Actavis plc (ACT), which has been in acquisition mode over the last few years, has struck yet another deal. This time the company announced its intention to acquire UK-based Auden Mckenzie Holdings Ltd, a privately owned company producing niche generic medicines and proprietary brands.
How Actavis Gains from the Acquisition
Upon completion of the acquisition, Actavis will become the primary supplier of generic pharmaceuticals in the UK. It will also gain access to approximately 175 generic and branded products, as well as a pipeline of around 40 products in various dosage forms for treatment in therapeutic areas. The company also expects the Auden Mckenzie acquisition to be accretive to its non-GAAP earnings in 2015.
Terms of the Deal
Actavis has agreed to pay approximately £306 million in cash, along with a two-year royalty on a percentage of gross profits of one of Auden Mckenzie’s products. Auden Mckenzie will be acquired on a debt free basis, and the transcation excludes its real estate portfolio. The acquisition is expected to close this quarter.
Our Take
We are positive on Actavis’ efforts to expand its portfolio and strengthen its pipeline. The company enjoys a strong position in the generics market. In addition to the generics business, Actavis has a significant and expanding branded pharmaceutical business.
Actavis has been pretty active on the acquisition front and has been working on strengthening its branded product portfolio. Late last year, Actavis announced its intention to acquire Botox maker Allergan Inc. (AGN). With this acquisition, Actavis will find itself in the company of the top 10 pharmaceutical companies across the world based on sales.
We believe that Actavis will continue to pursue bolt on acquisitions and deals to strengthen its generic and branded portfolio.
Actavis is a Zacks Rank #3 (Hold) stock. Some better ranked stocks in the health care sector include Impax Laboratories (IPXL) and Mallinckrodt plc (MNK). Both are Zacks Rank #1 (Strong Buy) stocks.
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