Bill Gunderson

About the Author Bill Gunderson

Bill Gunderson is the CEO and Chief Market Strategist of Gunderson Capital Managment in San Diego, CA. He is also a professional money manager, former research analyst, author of Best Stocks Now, and developer of the Best Stocks Now smartphone app. He offers four free weeks to his weekly Best Stocks Now to Seeking Alpha readers. He also hosts a daily stock market radio show on AM1000 KCEO from 7am-8am. Bill has appeared on the Fox Business Channel and on Bloomberg radio numerous times. He has been published in Barron's, Forbes, and numerous other publications i.e. Los Angeles Business Journal, San Diego Union Tribune, Phoenix Business Journal, Salem News, Rochester Business Journal, and many others.

Actavis plc (ACT): A Leader In ‘Growth Pharma’


Last July, Actavis acquired specialty pharma giant Forest Labs which marked the biggest pharma M&A deal of 2014. This year, on March 17, 2015, Actavis completed the acquisition of Allergan, beating out Vertex for the company and creating a $23 billion diversified global pharma company. Actavis has become a leader in a new industry model it refers to as “Growth Pharma“.


The company is also committed to R&D, with an investment this year of $1.7 billion. Its generics portfolio now features more than 1,000 generics, branded generics, established brands, and OTC products. It is now the third largest manufacturer of generics in the U.S.

Actavis just reported its 1Q15 results which included 10 days of contribution from the Allergan assets and they are pretty impressive. There sure does not appear to be any disruption associated with its recent buying spree.

Actavis reported a 59% increase in net revenue and a 23% increase in earnings. Earnings beat analyst expectations by a whopping $0.36. The company also raised guidance, signaling it is well on its way to delivering promised cost synergies and growth. The company guided earnings to $17.00 to $18.50 per share, significantly above the consensus of $17.70.

The stock traded up around 3% on the earnings results.

Actavis is a stock that has the distinction of being a Gunderson Trophy Winner. I am long the stock and have been for some time. So let’s take a closer look at this growth story in pharma.

Data from Best Stocks Now app

Actavis is a Large Cap drug company with a market capitalization of $118.6 billion. Its risk category is considered Moderate.

Data from Best Stocks Now app

The stock’s forward PE ratio is a reasonable 14 times, which is a discount to its annual 5 year growth rate of more than 16%. This gives it a PEG ratio of only .83 and earns it a Value Grade of A.

Data from Best Stocks Now app

Actavis has been a performance winner over all time periods. The stock is up 14% this year after having been up more than 48% over the last year. It has a Momentum Grade of C+ and a Performance Grade of A+. The stock has delivered average total returns of 58% and 48% over the 3 and 5 year periods.

Data from Best Stocks Now appActavis ranks #80 out of the more than 4000 stocks in the Best Stocks Now universe. It receives a Stock Grade of A- and rates a Buy rating.

What is the difference between “Big Pharma” and “Growth Pharma”? As opposed to the slow-growing industry stalwarts, Actavis is targeting 10% growth for its branded drug business. Its focus on “growth pharma” means targeting highly efficient SG&A spending, sustainable commercial franchises with patent protection, and products with a strong global commercial footprint.

And if this latest quarter is any indication, “growth pharma” is a good place to be.

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