Actavis seals Forest merger for $25 billion

Actavis has acquired Forest in a $25 billion merger which will create a company with one foot in generics and another in patent-protected medicines.

The Forest deal is the just the latest in a trail of acquisitions which has seen generics company Actavis transformed into a global player with annual sales of around $15 billion.

Actavis chairman and chief executive Paul Bisaro said the new company would have a “balanced offering of strong brands and generics, a focus on strategic, lower-risk drug development, and – most important – the ability to drive sustainable organic growth.”

Bisaro said the new merged company would be able to deliver double-digit revenue and earnings growth; but quite how much the new firm will rely on innovative R&D as opposed to lower-risk new medicines is yet to be seen.

Forest has been cutting back on its R&D investment of late – it cut its research and development budget by 25% in the last quarter in a streamlining initiative dubbed Project Rejuvenate.

These cutbacks followed the 2012 patent expiry of Forest’s big earner, antidepressant Lexapro, with pressure mounting on it to find major new products to plug the gap.

Forest recently made its own acquisition, spending $2.9 billion on Aptalis, which brought with it lead product, antipsychotic Saphris.

The firm’s chief executive Brent Saunders, who only took over at Forest in September, has already announced a $500 million in reduced R&D spending, including large-scale redundancies. The firm was hit in November by the FDA’s rejection of the schizophrenia drug cariprazine, which it co-developed with Gideon Richter. The FDA has asked for additional clinical data, which could require further trials. But Actavis’ promise of a focus on ‘lower risk’ research means such projects could be jettisoned.

Forest has a total of five late-stage stage products, including treatments for Alzheimer’s, cardiovascular disease, infectious disease, schizophrenia and treatments for COPD.

One striking example of Actavis’ rejection of risky business opportunities was the recent sale of its subsidiary in China. Bisaro said the country was an “unfriendly environment”, despite its huge growth potential.



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