Pressuring the copycats to consolidate
Name: Paul Bisaro
Title: CEO, Actavis (formerly Watson)
Say Paul Bisaro's only claim to fame was the recently engineered merger of Watson Pharmaceuticals and Actavis ($ACT), and you've missed the buildup to the grand M&A denouement. That deal vaulted Watson into third place in the generics business, behind only Teva Pharmaceutical Industries ($TEVA) and Novartis' ($NVS) Sandoz unit. It also happened to be among the biggest M&A deals last year.
What's more--and perhaps more important--the Watson-Actavis merger intensified pressure on other copycat drugmakers to consolidate. With so many mass-market drugs newly off patent, or on their way off, companies need blockbuster-worthy manufacturing and distribution capacity. The major players have the scale to mount major drug launches, such as Watson's authorized generic version of Lipitor. They have economies of scale, too, and that's key in a low-margin business.
So, smaller generics companies need to team up to compete. Live together or die alone, so to speak. As Watson wrapped up its purchase and took on the Actavis nom de guerre, even previously resistant companies like Germany's Stada started making noise about selling out.
By the time Bisaro unveiled that deal last April, Watson had already been ratcheting up its game. In 2011, the company rolled out product after product, including some authorized generics of leading Big Pharma drugs. There was Lipitor, which Watson launched with Pfizer ($PFE), and an authorized copy of Johnson & Johnson's ($JNJ) ADHD drug Concerta. The company also continued its women's health expansion with the launch of the injectable contraceptive Seasonique.
The company was also making smaller deals, including the Greek generics company Specifar, which it bought in 2011 for $562 million. In early 2012, Watson snared Strides Arcolab's Australia-based generics unit for $392 million. In all, the company qualified for fourth place on FiercePharma's list of 2011's fastest-growing generics makers, with 38% growth--and that came on top of 46% growth in 2010.
And then there's Watson's stock performance. Since Bisaro took over in 2007, Watson's shares have tripled. Teva's new CEO, Jeremy Levin, might have to take a page or two from Bisaro's book to settle his own investors down.
What's next for Bisaro and the new Actavis? Bisaro has said he'll cut $300 million in costs from the combined company, to keep those economies of scale coming. On the growth side, he's been eyeing expansion in the branded-drugs business. As Big Pharma's patent cliff declines, there will be fewer megablockbusters to copy. To keep his company growing, Bisaro figures he needs some higher-margin products--i.e., brands. The company has a small portfolio of brands, and it's looking to buy more--and develop more. Bisaro says Actavis will be making "significant investments" in R&D, including spending on biosimilars.