(ACT) Actavis Beats on Earnings – Raises View

Actavis, Inc.’s (ACT) first quarter 2013 earnings of $1.99 per share beat the Zacks Consensus Estimate of $1.87 and increased 21% from the year-ago earnings.

Revenues for the reported quarter came in at approximately $1,895.5 million, up 24% from the year-ago figure, but below the Zacks Consensus Estimate of $1,995 million.

Quarterly Details

Actavis operates through three segments: Actavis Pharma, Actavis Specialty Brands  and Anda Distribution.

The Actavis Pharma segment posted sales of $1.5 billion, up 37%. The upside was driven by new product launches including the generic versions of Suboxone sublingual tablets and Singulair in several EU markets. International revenues were strong at $608.6 million, up 254%, reflecting the inclusion of legacy Actavis products.

Actavis Pharma revenues are expected in the range of $6.3 billion – $6.5 billion in 2013. This segment should benefit from the launch of its authorized generic version of Zovirax ointment 5% in April. The company was also very active on the patent settlement front and signed agreements for generic versions of Crestor, Exalgo, Ziana, Zyclara, Intuniv and the abuse deterrent version of OxyContin.

Actavis Specialty Brands revenues came in at $130.7 million, up 19%. Increased contributions from products like Rapaflo, Crinone, Androderm and Generess Fe and the inclusion of Kadian revenues as a result of the Actavis acquisition aided the performance of the segment. Actavis Specialty Brands is slated to post revenues of $550 million – $600 million in 2013.

Net revenues from the Anda Distribution segment decreased 23% during the quarter to $231.0 million reflecting lower chain sales and new third party product launches. This segment consists of only third-party product sales and is expected to post revenues of $1.0 billion – $1.2 billion in 2013.

Raises Earnings Outlook

Following the release of first quarter results, Actavis raised its earnings guidance for 2013 and now expects to earn $8.10 – $8.50 per share. The company was earlier expecting to earn $7.70 – $8.10 per share. Total revenues guidance remained unchanged at $8.1 billion. The Zacks Consensus Estimate for earnings currently stands below the revised guidance range at $8.09 per share. Meanwhile, the Zacks Consensus Estimate for revenues is $8.1 billion.

Actavis currently carries a Zacks Rank #2 (Buy). We view the company’s acquisition of Actavis Group as a smart strategic move. We believe the company should be able to achieve its guidance easily. With fewer major patent expiries slated to occur in the next few years, we are encouraged by Actavis’ focus on building its branded and biosimilars pipeline.

Companies in the pharma space that currently look well-positioned include UCB (UCBJF), Catalyst Pharmaceuticals Partners Inc. (CPRX) and AbbVie (ABBV). While UCB and Catalyst Pharma are Zacks Rank #1 (Strong Buy) stocks, AbbVie is a Zacks Rank #2 stock.

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