Actavis: What it’s like to join the Fortune 500

May 10, 2013, 7:21 PM UTC
Actavis CEO Paul Bisaro with his new Fortune 500 hat. Until a recent merger, Actavis was known as Watson Pharmaceuticals.

This is the first in a regular series of stories that will be focused on people, companies, and trends in the Fortune 500.

Fortune — How do things change for a company on the day when it officially joins the Fortune 500? Is the status upgrade a transformative event? Does the food in the cafeteria suddenly taste better? Do employees walk around the office with their heads held a little higher and answer the phone with a bit more gravitas in their voice?

I found myself pondering these questions on Monday as I drove west from New York City to the Parsippany, N.J., headquarters of Actavis (ACT), the generic and specialty pharmaceutical company and, at No. 432, one of 24 new members of the Fortune 500 this year.

The list of newcomers in 2013 includes companies as diverse as social media giant Facebook (FB), which made it at No. 482 less than a year after its controversial IPO, and oil refiner Phillips 66 (PSX), which debuted at No. 4 after being spun off from ConocoPhillips (COP).

But I decided to spend Fortune 500 day at Actavis — and not just because I like leafy New Jersey towns with office parks. A lot has been going on lately at the company, which makes generic versions of Lipitor and Vicodin, has big-selling medications that address ADHD and low testosterone, and is huge in oral contraceptives. The single biggest development is that the drugmaker recently changed its name from Watson Pharmaceuticals to Actavis after a merger — but more on that in a moment.

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I arrived and sat down with CEO Paul Bisaro in a conference room. The new 500 had just been released that morning. Had Actavis been waiting for the call, I wondered? Did the executives realize that the company’s $5.9 billion in 2012 revenue would be enough to make the jump from No. 515 last year to full 500 status? “Actually, it was a surprise,” said Bisaro, after I presented him with a Fortune 500 hat and lapel pin. “I hadn’t focused on it. But I’m just happy that we’re here. I think it’s going to be great.”

Not precisely the answer I was looking for. But knowing that it’s been a busy time at Actavis, I was willing to forgive Bisaro for letting the 500 news sneak up on him. Two weeks ago the company’s stock price passed $100 per share for the first time. At $107 yesterday, the stock has more than doubled since the beginning of 2011 and has easily outperformed that of rivals Mylan (MYL) and Teva Pharmaceutical (TEVA). And when the company released its first-quarter results last week, it boosted its earnings projections for 2013.

In fact, moments before I showed up Bisaro had been meeting with a group of investors. They were interested in his numbers, of course, but mostly they wanted to ask about recent reports that Actavis might be bought by Canadian drugmaker Valeant Pharmaceuticals International (VRX), a particularly acquisitive company that has done more than 30 deals in the past five years. “Of course everyone wanted to talk about the rumor,” said Bisaro. “But of course we don’t talk about rumors so it was a very short conversation.”

If, hypothetically, Actavis were to be acquired by Valeant in the near future, that would make for a very short stay for Actavis on the 500. Wouldn’t that be kind of a letdown? “Our intention is to be on the Fortune 500 for a long time,” replied Bisaro tactfully.

It’s only been a few months since Bisaro completed a major purchase of his own. On Oct. 31, Watson Pharmaceutical announced that its $5.5 billion stock and cash deal to buy the Actavis Group of Switzerland had closed, and that the newly-merged company would be known as Actavis, not Watson. (To fund the purchase, the company put about $6 billion of debt on its balance sheet. It’s now at 3.5 times debt-to-EBITDA, which Bisaro says is easily manageable given its strong cash flow.) The deal made Actavis the world’s third-largest generic drugmaker. It now operates in 62 countries, up from 20. “We can truly say we’re a global company now,” Bisaro told me.

Taking the Actavis name made sense, said Bisaro, because “Watson” turned out to be too common around the world, and he ran into copyright conflicts with similarly named businesses in markets such as Australia and England. But the company didn’t take the name change lightly. It hired brand strategy firm Lippincott to explore options, and the consultants came back with roughly 2,000 possibilities. (One internal suggestion that was quickly rejected was a Watson/Actavis mash-up: “Wacktivis.”) Bisaro and his team whittled down the list to eight finalists before deciding that embracing Actavis, already recognized globally, was the best solution.

MORE: 13 things you didn’t know about the Fortune 500

Actavis has successfully rebranded itself everywhere already except its own office park headquarters in Parsippany. All the signage in the parking lot and on the outside of the building still reads “Watson Pharmaceuticals.” Of course, it took two years for the company to get permission from the local township to put the name up when they moved in a few years ago, after Bisaro moved the headquarters from Corona, Calif. The battle to change the sign may well rage on well after the merger integration is a distant memory.

The drugmaker was originally given the name Watson by co-founder Allen Chao, a Taiwanese-American. He wanted to honor his mother, whose maiden name was Hwa. So he Americanized “Hwa’s son” into Watson when he started the firm in 1984. Chao served as CEO until he retired in 2007, and Bisaro was recruited to be his successor.

Bisaro, 52, got into the world of pharma when he joined Barr Pharmaceuticals in 1992 as chief legal counsel, later rising to become president and chief operating officer. When he arrived at Watson, he immediately decided that a top priority was to expand internationally. At the time, almost 100% of the drugmaker’s revenues were derived from the U.S. This year about 40% of sales at Actavis will come from outside the U.S., and Bisaro thinks that in five years the ratio of U.S. to non-U.S. revenues could be 50/50. Of the company’s 17,000 employees, about 5,400 are in the U.S. It has large production operations in India.

All generic drugmakers are dealing with a major business challenge these days: The wave of patent expirations on best-selling, branded drugs that fueled their business in recent years is slowing. The next big opportunity, according to Bisaro, is in so-called biosimilars — basically, generic versions of the complex, expensive biotech medicines that have begun to overtake traditional small molecule pharmaceuticals in sales. Bisaro calls biosimilars “the new frontier.” Actavis has signed a deal with biotech giant Amgen (AMGN) to partner in selling four of its drugs as they come off patent. The CEO says he is confident that Actavis is set to keep growing in this brave new world.

If Bisaro is right, Actavis could become a fixture on the 500, climbing its way toward the top. “We don’t just want to be 432,” he said. “We want to go up higher.”

At some point, maybe he’ll even have enough cred to get the sign changed on his building.