 percent of prescriptions already being written for cheap generic drugs, manufacturers have increasingly turned their attention to higher-profit branded medicines.

"They all always had a little bit of branded activity. The next logical step is to get back into the U.S. market more on the branded side," said Canaccord Genuity analyst Corey Davis.

Rival Teva Pharmaceuticals Industries Ltd, which has the world's largest portfolio of generic offerings, makes most of its profit from its branded multiple sclerosis drug Copaxone and added to its branded specialty drug holdings in 2011 with the $6.8 billion acquisition of Cephalon. Mylan Inc sells EpiPen for severe allergic reactions and branded respiratory drugs.

Actavis had already beefed up its specialty pharmaceuticals business with the $25 billion purchase of Forest Laboratories this year and its $8.5 billion acquisition of Warner-Chilcott in 2013.   Continued...